Income Tax Details can be disclosed under Right to Information if it concerns "Larger Public Interests" - held Supreme Court

Scope of disclosure of certain Income Tax Details under RTI

Supreme Court in the case of 

GIRISH RAMCHANDRA DESHPANDE VS. CIC, 

has held that,-

"The details disclosed by a person in his income tax returns are “personal information” which stands exempted from disclosure under clause (j) of Section 8(1) of the RTI Act, unless it involves a larger public interest and the Central Public Information Officer or the State Public Information Officer or the Appellate Authority is satisfied that the larger public interest justifies the disclosure of such information."

Issue:

Whether the Central Information Commissioner (for short 'the CIC') acting under the Right to Information Act, 2005 (for short 'the RTI Act') was right in denying information regarding the third respondent's personal matters pertaining to his service career and also denying the details of his assets and liabilities, movable and immovable properties on the ground that the information sought for was qualified to be personal information as defined in clause (j) of Section 8(1) of the RTI Act?

Facts:

The petitioner  sought for copies of all memos, show cause notices and censure/punishment awarded to the third respondent from his employer and also details viz. movable and immovable properties and also the details of his investments, lending and borrowing from Banks and other financial institutions. Further, he has also sought for the details of gifts stated to have accepted by the third respondent, his family members and friends and relatives at the marriage of his son. The information mostly sought for finds a place in the income tax returns of the third respondent. 

The question for consideration is whether the above-mentioned information sought for qualifies to be "personal information" as defined in clause (j) of Section 8(1) of the RTI Act.

As far as the scope of the Sec-8 (1) is concerned it states as follows:-

Exemption from disclosure of information.-

(1) Notwithstanding anything contained in this Act, there shall be no obligation to give any citizen,-

(e) information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information;

(g) information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes;

(j) information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual unless the Central Public Information Officer or the State Public Information Officer or the appellate authority, as the case may be, is satisfied that the larger public interest justifies the disclosure of such information."

Observation by Supreme Court:

Upon deciding the issue Supreme court observed and categorically held that, the details as called for by the petitioner such as ( copies of all memos issued to the third respondent, show cause notices and orders of censure/punishment etc. are qualified to be personal information ) as defined in clause (j) of Section 8(1) of the RTI Act. 

Further held that, the performance of an employee/officer in an organization is primarily a matter between the employee and the employer and normally those aspects are governed by the service rules which fall under the expression "personal information", the disclosure of which has no relationship to any public activity or public interest. On the other hand, the disclosure of which would cause unwarranted invasion of privacy of that individual. 

Held that,-

"The petitioner in the instant case has not made a bonafide public interest in seeking information, the disclosure of such information would cause unwarranted invasion of privacy of the individual under Section 8(1)(j) of the RTI Act."

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Provident Fund & E.S.I.- allowability of claim of deduction U/s. 43B of the Income Tax Act, 1961

Allowability of Deduction of payment made on account of Contribution of Provident Fund and E.S.I. - as per Sec- 43B of the Income Tax Act, 1961

. . . an enabling provision, its applicability in Income Tax Law & Legal controversies 

Every organization is responsible to make correct and timely mandatory deductions towards contribution made on account of Provident Fund, E.S.I and any other statutory obligations, or else are made responsible to for withholding employees’ contribution due to failure in remitting these amounts to respective statutory authorities. Consequences, as simple as that –“non-allowability of claim of deduction under Income Tax Act, 1961”.

Hence, complying with the timelines as prescribed under the specified Acts is necessary in order to get the entitled benefit under Income Tax Law. Therefore, one needs to be well versed with the latest rules and regulations so as to avoid the unintended non-compliance and consequences thereof under these Acts. These statutory deductions are complex and failure for non-compliance leads to monetary punishments. In a way an organization end up paying hefty amount and efforts for its necessary compliance.  

Sec- 36 (1)(va) to be read with Sec- 43B of the Income Tax Act, 1961

 Sec-36 (1) (va) reads as follows, -

“(va) any sum received by the assessee from any of his employees to which the provisions of sub- clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee' s account in the relevant fund or funds on or before the due date. Explanation.

For the purposes of this clause," due date" means the date by which the assessee is required as an employer to credit an employee' s contribution to the employee' s account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract of service or otherwise”

Sec- 43B of the Income-tax Act, provides that,

certain expenditures, which would otherwise have been allowable as deductions in computing the total income under the Income-tax Act, 1961 shall be allowed as deduction only in the year of actual payment of such items by the assessee. These expenditures are listed under clauses (a) to (f) of the said Section.

To sum up the above, -

•  Employees' contribution is an “income in the hands of the employer/assessee” as per section 2(24)(x);

•  The same is an allowable expenditure, provided the payment thereof is made on or before the due date prescribed under the relevant PF scheme, as per provisions of section 36 (1) (va);

•  The employer's contribution is allowable as expenditure if the payment is made on or before due date of filing his return of income u/s 139(1) and the proof thereof is attached along with the return of income.

Clause (b) of the said Section refers to the sums payable by an employer by way of contribution to any provident fund, super-annuation fund, gratuity fund, or any other fund for the welfare of employees.

The second proviso to Sec- 43B provides that no deduction of such sums covered by the said clause (b) shall be allowed unless such sum has actually been paid on or before the due date as defined in the Explanation below Sec. 36(1)(va).

Incidentally, the aforesaid Sec. 36(1)(va) also provides that any sum received by the assessee from his employees’ as contributions to a Provident Fund, Superannuation Fund, ESI Fund or any other fund for welfare of employees, regarded as income by virtue of S. 2(24)(x), shall be allowed as a deduction in computing business income, only if such sum is credited by the assessee to the employees’ account in the relevant fund or funds on or before the due date.

Section- 43B controls the allowability of deduction of payment specified in clauses (a) to (d) thereof and provides certain conditions subject to which alone the deductions may be permissible, -

Section 43B which commences with a non obstante clause, mandates that the sum referred to in any one of the clauses, will be allowed as deduction in computing the income under section 28 of that previous year only, in which such sum is actually paid by the assessee, irrespective of the fact that the said deduction is otherwise allowable under the Act, and irrespective of the previous year in which the liability to pay such sum was incurred by the assessee, according to the method of accounting regularly employed by him.

The first proviso to section 43B relaxes the rigour of the section if the sum referred to in clause (a) or clause (c) or clause (d) is actually paid by the assessee before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to any such sum was incurred and evidence of such payment is furnished by the assessee along with such return.

The second proviso imposes a further restriction on the allowability of deduction of any sum referred to in clause (b). It provides that unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date, it shall not be allowed as deduction.

Under section 43B, the sum referred to in “clause (b)” of section 43B has been treated differently, as it relates to the sum payable by the assessee as an employer, which includes employer's contribution as well as employees' contribution. If such contributions which are payable to any provident fund or superannuation fund or any fund are paid within the due date, the employer will be able to avail of the benefit of deduction under section 43B, although the general rule embodied in section- 43B is one of allowability of deduction based on actual payment.

The rule contained in the second proviso is an exception to the rule. And here, the actual payment is not enough; the payment should also be made within the due date as defined therein.

Controversy – Whether the amendment brought in Sec- 43B vide Finance Act, 2003 amendatory in nature or curative (retrospective effect w.e.f. 1^st April 1988) in nature?   

That vide Finance Act, 2003 an amendment was brought in, thereby deleting the second proviso of Sec-43B made w.e.f. Assessment year 2004-05 therefore became a permissible deduction in the year of payment treating it on par with other items covered by section 43B. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand and with the contributions to Employees' Provident Fund, superannuation fund and other welfare funds on the other.

This amendment brought about the uniformity came into force w.e.f. 1st April 2004.

The Supreme Court in the case of C.I.T. VS. Alom Extrusions Limited ( 2009) solved the said issue.

The issue of the litigation in the above case was, -

“whether omission [deletion] of the second proviso to Section 43-B of the Income Tax Act, 1961, by the Finance Act, 2003, operated with effect from 1st April, 2004, or whether it operated retrospectively with effect from 1st April, 1988?”

While deciding the matter, Apex Court took into consideration the “Principle of Construction”, thereby relied upon the relevant observations passed in the case of Commissioner of Income Tax, Bangalore vs. J.H. Gotla, which states, -

“the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be sub served by the object of the legislation found in the manner indicated before, then if another construction is possible apart from strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction.”

Therefore, in the light of the above observation, amendment to sec- 43B brought in by Finance Act, 2003 was held to be ‘curative’ in nature with retrospective effect from 1^st April 1988 i.e. since the very inception of the provision.

Controversy - Whether the assessee was entitled to claim the benefit vide Sec.43-B for that period particularly in view of the fact that he has contributed to provident fund before filing of the return?

In the case of C.I.T. vs. Vinay Cement Ltd. Hon’ble Apex Court has observed and held that, benefit u/s. 43B be given if the payment has been made before the filing of the Income Tax return.

The issue was again adjudicated in the case of C.I.T. vs. A.I.M.I.L. (2009). Therein, Hon’ble Delhi High Court has held that,

“if the employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act. Therefore, the Act permits the employer to make the deposit with some delays, subject to the aforesaid consequences. Insofar as the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed, as per the principle laid down by the Supreme Court in Vinay Cement (supra).”

In the recent past, Calcutta High court in the case of C.I.T. vs. Vijayshree Limited has settled an issue that whether the deletion of an addition made by the Assessing Officer on account of Employees' Contribution to ESI and PF by invoking the provision of Section 36(1)(va) read with Section 2(24)(x) of the Act was correct or not.

Hon’ble Calcutta High Court relied upon the judgment passed by Hon’ble Supreme court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd. Accordingly, had held that,

“the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec-43(B) of the Income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act.”

After observing the plea, I find that it was not the case of adjudicating the question of applicability of provision of sec-43B with retrospective operation or not. And that, the plea taken by Calcutta High court doesn’t make any difference for the reason being that the case pertained to A.Y. 2006-07 and amendment to the second proviso to the Sec- 43 (B) of the Income Tax Act, as introduced by Finance Act, 2003 was already made applicable w.e.f 1^st April 2004.

The question is whether the assessee would get the benefit of deduction u/s. 43B of the I.T. Act, for payment made towards Employer’s and Employees’ contribution to PF and ESI made after due date of the respective Acts but paid before the due date of filing of the income tax return.

Recently, Hon’ble Supreme court has one again confirmed in the case of Commissioner of Income Tax vs. Solar Exports that, the Finance Act, 2003 to be curative in nature which would have retrospective application operating from 1^st April, 1988, when the proviso stood inserted.

To Conclude:

 It is worth mentioning to discuss in brief the main object of sec- 43B. It is an exception to the general rule of law that a deduction should be allowed in respect of business expenditure in the year in which the same was incurred in case of a person following the mercantile system of accounting. The Section provides that the deduction will be allowed in respect of the listed expenditure in computing the income of the previous year in which the sum is actually paid. Once the payment is shown to have been made, the intention is to confer deduction, which is gathered clearly from the main Section as was introduced.

Hence, all provisions and Explanation added thereafter shall ensure the fulfillment of the main object and are required to be interpreted in a manner to achieve the aforesaid objective.

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Difference of opinion on account of taxability of any item/nature of payment falling under various TDS provisions- no disallowance can be made u/s. 40 (a) (ia)

"assessee may be an assessee-in default" but penal provision u/s. 40 (a) (ia) cannot be invoked...

I.T.A.T. Mumbai in the case of UE Trade Corp. (India) Ltd. vs. D.C.I.T. has observed and held that, the difference in shortfall was due to the "applicability of provisions. 

The assessee deducted tax at source u/s. 194C, whereas the A.O. were of the opinion that provision of sec-194I would be applicable. Hence, held that assessee is in default as per provisions of sec. 201 but the disallowance of the expenditure was not permissible u/s. 40 (a)(ia) of the I.T. ACT, 1961.

Interim Suspension by Andhra Pradesh High Court of the ITAT Special Bench decision in the case - "Merilyn Shipping & Transports, Vishakhapatnam vs. A.C.I.T"

Landmark Judgment faces interim suspension

MERILYN SHIPPING & TRANSPORTS, VISHAKHAPATNAM 

VS. 

ADDITIONAL COMMISSIONER OF INCOME TAX 

It has not been very long since, Hon'ble ITAT, Vishakhapatnam, Special Bench in the case of Merilyn Shipping & Transports, Vishakhapatnam vs. Additional Commissioner of Income Tax has passed a landmark Judgment pertaining to provision of sec- 40 (a) (ia) of the I.T. Act, 1961. 

The question & the issue which was decided was,

" Whether Sec- 40 (a) (ia) of the Income Tax Act, 1961 can be invoked only to disallow expenditure of the nature referred to therein which is shown as 'payable' as on the date of the balance sheet or it can be invoked also to disallow such expenditure which become payable at any time during the relevant previous year and was actually paid within the previous year? "

It was held by the majority decision by the Hon'ble ITAT, Special Bench that,

"The provision of sec-40 (a) (ia) of the Act are applicable only to the amounts of expenditure which are payable as on the date 31st March of every year and it cannot be invoked to disallow which had been actually paid during the previous year, without deduction of TDS."

Revenue Department was not happy with the decision and hence, filed a petition u/s. 151 of the CPC before Andhra Pradesh High court. Hon'ble High court suspended the operation of the order passed by Hon'ble ITAT, Special Bench. 

Granted the interim suspension.

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E-Passbook scheme for the Employees' Provident Fund Organisation to be launched today

E-Passbook scheme for the Employees' Provident Fund Organisation to be launched today

Subscribers to the Employees’ Provident Fund Organisation will now be able to download their e-pass book each month, if they are active members and if their electronic challan-cum-return is uploaded. 

In the case of members who are not active (left service) and have not settled their account or have not become inoperative, the facility to download the pass book on request basis shall be available, it said. 

The facility shall be available on www.epfindia.gov.in. 

Once the facility comes into operation, PF members can register on the Member Portal by using his/her photo identification number, such as PAN, Aadhaar, National Population Registry, driving licence, passport, voter ID, ration card and use the mobile number as password. This way, the member will not be required to remember any user ID/password, the Ministry said. Once registered, a member can download the pass book by entering his/her account number. If available, the pass book will appear for download. 

“The e-pass book shall contain the transaction-wise details in the member’s account (all credits and debits) since the month for which the details for the establishment have been processed in the new application software at the field offices,” the Ministry added. 

The facility, however, will not be available for members under exempted establishments under the EPF Scheme 1952 (as the fund details are maintained by the Trust), inoperative members (i.e. in accounts where no contribution has been received during preceding 36 months). 

However, there will be some restrictions, as only one registration will be allowed against one mobile number, and a member can download the passbook for only one account number under one establishment.

source – www.thehindubusinessline.com

CIT vs. Solar Exports - Proviso to Section - 43B - Supreme court recently in case C.I.T. vs. Solar Exports has held that Finance Act, 2003 is curative in nature & has retrospective operation from 1st April 1988

Once again Supreme court had settled he issue pertaining to the question of allowability of deduction of PF, ESI, etc being paid subsequent to the close of the accounting period but before the due date of filing of return in the case of Commissioner of Income Tax vs. Solar Exports. 

The term certain deductions be allowable only on actual payment related to provident fund payments as per section - 43B of the Income Tax Act, 1961 has been quite a topic in income tax litigation. This case relates to the assessment year 2000-01 and 2001-02. 

Supreme court held that this case was squarely covered by the decision of the Apex court in the case of CIT vs. Alom Extrusions Ltd. [2009] 319 ITR where it was held that the Finance Act, 2003 is curative in nature and that the same is applicable from 1st April 1988 when the proviso was first inserted. 

Held that, revenue has to accept the payment of ESI, PF etc, paid by the assessee and shall give deductions of that amount in favor of assessee as claimed in the income tax return. 

This special leave to appeal rose out of the judgment & order of Karnataka High Court.

Challenges faced by women in legal profession

Major Challenges confronted by Women in Legal Profession

Life is either a daring adventure, or it is nothing . . .

Women in legal profession who have very little support in litigation & insufficient professional network face indefinite struggle in the field of legal practice, and gradually with time it becomes tough for many to pursue further. Like many other working women in other jobs or profession, women lawyers are also forced to choose between their careers and family. 

Here are some major challenges faced by women in legal profession in India,-

1) Gender bias & discrimination at workplace: It is often seen that women are underestimated while allocating challenging tasks at work. They are forced to be contend with lesser professional fees in compare to their male counterparts. Women are also denied benefits, bonuses and promotions at times. They are made to feel like to be less competent and less reliable and hence employers don't confide on them or neither wants to invest on them; especially when women take maternity leave. Also it has been unearthed during interview that, they are being asked questions pertaining to marriage plans, family plans etc. which eventually becomes one of the criteria for an employer to to take a call during hiring process. Questions related to travelling to different places in connection to work is also asked in an interview. Some agrees to take the challenge and some back out due to social and family constraints. Women are continuously being doubted and challenged of their competency and sincerity. 

2) Marriage & Maternity breaks: Often women sacrifice their personal needs while coping up with never-ending professional responsibilities. They are equally concerned about achieving and meeting the challenging professional responsibilities and in a way things get complex and tough while pursuing long hours of work. Therefore, women lawyers struggle a lot in maintaining a balance alongside a demanding career. Professionally, it is humiliating for a woman lawyer who is questioned of her dedication, sincerity & commitment towards work when she gets married or take maternity leave. It seems that women in the law firm and corporate sector is the worst effected. Even though however competent or deserving candidate she may be, they are victim of prejudice when they are denied of their earned entitled promotion or many other benefits. In a way they loose out opportunities to climb a ladder of success in reaching up to upper ranks of the legal structure of a Law firm/ corporate sector. 

On the other hand women in litigation also find it extremely difficult to cope with the gap that is created due to maternity break. It is a known fact that, being visible in courts is a part of the deal in becoming a successful lawyer. Women in litigation has certain freedom to work as there is no fixed hours or deadlines to follow. However, the independent practitioners sacrifice their earnings during this period as they are not in a position to reach out to work hard to acquire clients and work. In legal sector continuity in legal practice is highly appreciated by employers and clients, & these are the major reasons of setbacks for a women in legal profession in order to pursue their career with full control. Long absence from the court room corridors which is considered to be "the integral place" is certainly a doom for their legal career. 

By the way what difference does it make for a women lawyer in Law firm/ corporate sector to that of women in litigation!  

3) Denied of rightful fees: It is extremely humiliating to find, when women legal professionals are denied of their rightful fees. Independent women legal practitioners often have to face a very difficult time in procuring clients and professional fees.

4) Gender Preferences while recruiting a lawyer in corporate: Many a times while applying for a position with a respectable company via job portals, the requirement for the position reads- "Only Male Candidates shall apply for the post" or "Preferably male candidates". This is humiliating, disheartening and gender discrimination. 

5) Family & Social pressure: Mainly, the problem begins post-marriage. At this stage things get difficult in maintaining a fine balance between legal practice and family obligations. Marriage to someone who is in the same profession could be advantageous for a woman legal practitioner or else things could get difficult. Hectic work schedules, late night shifts, attending meetings at odd hours, travelling to places due to work are few of the major reasons for woman lawyers to quit their jobs and stop practicing. Another reason is when there is a lack of family support post maternity and lack of creche facilities, which are also few of the reasons for setback in their legal career. 

To the extent, such circumstances forces a woman legal professional to sacrifice their career at the end.     

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The desirability of ethics in Legal profession

THE DESIRABILITY OF ETHICS IN LEGAL PROFESSION

the practice of securing harmonious co-operation between the Bar & the Bench & establishing the promotion of highest standards in fair dealings with ones clients, opponent & witnesses

“With great power comes great responsibility”… but the question is, how far the proverb stands to be true when compared to the legal profession?

Our Indian Constitution has prescribed in Article 22(1), -

“No person who is arrested shall be detained in custody without being informed, as soon as may be, of the grounds for which arrest nor shall he be denied the right to consult and to be defended by, a legal practitioner of his choice”.

Bar Council of India Rules explicitly states the “Standards of Professional Conduct and Etiquettes”, where an Advocate is bound to accept any brief in the Courts or Tribunals or before any other authorities in or before which he proposes to practice at a fee consistent with his standing at the Bar and the nature of the case with an exception to special circumstances, where he may refuse to accept a particular brief. Section 49(1)(c) of The Advocates Act of 1961 empowers the Bar council of India to make rules so as to prescribe the standards of professional conduct and etiquette desired to be observed and practiced by the advocates. To sum up, legal professionals have a vital role to play on social dimension.

Every profession has its own sets of ethics, set of norms & code of conduct codified for correct approach. For instance, writing an article in a newspaper or magazine, a journalist is expected to follow basic prescribed code of ethics i.e. verification of facts before putting it into writing before publishing the same for public. Doctors, if simply put are also expected not to refuse with medical help at the time of dire emergency. No wonder why they are considered as “next to god”. If simply put, the lawyers are also bound by certain professional ethics and guidelines, in order to safeguard the interest of a common man.

Legal profession is highly dynamic and competitive. In this 21^st century and expanding globalization, the profession has ceased to be referred “a traditional profession”. With increasing globalization mobility of lawyers have become frequent, and with time and pace the legal practice has also become more complex. It is seen that there is a constant conflict of approach between a conventional lawyer and street-smart lawyer, both struggling through the cutthroat competition. Practicing law with passion while maintaining integrity is seldom seen admired and valued. The public image of legal professionals is far from flattering as they are referred as “fortune seekers” instead of being someone who seeks to serve.

In the recent past, there had been an utter rage when lawyers challenged Rule 36 of the Bar Council of India Rules before the Supreme Court on the issue of blanket ban on “advertising services”. Rule 36 prohibits lawyers from advertising to get clients, either directly or indirectly and the prohibition extended to include websites and also online directories. A simple law degree would not suffice if larger public interests were to be taken into consideration.

Lawyers cannot be termed as businessmen! Mere solicitation of their legal specialization, skills and information can never be equated with profit making. With diversified areas of legal practice, nobody is expected to be master of every sphere of law.

Hence, making available of relevant information regarding their work and expertise on websites, online directories etc for the consumers cannot be termed as commercialization of legal services. Every citizen who seeks for legal service/legal help is rightly entitled to know about his/her lawyer and ones expertise, because at the end of the day a fee is charged by the lawyer for rendering legal service. “Lawyers cannot attract business through advertisements” is a conventional opinion. What about circulation of personal visiting cards by the professionals? Wouldn’t it be referred as solicitation of their legal service only to get more clients? The difference is embracement of the modern tool or medium of providing information to public by way of advertisement on websites / online-portals, directories etc instead of a usual conventional approach of distributing ones visiting cards. In the end resolution to amend Rule 36 were sorted and advocates are now allowed to provide information on websites under intimation and as approved by the Bar Council of India.

Now, if an ethical approach in legal practice is so much desired and Bar Council of India is active in maintaining the integrity of this profession by safeguarding the same from getting commercialized, then why this profession is no longer regarded as a noble one? What are the reasons for this outright decline by the public? Why people are loosing faith in lawyers and judiciary? As far as practical aspect is concerned, the legal hierarchy and its procedural complexities are the main reasons for indefinite litigation process and a lawyer is always doubted for being unethical and manipulative.

Not to mention of another issue for which people are loosing faith in this so-called noble profession. It is that when “lawyers resort to strike” for disagreement. Considering the exigencies of the profession and speedy disposal of cases in order to achieve justice is the need of an hour. What intrigues me is whether it is socially, morally & ethically acceptable to let an innocent suffer for the want of an immediate legal aid when the lawyers are on strike? This is one of the major facets of this legal profession, which should be obeyed in order to achieve harmonious relationship with the public. 

Hon’ble Supreme Court has out rightly stated that lawyers cannot resort to strike which is illegal. In the case of Ex Capt. Harish Uppal vs Union of India & Anr (2002) Hon’ble Supreme Court has held that,

“if a lawyer, holding a Vakalat of a client, abstains from attending Court due to a strike call, he shall be personally liable to pay costs which shall be addition to damages which he might have to pay his client for loss suffered by him. There will be no strikes and/or calls for boycott. It is hoped that better sense will prevail and self restraint will be exercised.” 

On such occasions Bar Councils are expected to uphold the dignity of courts in order to prevent interference in the smooth functioning of the administration of justice and also to ensure that there shall be no unprofessional or unbecoming conduct from the lawyers. Considering the responsible position and their duty, no Bar Council shall ever consider giving a “call for strike” or “call for boycott”. Considering this situation, Bar councils instead of resorting to strike and protest shall challenge the legality of provisions in court that are binding them.

After all, if the citizens are expected to be law abiding, why an exception shall be made for the legal professionals!

Law is a serious profession and is very different from other professions. It affects not only an individual but also society at large. If the importance of this profession lies in maintaining a discipline and certain code of conduct, then why wouldn't the society rightfully expect an ideal behavior from a lawyer!  

Commissioner of Income Tax vs. Virgin Creations - "matter of review"

Decision of Calcutta High Court in the case of Commissioner of Income Tax vs. Virgin Creations

… Is a matter of review

The decision passed by the Hon’ble Calcutta High Court has created a history of providing relief to the “TDS defaulters” in a very short span of time. The legal applicability of retrospective application of amendment to the provision of sec-40 (a) (ia) of the Income Tax Act, 1961 brought in by the Finance Act, 2010 is said to have sorted out by this Hon’ble High court in the case of C.I.T vs. Virgin creations.

Tax-payers and tax-representatives have considered the said judgment as a “sigh of relief!”. But the question is that, although the amendment in the provision of section 40(a)(ia) of the Act was introduced with an objective to remove hardship faced by the taxpayers, how far an order passed by a Higher judicial authority which is factually erroneous can provide relief to the TDS defaulters?

The Amendment as explained in the Memorandum explaining the provision in Finance Bill, 2010 is as under: -

Disallowance expenditure on account of non-compliance with TDS provisions,

“The existing provisions of section 40(a)(ia) of the Income-tax Act provide for the disallowance of expenditure like interest, commission, brokerage, professional fees, etc. if tax on such expenditure was not deducted, or after deduction was not paid during the previous year. However, in case the deduction of tax is made during the last month of the previous year, no disallowance is made if the tax is deposited on or before the due date of filing of return.

It is proposed to amend the said section to provide that no disallowance will be made if after deduction of tax during the previous year, the same has been paid on or before the due date of filing of return of income specified in sub-section (1) of section 139.

This amendment is proposed to take effect retrospectively from 1^st April, 2010 and will, accordingly, apply in relation to the assessment year 2010-11 and subsequent years.”

The amendment has led to an enormous confusion and controversy in tax litigation. Although this aforesaid provision has been challenged before various court of law since it’s inception vide Finance Act, 2004, the issue of it’s application made with a retrospective effect but with prospective date i.e. w.e.f. 01.04.2010 relevant to A.Y. 2010-11 is the most debated one. Several judicial and quasi-judicial authorities had tried to clarify the position and the applicability of this amendment in number of cases. 

With reference to the already made discussion above, I would like to point out that, Hon’ble High Court while passing the decision in the case of Virgin creations has mentioned that, Hon’ble Supreme Court in the case of Allied Motors Pvt. Ltd. and in the case of Alom Extrusions Ltd. have already decided that sec-40 (a) (ia) has retrospective application”. Relevant extract from the order in the case of Virgin creations is as under, -

“The learned Tribunal on fact found that the assessee had deducted tax at source from the paid charges between the period April 1, 2005 and April 28, 2006 and the same were paid by the assessee in July and August 2006, i.e. well before the due date of filing of the return of income for the year under consideration. This factual position was undisputed.

Moreover, the Supreme Court, as has been recorded by the learned Tribunal, in the case of Allied Motors Pvt. Ltd. and also in the case of Alom Extrusions Ltd., has already decided that the aforesaid provision has retrospective application.”

Now, I would also like to briefly state the relevant paragraph from the judgment passed by Hon'ble Supreme court in the case of Allied Motors Pvt. Ltd. (P) Ltd. vs. Commissioner of Income Tax, -

 “Whether on the facts and in the circumstances of the case, the sales-tax collected by the assessee and paid after the end of the relevant previous year but within the time allowed under the relevant sales-tax law is to be Income-Tax Act, 1961 while computing the business income of the said previous year “?

In this case, the deduction that was claimed by the assessee was disallowed by the Income-tax Officer under Section 43B of the Income-tax Act, 1961 which was inserted in the statute with effect from 1.4.1984.”

Again in the case of Commissioner of Income Tax vs. Alom Extrusions Limited, the issue, which was adjudicated and clarified by Hon'ble Supreme Court of India was that, -

“whether omission [deletion] of the second proviso to Section 43-B of the Income Tax Act, 1961, by the Finance Act, 2003, operated with effect from 1st April, 2004, or whether it operated retrospectively with effect from 1st April, 1988?”

Now, after careful observation of both the afore-mentioned judgments passed by the Hon'ble Supreme Court, I have observed that sec-40 (a) (ia) has in fact not been adjudicated at all by Hon'ble Supreme Court. Therefore, Hon'ble High Court of Kolkata in the case of Virgin Creations has indeed erred in its factual observation while passing the decision, and that the same require some serious review.

Till date, no reported judgment challenging the order of the judgment of the said High Court of Calcutta is found and I am of the opinion that the same requires an immediate review. 

No TDS liability u/s. 194C where the assessee, a transporter has made payments for hiring of trucks simplicitor and not for transportation of goods.

IN THE ITAT KOLKATA BENCH 'A'

Lokesh Duggal

vs.

Income Tax Officer, Ward 35(3), Kolkata

Facts: The assessee is an individual, and is engaged in the business of transportation of goods. During the course of business carried on by him, the assessee had to take several trucks on hire, from middlemen or agents of the subcontractor, so as to meet his requirements. It is on these payments that the assessee did not deduct tax at source under section 194C, and, this non deduction of tax source from payments to the agents of the truck-owners, inter alia, resulted in the impugned disallowance under section 40(a)(ia). In appeal the CIT(A) has confirmed the disallowance.

Held that,-

"What follows from the above analysis, with which we are in considered agreement, that so far as pre June 2008 position is concerned, tax withholding obligations under section 194 C in respect of an individual only in cases where the payments were made to a sub contractor for carrying out a part off work, or the work itself, undertaken by the assessee and that too when such individual's turnover from business or profession exceeded threshold specified in section 44AB. That condition is clearly not satisfied in the present case. It is not the revenue's case that the payment is made for sub contracting the work, and, as we seen in the earlier discussion, there is nothing on record to even suggest so. That would have been the case, for example, when assessee received the goods for transportation and the assessee had made payment for such transportation of goods, not truck hire simplictor as is the case before us, to a third party. When it is not a case of sub contracting, it is wholly immaterial that assessee's turnover exceeded the specified threshold under section 44AB, which, as we have noted above, applied only in respect of sub contracting work at the relevant point of time. Clearly, therefore, the assessee did not have any tax withholding obligation in respect of truck hire payments in the pre-amendment period. Once we come to the conclusion that the assessee did not have any obligations to deduct tax at source under section 194C, the very basis of impugned disallowance ceases to be good in law. The disallowance must, therefore, stand deleted for this short reason alone. In these circumstances, we also see no need to address ourselves to other very erudite legal contentions put forward by the learned counsel. The impugned disallowance stands deleted."

In the result, the appeal was allowed. 

Initiation of recovery proceedings without rejecting the Stay Application is against the Principle of Natural Justice as held by ITAT, Hyderabad

Rule of Natural Justice in TaxLaw

The principles of natural justice concern procedural fairness and ensure a fair decision is reached by an objective decision maker. 

IN THE ITAT HYDERABAD BENCH 'A'

Capital IQ Information Systems India (P.) Ltd.

vs.

Assistant Commissioner of Income-tax, Cir. 1(2), Hyderabad

The initiation of recovery proceedings without rejecting the stay petition is against the Rule of Natural Justice. 

Briefly the facts are as follows,-


Assessee is engaged in Information Technology enabled services and business support services to the parent company. Assessment for the year under appeal, was completed invoking the provisions relating to the Transfer Pricing, under S. 143(3) of the Act read with S. 144C of the Act as against returned income. Demand was accordingly raised.

The learned counsel for the assessee had filed a copy of notice under S. 226(3) dated 6.6.2012 regarding the attachment of the bank of account of the assessee and mentioned that such attachment made by the assessing officer when the application for stay of recovery was still pending, was not proper.

That without taking any decision on the stay application of the assessee pending before the assessing office, it is unfortunate that the Revenue authorities did not bother to inform the assessee about the fact of attachment on the bank account of the assessee, which was in fact, ultimately informed to the assessee by the bank.

Further, he reiterated by stating that in all probability, the assessment have to be set aside by the Tribunal in view of the violations caused to the principles of natural justice and the inquiries carried out at the back of the assessee, without meeting the objections raised by the assessee before the TPO/Assessing officer, DRT, etc.

Hon'ble ITAT held that, initiation of the recovery proceedings without passing any order on the stay application of the assessee. The recovery proceedings under S. 220(6) were initiated without attending to or expressly rejecting the stay application filed by the assessee before the assessing officer. Also stated that there was Lack of transparency and the assessing officer had failed to honor the set principles of natural justice. Subsequently, it was also observed that the objections raised by the assessee before the lower authorities were not met by passing a speaking order. 

In the result, Stay Application of the assessee was partly allowed.

High Court, Kolkata held that, the foreign travel expenses shall be disallowed in entirety in absence of details/evidences & explanation for justification of undertaking such foreign tours in connection to business

The assessee was required to give the details of foreign visits and justification related to assessee's business. The assessee has replied that these are incurred for possible future expansion of business but no other details were given regarding what in the further expansion plan and which visit is for what particular project or purpose and in these visits which foreign concerns were contacted and what business dealing was made. In the absence of these details the assessee has not proved that these are related business activities. The appellant-assessee has not been able to discharge initial burden to prove that the expenses on account of foreign visits was relatable to business expenditure. 

HIGH COURT OF CALCUTTA

Peerless General Finance & Investment Co. Ltd.

vs.

Commissioner of Income-tax, W.B.-I, Kolkata

KALYAN JYOTI SENGUPTA AND JOYMALYA BAGCHI, JJ.

IT APPEAL NO. 302 OF 2003

MAY 17, 2012

Facts of the case: the nature of the assessee's business is a non-banking financing that includes acceptance of deposit from public to pool for making investments within the limitation of prudential norms issued by the RBI, and it obviously precludes the possibility of any purpose of capital nature. The continuity of collection in foreign exchange and the long history of regular campaign over years per se is a circumstance of substantially evidentiary value.

Issue: The assessee claimed deduction on account of foreign tours undertaken at different times for business purposes of the company.

Assessee's contented that, both the assessing officer and the learned Tribunal had gone wrong not accepting this fact of collecting business from foreign countries and as such travel tour by the officials of the assessee to the foreign countries is an essential part of the business- that non-availability of formal evidence as recorded by the learned Tribunal, does not amount to a case of absence of evidence because the nature of campaign involving man to man and group contacts amongst the non-resident Indians produces no document- the standard of proof set by the learned Tribunal is not a pragmatic one- placing reliance on a judgment in case of CIT v.Coimbatore Salem Transport Co. (P.) Ltd. [1966] 61 ITR 480 (Mad.) that in a situation like this onus of proof is required to be discharged by the Revenue- enough evidence was produced giving list of names of the places and names of the personnel visited therefore no other proof was required- result of the foreign trip for the business purpose is not determinative factor as have been wrongly held by the learned Tribunal.

On the other hand revenue contended that, assessee-appellant failed to prove by supporting documents and evidence that there has been travel tour in connection with the business- Assessing Officer was perfectly justified in disallowing such claim- decision of the CIT (Appeals) allowing 50% of the claim was not legally sustainable as the same was based on surmises and assumptions- Tribunal has correctly reversed the judgment and order of the CIT (Appeals) as nothing was produced though repeated opportunity was given to produce the same. The appellant has not furnished full details and information with regard to following foreign trips by the personnel of the Assessing Officer.

Hon'ble High Court, Calcutta has held that, in order to claim deduction the assessee has to prove by adducing cogent evidence that it was incurred on account of business activities of the company. It appears as rightly pointed out by learned counsel for the respondent that despite opportunity being given they could not produce any materials that such foreign tour was undertaken in relation to the business of the company. Mere furnishing information and making of statement are not good enough to establish the case of foreign travel. 

Further stated that, "It will appear that the Commissioner of Income Tax (Appeals) has accepted mere statement made to be correct without caring for evidence and it would appear therefrom it is absolutely based on surmise and conjecture. We therefore find force in the submission of the learned Counsel for the respondent. Therefore the decision of the learned Tribunal is absolutely justified. We are of the view that the appellant-assessee has not been able to discharge initial burden to prove that the expenses on account of foreign visits was relatable to business expenditure. We are unable to accept the contention of Mr. Bagchi that materials produced before the learned Tribunal is quite adequate to hold that the foreign tour was relatable to business activity of the assessee company. We also fail to understand on what basis the Commissioner of Income Tax (Appeals) has allowed 50% we think it was completely guess work and it appears as if just because the Commissioner of Income Tax (Appeals) thinks that the aforesaid expenditure of disallowance should be granted and it was granted."