No overreach for AAR’s rulings

Our Bureau | Updated on February 03, 2013



Prudential Assurance Co Ltd obtained a ruling from the Authority for Advance Rulings (AAR) that profits arising from realisation of portfolio investments in India are part of its business profits and cannot be taxed in India in the absence of a private equity. Subsequently, the AAR passed a contrary ruling in the case of Fidelity Northstar Fund, wherein the income was held taxable as capital gains. Based on the latter ruling, the Assessing Officer in the Prudential Assurance Co Ltd case issued a notice to reopen the assessment. Under Section 245S of the Income Tax Act, the AAR’s ruling is binding on the applicant as well as the commissioner and subordinate tax authorities. Thus, reopening an assessment based on the ruling in some other case would amount to rewriting the law. A notice issued under Section 148 would, in effect, nullify the law. The Tribunal held the reopening as invalid and, much to the relief of taxpayers, this was confirmed by the Bombay High Court.

Awaiting booster doses in the Budget

The countdown has started for the 2013 annual Budget. Over the past few days, teasers from the Finance Minister P. Chidambaram have suggested the Government is very conscious of growth and keen not to derail it at any cost. The tax anti-avoidance law GAAR has been postponed by two years and, in an attempt to bring investors back to Indian shores, the Minister also indicated that the tax regime is expected to be stable and there will be efforts to widen the tax base. At the same time, there is some commotion that the super-rich should be taxed at a higher rate, as in the western world, but it appears that the country is not fully prepared for it yet. The Government has also constantly reiterated that it is serious about fiscal discipline and sticking to the targeted fiscal deficit. Let us hope the Budget turns out to be another booster dose for the current momentum.

Resolving TDS issues speedily

The Central Board of Direct Taxes recently formulated the “Centralised Processing of Statements of Tax Deducted at Source Scheme, 2013” in a bid to address the numerous problems faced by taxpayers due to faulty processing of TDS claims. The scheme attempts to give effect to the recent directions of the Delhi High Court after it took note of the numerous hardships faced by assessees in the Court On Its Own Motion vs. CIT case.

The scheme spells outs ways in which TDS correction statements will be filed, their processing, rectification of mistakes and so on. In particular, it stipulates that refunds against outstanding tax demand can be adjusted under Section 245 only after intimating the taxpayer. An appeal can also be filed against actions of the Central Processing Centre, or CPC.

The scheme is a welcome move to give taxpayers access to speedy resolution of TDS-related discrepancies.

Published on February 03, 2013

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