INCOME TAX REGULATORY UPDATES NOTIFICATION NO. 138/2021, DATED 27-12-2021
CBDT Notifies Rule 2DD for Computation of Exempt Income of Specified Fund U/S 10(23FF)
Editorial Note: The Finance Act, 2021 has inserted a new clause (23FF) to section 10 to provide the capital gain exemption to investors of the resultant fund or specified fund to the extent capital gain income attributable to units held by a non-resident. The CBDT has notified a new Rule 2DD prescribing manner to compute such exempt income of specified fund under said sub-clause.
NOTIFICATION NO. 137 /2021/ F.NO. 370142/57/2021-TPL(PART-I), DATED 13-12-2021
CBDT notifies e-Verification Scheme, 2021 to collect info. & exercise of certain power by AO
Editorial Note : The CBDT has notified the e-Verification Scheme, 2021, effective from 13-12-2021. The scope of the Scheme shall be in respect to collecting information under sections 133, 133B, 133C, the exercise of power to inspect registers of companies under section 134, and exercise of the power of AO under section 135. The Scheme shall be applicable to deal with the mismatch of information uploaded to the taxpayer’s registered account.
NOTIFICATION NO. G.S.R. 851(E), DATED 10-12-2021
CBDT notifies conditions to claim exemption on transfer of non-deliverable forward contracts u/s 10(4E)
Editorial Note: The Finance Act, 2021 has inserted a new clause (4E) under section 10 to exempt any income received by a non-resident due to the transfer of non-deliverable forward contracts entered into with an offshore banking unit of IFSC. The CBDT has notified Rule 21A
NOTIFICATION NO. 135/2021, DATED 08-12-2021
Govt. notifies provisions of protocol amending India-Kyrgyz Republic DTAA
Editorial Note: The Central Government has notified all the provisions protocol the Protocol, amending the Convention between the Government of the Republic of India and the Government of the Kyrgyz Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
NOTIFICATION NO. S.O. 5056(E), DATED 06-12-2021
Central Govt. specifies ‘Jeevan Akshay-VII Plan’ of LIC as annuity plan for purpose of Sec. 80C deduction
Editorial Note : The Central Government has specified the Jeevan Akshay-VII Plan of the Life Insurance Corporation of India, as the annuity plan of the Life Insurance Corporation of India for the purpose of section 80C(2)(xii). Section 80C(2)(xii) allows deduction of the sum deposited in the annuity plans of the Life Insurance Corporation or any other insurer as the Central Government may specify.
RECENT JUDICIAL RULINGS ON INCOME TAX
SECTION 9 OF THE INCOME-TAX ACT, 1961 – INCOME – DEEMED TO ACCRUE OR ARISE IN INDIA
Royalties or fee for technical services – Satellites/transponder, use of : Where assessee-company, a tax resident of USA, was owner and operator of global network telecommunication satellites located in outer space and was engaged in active business of transmitting telecommunication signals to/from its customers, income earned by assessee from same was not in nature of ‘royalties’ within ambit of Explanation 2 to section 9(i)(vi) and article 12(3) of India-USA DTAA and it was not liable to tax in India – Intelsat Corporation v. ACIT – [2021] 133 taxmann.com 207 (Delhi – Trib.)
SECTION 9 OF THE DIRECT TAXES VIVAD SE VISHWAS ACT, 2020 – ACT NOT TO APPLY IN CERTAIN CASES
If FIR is lodged, prosecution can be said to have been instituted within the meaning of section 9(c) of DTVSV Act – Reliance Industries Ltd. v. Chief Commissioner of Income-tax, Mumbai – [2021] 133 taxmann.com 302 (Bombay)
SECTION 14A OF THE INCOME-TAX ACT, 1961 – EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME
Professional fee : Where disputes between parties regarding disallowance under section 14A with regard to interest expenses had already been settled under Direct Tax Vivad Se Vishwas Act, 2020 and rules made thereunder, SLP against impugned order of High Court holding that where interest free funds available with assessee were far more than gross investment, no disallowance under section 14A was warranted, was to be disposed of as infructuous – Principal Commissioner of Income-tax v. Gujarat Fluorochemicals Ltd. – [2021] 133 taxmann.com 212 (SC)
SECTION 45 OF THE INCOME-TAX ACT, 1961 – CAPITAL GAINS – CHARGEABLE AS
Share transaction – Capital gains v. Business income : Where disputes between parties regarding taxability of surplus arising from sale of shares and securities had already been settled under Direct Tax Vivad Se Vishwas Act, 2020 and rules made thereunder, SLP against impugned order of High Court holding that assessee-company having continuously treated transaction in shares and securities as investment, hence, Assessing Officer could not have treated same as business transaction so as to treat surplus as business income was to be disposed of as infructuous – Principal Commissioner of Income-tax v. Gujarat Fluorochemicals Ltd. – [2021] 133 taxmann.com 212 (SC)
SECTION 92C OF THE INCOME-TAX ACT, 1961 – TRANSFER PRICING – COMPUTATION OF ARM’S LENGTH PRICE
Comparability factors – Turnover filter: Where Tribunal had upheld decision of Commissioner (Appeals) in excluding comparables having an annual turnover of less than Rs. 5 crores in ITeS segment, TPO was unjustified in including said comparables again – Joint Commissioner of Income-tax, New Delhi v. American Express (India) (P.) Ltd. – [2021] 133 taxmann.com 308 (Delhi – Trib.)
Comparables, functional similarity – Information technology enabled services : A company engaged in software testing, verification and validation of software and which was predominantly providing services to a related party was incomparable to assessee, ITES provider – CPA Global Support Services (I) (P.) Ltd. v. Income-tax Officer – [2021] 133 taxmann.com 206 (Delhi – Trib.)
Comparables, functional similarity – Information technology enabled services : A KPO company whose financials showed that iut was outsourcing its substantial amount of work to outsiders could not be compared with assessee which was a captive ITE service provider – CPA Global Support Services (I) (P.) Ltd. v. Income-tax Officer – [2021] 133 taxmann.com 206 (Delhi – Trib.)
Adjustment – Interest : Where differential impact of working capital of assessee vis-a-vis its comparables has already been factored in the pricing/profitability of assessee which is more than that working capital adjusted margin of comparables, any further adjustment to margins of assessee on pretext of outstanding receivables is unwarranted and wholly unjustified – CPA Global Support Services (I) (P.) Ltd. v. Income-tax Officer – [2021] 133 taxmann.com 206 (Delhi – Trib.)
SECTION 143 OF THE INCOME TAX ACT, 1961 – ASSESSMENT – GENERAL
No interference by HC is called for in a writ petition if order terse but eloquent since such order is not a non-speaking order – Muvendar Trust v. Income Tax Officer – [2021] 133 taxmann.com 303 (Madras)
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