Western India Regional Council of
The Institute of Chartered Accountants of India

Law Update Details

March 2019 CA. Haresh P. Kenia, CA. Deepak Lala, CA. Paras K. Savla & CA. Hemant R. Shah

Section 160 of the Income-Tax Act, 1961 – Representative Assessee – General – Clarification Regarding Liability and Status of Official Assignees under the Income-Tax Act

Circular No. 4/2019 [F. No. 225/472/2018/Ita.ii], Dated 28/1/2019

Under provisions of the Presidency Towns Insolvency Act, 1909 and the Provincial Insolvency Act, 1920, where an order of Insolvency is passed against a debtor by the concerned Court, property of the debtor gets vested with the Court appointed Official Assignee. The Official Assignee then realizes property of the insolvent and allocates it amongst the creditors of the insolvent. Consequentially, Official Assignee has the responsibility to handle income-tax matters of the estate assigned to him. In this regard, a clarification has been sought regarding applicability of clause (iii) of section 160(1) of the Income-tax Act, 1961 (Act) which applies on a ‘Representative Assessee’ in the case of an Official Assignee. Further, clarity regarding status of the Official Assignee’s i.e. their fallibility in the appropriate category of ‘persons’, as defined in section 2(31) of the Act, has also been sought. As per provisions of section 160(1)(iii) of the Act, a ‘Representative Assessee’ amongst other situations specified therein, becomes liable in respect of any income which the Assignee receives or is entitled to receive while managing the property for benefit of any person. As per the two insolvency Acts, Official Assignee manages the property of the debtor for the benefit of the creditors. Further, the Insolvency Act, 1909, in unambiguous terms, provides that an insolvent ceases to have an ownership interest in the estate once an order of adjudication is made under section 17 of the Insolvency Act. Thus, it is hereby clarified that since Official Assignee does not receive the income or manage the property on behalf of the debtor, they cannot be considered as a ‘Representative Assessee’ of the debtor under the Act while computing the tax liability arising from the estate of the debtor. As property of the insolvent is vested with the Official Assignee as per specific provisions of the Act/Law regulating functioning of the Official Assignee’s, they have to be treated as a ‘juristic entity’ for purposes of the Income-tax Act. Hence, it is clarified that for purpose of discharge of tax liability under the Act, the status of Official Assignees is that of an ‘artificial juridical person’ as prescribed in section 2(31)(vii) of the Act, not being one of the ‘persons’ falling in sub-clauses (i) to (vi) of section 2(31) of the Act. Therefore, Official Assignee is required to file Income-tax return electronically in the ITR Form applicable to ‘artificial juridical person’ separately for each of the estate of the insolvent and the income shall be taxed as per the rates applicable in a particular year to an ‘artificial juridical person’. In view of the above position, Official Assignees would have to obtain a separate PAN for each of the estate of the insolvent.

Income-Tax (First Amendment) Rules, 2019 – Substitution of Rule 12D

Notification No. g.s.r. 76(E) [No. 4/2019 (F. No. 370142/22/ 2017-Tpl)], Dated 30/1/2019 as corrected by Corrigendum G.s.r. 93(E) [Notification No. 10/2019/F. No. 370142/22/2017–Tpl], Dated 5/2/2019

In the Income-tax Rules, 1962, for rule 12D, the following rule shall be substituted, that shall come in force on the date of their publication in the Official Gazette namely:

“12D. Prescribed income-tax authority under section 133C.—The prescribed income-tax authority under section 133C shall be an income-tax authority not below the rank of Assistant Commissioner of Income-tax who has been authorised by the Central Board of Direct Taxes to act as such authority for the purposes of that section.”.



No adjournment on the ground of non-presence of counsel in court: (SC)

Ram Siromani Tripathi & Others vs. State of U.P. & Others

[Appeal No.:Civil Appeal No. 9142 of 2010, Date of Judgement/Order : 07/2/2019]

“Mr. R.K.Ojha, the learned Counsel, appears on behalf of the counsel for the appellants and submits that the learned counsel for the appellants is not present in the Court today. It is stated that he is out of station. This is no ground to seek adjournment. We therefore reject the request for adjournment. We have asked the learned counsel to argue the matter. He submits that he does not know anything about the case.

In these circumstances, we dismiss the appeals for non-prosecution.

We make it clear that since we have not found it to be a good ground for adjournment, under no circumstances, application for restoration shall be entertained.”


Bogus Capital gains: Order Without Cross Examination Opportunity is invalid

Anubhav Jain vs. ITO (ITAT Delhi) Date of Judgement/Order : 26/11/2018, A.Y.2014-15

[Appeal No.: ITA No. 4565/DEL/2018 Courts : All ITAT (5681) ITAT Delhi (1293)]

Return of the assessee selected for scrutiny through CASS for reason ‘Suspicion long term capital gain’. The authorized representative (AR) of the assessee duly attended the proceedings and furnished required details. The AO passed Assessment Order assessing addition of income. The addition of income was done based simply on the statement of Sh. Vikram Kayan.

Assessee demanded cross examination of Sh. Vikram Kayan on the basis of which addition of income was assessed, however, opportunity of cross examination was not provided. Assessee also demanded copy of the statement of Sh. Vikrant Kayan which was also not provided.

It was held that the Order is bad in law and against principle of natural justice in as much as the same is passed based on the statement of person without providing the assessee the copy of the statement and also not providing the assessee an opportunity to cross examine the person whose statement is the base of the addition.

Municipal Tax directly related to let out Property cannot be deducted against other Income

ACIT vs. Camoron Finance & Investments (ITAT Mumbai)

[Appeal No.: ITA No. 5449/Mum/2017, Date of Judgement/Order : 28/11/2018] (A.Y. 2008-09)

Payment of municipal taxes are directly related to letting out of the property, therefore, the same could not be allowed as a deduction U/s. 57(iii) for the purpose of earning of amenities charges by the assessee.

No TDS on Payment to Amazon for Web-Hosting as same is not Royalty

EPRSS Prepaid Recharge Services India Pvt. Ltd. vs. ITO (ITAT Pune)

[Appeal No.: ITA No. 86/PUN/2017] [Date of Judgement/Order:05/12/2018] A.Y. 2012-13

Tribunal further observed that there was no amendment in the DTAA between the two countries analogous to the Explanation 5 to section 9(1) of the Act and accordingly Amazon was not chargeable to tax in respect of Web hosting charges received from the assessee in India. The Tribunal still further held that the amount paid to Amazon, at the first instance, was not in the nature of royalty itself. The ld. DR fairly admitted that the facts and circumstances prevailing in the instant year are mutatis mutandis similar to those of preceding years. “…Respectfully following the precedent, I overturn the impugned Order on this score and order for the deletion of addition of Rs. 46,28,457/- made and confirmed by the authorities below.”


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