Even after discussion at length of heads there are some issues which holds worth for discussion, some of them are being discussed here.

If a business receives an amount on which ‘right to receive is yet to be established’ (In case of participation in technical collaboration) . In such cases what is the substance of such receipt has to be established and true nature has to be deduced after testing on certain fundamentals. If this money is of recurring nature and this is certain that compliance of terms and conditions associated with that receipt is undoubted, such receipts can be considered as income in the year of receipt.

[ Circular No 21 dated 9th July 1969]

Retention Money:- In CIT Vs. Associated Cables Pvt Ltd. (286 ITR 596) – The question of law sought to be raised in this appeal is as to whether the retention money could be considered to be the income of the assessee in the year in which the amount was retained. The Income-tax Appellate Tribunal has referred to a judgment of the Tribunal in Associated Cables P. Ltd. v. Deputy CIT [1994] 206 ITR (AT) 48 (Bom). Mr. Sathe appearing for the respondent has, however, drawn our attention to two judgments, viz., of the Calcutta High Court and the Madras High Court. The Calcutta High Court judgment is reported in CIT v. Simplex Concrete Piles (India) P. Ltd. . A Division Bench of the Calcutta High Court in that matter has held that the payment of retention money in the case of contract is deferred and is contingent on satisfactory completion of contract work. The right to receive the retention money is accrued only after the obligations under the contract are fulfilled and, therefore, it would not amount to an income of the assessee in the year in which the amount is retained. The other judgment relied upon is in the case of CIT v. Ignifluid Boilers (I) Ltd. reported in [2006] 283 ITR 295 (Mad). In that judgment also, a Division Bench of the Madras High Court has held that the amount retained does not accrue to the assessee and, therefore, the assessee would not be liable. In view of what is stated above, there is no reason to entertain the appeal. The appeal is dismissed.

Estimation of Net Profit by AO :- When AO is proposing to estimate the Net Profit to the best of his judgement or otherwise – it should be estimated subject to the allowance for depreciation. (letter No. 29D dated 31st August 1965].

Issue/approval of notifications under section 10(23C)(iv) or section 35(1)(ii)/(iii) after completion of assessment – rectification of mistake consequent thereto- When a notification of approval of exemption or relaxation or registration of any association, university, collage or institution are issued much after the completion of assessment for relevant assessment year – in view of the notification issued at subsequent date but which is applicable to the assessment years inlvoved in the application this would be treated as a mistake apparent from record. Will be rectified under section 154

Not applicability of 40A(3) in case of payment made on bank strike and clearing suspension :- In CIT v K.K.S. K Leather Processor P. Ltd.[2007] 292 ITR 669(Mad.)it was held that payments made on a day on which the banks are closed either on account of holiday or strike, shall not come within the ambit of disallowance u/s 40A(3).

Tax liability on sales if converted into loans (deffered)may be allowed as deduction in assessment for previous year in which such conversion has been permitted :- Section 43B of the Income-tax Act, 1961, provides, inter alia, that a deduction in respect of any sum payable by the assessee by way of tax or duty under any law for the time being in force shall be allowed from the income of the previous year in which such sum is actually paid irrespective of the previous year in which the liability to pay such sum was incurred. Since the introduction of this provision, the assessees who collect any tax on sales, but do not pay the amounts to the Government during the previous year, under the deferral schemes provided by the State Governments are not entitled to the benefit of deduction from their income. [ Circular No. 496 dated 25th Sptember 1987] The Board have considered the matter and are of the opinion that deferral schemes notified by the State Governments through Government Orders meet the requirements of the Board’s Circular No. 496, dated 25-9-1987 in effect though in a different form. Accordingly, the Board have decided that the amount of tax liability linked to sales converted into loans may be allowed as deduction in the assessment for the previous year in which such conversion has been permitted by or under Government Orders. [ Circular No. 674 dated 29th December 1993]. This seems to be logical and equally applicable on all taxes liabilities equally irrespective of nomenclature.

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