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The Government Giveth and the Government Taketh Away: Charitable Institutions satisfied but facing accounting complexities
By Tanmay Bhatnagar
The year 2022 has witnessed major changes in exemption regimes available to charitable institutions under the Income-tax Act, 1961. Through these changes, while the Government has seemingly taken care of one issue faced by charitable institutions, it has also given birth to a new one. The article in this issue of Direct Tax Amicus discusses both these issues and analyze the Jekyll and Hyde nature of the amendments of 2022. Dealing with the amendment defining the term ‘application of income’, the article states that the change opens a new can of worms. It observes that while the Memorandum explaining the Finance Bill, 2022 states that the amendments affirm the position taken by various Courts, an analysis of various High Court decisions indicates the contrary. According to the author, method of accounting for charitable institutions has now become complicated where the institutions are following mercantile system of accounting. The article goes on to also discuss the introduction of Section 115BBI and that it is possible to argue that the introduction of this new section would ensure that complete exemption is not denied to charitable institution for a minor breach...
Notifications & Circulars
Use of functionality under Sections 206AB and 206CCA clarified
Transactions where PAN is required to be mandatorily obtained notified
Faceless Penalty Scheme, 2021 amended
Manner of filing appeal against Order of Board of Advance Ruling before the High Court clarified
Re-assessments – Implementation of Supreme Court judgment in Ashish Agarwal case clarified
TDS on perquisites and benefits – CBDT issues guidelines on new Section 194R
Ratio decidendi
Commission paid to directors and relatives to be disallowed as expenditure under Section 37 of Income-tax Act in case of insufficient evidence on receipt of service – Orissa High Court
Power of compounding of offences is a quasi-judicial power, hence covered by SC decision extending period of limitation during Covid – Delhi High Court
Reassessment notice issued under erstwhile law, for AY 2014-15, invalid on account of being time barred under the new law – Allahabad High Court
Interest on loan availed for investment in subsidiary allowed as revenue expenditure as investment based on business necessity – ITAT Pune
Fees paid to investigators for providing clinical trial services to Associated Enterprise cannot be treated as pass-through cost and mark-up should be charged while billing to AE – ITAT Bangalore
