DTRTI NEWSLETTER Issue No.8/Chennai July 27, 2018

158TH INCOME TAX DAY CELEBRATIONS AT CHENNAI

Income tax was first levied in 1860 through the first Income tax Act and the authority to levy this duty

came into force on 24th July. Hence this day is celebrated as Income tax day.

Pr.CCIT Shri Sushil Khumar planting a sapling as part of 158th Income tax day celeberations in Chennai.

Visual Arts Students of Stella Maris College, Miss Chiquita Ravi, d/o. Shri Ravichandrasekar, ITO & Miss. Harsha Vardhini received prizes from the Pr.CCIT in appreciation of having painted murals decorating the walls of the renovated old auditorium “Vaigai” during the 158th Income tax day celebrations.

CONTENTS

158th Income tax day celebrations IT World this Week

Officer for the Week Topic for the week

Section for the week Judgment for the Week Learn the subject through a crossword puzzle

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IT WORLD THIS WEEK – FDDI

Foreign-Derived Tangible Income Taxes (FDII) New International Tax Provisions for 2018 and Beyond With the recently enacted tax reform a new term has been introduced into the international tax arena: foreign-derived intangible income (FDII) in USA. We’re going to spend a few minutes wrapping our heads around what this new provision is and its potential impact on taxpayers. Where GILTI income (Global intangible low-taxed income) and the corresponding deduction looks to CFC income, the FDII deduction is sort of opposite of this whereby it looks to the foreign-derived income of a US corporation in order to determine the corresponding deduction. Please note that any foreign derived intangible income is already included within the US taxable income of the corporation. So this provision is not looking to add any additional income to the return, but rather can just potentially provide a deduction based on the foreign-derived income.

The deduction is 37.5% of the foreign-derived intangible income of a domestic corporation for the tax year. (Note that this deduction will decrease to 21.875% after December 31, 2025). We won’t get into the technical computation of the deduction, but in a nutshell it ends up being a deduction of 37.5% of the computed FDII and the deduction is computed similarly to the GILTI computations as discussed in the previous issue of this Newsletter. (Issue-7 dated 20/07/2018) Part of computing the FDII involves determining the foreign derived eligible income of the corporation. Foreign derived eligible income of a taxpayer is deduction eligible income that is derived in connection with property sold to any person who is not a US person for foreign use or services provided to any person not located within the US. Foreign use is any use, consumption, or disposition which is not within the US. So, under this provision a US corporate taxpayer could receive a tax deduction for exports of property used in foreign jurisdiction or for providing services to any person, or with respect to any property, not located in the U.S.

…

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624

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Troubles will vanish (i.e., will be troubled) before the man who (struggles against difficulties) as a

buffalo (drawing a cart) through deep mire.

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OFFICER FOR THE WEEK

Shri A.K. SATPATHY, IRS, CCIT

PROFILE OF THE OFFICER

Shri A.K. Satpathy belongs to the 1985 batch of IRS. He is a native of Odisha. He has completed B.A. (Political Science) from Utkal University, Bhubaneswar and stood 4th in the university. He completed M.A. (Political Science) from Delhi University and stood 2nd in the university. He joined SAIL in 1980 and worked in Purchase Department, Salem Steel Plant, Tamilnadu and Rourkela Steel Plant, Odisha. He has undergone Materials Management Course at Management Training Institute, Ranchi. During his stint in Income tax Department, he has attended various training courses in NADT, DTRTI – Mumbai and Kolkata. He has attended mid-career training program at IIM, Bangalore and Maryland University, U.S.A. After traning at NADT, Nagpur, he joined the field in May 1987 at Bhubaneswar, Odisha. His initial career as ACIT/DCIT was in the state of Odisha and the major part was ADIT(Inv.), Bhubaneswar and ACIT(H.Qrs.). He also had a brief tenure as ACIT(Sambalpur) for one year. On promotion, he joined as DCIT(Appeal) in Ahmedabad in 1996 and continued in Ahmedabad till 2006 when he got his next promotion as CIT. As JCIT/ Addl. CIT, he has worked in both Company and Non-Company Ranges and also as Addl. DIT (High Court Cell and Prosecution). On promotion as CIT, he joined as CIT(A) in Hyderabad in 2006. Till 2011, he was CIT(A) and thereafter, he served as CIT(Central) till June, 2015 when he was transferred to Odisha as Pr.CIT, Cuttack. As Pr. CIT, he held additional charge of Pr.CIT, Sambalpur for around 6 months. He also held additional charge of Pr. DIT (Inv.), Odisha in addition to his substantive charge. On promotion as CCIT, he joined as CCIT-2, Chennai in February, 2018. He likes gardening & has developed roof top gardens in Bhubaneswar as well as in Hyderabad. Apart from gardening, he also likes cooking and reading books.

FIVE POSERS TO THE OFFICER

1. What are the 3 important leadership principles

you followed which contributed to your success?

Ans.

(i) I never thrust my ideas while interacting with

others at any point during my career.

(ii) I believed in democracy & collective decision

making.

(iii) Maintained equidistance between higher-ups and

subordinates and treated both with equal respect.

2. What would you say have been your greatest

accomplishment & failure & what did you learn

from them?

Ans. I have full job satisfaction & wherever I was

posted in whatever capacity, I tried to do my duty

with utmost dedication and devotion. In my entire

career, I was not after any particular post or place of

posting. I had exposure in almost all areas of

administration, assessment, Judicial, Prosecution.

With this exposure in our department, I feel that I can

work anywhere in any field. This is my great

accomplishment. Fortunately, I have not faced any

failures in my career by God’s grace.

3. What are your suggestions for developing next

generation of leadership in the department?

Ans.

(i) Treat the assessees well with a smile and they will

never mind paying taxes.

(ii) Ability to adapt to the changing circumstances

4. What should be the vision for the department

for the next 5 years?

Ans. Collection of tax should not be the only aim of the

department, but what is required is to create a tax-

friendly atmosphere which will enhance the voluntary

compliance from the taxpayer.

5. What qualities do you think will make an officer

successful in the Department?

Ans. In my view, an officer should

(i) Have the confidence on his/her subordinates and

higher-ups.

(ii) Have a good behavior towards the stakeholders of

the department – assessees, CAs, Advocates, etc. and

never give a chance to them to have a grievance or

complaint against the concerned officer.

(iii) Respect the time of others as his/ her own.

(iv) Indispensability factor in case of individuals

should be done away with.

4

TOPIC FOR THE WEEK

SIMPLE STEPS TO PROTECT YOUR COMPUTER SYSTEM FROM CYBER ATTACK

1. Log into web administration interface

to change login credentials.

2. Never use default login credentials of

the router.

3. Regularly keep updating your router’s

firmware.

4. Be aware of malware with SSL (secure

sockets layer) stripping capabilities.

Session held at MSTU, Chennai for the candidates appearing for the departmental exam for

Ministerial Staff

YOUR QUERIES

The Officers and members of staff may send in their queries on technical issues to

chennai.adg.dtrti@incometax.gov.in and the same will be answered by experts in the field of

query. The 3 best queries will be published in the next edition for the benefit of all.

.- குறள் 644

,

.

Understand the qualities (of your hearers) and (then) make your speech; for superior to it, there is neither

virtue nor wealth.

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SECTION FOR THE WEEK (S.245 C)

Application for Settlement of Cases [S. 245 C]

Any assessee against whom a case is pending

before any Income-tax Authority can apply to

the Settlement Commission in the prescribed

manner to have the case settled. The

application must be accompanied by

prescribed fee and once it is submitted it

cannot be withdrawn.

An assessee may, at any stage of a case

relating to him, make an application in

prescribed form for settlement of case. Such

application must contain

(i) a full and true disclosure of his income

which has not been disclosed before the

Assessing Officer

(ii) the manner in which such income is

derived

(iii) the additional amount of income tax

payable on such disclosed income ; and

(iv) the additional income-tax payable on

such disclosed income that (calculated as per

provision of IA) exceeds Rs.100,000.

The Finance Act 2007 has further added that

no such application shall be made unless

(i) the additional amount of income-tax

payable on the income disclosed in the

application exceeds Rs. 3 lakhs; and

(ii) such tax and the interest thereon

which would have been paid had the income

disclosed in the application been declared in

the return of income before the Assessing

Officer on the date of application, has been

paid on or before the date of making the

application and the proof of such payment is

attached with the application.

Calculation Of Addl. Income-Tax [S.245C (IA)]

The method for calculation of additional tax is

given in sub-section (IB) to (ID) of

section 245C. These provisions are

(A) Where The Income Disclosed Relates To

One Previous Year [Section 245 C (1B)]

(i) If the applicant has not furnished a return

in respect of the total income of that year;

then, tax shall be calculated on the income

disclosed in the application as if such income

were the total income.

(ii) If the applicant has furnished a return in

respect of the total income of that year, tax

shall he calculated on the aggregate of the

total income returned and the income

disclosed in the application as if such

aggregate were the total income.

(B) Where The Income Disclosed Relates To

More Than One Previous Year [Section

245C(1D)]

The income shall be considered to be the

income of each previous year and tax shall be

calculated as per aforesaid provisions in

respect of each previous year. The difference

of tax payable and tax paid in respect of each

previous year shall be calculated. The

difference in amount of each previous year

shall be aggregated and this amount shall be

called additional Income-tax.

Note: An application made before the

Settlement Commission shall not be allowed to

be withdrawn by the applicant.

The assessee shall, on the date on which he

makes an application before the Settlement

Commission, also intimate the Assessing Officer

in the prescribed manner of having made such

application to the said Commisssion.

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JUDGEMENT FOR THE WEEK

Anbuchezhian vs. ITSC, ACIT [2018] 402 ITR

471 (Mad) - First and foremost condition for

an assessee to fulfil before Settlement

Commission is to satisfy the Commission that

his disclosure was full and true and if this

basic ingredient is not satisfied, the

Commission can reject the application at this

threshold.

FACTS

The assessee was an individual carrying on

business of distribution of films produced by

third parties.

A search proceeding under section 132 was

conducted in the offices and residential

premises of the assessee in Chennai and

Madurai during which, materials were

seized/impounded as well as cash and notices

under S.153A was issued. The assessee had

admitted undisclosed income under S. 132(4).

Thereafter, he preferred an application before

the ITSC, to settle the issues. The said

application was rejected for the reason that

the assessee had reduced the quantum of

transactions as per the seized material from

Rs. 357 crores to Rs. 175 crores. Pursuant

thereto, the assessee preferred the second

settlement application.

The second application for settlement was

also rejected on the ground that he failed to

make full and true disclosure and also the

manner of earning such income, which were

the requisite conditions laid down in section

245C(1).

On writ : HELD: The first & foremost

condition for an assessee to fulfil before the

ITSC is to satisfy the Commission that his

disclosure was full and true.

The ITSC has recorded that it considered the

application filed by the assessee, the paper

books filed, the submission of assessee and

the available records. After considering the

same, the Settlement Commission pointed

out that the assessee was not able to cogently

explain any of the entries relating to his claim

on 'not done' transaction. Therefore, it is

opined that trueness and fullness of the

disclosure is lacking in the application.

The ITSC took into consideration the written

submissions filed by the assessee during the

course of hearing which contain the co-

relation statement of diary notings with

actual transaction and list of 'not done'

transaction as claimed by the assessee. The

Settlement Commission pointed out that the

assessee was unable to clarify the notings in

the diary and the quantum of transaction.

The Settlement Commission appears to have

pointed out certain deficiencies with regard

to full and true disclosure of the assessee's

income and the manner of earning the same,

including further disclosure of additional

income of Rs. 5 crores. It is recorded by the

Settlement Commission that when these

deficiencies were pointed out, the assessee

relied on seized documents.

However, on perusal of the same, the ITSC

found that the entries appearing in the seized

documents did not match with the

explanations & certain entries were pointed

out such as the entries appearing in the name

of Gnanavel, being part of the seized

material. To the specific query made to the

assessee to explain 'not done' transaction, it

was observed that he was not able to explain

and match the transactions with the entries

appearing in the paper books.

7

…

Further, the Settlement Commission

observed that the explanation of the manner

of earning the further additional disclosure of

Rs.5 crores made in the second application

did not form part of the SOF nor assessee was

able to explain about the nature of details of

the disclosure.

Further, it appears that the Settlement

Commission pointed out these deficiencies to

the assessee during the course of hearing,

who was unable to give any clarification and

therefore it came to the conclusion that there

has been no full and true disclosure. On the

above grounds, the application has been

rejected. Thus, the case on hand is not one

where the Settlement Commission brushed

aside the documents filed by the assessee.

In fact an exercise has been done by the

Settlement Commission to examine the stand

taken by the assessee, giving liberty to the

assessee to explain from the documents filed

in the paper book. It needs to be pointed out

that vital aspects, which were queried by the

Commission, the assessee was unable to

explain or clarify or match the transactions.

An argument was put forth that the ITSC

ought to have utilized the machinery

available with it to cause clarification or to

call for a report under rule 9 or to call for a

report under section 245D(3).

The application is at the stage of admission

and the assessee should satisfy the ITSC that

there has been full and true disclosure.

At that stage of the matter, the Settlement

Commission cannot be expected to or cannot

be compelled to utilize the machinery

available with it or to invoke rule 9 or section

245C of the Income tax Act.

It is for the Settlement Commission to

regulate its business. The manner in which

the Settlement Commission proceeded cannot

be stated to be either arbitrary or

unreasonable.

The Court cannot dictate the procedure that

the Settlement Commission has to follow at

the stage of Section 245D(1) unless there is a

palpable error or violation of any procedures

under the Act.

In other words, broad parameters required to

satisfy a prima facie case before a Court of

law is what is required at the stage of section

245D(1) of the Act.

The degree of proof for a prima facie case is

on higher pedestal before a judicial forum. It

is no doubt true that section 245 was inserted

into the provisions of the Income-tax Act for

an early resolution of complicated tax

disputes, where the assessee gets relief, more

particularly from penalty and prosecution.

However, to be entitled for such a remedy,

the conduct of the assessee is primordial.

The conduct of the assessee definitely leads

to the irresistible conclusion that there has

been no full or true disclosure. …

– குறள் 648

,

.

If there be those who can speak on various subjects in their proper order and in a pleasing

manner, the world would readily accept them.

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LEARN THE SUBJECT – “DIGITAL FORENSICS” THROUGH A CROSSWORD

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ACROSS: 4. The amendment to Finance Act, 2001

provisions of sub-section (22A) to S.2 was inserted to provide definition of document which included __________________ as defined under Information Technology Act 2000 and given recognition as admissible evidence at par with a document (10,6)

7. ____________ in an asymmetric crypto system, means a private key and its mathematically related public key, which are so related that the public key can verify a digital signature created by the private key (3,4)

8. ____ means a person who sends, generates, stores or transmits any electronic message or causes any electronic message to be sent, generated, stored or transmitted to any other person but does not include an intermediary (10)

10. ___________ with respect to any particular electronic message means any person who on behalf of another person receives stores or transmits that message or provides any service with respect to that message (12)

12. S.132(1)(iib) of the Act requires any person who is found to be in possession or control of any books of account/documents maintained in the form of electronic record to afford the AO the necessary facility to _________ such books of account or other documents (7)

13. ___________ Volume also known as Volume Snapshot Service, is included with Microsoft Windows and makes automated backup copies of some files and operating system components from time to time on New Technology File System based computers (6)

14. __________ is the fastest data copying tool which uses memory pre-allocation and multithreading (6)

15.Computer ___________ means computer, computer system, computer network, data, data base or software (8)

DOWN: 1. When digital device/data is encrypted

using a hashing algorithm, it results in a new number of a fixed length called the dark __________________ (7,6)

2. _______ means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3 (7,9)

3. Computer ________ means any set of computer instructions that are designed to modify, destroy, record, transmit data or program residing within a computer, computer system or computer network or by any means to usurp the normal operation of the computer, computer system, or computer network (11)

5. _________ deals with extracting information from storage media in the form of active, deleted files and data from unallocated, slack spaces (4,9)

6. ________ is any evidence presented by a person who is not a direct witness (7)

9. _____means a person in whose name the Digital Signature Certificate is issued (10)

11. For taking logical backup of Windows System, _____________ or "Robust File Copy", is a command-line directory and/or file replication command (8)

Please e-mail your answers to chennai.adg.dtrti@incometax.gov.in.

And the first correct entry will be rewarded. Answers will follow in the next issue.

Published by: Team DTRTI, Chennai