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Manuals Income Tax
Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents...
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ICDS applicability may govern specified transactional tax issues, raising whether prior judicial precedents remain operative.
The ICDS, notified under section 145(2), are intended to standardise computation of business and other income for the transactional issues they address and apply to assessment years following notification. They were framed after reviewing judicial views to supply authoritative guidance where earlier judicial decisions arose without statutory standards; nevertheless, some ICDS provisions may conflict with those precedents, posing a question about which authority should prevail.
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Accounting method application: ICDS governs sources using the mercantile system but not sources accounted on a cash basis.
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ICDS applicability limited to mercantile accounting; excludes cash-accounting and individuals/HUFs not subject to tax audit.
ICDS applies to persons following the mercantile system of accounting and does not apply to those following the cash system. For individuals and HUFs, ICDS is applicable only if they carry on business or profession and their books are required to be audited under the tax audit provisions; it does not apply where there is no business or professional income even if mercantile accounting is followed for other heads.
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Foreign tax credit conversion uses telegraphic transfer buying rate on the last day of preceding month.
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Foreign Tax Credit documentation: verified income statement plus certificate and payment or deduction proof to claim credit.
Foreign Tax Credit eligibility requires a verified statement of foreign income and foreign tax paid in the prescribed form, plus a certificate or statement specifying the nature of the income and tax deducted or paid issued by the foreign tax authority, the person who deducted the tax, or signed by the taxpayer, accompanied by a tax challan or online payment acknowledgement for payments and proof of deduction where tax was withheld.
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Foreign tax credit allowed against MAT/AMT like normal tax, but any excess over normal provisions is ignored.
Foreign tax credit under Rule 128 of the Income tax Rules, 1962, is allowable against tax payable under MAT or AMT in the same manner as under the normal provisions; any foreign tax credit available against MAT/AMT that exceeds the credit allowable under normal provisions is ignored when computing MAT/AMT credit.
Act Rules Income Tax
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Foreign tax credit: credit limited to lower of domestic tax and foreign tax; treaty excess is disregarded.
Rule 128 of the Income tax Rules, 1962 limits Foreign Tax Credit to the lesser of domestic tax chargeable on the doubly taxed income and the foreign tax actually paid, and directs that any foreign tax paid in excess of the tax payable under the applicable DTAA be ignored for credit computation.
Act Rules Income Tax
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Foreign Tax Credit denial: no credit for domestic interest, fees or penalties and for disputed foreign taxes.
Rule 128 restricts Foreign Tax Credit by disallowing FTC against interest, fees or penalties payable under the Income-tax Act, and by excluding any foreign tax (or part thereof) that is disputed by the assessee.
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Foreign Tax Credit requires evidence of settlement, proof of payment and an undertaking within six months of dispute resolution.
Foreign Tax Credit (FTC) is allowed for disputed foreign tax only if, within six months from the end of the month in which the dispute is finally settled, the assessee furnishes evidence of settlement, evidence that the tax liability has been discharged by the assessee, and an undertaking that no refund in respect of that amount has been or will be claimed.
Act Rules Income Tax
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Foreign tax definition determines FTC scope: DTAA-covered taxes apply, otherwise income-tax-type foreign levies qualify for credit.
Definition of foreign tax for Foreign Tax Credit under Rule 128: where a DTAA exists, foreign tax is the tax covered by that DTAA; where no DTAA exists, foreign tax is the tax payable under the foreign country's law in the nature of income-tax as defined in the statutory explanation, including excess profits tax or business profits tax charged on profits by central or local authorities.
Act Rules Income Tax
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Foreign tax credit proportionate allocation ensures foreign tax relief is apportioned when income is taxed across multiple years.
Foreign tax credit under the Income tax Rules operates on a proportionate allocation principle when the same income is taxable in more than one year; the credit entitlement must be apportioned across the years in which the income is offered to tax so that relief for foreign taxes corresponds to the portion of income taxed in each year.
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Foreign tax credit allowed when foreign tax corresponds to income offered or assessed to tax in India in the same year.
Foreign tax credit is available to Indian residents for tax paid in a foreign country or specified territory, and is allowed only in the year when the corresponding income is offered to tax or assessed to tax in India, creating a temporal link between domestic taxation of the income and recognition of the foreign tax credit.
Manuals Income Tax
STEPS NEED TO BE TAKEN AFTER APPROVAL ADVANCE PRICING AGREEMENT(APA)?
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Advance Pricing Agreement requires modified returns and extends reassessment deadlines for affected assessment years by tax authorities.
Entry into an Advance Pricing Agreement fixing the arm's length price requires the taxpayer to file a modified return for each affected assessment year within three months from the end of the month in which the APA is executed. If an assessment was already completed, the Assessing Officer must reassess under the APA and complete that reassessment within one year from the end of the financial year in which the modified return is filed. If the assessment was pending, the Assessing Officer may complete it within an extended timeframe permitted for APA-related assessments.

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The Intricacies of Unexplained Investment and Legal Recourse: A Comprehensive Analysis of a recent Case

18 January, 2024

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Deciphering Legal Judgments: A Comprehensive Analysis of Case Law

Reported as:

2024 (1) TMI 606 - ITAT VISAKHAPATNAM

Introduction:

A landmark judgment by the Income Tax Appellate Tribunal (ITAT) Visakhapatnam has set a precedent in the interpretation and application of tax laws concerning unexplained investments in property transactions. This case presents a fascinating exploration of legal principles pertaining to income tax assessments and property law.

Background:

The case originated from a survey conducted under section 133A of the Income Tax Act, 1961, which revealed a significant land purchase in Visakhapatnam. The Income Tax Department scrutinized this transaction, suspecting unexplained investments.

Issue 1: Investigating the Source of Property Investments:

The central issue was identifying the source of funds for the land purchase. The IT Department challenged the claim that the investment was funded through advances from various individuals. This led to a complex legal discussion about the credibility of these sources and the nature of the property transaction.

Issue 2: Validity of Cancellation Deeds in Property Transactions:

The case also revolved around the legal validity of cancellation deeds. The question was whether such deeds, which claimed no consideration for the land, could nullify the original transaction without a civil court decree.

Court's Deliberation and Findings:

The Tribunal meticulously examined the evidence, including the initial survey, property documents, and legal arguments. It analyzed the applicability of the Income Tax Act and the Specific Relief Act, 1963, focusing on procedures for cancelling registered instruments.

Final Conclusion:

The Tribunal upheld the additions made by the Income Tax Officer under section 69 of the Act, stating that the registered cancellation of the sale deed was not legally valid without a civil court decree. The decision emphasized the need for conclusive proof regarding the non-passing of consideration and the credibility of the alleged sources of investment.

Evolved Doctrines and Principles:

This judgment emphasizes several legal principles. It highlights the necessity for taxpayers to prove the creditworthiness of sources in property transactions and clarifies the procedures for cancelling registered instruments. Additionally, it demonstrates the rigorous approach of tax authorities in scrutinizing high-value transactions with unclear fund sources.

Conclusion:

This ITAT decision is significant for understanding the complexities of income tax laws in the context of property investments. It serves as a critical reminder of the need for transparent financial dealings and verifiable documentation in substantial property transactions.

 

Full Text:

2024 (1) TMI 606 - ITAT VISAKHAPATNAM

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Acts Income Tax
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