Honouring Honourable Mr. Justice Pradeep P. Bhatt, President of the ITAT honoured with Justice P. N. Bhatwati Award on 1-9-2019 in recognition of his Systematic Reforms & Infrastructure in Judiciary & ITAT

We are pleased to state that Honourable Mr. Justice Pradeep P. Bhatt, President of the ITAT, was honoured on 1-9-2019 in recognition of his Systematic Reforms & Infrastructure in Judiciary & ITAT.

Mr. Justice Pradeep P. Bhatt has been conferred with the Justice P. N. Bhatwati Award by his Excellency Mr. Biswabhusan Harichandran, Honourable Governor of Andhra Pradesh in the distinguished presence of Mr. Justice A. K. Patnaik, former Judge of Supreme Court of India, Mr. N. Ravi Chairman, Press Trust of India. It is an honour to this Institution.

We congratulate Honourable Mr. Justice Pradeep P. Bhatt, President of the ITAT, for making honest efforts to reform and improve the infrastructure of the ITAT.

1. S. 2(14) : Capital asset – Tree standing on an agricultural land are transferred along with land as its integral part in one transaction, said land would be regarded as ‘agricultural land’ and not a separate capital asset – Entitle to exemption. [S. 2(14) (iii)(a), 10 (37), 45]

   Tribunal held that tree standing on an agricultural land are transferred along with land as its integral part in one transaction, said land would be regarded as agricultural land and not a separate capital asset. Entitle to exemption. (AY. 2012-13)

   ITO v. G. S. Lekha (Smt) (2019) 177 ITD 1 (TM) (Cochin) (Trib.)

2. S. 4 : Charge of income-tax – Capital or revenue – Right to sue – Damages received for breach of development agreement are capital in nature & not chargeable to tax. [S. 2(14), 45]

   Tribunal held that the only right that accrues to the assessee who complains of breach is right to file a suit for recovery of damages from the defaulting party. A breach of contract does not give rise to any debt. A right to recover damages is not assignable because it is not a chose-in-action. Such a mere ‘right to sue’ is neither a capital asset u/s. 2(14) nor is it capable of being transferred & is therefore not chargeable under u/s 45 of the Act. (ITA No. 86/Mum/2017, dt. 29.05.2019)(AY. 2012-13)

   Chheda Housing Development Corporation v. ACIT (Mum)(Trib), www.itatonline.org

3. S. 4 : Charge of income-tax – Capital or revenue – Interest subsidy given for the purpose of payment of loan acquired for the acquisition of capital asset is capital receipt. [S. 28(i)]

   Assessee received interest subsidy from Rajasthan Govt. and disclosed the same as capital reserve in its balance sheet. Ld. AO treated it as revenue receipt. CIT (A) confirmed the contention of the assessee following earlier years order. On further appeal, the Tribunal observed that in Sahney Steel & Pressing Works Ltd. v. CIT(1997) 228 ITR 253 (SC), the Supreme court held that subsidy given to the new industries at the commencement of business, to carry on their business and not as an aid for setting up of the industries that subsidy is treated as operational subsidy and not a capital one. With regard to revenue subsidy, it held that if it is given by way of assistance to carry on trade or business, it has to be treated as a trading receipt. The Tribunal observed that in the present case, the interest subsidy was given only for the payment of loan acquired for acquisition of capital assets. As such, it is a subsidy given for setting up of business. Hence, it has rightly been treated as a capital receipt. (ITA No. 15/LKW/2018, dt. 07.12.2018) (AY. 2012-13)

   JCIT v. J. K. Cement Ltd. (2019) 69 ITR 26(SN) (Luck.)(Trib.)

4. S. 9(1)(vi) : Income deemed to accrue or arise in India – Non – Resident – Royalty-Computer software – Transfer of copyrighted software – consideration would not amount to ‘royalty’ or fees for ‘included services’ or ‘technical services’ – Not taxable in India – Not liable to deduct tax at source – DTAA – India – Sweden. [S.9(1)(i), Art. 12]

   Assessee non-resident and was providing software services and also IT support services to Swedish Company (SA) Since SA did not acquire any copyright in software and it was a mere transfer of copyrighted software, consideration received by assessee would not amount to ‘royalty’ or ‘fees for included services’ or ‘fees for technical services’ under realm of section 9 (1)(vi) or under article 12 of DTAA between India and Sweden. Accordingly not taxable in India. Not liable to deduct tax at source. (AY. 2010-11, 2011-12, 2013-14)

   Sandvik Tooling Sverige AB v. DCIT (IT) (2019) 176 ITD 390 (Pune) (Trib.)

5. S. 10(33) : Capital asset – Tax avoidance – Loss on redemption of units – Short term capital loss is allowed to be set off – Denial of exemption on dividend is held to be not valid. [S.2(14), 94(7)]

   The assessee had obtained a loan from a financial services company and purchased units of mutual funds. It had earned dividend from the same and also redeemed the units. On redemption, it suffered a short term capital loss soon after earning dividend and set-off the same against the long term capital gains. The AO considered that the assessee had connived with the financial services company and the mutual fund to form a colourable device to earn dividend as well as suffer short term capital loss for set-off. Accordingly, the AO disallowed the short-term capital loss claimed by the assessee and denied the exemption of dividend income u/s 10(33). Tribunal held that the assessee had been regularly investing in mutual funds and all the documents were filed to rebut the colourable device or connivance alleged by the AO. The Tribunal also observed that the transaction went out of the purview of section 94(7) and the investment of the assessee was only 1.38% of the fund size. Further, the mutual fund was regulated. After taking into consideration all of the aforementioned, the Tribunal reached a conclusion that the assessee did not connive with the financial services company and mutual fund. Thus, the Tribunal directed the AO to allow the short term capital loss and exemption u/s 10(33). (AY. 2015-16).

   Agencies Rajasthan P. Ltd. v. ITO (2019) 73 ITR 633 (Jaipur) (Trib.)

6. S. 10(37) : Capital gains – Agricultural land – With in specified urban limits – Compulsorily acquiring of land for public purpose- Provision meant for removing hardship – Two years prior to acquisition was used for agricultural purposes – Agricultural Officer had certified land to be agricultural land – AO cannot deny the exemption. [S.2(14)(iii)(a) (b), 45]

   Land belonging to assessee as well as adjoining lands were acquired for purpose of development of Seaport (VISL) – Thereafter, assessee by a registered sale deed conveyed property to VISL. AO held that on date of transfer, land owned by assessee became part of Municipal Corporation and, thus, it could not be regarded as agricultural land because of S. 2(14)(iii)(a), and on that basis, he denied benefit of exemption under S. 10(37) of the Act. There was difference of opinion amongst the members and the matter is referred to third member. Third member held that provision of S. 10(37) are meant specifically for purpose of removing hardship to a land holder, whose lands are situated in an area specified in section 2(14)(iii)(a)(b), if such lands are compulsorily acquired for public purpose subject to condition that, two years prior to their acquisition, land was used for agricultural purposes. On facts the Agricultural Officer had certified said land to be agricultural land, AO was not right in coming to conclusion that land falling within purview of capital asset under S.2(14)(iii)(a) would not be entitled to exemption under S. 10(37) of the Act. (AY. 2012-13)

   ITO v. G.S. Lekha. (Smt) (2019) 177 ITD 1 (TM) (Cochin) (Trib.)

7. S. 10(37) : Capital gains – Agricultural land – Interest received on enhanced compensation – Entitle to exemption. [S. 45(5), Land Acquisition Act, S.28]

   Interest on enhanced compensation for acquisition of agricultural land by Government is exempt from tax. (AY. 2011-12)

   Opinder Singh Virk Pravesh Kumar Sharma. v. ITO (2019) 176 ITD 863 (Delhi) (Trib.)

8. S. 11 : Property held for charitable purposes – Application of income – Income from house property – Rental income derived from Trust – No Standard deduction at 30 percent is not allowable – Repairs and maintenance expenses incurred on trust property being meant for objects of charitable trust is to be allowed in computing income of the Trust as application of income. [S. 24(a)]

   Tribunal held that while determining income available for application under section 11, income of a trust should be computed under commercial principles without resorting to computation mechanism as provided under respective head of income. Accordingly standard deduction u/s. 24(a) at 30 percent is not allowable. Tribunal held that deduction as to repairs and maintenance expenses incurred on trust property being meant for objects of charitable trust, was to be allowed in computing income available for application. (AY. 2012-13)

   Nandlal Tolani Charitable Trust. (2019) 176 ITD 769 (Mum) (Trib.)

9. S. 11 : Property held for charitable purposes – Application of income – Payment to another charitable trust – Exemption cannot be denied merely because the done trust has not spent the donation during the year itself – Interest accrued on fixed deposit – Deemed application of income – Exemption cannot be denied. [S.11(2) 12, 12A, 13(3)]

   Tribunal held that, exemption cannot be denied merely because the done trust has not spent the donation during the year itself. Tribunal also held that interest accrued on fixed deposits which was not received, to be treated as deemed application of income under clause (2) of Explanation to section 11(1), exemption cannot be denied. (AY. 2013-14, 2014 -15)

   All Saints School v. ITO (2019) 176 ITD 632 (Delhi) (Trib.)

10. S. 12AA : Procedure for registration – Trust or institution – Possibility of misuse of donations – Approval u/s 80G cannot be denied. [S. 80G]

    Tribunal held that merely because charitable educational institution was prosperous and failed to state as to why there was need for donations and it failed to submit list of proposed donors, approval under section 80(5)(vi) could not be denied merely upon possibility of misuse of donations.

    Adesh Foundation (Regd.) v. CIT (2019) 176 ITD 506 (Asr) ( Trib.)

11. S. 28(1) : Business income – Suppression of income – Future and options – Shares and derivatives – Client code modifications (CCM) – Burden is on the assessee to establish that the client code modifications have been done on the behest of the assessee – Addition cannot be made as suppression of income of the assessee. [S.143(3)]

    Tribunal held that the transactions were supported by bills/contract notes and the assessee couldn’t have done any client code modifications. The data provided by the A.O. neither pertained to assessee nor any modification was carried out on behest of the assessee. There is nothing on record to establish that the loss transactions were not genuine. Further, assesse is not a registered broker and thus, could not modify the client code. Nothing has been brought on record by the AO to prove that the modifications have been done on the behest of the assessee and thus, the assessee couldn’t be held responsible for the modification to the client code. Tribunal also held that no nexus can be established with the losses suffered by the assessee. The connivance/ collusion of the assessee with the share broker could not be established. Accordingly the deletion of addition by the CIT(A) is affirmed. (ITA No. 5688/Mum/2017 dt 03-07-2019) ( AY. 2010-11)

    DCIT v. Vipul D. Shah (Mum) (Trib) (UR)

12. S. 28(i) : Business income – Income from house property – Assessee is not merely letting out its premises for warehousing but were doing complex commercial activity hence to be treated as business income. [S. 22]

    Assessee earned rental income from the warehousing activities and treated the same as business income and claimed expenditure against the same. However, Ld. AO treated the same as Income from House Property and disallowed the expenditure claimed by the assessee against earning of such income. On appeal, CIT (A) treated the rental income as business income Aggrieved by the order of CIT (A), Revenue filed an appeal before ITAT. The Tribunal dismissed department appeal following the earlier year’s order, wherein it was observed that the assessee is not merely letting out its premises for warehousing but were doing complex commercial activity. All the duties cast upon the assessee was responsible for ensuring the incoming and, outgoing of goods apart from providing adequate security. The consideration received by the assessee from client is not for letting the property on rental basis but the consideration received is exclusively for providing the benefits of business service facilities to the client. The customer had no right of occupancy and the assessee had control of the premises. The Tribunal held that as assessee provided round the clock service to the clients from various aspects from letting out of goods, their security etc., rental income will definitely fall within the purview of business income. (ITA No. 380/Mum/2017 & ITA No. 7556/Mum/2016, dt. 19.12.2018, AY 2012-13)

    Grand Wood Works and Saw Mills v. ITO (2019) 69 ITR 3 (SN.) (Mum.)(Trib.)

13. S. 28(i) : Business loss – Future and options – Shares and derivatives – Client code modifications (CCM) – No stretch of imagination can any AO consider a transaction on the stock exchange as income of a person other than the one who has either actually received monies in his bank account (In case of profit) and /or paid any monies from his bank account (in case of loss) – burden is on AO to establish that the losses were purchased or that there was payment in cash/cheque for such favors. [S. 143(3)]

    Tribunal held that the assessee is not registered broker on the stock exchange. Only the registered brokers can modify client code (CCM) of their own clients. The AO has not brought on record to establish that the losses were purchased or that there was payment in cash/cheque for such favors. AO has mechanically added amounts as income of the assessee without verifying the records. Tribunal also held that, by no stretch of imagination can any AO consider a transaction on the stock exchange as income of a person other than the one who has either actually received monies in his bank account (In case of profit) and/or paid any monies from his bank account (in case of loss) and nothing has been placed on record by the AO to demonstrate that any proceedings were ever initiated against the assessee by the SEBI or any stock exchange. Accordingly the loss is held to be allowable as business loss. (ITA No. 5689 /Mum/2017 dt 13-05 2019 ) (AY. 2010-11)

    DCIT v. Comet Investment Pvt. Ltd. (Mum) (Trib) (UR)

14. S. 28(i) : Business loss – Future and options loss – Client code modification – Repetitive client code modifications – Client code modifications are tainted with collusive action and manipulation – Loss is held to be bogus – Not allowable as business loss – Reassessment is also upheld. [S. 133(6), 147, 148]

    Dismissing the appeal of the assessee the Tribunal held that Unusual & sudden spurt in client code modifications undertaken by brokers was with an intention to evade taxes. In large number of client code modifications, there are no similarity between wrong code and correct code and secondly there are repetitive client code modifications. Thus, client code modifications are tainted with collusive action and manipulations & shall go out of the protection granted by the circulars of NSE/SEBI Followed Rakesh Gupta 405 ITR 213 (P&H) & Ninja Securities followed). Reassessment is also upheld. (ITA no. 6534/Mum/2017 (AY. 2010-11)

    Time Media & Entertainment LLP v. ITO (Mum)(Trib),www.itatonline.org

15. S.28(i): Business loss – Share transactions – Registered stock exchange – Prevailing market prices – STT paid – Produced contract rates, demat statements and bank statements – loss cannot be disallowed as bogus. [S.68]

    Dismissing the appeal of the revenue the Tribunal held that, the assessee had furnished all details of purchase and sale of shares, obligation files of stock exchange and trade files received from stock exchange in which all details were given showing transactions entered into by assessee, Demat transaction and holding statements showing delivery of shares for purchase and sale of shares,copies of contract notes issued by registered share broker for purchase and sale of shares, provided copy of bank statements marking payments made to/received from stock exchange in respect of purchase and sale of shares. Loss cannot be disallowed as bogus loss. (AY. 2013-14)

    DCIT v. PRB Securities (P.) Ltd. (2019) 176 ITD 649 (Kol) (Trib.)

16. S. 32 : Depreciation – Additional depreciation – S. 32(1)(iia) would not restrain the assessee from claiming the balance of the benefit of additional depreciation in the subsequent assessment year. [S. 32(1)(iia)]

    During the year under consideration i.e. AY 2012-13, assessee claimed residual 50% additional depreciation on the assets installed in the second half of the assessment year 2011-12. Ld. AO disallowed the same. On appeal to CIT (A), CIT (A) allowed the additional depreciation claim of the assessee. Aggrieved by the same, assessee filed an appeal before ITAT.

    The assessee company claimed additional depreciation on the assets installed in the second half of the assessment year 2011-12. The AO held that additional depreciation is allowed only at 50% on the assets put to use for less than 180 days. He observed that the company wants to claim the residual 50% of the additional depreciation on the assets put to use for less than 180 days in the next assessment year, which is not correct as per provisions of the Act. Finance Act, 2015 has allowed 50% additional depreciation in the next year of put to use effective from 01-04-2015. Since the provision of section 32 of the Act do not provide for carry forward of the residual additional depreciation in the current assessment year, the claim of additional depreciation was rejected. On appeal, the ld. CIT(A) allowed the assessee’s claim, following ‘M/s Automotive Coaches & Components Ltd. vs. DCIT’, order dated 12.02.2016, passed by the Chennai Bench of the Tribunal in ITA No. 1789/Mds/2014, for A.Y. 2008-09, wherein, it was held that if additional depreciation could not be allowed at the rate of 20% during the year in which the machinery was installed, the balance 50% has to be allowed in the subsequent year, and ‘CIT v. Pittal India (P) Ltd. (2016) 129 DTR 153 (Karn.)(HC), in which, it was held that the proviso to Section 32 (1)(iia) of the I.T. Act would not restrain the assessee from claiming the balance of the benefit of additional depreciation in the subsequent assessment year. On further appeal the Tribunal observed that there was no decision contrary to the above decisions and hence there was no error in the CIT(A) order. (ITA No. 15/LKW/2018, dt. 07.12.2018 (AY. 2012-13)

    JCIT v. J. K. Cement Ltd. (2019) 69 ITR 26 (SN) (Luck.)(Trib.)

17. S.32 : Depreciation – Transit mixer mounted on vehicle eligible for higher rate of depreciation – Trucks on which said RMC was mounted for transporting it to construction site – Not eligible for higher depreciation. [S.32(1) (iia)]

    Tribunal held that Transit mixer mounted on vehicle eligible is to be considered as plant and eligible for additional depreciation. However Trucks on which said RMC was mounted for transporting it to construction site is not eligible for higher depreciation. (AY. 2011-12)

    Innovative Infrastructure (P.) Ltd. v. DCIT (2019) 176 ITD 868 (Ahd) (Trib.)

18. S. 37(1) : Business expenditure – Capital or revenue – Expenditure on scholarship – Held to be revenue expenditure.

    Tribunal held that in the professional field there are innovative ways visualized by professionals to make themselves visible in the professional circle and to build their own professional profile for generating higher and value-added business such as sponsoring seminars, becoming knowledge partners, setting up prizes and awards, creating competitive award ceremonies, hosting vibrant summits etc. The way professionals promote themselves is changing very fast and benefits of such expenditure are huge and wide. (ITA No. ITA 2285 & 2392/Del/2016, dt. 13.08.2019) (AY. 2011-12)

    Harish Narinder Salve v. ACIT (Delhi)(Trib), www.itatonline.org

19. S.37(1) : Business expenditure – Illegal payments – Fee paid for registration of product in Iraq – Cannot be said to be payment of kickbacks to Iraqi regime for doing business – Allowable as deduction.

    Tribunal held that fees of ₹ 1.32 lakh paid to Delhi based agent for registration of products in Iraq cannot be said to be kickbacks to Iraqi regime for doing business. Allowable as deduction. (AY. 2003 -04)

    DCIT v. Core Healthcare Ltd. (2019) 177 ITD 26 (Ahd) (Trib.)

20. S.37(1) : Business expenditure – Commission – ad hoc disallowance of 50% – Furnished details of payment – Ad hoc disallowance is held to be not justified.

    Tribunal held that when the assessee substantiated payment of commission by submitting vouchers,bills which are of hand made disallowance of 50% of expenses only on the basis that the vouchers are handmade is held to be not justified. (AY. 2011-12)

    Alkoplus Producers (P.) Ltd. v. DCIT (2019) 177 ITD 150 / 71 ITR 650 (Pune) (Trib.)

21. S. 37(1) : Business expenditure – Illegal expenses – Distribution of ball pens, medical gifts etc with logo of the company to doctors and hospitals – Allowable as business expenditure – Explanation 1 to S. 37(1) is not applicable.

    Pharmaceutical company, engaged in business of trading and marketing of medicines, incurred expenses towards business promotion by way of organizing medical camps/blood donation camps/free check up camp, etc., with distribution of ball pens and medical gifts etc with logo of assessee-company to doctors and hospitals is allowable as business expenditure. Explanation 1 to S. 37(1) is not applicable. CBDT Circular No. 5 of 2012, dated 1-8-2012 and ‘Indian Medical Council Regulations, 2002’, imposing prohibition on medical practitioner and their professional associations from taking any gift, travel facility, hospitality, cash or monetary grant from pharmaceutical and allied health sector industries are not applicable. (AY. 2015-16)

    Aishika Pharma (P.) Ltd. v. ITO (2019) 177 ITD 238 (Delhi) ( Trib.)

22. S.37(1) : Business expenditure – Asset management company – Date of approval given by SEBI was to be regarded as date on which assessee set up its business and was ready to commence said business- Expenses incurred for purpose of business after said date of approval were eligible for deduction. [S.3, Regulation 21 of the SEBI (Mutual Fund) Regulations, 1996]

    Dismissing the appeal of the revenue the Court held that, business of assessee was set up and assessee was ready to commence its business once it was approved by SEBI to act as an asset management company in accordance with sub-regulation (2) of Regulation 21 of the 1996 Regulations which approval was granted by SEBI in favour of assessee on 17-10-2012. Accordingly the assessee is entitled to deduction of admissible business expenses incurred by it on or after 17-10-2012 when business could be said to have been set up by assessee. (AY. 2013-14)

    DCIT v. PPFAS Asset Management (P.) Ltd. (2019) 176 ITD 541 (Mum) (Trib.)

23. S.37(1) : Business expenditure – Construction business – Accounting Standard-2 – Justified in debiting all expenses to work – in – progress except expenses related to administration, selling, marketing, etc. [S.145]

    Tribunal held that the assessee was justified in debiting all expenses to work-in-progress except expenses related to administration of business. Since employee cost, administrative, selling and marketing expenses etc. were revenue expenses not related to construction activity, same would be allowable in year in which they were incurred. (AY. 2007-08)

    Macrotech Construction (P.) Ltd. v. ACIT (2019) 176 ITD 530 (Mum) (Trib.)

24. S. 40(a)(ia): Amounts not deductible – Deduction at source – Contractor – PAN of transporters at time of payment of freight was collected – Disallowance cannot be made. [S.194C(6), 194C(7)]

    Assessee made payments to transporters towards freight charges without deducting TDS on same on ground that transporters had furnished their respective PANs to assessee at time of payment of freights. Assessing Officer held that the assessee could not furnish PANs of transporter to prescribed Income tax authority as per requirement of section 194C(7) accordingly disallowed the payment applying the provision of S. 40(a)(ia) of the Act. Tribunal held that provisions of S. 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in limited context of non-deduction of TDS and same cannot be extended to ensure that even where assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because subsequent obligation in terms of filing of prescribed forms has not been complied with. Accordingly the deletion of addition by CIT(A) is affirmed. (AY. 2015-16)

    ACIT v. Arihant Trading Co. (2019) 176 ITD 397 (Jaipur) (Trib.)

25. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Hiring charges for use of cranes – Payment being not contractual – Not liable to deduct tax at source. [S.194C]

    Assessee firm was engaged in business of civil construction. Assessing Officer held that payment made to hiring charges for use of crane is liable to deduct tax at source u/s. 194C. However, assessee did not deduct tax at source the payment was disallowed. Tribunal held that simpliciter payment of hiring charges of cranes could not be brought within sweep of definition of term ‘work’ hence it was not obligatory on part of assessee to deduct tax at source. ( AY. 2013-14)

    Bhangal Construction Co. v. ITO (2019) 176 ITD 419 (Asr) ( Trib.)

26. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payments to transporters –Permanent Account Number and addresses of transporters before the Assessing Officer – Provision of S. 194C(6) is complied with – No disallowance can be made. [S.194C(6)]

    Tribunal held that the assessee had submitted the permanent account number and addresses of the transporters before the Assessing Officer and thus complied with the provisions of S. 194C(6) hence no disallowance can be made. (AY. 2012-13)

    Fine Blanking Pvt. Ltd. v. DCIT (2019) 70 ITR 400 (Bang) (Trib)

27. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Assignment of loan to third party by making a payment in terms of present value of future liability – Surplus resulting from assignment of loan was not cessation or extinguishment of liability as loan was to be repaid by third party – Cannot be assessed as cessation of trading liability. [S.28(iv)]

    Assessee borrowed loan of ₹ 12 crores from a company. Assessee assigned liability of repayment of loan to third party CPPL by making payment of ₹ 0.36 crores in terms of present value of future liability. Surplus of
    ₹ 11.64 crores resulting from assignment of loan liability in terms of present value of future liability was credited to profit & loss account under head income from other sources but while computing total income, said income was reduced from income on ground that such surplus represented capital receipt and, therefore, not taxable. AO held that assignment of loan represented income under S. 41(1) or under S. 28(iv) of the Act. Tribunal held that since loan amount was utilized by assessee for purchase of shares and same was not used in relation to trading activity of assessee in its line of business, said surplus could not be treated as revenue receipt. Tribunal also held that surplus resulting from assignment of loan was not cessation or extinguishment of liability as loan was to be repaid by third party and, therefore, could not be brought to tax. (AY. 2000-01)

    Cable Corporation of India Ltd. v. DCIT (2019) 177 ITD 223 (Mum) (Trib.)

28. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Provision can be invoked only if deduction of the very same sum is allowed in earlier years.

    The assessee, a partnership firm, was carrying on warehousing business and also engaged in the manufacturing of wooden articles for the use of textile industry. The income derived from these two activities were offered as business income. The assessee, a tenant of Bombay Port Trust (BPT), was liable to pay rentals in respect of premises taken on lease from BPT. BPT increased the rentals and which was subject matter of litigation. However, assessee in the past, has provided for the incremental rentals payable to BPT and claimed the same as deductions in the returns filed for the AY 1990-91, 91-92 & 92-93. The same was disallowed by the AO. Thereafter, the rentals were ultimately fixed by the Hon’ble Apex court. The Hon’ble Bombay High Court held that assessee is entitled to deduction only to the extent of rent ultimately fixed by the Hon’ble Apex Court. During AY 2012–13, the assessee wrote back the liabilities representing incremental rentals payable to BPT in the sum of ₹ 17,11,818/- and credited same to its profit & loss account. However while filing return of income Assessee reduced this sum of ₹ 17,11,818/- on the ground that for the earlier years, the incremental rentals were not allowed as deduction. The AO ignored the order passed by his predecessor pursuant to High Court order and added a sum of ₹ 17,11,818/- of section 41(1) of the Act on the ground that Tribunal had granted relief to the assessee & hence assessee cannot be given double benefit. The action of the AO was upheld by the CIT (A). Aggrieved by the same, assessee filed an appeal before the Tribunal. The Tribunal observed that provision of section 41 (1) of the Act could be invoked only if deduction of the very same sum has been allowed in earlier years for the assessee, which in the fact of the instant case, was not granted in the earlier order of Ld. AO. Hence, there is no double benefit claimed by the assessee and hence addition made u/s. 41(1) was deleted. (ITA No. 380/Mum/2017 & ITA No. 7556/Mum/2016, dt. 19.12.2018, (AY. 2012-13)

    Grand Wood Works and Saw Mills v. ITO (2019) 69 ITR 3 (SN) (Mum.)(Trib.)

29. S. 45: Capital loss – Long term capital gains – Long term capital loss – Set-off is allowed against taxable income. [S.2(14), 2(39A) 10 (38 ), 45, 70, 71, 72, 74]

    Tribunal held that the fact that “long-term capital gains” on listed shares are exempt from tax does not mean that “long-term capital loss” on such shares is not available for set-off against taxable income. While the gains are exempt, there is no bar against claiming set-off of the loss (CIT v. J. H. Gotla (1985) 156 ITR 323 (SC) distinguished, CBDT Circular No. 7/2013 dated 16.07.2013 referred, Raptakos Bret & Co. v. DCIT (2015) 69 SOT 383 (Mum) (Trib) followed) (ITA No.511/Kol/2017, dt. 01.07.2019) (AY. 2013-14)

    United Investment v. ACIT (Kol)(Trib), www.itatonline.org

30. S. 45 : Capital gains – Penny stocks – Long term capital gains from penny stocks cannot be treated as bogus if the documentation is in order and no fault is found by the AO- Addition is deleted. [S.38, 111A]

    Tribunal held that LTCG from penny stocks cannot be treated as bogus if the documentation is in order and no fault is found by the AO. Followed CIT v. Lavanya Land Pvt. Ltd. (2017) 83 taxmann.com 161 (Bom) (HC) Ratio in Sanjay Bimalchand Jain (ITA No 18 of 2017 dt 10-04 2017 distinguished. (ITA No. ITA No. 2351/Kol/2017, dt. 09.08.2019) (AY. 2014-15)

    Chandra Prakash Jhunjhunwala v. DCIT (Kol)(Trib), www.itatonline.org

31. S.45 : Capital gains – Firm – Retirement – Excess sum paid over and above sum standing to credit of capital account of partner is assessable as capital gains. [S.2(47) 54EC]

    Tribunal held that excess amount received by retiring partner over and above sum standing to credit of capital account is assessable as capital gains. However, the computation of the capital gain has been modified by treating value of goodwill also as part of the credit in the partners capital account. Consequently, the capital gain in question was less than ₹ 50 lakhs and since the assessee has been allowed exemption under section 54EC to the extent of ₹ 50 lakhs, no capital gain is exigible to tax in the present case. (AY. 2008-09)

    Savitri Kadur. v. DCIT (2019) 177 ITD 259 (Bang) (Trib.)

32. S.45: Capital gains – Sale of shares – Entry operator – Bogus long term capital gains – Produced sufficient material – Addition cannot be made as cash credits. [S. 10(38), 68]

    Tribunal held that though the Department had contended that it had searched various entry operators alleged to have engaged in giving bogus long-term capital gains none of the entry operators had ever quoted the assessee’s name. In the present the assessees had placed sufficient materials on record indicating that they had derived the long-term capital gains form sale of shares. Addition as cash credit is held to be not justified. (AY. 2014-15)

    Sangita Jhunjhunwala (Smt) v. ITO (2019) 70 ITR 247 (Kol) (Trib)

33. S. 45(2A) : Capital gains – Depository – Security – Demat – Multiple accounts – FIFO method – Should be applied to account wise and not person wise. [S. 2(42A)]

    The assessee contended that FIFO method should be applied person wise and not account wise. Tribunal held that it would lead to an anomaly for identification of shares. After the introduction of S. 45(2A) and Depositories Act,1996, those participating in the depositories mechanism will have to accept FIFO as a way of maintaining securities. (Circular No 768 dt 24th June, 1998 (1998) 232 ITR 5 (St)) ( ITA No. 2020/del/2017, dt. 14.06.2019) (AY. 2009-10, 2010-11)

    Radhika Roy v. DCIT (2019) 200 TTJ 665/73 ITR 239 (Delhi)(Trib), www.itatonline.org

    Dr. Prannoy Roy v. DCIT (2019) 200 TTJ 665/ 73 ITR 239 (Delhi)(Trib), www.itatonline.org

34. S. 50C : Capital gains – Full value of consideration – stamp valuation – Though the 3rd Proviso to S. 50C, which provides a safe harbour of 5%, applies w.e.f. 01.04.2019, it must be interpreted to apply since the insertion of s. 50C (01.04.2003) because it is curative and removes an incongruity and avoids undue hardship to assessees. [S. 43CA, 45]

    Tribunal held that though the 3rd Proviso to S. 50C, which provides a safe harbour of 5%, applies w.e.f. 01.04.2019, it must be interpreted to apply since the insertion of S. 50C (01.04.2003) because it is curative and removes an incongruity and avoids undue hardship to assesseess. (ITA No. ITA No. 2351/Kol/2017, dt. 09.08.2019)( AY. 2014-15)

    Chandra Prakash Jhunjhunwala v. DCIT (Kol)(Trib), www.itatonline.org

35. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Report of DVO – CIT(A) is bound to issue notice Valuation officer – Matter remanded [S.45]

    AO referred case to DVO for proper valuation. DVO determined valuation of property at
    ₹ 1.27 crores. AO on basis of DVO’s report passed assessment order. CIT(A) without giving notice to DVO up held the order of the AO. On appeal the Tribunal held that CIT(A) is under statutory obligation to serve notice of hearing to DVO. Accordingly the order of CIT(A) is set aside for adjudication on merits in accordance with the scheme of the law, after giving a due and reasonable opportunity of hearing to the assessee as also to the DVO, and by way of a speaking order. (AY. 2013-14)

    Lovy Ranka. v. DCIT (2019) 177 ITD 321 (Ahd) (Trib.)

36. S. 54 : Capital gains – Profit on sale of property used for residence – Right of allotment – Surrender of rights – Held more than three years – Compensation assessable as long term capital gains – Entitle to exemption in relation to investment in new flat. [S.2(47)(ii), 45, 47]

    Dismissing the appeal of the revenue the Tribunal held that compensation received by the assessee in respect of surrender of allotment letter which is held for more than three years is assessable as long term capital gains. As the assessee invested the amount in new flat is entitle to exemption. Followed CIT v. Ram Gopal ( 2015) 372 ITR 498 (Delhi) (HC) (AY. 2012-13)

    ACIT v. Ashwin S. Bhalekar ( 2019) 74 ITR 5 (Mum) (Trib)

37. S. 54 : Capital gains – Profit on sale of property used for residence – Failure to obtain possession of plot with in period of three years – Exemption cannot be denied. [S.45]

    Assessee sold a residential house and invested sale consideration for purchase of plot for purpose of construction of residential house thereon and claimed exemption under S.54 of the Act. AO disallowed the claim on the ground that the assessee had neither purchased a house nor constructed a house within period of three years. Tribunal held that since, inspite having made payment for plot within stipulated period, developer failed to give possession of plot and thus, assessee could not construct residential house within a period of three years from date of sale of property by assessee because of reasons beyond control of assessee, amount utilized by assessee for acquisition of plot was to be construed as amount invested in purchase/construction of residential house. Accordingly entitled for exemption. (AY. 2015-16)

    Varun Seth. v. ACIT (2019) 177 ITD 499 (Delhi) (Trib.)

38. S. 54 : Capital gains – Profit on sale of property used for residence – Booking of semi finished flat with builder – Carry out internal fit-outs to make it liveable on its own – treated as construction of property and not purchase of property – same was to be treated as case of construction of property and not purchase of property – Entitle to exemption. [S. 45]

    Assessee sold a residential property and invested sale consideration for booking a semi-finished residential flat with a builder and claimed exemption u/s 54 of the Act. AO disallowed the claim on grounds that the assessee had acquired new property beyond period of one year prior to date of transfer prescribed. CIT(A) allowed the claim. On appeal by the revenue the Tribunal held that booking a semi finished flat with builder who constructed unfinished bare shell of flat in which assessee had to carryout internal fit outs on its own to make it liveable, was to be considered as a case of construction of new flat and not purchase of a flat. Accordingly eligible for exemption. (AY. 2012-13)

    ACIT v. Seema Sobti. (2019) 177 ITD 370 (Delhi) (Trib.)

39. S. 54 : Capital gains – Profit on sale of property used for residence – Investment of consideration for booking a semi – finished flat with a builder – Treated as construction of property and not purchase of property – Entitle to exemption [S. 45]

    Assessee sold residential property and utilised sale consideration for booking a semi-finished flat with a builder by periodic payment of instalments and assessee had to carry out internal fit-outs to make said flat liveable on its own, same was to be treated as case of construction of property and not purchase of property. Entitle to exemption. (AY. 2012-13)

    ACIT v. Akshay Sobti. (2019) 177 ITD 92 (Delhi) (Trib.)

40. S. 54 : Capital gains – Profit on sale of property used for residence – Exemption cannot be denied on the ground that investment in new flat is out of loan funds if other conditions are fulfilled. [S. 45]

    Assessee sold a jointly held flat wherein her share of capital gain amounted to ₹ 55,82,426/-. Assessee made investment of ₹ 98,90,358/- in purchase of new flat and accordingly claimed exemption u/s. 54 of the Act. AO reduced exemption u/s. 54 to ₹ 48,90,358/- on the ground that investment in new house included housing loan of ₹ 50,00,000/- availed from CITI Bank. CIT (A) upheld the order of Ld. AO. Aggrieved by the same, Assessee filed an appeal before ITAT. The Tribunal observed that the housing loan was disbursed much after the purchase of new house it was evident from the loan sanction letter of CITI bank as well as bank statement. Thus housing loan was not utilized for the purchase of new house. The Tribunal further held that if the assessee purchases new house with in the stipulated time period mentioned in section 54 of the Act, assessee is entitled to claim deduction u/s. 54 of the Act irrespective of whether or not money invested in the purchase of new house property is out of sale consideration received from the transfer of original asset. The Tribunal allowed assessee’s appeal. (ITA No. 607/Mum/2018, order dt. 05.10.2018, AY 2011-12)

    Hansa Shah v. ITO (2019) 69 ITR 334 (Mum) (Trib.)

41. S. 54 : Capital gains – Profit on sale of property used for residence – Investment in purchase of new residential property up to date of filing of his revised return – Entitle to exemption. [S. 139(5)]

    The assessee would be entitled to claim exemption under S.54 to extent he had invested capital gain on sale of old residential flat towards purchase of new residential property up to date of filing of his revised return of income under section 139(5) of the Act. ( AY. 2013-14 )

    Rajendra Pal Verma. v. ACIT (2019) 176 ITD 211 (Mum) (Trib.)

42. S. 54 : Capital gains – Profit on sale of property used for residence – Deposit in Capital gain account scheme- Payment to developer within prescribed time- Possession was not obtained -Consumer Redressal Commission had put stay on developer- Exemption cannot be denied- Amount deposited in capital gain account also cannot be taxed though the amount was not utilised with in specified time limit. [S.45, 54(2) ]

    Assessee had invested sale consideration of ₹ 62.63 lakhs in residential flat and deposited ₹ 19 lakhs in Capital Gain Account Scheme. Assessing Officer disallowed deduction of ₹ 62.63 lakhs on premise that neither assessee had taken possession of new flat nor purchase deed was executed in favour of assessee within period of three years and also disallowed deduction of ₹ 19 lakhs deposited in capital gain account on ground that assessee had not utilised same within prescribed period. Tribunal held that the assessee had made payment for purchase of flat to developer within stipulated period, However, assessee could not obtain possession and got purchase deed executed within period of three years as there was a complaint filed against developer with National Consumer Dispute Redressal Commission which had put stay on developer. The assessee could not utilise amount in capital gain account scheme due to stay on developer. Since delay in obtaining possession and getting purchase deed executed and failure to utilise amount in capital gain scheme was on account of developer and was by reason beyond control of assessee, exemption under S. 54 could not be denied. (AY. 2012-13)

    Bal Kishan Atal. v. ACIT (2019) 176 ITD 330 (Delhi) (Trib.)

43. S. 54B : Capital gains – Land used for agricultural purposes – Land purchased in the name of assessee’s son – Exemption cannot be denied. [S.45]

    Tribunal held that exemption under S. 54B could not be denied for the reason that the eligible agriculture land had been purchased in the name of the assessee’s sons. The assessee sold the agricultural land and out of the sale proceeds, he purchased other piece of land in his name and in the name of his sons for agricultural purposes within the stipulated time. It was not the case of the Department that from the sale proceeds of the agricultural land earlier owned by the assessee, the land was purchased for any other purpose than the agricultural purpose. Hence, exemption under S. 54B of the Act was to be allowed even if the new agricultural land was purchased in the name of family members. (AY. 2011-12)

    Balu Vitthal Kharate v. ITO (2019) 70 ITR 315 (Pune) (Trib)

44. S. 54F : Capital gains – Investment in a residential house – Part ownership in property – Not considered absolute ownership – Assesse eligible on the date of transfer of original asset – Exemption is allowed. [S.45]

    Dismissing the appeal of the revenue the Tribunal held that the term owns more than one residential house used in S. 54F (1) has to be strictly construed and accorded to its literal meaning. Hence, it would not include partial or fractional ownership. Thus the assesse was eligible for deduction u/s 54F on the date of transfer of original asset. Followed ITO v. Shri Rasiklal N. Satra (2006) 98 ITD 335 (Mum) (Trib). ITA No. 3788/Mum/2016 (Mum) dt 31.01.2018 –‘F’ Bench

    DCIT v. Shri Dawood Abdulhussain Gandhi ( Mum) (Trib)

45. S. 54F : Capital gains – Investment in a residential house – Property was co-jointly owned in name of wife – Could not be treated as absolute owner – Exemption cannot be denied. [S.45]

    Assessee filed his return claiming deduction under S. 54F in respect of capital gain arising from transfer of capital assets. AO held that at time of transfer of capital asset, assessee was owner of two residential houses out of which one he had jointly purchased with his wife. Accordingly denied the exemption. on appeal the Tribunal held that word ‘own’ in S. 54F would include only case where a residential house is fully and wholly owned by assessee and, consequently, would not include a residential house owned by more than one person. Since a residential property was co-jointly owned in name of assessee and his wife, he could not be treated as absolute owner of said property and, thus, deduction under section 54F could not be denied. Followed Seth Banarsi Dass Gupta v. CIT (1987) 166 ITR 783 (SC) (AY. 2010-11)

    Ashok G. Chauhan. v. ACIT (2019) 176 ITD 717 (Mum) (Trib.)

46. S. 54F : Capital gains – Investment in a residential house – Full value of consideration – No requirement that sale proceeds alone is to be utilised for making deposit in capital gains scheme – Only one house property as on date of sale of plots – only net consideration is required to be appropriated towards purchase of new asset. [S. 45, 48, 50C]

    Tribunal held that the deeming fiction provided under section 50C in respect of the term “full value of consideration” was to be applied only to section 48. The meaning of “net consideration” in section 54F(1) was not governed by the meaning of “full value of consideration” as mentioned in section 50C. The Assessing Officer could not adopt the deemed consideration arrived at under section 50C while computing the deduction of the assessee for the purpose of section 54F and had to take into account only the “net consideration”. Investment is sufficient compliance for claiming exemption though the construction of house property is not completed is entitle to exemption. The investment made by the assessee may be sourced other than entirely from the capital gains. (AY. 2012-13)

    Sabita Devi Agarwal (Smt) v. ITO (2019) 69 ITR 231 (Kol)(Trib)

47. S. 55 : Capital gains – Capital receipt – Cost of improvement – Cost of acquisition – ‘Know-how under development’ does not created a right – If the know-how is not registered, no rights are conferred – Cost of acquisition of will be not ascertainable. As computation mechanism fails, capital gains will not be chargeable. [S. 35, 41(3), 45, 55(2)(a)]

    The assessee has transferred a know-how under development (i.e. the know-how was not complete and would require further work and development to become commercially exploitable) and claimed the consideration as exempt capital receipt. The Assessing Officer taxed the receipt as taxable u/s. 41(3) as sale of asset representing capital expenditure of scientific nature covered u/s 35. On appeal, the CIT (A) held that section 41(3) will not apply as the know-how was a self-generated asset and thus deduction u/s 35 could not have been claimed. However, the receipt from transfer of the know-how will be taxable as capital gains. Further, based on the provisions of section 55(2)(a), the CIT(A) held that the cost of acquisition will be Nil in case of ‘right to manufacture, produce or process any article or thing’. Aggrieved, the assessee and the Revenue were in appeal against the CIT(A) order. The Tribunal held that the know-how is only under development and does not generate a right. Further, as the know-how was not registered, right cannot be conferred upon the owner. Thus, the Tribunal held in case of know-how under development, cost of acquisition cannot be Nil in terms of section 55(2)(a). As the cost of acquisition is not ascertainable, capital gains would not be chargeable. (AY. 2006-07)

    Bharat Serums and Vaccines Ltd. v. ACIT (2019)73 ITR 205 (Mum.)(Trib.)

48. S. 56 : Income from other sources –HUF –Relative – Amounts received by a member from the ‘HUF’ cannot be said to be income of the member exigible to taxation – Revision is held to be not valid [S.56(2) (vii), 263].

    The Tribunal held that the stand of the Dept that in the case of an individual, a “HUF” is not a “relative” and that while a gift by the individual to the HUF is exempt, a gift from the HUF to its member is taxable u/s 56(2)(vii) is not correct. S. 56 (2) (vii) provides that the members of the ‘HUF’ are to be taken as “relatives”. The converse is not provided because on first principles, amounts received by a member from the ‘HUF’ cannot be said to be income of the member exigible to taxation. Terming by the PCIT of decisions of the Tribunal as “incorrect” tantamounts to judicial indiscipline and will lead to chaos. Order u/s 263 is quashed. ( ITA No. 773/C HD /2018, dt. 17.07.2019) (AY. 2011-12)

    Pankil Garg v. PCIT (Chand)(Trib), www.itatonline.org

49. S. 56 : Income from other sources – Valuation- start-up – Assessee has the option under Rule 11UA(2) to determine the FMV by either the ‘DCF Method’ or the ‘NAV Method’- The AO has no jurisdiction to tinker with the valuation and to substitute his own value or to reject the valuation. [S.56 (2) (viib)]

    The assessee has the option under Rule 11UA(2) to determine the FMV by either the ‘DCF Method’ or the ‘NAV Method’. The AO has no jurisdiction to tinker with the valuation and to substitute his own value or to reject the valuation. He also cannot question the commercial wisdom of the assessee and its investors. The ‘DCF Method’ is based on projections. The AO cannot fault the valuation on the basis that the real figures don’t support the projections. Also, the fact that independent investors have invested in the start-up proves that the FMV as determined by the assessee is proper. ( ITA. No. 8113/DEL/2018, dt. 27.05.2019) (AY. 2015-16)

    Cinestaan Entertainment P. Ltd. v. ITO (Delhi)(Trib), www.itatonline.org

50. S. 56 : Income from other sources – Excess share premium- second level subsidiary of a company in which public are substantially interested – Addition cannot be made. [S.2(18), 2(24), 56(2) (viib), R.11UA]

    During year, assessee-company issued shares at premium of ₹ 990 per share. AO added excess share premium collected to income of assessee by invoking provisions of S. 56(2)(viib) of the Act. Tribunal held that the assessee was second level subsidiary of a company in which public was substantially interested hence would not fall under S. 56(2)(viib) of the Act. Accordingly the addition made by AO was not justified. (AY. 2015-16)

    Apollo Sugar Clinics Ltd. v. DCIT (2019) 176 ITD 724 (Hyd) (Trib.)

51. S.56: Income from other Sources- Purchase of shares at ₹ 4 per shares when the market price was ₹ 140 per share – Failure to explain by credible evidence or any reason or no motive for tax evasion- Difference is held to be taxable as income. [S.56(2) (vii) (c)]

    The assessee’s purchase of shares of NDTV Ltd at ₹ 4 per share from RRPR Holdings Pvt. Ltd. when the market price of the share was ₹ 140 is a benefit taxable u/s 56 (2)( vii). The argument that as it is a transaction between closely related parties, there is no motive of tax evasion & s. 56 (2) does not apply is not acceptable. The assessee has failed to explain by credible evidence any reason of buying shares of the company at ₹ 4 per share when the quoted price was ₹ 140 & so the assessee cannot say that there was no motive of tax evasion. Even otherwise, s. 56 (2) deems
    such differences/receipts as income. (ITA No. 2020/del/2017, dt. 14.06.2019) (AY. 2009-10, 2010-11)

    Radhika Roy v. DCIT (Delhi)(Trib), www.itatonline.org

    Prannoy Roy v. DCIT (Delhi)(Trib), www.itatonline.org

52. S. 68 : Cash credits – Share capital premium – The test of human probabilities cannot be applied to business transactions – The AO cannot reach this conclusion without further investigation and bringing material on record.

    Tribunal held that, the AO cannot treat the share premium as unexplained cash credit only because the same is not commensurate with the income and financial strength of the assessee. The AO cannot reach this conclusion without further investigation and bringing material on record.

    (ITA No. 698 to 701/Bang/2018, dt. 02.08.2019)(AY. 2007-08 & 2008-09)

    Janani Infrastructure Pvt. Ltd. v. ACIT (Bang)(Trib), www.itatonline.org

53. S. 68 : Cash credits – Loans – Allegation that loans received from companies controlled by Praveen Kumar Jain as accommodation entries –Substantial supporting material to prove loan transactions were genuine were produced – Addition is held to be not valid.

    Dismissing the appeal of the revenue the Tribunal held that the assessee has produced substantial documentary evidence such as confirmations of lender companies, copies of financial statements of lender companies, and copies of bank statements evidencing advancing of loan by lender companies to assessee through normal banking channel, etc. Interest paid on said loans was subjected to deduction of tax at source as per mandate of law, notices issued by Assessing Officer under section 133(6) to principal officers of lender companies, were duly complied with and required details were also furnished by lender companies. Merely because information was received by the Assessing Officer from the office of the Dy. DIT (Inv.) that the search proceedings conducted under section 132 in the case of one Praveen Kumar Jain had revealed that he was engaged in providing accommodation entries through several companies managed and controlled by him cannot be the sole basis to treat the loan as non genuine. (AY. 2010-11)

    ITO v. Pratima Ashar (Smt.) (2019) 177 ITD 481 (Mum) (Trib.)

54. S.68: Cash credits – Presumptive taxation- Non-maintenance of books of account – Addition cannot be made as cash credits [S.44AA(2)(iv)]

    Tribunal held that the assessee had offered profit at eight per cent. and the AO has accepted claim of exemption from maintenance of books as provided under S. 44AA(2)(iv) of the Act. Addition confirmed by CIT(A) is deleted. (AY. 2009-10)

    Indrani Devi v. CIT (2019) 70 ITR 42 (Patna) (Trib)

55. S. 68: Cash credits – Share premium – Share premium collected over and above premium worked out in Valuation Certificate submitted to RBI, in view of fact that as per Notification No. FEMA/203/2010-RB, dated 7-4-2010 – There is no bar on collecting higher amount as share premium – Addition cannot be made – Amendment is applicable from the AY. 2013-14 – Even otherwise, the amendment will not apply to the investor which is a SEBI registered Venture Capital Fund.

    Assessee issued shares, to NSR, Mauritius, a SEBI registered Venture Capital Fund at a premium of ₹ 1030/- per share. In valuation certificate submitted to Reserve bank of India, price of share was worked out at ₹ 682/- per share, consisting of ₹ 10/- par value plus premium of ₹ 672/- per share. AO held that premium collected by assessee over and above premium worked out in Valuation Certificate was unjustified accordingly, assessed the same as cash credits. Tribunal held that in terms of Notification No. FEMA/203/2010-RB, dated 7-4-2010, share premium amount worked out in Valuation Certificate is minimum amount that can be collected by assessee and, hence, there is no bar on collecting higher amount as share premium. As there is no dispute about identity, creditworthiness of investor and genuineness of transactions the AO is not justified in making the addition. The Tribunal is also held that the amendment brought in section 68 of the Act with effect from 1-4-2013 has been held to be applicable from assessment year 2013-14 onwards. Even otherwise, the amendment will not apply to the assessee herein as the investor is a SEBI registered Venture Capital Fund. (AY. 2012-13)

    DCIT v. Varsity Education Management (P.) Ltd. (2019) 177 ITD 44 (Mum) (Trib.)

56. S. 68: Cash credits – Bogus capital gains from penny stocks – Mere allegation is not sufficient – No action from SBI – Capital gains cannot be assessed as cash credits.[S.45 ]

    The allegation that the Co is a penny stock co whose share price has been artificially rigged by promoters/brokers/operators to create non-genuine LTCG is not sufficient. The AO has failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that the documents were not authentic. No specific enquiry or investigation was conducted in the case of the assessee and/or his broker either by the INV Wing or by the AO during the course of assessment proceedings. The penny stock was also not subject to any action from SEBI (Udit Kalra v. ITO (2019) 176 DTR 249 (Delhi)(HC) distinguished, CIT v. Fair Invest Ltd ( 2013) 357 ITR 146 (Delhi)(HC) followed). (ITA No. 3212/DEL/2019, dt. 12.06.2019)(AY. 2015-16)

    Deepak Nagar v. DCIT (Delhi)(Trib),www.itatonline.org

57. S. 68 : Cash credits – Gain from off market trading in commodities – Statement of the broker that his company had not made any off market transactions with other clients – AO based on the statement assumed that transactions were not genuine – All details filed and even broker confirmed transactions – AO further denied set off against loss from F & O market – Addition deleted. [ S.115BBE ]

    The assessee company which is engaged in share trading activities in various stock exchanges including F&O, commodities share trading and currency trading had filed its return of income for A.Y. 2013-14 on 25.09.2013. During assessment proceedings, AO observed that the assessee made gain of ₹ 5,73,96,307/- in the business of trading in commodities. This gain was ‘set off’ against the loss of ₹ 5,56,42,339/- from F&O transactions, and a further loss of ₹ 1,82,496/- from currency transactions. It was observed by the A.O that the assessee had shown a net profit of ₹ 21,25,794/- from its various share trading activities etc. When asked, assessee submitted that only one commodity transaction was entered in MCX and all other transactions were off market transactions which were through M/s Kaynet Commodities Pvt. Ltd. Assessee produced before the AO ‘bills’ of the off market trading that was carried out during the year. AO in order to verify the genuineness of the claim of the assessee issued summons under Sec. 131 to the Director of M/s Kaynet Commodities Pvt. Ltd. and recorded his statement under oath. Shri Mukesh Shah, Director of M/s Kaynet Commodities Pvt. Ltd. in his statement admitted before the AO that his company had not made any off market transactions with other clients. AO held a conviction that the commodity gains of ₹ 5,73,96,307/- claimed by the assessee were in the nature of artificially engineered gains that were created to ‘set off’ against the ‘loss’ incurred in F&O transactions. The AO that all the purchase and sale transactions were merely carried out by the assessee on a plain piece of paper and no movement of actual funds and only a journal entry was passed on 28.12.2012 and 05.01.2013 amounting to ₹ 1,00,00,000/- and ₹ 1,42,00,000/-, respectively, in the ledger of M/s Kaynet Commodities Pvt. Ltd. AO thus characterised the amount of ₹ 5,73,96,307/- as an unexplained cash credit under Sec. 68 of the Act. The AO further held that addition made under Sec. 68 could not be taken as income under any specific head of income, therefore, ‘set off’ of the F&O loss against the said deemed income could not be allowed. On appeal the CIT(A) allowed the appeal. On further appeal by the Revenue, the ITAT observed that assessee had placed on record the complete details i.e. name and address of the counter party viz. M/s Sneha Metal Pvt. Ltd. with the A.O, but the AO had not deemed it fit to make any enquiry with the said party. The Tribunal held that in case the A.O had any serious doubts as regards the identity and creditworthiness in respect of the counter party which was identified in the course of the assessment proceedings, then it was open for him to have made further enquiries, which we find has not been done by him. The Tribunal held that the commodities transactions were carried out by the assessee throughout the year, thus the same clearly dislodges the observation of the A.O that the profit generated therefrom was prompted with an intent to ‘set off’ the same against the loss suffered by the assessee in the F&O transactions. The Tribunal further observed that though an amount of ₹ 2,42,00,000/- was adjusted through journal entries, however, the payment of ₹ 3,21,50,000/- was received through account payee cheques, which thus clearly established the movement of actual funds in respect of the aforesaid transactions. The Tribunal therefore held that profit of ₹ 5,73,96,307/- from commodities transactions cannot be held as an unexplained cash credit under Sec. 68. The Tribunal further held that Sec. 115BBE was brought on the statute by the Finance Act, 2012 with effect from 01.04.2013. On a perusal of the said statutory provision, as was then so available on the statute and was applicable to the case of the assessee for the year under consideration i.e A.Y. 2013-14, no restriction was placed as regards ‘set off of losses against the income referred to in Sec. 68, 69, 69A, 69B, 69C and 69D. Rather, the legislature in all its wisdom by amending Sec. 115BBE vide Finance Act, 2016 w.e.f 01.04.2017 had only w.e.f A.Y. 2017-18 placed a restriction on ‘set off of losses, in addition to raising of any claim of expenditure and allowance against such income. The fact that the aforesaid amendment of Sec. 115BBE by the Finance Act, 2016, w.e.f 01.04.2017 is prospective in nature was mentioned in CBDT Circular No. 3/2017, dated 20.01.2017. Thus even if the amount would have been taxable u/s 68, there was no embargo to claim ‘set off’ of losses in the year under consideration. (ITA No. 5650/Mum/2017, dt. 30 Nov, 2018, (AY. 2013-2014)

    ITO v. Prism Share Trading (P) Ltd. (2019) 174 DTR 257 / 197 TTJ 733 (Mum.)(Trib.)

58. S. 68: Cash credits – Books of account- Sale of shares – long term capital gains – Bank statement is not books of account- Addition cannot be made without giving an opportunity of cross examination – Addition is deleted. [S.2(12A) 44AA]

    Tribunal held that mere bank statement which is issued by bank to its client/account holder could not have been elevated to status of books maintained by assessee within meaning of section 2(12A) and section 44AA of the Act. The revenue cannot rely on the statements of third parties without giving an opportunity of cross examination is violative of principles of natural justice. (AY. 2015-16)

    Vinesh Maheswari v. ITO (2019) 176 ITD 576 (Delhi) (Trib.)

59. S.69: Income form undisclosed – Bogus purchases – The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases – The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. [S. 251]

    AO to believe that the said purchases were non-genuine and accordingly, the additions against these purchases were estimated @12.5% which resulted into an addition of ₹ 10,41,892/-. The Ld. first appellate authority, after considering assessee’s submissions and material on record came to a conclusion that the circumstances called for full additions as against 12.5% estimated by Ld. AO. Tribunal held that, The CIT(A) is not justified in enhancing the assessment to disallow 100% of the bogus purchases- The only addition which can be made is to account for profit element embedded in the purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. Followed, PCIT v. Mohommad Haji Adam (Bom HC) (ITA. No. 4650/Mum/2018, dt. 16.05.2019)(AY. 2009-10)

    V. R. Enterprises v. ITO (Mum)(Trib),www.itatonline.org

60. S. 69C : Unexplained expenditure – Bogus purchases – Accommodation entries – Additional grounds – Approval is not available in the file – On the basis of affidavit filed by the AO, the Tribunal is presumed that the approval was obtained before issue of notice – 100% addition is confirmed for alleged bogus purchases, considering the statements and material available on the record. [S. 153A, 153D]

    Tribunal held that there is serious suspicion about the conduct of the assessee in taking additional ground challenging the issue of approval u/s 153D for the first time before the Tribunal. The assessee is making an attempt is derail the issue on merits and to escape on technical ground. The affidavits filed by the AOs coupled with circumstantial evidences available in the assessment folders clearly establish the fact of obtaining necessary approval u/s 153D though copy of approval letter is not available in the assessment record. Accordingly the additional ground was rejected. Considering the statement of the Director and the assessee could not produce the delivery challans etc, the contention of the assessee that only profit can be assessed is not correct. 100% addition u/s 69C towards bogus purchases confirmed followed NK Proteins Ltd v. DCIT (2017) 292 CTR 354 (SC) followed).
    (ITA No. 3874/Mum/2015, dt. 10.04.2019) (AY. 2007-08/ 2011-12)

    Pratibha Pipes & Structurals Ltd. v. CIT (Mum)(Trib), www.itatonline.org

61. S. 80P : Co-operative societies – Benefit of S. 80P(2)(a)(i) cannot be denied to co-operative credit societies. [S.80P(2)(a)(i), 80P(4)]

    Tribunal held that benefit of section 80P(2)(a)(i) cannot denied to co-operative credit societies, in view of their functions of providing credit facilities to members, and same is not hit by provisions of section 80P(4). (AY. 2007-08 to 2009-10)

    ACIT v. People’s Co. op. Credit Society Ltd. (2019) 177 ITD 25 (SB)(Ahd) (Trib.)

62. S. 92 : Transfer pricing – Arm’s length price – Tonnage tax – Provisions of Chapter X (Transfer pricing) would have no application in computing income of assessee chargeable to tax as per Chapter XII-G (Tonnage tax scheme) [S. 115JB, 115VA]

    Tribunal held that and accordingly it is to be held that transfer pricing regulations do not apply to assessee to extent of operations carried out through operating qualifying ships where income is taxed under Tonnage Tax Scheme. (AY. 2007-08)

    Van Oord India (P.) Ltd. v. ACIT (2019) 177 ITD 687 (Mum) (Trib.)

63. S. 92C: Transfer pricing – Arm’s length price- cannot determine The ALP at nil on an ad-hoc basis – If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

    If the TPO is not satisfied with the assessee’s method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP. ( ITA no. 3668/Mum./2008, dt. 25.04.2019) (AY. 2003-04)

    ACIT v. Netafim Irrigation India Pvt. Ltd. (Mum)(Trib), www.itatonline.org

64. S.115BBE : Tax on income referred in S 68, 69, 69B 69C, S69D – Set off of loss – Survey -Surrender of income – Set off of losses was to be allowed – The amendment made to section 115BBE denying the benefit of set off of losses with effect from 1-4-2017 was retrospective in nature. [S. 68 to 69C, 71, 115BBE, 133A]

    The assessee surrendered the additional income during the survey. The income surrendered were partly in nature of business income and partly deemed income. The assessee had set off debit entries and business loss against the same. The Assessing Officer treated the entire additional income surrendered as deemed income as provided under sections 69, 69A, 69B and 69C separately and charged to tax under section 115BBE and denied the set off of losses. On appeal the Tribunal held that the amendment made to section 115BBE denying the benefit of set off of losses with effect from 1-4-2017 was retrospective in nature, it is prospective, hence the assessee is entitle to set off the losses against deemed income assessed under S. 69 69A and 69C of the Act. Followed, P CIT v. Khushi Ram & Sons Foods (P.) Ltd. in (ITA No. 126 of 2015, dt. 29-7-2016 (P& H) (HC)) (AY. 2013-14, 2014-15)

    Famina Knit Fabs. v. ACIT (2019) 176 ITD 246 (Chd.) (Trib.)

65. S. 115JB : Book profit – Amalgamation – Revaluation on basis of fair market value (FMV) – Revaluation was mandated by order of High Court approving amalgamation scheme – Difference arising between book value of shares shown in books of amalgamating company and FMV of shares which formed capital reserve of assessee, could not be added while computing book profit. [S.145]

    High Court sanctioned scheme of amalgamation of assessee company with its two wholly owned subsidiary companies. Assessee acquired shares of one, IHFL held by amalgamating companies. It revalued such shares at time of amalgamation as per existing market price. Difference arising between book value of shares shown in books of amalgamating companies and fair value of shares formed part of capital reserve of assessee-amalgamated company. Assessing Officer was of view that in terms of clause (v) to Explanation 1 of section 115JB, such amount in capital reserve on account of revaluation of shares had to be taken into account while computing book profit. Tribunal held that on amalgamation, assessee acquired shares held by amalgamating company and same were revalued on basis of fair market value (FMV), since such revaluation was mandated by order of High Court approving amalgamation scheme, difference arising between book value of shares shown in books of amalgamating company and FMV of shares which formed capital reserve of assessee, could not be added while computing book profit under section 115JB of the Act. (AY. 2015-16)

    Priapus Developers (P.) Ltd. v. ACIT (2019) 176 ITD 223 / 71 ITR 113 (Delhi) (Trib.)

66. S. 133A: Power of survey – Statement recorded u/s 133A of the Act does not hold any evidentiary value without any corroborative evidence – Deletion of addition is held to be justified.

    The assessee engaged in the business of manufacturing hides and its sales. A survey u/s 133A was conducted on the business premises of the assessee. During the course of survey, statement on oath of one of the Directors was recorded wherein he was forced to surrender ₹ 1 crore being the amount in different denominations on different dates as advance given for the purpose of purchase of land. The amounts were entered on different pages of a pad of spiral binding. Assessee thereafter retracted his statement as well as surrendered amount soon after survey. The assessee did not include the amount surrendered in its return of income. The Assessing Officer made addition of ₹ 1 crore on the basis of statement on oath of the assessee. CIT (A) affirmed the order of the Ld. AO. Aggrieved by the order of CIT (A), assessee filed an appeal before the ITAT. The Tribunal observed that in the survey a writing pad/diary was found wherein certain amounts were mentioned. However the addition of ₹ 1 crore was merely on the basis of the statement. The Assessing Officer and even ld. CIT (A) whose powers are co-terminus with that of the Assessing Officer did not conducted any specific enquiry neither at the time of survey or post-survey nor was any verification carried out so as to bring forth other independent materials on record to corroborate and justify alleged transactions found in the diary. The order of the Assessing Officer was also silent as to what immoveable property was purchased by using the amounts mentioned in diary. There is no mention to amount to whom the amount was paid. In nutshell, the addition is made merely on the basis of statement of the assessee recorded u/s 133A without any conclusive evidence. In view of the same, the Tribunal deleted the addition. (ITA No. 394/Lucknow/2018 & S.P. No. 18/Lucknow/2018, dt. 30.11.2018, A.Y. 2015-16)

    Habib Tannery P. Ltd. v. Dy. CIT (2019) 69 ITR 28 (SN.) (Luck.)(Trib.)

67. S. 143(2) : Assessment – Notice – If the notice was not served upon a person authorised to receive it, the notice cannot be said to be validly served and consequently the assessment is void. [S. 282(1)]

    The AO had served notice u/s. 143(2) on 27 August 2013 upon a certain person who was in part time employee of the assessee till 31 March 2011. Subsequently, the AO had again issued notice u/s 143(2) on the directors [beyond the time limit for the said notice]. The Tribunal noted that the assessee had submitted affidavit from the part time employee wherein the said person had refused to accept the notice (as he was no longer associated with the assessee) and he could not send the notice to the company due to the change in address. Further, the directors also filed affidavits reconfirming the facts. The Tribunal after analysing the provisions of section 282 of the Act and the provisions of the Civil Procedure Code, 1908 considered that the notice was not served upon a person who was authorised to receive it and thus lead to invalid service/ non-service of notice and the assessment order u/s 143(3) was to be quashed. (AY. 2012-13)

    Anidhi Impex Pvt. Ltd. v. ITO (2019)73 ITR 379 (Mum.) (Trib.)

68. S. 143(2) : Assessment – Notice –Authorised representative-Objection to service of notice was objected by the Assessee –Objection was later with drawn by the assesee’s representative by signing order sheet – Consent given by the representative is binding on the assesse – Challenge to the assessment on the basis that there was valid service is held to be not valid. [S. 288, 292BB]

    The Authorised representative contended before the Tribunal that the notice u/s. 143(2) was not served on the partners of the assessee firm as is the requirement under the law. He submitted that the service of notice on Shri Harish C. Pawar, Manager of the assessee did not tantamount to a valid service and hence the assessment be quashed. Departmental representative placed on record a copy of order sheet of the assessment proceedings The Tribunal noticed that entry dated 13-08-2012 of the assessment proceedings notes that Shri D.P. Lunawat, Advocate attended on behalf of the assessee. This order sheet entry further records that office copy of notice u/s. 143(2) was shown to Shri D.P. Lunawat, duly signed by the assessee firm and received by Shri Harish C. Pawar, Manager. It goes on to state that the ld. AR was asked if he still had any objection to the service of notice, to which Shri Harish C. Pawar stated that ‘he has no objection’. Accordingly the Tribunal held that if the assessee objects to the AO’s jurisdiction but his Authorised Representative later conveys no-objection, it means that the assessee has withdrawn his objection. Submission that the AR had no authority to convey no-objection and cannot bind the assessee is not acceptable. Once the assessee empowers his Authorised representative to appear before authorities, all of the Authorised representative concessions are binding on the assessee. Accordingly Challenge to the assessment on the basis that there was valid service is held to be not valid. (Himalayan Cooperative Group Housing Society v. Balwan Singh (2015) 7 SCC 373 distinguished).( ITA No. 1448/Pun/2014, dt. 28.11.2018)(AY. 2010-11)

    K. C. Cold Storage v. ACIT (Pune)(Trib),www.itatonline.org

69. S. 143(2) : Assessment – Notice – If a notice is issued but is returned unserved by the postal authorities and thereafter no effort is made to serve another notice before the deadline, it shall be deemed to be a case of “non-service” and the assessment order will have to be quashed. [Rule 127]

    Tribunal held that there is a difference between “issue” of notice and “service” of notice. Service of notice is a pre-condition for assuming jurisdiction to frame the assessment. Under Rule 127, service at the PAN address is valid even if it is different from the address in the Return. If a notice is issued but is returned unserved by the postal authorities and thereafter no effort is made to serve another notice before the deadline, it shall be deemed to be a case of “non-service” and the assessment order will have to be quashed. (AY. 2009-10). (ITA No. 1763/PUN/2013, dt. 01.07.2019) (AY. 2009-10)

    Anil Sisanlal Marda v. ITO (Pune )(Trib), www.itatonline.org

70. S.147 : Reassessment – After the expiry of four years – Client code modifications (CCM) –Recorded reasons being vague merely on the basis of information received from the office of DIT (Intell CR Inv.) reassessment is held to be bad in law. [ S.148 ]

    Allowing the appeal of the assessee the Tribunal held that as per the recorded reasons by the AO indicated that the assessee is treated as share broker and not mentioned how the figures are arrived. Accordingly the Tribunal held that as the recorded reasons being vague merely on the basis of information received from the office of DIT( Intell CR Inv.) reassessment is held to be bad in law. followed Chhigamal Rajpal v. S. P Chaliha (1971) 79 ITR 603 (SC), Sheo Nath Singh v. ACIT ( 1971) 82 ITR 147 (SC). (Refer Coronation Agro Industries Ltd v Dy. CIT (2017) 390 ITR 464 ( Bom) (HC) (AY.2009-10)

    Dy. CIT v. Sertu Securities Pvt. Ltd. ( Mum) (Trib) (UR)

71. S.147 : Reassessment – After the expiry of four years – Re-opening Reopening merely on the basis of information received from investigation wing without application of mind is not valid.[S.148 ]

    A search u/s 132 of the Act was conducted on the assessee’s group. The Ld. AO completed the assessment u/s 153C of the act. Subsequently, a search was conducted on third parties wherein statement of a third person was recorded wherein he admitted to have given bogus loans. The Ld. AO thereafter reopened the earlier assessment completed u/s 153C, by making the addition of loan received and adding it to the total income of the assessee. CIT (A) confirmed the order of Ld. AO. Aggrieved by the same, assessee filed an appeal before ITAT. The Tribunal observed that reopening was done on the basis of the evidences gathered during the search conducted on the third parties. The basic requirement of law for reopening an assessment is application of mind by the Assessing Officer, to the materials produced prior to reopening the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. The Tribunal held that in the instant case, Ld. AO simply acted upon the information received from the investigation wing and did not apply his own mind. Therefore, the reopening under section 147 only on the basis of information received from the Investigation Wing was quashed as not valid. (ITA No. 181/Asr/2017 dt. 15.01.2019 (AY. 2008-09)

    Holy Faith International Pvt. Ltd. v. Dy. CIT (2019) 69 ITR 687 (Asr.)(Trib.)

72. S. 147: Reassessment – After the expiry of four years – The assessment framed by AO who had not issued notice u/s 148 of the Act is void-ab-initio – Notice was issued by the AO who had no jurisdiction – Reassessment is held to be bad in law. [S.2 (7A), 148]

    The ITO-1 (5), Ludhiana reopened the assessment and issued notice dated 30.03.2017 u/s 148 of the Act on the basis of reasons so recorded. In response to such notice, assessee filed return of income declaring income of ₹ 49,320/-. Thereafter, the assessment was framed by ITO-1(5), Jalandhar assessing the income at ₹ 6,71,915/-. Aggrieved by the same, assessee filed an appeal before the CIT (A) and raised the objection to the jurisdiction of AO but the Ld. CIT (A) did not find the merit in the objection of the assessee by observing that this objection was not raised before the Ld. AO and upheld the order of Ld. AO. Being aggrieved the assessee carried the matter to the ITAT. The Tribunal observed that ITO-1 (5), Ludhiana issued the notice u/s 148 r.w.s. 147 and thereafter the jurisdiction was transferred to ITO-1(5), Jalandhar who never issued the notice u/s 148 of the Act but framed the assessment u/s 143 of the Act. The Tribunal also observed that the erstwhile AO while issuing the notice u/s 148 of the Act mentioned that assessee had deposited a cash of ₹ 1,39,28,640/- in the bank account which had escaped assessment. However to the contrary, in the assessment order, the subsequent AO mentioned that the cash deposited in the bank was ₹ 51,24,064/-. The Tribunal thus concluded that reasons recorded by earlier AO were not emerging from the record available with him. The Tribunal further relying on the decision of the ITAT Agra Bench in case of Jawahar Lal Agarwal v. ITO where the issue was similar held that the AO may assess or reassess any income escaping assessment, if he has reason to believe such escapement of income. The section starts with the words ‘If the Assessing Officer has reason to believe’. As per section 2(7A) of the Act, ‘Assessing Officer means an Officer, as named therein, who is vested with the relevant jurisdiction. Thus, it was only the Officer having jurisdiction of the matter who u/s 147 of the Act, could have formed any reason to believe escaping assessment and none other. In view of the above, Tribunal held that since the reasons were recorded by the AO who did not exercise the relevant jurisdiction, such reasons were non-est, being in-flagrant violation of the express provision of section 147 r.w.s 2(7A) of the Act. Thus the reassessment order was quashed. (ITA No. 274/Asr./2018 dt. 16.01.2019 (AY. 2010-11)

    Gaurav Joshi v. ITO(2019) 174 DTR 353 / 197 TTJ 946 (Asr.) (Trib.)

73. S. 148: Reassessment – Time Limit for issue of notice – Reopening notice invalid once the time limit to reopen has expired. [S.147, 149(1)(b), 150, 250]

    Assessee filed its return and assessment proceedings under section 147 were initiated by issuing notice under section 148. AO calculated capital gains from the property and assessment was completed accordingly.

    On appeal, CIT(A) vide order dated 3 May 2019 annulled the assessment order framed by AO but directed AO to execute remedial action on the legal heir of the assessee under section 148 of the Act.

    Tribunal held that in accordance with provisions of section 149(1)(b), notice under section 148 could have been issued by end of AY 2018-19. The said period had already elapsed when the order was passed. Therefore, the direction of CIT(A) to reopen the case was not in accordance with law. In the
    result, Tribunal ruled in favour of assessee. (AY. 2011-12)

    Anshuman Ghosh v. ITO (2019)73 ITR 685 (Luck.)(Trib.)

74. S. 148 : Reassessment – Notice – Where notice for reopening issued by AO prior to approval by CIT, the reassessment is bad in law [S.147]

    The AO had initiated reassessment proceedings based on a search / survey operation and made addition u/s. 68 in respect of share capital. On appeal, the CIT (A) deleted the addition. Aggrieved, the Department was in appeal before the Tribunal. The assessee had simultaneously filed cross objections against the validity of the reassessment proceedings as the notice u/s 148 was issued prior to approval of the concerned. The Tribunal noted that the approval of the CIT was obtained after issuing notice u/s 148 and accordingly the mandatory conditions of section 148 were violated. Thus, the Tribunal held the reassessment to be void ab initio and bad in law.(AY. 2007-08)

    DCIT v. Bhaijee Portfolio Pvt. Ltd. (2019) 73 ITR 403 (Delhi)(Trib.)

75. S. 148 : Reassessment – Notice- Order on appeal – If notice u/s 148 is beyond the time limit, the CIT(Appeals) cannot give direction u/s 150 to the AO to execute remedial action u/s 148
    [S. 147,.148 149(1) (b), 150]

    The assessee had not filed its return of income for Assessment Year 2008-09. Accordingly, reassessment proceedings u/s 147 were initiated. The AO’ had issued notice u/s 148 beyond the time limit of six years. The AO passed an assessment order disallowing the claim u/s 80P. On appeal, the CIT (Appeals) vide order dated 2 May 2019 annulled the assessment order. but gave direction u/s 150 to consider that the income has escaped assessment and take remedial action u/s 148 based on a Supreme Court decision. The Tribunal noted that in the present case, notice u/s 148 could have been issued only by the end of the Assessment Year 2015-16. The Tribunal held that the CIT(A) cannot confer jurisdiction upon the AO which it did not have. Thus, as the limitation period of six years had lapsed, notice u/s 148 could not be issued and thus reassessment proceedings u/s 147 cannot be initiated. (AY. 2008-09)

    Allahabad Bank Karamchari Co-Operative Credit Society Ltd. v. ITO(2019) 73 ITR 700 (Luck.)(Trib.)

76. S. 153 : Assessment – Reassessment – Limitation – Commissioner (Appeals) set aside order of Assessing Officer dt. 29-3-2000 vide his order dt. 27-11-2000 -Set aside assessment was completed on 31-3-2003 – Set aside assessment was to be completed before 31-3-2002 – Asessment was completed on 31-3-2003- Barred by limitation – Order passed by Commissioner (Appeals) after 1-4-2000-, new assessment is to be completed within one year from end of financial year in which order was passed by Commissioner (Appeals). [S.153(2A)]

    Commissioner (Appeals) set aside order of Assessing Officer dt. 29-3-2000 vide his order dt. 27-11-2000. Set aside assessment was completed on 31-3-2003. Set aside assessment was to be completed before 31-3-2002. Since set aside assessment was completed on 31-3-2003, same was clearly barred by limitation. Order passed by Commissioner (Appeals) after 1-4-2000, new assessment is to be completed within one year from end of financial year in which order was passed by Commissioner (Appeals). Circular No. 14 of 2001, dt. 27-11-2001. (AY.1997-98)

    Awanindra Singh. v. DCIT (2019) 176 ITD 355 (Delhi) (Trib.)

77. S. 153C : Assessment – Income of any other person – Search- Recording of satisfaction is mandatory even if the Assessing Officer of the person in respect of whom the search was conducted and the other person was one and the same.- Additions were deleted. [ S.132 ]

    Allowing the appeals, that the Central Board of Direct Taxes by Circular No. 24 of 2015 dated December 31,2015 had issued directions with regard to recording of satisfaction under S. 153C of the Act and clarified that even if the Assessing Officer of the person in respect of whom the search was conducted and the other person was one and the same, he was required to record his satisfaction. Therefore, the provisions of law had to be complied with for initiating the proceedings under S. 153C of the Act. The seized documents could be handed over by the AO of the person in respect of whom the search was conducted to the AO of the assessee or the other person only after recording the satisfaction under S.153C of the Act. Therefore, the AO could proceed under S. 153C of the Act from the date of recording of satisfaction on September 8, 2010 for the preceding six assessment years 2005-06 to 2010-11. The assessments made by the AO S. 153C for the assessment years 2003-04 and 2004-05 were beyond the jurisdiction. Accordingly the additions were deleted. (AY 2003-04 to
    2008 -09)

    Satkar Fincap Ltd. ACIT (2019) 70 ITR 294 (Delhi) (Trib)

78. S. 153C : Assessment – Income of any other person – Search- Profit and loss account and balance sheet – Not Incriminating documents – Addition is held to be not valid. [S.132]

    Tribunal held that only incriminating documents relating to the assessee was the balance-sheet and profit and loss account as on March 31, 2010 which would not relate to assessment years under appeal, i. e., assessment years 2006-07 to 2008-09. Thus, no incriminating material was found during the course of search so as to proceed against the assessee under section 153C. It was a general satisfaction recorded, and the Assessing Officer was not justified in proceeding against the assessee under S. 153C of the Act. (AY, 2006-07 to 2008-09)

    Wisdom Realtors P. Ltd. (2019) 70 ITR 181 (Delhi) (Trib)

79. S. 201 : Deduction at source – Failure to deduct or pay – Order passed after six years from expiry of financial year 2005-06 relevant to impugned assessment year – Held to be barred by limitation. [ S.195(2), 201(1), 201(IA) ]

    AO initiated proceedings under S. 201 by issuing a notice on 28-3-2013 for not deducting tax at source and passed an order under S. 201(1) treating assessee as an assessee in default for having not deducted tax at source under S. 195(1) on 27-3 2015. Tribunal held that order passed after six years from expiry of financial year 2005-06 relevant to impugned assessment year, were barred by limitation. (AY. 2006-07)

    Aditya Birla Nuvo Ltd. v. ITO (2019) 177 ITD 434 (Mum) (Trib.)

80. S. 206C : Collection at source – Scrap -Ship breaking – Declaration from buyer that he is purchasing goods for reuse in manufacturing process or producing article or things-Tax not required to be collected. [S.206C(7), 206(IA) ]

    Dismissing the appeal of the revenue the Tribunal held that the assessee had submitted declaration before Assessing Officer from the buyer stating that he is purchasing goods for reuse in manufacturing process or producing article or things hence tax not required to be collected. (AY. 2014-15)

    ACIT (OSD) v. Bansal Ship Breakers (P.) Ltd. (2019) 176 ITD 319 (Ahd) (Trib.)

81. S. 249 : Appeal – Commissioner (Appeals) – Payment of admitted tax- Subsequently required amount of tax is paid – Appeal shall be admitted on making payment of tax and taken up for hearing on merits. [S. 246A, 249(4), (a)]

    Tribunal held that in terms of section 249(4)(a), stipulation as to payment of tax ante filing of first appeal is only directory and not mandatory. Where appeal is filed without payment of tax but subsequently required amount of tax is paid, appeal shall be admitted on making payment of tax and taken up for hearing on merits. (AY. 2006-07)

    Annapoorneshwari Investment. v. DCIT 177 ITD 717 (Bang) (Trib.)

82. S. 251 : Appeal – Commissioner (Appeals) – Powers – Deduction at source- TDS return – There is no power conferred on authority to declare a TDS return as non-est exposing assessee to consequences thereof. [S.200(3), 234E]

    The assessee filed statement of tax deducted at source on 9-3-2017. There was a delay in filing the TDS statement. The Assessing Officer by intimation under section 154, read with section 200A, levied late fee of ₹ 6,900 under section 234E. The Commissioner (Appeals) cancelled the order of the Assessing Officer holding that there would be no computation of fee for delayed filing of TDS return while processing TDS return under section 234E could be made for the assessment years prior to 1-6-2015. However, the Commissioner (Appeals), in exercise of his power of enhancement, held that TDS statement filed without payment of fee under section 234E beyond the time prescribed under section 200(3) was non-est in law. Tribunal held that,there is no power conferred on authority to declare a TDS return as non-est exposing assessee to consequences thereof. Accordingly the order of the CIT(A) is quashed. ( AY. 2013-14, 2014-15)

    Manoj Kumar Jaiswal. v. ACIT (2019) 176 ITD 301 (Bang) (Trib.)

83. S. 254(1) : Appellate Tribunal – Duties – Cross objection – Delay of 1965 days condoned Order passed without following the mandate laid down u/s 144C of the Act is quashed – Penalty levied was also quashed. [ S.92CA, 144C]

    Tribunal held that none should be deprived of an adjudication on merits unless it is found that the litigant deliberately delayed the filing of appeal. Delay due to improper legal advice should be condoned. A technical view of dismissing the appeal on the ground of delay should not be taken if the legal issue has to be decided for other years. Followed Vijay Vishin Meghani v. DCIT ( 2017) 398 ITR 250 (Bom) (HC). A draft assessment order u/s 144C issued with a notice of demand u/s 156 and a s/ 271(1)(c) penalty notice is null and void (Eaton Fluid Power Ltd v. DCIT ( 2018) 96 taxmann.com 512 (Pune) (Trib) followed, BS Ltd v. ACIT (2018) 94 taxmann.com 346 (Hyd) (TRIB) distinguished) (ITA No. 649/PUN/2013 & 1726/PUN/2014, dt. 29.08.2019)(AY. 2008-09 & 2009-10)

    Atlas Copco (India) Limited v. DCIT (Pune)(Triib), www.itatonline.org

84. S. 254(1) : Appellate Tribunal- Delay of 420 days in filing appeal due to subsequent decision of the Supreme Court is a valid ground for condonation of delay -An order can be said to suffer from a “mistake apparent from the record” if it contrary to a subsequent judgement of the Supreme Court. Courts do not make any new law; they only clarify the legal position which was earlier not correctly understood. Such legal position clarified by Courts has retrospective effect as the law was always the same [S. 80HHC, 154]

    Tribunal held that delay of 420 days in filing appeal due to subsequent decision of the Supreme Court is a valid ground for condonation of delay. Tribunal also held that an order can be said to suffer from a “mistake apparent from the record” if it contrary to a subsequent judgement of the Supreme Court. Courts do not make any new law; they only clarify the legal position which was earlier not correctly understood. Such legal position clarified by Courts has retrospective effect as the law was always the same. (ITA NO. 4192/MUM/2012, dt. 20.08.2019)(AY. 2003-04)

    Anandkumar Jain v. ITO (Mum)(Trib),www.itatonline.org

85. S. 254(2): Appellate Tribunal-Rectification of mistake apparent from the record – Tribunal can recall order and change its mind in even if draft copy is signed and order is dictated in open Court- Rectification application is held to be not maintainable [ S.254(1) R. 46A ]

    The assessee filed the miscellaneous application and contended that in course of appellate proceedings, Tribunal categorically accepted its plea that order of Commissioner (Appeals) was to be set aside and, matter was to be remanded back for disposal afresh after admitting additional evidence brought on record. However, when order of Tribunal was received, it was found that appeal of assessee had been dismissed on main ground of addition instead of setting aside case back to file of Commissioner (Appeals). Dismissing the petition the Tribunal held that a Court can recall order and change its mind in extreme case even if draft copy is signed and order is dictated in open Court. Tribunal also held that while passing the order, Tribunal had taken into account relevant material available on record and had discussed applicability of rule 46A. Accordingly rectification application was dismissed. (AY. 2009-10)

    Kamaljit Singh v. ITO (2019) 177 ITD 246 (Asr) (Trib.)

86. S. 254(2) : Appellate Tribunal-Rectification of mistake apparent from the record – Judges can change or alter their decision at any time until the judgement is signed & sealed- A miscellaneous application on the ground that the ITAT Members stated a particular decision during the hearing but did the opposite in the order is not maintainable.

    The Tribunal held that the fact that the judges indicate a decision during the hearing or even dictate a judgement in open court gives no right to the litigant. Judges can change or alter their decision at any time until the judgement is signed & sealed. A miscellaneous application on the ground that the ITAT Members stated a particular decision during the hearing but did the opposite in the order is not maintainable. Followed Surendra Singh & Ors. v. State of U.P., AIR 1954 SC 194. The Apex Court in Master Construction Co. (P.) Ltd. v. State of Orissa (1966) 17 STC 360, CIT v. Karam Chand Thapar & Br. P. Ltd. (1989), 176 ITR 535(SC) Kamaljit Singh Prop. v. ITO, Ras Bihari Bansal v. CIT (2007) 293 ITR 365 (Delhi) (HC).( ITA No. 675(Asr)/2013, dt. 23.04.2019)(AY. 2009-10)

    Kamljit Singh Prop. Dhanoa Brothers v. ITO (Amritsar)(Trib), www.itatonline.org

87. S. 254(2) : Appellate Tribunal-Rectification of mistake apparent from the record – Appeal admitted before High Court – Rectification application is not maintainable.

    Dismissing the rectification application of the assessee the Tribunal held that If an appeal against the order of the ITAT has been filed in the High Court and the same has been admitted by the High Court, a Miscellaneous Application u/s 254(2) seeking rectification and recall of the order is not maintainable. The Miscellaneous application is maintainable only if the appeal is pending and has not been admitted (RW Promotions v. ITAT (2015) 376 ITR 126 (Bom) (HC) distinguished) CIT v. Muni Seva Ashram (2013) 38 taxmann.com 110 (Guj) (HC) followed M.A. No. 97/PUN/2018 in ITA No. 204/PUN/2012 dt. 15-03 2019) (AY. 2008-09)

    Ratanlal C. Bafan v. JCIT (Pune) (Trib)

88. S. 255 : Appellate Tribunal – Third member – Powers- Third member has to pass an order agreeing with the one of the views. [S. 254(1), 255 (4)]

    The third member does not have the wide discretion to exercise power as is available to Members deciding the original appeal. Third member necessarily has to pass an order agreeing with one views available in accordance with the provisions of S. 255(4) of the Act. (AY. 2006-07 to 2008-09)

    Harvinder Singh v. ITO ( 2019) 200 TTJ 137 /179 DTR 225 (TM) (Amritsar) (Trib)

89. S. 271AAB : Peanlty – Search initiated on or after Ist day of July 2012-Undisclosed income – Additional amount declared – Penalty levied at 60 % on the amount surrendered is not valid penalty can be levied only at 10 % of surrendered income – Additions made in respect of debatable issue levy of penalty is not justified. [S.132(4), 271AAB(1)(a), 271AAB( c), 274 ]

    Assessee disclosed additional income in the course of search proceedings in respect of coverup any disallowances/ additions / stock etc. The amount disclosed was included in the return of income for the purpose of taxation. The AO has also made other additions. The AO levied the penalty in respect of amount surrendered and also in respect of other additions applying the provisions of S.271AAB(1) (c) at the rate of 60% of the undisclosed income. Penalty was confirmed by CIT(A). Allowing the appeal of the assessee the Tribunal held that in respect of other additions such as disallowances u/s 14A and 36(1) (v) being debatable issue the levy of penalty is not justified. As regards the surrender of income in respect of stock which was not disclosed by the assessee which was surrendered in the course of search proceedings and has substantiated the manner of earning of income hence penalty is leviable @ 10% of the amount sundered u/s 271AAB(1)(a) of the Act and not @ 60% under S. 271AAB(1) (c) of the Act. (ITA No 695/ CHD/ 2018 dt 18-04 2019 ( AY. 2014-15)

    SEL Textiles Ltd v. DCIT (Chd) (Trib) (UR)

90. S. 271AAB : Peanlty -Search initiated on or after Ist day of July 2012- Undisclosed income – Surrender of long term capital gain – income – Would not ipso facto be regarded as undisclosed income unless and until it is tested as per definition provided in Explanation to section 271AAB of the Act – Order of penalty is quashed. [S. 45, 132(4), 153A, 275]

    In course of search proceedings, statement of assessee was recorded under S. 132(4) wherein he surrendered long-term capital gain arising from sale of shares. AO levied the penalty in respect of surrender of income. Tribunal held that all transactions of purchase and sale and LTCG arising from sale of equity shares of listed companies were duly recorded in books of account, primary condition for treating such income as undisclosed income in terms of S. 271 AAB was not satisfied, accordingly the penalty was quashed. (AY. 2016-2017)

    Aparna Agrawal (Smt.) v. DCIT (2019) 176 ITD 753 (Jaipur) (Trib.)

91. S. 271(1)(c) : Penalty – Concealment – Notice u/s 274 issued without striking off the irrelevant words show non-application of mind by the AO. [S.274]

    The Assessing Officer had issued notice u/s 274 to levy penalty 271(1)(c) for concealment of income or furnishing inaccurate particulars to levy penalty for disallowance of interest and certain other business expenses, without striking off any of the aforesaid limbs. The Tribunal following the decisions in Dilip N. Shroff v. JCIT (2007) 291 ITR 519 (SC) and the dismissal of the Special Leave Petition in SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (SC)/ 366 ITR 13 (SC) (St) held that as the AO did not strike off the irrelevant words, the penalty proceedings were without application of mind and thus unsustainable. (AY. 2010-11)

    BSM Developers Pvt.Ltd v. ITO(2019)179 DTR 193 / 73 ITR 69 / 200 TTJ 388 (Delhi) (Trib)

92. S. 271(1)(c) : Penalty – Concealment – Recording the satisfaction as regards concealment of particulars of income – Imposition of penalty for furnishing inaccurate particulars of income – Levy of penalty is held to be not valid [S.274]

    Third member held that when the AO has recorded the satisfaction as regards concealment of particulars of income while initiating the penalty proceedings and imposed penalty for furnishing inaccurate particulars of income, the levy of penalty is not sustainable. (AY. 2006 -07, 2008 -09)

    Harvinder Singh v. ITO ( 2019) 200 TTJ 137 /179 DTR 225 ( TM ) ( Amritsar ) (Trib)

93. S. 271(1)(c) : Penalty – Concealment – Notice not specifying the charge whether concealing particulars of income or furnishing inaccurate particulars of income – Failing to strike inapplicable words – Levy of penalty is held to be not valid. [S.274]

    Tribunal held that the show cause notices issued did not specify the charge against assessee as to whether it was for concealing particulars of income or furnishing inaccurate particulars of income and the AO did not struck out the inapplicable words. Accordingly imposition of penalty is held to be not valid. ( AY. 2008 -09)

    Rajesh Enterprises v. ITO ( 2019) 74 ITR 12 (SN) (Bang) (Trib)

94. S. 271(1)(c) : Penalty – Concealment – Failure to show the interest income due to inadvertent mistake of accountant – Levy of penalty is not justified.

    Tribunal held that Failure to show the interest income due to inadvertent mistake of accountant. Levy of penalty is not justified. (AY. 2012-13)

    V. K. C. Jayamohan v. ACIT (2019) 70 ITR 328 (Chennai) ( Trib)

95. S. 271C : Penalty – Failure to deduct at source – It is necessary to establish that there was contumacious conduct on the part of the assessee- Penalty levied was deleted. [S.273B]

    The Assessee is a university engaged in the field of education and runs various educational and professional courses. Assessee entered in to an MOU with M/s AD education & research. During the year assessee paid certain amounts to M/s AD education & research for the services provided for the procurement of students. Ld. AO treated such payment as commission on which TDS was liable to be deducted u/s 194H of the Act. He noted that there was failure on the part of assessee for non-deducting TDS on commission paid. Ld. AO further levied penalty u/s 271C. CIT (A) sustained the penalty. Aggrieved by the same, assessee filed an appeal before ITAT challenging the levy of penalty u/s 271C. The Tribunal observed that assessee had agreed to share fees as high as 50% of association fees and 20% of course fees with the service provider, and held that the said payment seems to be more in the nature of revenue sharing rather than payment of commission for services rendered by the service provider. Therefore, it cannot be held conclusively that such payments would surely fall in the definition of commission so defined in section 194H of the Act. Further it was a debatable issue and thus levy of penalty for non-deduction of TDS cannot be justified. The explanation of the assessee that it was under a bona fide belief that such payments doesn’t call for TDS cannot be disputed. The Tribunal further noted that subsequent to TDS verification by the Department when such matter was pointed out to the assessee, the latter has complied with the same by depositing appropriate TDS along with interest. The Tribunal held that for levy of penalty u/s 271-C what is necessary is to establish that there was contumacious conduct on the part of the assessee which is not present in the case of the assessee. In light of above discussions and keeping in view the provisions of section 273B of the Act, the penalty so levied u/s 271C was deleted. (ITA no. 870/JP/2018 dt. 06.02.2019 (AY. 2012-13)

    Jaipur National University v. Jt. CIT (2019) 175 DTR 337 (Japur.) (Trib.)

96. S. 271B : Penalty- Failure to get accounts audited – Audit report is made available before completion of assessment – No loss to revenue – Levy of penalty is held to be not valid. [S. 44AB )

    Tribunal held that the assessee got its books of accounts audited on March 28, 2014 and they were made available to the Assessing Officer and no prejudice had been caused to the Revenue. The assessee had only committed a technical or venial breach which did not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. Levy of penalty is held to be not justified. (AY. 2013-14)

    Johns Biwheelers v. ACIT (2019) 70 ITR 325 (Cochin) (Trib)

1. S. 4 : Charge of income-tax –Deposit – Subscription receipt – The primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account. [S. 145]

   Assessee treated subscription receipts as income. However the receipts in question were capital receipts and not income. Tribunal decided the issue in favour of the assessee. High Court reversed the order of the Tribunal. On appeal the Court held that the primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account. Order of High Court is set aside and order of the Tribunal is affirmed. ( CA No. 1265 of 2007, dt. 09.07.2019).

   Peerless General Finance and investment Co. Ltd. v. CIT ( 2019) 416 ITR 1/ 107 taxmann.com 228 / 309 CTR 321/180 DTR 97(SC),
   www.itatonline.org

   Editorial : From the judgement in CIT v. Peerless General Finance and investment Co. Ltd (2006) 282 ITR 209/204 CTR 198 (Cal) (HC)

2. S. 35AC : Expenditure on eligible projects – Schemes – Promissory estoppel is not available to an assessee against the exercise of legislative power nor any vested right accrues to an assessee in the matter of grant of any tax concession to him- In a taxing statute, a plea based on equity or/and hardship is not legally sustainable – Withdrawal of exemption is valid. S. 35AC(7) is prospective in nature – Provision is valid in law. [ S. 35AC(7) ]

   The appellant is a Charitable Trust registered under the provisions of the Bombay Public Trust Act, 1950. On 27.09.2014, the appellant filed an application under S.3 5AC of the Act to the National Committee for Promotion of Social and Economic Welfare, Department of Revenue, North Block, New Delhi for grant of approval to their hospital project as specified in S. 35AC of the Act so as to enable any “assessee” to incur expenditure by way of making payment of any amount to the appellant for construction of their approved hospital project and accordingly claim appropriate deduction of such payment from his total income during the previous year. Like the appellant, several persons, as specified in Section 35AC of the Act, also made applications to the Committee for grant of approval to their hospital projects. A notification was issued by the Government of India on 07.12.2015 mentioning therein that the Committee has approved 28 projects as “eligible projects” under Section 35AC of the Act. The name of the appellant appears at serial No. 10 in the notification dated 07.12.2015. The appellant, received amount by way of donation from several assesses. However due to insertion of S. 35AC(7) from the assessment year 2018¬-19 by the Finance Act, 2016 with effect from 01.04.2017 the benefit of the exemption was withdrawn. The appellant challenged the validity of the provision S. 35AC(7) with effect from 1-4 2017.. High Court dismissed the petition holding that the provision is valid in law. On appeal to supreme Court the Court held that a plea of promissory estoppel is not available to an assessee against the exercise of legislative power nor any vested right accrues to an assessee in the matter of grant of any tax concession to him. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. Accordingly the withdrawal of exemption is valid and dismissed the petition. (CAC No. 5849 of 2019, dt. 25.07.2019)

   Prashanti Medical Service & Research Foundation v. UIO (2019) 108 CTR 209, (SC),
   www.itatonline.org

3. S. 43(5) : Speculative transaction – Non-banking financial company – Trading in shares and securities – Loss incurred as a result of trading in shares – cannot be set off against the business of futures and options as it did not constitute profits and gains of a speculative business. [S.73]

   The assessing officer held that in view of the provisions of Section 43(5)(d), activities pertaining to futures and options could not be treated as speculative transactions. The loss from speculation was held not to be capable of being set off against the profits from business. Tribunal also affirmed the view of the AO. High Court also affirmed the view of the Tribunal. On appeal the Apex Court held that, the amendment to the Explanation to s. 73 by the Finance (No 2) Act 2014 with effect from
   1st April, 2015 is not clarificatory or retrospective. Consequently, loss occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) is not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business. (AY. 2008-09)) (CA Nos. 4483 of 2019, dt. 30.04.2019)

   Snowtex Investment Ltd v. PCIT (2019) 414 ITR 227 / 265 Taxman 3/ 308 CTR 665 / 178 DTR 989 /105 taxmnn.com 282 (SC),
   www.itatonline.org

4. S. 80IB(10): Housing project – Stay of judgement in CIT v. Global Reality(2015) 379 ITR 107 (MP) where it was held that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut – off date, does not satisfy the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder hence not entitle to exemption. [S. 80IB(10)(a)]

   Apex Court stayed the judgement in CIT v. Global Reality (2015) 379 ITR 107 (MP) (HC) where it was held that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not satisfy the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder hence not entitle to exemption. ( SLP Nos. 35004-05/2015, dt. 08.07.2019)( AY. 2004-05 to 2006-07)

   Global Estate v. CIT (SC), www.itatonline.org

5. S. 92CA: Reference to transfer pricing officer – CBDT’s Instruction No. 3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO – The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good – The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO. [S. 92C, 119]

   Court held that CBDT’s Instruction No. 3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO. The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good. The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO. (CA NO. 6144 of 2019, dt. 13.08.2019)

   PCIT v. S. G. Asia Holding (I) Pvt. Ltd. (2019) 108 taxmann.com 213 (SC),
   www.itatonline.org

6. S. 143(2) : Assessment – Notice –Failure to issue a notice u/s 143(2) renders the assessment order void even if the assessee has participated in the proceedings [S. 292BB]

   The failure to issue a notice u/s 143(2) renders the assessment order void even if the assessee has participated in the proceedings. S. 292BB does not save complete absence of notice. For S. 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. ( ACIT v. Hotel Blue Moon ( 2010) 321 ITR 362 (SC) is referred) ( CA Nos. 6261-6262 of 2019, dt. 13.08.2019) (AY. 2010-11)

   CIT v. Laxman Das Khandelwal( 2019) 108 taxman.com 183 (SC),
   www.itatonline.org 

   Editorial: CIT v. Laxman Das Khandelwal ( 2019) 108 taxmann.com 182 (MP )(HC ) is affirmed.

7. S. 143(3): Assessment – Jurisdiction – Amalgamation of companies – Notice issued in the name of amalgamating entity after amalgamation is void – The amalgamating entity ceases to exist – Participation in the proceedings by the assessee cannot operate as an estoppel against law. [S. 144C(1), 170(2), 292BB ]

   Dismissing the appeal of the revenue the Court held that a notice issued in the name of the amalgamating entity after amalgamation is void because the amalgamating entity ceases to exist. Participation in the proceedings by the assessee cannot operate as an estoppel against law. This is a substantive illegality and not a procedural violation of the nature adverted to in s. 292BB. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. (CA No 5409 of 2019, dt. 25.07.2019) (AY. 2011-12)

   PCIT v. Maruti Suzuki India Ltd. (2019) 309 CTR 453/ 180 CTR 185 / 107 taxmann.com 375 (SC),
   www.itatonline.org

   Editorial : Order in PCIT v. Maruti Suzuki India Ltd. (Successor of Suzuki Powertrain India Ltd.) (2017) 397 ITR 681 (Delhi) (HC) is affirmed.

8. S. 254(1) : Appellate Tribunal – Capital or revenue – Tribunal Recording Inconsistent findings – Matter remanded to Tribunal for decision afresh. [S.37(1), 260A ]

   Allowing the appeal of the revenue the Court held that the Appellate Tribunal has recorded inconsistent findings which was affirmed by High Court. Accordingly the matter remanded to Tribunal for decision afresh (AY. 1993-94)

   PCIT v. Ballarpur Industries Ltd. (2019) 413 ITR 447 (SC)

9. S.260A : High Court – Question of law – Reassessment – Book profit – Provisions – High Court was not justified in dismissing appeal on ground that appeal did not Involve any substantial question of law and case was remanded to High Court for deciding revenue’s appeal afresh on merits in accordance with law after framing substantial question of law in accordance with law.
   [S. 115JB 147 , 148 ]

   AO issued notice under S. 148 to assessee on ground that assessee made various provisions, namely, for gratuity, doubtful debts, warranty, and obsolescence which were in nature of unascertained liabilities and were not added to book profit resulting in under assessment of income and disallowed 20 per cent of said provision and made addition to closing stock. Tribunal held that the notice was issued on account of change of opinion hence bad in law. High Court dismissed revenue’s appeal against Tribunal’s order in limine holding that it did not involve any substantial question of law. Supreme Court held that High Court was not justified in dismissing appeal on ground that appeal did not Involve any substantial question of law and case was remanded to High Court for deciding revenue’s appeal afresh on merits in accordance with law after framing substantial question of law in accordance with law. (AY. 1999-2000)

   PCIT v. Nokia India (P.) Ltd. (2019) 263 Taxman 460 (SC)

   Editorial: Order in (ITA No.854 of 2016 dt 21-4 2017) PCIT v. Nokia India (P.) Ltd (2019) 104 taxmann.com 467/ 263 Taxman 463 ( Delhi ) (HC) is set aside.

10. S. 260A : Appeal – High Court – Without admitting the appeal and framing any question of law and dismissing it is not in conformity with the mandatory procedure – High Court is directed to hear the appeal following the mandatory procedure. [S.260A(2) (C), 260A(3)]

    Allowing the appeal of the assessee the court held that, High Court was not justified in dismissing the appeal without admitting the appeal and framing any question of law and dismissing it is not in conformity with the mandatory procedure. High Court is directed to hear the appeal following the mandatory procedure. (AY. 2005-06, 2006-07)

    Ryatar Sahakari Sakkarre Karkhane Niyamit v. ACIT (2019) 308 CTR 507 / 264 Taxman 77 (SC)

    Editorial: From the judgement, Ryatar Sahakari Sakkarre Karkhane Niyamit v. ACIT (2016) 383 ITR 562 /287 CTR 649/ 137 DTR 383 ( Karn) (HC)

11. S. 261 : Appeal – Supreme Court – Monetary limits – Tax effect of Less than of ₹ 1 crore – Appeal is allowed to with drawn, leaving all the questions of law open.
    [S. 80HHC]

    Tax effect is less than ₹ 1 crore. Appeal is allowed to with draw, leaving all the questions of law open. Circular No 3 of 2018 dt 11-08-2018, (2018) 405 ITR 29 (St) / amended circular dt 20 -08 208 (2008) 407 ITR 7 (St) From CIT v Mereena Creations ( 2011) 330 ITR 199 (Delhi) (HC) (AY. 2001-02)

    CIT v. Mereena Creations. (2019) 414 ITR 332 (SC)

12. S. 293 : Bar of suits in civil courts – Review general principles – If the civil suit was not maintainable in view of S. 293 of the Act and this was the purported defence of the respondents and of the Department and consequential effect of the order dated September 8, 1965, no party could be left remediless and the grievance raised before the court of law, had to be examined on its own merits – There was no error committed by the High Court in its judgment rendered in exercise of its review jurisdiction calling for interference. Decision of the Calcutta High Court affirmed.

    Dismissing the appeal the Court held that S. 293 of the Income-tax Act, 1961 puts a complete bar on filing suits in any civil court against the Income-tax authority. The mandate of law remained unnoticed by the single judge of the Calcutta High Court on October 26, 1990 while relegating the parties to address in the pending civil suit at Delhi although it was dismissed much prior to the pronouncement of the judgment dated October 26, 1990. Even in the appeal, the Division Bench granted liberty to the respondents to file a fresh civil suit in respect of the subject property in Delhi and neither party had brought to the notice of the court the mandate of law as envisaged under section 293 of the Income-tax Act, 1961 that a civil suit against the Income tax Department was not maintainable under the law. The High Court took notice of this in its review jurisdiction when it arrived at the conclusion that there was an error apparent on the face of the record and consequently allowed the application for review, recalled the order dated October 19, 2012 and set aside the judgment and order dated March 31, 2006 passed in the miscellaneous application and for restoration of the writ petition to be heard on its own merits. The effect of S. 293 of the Act had been mistakenly omitted under the judgment in review. That apart, the effect of the order of the High Court on the Department’s application in the 1957 suit was open to examination in the writ proceedings as it was the defence of the Department in the reply to the review application and before the court that in the auction sale which was held in the month of August, 1964, permission of the court was not obtained. After the order was passed on the Department’s application by the single judge of the High Court in the 1957 suit, it would certainly affect the auction sale held by the Department in reference to the subject property in question. If the civil suit was not maintainable in view of section 293 of the Act and this was the purported defence of the respondents and of the Department and consequential effect of the order dated September 8, 1965, no party could be left remediless and the grievance raised before the court of law, had to be examined on its own merits. There was no error committed by the High Court in its judgment rendered in exercise of its review jurisdiction calling for interference. Decision of the Calcutta High Court affirmed. The court made it clear that its observations were only for the purpose of disposal of the appeal and the writ petition was to be decided by the High Court of Calcutta on its own merits, after hearing the parties, in accordance with law. The cases in which the review application could be entertained are : (i) discovery of new and important matter or evidence which, after the exercise of due diligence, was not within knowledge of the petitioner or could not be produced by him ; (ii) mistake or error apparent on the face of the record ; (iii) any other sufficient reason. A review will not be maintainable in the following cases : (i) repetition of old and overruled argument ; (ii) minor mistakes of inconsequential import. Review proceedings cannot be equated with the original hearing of the case. A review is not maintainable unless the material error, manifest on the face of the order, undermines its soundness or results in miscarriage of justice. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error. The mere possibility of two views on the subject cannot be a ground for review. The error apparent on the face of the record should not be an error which has to be fished out and searched. The appreciation of evidence on record is fully within the domain of the appellate court, it cannot be permitted to be advanced in the review petition. A review is not maintainable when the same relief sought at the time of arguing the main matter had been negatived.

    Sunil Vasudeva v. Sundar Gupta (2019) 415 ITR 281 (SC)

    Income Declaration scheme , 1996.- Finance Act , 2016

13. S. 183 : Payment of tax – Failure to pay third instalment – Rejection of application was held to be not justified – Permitted assessee to deposit tax under Income Declaration Scheme belatedly subject interest @ 12%. [IDS, S. 196 ITACT , 119(2)]

    Assessee filed declaration of undisclosed income under Income Declaration Scheme, 2016. Subsequently, assessee paid 50 per cent of total tax, surcharge and penalty in two instalments, however, did not pay third instalment of remaining 50 per cent of tax, surcharge and penalty. Application to CBDT seeking extension of time for making payment of third instalment was rejected. High Court also dismissed writ petition. On appeal the Supreme Court held that the assessee was to be permitted to deposit third instalment with interest at rate of 12 per cent with Income Tax Department.

    Dal Chandra Rastogi. v. CBDT (2019) 264 Taxman 83 (SC)

    Editorial: Order of High Court is reversed , Siddharth Rastogi v. CBDT (2018) 402 ITR 17/ 301 CTR 545 / 163 DTR 449 (Delhi) (HC)

    Dal Chandra Rastogi v. CBDT (2018) 402 ITR 17/ 301 CTR 545 / 163 DTR 449 (Delhi) (HC)

    Meena Rastogi v CBDT (2018) 404 ITR 97/ 301 CTR 548 / 163 DTR 452(Delhi) (HC)