“CONCEALMENT / INACCURATE FURNISHING ATTRACTS PENAL PROVISION”

TAX TALK-22.10.2012-THE HITAVADA
TAX TALK

BY CA. NARESH JAKHOTIA (Chartered Accountant)

“CONCEALMENT / INACCURATE FURNISHING ATTRACTS PENAL PROVISION”

Query 1]
Sir, I am an employee at a PSU and I have bought a house in August-2009 from the Housing Board at Bhilai for which I took a House Building Loan from my Company in January- 2010.The construction of the house is still not completed. In the meantime, my company has started deducting the interest of the house building loan. The Certificate shows the following amounts deducted as interest:

F.Y. 2010 – 2011     :-         Rs. 17,024/-

F.Y. 2011 – 2012     :-         Rs. 35,196/- .

These amounts are not reflected in my Form 16.

My questions are:

1.      Whether can I claim these amounts in my IT return as a "Loss from House property", this being my only property? Or

2.      Will this interest be treated as pre-construction period interest (will be cumulated & divided by five) and can be claimed only after the construction is over? When can the pre-construction period interest be claimed?

3.      I have filed the IT return for the F.Y.2010 - 2011. If I have to claim the interest, will I have to file a revise return for last year? [K.Raju-minaraju26@yahoo.in]

Opinion:

Interest in respect of pre-construction is deductible in five equal annual installments commencing from the financial year in which the construction of house is completed. The “pre-construction period” means the period commencing on the date of borrowing & ending on the March 31^st immediately prior to the date of completion of construction /acquisition. If the house is completed in any particular year then one should note that the pre-construction interest doesn’t include the interest for the period from 1^st April of that year to the date of completion in that year.

With above basic idea, it may be noted that

1. Before completion of the construction of the house property, deduction towards interest on borrowed capital, as mentioned in the query, cannot be claimed.
2. The deduction towards the pre-construction period need to be aggregated and will be deductible in 5 equal installment commencing from the year in which the construction of the house property is completed.
3. No question of revising the income tax return arises in your specific case.
4. The readers may note that Interest on borrowed capital is restricted to Rs. 30,000/- if house construction is not completed within a period of 3 years

Query 2]

I am a salaried employee in a PSU. For the year 2010-11 (Assessment year 2011-12) Rs. 4.15 lacs was paid against Salary income. I filed my returns through ITR-1 in which I did not show Interest income from saving a/c as it was very small amount, and also did not show Long term capital gains derived from diversified equity mutual funds(SIPs) as they do not attract any tax and due to difficulty in calculating gains from SIPs. Recently, I have received a letter as "AIR Only" case from Assessing Officer to attend with all supporting documents. After this, I came to know about 26AS in which I found an entry showing an amount of Rs.1.20 Lacs during 2010-11 against IPO though shares were not allotted. In this scenario, please let me know what are the implication and kindly advice what I need to do further. [B A Reddy-cst_wcl@rediffmail.com]

Opinion:

Tax payers should take utmost care to disclose all the income and required detail while filing the income tax return. It may be noted that concealment of Income or furnishing of inaccurate particulars of income could attract various penal provisions under the Income Tax Act-1961.

In your specific case, you have not mentioned
a] Interest on S.B. A/c &

b] Exempt income details (LTCG on SIP).

As far as Interest of Saving Bank A/c is concerned, you may make a submission to your Assessing Officer expressing your willingness to pay the tax & interest thereon.  You may further make a submission to your Assessing Officer requesting him to condone the unintentional & minimal error which doesn’t have much tax implications.

Query 3]

We have query regarding the disallowance of provident fund contribution in the tax audit report (Form No. 3CD) or computation of taxable income. As per the rules, PF contribution has to be deposited with Govt. within 15 days from of the next month, failure to which leads to the addition of employee part to the gross total income. Kindly explain whether there is any provision of grace days (5 days) for payment, e.g., Contribution related to April month were deposited on 18^th may, so what will be the due date in this case 15^th May or 20^th May ( 15 + 5 grace days).  Your valuable explanation in this regard will be of great help. [prasad.naib@gmail.com]

Opinion:

By & large, the issue is now settled by the judiciary. It has been held in various judicial pronouncements that now the deduction would be admissible even if the payment is done before the due date of filing the return of Income (i.e., beyond the due date prescribed under the PF Act). You can refer the following:

1.      CIT Vs. Vinay Cement Ltd (2007) 213 CTR 268 [SC]

2.      CIT Vs. Dharmendra Sharma (2007) 297 ITR 320 (Gau)

3.      CIT vs. George Williamson (Assam) Ltd (2006) 284 ITR 619 (Gau)

4.      CIT  Vs. Lakhani India Ltd (2010) 232 CTR 81 (P&H)

5.      ACIT V/s. M/s Vipul Facility Management Pvt. Ltd.[ITAT-Delhi in ITA No.1020/Del /2012 –Dated: 06-09-2012]