On November 9, 2012, the Income-tax Appellate Tribunal stipulated that appeals and applications filed before the Nagpur Bench should be heard by members of ITAT-Mumbai through videoconferencing.

The ITAT President may direct that appeals pending before any of its Benches shall be heard through videoconferencing, in addition to open court, if the parties to an appeal opt for it, with members of the same or other Bench participating.

This is a welcome move as it will save time, cost and carbon emission, besides enabling speedy disposal of cases and allowing taxpayers in distant locations file a stay application in an emergency.

In line with this suggestion, a similar videoconference facility can be introduced for cases pending before High Courts, the Supreme Court and the Authority for Advance Rulings.

Anti-abuse clause in India-UK treaty

Recently, the Government signed a protocol amending the India-UK and Northern Ireland tax treaty, which was originally signed on January 25, 1993.

As the tax treaty benefit was not available to some entities such as partnerships, trust and so on, the modification now extends the benefit to them to the extent their income is taxed in the UK in the hands of beneficiaries.

The protocol provides that the gross dividend will be taxable at 15 per cent if it is paid out of income derived directly or indirectly from immovable property by an investment vehicle that distributes most of this income annually and whose income from such immovable property is exempt from tax. For all other cases, withholding tax rate will be 10 per cent. However, if the main purpose or one of the main purposes is to take advantage of the dividend article then no relief shall be available to the taxpayer.

Limitation of Benefit clause is inserted through this protocol, which provides that the benefit of the tax treaty shall not be available if the main purpose or one of the main purposes of the creation or existence of a resident or of the transaction undertaken was to obtain benefits under the tax treaty.

The protocol would enable tax authorities in both countries to exchange banking information. It also provides for information sharing with other agencies with consent. Both countries would also enter into a memorandum of understanding to expedite information exchange and assistance in tax collection.

Double dip of interest on loan

Many taxpayers take loans to acquire housing properties in India. Some, however, claim a double deduction of the interest expense incurred. First, it is claimed as a deduction when computing income from house property and, second, interest is claimed as part of the acquisition cost when computing capital gains on sale of such property.

Recently, the Chennai Tribunal upheld such double dip in tax deduction. It observed that according to Indian tax laws, a deduction of interest expense is claimed under a specific provision (that is, when a taxpayer computes income from ‘house property’), whereas the cost of the same house property, which may include the interest component, is reduced from the sale consideration while computing capital gains under a different specific provision. As the provisions are different and don’t override each other, the taxpayer is entitled to claim both deductions.

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