Category
“Partition” means—
(i) Where the property admits of a physical division– a physical division of the property. However a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition; or
(ii) Where the property does not admit of a physical division- then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition;
“Partial partition” means a partition which is partial as regards the persons constituting the Hindu undivided family, or the properties belonging to the Hindu undivided family, or both.
Income Tax Act, post 31-12-1978, does not recognise the concept of Partial Partition
Assessment after Total Partition of HUF- Sec 171
(1) Assessment as such: A HUF shall be assessed as undivided except where there has been a total partition.
(2) Inquiry before assessment: Where, at the time of making an assessment u/s 143 or 144, it is claimed by or on behalf of any member of a Hindu family assessed as undivided that a partition, has taken place among the members of such family, the Assessing Officer shall make an inquiry thereinto after giving notice of the inquiry to all the members of the family.
(3) Recording of findings: On the completion of the inquiry, the Assessing Officer shall record a finding as to whether there has been a total partial partition of the joint family property, and, if there has been such a partition, the date on which it has taken place.
(4) Consequence of total partition: Where a finding of total partition has been recorded by the Assessing Officer, and the partition took place during the previous year,—
(a) the total income of the joint family in respect of the period up to the date of partition shall be assessed as if no partition had taken place; and
(b) each member or group of members shall, in addition to any tax for which he or it may be separately liable and notwithstanding Sec 10(2), be jointly and severally liable for the tax on the income so assessed.
(5) Partition after previous year: Where a finding of total partition has been recorded by the Assessing Officer, and the partition took place after the expiry of the previous year, the total income of the previous year of the joint family shall be assessed as if no partition had taken place; and the provisions of clause 4(b) above shall, apply to the case.
(6) Recovery of tax: If the Assessing Officer finds after completion of the assessment of a Hindu undivided family that the family has already effected a partition, the Assessing Officer shall proceed to recover the tax from every person who was a member of the family before the partition, and every such person shall be jointly and severally liable for the tax on the income so assessed.
(7) Several liability: For the purposes of this section, the several liability of any member or group of members thereunder shall be computed according to the portion of the joint family property allotted to him or it at the partition, whether total or partial.
(8) Applicability of the section: The provisions of this section shall, apply in relation to the levy and collection of any penalty, interest, fine or other sum in respect of any period up to date of the partition, of a Hindu undivided family as they apply in relation to the levy and collection of tax in respect of any such period.
(9) Consequences of Partial Partition: Notwithstanding anything contained in the foregoing provisions of this section, where a partial partition has taken place after the 31-12-1978:
(a) no claim that such partial partition has taken place shall be inquired into
(b) such family shall continue to be liable to be assessed under this Act as if no such partial partition had taken place;
(c) each member or group of members of such family immediately before such partial partition and the family shall be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under this Act by the family in respect of any period, whether before or after such partial partition;
(d) the several liability of any member or group of members aforesaid shall be computed according to the portion of the joint family property allotted to him or it at such partial partition,and the provisions of this Act shall apply accordingly.
In effect – the Income Tax Act, post 31-12-1978, does not recognise the concept of Partial Partition
Special provisions relating to tax on accreted income of certain trusts and institutions
Chapter – XII EB
Sec 115TD- Tax on Accreted Income
Note:
Consequence:
|
Additional income tax = 30% of Accreted Income
|
| Accreted Income = Fair market value of total assets (-) Total liabilities
The following asset and liability, if any, related to such asset shall be ignored:
– any asset which is directly acquired out of agricultural income u/s 10(1) – any asset acquired during the period beginning from the date of establishment till the date of registration u/s 12AA, if no benefit u/s 11 and 12 were allowed during the said period.
Where due to the first proviso u/s 12A(2), the benefit of sec 11 and 12 have been allowed prior to the date of registration u/s 12AA is effective, then, for the purposes of this clause, the registration shall be deemed to have become effective from the first day of the earliest previous year for which the benefit u/s 12AA was available.
– Further, in the case of dissolution, assets and liabilities, if any, related to such asset, which have been transferred to any other trust or institution registered under section 12AA orto any entity referred to in Sec 10(23C) (iv)/(v)/(vi)/(via), within the period specified in the said clause, shall be ignored. |
Note:
Specified date means date of conversion or merger or dissolution as the case may be
3 . Deemed violation on conversion:
A trust or an institution shall be deemed to have been converted into any form not eligible for registration u/s 12AA in a previous year, if:
| – it has adopted or undertaken modification of its objects which do not conform to the conditions of registration and it,— |
| (a) | has not applied for fresh registration u/s 12AA in the said previous year; or | |
| (b) | has filed application for fresh registration u/s 12AA but the said application has been rejected. |
4 . Payment irrespective of regular income tax due:
Additional tax on accreted income is payable notwithstanding that no income tax is payable by a trust or the institution on its total income computed in accordance with the provisions of this Act.
5 . Due date for payment of tax on Accreted Income:
The principal officer or the trustee and the trust or the institution shall also be liable to pay the tax on accreted income within 14 days from:
| Situation | Due date |
| Cancellation of registration | 14 days from the date on which:
– the period for filing appeal u/s 253 against the order cancelling the registration expires and no appeal has been filed by the trust or the institution; or – the order in any appeal, confirming the cancellation of the registration, is received by the trust or institution |
| Where the entity has adopted or undertaken modification of its objects which do not conform to the conditions of registration and:
Ithas not applied for fresh registration u/s 12AA in the said previous year |
14 days from the end of the previous year |
| It has filed application for fresh registration u/s but the said application has been rejected. | 14 days from the date on which:
– the period for filing appeal under section 253 against the order rejecting the application expires and no appeal has been filed by the trust or the institution or – the order in any appeal, confirming the cancellation of the application, is received by the trust or institution,
|
| Merger | 14 days from the date of merger |
| Dissolution and failure to transfer all assets | 14 days from the date on which the period of 12 months for transfer expires
|
Interest payable for non-payment of tax – Sec 115TE
Where there is a failure to pay the whole or any part of the tax on the accreted income within the time allowed u/s 115TD(5), simple interest @ 1% for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid shall be levied.
Trust or institution is deemed to be assessee in default – Sec 115TF
(1) Failure to pay tax on accreted income:Where there is a failure to pay tax on accreted income in accordance with the provisions of sec 115TD, then, the Principal Officer or the entity shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply.
(2) In case of dissolution: Notwithstanding anything contained in sub-section (1), in a case where the tax on accreted income is payable owing to failure to distribute on dissolution, the person to whom any asset forming part of the computation of accreted income thereof has been transferred, shall be deemed to be an assessee in default in respect of such tax and interest thereon and all the provisions of this Act for the collection and recovery of income-tax shall apply:
However the liability of the person shall be limited to the extent to which the asset received by him is capable of meeting the liability.
Chapter XIV-A
Repetitive appeals on similar issues at various appellate for a have led to significant increase in the number of cases and huge drain of productive judicial and executive resources. To eliminate the need to decide on similar issues pertaining the same assessee, Finance Act 2015, inserted Sec 158A and Sec 158AA where the rationale, to be pronounced in existing cases need not be further litigated in pending appeals of subsequent years.
Sec – 158A: Procedure when assessee claims identical question of law is pending before High Court or Supreme Court.
(1) Declaration by Assessee: Where an assessee claims that any question of law arising in his case for an assessment year which is pending before the Assessing Officer or any appellate authority is identical with a question of law arising in his case for another assessment year which is pending before:
he may furnish to the Assessing Officer or the appellate authority, a declaration in Form 8 (Rule 16), that if the Assessing Officer or the appellate authority, agrees to apply in the relevant case the final decision on the question of law in the other case, he shall not raise such question of law in the relevant case in appeal before any appellate authority or any High Court or Supreme Court.
(2) Report from Assessing Officer: Where a declaration u/s 158A(1) is furnished to any appellate authority, the appellate authority shall call for a report from the Assessing Officer on the correctness of the claim made by the assessee and, where the Assessing Officer makes a request to the appellate authority to give him an opportunity of being heard in the matter, the appellate authority shall allow him such opportunity.
(3) Order of the Assessing Officer or the appellate authority: The Assessing Officer or the appellate authority, as the case may be, may, by order in writing,—
admit the claim of the assessee if he or it is satisfied that the question of law arising in the relevant case is identical with the question of law in the other case; or
reject the claim if he or it is not so satisfied.
(4) Admission of claim: Where a claim is admitted u/ss (3),—
(a) the Assessing Officer or the appellate authority may make an order disposing of the relevant case without awaiting the final decision on the question of law in the other case; and
(b) the assessee shall not be entitled to raise, in relation to the relevant case, such question of law in appeal before any appellate authority or Court.
(5) Application of decision: When the decision on the question of law in the other case becomes final, it shall be applied to the relevant case and the Assessing Officer or the appellate authority, shall, if necessary, amend the order referred u/ss (4) conformably to such decision.
(6) Order to be final: An order u/ss (3) shall be final and shall not be called in question in any proceeding by way of appeal, reference or revision under this Act.
Sec 158AA- Procedure when in an appeal by revenue an identical question of law is pending before Supreme Court.
(1) Application by Assessing Officer: Where the Commissioner or Principal Commissioner is of the opinion that any question of law arising in the case of an assessee for any assessment year is identical with a question of law arising in his case for another assessment year which is pending before:
he may, instead of directing the Assessing Officer to appeal to the Appellate Tribunal u/s 253(2)/(2A), direct the Assessing Officer to make an application to the Appellate Tribunal in the prescribed form within 60 days from the date of receipt of the order of the Commissioner (Appeals) stating that an appeal on the question of law arising in the relevant case may be filed when the decision on the question of law becomes final in the other case.
(2) Acceptance by Assessee: The Commissioner or Principal Commissioner shall direct the Assessing Officer to make an application u/ss (1) only if an acceptance is received from the assessee to the effect that the question of law in the other case is identical to that arising in the relevant case; and
In case no such acceptance is received, the Commissioner or Principal Commissioner shall proceed in accordance with Sec 253(2)/(2A).
(3) Order of the CIT(A): Where the order of the Commissioner (Appeals) referred to u/ss (1) is not in conformity with the final decision on the question of law in the other case, the Commissioner or Principal Commissioner may direct the Assessing Officer to appeal to the Appellate Tribunal against such order and save as otherwise provided in this section all other provisions of Part B of Chapter XX shall apply accordingly.
(4) Time limit: Every appeal u/ss (3) shall be filed within 60 days from the date on which the order of the Supreme Court in the other case is communicated to the Commissioner or Principal Commissioner.
The Direct Tax Dispute Resolution Scheme 2016
Chapter X of Finance Act 2016
Purpose:Settle pending appeals/ disputes faster and economical for assessees
Act means Income Tax Act or Wealth Tax Act
Eligible Person:Any assessee/declarant making a declaration u/s 203 of the Finance Act 2016, to a notified officer not below the rank of CIT.
Amount Payable:
| Situation | Value | Tax and interest payable | Penalty payable |
| Pending appeal related to tax arrears | Disputed tax does not exceed Rs 10 lakhs | Disputed tax+ Interest till date of assessment | 25% of minimum penalty on total income finally determined |
| Any other case | Disputed tax+ Interest till date of assessment + 25% of minimum penalty | 25% of minimum penalty on total income finally determined | |
| Specified tax | Any amount | Amount of tax so determined |
Note:
Disputed tax means the tax determined under the Act which is disputed by the assesse / declarant.
Specified taxmeans a tax:
Tax arrears means the amount of interest, tax or penalty determined under the Act in respect of which an appeal is pending with CIT(Appeals).
Time limit:Such declaration shall be filed at any time between 1st of June 2016 till 31st of December 2016.
Consequences of filing:
| Nature | Situation | Consequence |
| Tax arrears | Appeal is pending with CIT (Appeals) | Such appeal is deemed to be withdrawn |
|
Specified tax |
– Appeal is pending with CIT (Appeals), Tribunal, High Court or Supreme Court
– Writ petition is filed with High Court or Supreme Court |
With draw such appeal / writ and submit proof of such withdrawal |
| Initiated arbitration/conciliation proceedings under any law or DTAA | Withdraw such claim/proceedings and furnish proof of such withdrawal | |
| Further, an undertaking shall be furnished by the declarant waiving his right to pursue any remedy or claim available under any statute, agreement or in equity- Sec 203(4) | ||
Caveats:
Under the following circumstances, it shall be presumed that no declaration has been made under this Scheme and consequently all proceedings / appeals shall stand revived:
Process of determination of final tax:
Consequences of the order
Immunity:
The designated authority, shall, subject to the provisions of the Scheme grant:
Note: The benefit of immunity shall be restricted to incomes/wealth covered under the declaration made under this Scheme
No refund:
Any amount paid under the Scheme shall not be refunded under any circumstances
Non Applicability of the Scheme:
The provisions of this Scheme shall not apply:
Powers of the Central Government:
Any order or rule made under the above sections shall, as soon as may be after it is made, be laid before each House of Parliament.
With a view to reduce the huge backlog of cases pending in courts, tribunal, arbitration and to enable the Government to realise its dues expeditiously, a one-time settlement scheme, known as Direct Tax Dispute Resolution Scheme, is proposed to be introduced in relation to tax arrears and specified tax.
SALIENT FEATURES OF THE SCHEME
-The Scheme shall be applicable to tax, interest or penalty determined under the Income-tax Act or the Wealth-tax Act, 1957 in respect of which appeal is pending before the Commissioner of Income-tax (Appeals) or the Commissioner of Wealth-tax (Appeals) as on 29.02.2016. The pending appeal could be against an assessment order or a penalty order.
-The declarant under the Scheme shall be required to pay tax along with interest up to the date of assessment. Further, if the disputed tax exceeds Rs.10 lakhs, 25% of penalty leviable shall also be paid
-In case of appeal pending against penalty order, 25% of the minimum penalty leviable shall be payable along with tax and interest
WORKING OF THE SCHEME
– A person can also make declaration in respect of any tax determined on account of retrospective amendment, for a period prior to the date of enactment of such amendment and dispute of which is pending as on 29.02.2016
– Once the declaration is made, appeal pending before Commissioner (Appeals) shall be deemed to be withdrawn
– If an assessee opts for this Scheme, he shall withdraw any appeals or writ petitions filed with Tribunal or Courts before making such declaration and furnish proof of withdrawal. Further, notices given by declarant and claims made pursuant to any agreement entered by India, shall be required to be withdrawn to entail benefits of this Scheme.
– An undertaking has to be given by declarant of waiving the right of any remedy or claim under any law or pursuant to any agreement entered by India
– The specified tax and the related matters mentioned in the declaration shall not be taken up by any authorities for the purpose of resolving or deciding on issue
– In case the declarant violates any provisions or conditions mentioned in this Scheme or provides any false particulars at the time of declaration, it shall be presumed that the said declaration was never made and the consequences, of pending proceedings under Income Tax Act or Wealth Tax Act pursuant to declaration, shall be deemed to have been revived
BENEFITS OF THE SCHEME
– Immunity from prosecution of any offence under the Income-tax Act or the Wealth-tax Act, subject to specified conditions
– Immunity from imposition of penalty in case of specified tax, subject to specified conditions. However, in case of tax arrears, immunity from penalty shall be of the amount exceeding the penalty payable as per the Scheme
– Waiver of interest in respect of specified tax, subject to specified conditions. However, in case of tax arrears, the waiver shall be of the amount exceeding the interest payable as per the Scheme
– Matter covered by order of designated authority shall not be reopened in any other proceeding
– Benefits under this Scheme shall be restricted to proceedings mentioned in the Scheme
CASES NOT COVERED UNDER THE SCHEME:-
-Cases where prosecution has been initiated before 29.02.2016.
– Search or survey cases where the declaration is in respect of tax arrears.
– Cases relating to undisclosed foreign income and assets.
– Cases based on information received under DTAA where the declaration is in respect of tax arrears.
– Person notified under Special Courts Act, 1992.
– Cases covered under Narcotic Drugs and Psychotropic Substances Act, Indian Penal Code, Prevention of Corruption Act or Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
PROCESS OF THE SCHEME
-A declaration shall be made to designated authority not below Commissioner in form and manner as may be prescribed
– The designated authority shall confirm the amount payable within 60 days from receipt of application
– The declarant shall pay the amount confirmed by the designated authority within 30 days from the day of determination of amount by the designated authority
– Amount paid under the Scheme shall not be refundable
SMOOTH FUNCTIONING OF THE SCHEME
– Central Government shall be vested with powers to make rules and administer the working of Scheme and it shall issue directions or orders to concerned persons for execution of the Scheme
– In case of any difficulty arising in relation to Scheme, the Central Government, through an order, may remove such difficulty; however, no such orders shall be passed after the expiry of 2 years from the date on which the Scheme comes into force. The order shall be required to be laid down before each House of Parliament.
– Further, any rules made by Central Government, for the purpose of Scheme, shall be laid down before each House of Parliament
The Scheme is a welcome move and it will be interesting to see how many assessees turn up and seek for declaration in order to buy peace from the harsh probable consequences.
No 3, Apex Plaza, 6th Floor,
Nungambakam High Road,
Nungambakkam,Chennai – 600034
