JALGAON DIST.

TAX PRACTITIONERS` ASSOCIATION

e NEWS LETTER
e mail: presidentjdtpa@gmail.com

YEAR 2013-14 MAY No.1

SECTION A INCOME TAX

EDITOR:
SURESH KESWANI 1] GIST OF JUDGEMENTS: … CA N.S. DOSHI
EDITORIAL BOARD: RECENT IMPORTANT DECISION
M.R. SHIRUDE UNDER I. T. ACT, 1961__________
SAHEBRAO PATIL
N.S. DOSHI 1. Interest on borrowed capital -
MAGAN PATIL
Diversion of funds to group companies - No disallowance is called for as far
R.B. CHOPDA
as the opening balance is concerned - Only the differential amount which has
SHIRISH SISODIA
been advanced by the assessee during the relevant year to the group
DINAR DAPTARI
companies can be taken into consideration for disallowance of interest if the
R.D. JAIN
same has been given out of the borrowed funds - Issue is restored to the AO
to examine the same by taking into account all the relevant facts and
availability of assessee’s own funds.
See
SKOL Breweries Ltd., Vs. Asstt. CIT.
(2013) 153 TTJ. 257, Mumbai.

2. Capital Gains
- deductions u/s. 54/u/s. 54F

2.1 Transfer of capital asset and investment of net consideration in purchase or

construction of residential house - New residential house need not be
purchased by assessee in his own name or exclusively in his name - Assessee
purchasing residential house in name of his wife - Assessee entitled to
exemption under section 54F -
See
54 CIT V. Kamal Wahal
(2013) 351 ITR 4 (Delhi)
Note
Contrary decision
Prakash V. ITO,
312 ITR 40. Bom.
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2.2 Sec. 54 and Sec. 54F are independent provisions and assessee can claim exemption
under both sections for investment in the same house.
See
Venkata Ramana V. Dy. CIT,
(2013) 142 ITD 16; Hyd.
3. Remuneration to partners
Excessive and unreasonable payments - Partnership deed specifically providing for
payment of remuneration to working partners - Remuneration paid to partners
within statutory fixed limit - No disallowance can be made on the ground of
excessive expenditure.
See
CIT V. Great City Manufacturing Co.,
(2013) 371 ITR 156.

4. Reassessment

Notice within four years - No power in Assessing Officer to review assessment -

Commission paid to directors - Assessee explaining basis on which decision taken
to make payment of commission - Amounts paid to directors assessed as salary
income in their hands Reopening of assessment on change of opinion without
tangable material not valid.
See
OHM Stock Brokers Pvt. Ltd., V. CIT
(2013) 351 ITR 443 (Bom).
5. Penalty

5.1 Penalty u/s. 271 D

Loan in cash exceeding prescribed limit - Amount received in cash by assessee

from her father-in-law for purchasing property - Transaction genuine and source
disclosed for such transaction - Penalty could not be imposed - Income tax Act,
1961. Ss. 269SS, 271D.

See

CIT V. Smt. M. Yesodha,

(2013) 351 ITR 265. Madras.

5.2 Penalty u/s. 271 (1) (c)

(i) Penalty - Furnishing inaccurate particulars - Assessing Officer treating

amount as income from business - Amount reported in return - Treating
income under some other head not inaccurate particulars - Tribunal rightly
deleting penalty.

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 See

CIT V. Amit Jain

(2013) 351 ITR 74; Delhi.

(ii) Penalty U/s. 271 (1) (c) could not be imposed merely because books of
account were rejected and profit was estimated on the basis of fair G.P.
ratio.

See

CIT V. Whitelene Chemical’s

(2013) 215 Taxman 93 (mag.) Guj.

(iii) Penalty u/s. 271 (1) (c) no valid return filed within time allowed u/s. 139 or
notices issued u/s. 142. Entire income to be considered as concealed
income.

See

T. V. Maggadevan V. Dy. CIT,

(2013) 22 ITR (Trib) 343 Chennai.

6. Credit Co.Op. Society: Sec. 80P _

6.1 Deduction under Sec. 80P (2) (a) (i)

Assessee co-operative society is entitled to increased deduction under Sec. 80P (2)
(a) (i) on the addition made to income as a result of disallowance of various
provisions viz; provision for doubtful loan funds, investment fluctuation reserve,
provision for purchase of vehicles fund and NPA provisions.

See

Asstt. CIT V. Buldana Urban Co-Operative Credit Society Ltd.,

(2013) 153 TTJ 728; Nagpur.

6.2 Addition u/s. 68 vis-à-vis unexplained deposits

Assessee co-operative society engaged in the business of providing credit facilities

to its members having accepted deposits during the course of its business without
complying with the KYC norms and eventually surrendered the amount, the income
added under sec. 68 has to be treated as the profits and gains arising from the
business of the assessee and, therefore, deduction under sec. 80 P (2) (a) (i) is
allowable in respect of the addition sustained under Sec. 68.

See

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 Asstt. CIT Vs. Buldana Urban Co.Op. Credit Society Ltd.,
(2013) 153 TTJ 728 Nagpur.

6.3 Locker Rent

Assessee co-operative society not being engaged in the business of banking and the
locker rent derived by it not being profits and gains attributable to the business of
providing credit facilities to the members carried on by it, deduction under sec.80P
(2) (a) (i) is not allowable in respect of locker rent.

See

Asstt. CIT Vs. Buldana Urban Co.Op. Credit Society Ltd.,

(2013) 153 TTJ 728 Nagpur.

7. Addition u/s. 69C

Unexplained expenditure vis-à-vis fraudulent capital gains - 5 per cent of the sale
consideration has been rightly treated as unexplained expenditure under sec. 69C
towards payment of commission to operators/arrangers of such fraudulent
transactions

See

Arvind M. Kariya Vs. Asstt. CIT

(2013) 153 TTJ 422 Mumbai A.

SECTION B M VAT/ CST

SHOOTOUT BY THE SALES TAX DEPARTMENT
- R. B. Chopada
Tax Consultant, Bhusawal.

After being free from VAT Refund Audits, VAT payments etc now the ‘Intelligence
team’ of the Sales Tax Department have brought business for all tax practitioners’.
They have framed 14 parameters. They found around more than 1100 dealers
from Jalgaon district come in these 14 parameters. With the help of latest software
techniques they extracted such information. Now the department will issue notices
in form 603 to all those dealers falling under these parameters. If dealer agrees
with the discrepancies then he has to pay the differential amount of tax. Otherwise
the department will assess him u/s 23(5).

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The Parameters are as follows.

1) Tax Credit from wrong TIN holders.

2) Tax Credit from Hawala Beneficiary.
3) Non-filer Beneficiary.
4) J1 Beneficiary i.e. Customer wise VAT Sales Beneficiary
5) Tax Credit from Dealer whose Registration under MVAT Act is cancelled.
6) Wrong Input Tax Credit from Composition Dealer.
7) Tax Credit from Return defaulter.
8) Excess Credit in J2 with others J1
9) J4 and J3 Negative Mismatch i.e. debit note or credit note.
10) Sales Suppression and J2 revise
11) Form ‘C’ excess Value.
12) Form ‘F’ excess Value.
13) CST Declaration Tax
14) Ask to Pay MVAT and CST

While going through the data available with the department from various sources
i.e. Returns, VAT Audit Reports, Declaration issued, Declaration obtained.
Annexures etc the intelligence team of the department found various discrepancies
which fall in these 14 parameters.

Out of these 14 Parameters, Tax Credit from Hawala Beneficiary. Non-filer

Beneficiary has caused genuine hardship to the dealers, as the dealer does not
have any other source to know that the dealer from whom he is purchasing goods
is Hawala dealer or he will not filed his return.

At last according to me the department has come out with ‘spice and ice’ together
As though this move has led to additional compliance burden for the
assesses(spicy), it is a boost to the sales tax practice(ice in this hot summer).

So friends now u need to plan out for this additional business, so that
simultaneously u can easily handle the regular ones.

VAT AUDIT U/S. 61 OF MVAT ACT, 2002

(BY CA MAGAN N. PATIL)

Sales tax is the major source of revenue of the State Govt. earlier sales tax was
recovered under the provisions of Bombay Sales tax Act, 1959, under this Act there was
no provision for audit of accounts of the dealer/ tax payer. The Maharashtra Value Added
tax Act, 2002 was made applicable in the state of Maharashtra on and w.e.f. 01/04/2005.
To have the better compliance of taxing provisions by the dealers and to ensure better

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recovery of taxes, provisions of audit of accounts of the dealers in certain cases are made
applicable from the F. Y. 05-06. The above provisions of audit are on the similar line of the
provisions of tax audit under the Income tax Act, 1961.

The provisions of VAT audit are governed by section 61 of the MVAT Act, 2002
and relevant rules 65 & 66 of the Maharashtra Value Added Tax Rules, 2005. The
provisions of section 61 are as under

Section 61 – Accounts to be audited in certain cases

Following three situations are prescribed by this section -

(1) Every dealer, whether registered or not under this Act shall gets his accounts
audited, if

a) If the turnover of sales or as the case may be purchases exceeds-

- Rs. 40 lakhs during the year. From F. Y. 05-06 to F. Y. 09-10
- Rs. 60 lakhs from F. Y. 10-11 and onwards
The term used for calculating the VAT audit limit is turnover of sales or
turnover of purchases, however the sales price as defined in section 2(25) and
purchase price as defined in section 2(20) does not include the sales tax
elements vide explanation II to each section, therefore the definition of turnover
of sales vide section 2(33) and turnover of purchases vide section 2(32) does
not include sales tax elements and accordingly while determining turnover for
VAT audit sales tax collection and sales tax payment in tax invoices is not
required to be considered.
However table 2 of Form No. 704 which is prescribed form of VAT audit
report under rule 65, used the word gross turnover of sale including sales tax
as well as turnover of non sales transactions like job work charges, etc.
In view of the above position, whether turnover of sales or purchases is to
be considered without VAT element or with VAT element is a point of difference
of opinion. However it is better to consider the sales or purchase turnover with
sales tax collection and payment.

Or

b) a dealer or person who holds licence in –

i) Form P.L.L. under the Maharashtra Distillation of Spirit and Manufacture of
Potable Liquor Rules, 1966 or

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 ii) Form B-RL under the Maharashtra Manufacture of Beer and Wine Rules,
1966, or
iii) Form E under the Special Permits and Licence Rules, 1952, or
iv) Forms FL-I, FL-II, FL-III, FL-IV under the Bombay Foreign Liquor Rules,
1953, or
v) Forms CL-I, CL-II, CL-III, CL/FL/TOD-III under the Maharashtra Country
Liquor Rules, 1973.
In this situation there is no limit of turnover prescribed for VAT audit, only
holding of licence is sufficient cause to gets the accounts audited and these
provisions are applicable from F. Y. 05-06 and onwards.

c) the dealer holding entitlement certificate under Bombay sales tax Act, 1959 or
under this Act under any package scheme of incentive is also required to get his
accounts audited from F. Y. 10-11 and onwards, it is to be noted that no turnover
limit fixed for this situation also.
Under the above situations the books of accounts are required to be audited by the
Chartered Accountant or Cost Accountant and the complete report of such audit is
required to be furnished to the sales tax department. The time limit for submission of audit
report to the sales tax department is 9 month and 15 days (refer rule 66) of the end of the
year to which report relates.
The complete audit report means where all the items, certifications, tables, schedules,
and annexures are properly field and are arithmetically self consistent.

(2) this subsection provides for the penalty on the failure of the dealers who are required to
get there accounts audited and furnish a copy of such report before the due date to the
sales tax department. The commissioner may after giving a dealer reasonable opportunity
of being heard, imposed on him a penalty equal to one tenth percent of the total sales.
Further if the dealer fails to file the copy of the audit report within prescribed time
however he files the same within one month from the end of the prescribed period and the
dealer prove before the commissioner that the delay was beyond his control, then no
penalty under this section shall be imposed upon him.
While going through this subsection it is clear that, the penalty is leviable on the
turnover of the sales and not on the turnover of purchases, further there is no maximum
limit of penalty. The maximum limit of penalty of Rs.1 lakh is deleted from 15/08/2007. the

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penalty proceeding is not mandatory as the word used is may instead of the word shall.
Penalties levied under this section and u/s.2A are in addition to tax payable.

(2A) where a dealer furnished the audit report within the time but he knows that the report
furnished is not complete in such situation commissioner may after giving a reasonable
opportunity of being heard may imposed on him a penalty a sum of Rupees one tenth
percent of the total sales.

(3) provisions of audit and penalties are not applicable to the departments of Union Govt.,
any department of State Govt., Local Authority, Railway Administration including Kokan
Railway and Maharashtra State Road Corporation.

Tax audit limit under Income tax Act, 1961 for the F. Y. 12-13 and onwards is Rs.1
crore, however the VAT audit limit is Rs.60 lakhs only.

SECTION C NEWS YOU CAN USE

1] Shri S.B. Page has been joined as Deputy Commissioner of Sales at Jalgaon
Office. His contact Number is 0257-2238705. We heartily welcome him wish best
of success. We are confident that his approach will be to give us dealer-friendly
administration.

2] Sales Tax Officers and Mobile No.s

Sl No Name & Initials Designation Mobile No

1 TADVI.N.A DCST 9822002874
2 THAKRE V.B ACST 9421569809
3 MAHAJAN. K.K ACST 9421689423
4 AUTI.V.H ACST 8087867289
5 SHINDE.M.R ACST 9823304033
6 UNDE.B.T ACST 9730564563
7 DOIPHODE.V.M ACST 9503514010
8 CHODHARI.P.P STO 9764837945
9 BHOSALE.N.B STO 9923541616
10 NIKAM. R.B STO 9860657345
11 THAKRE. E.S STO 9422221596
12 JHADHAV.N.S STO 9623927383
13 KOLI.V.P STO 9096630719
14 PATIL. N.M STO 9869031665

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 15 JOSHI. S.T STO 9860488198
16 PATIL. N.G STO 9422972434
17 SHUKLA.S.S STO 9422370078
18 ADHAV.S.S STO 9833175669
19 BAPAT.V.R STO 9820864280
20 BAVISKAR.B.T STO 7385672350
21 CHODHARI.P.B STO 9987556016
22 DONGARE.U.S STO 9930488158
23 PARDESHI.S.B STO 9923136122
24 SONWANE.S.G STO 9923661934
25 NEHERE.S.B STO 9226783911
26 SAVANT.S.S STO 9892925622
27 AVHAD.S.D STO 9969010417
28 BHOSALE.K.S STO 9405110139

FROM EDITOR
I am thankful to president and board for giving opportunity to me as an editor of
this JDTPA e Newsletter. This e Newsletter will be published every month. Considering
the concept of SAVE PAPER AND SAVE TREES e Newsletter will be sent to the member
through their e mails. It is not available in Print/paper form. Members are requested to
please contact to Secretary Shri Sahebrao Patil and update their e mail id.
I am thankful to our professional brothers who have made contribution in form of
matter for this. Members wishing to contribute matter on Income Tax, M Vat Act or on
other subject may send on email at keswanisu@gmail.com or presidentjdtpa@gmail.com.

Thanks and regard ……………

-Suresh Keswani, Editor

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