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June 2018

Direct Tax Amicus: March 2018

Deduction of tax at source on reimbursements - An unsettled debate!

The issue of liability to deduct tax at source on reimbursement of expenditure can be traced to the difference in claim of the taxpayer and taxman. The taxpayer claims that the receipts in the form of reimbursement of expenditure do not fall in the realm of the term ‘income’ whereas the taxman claims that the gross receipts (including reimbursements) form part of total income and even though owing to computation mechanism, the reimbursement may not lead to a tax liability in the hands of the payee. There are divergent court rulings, the issue of privity to contract and varying opinions on nature of income, etc, and hence there is no single test to determine the liablity of a payer to deduct TDS. It is advisable that the precise facts of each case should be kept in mind rather than applying rule of thumb...

 

Ratio decidendi

  • Expenditure in dividend earned from strategic investments disallowed under Section 14A - Supreme Court
  • No income tax on non-occupancy & other charges by cooperative societies - Supreme Court
  • Loss return will not qualify as ‘tax paid’ for purposes of payment of tax by recipient in proviso to Section 201 – Kerala High Court
  • Voluntary disclosure after survey amounts to concealment – Penalty imposable - Delhi High Court
  • Human error should not nullify a valid proceeding as mandated by Section 292B - Delhi High Court
  • Deduction of input tax credit relating to exempted services, permissible - ITAT Mumbai
  • Charitable activity - Registration u/s 12A requires only determination of ‘object’ - ITAT New Delhi
  • No capital gain/loss on transfer of shares to second step down subsidiary - ITAT Kolkata

 

News Nuggets

  • E-assessment procedure extended to inquiry before assessment
  • EU moves to tax digital economy – Press release issued by European Commission

 

March, 2018/Issue-43 March, 2018/Issue-43

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