Simultaneous Deduction of 2 Exemptions 54EC & F

The Assessing Officer denied the benefit claimed by the assessee under section 54 EC towards the investment made in REC bonds for a sum of Rs. 50 lakh out of total long-term capital gain of Rs. 3.40 crores. The Assessing Officer was of the view that once the exemption has been claimed under section 54F and the entire capital gain has not been utilised for the purchase of residential house, then the net consideration which is not appropriated by the assessee towards the purchase of new asset and also not deposited in the banks or institution as specified and notified in the official Gazette by the Central Government as per the provisions of sub section (4) of section 54F, the assessee cannot avail the exemption under section 54 EC. It is to be noted that it is not a case of availing double exemption on the same amount but the assessee has claimed exemption under section 54F as well as under section 54 EC for the respective amount of capital gain invested in purchase of new house and REC bonds. Wherever any such restriction is deemed fit, the legislature has provided in the statute a sufficient check under chapter VI-A of the Income Tax Act. As far as the claim of exemption under section 54F and under section 54 EC, there is no such restriction in the statute that the assessee cannot claim the exemption under both sections, even if the conditions provided under the respective sections are complied with and the same does not result in availing double exemption on the same amount.

objective question for CS and CWA final

         i.         Its Just Romancing the Taxation... The Romance Continues....

            Any amount deposited in special account or Deposit account u/s_.33ABA will be allowed as a deduction to – the assessee will be restricted to ___ of{h profit such business

Ans. 20% 

       ii.         Winnings from lotteries, races, etc. is taxed at a' flat rate of

Ans. 30%

   iii.        AO stand for?

Ans: AO is Assessing Officer

   iv.        Interest on capital of partners is allowed as a deduction only if the interest has been than'.        % simple interest

Ans:- 8%

    v.        TCS?

Ans: Tax collected at source

   vi.        SVA?

Stamp Value Authority

  vii.        CCIT?

Chief Commissioner of Income Tax

viii.        PAN is a _________ digit Number

Ans.10

     ix.            ABC Ltd provides a credit card to its senior management which is to be used exéWsively for official purposes. The perquisite value in this case would be considered as nil if 2 conditions are fulfilled. (I)________ (ii)

Ans. (i) Complete details of such expenditure are maintäinedby'the employee and Ans. (ii) employee gives a certificate that expenses were for official purposes only

       x.            Value of shares as of the valuation date is chargeable to wealth tax @ - % ?

Ans: 0%. Not chargeable to wealth tax

     xi.            Interest on capital borrowed for acquisition or construction of property is deductible subject to limit of Rs._________per year, if capital is borrowed on or after_________. This is allowable if acquisition or construction is completed within_________ Years from

Ans. 1, 50,000, 1-4-1999, 3 years, the end of the financial year in which the capital was

    xii.            Mr.P had purchased a property on 15.7.1961. He has a choice of substituting the fair market value as on____________instead of the original 'cost for the purpose of capital gains.

Ans.1.4.1981.

  xiii.            If in a year 15th September is a Sunday, assessees will have to pay advance tax on or before

Ans. 16th September.

  xiv.            On 5.4.2012, the earliest year that an assessing officer can reopen assessment is for assessment year if escaped income is Rs. 50000.

Ans 2008-09

   xv.            Interest is paid if return of income is filed after the due date under section

Ans. 234A

  xvi.            The limit for deduction under section 8OGG is_________% of total 'income Or Rs______per month, whichever is ________

Ans: 25% of total income or Rs.2000 per month, whichever is less.

xvii.            An assessee is a real estate agent and his gross receipts in a year on account of commission is expected to exceed Rs. 23,50,000. He does not have a PAN allotted to him. He should apply for a PAN' before

Ans. 30th June.

xviii.            The due date for filing of return under section. 139(1) by a company having a turnover of less than Rs.1crore is

Ans. 31st July of the assessment year

  xix.         As and when the value adopted by the stamp valuation authority is revised, the AO is empowered to amend the assessment order wherein capital gains had been computed and assessed within  years from the enddf the previous years in which the order revising the value was assessed.

Ans. 4 years

   xx.            Pre - construction period interest is deductible over a period of years.

Ans. 5 years

  xxi.            After a search and seizure operation , the authorised officer will hand over all the seized books documents etc to the Assessing Officer within '______ days “of the last executions of the authorizations for the search.

Ans.     60 days

xxii.            For non-compliance of provisions of section 269SS relating to mode of taking certain loans or deposits, the penalty is levied on the person - the loan or deposit.

Ans. Accepting

xxiii.            Deduction Under section 80C is allowed only to those assessees who are

Ans:"Individual or an HUF.

xxiv.            While calculating book profit u/s 115 JB, the net profit shown in the profit and loss account as increased by certain amounts if they have been debited to the P&L State any four items

Ans:-

Proposed Dividend

Income Tax paid or Provided

Depreciation

Deferred Tax

xxv.            Under section 143(1), the assessing officer can assess the income or toss after making adjustments relating to ________________and________________.

Ans. arithmetical errors and incorrect claim

xxvi.            Premium has to be added to the valuation of a property if the difference between the unbuilt areas of the plot of land and the specified area exceeds___________________but does not exceed

Ans. between 5% and 20%.

xxvii.            An assessee has claimed deduction of Rs 3,00 000/ under section 80QQB The assessee is likely to be an________________________by profession

Ans. Author

xxviii.            Computer Software is considered as expenditure of ____________nature

Ans. Capital

xxix.            The period of holding of shares acquired in exchange of convertible debentures shall be reckoned from

Ans. Date of allotment of the shares

xxx.            Deduction for bad debts is allowed to an assessee carrying on business in the year in which

Ans. debt is written off as bad.

xxxi.            Mr. Chintamani receives Rs. 10000/- as interest on Fixed Deposit with ABC Ltd and Rs. 5000/ as interest on capital from the firm in which he is a partner The two amounts will be charged to tax under the heads and  respectively

                Ans. Income from Other Sources and Business Income

xxxii.         The assessee is obliged to pay interest under section -,________________and _______and has a right to receive interest under section

               Ans. Interest paid under sections 234A, 2348, 234C and 234D and interest received u,s 244A

xxxiii.            In case of a company, the is required to sign the return of income

               Ans. managing director

xxxiv.          As per section 2(47)                                or                      of a zero coupon bond will be treatec as for the purpose of capital gains tax

Ans. maturity or redemption

xxxv.            Under Wealth Tax Act, the penalty for concealing particulars of assets ranges________ a  of -- to a maximum of________________of the tax sought to be evaded

Ans minimum 100% and maximum of 500%

xxxvi.         Interest paid on housing loan can be availed as a deduction under head - and the principal amount can be deducted under

Ans. Interest is allowed under the head house property and the principal amount under section 80C Chapter VI-A

xxxvii.            Best judgement assessment under section 144 is an   assessment

Ans: ex-parte

xxxviii.            Income tax rates are fixed by

Ans: Finance Act

xxxix.            The person who deducts tax at source has to issue TDS ceilificates in Form________for deduction from Salary and Form______for deduction from any other payment

Ans: Form 16 and Form 16A

    xl.            Rental income earned by a dealer in property is taxable under the head

Ans Income from House Property

  xli.            Salaries payable to a Member of Parliament is taxable under the head

Ans. income from Other.-Sources

xlii.            Mr.L an expert in tax and employed with ABC Ltd, delivers lectures in different seminars. The fees thus received by him will be taxed under the head

Ans: Income Other Sources

 xliii.            S has a fixed deposit Rs.1,00,000 with Bank Ltd. After 366 days Mr. S got back Rs.1,07,500. Capital gains that will be subject to tax would be

Ans:The ⁱncrease is due to interest and not captaf gain and will be taxed under the head 'Income under the head  other sources".

xliv.            assessee can file a belated return before completion of the assessment or before expiry

Ans: one ^year from the end of the relevant assessment year or Before the completion of Assessment whichever is earlier.

case law on 271(1)(c)

Post Dated 4-4-2013

HIGH COURT OF DELHI-  CIT Vs.  AMIT JAIN

Income from dealing in shares claimed as a capital gain though assessed by the Assessing Officer as a business income – cannot amount to furnishing of inaccurate particulars so as to attract sec 271(1)(c) penalty.

Section 115BBE and Section 68 – Taxing the unexplained!

Section 115BBE and Section 68 – Taxing the unexplained!

This Article aims at highlighting the unsung provisions of Section 115BBE of the Income-tax Act, 1961 (Act),applicable from AY 2013-14 onwardsand surfacing some practical concerns surrounding its applicability.

Background

Certain unexplained cash credit, investment, expenditure, etc., are deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C and Section 69D of the Act and were earlier subject to tax as per the tax rate applicable to the taxpayer. As a consequence, in case of individuals, HUF, etc., no tax was levied up to the basic exemptionlimit and even if such income was higher than basic exemption limit, it could be levied at the lower slab rate.

Present framework

Section 115BBE of the Act now specifically levies tax on such unexplained items deemed as income at the flat rate of 30 per cent (plus surcharge and cess, as applicable), irrespective of the slab of income. Moreover, no deduction is available for any expenditure or allowance while computing such deemed income.

Illustration:

Sr. No.	Particulars	Tax impact
		Erstwhile provisions	Present framework
a.	Unexplained items deemed as income under Section 68, etc.	1,00,000	1,00,000
b.	Other income	50,000	50,000
c.	Total income (a + b)	1,50,000	1,50,000
d.	Tax on unexplained income (30% of a)	Not Applicable	30,000
e.	Tax on other income	Nil	Nil
f.	Tax on total income(d + e)	Nil	30,000

Brief Analysis

Let us now ponder on the applicability of Section 115BBE of the Act with reference to the provisions of Section 68 of the Act dealing with unexplained cash credit.

Section 68 of the Act provides inter alia that if any sum is found credited in the books of a taxpayer and he either does not offer any explanation about nature and source of such sum, or  the explanation offered by him is not satisfactory in the opinion of Assessing Officer, then such sum can be taxed as his income.

Consider a scenario where an individual files his return of income, declaring income from Tuition fees and avails the tax slab benefit. However, such individual is unable to demonstrate / substantiate the source of such income (as regards the payer, etc.) and the Assessing Officer rejects the explanation, being not properly explained to his satisfaction.

Under such circumstances, it appears that the Assessing Officer may now be tempted to trigger the provisions of Section 115BBE of the Act read with Section 68 of the Act. This means that such income, though already offered to tax by the taxpayer, would be taxable at flat rate of 30 per cent on gross basis (i.e., without any deduction / allowance).

Does this means that the Assessing Officer is vested with unfettered powers to reject any explanation, being not to his satisfaction?  No – the Assessing Officer is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. The taxpayer is nevertheless saddled with the primary obligation to demonstrate the nature and source of any sum credited in books.

It is seen that many individuals file their return of income, offering income in the nature of Commission, Brokerage, Embroidery charges, etc., and avail the tax slab benefit. In the absence of requisite substance in such transactions, one may possibly need to now evaluate the income-tax implications under Section 115BBE of the Act, if any.

Some Posers – Food for thought!

o    While Section 68 of the Act traditionally applies to unexplained ‘cash credit’ like loans, deposits, advances, share capital, etc., the moot point is whether it will also apply to ‘income’ which is already offered to tax?

o    If an Assessing Officer rejects taxpayer’s explanation surrounding the head of taxation (say, House Property v. Business Income, Business Income v. Capital Gain), being not to his satisfaction, whether Section 115BBE of the Act can still be triggered, empowering the Assessing Officer to inter alia deny all legitimate expenses / allowances?

Perhaps, it may be possible to argue that Section 115BBE of the Act is a machinery provision to levy tax on income and it should not enlarge the ambit of Section 68 of the Act to create a deeming fiction to tax any sum already credited / offered as income. Such recourse is unwarranted, keeping in mind the objective to introduce Section 115BBE of the Act was to only curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit.

Conclusion and key takeaways

Nobody can predict destiny, but one can take adequate measures to safeguard / insulate him from the foreseeable hindrances that may surface down the line. In the present context, some key takeaways are as under:

o    Endeavour to demonstrate substance over form;

o    Maintain robust documentation, evidencing the nature and source of income;

o    Prefer transactions routed through normal banking channel, which will lend due credence

THE LATEST CASE LAW ON SEC.54F: -

                                                THE LATEST CASE LAW ON SEC.54F: -

CIT vs. Jagtar Singh Chawla (P&H High Court)

S. 54F: Deposit in capital gains account scheme by s. 139(4) due date sufficient

The assessee sold property on 20.06.2006 (AY 2007-08) for a consideration of Rs. 2.24 crores. The said amount was not invested in the capital gains account scheme by the due date of filing the return u/s 139(1) (31.07.2007) and was instead used to purchase a new residential house on 31.3.2008. The assessee claimed exemption u/s 54F which was denied by the AO & CIT(A) on the basis that u/s 54F(4) the amount of the consideration which is not appropriated for purchase of the new asset before the date of furnishing the return of income u/s 139 had to be deposited in the “capital gains account scheme” before the due date for filing the return of income u/s 139(1). On appeal by the assessee, the Tribunal allowed the claim. On appeal by the department to the High Court, HELD dismissing the appeal:

Though s. 54F(4) provides that the amount not appropriated towards purchase of the new asset has to be deposited in the capital gains account scheme before the due date for filing the return u/s 139(1), sub-section (4) of s. 139 is in the nature of a proviso to s. 139(1). S. 139(4) provides that a person who has not furnished a return within the time allowed to him under s. 139(1) may furnish the return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. For AY 2007-08, the last date for filing the return u/s 139(4) is 31.3.2009. This extended time limit is available for making deposit in the capital gains account scheme. As the assessee had invested the consideration in purchase of a new house before that date, the exemption has to be allowed (Jagriti Aggarwal 339 ITR 610 (P&H), Rajesh Kumar Jalan 286 ITR 274 & Fathima Bai (Kar) followed