Article
Impact of Section 281 on transfer of assets: Myriad issues thereunder
By Shivam Gupta and Tanmay Bhatnagar
Section 281 of the Income Tax Act, 1961 empowers the Department to declare a transfer of an asset as void where the transferor, during the pendency of any proceedings under the IT Act or completion thereof, but before the service of notice under the Second Schedule by a TRO, creates a charge on, or parts with the possession of any of his ‘assets’ in favour of another person. Considering the far-reaching consequences of the provision, the article in this issue of the Direct Tax Amicus highlights few practical issues that may be faced by the parties to a transfer. The authors in this regard discuss the questions like whether NOC is required in case of all transfers, establishment of bona fides by transferees, determination of transferor’s potential liability, whether charge is created in case of transferable development rights, and slump sale transactions. According to the authors, given the multi-faceted issues surrounding Section 281, the parties may want to tread with caution before taking any legal position in relation to the said provision.
Notifications & Circulars
- One-time relief to taxpayers in relation to transactions with persons with inoperative PAN
- Trusts or institutions – Due date for filing Form 10A/10AB extended to 30 June 2024
Ratio decidendi
- Perquisites – Residuary clause under Section 17(2)(viii) does not lead to delegation of essential legislative function to CBDT – Rule 3(7)(1) is also constitutionally valid – Supreme Court
- Addition under Section 69 is not justified on an asset recorded in the books – ITAT Mumbai
- Addition under Section 69B is not justified without any proof of expenditure – ITAT Mumbai
- No limitation period for considering an application for compounding – Delhi High Court
- Mens rea is essential for upholding prosecution under Section 276CC, for delayed filing of return – Rajasthan High Court
- Assessment order sans show cause notice is wrong, as requirement of SCN is not an empty formality – Bombay High Court
- Expenditure incurred for reimbursement to non-resident associated enterprises when not Fee for Technical Service – Delhi High Court
