Query No. 1 : Penalty under Section
271(1)(c) when assessed under S. 115JB
under section 271(1)(c) of the Act can be levied in a case where tax has
been paid by the assessee under section 115JB of the Act and amount of
tax payable as book profit is the same even as per order of assessment,
with reference to variation in the amount of loss or income determined
as per normal provisions of the Income-tax Act?
CIT v. Nalwa Sons Investments
Ltd., [327 ITR 543 (Del.)] the facts were the assessee filed
return declaring loss of
crores. Thereafter, the revised return exhibiting the income at
crores were filed under provisions of section 115JB of the Income-tax
1961. The assessment was framed under section 143(3) at loss of
36.95 crores, after making certain additions as per normal provisions
and book profit at Rs.
4.07 crores under section 115JB of the Act.
The Court observed
that under the scheme of the Act, the total income of the assessee is
first computed under the normal provisions of the Act and tax payable on
such total income is less than certain percentage of book profit, then,
such book profit shall be deemed to be the total income and tax shall be
payable on such deemed income.
Further, the Court has also noted that the
Explanation 4 to section 271(1)(c ) of the Act, which gives the meaning
of the term “the amount of tax sought to be evaded”. That is where the
income in respect of which particulars have been concealed or inaccurate
particulars have been furnished has the effect of reducing the loss
declared in the return or converting that loss into positive income, the
tax sought to be evaded shall be the tax that would have been chargeable
on the amount of such income if it were the total income.
After considering the scheme as well as
Explanation 4 to section 271(1)(c ) of the Act the Delhi High Court held
that, no doubt there was concealment but that had its repercussions only
when the assessment was done under the normal procedure. In the instant
case, the assessment as per normal procedure was, not acted upon. On the
contrary, it is deemed income assessed under section 115JB of the Act
which became the basis of assessment. Tax is paid on the income assessed
under section 115JB of the Act. Hence, when the computation was made
under section 115JB of the Act, the aforesaid concealment had no role to
play and was totally irrelevant. Therefore, the concealment did not lead
to tax evasion at all. Therefore, penalty cannot be imposed on the basis
of disallowance or addition made under normal provisions.
Query No. 2 : Section 50C – Stamp Duty
value exceeds the actual consideration
X purchased a vacant
site (2400 sft) of rural area of Andhra Pradesh for
10,000/- in the financial year 1995-96 and paid Stamp Duty as per above
consideration. Now X wants to sell it to Y for
Rs. 2,00,000/- i.e. actual consideration. But Stamp Duty has to pay for
16,00,000 i.e reckoner
16,00,000/-. What steps X and Y should take?
Section 50C(1) if
the Act provides that in case where the value adopted or assessed by the
stamp valuation authority in respect of a transfer of land or building
or both for the purpose of payment of stamp duty exceeds the
consideration received or accrued by the assessee for such transfer, the
value so adopted or assessed shall be deemed to be the full value of the
consideration received or accruing for such transfer.
provides for the valuation of the capital asset to be referred to a
valuation officer where the assessee claims that the value adopted by
the stamp authority is in excess of the fair market value of the
property. The valuation of the capital asset cannot, however, be
referred to a valuation officer where the value adopted or assessed by
the stamp authority has been disputed in appeal or revision or in
reference before any authority, Court or the High Court.
So, in this case, Y
has to challenge the value adopted or assessed by the stamp authority in
appeal or revision or in reference before any authority, Court or High
If Y does not
dispute the said valuation before any authority or Court or High Court
then, X can claim before the Assessing Officer that the value so adopted
or assessable by stamp duty authority is in excess of fair market value
of the property as on date of transfer, be referred to the valuation
Query No. 3 :
Applicability of TDS
X purchased a
vacant site in Andhra Pradesh from Y (Non-Resident) for sale
25,00,000/-, in the Financial Year 2010-11, without deducting TDS.
Whether section 195
of the Income-tax Act, 1961 would be
The objective of this section is to ensure
that the tax on the income of non-residents and foreign companies is
deducted at source, so that the department is not put to the trouble of
recovering it from such persons whose connections with India, may be
transient or whose assets in India, may not be sufficient to meet the
If income is chargeable in the hands of Y
(non-resident) tax has to be deducted as per the provisions of section
195 of the Act. The Supreme Court in
GE India Technology Centre
Pvt. Ltd. v. VIT [327 ITR 456] has held that the obligation
to deduct tax at source arises only when there is a sum chargeable under
the Act i.e. payment which has an element of “income” chargeable to tax
However from July 1, 2012 sub-section (7)
has been inserted in section 195 to provide that a person responsible
for paying a non-resident in relation to a specified class of persons or
cases which are notified by the Board shall make an application to the
Assessing Officer to determine whether tax is to be deducted or not.
Query No. 4 : Can
Jain being of minority community continue in the status of HUF?
As per F. No. 4-2/2014 –NCM., G.O.I.
Ministry of Minority Affairs, dated February 6, 2014, Jain Community are
covered under section 2(c ) of National Commission of Minority Act 1992
as minority. So, can Jain continue with HUF under the Income-tax Act?
There is no restriction on Jains to be
assessed under the status of “HUF” under the Direct Tax laws, even
though Jain community has been declared as a minority community.
definition of the expression HUF has been attempted in any of the Direct
Tax laws because the term has a definite connotation under the Hindu
Law. The Supreme Court in
Surjit Lal Chhabda v. CIT [101 ITR 776] and the Bombay High
Court in CIT v. Gomedalli
Lakshmi Narayan [3 ITR 367] have declared that the expression
HUF must be construed in the
sense in which it is understood under the Hindu Law.
Mulla, in his
seminal work on Hindu Law, stated that the Hindu Law applied to the
not only by birth but Hindus by conversion;
Illegitimate children where both parents are Hindus;
Illegitimate children where father is Christian and mother a Hindu and
if children are brought up as Hindus;
Buddhists in India, Sikhs, Nambudri Brahmins except so far as such law
is varied by custom and to Lingayats;
(v) A Hindu by
birth who having renounced Hindusism has reverted to it;
(vi) Sons of
Hindu dancing girls;
Arya Samajists, and Santhals of Chhota Nagpur;
(viii) Hindus who
make a declaration that they are Hindus for the purpose of Special
(ix) Kutchi Memons who had settled in
Madras and Travancore, etc., and regulated their affairs according to
Hindu law in matters of succession, inheritance and property including
the Hindu concept of coparcenary and survivorship. Therefore,
accordingly to CED v.
Hajee Abdul Sattar Sait [(86 ITR 53 (SC)] such Kutchi Memons
being mass converts were governed in matters of property, succession and
inheritance by the rules of Hindu law including the rules as to joint
family property, its distribution according to the rule of survivorship
and the right of a son by birth.
Query No. 5 : Assessment on Executors
Please explain the procedure for e-filing
of return of a deceased’s estate till final distribution of assets i.e.
maturity of Section 54EC Bonds, Tax Saving FDR., P.O. deposits etc.,
(section 168 (1)(a). Whether he will have to apply for separate PAN or
PAN of deceased will serve the purpose. The basic exemption will also be
2,00,000/- or not applicable to deceased?
Section 168 of the Act applies to
executors as well as to administrators or other
person administrating the estate of a deceased person.
Sections 159 and 168 of the Act deal with
assessments on legal representatives. Section 159 of the Act is meant to
enable the revenue to make an assessment on legal representation in
respect of the income which accrued to or was received by the deceased,
while section 168 of the Act authorises an assessment on the legal
representative in respect of the income which accrues to him after the
death, the estate being vested in him. Though the assessment is on the
executor or executors, as the case may be, for all practical purposes it
is the assessment of the deceased
[CIT v. G.B.T. Sheth and
Another – 133 ITR 192 (MP)].
Hence, the executor
has to e-file return under the PAN of the deceased and would be entitled
for basic exemption.