The taxation of a receipt under the Income Tax Act becomes challenging when the said receipt is in the nature of capital as pleaded by tax payer as against revenue by tax authorities. Needless to state, that under the Income Tax Act, 1961 (for brevity ‘ITA’), all revenue receipts are taxable unless specifically stated not taxable and all capital receipts are not taxable unless specifically stated to be taxable. This is one of the cardinal principals embodied in ITA. However, whether a receipt is in the nature of capital or revenue is always hard to find and the courts had always framed various tests to determine the nature of the receipt and consequently the taxability.

In this article, we are dealing with determination of nature of one such receipt, which is received on extinction of profit apparatus or sterilisation of profits. Let us understand the nature of receipt by taking an example.

Read more: Taxation of Receipts - Extinction of Profit Earning Apparatus

In this edition, we bring you to quite a few interesting articles.

The article on ‘Mohit Minerals – Recipient of Service – To be Revisited?’ deals with the decision of recent Honourable High Court of Gujarat in the matter of Mohit Minerals, where in the Honourable High Court has struck the levy of tax under reverse charge on importer stating that he could not be called as recipient of service. However, seen from a different perspective, we believe that the importer can be called as recipient of service and accordingly be subjected to reverse charge obligation. We have articulated our understanding and observations in the said article.

The article on ‘Taxation of Receipts – Extinction of Profit Earning Apparatus’ deals with the taxation of receipts which are in the nature of extinction of source of income. The question whether such receipt is capital or revenue has been discussed in such article and hope you will have a good read of the same.

The article ‘SOFTEX for Non-STPI Units – A Mandatory Requirement – FEMA’ is to alert all clients in the DTA units which are engaged in provision of software services to get registered with STPI as Non-STPI to comply with FEMA regulations and accordingly save themselves from penalty and compounding.

I hope that you will have good time reading this edition and please do share your feedback. I will also urge clients to mail us topics or issues on which you want us to deliberate in our future editions, so that we can contribute to the same.

Read more: SBS Wiki E Journal Feb 2020

Introduction:

This article is a continuation to our article in previous edition. In the previous article, we took up to deal the tax implications on development of plots, wherein, we have identified four transactions which are common to any development agreement:

Transaction I - Transfer of Development Rights (TDR) by landowner to developer

Transaction II - Construction Services provided by developer to landowner

Transaction III - Sale of Plots allotted to his share by developer

Transaction IV - Sale of Plots allotted to his shared by landowner 

The tax implications on Transaction I and Transaction II are dealt in the previous article. Now, in this article, we wish to deal with tax implications on Transaction III and Transaction IV and conclude with our comments.

Read more: GST Implications On Development Of Plots

One of the significant issues that caught everyone’s attention in the recent budget was the amendment to Section 115-O of IT Act[1] which deals with dividend distribution tax (for brevity ‘DDT’), wherein the effect of amendment is that the domestic companies need not pay such DDT for any amount declared, distributed or paid by way of dividends post 31^st March 20. In this article, we would detail the various issues which gets touched upon as a consequence to such amendment.

Read more: All About Dividends & Tax