CPC-advisory for 26AS Tax Credits for TDS on Sale of Immovable Property u/s 194IA

CPC-advisory for 26AS Tax Credits for TDS on Sale of Immovable Property u/s 194IA (26QB Statement)-Avail Benefit of CPC(TDS) Analytics for Correction of PANs.

26AS Tax Credits for TDS on Sale of Immovable Property

Avail the Benefit of CPC(TDS) Analytics for Correction of PANs in your TDS Statements.

CPC (TDS) Advisory for Tax Credits in 26AS with respect to Tax Deducted on Sale of Immovable Property (26QB Statement)

As per section 194IA of the Income Tax Act, buyer is required to deduct tax at source @1% of the amount paid/credited to the seller. Therefore, after processing of 26QB statements, the information will appear in 26AS of buyer & Seller in the following manner:-

Scenario 1
If Buyer has deducted & deposited Rs.50,000/- on payment of Rs.50,00,000/-.

Seller: TDS Credit is reflected in Part A2 of the seller to the extent of 1% of amount paid/credited. This credit is available for claim in ITR by the seller.

26AS Tax Credits for TDS on Sale of Immovable Property

Buyer: Total tax deposited by buyer is shown in Part F of 26AS of Buyer for information. Part F information is not available for Claim in ITR of buyer.

26AS Tax Credits for TDS on Sale of Immovable Property

Scenario 2: If Buyer has deducted & deposited Rs.60,000/- on payment of Rs.50,00,000/-.

Seller: TDS Credit is reflected in Part A2 of the seller to the extent of 1% of amount paid/credited. This credit is available for claim in ITR by the seller.

26AS Tax Credits for TDS on Sale of Immovable Property

Buyer: (i) Excess Tax Deposited by buyer i.e. Rs.10,000.00(Rs.60000-Rs.50000) is shown in Part A2 of 26AS of Buyer. This credit is available for claim in ITR of Buyer.

26AS Tax Credits for TDS on Sale of Immovable Property

Buyer: (ii)Total tax deposited by buyer is shown in Part F of 26AS of Buyer for information. Part F information is not available for Claim in ITR of buyer.

26AS Tax Credits for TDS on Sale of Immovable Property

Note: This is only for Information Purpose.

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Second Time Correction in 26QB Form is now available for Taxpayers on TRACES

Second Time Correction on critical fields in 26QB Form is now available for Taxpayers on TRACES with respect to tax deducted at source on transfer of Immovable Property exceeding Rs. 50 Lakhs under section 194IA of the Income Tax Act, 1961.

Second Time Correction in 26QB Form

Important information on 26QB Correction

• Buyers registered on TRACES only can avail the facility of “26QB correction” under “26QB ” Menu after login.

• Request for 26QB correction can be raised from Assessment Year 2014-15 onwards

• If Buyer files 26QB correction and seller is Known , correction can be submitted through e-Verify (Net Banking) /AO Approval / DSC (If Buyers DSC is registered) for updating PAN details (Buyer Seller)

• If Digital Signature is not registered for Buyer and Seller is non Traceable , the correction request can be submitted through AO Approval option for updating PAN details (Buyer/ Seller)

• If Digital Signature is not registered for Buyer and Seller is known , the correction request can be submitted through e-Verify (Net Banking) /AO Approval option for updating PAN details (Buyer Seller)

• If PAN of Seller requires to be updated, the correction request will require previous Seller ‘s approval if Seller is known otherwise Buyer can opt for AO approval

• If PAN of Buyer requires to be updated, the correction request will require Seller’s and intended (New) Buyer approval. If Seller is known otherwise Buyer can opt for AO approval

• If both PAN of Seller and of Buyer are to be updated, the correction request will require previous Seller ‘s and updated Buyer’s approval from previous. If Seller is known otherwise Buyer can opt for AO approval

• Jurisdictional AO will be decided based on Buyer’s PAN’s (PAN submitting the correction) jurisdiction • Buyer should be registered with DSC as well as DSC should be installed in the system while submitting the request.

Brief Steps for 26QB Correction

• Step 1 : Login on TRACES as a taxpayer with registered User ID and Password

• Step 2: Select option “ online correction” under “26QB” tab to initiate correction request.

• Step 3: Select Appropriate Assessment year, Sellers PAN number and Acknowledgement number of the 26QB for which request of correction is to be placed.

• Step 4: Go to “ Track Correction Request” under “26QB” and initiate correction once the status is “ Available” for the request placed for the correction in step no. 3.

• Step 5: After submitting the correction, an correction ID will be generated through which status of correction can be tracked.

• Step 6: If DSC is not registered ,furnish hard copy of acknowledgement of form 26QB correction his Identity Proof, PAN Card, the documents related to Transfer of Property and the proofs of payment made, to Jurisdictional AO for verification

OR

With “E-Verification (Net Banking) Service” user can submit 26 QB Correction statement without approval from Assessing Officer and Digital Signature Certificate registration at TRACES website as Taxpayer. (This option is not available for NRI Taxpayers )

Carried forward depreciation set off with short term capital gain u/s 50 is allowed – ITAT

Carried forward depreciation set off with short term capital gain u/s 50 is allowed in view of the amended provisions of Section 32(2) wef 01-04-2002- ITAT

Carried forward depreciation set off with short term capital

ABCAUS Case Law Citation:
ABCAUS 2035 (2017) (08) ITAT

Assessment Year :  2012-13

Important Case Laws Cited/relied upon by the parties:
M/s. Nandi Steels Limited

Brief Facts of the Case:

The appellant assessee ws engaged in executing civil contract works. It filed its return of income admitting total income at Rs. NIL.

The Assessing Officer (AO) took up the case for scrutiny. During the course of scrutiny, the assessee filed revised computation showing the loss to be Rs. 1,24,303/-. The AO proceeded to complete the assessment and determined the loss at Rs.1,39,007/- as against loss admitted.

The AO also determined a short term capital gain of Rs. 10,00,000/- u/s 50 of the Income Tax Act, 1961 (the Act). The AO has held that this short term capital gains determined u/s 50 cannot be set off against loss not only of brought forward amount but even the current year loss.

In response to AO’s queries it was submitted that the assessee wass entitled to set off the short term capital gains against loss as the provisions of Section 50 is only a deeming provision for computation and cannot extend beyond that and that the balance after set off with current year should be treated as business income and set off against brought forward loss.

The AO, however, did not accept the same and taxed the short term capital gain separately.

CIT(A) confirmed the order of the AO. Against which the assessee was in appeal before the ITAT.

Observations made by the Tribunal:

The ITAT opined that in view of the amended provisions of Section 32(2) by Finance Act 2001, w.e.f. 01-04-2002, the carried forward unabsorbed depreciation takes the character of current year depreciation and it could be set off against the short term capital gain in this assessment year.

However, the ITAT clarified that the carried forward business loss if any, that cannot be set off against the short term capital gain in the assessment year under consideration.

Held:
The ground for set off of depreciation allowed.

Carried forward depreciation set off with short term capital
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Advances converted into reserves not cessation of liability u/s 41(1). Pre-conditions / Tests to be applied

Advances converted into reserves not cessation of liability u/s 41(1). Pre-conditions / Tests to be applied for applicability of the deeming provisions as laid by Supreme Court

cessation of liability

ABCAUS Case Law Citation:
ABCAUS 2034 (2017) (08) HC

Assessment Year :  2000-01

Important Case Laws Cited/relied upon by the parties:
Commissioner of Income Tax Vs. T.V.Sundaram Iyengar and sons Ltd (222 ITR 344).
Commissioner of Income Tax Vs. Kesaria Tea Company (254 ITR 434)
Polyflex (India) Pvt. Ltd vs. Commissioner of Income Tax (257 ITR 343)

Brief Facts of the Case:

The appellant company was part of global group of companies and had been set up completely with investment from the parent company. The  parent company had also advanced money towards business needs and the advances were to be adjusted against future supplies to the parent company.

The prevailing foreign direct investment policy imposed a cap of 74% in the mining sector. The company approached private sources for their participation in the equity and as a pre-condition to their investment, the resident investor required the company to dilute the losses incurred by equal investment to be made by the foreign parent company.

Accordingly, the parent company directed the appellant company to convert the advances made by it into capital and the appellant complied with the direction converting the advances, of an amount of Rs. 10,77,49,601/- as capital and transferring the same to general reserves.

During the re-assessment proceedings, the Assessing Officer (AO) was of the view that the provisions of section 41(1) of the Income Tax Act, 1961 (the Act) relating to cessation of liability were attracted and that the amount of advances converted into reserves were liable to be brought to tax as income. Accordingly the AO completed the assessment in terms of section 143(3) read with section 147 of the Act observing that the aforesaid amount ought to have been taken to the profit and loss account instead of to general reserves.

The CIT(A) noted that the provisions of section 41(1) of the Act stood attracted only in a situation where the amount in question, in respect of which liability had ceased, had been claimed as an allowance or a reduction in any previous year, which fact had not been established in the present case. He noted that there was no nexus between the allowance/reduction in the previous years and the amount in question to invoke the provisions of section 41(1). He thus concurred with the submission of the assessee that the said amount constitued a capital receipt.

The matter travelled in appeal to the Income Tax Appellate Tribunal (ITAT).  The ITAT found that the amount was originally received as an advance against supply/export of garnet. Subsequently the claim over the amount was waived and in such circumstances the tribunal was of the view that the amount partook the character of a revenue receipt. Thus, according to the tribunal, the subsequent transfer of the amount to general reserve would constitute only an application that would not change the nature of the taxability of the amount at a stage anterior thereto.

In the present case, the company challenged the aforesaid conclusion of the tribunal before the High Court.

Observations made by the High Court:

The Hon’ble High Court noted that the circumstances in which the infusion of capital was made and the findings relating thereto were undisputed. The CIT(A) had  found that there was nothing on record to lead to the conclusion that the advances from parent company had been claimed as an allowance or reduction in any previous year. This finding of fact had not been disturbed by the tribunal in any way.

The Hon’ble High Court observed that in order for the provisions of Section 41(1) to stand attracted, the benefit obtained by the assessee in the relevant year should have a direct nexus with an allowance or deduction for any previous year as a claim of loss, expenditure, or trading liability which had not been established in the present case.

The Hon’ble High Court distinguished the decision of the Supreme Court relied by the ITAT and clarified that in the said case, the amounts received had depleted by adjustments made by the assessee from time to time and the resultant balance had been transferred by the assessee to the profit and loss account whereas this was not the case in the present matter. The advances received in the present case had remained static without depletion of any sort and more importantly, not been claimed in the previous years. Thus, the pre-condition to the application of section 41(1) of the Act had not been satisfied in the instant case.

The Hon’ble High Court referred to a later decision of the Supreme Court which decided a matter relating to the write back by an assessee in its accounts, of a provision made for the earlier years towards purchase tax liability. The question before the Hon’ble Supreme Court was whether the circumstances contemplated by section 41(1) existed so as to enable the Revenue to take back what has been allowed earlier as business expenditure and to include such amount in the income of the relevant assessment year.

The Hon’ble Supreme Court concluded that the following points were critical in the event the provisions of section 41(1) are to apply:

(1) In the course of assessment for an earlier year, allowance or deduction has been made in respect of trading liability incurred by the assessee;

(2) Subsequently, a benefit is obtained in respect of such trading liability by way of remission or cessation thereof during the year in which such event occurred;

(3) in that situation the value of benefit accruing to the assessee is deemed to be the profit and gains of business which otherwise would not be his income; and

(4) such value of benefit is made chargeable to income tax as the income of us’.

The Hon’ble High Court noted that the Hon’ble Supreme Court in another decision had occasion to consider the application of section 41(1) of the Act to excise duty refunded to the assessee. The Hon’ble Court held that:

(i) The first step would be that in relevant assessment an allowance or deduction has been made of any loss, expenditure or trading liability incurred by the assessee.

(ii) the assessee must have subsequently

(a) obtained any amount in respect of such loss or expenditure or

(b) obtained any benefit in respect of such trading liability by way of remission or cessation thereof.

In case either of these events happen, the deeming provision enacted in the closing part of subsection (1) comes into play. Accordingly, the amount obtained by the assessee or the value of benefit accruing to him is deemed to be profits and gains of business or professions and it becomes chargeable to income-tax

Held:
Following the above tests/criterions laid down by the Supreme Court, the applicability of deeming provisions of section 41(1) ruled out and the appeal was allowed.

cessation of liability
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