As per the section 17(2) "perquisite" includes— (i) (ii) ....... (viii) The value of any other fringe benefit or amenity as may be prescribed: Provided that nothing in this clause shall apply to,— 1. the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer – this condition will be relevant only when the employer has a hospital and medical treatment is provided to the employee without cost. 2. any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family— (a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; (b) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines : This clause will be relevant when actual expenditure is incurred by the employee and then the employer re-imburses the amount in the specified hospitals. In your query, as the employers are distributing medical kits to employees firstly: 1. It cannot be considered as medical treatment, because there is no treatment to any disease but just a precautionary measure for all the employees and 2. Employees are not actually incurring cost which is then reimbursed by the employer and 3. Employer does not own a hospital where the treatment is given (assumed that the employer is not a hospital or owns one) Therefore, in our view exemption from perquisite cannot be availed. The value of perquisite will be determined as per Rule 3 which says that, the value of any benefit provided by the employer shall be determined on the basis of cost to the employer Therefore, medical kits given to employees by the employers will be considered as perquisites under section 17(2) of the Income Tax Act. Further, such expenditure should be allowable as a deduction to the employer u/s 37(1) of Income Tax Act,1961.
As per the section 17(2) "perquisite" includes— (i) (ii) ....... (viii) The value of any other fringe benefit or amenity as may be prescribed: Provided that nothing in this clause shall apply to,— 1. the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer – this condition will be relevant only when the employer has a hospital and medical treatment is provided to the employee without cost. 2. any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family— (a) in any hospital maintained by the Government or any local authority or any other hospital approved by the Government for the purposes of medical treatment of its employees; (b) in respect of the prescribed diseases or ailments, in any hospital approved by the Principal Chief Commissioner or Chief Commissioner having regard to the prescribed guidelines : This clause will be relevant when actual expenditure is incurred by the employee and then the employer re-imburses the amount in the specified hospitals. In your query, as the employers are distributing medical kits to employees firstly: 1. It cannot be considered as medical treatment, because there is no treatment to any disease but just a precautionary measure for all the employees and 2. Employees are not actually incurring cost which is then reimbursed by the employer and 3. Employer does not own a hospital where the treatment is given (assumed that the employer is not a hospital or owns one) Therefore, in our view exemption from perquisite cannot be availed. The value of perquisite will be determined as per Rule 3 which says that, the value of any benefit provided by the employer shall be determined on the basis of cost to the employer Therefore, medical kits given to employees by the employers will be considered as perquisites under section 17(2) of the Income Tax Act. Further, such expenditure should be allowable as a deduction to the employer u/s 37(1) of Income Tax Act,1961.
Based on the facts, we understand that the Company intends to pay a lumpsum compensation to the widow/ legal heirs of the employee, who has passed away due to COVID. Any payment made by the Employer to the widow or legal heir of an employee who dies in active service shall be squarely covered by the clarification issued by CBDIT vide Circular No.573 dt 21-08-1990 and accordingly not taxable. This is a settled issue and may not be litigated. We also wish to highlight that such payment must not be in nature of Gratuity or Leave encashment or any other component of full and final settlement the taxability of which shall be governed by the respective provisions. Adequate documentation in this regard is suggested. However another member of the tax clinic team is of the opinion that there could be a trigger u/s 56(2)(x) - The Circular under question was issued in the year 1990 when provisions similar to the current 56(2)(x) did not exist. It may be contested by the department that the circular does not hold good in the context of present law. The circular in itself is very short and does not support the conclusion with any reasoning. A third member of the tax clinic is of the view that 56(2)(x) should not apply and the circular quoted should be still valid. The circular was issued u/s 4 of the Income Tax Act. Therefore, a position can be taken that 56(2)(x) cannot override section 4 or any circular issued u/s 4.
We do understand the practical difficulty being faced while processing returns having FTC clams. Let us try to give you a solution combining practical and technical possibilities. As per rule 128 read with section 139 of the Income Tax Act 1961, in order to claim Foreign Tax Credit (FTC) Form 67 is to be filed before filing the tax return within the due dates mentioned therein u/s 139(1). However, Scenario 1: If the time limit to file revised return is not yet expired In this scenario, on the basis of the rule 128 and some rulings which have held that due date u/s 139(1) also includes due date u/s 139(4)/139(5), it can be argued that Form 67 can be filed before filing such belated/ revised return if the due dates to file belated and revised return have not yet expired. No doubt, this could be litigious and not accepted by tax authorities, as the requirement under 128 is succinct. Further, it is also important to point out that relief from double taxation is granted by section 90 and the requirement of furnishing Form 67 is only a procedural requirement. There are rulings u/s 206AA which can be relied upon to argue that relief granted by section 90 read with respective DTAA cannot be denied for a procedural lapse. So, you could consider filing Form 67 and file a revised ITR. If in case, the CPC is not accepting Form 67 in revised or belated return[because of reasons of valiation rules which are enforced by them], then following options could be explored: - Raise a grievance with CPC using the efiling portal or using the PGportal[CPGRAMS] or use twitter to raise a grievance - File an appeal before CIT(A) against 143(1) intimation or - File a revision petition u/s 264 against 143(1) intimation Scenario 2: If the due date to file revised return has expired If the due date to file the revised return has already expired and intimation u/s 143(1) is issued, in that case, rectification u/s 154 cannot be filed to include a claim of FTC. This is because, no new claim which is absent in the original return can be made in 154 application. We understand you may have claimed FTC in the ITR but as per rule 128 filing Form 67 is a part & parcel of making the FTC claim in the original return. So the options that will be available are only: - File an appeal before CIT(A) against 143(1) intimation or - File a revision petition u/s 264 against 143(1) intimation - Another stray option that can be explored is to file an application u/s 119 before the CIT to admit the claim, in case any genuine hardship can be demonstrated. One word of caution, in case a 154 order has been passed against your application for rectification of intimation and you choose to file an appeal before CIT(A), you may not get relief before CIT(A). This is because, the appeal against 154 order can get very limited only to extent of whether there was a mistake apparent on record. CIT(A) accepting a procedural lapse and granting relief could be a difficult possibility. Then, the matter might have to travel upto ITAT. Therefore, a careful evaluation of filing revision petition u/s 264 as against filing an appeal before CIT(A) can be made.
We are given to understand that the assessee has applied for fresh registration and the same is approved by way of provisional registration. For the sake of convenience, we will assume that it is in connection to 12AB of the Act (a similar analogy can be drawn to provisions of 10(23C)/80G/35). As per the new regime, if an assessee wishes to obtain a fresh registration it has to make an application under Form 10A (refer to Rule 17A read with Section 12A(1)(ac) of the Act) at least one month prior to the commencement of the previous year (PY) from which registration has been sought. The requirement, of the application to be filed at least one month prior to the PY from which registration has been sought is, has been relaxed for the applications filed in the PY 2021-22. Once an application is made under section 12A(1)(ac) the same has to be processed under section 12AB(1)(c) of the Act. As per the said section, provisional registration has to be granted for 3 years from the AY from which the registration is sought. So there is no question of grant of provisional registration for 5 years, as mentioned in the question. It is relevant to note therefrom that there is no provision to reject such applications. All applications will be passed by way of grant of provisional registration. However, defective/incomplete forms can lead to the cancellation of provisional registration after hearing the assessee. It may be relevant to note from Section 12AB(1) that, for applications made under 12A(1)(ac)(i) [dealing with renewals] and 12A(1)(ac)(vi) [dealing with fresh registrations], there is no detailed scrutiny of documents/information to satisfy about the genuineness of the activities of the trust/institution, among other requirements. Since that level of check is not done, the law mandates such trusts to make an application under section 12A(1)(ac)(iii) by way for the filing of Form 10AB (as again form 10A filed previously) within 6 months from the commencement or at least six months prior to the expiry of 3 years, whichever is earlier. Such application will be considered for processing under section 12AB(1)(b) and will be subject to greater scrutiny of the activities. The registration under the said section will be for 5 years.
Duplicate. Refer to the answer to the previous question.
Our understanding, an Assessee claimed a deduction of Rs. 1.27Cr while profit recorded in audited P/L was Rs. 1.12 Cr. It is not clear on the quantum of correct deduction to be claimed. As it appears that the Assessee has not appealed the order, we have proceeded with an assumption that that the correct deduction is Rs. 1.12 Crore. We understand that the AO has initiated proceedings u/s 154, where he has added income under the head ‘income from other sources’ representing the difference between the deduction claimed in the return and deduction allowed under 143(3). In this regard, it is relevant to note that return of income is ‘a record’ for the purpose of section 154 of the Act and therefore the same can be considered for the purpose of amending the order as there is an apparent difference between the returned income and assessed income. However, it is necessary to consider the submissions made during the course of the assessment. Whether or not the Assessee has attempted to explain the difference in the ITR and the P/L will decide the legality of the proceedings u/s 154 of the Act. If the assessee has explained the difference and the AO, considering the explanation, accepted that the deduction allowable is only Rs. 1.12 Crore as against Rs. 1.27 Crore, then the same will amount to revision instead of rectification. It is well accepted that the AO cannot revisit/revise the order u/s 154 of the Act. In a case where there is no explanation by the Assessee on the difference in the returned and correct/PL amount, the AO is justified to consider that as a mistake apparent from the record and subject the same to rectification u/s 154 of the Act. During the course of the rectification proceeding, the Assessee should present the correct particulars of income and explain the inadvertent error committed in the returned income. It is well accepted that merely because the Assessee has claimed the wrong deduction or offered the wrong amount to tax, the same will not preclude him from offering the correct income to tax. If an order has been passed u/s 154 of the Act, depending upon the submissions made in the assessment and rectification proceedings, the Assessee can take a suitable stand before the appellate authorities. With respect to the query whether the above leads to “amending the order” of AO, we are of the considered opinion that it results in amending the order with respect to the income liable to tax under the head ‘Income from other sources. Below clarifications can be provided if you need more clarity on the above: - Correct quantum of deduction. Whether it is as per the ITR or Profile and loss account? - Stand taken during the course of the assessment. Whether submissions were made on incorrect claim/profit and loss accounts? - Status of rectification proceedings - Whether rectification order has been passed? - Status of assessment proceedings - Whether appeal has been filed? - Kindly elaborate on the second question - "In addition to point (i), the AO is NOT comparing the two comparables. Hence, the order is arbitrary in law."
Dear Querist, We understand that a client of yours has now become an NRI and whether he needs to obtain Aadhar and link it PAN. In this regard, it is imperative to delve into the provisions of Section 139AA which mandates the requirements to link Aadhar and PAN. The section reads as follows: .......... 139AA. Quoting of Aadhaar number.—(1) Every person who is eligible to obtain Aadhaar number shall, on or after the 1st day of July, 2017, quote Aadhaar number— (i) in the application form for allotment of permanent account number; (ii) in the return of income: Provided that where the person does not possess the Aadhaar Number, the Enrolment ID of Aadhaar application form issued to him at the time of enrolment shall be quoted in the application for permanent account number or, as the case may be, in the return of income furnished by him.......................... Explanation.—For the purposes of this section, the expressions— (i) "Aadhaar number", "Enrolment" and "resident" shall have the same meanings respectively assigned to them in clauses (a), (m) and (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 (18 of 2016);...... As can be seen from the above, every Person (as defined under section 2) of the Income Tax Act,1961 (Limited to Individuals, in the instant case) who is Eligible to obtain Aadhar shall mandatorily obtain and quote/ link with PAN. It further draws our attention to the question who is eligible to obtain Aadhar, in this regard, we need to decipher certain provisions of Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016. In the said Act, Section 3 reads: ................. 3. (1) Every resident shall be entitled to obtain an Aadhaar number by submitting his demographic information and biometric information by undergoing the process of enrolment. Thus it can be inferred that every resident is eligible and mandatorily required to obtain Aadhar. This further requires analysis as to who would be a resident. The said Act, defines in section 2, that ..... (v) “resident” means an individual who has resided in India for a period or periods amounting in all to one hundred and eighty-two days or more in the twelve months immediately preceding the date of application for enrolment;..... Thus, a person who is staying in India for a period of more than 179 days or more in the immediately preceding 12 months of date of application, shall be required to obtain Aadhar. On a combined reading of the above, we can summarize that a person resident in India as defined in the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 shall be required to obtain and quote/ link the Aadhar to PAN. In your case since your client is a non resident, in our opinion he need not obtain and furnish the Aadhar/ link it to PAN. Thanks.
By virtue of provisions of sec 50C 'The extra 13 lacs' referred to in the query is also taxable as capital gains only and not as other sources. If the entire gain of 48 lacs is invested in specified tax saving bonds, under section 54EC, the entire gain on sale of flat shall not be subjected to any taxes. However, such claims of benefit under section 54EC may be litigated by the department. In this context reference may be made to the ruling of Bombay High Court in the case of Jagadish C Dabalia vs ITO [2019] 104 taxmann.com 208 (Bombay), which indirectly favours the above view.
Sec 54 provides for following timelines: Buy within one year before the date on which the capital asset is transferred or Buy within two years after the date of transfer of the capital asset or Construct within 3 years from the date of transfer of capital asset For purchase, there are backward and forward timelines but for construction, there is only forward timeline. Although construction can start before the transfer of capital asset (ref: CIT Vs. J.R. Subramanya Bhatt (1887) 165 ITR 571 (Karn); CIT vs Bharti Mishra [2014] 265 CTR 374 (Delhi) and many others) the construction has to end within 3 years from the date of transfer of capital asset i.e. after the date of transfer of capital asset. Since, in the present case, it is a case of construction, the benefit of section 54 is not available. Even if we hold that the said benefit can also be applied for 'construction', the benefit under section 54 is still not available as the same has been completed one year prior to the transfer. Please consider the deductibility under sections 54EC and 54GB of the Act.
The provisions of section 56(2)(x) is a Specific Anti Avoidance provision. There is only one exception provided where agreement was entered into for sale at an earlier date, consideration was paid by banking modes and on such date if the value adopted for stamp duty was lower, such lower value will be considered for the purpose of testing the applicability or otherwise of 56(2)(x). Other than this, there are no exceptions available and the amount of Rs.39 lakhs in your query will invariably taxable in the hands of the buyer. Apart from this, it may also be taxable in the hands of the seller by operation of section 50C. If however, the stamp duty value itself was questionable, then the benefit of 3rd proviso to section 56(2)(x) could be claimed by justifying the FMV is lower than the stamp duty value.
TDS under 194-IA is deductible at the rate of 1% on the sum paid by way of consideration for transfer of immovable property. No tax is required to be deducted where consideration paid for the transfer of an immovable property is less than fifty lakh rupees. Sections 50C and 43CA are deeming fictions which under certain scenarios substitute actual transaction value with guidance value for the purpose of computing gain in the hands of the seller. It is a settled law that a deeming fiction cannot be extended any further and has to be limited to the area for which it is created. Any argument that the provisions of Sec 50C / 43CA which deem guidance value as full value of the consideration received in the hands of the seller would also extend to consideration for the transfer of an immovable property paid by the buyer would be contrary to the settled law. Also there is no equivalent deeming fiction under 194-IA to deem higher of transaction price / guidance value as the consideration value for TDS purposes. Therefore we are of the view that for the purpose of TDS provisions under section 194-IA, value as per stamp valuation authority would be of no relevance.
The question is very generic, short on facts and details. The tax liability of an assessee is dependent on multiple aspects including his residential status, age, components of income, tax slabs that are applicable etc. In the absence of complete information we express our inability to answer the query.
Dear Queriest, From the breif facts we understand that a resident is in receipt of services in the nature of audit and inspection and the resident should deduct TDS while making the payment. In such a case, the resident should deduct taxes under section 195 of the Act read with rates in force ( schedule of rates - the rates for foreign company is 40% + Surcharge + Cess). Though the nature of services would have to be looked at closely by verification of agreement, invoices, we are of the view that these services may be classified under Fee for technical services as defined under sec.9 of the Act. If that is case, you may alternatively evaluate the benefits of Sec.115A and also the applicable Double Taxation Avoidance Agreement of the country where the service provider is the resident provided he is able to provide all requisite documents in the nature of PAN, Tax Residency Certificate or Form 10F. However, there are some rulings which have held that Audit services don’t come under FTS. The queriest is advised to proceed cautiously.
The definition of the term 'profession' for the purpose of section 44ADA of the Act, is borrowed from section 44AA. The term 'medical' is covered thereunder. Whether a particular activity can be classified as `business' or `profession' will depend on the facts and circumstances of each case. The expression "profession" involves the idea of an occupation requiring purely intellectual skill or manual skill controlled by the intellectual skill of the operator, as distinguished from an operation which is substantially the production or sale or arrangement for the production or sale of commodities. - CIT Vs. Manmohan Das (Deceased) [1966] 59 ITR 699 (SC), CIT v. Ram Kripal Tripathi [1980] 125 ITR 408 (All). [Extract from ICAI guidance note] On the question of whether running a diagnostics laboratory is considered a profession, we are of the considered opinion that the same is not considered so due to commercial nature of its operations. We wish to place reliance on the ruling of the ITAT in the case of DCIT vs. Insight Diagnostic & Oncological Research Institute (P.) Ltd. [2002] 82 ITD 230 (PUNE) wherein a similar question was under consideration. The ITAT has observed as under The first controversy arising in the appeal was whether the activity carried on by the assessee amounted to business activity or professional activity. The word ‘business’ is of wide import and it refers to a real, substantial, and systematic or organized course of activity with a set purpose. This definition would normally include profession. However, since Legislature has defined the words ‘business’ and ‘profession’ separately, the word ‘business’ would not include the ‘professional activity. ‘The profession’ implies professed attainment of special knowledge as distinguished from mere skill. It involves labor, skill, education, and special knowledge. Despite this distinction, if any, professional activity is carried on tinged with a commercial character, then it may amount to the business. In the instant case, the venture carried on by the assessee was a commercial venture as seen from the various factors, namely : (1) it was started with a view to earn profit by making investment and borrowing funds from the bank, (2) the activity was looked after by the employed persons, i.e., by radiologists and technicians and other staff members, (3) the risk factor was also involved, and (4) the entire activity was carried on in an organised and systematic manner. Accordingly, the diagnostic centre started by the assessee was a commercial venture and the activity carried on amounted to business activity. Though the above ruling is in a different context, the same is relevant to the query/facts in the present case. In the following cases nursing homes are held to be business activities and not professions: It is held Medical Practitioners running Nursing Home would be a case of a professional man carrying on a business activity a.Dr. P. Vadamalayam v. CIT [1069] 74 ITR 94 (Mad.) b.CIT v. Dr. V.K. Ramachandran [1981] 128 ITR 727 (Mad.) c.CIT v. Upasana Hospital [1997] 225 ITR 845 (Kerala) d.ITO vs ASHALOK NURSING HOME (P.) LTD [2006] 9 SOT 61 (Delhi) (URO)[19-05-2006] .... The same ratio could be extended to diagnostic labs also. Minimum 50% is required in such cases if the gross receipts is below the prescribed limit. We request you to closely examine the facts/nature of operations before arriving at the conclusion.
Dear sir, Tax clinic is meant for issues and queries related to direct taxes only. Subject experts in the field of accounts may be contacted for queries pertaining to accounting treatments.
Sec 44ADA reads as under “44ADA. (1) Notwithstanding anything contained in sections 28 to 43C, in the case of an assessee, being a resident in India, who is engaged in a profession referred to in sub-section (1) of section 44AA and whose total gross receipts do not exceed fifty lakh rupees in a previous year, a sum equal to fifty per cent of the total gross receipts of the assessee in the previous year on account of such profession or, as the case may be, A SUM HIGHER THAN THE AFORESAID SUM CLAIMED TO HAVE BEEN EARNED BY THE ASSESSEE, shall be deemed to be the profits and gains of such profession chargeable to tax under the head "Profits and gains of business or profession.” ……………………” Law under presumptive scheme only intends to ease compliance burden of the assessee but does not intend to serve as a tax planning / evasion tool. The requirement under law to offer higher of 50% or actual profits as income is explicit and clear. So under law if the actual income is higher than the deemed rate of 50% such higher income has to be offered to tax.
There is no specific exemption for not uploading Form 15CA with regards to payments made through credit card. Rule 37BB(3) exempts the requirement of filing Form 15CA if a) The transaction is not chargeable to tax in India b) Remitter is an individual c) Transaction does not require prior approval of Reserve Bank of India as per the provisions of section 5 of the Foreign Exchange Management Act, 1999 (42 of 1999) read with Schedule III to the Foreign Exchange (Current Account Transaction) Rules, 2000; If above conditions are satisfied then for credit card payments Form 15CA need not be filed As regards BSR Code and branch details to be filled in the Form 15CA, the BSR code of the home branch may be filled in.
The benefit of Notification NO. 56/2012 [F. NO. 275/53/2012-IT(B)], DATED 31-12-2012 is not available to foreign banks and therefore there is no express immunity from non-deduction of TDS on bank guarantee commission/charges. If such charges are paid on account of a loan disbursed by a bank in India, the same will be deemed to accrue as per provisions of section 9(1)(i) owing to the presence of business connection in India. TDS as per ‘rates in force’ needs to be deducted as per section 195 of the Act. No relief as per the DTAA given the fact that PE is established in India If such charges are paid on account of loan disbursed by bank outside India, assuming that the payment is not received/accrues / in connection to business connection in India, we need to examine the applicability of section 9(1)(v) of the Act. Even if we consider that the definition of the term ‘interest’ under section 2(28A) of the Act is wide to cover the subject payment, there is no question of taxing the same under the provisions of the DTAA between India and Taipei. The applicability of each of the relevant articles is discussed below - Article 11 – Interest The definition of the term interest under DTAA is narrow compared to the definition under the Act. We are of the considered opinion that issue of Bank Guarantee does not trigger the definition and therefore provisions of Article 11 are not applicable. - Article 12 – Royalty and fees for technical services We are also of the considered opinion that provisions of financial services, as in the present case, cannot be considered as royalty or fees for technical services and therefore Article 12 is not applicable. - Article 22 – Other income As per Article 22(1), the right to tax other income which is not specifically covered is with the resident state. Article 22(2) and 22(3) are not applicable to the facts in the present case. - Article 7 – Business profits As we are given to understand that there is no PE and considering the non-applicability of Articles 11, 12, and 22, we are of the considered opinion that the said sum is not liable to tax in India. The above issue is complex, which requires a detailed examination of facts and relevant provisions. We recommend you to take a considered opinion before proceeding with the above views.
Section 44AD can be opted only in case of 'eligible business'. Since it is mentioned in the query that the Assessee is engaged in the profession, we are of the considered opinion that the Assessee can't opt for a presumptive scheme under section 44AD.
Sec 195(6) r.w.r 37BB mandates every person responsible for paying a non-resident to furnish information in Form 15CA / 15CB. However sub-rule 3 of Rule 37BB relaxes this requirement and no Form is required to be filed if remittance is made by an individual and remittance does not require prior approval of RBI under section 5 of FEMA Act. Payments to NRO accounts do not require any prior RBI approval. Therefore if such payment is being made by an individual, in our view there is no obligation to file Form 15CA for the given transaction.