Opinion Of Eminent Legal Luminaries On Controversial Issues

QUERY: A Co. has only agricultural income & income from sale of rural agricultural land (not capital assets). Can there be any liability under MAT?
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From the fact, it is apparent that querist is a company and therefore no Alternate Minimum Tax (AMT) would be applicable. For the companies Minimum Alternate Tax (MAT) would be applicable u/s. 115JB of the Act.
So while calculating “book profit” under Explanation 1 to section 115JB(1), the agricultural income falling u/s. 10(1) to be excluded as per Explanation (ii)

QUERY: Assessee changed its method of providing depreciation from ‘Straight Line Method (SLM) to “Written Down Value (WDV) during the year under consideration which resulted into shortfall in depreciation. Such shortfall was charged to P & L Account. AO disallowed claim of such additional depreciation on the count that Sec. 205 of the Companies Act does not entitled an assessee to claim depreciation for earlier years placing reliance on “McDowell and Co. v. CTO – 154 ITR 148”. Whether the change in method of accounting for depreciation was in accordance with Accounting Standards issued under the Companies Act? Whether AO has jurisdiction to go behind the “book profits” shown in P & L Account except to the extent of prescribed adjustments once it is found that books of accounts are certified by authorities under the Companies Act? What is the treatment of income on account of change in the method of depreciation? What is the treatment of additional claim / write back of depreciation in the books of account upon change in the method calculating the same?
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The assessee has changed method depreciation from SLM to WDV and shortfall (deficiency) is charged to profit and loss account as per accounting standard. Thus prepared accounts is per schedule VI of the Companies Act, 1956 (i.e. schedule III of the Companies Act, 2013) and certified by the authorities under the Companies Act. Therefore the Assessing Officer has no jurisdiction to go behind the “book profit” shown in P & L account except to the extent of prescribed adjustment mentioned under section 115JB of the Income tax Act, 1961. As per the Supreme Court in Apollo Tyres Ltd. v. CIT [255 ITR 273], while interpreting similar provision under section 115J of the Act.

QUERY: Can availment of MAT credit be deferred. In other words, assessee wants to pay regular tax and does not wish to utilise available MAT credit for reducing the current tax liability. Assessee wishes to utilise available MAT credit in future years. Is there any bar in his doing so?
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CIT v. Tulsyan NEC Ltd. [330 ITR 227], the Supreme Court held that the fact that the amount of credit to be allowed or to be set off is not frozen and is ambulatory does not take away / destroy the right of the assessee to the amount of tax credit.

QUERY: Whether Section 115BBE would come into operation when the assessee has himself declared in his original Return of Income (or voluntarily through revised return) any income which could have been brought to tax by the Assessing Officer u/s. 68, 69, 69A and 69B etc? In other words, if the assessee himself declares any income in the Return without specifying the source thereof as other income he should be liable to pay tax at the normal applicable rate and not necessarily at 30% specified u/s. 115BBE.
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QUERY: Income declared in return as other income. Can it be covered under section 115BBE though neither found recorded in any book (section 68) nor investment (Section 69)?
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It would mean such income would be taxed on standalone basis, so as to be taxable even in the hands of the person, whose aggregate income including such income falling under the provisions falls below taxable limit.
Therefore, irrespective of the “head” under which it is assessable such income would be taxed at flat rate of 60%.

QUERY: If project is approved prior to June 1, 2016 and subsequent fresh approval is obtained after June 1, 2016, whether the project is eligible to claim deduction under section 80-IBA. Note: The project is surely to be completed within 3/5 years of its approval.
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Deduction in respect of profits and gains from housing projects under section 80-IBA of the Income-tax Act, 1961 has been inserted by the Finance Act, 2016, with effective from April 1, 2017 i.e. from assessment year 2017-18.

QUERY: If a policy holder pays premium more than 10% of the sum assured, can he claim deduction under section 80C of the Act? When amount is received, how it would be taxed?
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Section 80C provides that an assessee, being an Individual or HUF shall be allowed a deduction from gross total income of an amount not exceeding Rs. 1,50,000/- in respect of amount paid or deposited in the previous year in the specified savings listed in section 80C(2) of the Act. One of amount for which a policy holder is entitled for deduction is amount deposited to effect or to keep in force an insurance on the life of the policy holder. However, as per section 80C(3A) only premium paid on insurance policy which is not in excess of 10% of the actual capital sum assured, is allowable for deduction.

QUERY: Whether Assessing Officer is justified in treating excess stock found as undisclosed investment under section 69 of the Act?
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As per the Bombay High Court in Ramanlal Kacharulal Tejmal [146 ITR 368] excess stock found represents investment of the assessee in property and therefore same can be assessed under section 69 of the Act.

QUERY: When a closely held company receives share application money with premium in A.Ys. 2009-10, 2010-11 & 2011-12, he files Form 2, confirmation, address, PAN, bank account details etc during the course of assessment. AO doubts the capacity of share applicants and adds back u/s. 68 based on statement recorded of accommodation entry provider to share applicants. Assessee company asked for a copy of statement recorded and cross examination of entry provider, which was not provided by the AO. Please also refer proviso to section 68. Is the assessment valid.
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Assessment is not valid, as it violates the principles of natural justice. The Supreme Court in R. B. Shreeram Durga Prasad v. Settlement Commission [176 ITR 169] has held that the order made in violation of principles of natural justice is void and nullify.

QUERY: AO made addition u/s. 68 in respect of share application money received by the assessee in the very first year of its incorporation. Whether AO could have made such addition in spite of the fact that assessee had practically done no business so as to generate any such income? What proof is required for proving the genuineness of the transaction? What shall be the scenario where share application money is received from tainted entities? What is the effect of finding that promoters / directors of assessee-company later on acquired the very shares at discounted rates from such share holders?
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AO has right to make addition of share application money received by the assessee in very first year of incorporation, irrespective of the fact, whether the assessee has done business or not, on the basis of proviso inserted by the Finance Act, 2012 w.e.f. April 1, 2013 i.e., assessment year 2013-14.

Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
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