307th Issue of Tax Connect

Tax Calendar

Income Tax

Notification

CBDT Notified The Rules Further To Amend The Income-Tax Rules, 1962 Vide Notification Dated 77/2021 Dated 7th July 2021.

Our Comments: In the Income-tax Rules, 1962, new Rule 8AC has been inserted as under: “Rule 8AC: Computation of short term capital gains and written down value under section 50 where depreciation on goodwill has been obtained.

(1) For the purposes of the proviso to section 50, the written down value of the block of the asset and short term capital gains, if any, for the previous year relevant to the assessment year commencing on the 1st day of April 2021 shall be determined in accordance with this rule.

(2) Where the goodwill of the business or profession was the only asset or one of the assets in the block of asset “intangible” for which depreciation was obtained by the assessee in the assessment year beginning on the 1st day of April, 2020, the written down value of this block of an asset for the previous year relevant to the assessment year commencing on the 1st day of April, 2021 shall be determined in accordance with the provisions of item (ii) of sub-clause (c) of clause (6) of section 43.

(3) Where the reduction under sub-item (B) of the item (ii) of sub-clause (c) of clause (6) of section 43, for the previous year relevant to the assessment year commencing on the 1st day of April 2021, exceeds the aggregate of the following amounts, namely:-

(i) the written down value of the block of assets at the beginning of the previous year relevant to the assessment year commencing on the 1st day of April 2021 without giving effect to reduction under sub-item (B) of the item (ii) of sub-clause (c) of clause (6) of section 43; and

(ii) the actual cost of any asset falling within the block of assets “intangible”, other than goodwill, acquired during the previous year relevant to the assessment year commencing on the 1st day of April 2021, such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets.

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Tax Connect: 310th Issue

(4) Without prejudice to the provisions of sub-rule (3) and section 55, where the goodwill of the business or profession was the only asset in the block of asset “intangible” for which depreciation was obtained by the assessee in the assessment year beginning on the 1st day of April, 2020, and the block of an asset ceases to exist on account of there being no further asset acquired during the previous year relevant to the assessment year commencing on the 1st day of April 2021 in that block, there will not be any capital gains or loss on account of the block of an asset having ceased to exist.

(5) The capital gains or loss on the transfer of goodwill, during the previous years relevant to the assessment year 2021-22 or subsequent assessment years, shall be determined in accordance with the provisions of section 48, section 49, and clause (a) of sub-section (2) of section 55.”

[For further details please refer to the notification].

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308th Issue of Tax Connect

GST

Case Law

M/s Radha Krishan Industries Versus State Of Himachal Pradesh & Ors.- Hon’ble Supreme Court- Provisional Attachment

Brief: It is evident that the expression ‘adjudicating authority does not include among other authorities, the Commissioner. In the present case, the narration of facts indicates that on 21 October 2020, the Commissioner had in the exercise of his powers under Section 5(3) made a delegation inter alia to the Joint Commissioner of State Taxes and Excise in respect of the powers vested under Section 83(1). The Joint Commissioner, in other words, was exercising the powers which are vested in the Commissioner under Section 83(1) to order a provisional attachment in pursuance of the delegation exercised on 21 October 2020.

OUR COMMENTS: The Joint Commissioner while ordering a provisional attachment under section 83 was acting as a delegate of the Commissioner in pursuance of the delegation effected under Section 5(3) and an appeal against the order of provisional attachment was not available under Section 107 (1). The writ petition before the High Court under Article 226 of the Constitution challenging the order of provisional attachment was maintainable. The High Court has erred in dismissing the writ petition on the ground that it was not maintainable. The power to order a provisional attachment of the property of the taxable person including a bank account is draconian in nature and the conditions which are prescribed by the statute for a valid exercise of the power must be strictly fulfilled. The exercise of the power for ordering a provisional attachment must be preceded by the formation of an opinion by the Commissioner that it is necessary so to do for the purpose of protecting the interest of the government revenue. Before ordering a provisional attachment the Commissioner must form an opinion on the basis of tangible material that the assessee is likely to defeat the demand, if any and that therefore, it is necessary so to do for the purpose of protecting the interest of the government revenue. The expression “necessary so to do for protecting the government revenue” implicates that the interests of the government revenue cannot be protected without ordering a provisional attachment. The formation of an opinion by the Commissioner under Section 83(1) must be based on tangible material bearing on the necessity of ordering a provisional attachment for the purpose of protecting the interest of the government revenue.

There has been a breach of the mandatory requirement of Rule 159(5) and the Commissioner was clearly misconceived in law in coming into the conclusion that he had discretion on whether or not to grant an opportunity of being heard. The Commissioner is duty-bound to deal with the objections to the attachment by passing a reasoned order which must be communicated to the taxable person whose property is attached. A final order having been passed under Section 74(9), the proceedings under Section 74 are no longer pending as a result of which the provisional attachment must come to an end; and. The appellant having filed an appeal against the order under section 74(9), the provisions of sub-Sections 6 and 7 of Section 107 will come into operation in regard to the payment of the tax and stay on the recovery of the balance as stipulated in those provisions, pending the disposal of the appeal.

[In favour of the petitioner].

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