SC judgement on s. 271 (1)(c) penalty in Dharmendra Textiles explained

Kanbay Software vs. DCIT (ITAT Pune)

In respect of AY 2002-2003, the assessee claimed by a revised return that the loss suffered in respect of one s. 10A unit was not liable to be set-off against the profits of another s. 10A unit. The AO rejected the claim and the assessee accepted the decision of the AO. On the question whether the assessee was liable for penalty u/s 271 (1) (c) for “furnishing inaccurate particulars of income”, especially in the light of UOI vs. Dharmendra Textile Processors 306 ITR 277 (SC), HELD allowing the appeal:

(1) On first principles, penalty u/s 271(1)(c) is not simply a consequence of an addition being made to the income of the assessee. Penalty u/s 271(1) (c), irrespective of whether it is a civil liability or a criminal liability can only be imposed when the scheme of the Act permits or requires so. It is not an automatic consequence of an addition being made to the income. An addition made during the course of assessment proceedings, by itself, cannot be enough to initiate, leave aside conclude, penalty proceedings u/s 271(1)(c).

(2) The judgement in UOI vs. Dharmendra Textile Processors has to be understood in the correct perspective. It does not make a radical change in the law nor does it affect the basic scheme of s. 271 (1) (c). Even in K P Madhusudanan vs. CIT 251 ITR 99, the assessee’s plea to the effect that ‘revenue was required to prove mens rea of a criminal offence’ before penalty u/s 271(1)(c) can be imposed was rejected. Penalty u/s 271 (1) (c) has been held to be ‘civil liability’ in contradistinction to prosecution u/s 276C. It is wrong to infer that because the liability is a “civil liability”, it ceases to be penal in character. There is no contradiction in a liability being a civil liability and the same liability being a penal liability as well, though a civil liability cannot certainly be a criminal liability as well. As observed in Om Prakash vs. UOI AIR 1984 SC 1194 @ 1209 “A penalty imposed by the sales tax authorities is a civil liability, though penal in character”.

Estimated expenditure towards warranty is allowable u/s 37 (1)

Rotork Controls vs. CIT (Supreme Court)

The assessee sold valve actuators. At the time of sale, the assessee provided standard warranty that if the product was defective within the stated period, the product would be rectified or replaced free of charge. For AY 1991-92, the assessee made a provision for warranty at Rs.10,18,800 at the rate of 1.5% of the turnover. As the actual expenditure was only Rs. 5,18,554, the excess provision of Rs.5,00,246 was reversed and only the net provision was claimed. The Tribunal allowed the claim on the basis that the provision had been consistently made and on a realistic manner. The High Court reversed the Tribunal on the basis that the liability was contingent and not allowable u/s 37 (1). HELD, reversing the High Court that:

(1) A provision is a liability which can be measured only by using a substantial degree of estimation. A provision is recognized when: (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c) a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision can be recognized;

PC as FM: His achievements in 5 budgets

Hi Every one.

The UPA has come back to power. The ex-FM has been declared won under dubious declartion. At 3pm he accepted a probable defeat and left the counting center as he was trailing since beginning. But suddenly with an hour or so he was declared elected. GOD BLESS this highly Democratic country.

Well if he becomes FM then he sure will enter the gunnies book of records. As it is he must be a serious contender for introducing many innovative taxes in the Indian economy in the last 5 budgets as under:

1->Freight Tonnage tax for shipping companies. Refer Chapter XIIG. This is a DEEMED Income.

2-> STT. IT that was .15% when introduced and subsequently raised to .25%

3-> CTT tax at .1%. [This has been temporarily withdrawn for election funding.]

4-> Education cess 2% across the board. [This is tax on tax [surcharge] on tax]

5-> Higher education cess 1% across the board. [This also is tax on tax [surcharge] on tax]

6-> An expenditure direct tax called FBT a DEEMED dis allowance of expenditure.

7-> Service Tax was raised from 8% to 12% [How ever for election purpose it was brought down to 10% by his successor]

8-> MAT introduced for sec.10AA exempted companies.

10->Divided Tax raised from 10% to 15%

11> Covered a huge chunk of items under Service tax. Like Service tax on cheque leaves issued by bank, and interest charged etc.

Further a new levy called folio charges [Rs. 100 per quarter that is 400 per year] by banks on all accounts except Saving Bank account. It is the Business of the any business man to keep accounts of his customer. Then why should they charge the customer, I do no understand. If I say that I do not want the bank to keep my folio, will the bank accept my statement and charge interest as per my statement? They do not render any service in maintaining my account to charge me for the same. Over and above this, Service tax + edn cess + higher edn cess are also charged.

What you got? The share market [I would call it a gambling] income got taxed at lower percentage of 10% [now 15%] much lower than an income earned by toiling night and day.

Now if he becomes FM again you can expect the following:

a-> In hindi they ask “App kahan service karte hain?” and reply comes as “Main xx company may service karta hoon.”

That means an employement is a service rendered. Naturally it will attract Service tax ++ to be paid by the employer. Any case the employer can get input credit.

b-> One gives money to his/ her spouse for running the house which again is a service. This will attract service tax.

c-> A new cess at 2% will be levied as Agriculture development cess for recovering 60000 crores agri loans written off.

This article is given by Vishwanathan from ITAXUSERS group.

Benefit of enhanced depreciation on commercial vehicles has been extended

No.402/92/2006-MC (10 of 2009)
Government of India / Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
***
New Delhi dated the 24th April 2009

The benefit of enhanced depreciation on commercial vehicles has been extended up to
30th September 2009. Now, commercial vehicles acquired on or after 1st January 2009 and put to use
before the 1st October 2009 will be eligible for depreciation at the rate of 50 percent. The Central
Board of Direct Taxes have issued a notification vide S.O. 989(E) dated 21st April 2009 (Notification
No.37/2009/F.No.142/01/2009-TPL) to this effect, substituting the words “1st day of April 2009”
with the words “1st day of October 2009”.
Earlier, the benefit was made available for commercial vehicles acquired on or after 1st January
2009 and put to use before the 1st April 2009 vide a notification dated 19th January 2009.
XXX

MAJOR CHANGE IN E FILING OF RETURNS-WITH REGARD TO ITR-V

MAJOR CHANGE IN E FILING OF RETURNS-WITH REGARD TO ITR-V

If the assessee does not use a digital signature for electronically transmitting the data, he is required to follow-up the electronic transmission of the data by submitting the Form ITR-V with the Income-tax Department as verification of the electronic filing of the return.

In such a case, the date of transmitting the data electronically will be the date of furnishing the return if the Form ITR-V is furnished within thirty days after the date of transmitting the data electronically. In case, Form ITR-V, is furnished after the above mentioned period, it will be deemed that the return in respect of which the Form ITR-V has been filed was never furnished and it shall be incumbent on the assessee to electronically re-transmit the data and follow it up by submitting the new Form ITR-V within thirty days.

Since the Form ITR-V is bar-coded, assessee is advised not to fold the same and post it in A4 size envelope. The assessee shall furnish the Form ITR-V to the Income-tax Department by mailing it to “Income Tax Department – CPC, Post Box No - 1, Electronic City Post Office, Bangalore - 560100, Karnataka” within thirty days after the date of transmitting the data electronically. The Post Box shall deliver all the Form ITR-V to the Centralized Processing Centre (CPC) of the Income-tax Department in Bangalore . Upon receipt of the Form ITR-V, the CPC shall send an e-mail acknowledging the receipt of Form ITR-V. The e-mail shall be sent in due course to the e-mail address furnished by the tax-payers in his return. No Form ITR-V shall be received in any other office of the Income-tax Department or in any other manner.