INCOME TAX REGULATORY UPDATES CIRCULAR F. NO. 500/107/2015 -FT&TR-IIICLARIFICATION ON
FAQ 6 (REPORTING) AND FAQ 3 (REPORTING) ISSUED BY U.S. IRS IN RESPECT OF FATCA REPORTABLE ACCOUNTS CIRCULAR F. NO. 500/107/2015 -FT&TR-III, DATED 31-1-2022
The Indian RFIs(Reporting Finan- cial Institutions) should ensure that the U.S. TIN is reported in respect of all U.S. Reportable accounts. However, if the U.S. TIN is not obtained, the RFI may populate the TIN field with specified codes in scenarios mentioned in the FAQ 6 (reporting) of U.S. IRS. It is to be noted that in all such cases where TIN has not been obtained, the U.S. IRS system will still generate an error notification to indicate that the entry is invalid when one of the above mentioned codes are used. If none of the specified codes as highlighted in FAQ 6(reporting) are applicable to the facts of a particular scenario and the TIN has not been obtained, the RFIs are advised as per FAQ 3(reporting) of U.S. IRS to populate the TIN field with nine times A or 0 (zero) which will also generate an error notification. The error notification in either case will provide 120 days to correct the issues. If the U.S. TIN is not provid- ed within that 120 day period, the U.S. will evaluate the data received and determine through a consider- ation of facts and circumstances if there is significant non-compliance. RFIs are requested to follow the above guidance in respect of report- ing of U.S. reportable accounts. Additionally, RFIs are requested to suitably revise the reports submit- ted in Form 61B in respect of U.S. reportable accounts
CIRCULAR NO. 3/2022 [F.NO. 503/1/2021-FT&TR-I] CLARIFICATION REGARDING THE MOST-FAVOURED-NA- TION (MFN) CLAUSE IN THE PROTOCOL TO INDIA’S DTAAS WITH CERTAIN COUNTRIES CIRCULAR NO. 3/2022 [F.NO. 503/1/2021-FT&TR-I], DATED 3-2-2022
It is hereby clarified that the appli- cability of the MFN clause and benefit of the lower rate or restrict- ed scope of source taxation rights in relation to certain items of income (such as dividends, interest income, royalties, Fees
for Technical Services, etc.) provid- ed in India’s DTAAs with the third States will be available to the first (OECD) State only when all the following conditions are met:
(i)The second treaty (with the third State) is entered into after the signa- ture/Entry into Force (depending upon the language of the MFN clause) of the treaty between India and the first State;
(ii) The second treaty is entered into between India and a State which is a member of the OECD at the time of signing the treaty with it;
(iii) India limits its taxing rights in the second treaty in relation to rate or scope of taxation in respect of the relevant items of income; and
(iv) A separate notification has been issued by India, importing the benefits of the second treaty into the treaty with the first State, as required by the provisions of sub-section (1) of Section 90 of the Income-tax Act, 1961.
If all the conditions enumerated in Paragraph 5(i) to (iv) are satisfied, then the lower rate or restricted scope in the treaty with the third State is imported into the treaty with an OECD State having MFN clause from the date as per the provisions of the MFN clause in the DTAA, after following the due proce- dure under the Indian tax law.
6. Notwithstanding the clarification given in the above paragraphs, where in the case of a taxpayer there is any decision by any court on this issue favourable to such taxpayer this Circular will not affect the implementation of the court order in such case.
RECENT JUDICIAL RULINGS ON INCOME TAX
2022] 135 taxmann.com 335 (Mumbai – Trib.)[25-02-2022]
INCOME TAX : CIT cannot invoke section 263 on a matter considered by CIT(A) especially when CIT(A) has directed AO to make additions on it
Editorial Note-CIT cannot invoke section 263 on a matter considered by CIT(A) in view of doctrine of merger especially when Revenue’s appeals on it has been dismissed by ITAT due to low tax effect. Revi- sion u/s 263 cannot be exercised on a matter considered by CIT(A) when he has directed AO to make additions on a matter, as essential ingredient.
2022] 135 taxmann.com 286 (SC)[22-02-2022]
INCOME TAX: No deduction under Section 37(1) for ‘freebies’ given by pharma companies to doctors, as it is “prohibited by law”&hit by Explanation 1 to Section 37(1)
Editorial Note :Pharmaceutical companies’ gifting freebies to doctors, etc., is clearly “prohibited by law” and hit by Explanation 1 to section 37(1), and not allowed to be claimed as a deduction under Section 37(1). When acceptance of freebies by medical practitioners is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner),pharmaceuti- cal companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium.
2022] 135 taxmann.com 348 (Delhi)[16-02-2022]
INCOME TAX : Rent received by trust from substantial contributor is ‘adequate’, if it exceeds municipal value for house tax; section 13(2)(b) cannot invoked
Editorial Note: Where rent received by trust from substantial contributor exceeds MCD value for house tax, in the absence of any contrary evidence, the rent cannot be termed as inadequate and property cannot be deemed to be applied for benefit of the substantial contrib- utor to whom it was let out.
• Mere non-acceptance of security deposit by the trust from substan- tial contributor is not determinative of inadequacy of rent charged by trust
to substantial contributor for trust property let out to him.
• In the present case, the Assessing Officer, apart from relying upon some opinion of rent from property broker firms and websites, does not appear to have made any independent inquiry on the adequacy of the rent being charged by the respondent/assessee from Ham- dard Dawakhana (Wakf).
• It is not shown that the Assessing Officer made any independent inquiry on the age and condition of the building of the assessee situated at Asaf Ali Road, New Delhi.
• In fact, as contended by the learned senior counsel for the respondent/as- sessee and taken note of by the learned ITAT and not denied by the appel- lant/revenue, the property at Rajdoot Marg was not even ready during Assessment Year 2008-09 and was lying vacant.
• In the absence of any such inquiry by the Assessing Officer, the invocation of Section 13(2)(b) of the Act was clearly flawed and rightly rejected by the learned ITAT.
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