AMIT BAJAJ ADVOCATE

Section 54EC provides for exemption from tax on long-term capital gain when the capital gain arises from the transfer of long-term capital asset and the whole or any part of the said capital gain is invested in certain bonds within the period of 6 months. Section 54EC speaks of the actual capital gain which arises out of transfer of long-term capital asset and not deeming amount. Whereas section 50C provides for deeming fiction where value of consideration is adopted as per the stamp valuation authorities or any authority of the State Government. Even if the property has been sold at a lesserprice but under the deeming fiction of section 50C, the value adopted by the stamp valuation authorities is to be taken as sale consideration. Such a deeming fiction cannot be imported into section 54EC. Hence, the deemed value cannot be considered for the purpose of exemption under section 54EC. Thus, for the purpose of deduction under section 54EC, the sale value would be taken at Rs. 16 lakhs, which is the actual sale consideration and has been invested in the bond. At the same time, for the working of the long-term capital gain, the sale consideration will be taken up as per the value determined under section 50C, which is at Rs. 24.48. Thus, the sale value for the purpose of computation of long-term capital gain would be taken at Rs. 24.48 lakhs.

PRESS RELEASE

Subject: Relaxation from compulsory e-filing of return of income for assessment year 2012-13 – for representative assesses of non-residents and in the case of private discretionary trusts -reg

Rule 12 of the Income-tax Rules, 1962 mandates that an individual or Hindu undivided family, if his or its total income or the total income in respect of which he is or it is assessable under the Act, during the previous year, exceeds ten lakh rupees, shall furnish the return electronically for the assessment year 2012-13 and subsequent assessment years.

Order under Section 119 of the Income Tax Act, 1961

order [f.no. 225/163/2012/ita-ii], dated 31-7-2012

On consideration of the reports of disturbance of general life caused due to failure of power and further in consideration of the fact that the e-filing of returns for a specified category of individuals and HUF has been made mandatory, the Central Board of Direct Taxes, in exercise of powers conferred under section 119 of the Income Tax Act, 1961, hereby extends the 'due date' of filing of returns of income for the Assessment Year 2012-13 to 31st August 2012 in respect of assessees who are liable to file such returns by 31st July 2012 as per provisions of section 139 of Income Tax Act, 1961.

Few days back there was a news that VAT on sugar has been imposed by Punjab Government @ 5%, but no notification publicly was available confirming the same. Now Excise & Taxation Department, Punjab has issued a public notice confirming that VAT @ 5% has been imposed on sugar w.e.f 25-07-2012.

It has also been clarified that surcharge will not be applicable on sugar hence rate of tax on sugar will be 5% only and not 5.5%.

A reading of the provisions contained in Section 54F(1), as it stood at the relevant point of time, shows that exemption from payment of tax on the capital gains arising on thetransfer of any long-term capital asset not being a residential house is available to an assessee being a Hindu Undivided Family or an individual, if the long-term capital gain is invested in purchasing a residential house or constructing the residential house within the time stipulated therein. Proviso to sub section (1) states that the exemption contemplated under sub section (1) would not be available where an assessee owns a residential house as on the date of thetransfer and that the income from the residential house is chargeable under the head “income from house property”. The Finance Act, 2001 amended the proviso with effect from 2001-02 to permit exemption under Section 54F, even if the assessee has owned one residential house as on the date of transfer, other than the new asset, or purchase in investments any residential house other than the new asset within a period of one year or three years as the case may be, but after the date of transfer of the original asset and the income from such residential house other than the one owned on the date of transfer of the original asset is chargeable under the head “income from house property”.

In the instant case, it is found that the eligible new asset was not purchased within one year before the date on which thetransfer of the original asset took place. Thus, the amount which is not utilized by the assessee for the purchase of new asset before the date of furnishing the return of income under section 139 was required to be deposited as per the provisions of sub-section (4) for availing deduction under section 54F in respect of those amounts also. In other words, as per the plain language employed in the above sub-section (4), only the amount which was actually utilized by the assessee for the purpose of purchase of the new residential house before the date of furnishing of the return of income under section 139 shall only be eligible forcomputation of deduction under section 54F(1). It is found that in the instant case it is not in dispute that the return of income for the relevant year was filed by the assessee on 9-1-2009, which is the date of furnishing of return of income under section 139 by the assessee. Thus, it is held that considered view, the amount utilized by the assessee for purchase of new residential house before 9-1-2009 qualifies for consideration with reference to which deduction under section 54F(1) is to be computed. Thus, the Commissioner (Appeals) was not justified in holding that only the amount which was utilized by the assessee before 31-3-2008 only qualifies for deductionunder section 54F. The assessee claimed that Rs. 15 lakh was utilized by him for the purchase of new residential flat on or before 9-1-2009. The orders of the lower authorities on this issue is, therefore, set aside and the Assessing Officer is directed to verify the amount which was invested by the assessee before the date of furnishing of return of income under section 139 by the assessee and, thereafter, allow the deduction under section 54F(1) with reference to the said amount as per law. Needless to mention that he shall allow reasonable and proper opportunity of hearing to the assessee before adjudicating the issue afresh.

Notice issued u/s 148 for reopening of assessment/s 147 on the ground the assessee was not entitled to exemption u/s 54EC in original assessment order.

It appears that all facts were available on record and according to the respondents was only erroneously granted. This is a clear case of review of an order. The application of law or interpretation of a statue leading to a particular conclusion cannot lead to a conclusion that tax has escaped assessment for this would then certainly amount to review of an order which is not permitted unless so specified in a statue. The order dated 14.11.2011 disposing of the Petitioner’s objection to initiation of proceedings under Section 147 of the said Act also proceeds on the view that there has been non application of mind during the original proceedings for assessment. This is unsustainable and as held this court in Asian Paints Ltd. v. Dy. C.I.T. 308 ITR 195 a fresh application of mind by the Assessing officer on the same set of facts amounts to a change of opinion and does not warrant reopening.

Whether the exemption u/s 54 will be available, in case, capital gain arising from sale of more than one residential house, is invested in one residential house. The ld. counsel appearing for the assessee argued that there was no restriction under section 54 that capital gain arising from two residential houses cannot be invested in one residential house. We find substance in the argument advanced by the Id. counsel for the assessee. No rulings have been brought on record by the ld. DR to show that the capital gain arising from sale of more than one residential houses cannot be invested in one residential house. The provisions of section 54 as pointed out earlier apply to transfer of any number of residential houses by the assessee provided the capital gain arising therefrom is invested in a residential house. The exemption u/s 54 is available if capital gain arising from transfer of a residential house is invested in a new residential house within the prescribed time limit. Thus there is an inbuilt restriction that capital gain arising from the sale of one residential house cannot be invested in more than one residential house. However, there is no restriction that capital gain arising from sale of more than one residential houses cannot be invested in one residential house. In case, capital gain arising from sale of more than one residential houses is invested in one residential house, the condition that capital gain from sale of a residential house should be invested in a new residential house gets fulfilled in each case individually because the capital gain arising from sale of each residential house has been invested in a residential house. Therefore, even if two flats are sold in two different years, and the capital gain of both the flats is invested in one residential house, exemption u/s 54 will be available in case of sale of each flat provided the time limit of construction or purchase of the new residential house is fulfilled in case of each flat sold.

Allahabad High Court in an important judgement has held that where income is declared under presumptive income  scheme (i.e section 44AE in this case), no addition could be made on the ground that some discrepancies were found in account books and considering any sum as income from other source on the basis of such discrepancies. 

This judgement makes it clear that once income is declared under presumptive income scheme no books of account are required to be maintained by the assessee and if the books of account are being maintained by assessee even then no addition could be made on the basis of discrepancies found, if any in such books of account.

CBEC issues Clarification Regarding Leviability of Service Tax on the Remittance of Foreign Currency in India from Overseas

The Central Board of Excise and Customs (CBEC) issued today necessary clarification regarding the leviability ofservice tax on the remittance of foreign currency in India from overseas. Various concerns have been expressed at different forums in this regard.

The CBEC through a circular issued today stated that the matter has been examined and it is clarified that there is no service tax per se on the amount of foreign currency remitted to India from overseas. In the negative listregime, ‘service’ has been defined in clause (44) of section 65B of the Finance Act 1994, as amended, which excludes transaction in money. As the amount of remittance comprises money, the activity does not comprise a ‘service’ and thus not subjected to service tax.

Accounting Code for payment of service tax under the Negative List approach to taxation of services, with effect from the first day of July 2012 - regarding.