Direct Tax – December 2022

1. Notification No. 3/2022, Dated 16-7-2022

CBDT exempts Non-Residents (NR) not having PAN from mandatory e-filing of Form 10F till 31-03-2023. Partial Relaxation With Respect To Electronic Submission of Form 10F by Select Category of Taxpayers In Accordance With DGIT (Systems)

• Circular No. 25/2022, Dated 30-12-2022

Clarification for the purpose of clause (c) of Section 269ST of Income Tax Act, 1961 in respect of dealership/distributorship contract in case of Co-operative Societies-

Section 269ST inter alia prohibits receipt of an amount of two lakh rupees or more by a person, in circumstances specified therein, through modes other than by way of an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed.

It is clarified that in respect of co-operative societies, a dealership/distributorship contract by itself may not constitute an event or occasion for the purpose of clause (c) of Section 269ST. Receipt related to such a dealership/distributorship contract by co-operative society on any day in a previous year, which is within ‘the prescribed limit’ and complies with clause (a) as well as clause (b) of Section 269ST, may not be aggregated across multiple days for purpose of clause (c) of Section 269ST for that previous year.

Important Judicial Precedents

1. JCIT Vs. Chambal Fertilisers & Chemicals Ltd. [2022] 145 taxmann.com 420 SC

Education cess on rate or tax levied on PGPB is to be disallowed in view of retrospective amendment made by FA2022 to section 40(a)(ii) w.r.e.f. 1-4-2005

Education cess on rate or tax levied on profits and gains of business/profession is to be disallowed in view of new Explanation 3 inserted in section 40(a)(ii) by the Finance Act,2022 with retrospective effect from 1-4-2005.

• S. M. Overseas P. Ltd. Vs. CIT [2022] [145 taxmann.com 375] (Supreme Court)]

During the pendency of the proceedings u/s 154 of the Act, it was not permissible for the Revenue to initiate reassessment proceedings u/s 147/148

Where the proceedings under Section 154 of the Act were not the subject-matter before the High Court and there was nothing on record that the notice under Section 154 of the Act was withdrawn on the ground that the same was beyond the period of limitation prescribed under Section 154(7) of the Act, it is to be held that , the proceedings initiated under Section 154 of the Act can be said to have been pending and the ITAT was right in holding that it was not permissible for the Revenue to initiate reassessment proceedings u/s 147/148 as proceedings under section 154 were pending and the High Court has committed serious error in observing and holding that the notice under Section 154 was invalid as the same was beyond the period of limitation as prescribed /provided under Section 154(7) of the Act. In the result, impugned order of HC is quashed and set aside and order of ITAT is restored.

• PCIT Vs. Simon India Ltd. [2022] 145 taxmann.com 389 (Delhi HC)]

The Delhi High Court held that the loss arising on reinstatement of the forward cover purchase contracts (marked-to-market loss) is an allowable deduction under Section 37(1), notwithstanding that the forward contracts have not been closed at year-end. The Court held that such losses are not speculative. The Court also held that the CBDT Instruction No. 3/2010 prescribing to the contrary is not a binding law.

• Murali Krishna Chakrala V. Deputy Director, Directorate of Enforcement [2022] [145 taxmann.com 248 (Madras HC)]

CA can’t be prosecuted under PMLA for certificate issued in Form 15CB based on non-genuine documents submitted by client.

• Form 15CB requires CA to certify nature of foreign remittance for TDS deductibility purpose based on documents submitted by client without requiring him to go into the genuineness of documents submitted by client.

• On a perusal of Form No. 15CB, it is clear that a Chartered Accountant is required to only examine the nature of the remittance and nothing more. The Chartered Accountant is not required to go into the genuineness or otherwise of the documents submitted by his clients. This could be compared with the legal opinion that are normally given by panel lawyers of banks, after scrutinizing title documents without going into their genuinity.

• A Panel Advocate, who has no means to go into the genuinity of title deeds and who gives an opinion based on such title deeds, cannot be prosecuted along with the principal offender. Applying the same analogy, we find that the prosecution of CA Murali Krishna Chakrala, in the facts and circumstances of the case at hand, cannot be sustained.

• ACIT V. Zoetis India Ltd. [2022] (12) TMI 1358 – ITAT Mumbai

Section 50C not attracted on transfer of leasehold right in land and building

Addition made u/s. 50C in respect of transfer of leasehold rights in land and building – capital gain adopting of stamp duty value in terms of Section 50C – HELD THAT:- The asset that has been transferred by the assessee is leasehold right in land and building. In the case of CIT vs. Greenfield Hotels and Estates Pvt. Ltd. [2016 (12) TMI 353 – BOMBAY HIGH COURT] has held that the provisions of Section 50C will not be applicable while computing capital gains on transfer of leasehold rights in land and building. In the instant case, the capital gain has arisen only on account of adopting of stamp duty value in terms of Section 50C – Since, Section 50C of the Act is held to be not applicable on transfer of leasehold rights, the decision renderd by ld. CIT(A) gets support from the binding decision rendered by Hon‟ble Bombay High Court. Accordingly, the AO was not justified in invoking provisions of Section 50C for determining capital gain arising on transfer of lease hold rights in land and building. Accordingly, we do not find any reason to interfere with the decision of Ld CIT(A) rendered on this issue.