Tax Column

I am an individual and hold 20,00,000 shares of ₹10/- each, aggregating to ₹2 crore of a closely held private limited company. The said company suffered huge losses and went into voluntary liquidation. As a result, my shares got cancelled without any consideration. Am I entitled to claim loss on this account in my Return of Income and whether I can set-off the loss against my other capital gains? [EasyDNNnews:PaidContentStart]

On cancellation of shares during the liquidation proceedings, it is nothing but the extinguishment of your rights in shares. As per the definition of transfer under section 2(47) of the Income Tax Act, such type of extinguishment is considered as transfer. The expression “extinguishment of your right therein” is of wide import which covers possible transactions that result in the destruction, extinction, termination, cessation or cancellation of the right Assesse has in a capital asset. Shares held by you in a closely held company are a capital asset. Therefore, the entire ₹2 crore can be claimed by you as a long-term capital loss. The said long-term capital loss will be available for set-off against any long-term capital gain arisen to you either in the same financial year or in subsequent financial years. However, the upper limit for set-off is eight assessment years. 

I am a trustee of one charitable trust which is approved under the Income Tax Act. There was a delay in uploading the audit report in Form 10B. Therefore, while processing the Return, the CPC has denied exemption under section 11 of the Income Tax Act and taxed the entire gross receipts received during the year including corpus donation received and determined a huge tax demand. Can you advise what remedies are available and whether we will succeed? 

Under the Income Tax Provisions, a trust claiming exemption under section 11 / 12 of the Income Tax Act needs to comply with certain compliances. One of the requirements is to obtain and upload the auditor's report in Form 10B electronically before the due date as mentioned in the Act. If there is a default, then CPC as well as the Assessing Officer may deny exemption and as a result, determine a huge tax liability. In your case, the CPC has already denied exemption to the Trust and seems to have determined a tax demand. Now you should immediately file an appeal against the Intimation under section 143(1) of the Act before the National Faceless Appeal Centre. In appeal, the CIT(A) may condone the default as ultimately the report was available at the time of processing the Return. As such, you must file an appeal immediately. Even if CIT(A) dismisses your appeal, then a further appeal can be filed before the Hon’ble Tribunal. I am sure, the Hon’ble Tribunal will condone the default and direct the Assessing Officer to grant exemption under section 11/ 12 of the Income Tax Act. There are a number of judgements of High Courts and Tribunals where on similar facts, delay / default has been condoned and the Assesse Trusts were given relief. The Trust can also approach the jurisdictional CIT for condonation of delay but success chances are a little less as compared to adopting Appellate Forum, as mentioned above. 

For Assessment Year 2023-24, as per Return I am entitled to a refund of ₹28 lakh. However, while processing the Return, certain credits of TDS were not given and as a result, the CPC has determined a refund of only ₹2 lakh. I have approached the concerned Assessing Officer but till today I have not received further refund. What are the remedies available to me to get the refund immediately? 

The immediate remedy is to approach the concerned jurisdictional Assessing Officer with a detailed application under section 154 of the I T Act for rectifying the apparent mistake committed by the CPC. In your application, you also mention details of TDS for which credit was not given and which are supported by the reflection of TDS in 26AS. You may have to follow personally with the Office of the Assessing Officer with all the documents pleading him to pass the order immediately and issue the refund. If the Assessing Officer and his office do not take any action on your rectification application, then you may approach the concerned Commission of Income Tax. However, if still you don’t succeed then make a grievance on CPGRAMS portal giving all the facts and make reference of pending rectification application. CPGRAMS is a single portal connected to all the ministries/ departments of Government of India / States Government. In my view, the CPGRAMS will seek information from the concerned Commission of Income Tax / Assessing Officer regarding the pending refund issue. Most probably, the refund will be issued to you. However, if still nothing works out, then you may approach the Hon’ble High Court for necessary directions to the Assessing Officer. The Hon’ble High Court may direct the Assessing Officer to issue the refund immediately along with the interest if your claim is found to be correct. However, going to the High Court may cost you additional money but you may get justice and will get the refund at the earliest. 

I have received an advance of ₹2 crore as a deposit against the sale of my residential flat. The total consideration agreed is ₹20 crore. The balance amount needs to be paid within three months and if the buyer fails to pay the balance amount, then the deposit of ₹2 crore would be forfeited. The buyer made a default and accordingly, I forfeited ₹2 crore. Are there any income tax implications in my hand? 

The entire ₹2 crore is taxable in your hand as income from other sources. Section 56(2)(ix) of the Income Tax Act makes it very clear that any advance received for the transfer of a capital asset and the deal does not take place and the amount is forfeited, then that amount is taxable as income from other sources. 

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