RNM Tax Alert – Direct Tax Part for April 2024

1. Circular No. 7/2024: Extension of due date for filing of form 10A/10B Under the income-tax Act, 1961.

• • Form No. 10A, in case of an application under clause (i) of the first proviso to clause (23C) of section 10 or under sub-clause (i) of clause (ac) of sub-section (1) of section 12A or under clause (i) of the first proviso to sub-section (5) of section 80G or in case of an intimation under fifth proviso of subsection (I) of section 35 of the Act, till 30.06.2024;
  • Form No. 10AB, in case of an application under clause (iii) of the first proviso to clause (23C) of section 10 or under sub-clause (iii) of clause (ac) of sub-section (I) of section 12A or under clause (iii) of the first proviso to sub-section (5) of section 80G of the Act, till 30.06.2024.

2. Partial modification of Circular No.3 of 2023 dated 28.03.2023 regarding consequences of PAN becoming inoperative as per rule 114AAA of the Income tax Rules, 1962- reg. 

Partial modification and in continuation of the Circular No. 3 of 2023, hereby specifies that for the transactions entered into upto 31.03.2024 and in cases where the PAN becomes operative (as a result of linkage with Aadhaar) on or before 31.05.2024, there shall be no liability on the deductor/collector to deduct/collect the tax under section 206AA/206CC.

Important Judicial Precedents

1. Non-furnishing of Form No.67 before the due date u/s 139(1) is not fatal to the claim for FTC

[2024] 162 taxmann.com 96 (Bangalore – Trib.)[17-04-2024]

Section 90 of the Income-tax Act, 1961, read with rule 128 of the Income-tax Rules, 1962 – Double taxation relief – Claim for foreign tax credit (Form No. 67) – Assessment year 2021-22 – Assessee filed its return claiming foreign tax credit (FTC) – However, Assessing Officer denied said credit on ground that assessee had not filed Form 67 within due date of filing return – It was noted that similar issue had been decided by Co-ordinate Bench of Tribunal in case of ITA No. 680/Bang/2022 dated 6-9-2022 wherein it was held that Rule 128(9) of Rules does not provide for disallowance of FTC in case of delay in filing Form No. 67; filing of Form No. 67 is not mandatory but a directory requirement; and (iii) DTAA overrides provisions of Act and Rules cannot be contrary to Act – Whether following aforesaid order, Assessing Officer was to be directed to allow foreign tax credit as per Form 67 filed after due date – Held, yes [Paras 4 and 5] [In favour of assessee]

2. Where assessee offered interest income as per Form 26AS and difference in interest income came to light post filing of ITR on account of delayed reporting by payer bank, same could not tantamount to under-reporting of income, consequently, it would not attract any penalty under section 270A

[2024] 161 taxmann.com 712 (Nagpur – Trib.) [16-04-2024]

Section 270A of the Income-Tax Act, 1961 – Penalty – For under-reporting and misreporting of income (Scope of provision) – Assessment year 2017-18 – Whether where as on date of filing of return, amount of interest earned as appearing in Form No 26AS had been rightly offered to tax and difference in interest income came to light post filing of return on account of delayed reporting by deductor/payer bank/Financial Institution, same could not tantamount to under-reporting of income, consequently, it would not attract any penalty under section 270A – Held, yes [Para 4] [In favour of assessee]

3. Interest received on enhanced compensation under section 28 of Land Acquisition Act would not be chargeable to tax as income from other sources under section 56(2)(viii)

[2024] 161 taxmann.com 735 (Delhi – Trib.) [15-04-2024]

Section 10(37), read with sections 56 and 263, of the Income-Tax Act, 1961 and section 28 of the Land Acquisition Act, 1894 – Capital gains arising from transfer of agricultural land (Revision) – Assessment year 2018-19 – Assessee received enhanced compensation after compulsory acquisition of his agriculture land and claimed interest received on said compensation as exempt – During scrutiny assessment, Assessing Officer completed assessment and allowed assessee’s claim – Principal Commissioner opined that said interest ought to be treated as income from other sources and was to be tax accordingly – He, thus, invoked revisionary proceedings under section 263 on ground that Assessing Officer completed assessment without carrying out necessary enquiry with respect to tax treatment of interest received on compensation – It was noted that in case similar to assessee GK v. PCIT, Rohtak ITA No. 1676/Del/2023, dated 13-2-2024, Tribunal held that amended provisions of section 56(2)(viii) by Finance Act, 2009 didn’t alter nature of interest under Land Acquisition Act from ‘capital receipt’ to ‘revenue receipt’ taxable under ‘income from other sources – Whether thus, following aforesaid view, interest received on enhanced compensation under section 28 of Land Acquisition Act would not be chargeable to tax as income from other sources under section 56(2)(viii) and impugned order of Principal Commissioner was to be quashed – Held, yes [Para 7.1 and 7.2][In favour of assessee]

4. Where assessee-company filed its income tax return for assessment year 2021-22 on 30.12.2021, opting for reduced taxation under section 115BAA, but Commissioner (Appeals) dismissed it due to late filing of Form 10-IC, since Circular No. 19/2023 issued by CBDT allowed for condonation of delay in filing Form No. 10-IC for AY 2021-22, and assessee fulfilled all conditions laid in said circular including timely return filing and electronic submission of Form 10-IC, it would be eligible for concessional tax rate under section 115BAA

[2024] 162 taxmann.com 200 (Ahmedabad – Trib.) [24-04-2024]

The assessee Pvt. Ltd. company has fulfilled all the conditions mentioned in such circular as under which makes it eligible for condoning the delay in filing of Form No.10-IC.”Accordingly, looking into the instant facts, the appeal of the assessee is allowed.

5. Where assessee, 50 per cent owner of an immovable property, had received Rs. 50 lakhs as its share of sale consideration on sale of said property and Registered Valuer had estimated fair market value of property at Rs. 54.09 lakhs and had calculated cost of property as on 1-4-1981 at Rs. 10 lakhs applying reverse method of indexation, since indexed cost of acquisition of Rs. 54 lakhs was higher than sale consideration, it would result into a long-term capital loss and, therefore, addition made by AO on account of LTCG was to be deleted

[2024] 162 taxmann.com 45 (Kolkata – Trib.) [23-04-2024]

Section 45 of the Income-tax Act, 1961 – Capital gains – Chargeable as (Capital loss) – Assessment year 2016-17 – Assessee, 50 per cent owner of an immovable property, had received Rs. 50 lakhs as its share of sale consideration on sale of said property – For purpose of calculating cost of acquisition, since property was acquired prior to 1-4-1981, assessee obtained report from Registered Valuer who had estimated fair market value of property at Rs. 54.09 lakhs and, thereafter, applying reverse method of indexation, calculated cost of property as on 1-4-1981 at Rs. 10 lakhs – Assessing Officer, however, estimated indexed cost of acquisition at Rs. 5 lakhs (50 per cent of cost at Rs.10 lakhs) and made an addition for long-term capital gain (LTCG) – It was observed that while calculating LTCG, no benefit of indexation had been given – Assessing Officer had himself considered cost of acquisition at Rs. 5 lakhs based on valuation report by Registered Valuer, which was fair market value of property (assessee’s share) as on 1-4-1981 – Assessing Officer had not made any efforts to get information about Circle rate of immovable property as on 1-4-1981 – Whether since, fair market value of property as on 1-4-1981 as calculated by Registered Valuer had been accepted by Assessing Officer and there being no other evidence of fair market value of property as on 1-4-1981, cost of acquisition as on 1-4-1981 would be Rs.5 lakhs (adopted by Assessing Officer) and indexed cost of acquisition would be Rs. 54 lakhs – Held, yes –