Bench

No. of BENC.

No MEM.

Institution

Disposal

Pendency

SMC
Pendency

Mumbai

11

17

705

1304

15403

2437

Pune

3

6

165

624

4856

323

Nagpur

1

0

49

0

1083

202

Raipur

0

19

0

1121

82

Panji

1

0

17

0

954

200

Delhi

9

13

929

1734

22622

2652

Deharadun (Circuit )

29

0

907

41

Agra

1

2

43

125

996

195

Bilaspur

0

Lucknow

2

2

37

127

1082

88

Allahabad

1

0

7

73

504

173

Varanasi (Circuit Bench)

11

57

347

118

Jabalpur

1

1

25

200

588

67

Kolkatta

5

7

264

491

3311

667

Patna

1

0

10

1

533

139

Cuttack

1

2

47

115

996

41

Guwahati

1

0

58

130

609

189

Ranchi (Jhark Hand) Circuit Bench

1

0

12

66

618

178

Chennai

4

5

326

447

5349

316

Bangalore

3

6

189

451

5175

189

Cochin

1

2

31

127

399

4

Ahemdabad

4

7

180

778

6677

1505

Surat

1

1

35

318

2634

743

Indore

1

2

122

314

2106

120

Rajkot

1

0

22

275

1419

417

Hyderabad

2

4

158

454

4781

817

Vishakha

1

2

44

170

819

260

Patnam

Chandigarh

2

4

111

262

1894

393

Amritsar

1

1

58

131

1674

556

Jaipur

2

3

74

206

1620

868

Jodhpur

1

0

32

0

612

148

Total

63

87

3809

8980

91689

14128

39

Vacancy

Nos. of Members

126

126

Editorial Board

Honourable Shri Pramod Kumar, Vice-President, ITAT, has assumed charge of Vice-President ITAT Mumbai on 6th September 2019.

It is for the first time in the history of the ITAT where a function was held in the presence of the Members of the ITAT, members of the Bar and the Departmental Representatives. Honourable Vice-President, Shri Pramod Kumar assumed the Charge in the presence of Honourable President Mr. Justice Pradeep P. Bhatt, Honourable Vice-President G. S. Pannu, honourable members on behalf of the ITAT Bar Association, Mr. Hiro Rai, President, Dr. K. Shivaram, Sr. advocate, past president, Mr. Subash S. Shetty, Past President and Senior departmental representatives were also invited on the occasion of Shri Pramod Kumar assuming charge as Vice-President .

Honourable President, Mr. Justice P. P. Bhatt greeted the honourable Vice-President Mr. Pramod Kumar and wished him success as the Vice-President of Mumbai. Honourable President also stated that he will make a sincere attempt to improve the infrastructure of the ITAT across the Country. Honourable Vice-President, Mr. G. S. Pannu, while welcoming the Vice-President Mr. Pramod Kumar, stated that Mr. Pramod Kumar is well known amongst the members of the Tax Bar of Mumbai. With his dynamic leadership and with the aid of technology, he will make further improvements in administration of justice before ITAT.

Mr. Hiro Rai, President of the ITAT Bar Association, Mumbai, on behalf of the members of the ITAT Bar Association, Mumbai, welcomed the Honourable Vice-President and wished him all the success.

On behalf of the departmental representatives, a warm welcome was accorded to the Honourable Vice-President and wished him all the success.

Honourable Vice-President, Shri Praomd Kumar thanked the honorabale President for bestowing on him, the responsibility as Vice-President of Mumbai and assured that he will make a sincere attempt to discharge his duties as Vice-President. He also assured that he will have regular interaction with the representatives of the ITAT Bar Association and Departmental representatives for better administration of justice before the ITAT Mumbai.

After the ceremony of taking charge of office, all the Members of the ITAT, Bar members and departmental representatives were invited for high tea at Members’ Library which was hosted by the ITAT. It was a great occasion for members of the Bar, especially the junior members to have an interaction with Honourable President and Vice-Presidents.

We wish all the best to Honourable Shri Pramod Kumar on assuming charge of Vice-President of ITAT, Mumbai and Honourable Shri G. S. Pannu on assuming charge as Vice-President, Delhi.

On 19-09-2019 ITAT Bar Association has hosted a dinner to welcome Honourable Shri. Pramod Kumar and to bid bid farewell to honourable Vice-President Shri G. S. Pannu. Honourable President Justice P. P. Bhat, honourable members of the ITAT and large number of the members of the ITAT Bar Association attended the function.

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. Suit for specific performance – Readiness and willingness of vendee – Plea of vendor that vendee does not have sufficient money – Contract Act, S. 55

    Once finding is recorded by High Court and Trial Court that vendor did not perform her part of contract. Then failure on part of vendee to demonstrate that he was having sufficient money with him to pay balance sale consideration is not much of consequence. Vendee deposited entire balance sale consideration as directed by Trial Court within extended period of time. Plea that vendee was not willing to perform his part of contract cannot be accepted. High Court rightly passed decree for specific performance. Plea of hardship by vendor not raised in written statement. Cannot be entertained for first time in appeal by way of SLP, moreso when concurrent findings that vendee was ready and willing to perform his part of the contract had been recorded by lower courts.

    Beemaneni Maha lakshmi v. Gangumalla Appa Rao (Since Dead) By LRs. : AIR 2019 Supreme Court 3013.

  2. Second Appeal – Procedure to be followed – High Court framing substantial question of law while delivering judgment and not at time of admission of appeal – Matter remanded back to High Court for deciding afresh – Civil P.C., S. 100(4), (5)

    High Court framing substantial question of law while delivering judgment and not at time of admission of appeal, Procedure adopted by High Court contrary to S. 100. Similarly, the High Court could have taken recourse to the powers conferred by proviso to Section 100 (5) of the CPC for framing any additional question of law at the time of final hearing of the appeal by assigning reasons for framing additional question, if it considered that any such question was involved. It was, however, not done. Instead, the High Court framed the questions for the first time while delivering the impugned judgment. Matter remanded back to High Court for deciding afresh

    Arulmighu Nellukadai Mariamman Tirukkoil v. Tamilarasi (Dead) By LRs.: AIR 2019 Supreme Court 3027

  3. Dishonour of cheque – Offences by Companies – For prosecution under S.141 arraigning of Company as accused is imperative Negotiable Instruments Act, Ss. 138, 141

    Cheque issued by accused on behalf of Company in capacity of being its Director. Demand notice served only on accused and complaint was lodged only against him without arraigning Company as accused. Complaint filed against accused, authorise signatory of company without arraigning Company as accused. Not maintainable. In absence of issuance of notice to Company, order of High Court directing to arraign company as accused, erroneous.

    Himanshu v. B. Shivamurthy and anr. AIR 2019 Supreme Court 3052

  4. Succession – Grant of probate or letters of administration – Limitation. Succession Act of 1925, Ss. 228, 276

    In an application filed for grant of probate or letters of administration, no right is asserted or claimed by the applicant. The applicant only seeks recognition of the court to perform a duty. Probate or letters of administration issued by a competent court is conclusive proof of the legal character throughout the world. That the proceedings filed for grant of probate or letters of administration is not an action in law but it is an action in rem. Therefore, even if the will is probated by any court mentioned in Section 228 of the Act, right to get the letters of administration is a continuous right which can be exercised any time, as long as the right to do so survives and the object of the trust exists or any part of the trust, if created, remains to be executed.

    Sameer Kapoor and Anr v. State through Sub-Division Magistrate South, New Delhi & Others AIR 2019 Supreme Court 3318.

  5. Cross-objection – Dismissal of Cross objection without assigning any reason – Validity : Civil P. C. O. 41, R. 22 (4)

    Order 41 Rule 22 of the Code provides that where, in any case in which any respondent has under this rule filed a memorandum of objection, the original appeal is withdrawn or is dismissed for default, the objection so filed may nevertheless be heard and determined after such notice to the other parties as the Court thinks fit. Merely because the High Court dismissed the appeals though on merits, yet that by itself would not result in dismissal of the landowners’ cross objection also. In our view, the cross objection had to be disposed of on its merits notwithstanding the dismissal of the appeals as provided by in Order 41 Rule 22 (4) of the Code by assigning reasons. Though the High Court dismissed the appeals of the State/NTPC on merits yet it was obligatory on the part of the High Court to have independently examined the issues raised by the landowners (respondents in appeal) before the High Court in the cross objection with a view to find out as to whether any case was made out on facts by the landowners for further enhancement in the compensation and, if so, to what extent.

    Badru ( Since deceased) through L. R. Hari Ram etc. v. NTPC Ltd. (formerly NTPC Ltd.) & Ors. AIR 2019 Supreme Court 3385.

  6. Right to life – Mobilizing School children for Govt. Programme on Sunday by issuing Govt. Orders – Violates fundamental right of children to participate in Govt. Programmes by issuing Govt. Orders. Constitution of India , Arts. 21, 51-A, 355

    Art. 21 guarantees “right to life” as a fundamental right and everyone is entitled to lead life safely with dignity subject to responsible restriction. It is the duty of state to protect such right of an individual citizen. Therefore, compelling any person including school going children or Collage student by issuing Govt. Order to participate in any programme when they are unwilling listeners is nothing but a captive audience and such order of the Government Violates not only fundamental right of citizen of the country but also violates human rights of individual including the children. State is under obligation to act in accordance with the provision of the constitution, where it’s primary task is to provide security to all citizen without violating human dignity. But the state insisted the school children to participate in such programmes, which would amount to violation of their fundamental right guaranteed under the constitution, so also their human right.

    M/s. Old Students Association, Post Graduates College, Osmania University, Hyderabad v. State of Andhra Pradesh and another. AIR 2019 Andhra Pradesh 25.

  7. Public documents – Report of bailiff, written on reverse side of summons issued by court – Is not public document as per S. 74 : Evidence Act Ss. 74, 77

    Treating a bailiff report of service of summons as in the present case, to be a public document under Section 74 of the said Act, would not be in consonance with law. This is because the report of a bailiff, as in this case, on the reverse of the document of summons issued by the Court is nothing but his opinion about service of summons or otherwise on the person to whom the summons have been issued by the Court. Although, it may be an official act, the report itself submitted by the bailiff in pursuance of the summons issued by the Court, cannot be said to be an act of the Court or record of an act of the Court, to qualify as a public document under Section 74 of the said Act.

    Sushilkumar Mandanlal Ganediwal v. Vijaykumar Madanlal Ganediwal. AIR 2019 Bombay 201.

  8. Arbitrary action and wrong decision relating to Govt. Contracts – Distinction between.

    There is a distinction between an arbitrary action and a wrong decision. An arbitrary action is one in which the decision maker has taken no guide other than his own will or pleasure and the decision is not fixed by any rule or which is not based on a disclosure of discernible principle. It is something unpredictable being whimsical and capricious.

    A wrong decision is one which may not necessarily be arbitrary and may be based on the strength of inferences which can be described as incorrect without any element of mala fides or irrationality. Such a decision falls within the realm of interpretation and may also be an outcome of error of judgment which is predictable.

    A wrong decision may therefore necessarily may not be an outcome of sheer arbitrariness. In a given situation, there may be two views possible. One may be right whereas the other may prove to be ultimately wrong or vice-versa. A decision of this nature that may be ultimately wrong may not necessarily be arbitrary as both views may be predictable. To gather arbitrariness one has to arrive at the conclusion that the decision is absolutely unreasonable which no prudent man can ever arrive at. Reasonableness and prudence are subjective in nature but in the administrative decision making process they are construed to mean that there is rationality and an assessment where the thought process has some rationale which may be right in one situation and wrong in another depending upon the facts and circumstances of a case. Further, the perception with which the decision making authority has proceeded to take an action, has also to be assessed as to whether it was motivated or the outcome of a mere whim or was it with the plain intention of taking an impartial and uninfluenced decision. In arriving at a conclusion, a correct or incorrect appreciation based on existing material will make the decision right or wrong but if the decision is without any rational perception and is whimsical then it becomes arbitrary.

    Vijeta Projects and Infrastructure Ltd. Ranchi v. State Of Bihar and others. AIR 2019 (NOC) 492 (PAT.)

  9. Banking transaction – Unauthorised withdrawal by fraudsters – Bank liable for loss caused to their customer : Banking Regulation Act, S. 6

    The relationship between a bank and its customers arises out of the contracts entered into between them. Such contracts consist of general terms applicable to all transactions and also special terms applicable to the special services, if any, provided by the bank to its customers. The relationship between a bank and its customer, insofar as it relates to the money deposited in the account of a customer, is that of debtor and creditor. The contractual relationship exists between a bank and its customers are founded on customs and usages. Many of these customs and usages have been recognized by courts and it is now an accepted principle that to the extent that they have been so recognized, they are implied terms of the contracts between banks and their customers. Duties of care is an accepted implied term in the contractual relationship that exists between a bank and its customer. It is impossible to define exhaustively the duties of care owed by a bank to its customer. It depends on the nature of services extended by the bank to its customers. But one thing is certain that where a bank is providing service to its customer, it owes a duty to exercise reasonable care to protect the interests of the customer. Needless to say that a bank owes a duty to its customers to take necessary steps to prevent unauthorised withdrawals from their accounts. As a corollary, there is no difficulty in holding that if a customer suffers loss on account of the transactions not authorised by him, the bank is liable to the customer for the said loss.

    State Bank Of India, Kottayam v. P. V. Geoege: AIR 2019 Kerala 140.

  10. Family arrangement / release deed – Registration Act, Ss. 17, 49 Proviso – Stamp Act, Ss. 35 :

    Document not registered. Document not intended to be brought in for collateral purpose but for extinguishing right and title over suit properties. Unregistered document, not admissible.

    S. Venkatachalam and others v. Kamalathal and Others AIR 2019 Madras 201.

  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)

Research Team

  1. S.2(14)(iii) : Capital asset – Agricultural land – Classified as dry land for which Kishtu had been paid – Adjacent land was divided into plots for sale cannot be the ground to reject the claim of the assessee. [S.45, 260A]

    Assessee sold agricultural land and claimed exemption. AO rejected the claim on the ground that the assessee had not utilised land for agricultural purpose. Tribunal held that records were showing that lands were agricultural land, classified as dry land for which Thisthu had been paid. Tribunal also held that the merely because of adjacent land was divided into plots for sale was not a reason to held that land sold by assessee was for purpose of development land in question cannot be treated as capital asset. Order of Tribunal is up held by the High Court. (AY.2012-13)

    CIT v. Venkateswara Hospital (2019) 106 taxmann. com 282 / 264 Taxman 90 (Mad)(HC)

    Editorial: SLP of revenue is dismissed, CIT v. Venkateswara Hospital (2019) 264 Taxman 89 (SC)

  2. S. 2(22)(e) : Deemed dividend – Income cannot be taxed in the hands of the shareholders unless it is shown that the monies have been received by them.

    Where provisions of deemed dividend were invoked in the hands of the borrower company on account of the fact that the same shareholders held substantial interest in the lending and the borrowing company, the amount of deemed dividend cannot be brought to tax in the hands of the said shareholders unless it is shown that they have actually received the money. (AY. 2006-07)

    Ramesh V. v. ACIT (2019) 177 DTR 105 / 104 taxmann.com 292 (Mad.)(HC)

  3. S. 4 : Charge of income-tax – Subsidy from foreign company – Capital receipt not liable to tax .

    Allowing the appeal of the assessee the Court held that in order to set up a joint venture in insurance sector, a foreign company gave capital subsidy to assessee in order to enable it to contribute its share in share capital of joint venture company, amount of subsidy so received was to be regarded as capital receipt not liable to tax. (AY. 2002-03)

    Sundaram Finance Ltd. v. ACIT (2019) 262 Taxman 465 / 413 ITR 298 (Mad)(HC)

  4. S. 4 : Charge of income-tax – Capital or revenue–Sale of shares upon open offer – Additional consideration paid in terms of open offer due to delay in making offer and dispatch of letter offer – Capital receipt.

    Dismissing the appeal of the revenue the Court held that the additional amount received by the assessee was part of the offer from the sale of shares made by it. The additional sum was part of the sale price and retained the same character as the original price of the share. The additional receipt of the assessee relatable to this component was a capital receipt.

    CIT v. Morgan Stanley Mauritius Co. Ltd. (2019) 413ITR332/308CTR139(Bom)(HC)

  5. S. 5 : Scope of total income – Accrual – Method of ccounting  – Amount retained under contract to ensure there are no defects in execution of contract – Amount retained did not accrue hence cannot be taxed on accrual basis. [S.145]

    Dismissing the appeal of the revenue the Court held that by the specific terms of the contract itself, the awarder was entitled to retain the amounts so as to rectify any defects arising in the period in which as per the terms of the contract the amount was retained. There could be no accrual found on the completion of contract, since the assessee’s right to such amount would depend on there being no defects arising in the subsequent period during which the awarder was enabled retention of such amounts. (AY. 2002-03 to 2005-06)

    CIT v. Chandragiri Construction Co. (2019) 415 ITR 63 (Ker)(HC)

  6. S. 10AA : Special economic zones – Reconstruction – Sole proprietorship was not been shifted to firm – Only Capital received from sole proprietorship- Not a reconstruction – Entitle to exemption. [S.10AA(4)(iii)]

    Sole proprietor has introduced his capital to partnership. AO denied the exemption on the ground that it was reconstruction of business. On appeal the Tribunal held that apart from capital received from proprietorship concern, huge amount of fresh capital had also been introduced to the firm and assets appearing in balance sheet of old concern i.e. sole proprietorship, had not been shifted to the firm hence it is not a reconstruction.

    High Court up held the order of the Appellate Tribunal. (AY. 2007-08)

    PCIT v. Green Fire Exports (2019)106 taxmann. com 32 / 263 Taxman 676 (Raj) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Green Fire Exports (2019) 263 Taxman 675 (SC)

  7. S. 10AA : Special economic zones – Conditions in section 10AA(4) are to be satisfied on a unit wise basis and not on an entity basis – Once the claim was allowed in the first year, it could not be denied in the third year. [S.10AA(4)]

    An assessee which had existing units in an SEZ and was claiming benefits under section 10AA, set up a new unit in the SEZ, with new plant and machinery and sought exemption under section 10AA on the profits earned from the said new units. The AO denied such exemption in the third year of claim on the ground that the new unit was formed by splitting or reconstruction of the existing business. Held that the conditions stipulated under section 10AA have to be satisfied on a unit wise basis and not on an entity basis. Simply because the assessee was carrying on the same business through existing units does not mean that the new unit, setup with new plant and machinery, will said to have been formed by splitting or reconstruction of business. Further, once the claim was allowed in the first year, it could not be denied in the third year. Accordingly, the issue was to be decided in assessee’s favour. (AY. 2013-14)

    PCIT v. Macquarie Global Services (P) Ltd. (2019) 178 DTR 27 / 102 taxmann.com 272 (Delhi)(HC)

  8. S. 11 : Property held for charitable purposes – Registration granted – AO cannot revisit objects again while examining compliance with S.11 of the Act. [S.2(15), 12A]

    Dismissing the appeal of the revenue the Court held that once registration was granted to assessee trust under S. 12A the AO while examining compliance with S. 11 cannot revisit objects of assessee again. Followed ACIT v. SuratCityGymkhana(2008)370ITR214(SC).

    (AY. 2008-09)

    DIT(E) v. Gemological Institute of India (2019) 105 taxmann.com 179 / 263 Taxman 349 (Bom) (HC)

    Editorial: SLP of revenue is dismissed on the ground of low tax effect DIT(E) v. Gemological Institute of India (2019) 263 Taxman 348 (SC)

  9. S. 14A : Disallowance of expenditure – Exempt income – Interest – Disallowance can be only on net interest on the loan. [R.8D]

    Dismissing the appeal of the revenue the Court held that disallowance can be only on net interest on the loan. (AY. 2008-09)

    CIT v. Jubiliant Enterprises P. Ltd. (2019) 416 ITR 58 (Bom) (HC)

    Editorial: SLP is granted to the revenue, CIT v. Jubiliant Enterprises P. Ltd. (2017) 397 ITR 32(St)

  10. S. 14A : Disallowance of expenditure – Exempt income – AO cannot reject the disallowances offered by the assessee, without adducing any reasons.[R.8D]

    High Court held that the AO cannot reject the disallowances offered by the assessee, without adducing any reasons.

    PCIT v. Moonstar Securities Trading and Finance Co. (P.) Ltd. (2019) 105 taxmann.com 274 / 263 Taxman 459 (Delhi) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Moonstar Securities Trading and Finance Co. (P.) Ltd. (2019) 263 Taxman 458 (SC)

  11. S. 14A : Disallowance of expenditure – Exempt income – In absence of any exempt income disallowance cannot be made. [R.8D]

    Affirming the order of the Tribunal the Court held that In absence of any exempt income disallowance cannot be made. Followed CheminvestLtd.v.CIT(2015)378ITR33(Delhi)

    (HC) (AY. 2013-14)

    PCIT v. GVK Project and Technical Services Ltd. (2019)106 taxmann.com 180 / 264 Taxman 77 (Delhi)(HC)

    Editorial: SLP of revenue is dismissed, PCIT v. GVK Project and Technical Services Ltd. (2019) 264 Taxman 76 (SC)

  12. S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot be made when there is no income exempt from tax. [R. 8D]

    Dismissing the appeal of the revenue the Court held that, disallowance cannot be made when there is no income exempt from tax. Referred Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) (AY. 2009-10)

    PCIT v. Caraf Builders and Constructions Pvt. Ltd. (2019) 414 ITR 122 / 261 Taxman 47 (Delhi) (HC)

  13. S. 28(i) : Business income – Income from house property – Shopping mall – Commercial exploitation – Facilities and services – Income derived by assessee by letting out shops in mall had to be assessed as income from business and not as income from house property. [S. 22]

    Court held that the assessee had earned income not merely by letting out shop rooms but also by providing amenities and facilities at shopping mall. Such amenities and facilities were special facilities for running shopping mall and were meant to attract customers and provide them comfort and convenience of shopping. Accordingly the income derived by assessee by letting out shops in mall had to be assessed as income from business and not as income from house property. (AY. 2009-10)

    CIT v. Oberon Edifices & Estates (P.) Ltd. (2019) 263 Taxman 377 (Ker.)(HC)

  14. S. 28(i) : Business loss- Speculative transaction – Damages – Palm oil – Damages paid for not honouring commitments to take delivery against some purchase orders placed on foreign sellers – Allowable as business loss – Not speculative loss. [S.43(5)]

    Assessee did not honour its commitment to take delivery against some purchase orders placed on foreign sellers consequent upon price of palm oil declining. Damages paid was claimed as business loss. AO held that the loss is speculative loss. Tribunal allowed the loss as business loss. Dismissing the appeal of the revenue High Court held that when a party in breach accepts claim for damages, what actually happens is disposal of a dispute and not any settlement of kind that is envisaged by word settled used in S 43(5). Accordingly up held that order of the Tribunal.

    CIT v. Ambo Agro Products (P.) Ltd. (2018) 257 Taxman 156 (Cal) (HC)

    Editorial: SLP of revenue is dismissed, CIT v. Ambo Agro Products (P.) Ltd. (2019) 264 Taxman 167(SC)

  15. S.28(i) : Business loss – Bank guarantee – Loss due to encashment of bank guarantee is allowable as business loss.

    Dismissing the appeal of the revenue the Court held that loss due to encashment of bank guarantee is allowable as business loss. (AY. 2002-03 to 2005-06)

    CIT v. Chandragiri Construction Co. (2019) 415 ITR 63 (Ker) (HC)

  16. S.28(i) : Business Loss – Embezzlement of cash by director – Recovery of amount or outcome of pending criminal prosecution against director before Metropolitan Magistrate is irrelevant – Allowable as deduction. [S.36(2), 37(1)]

    Dismissing the appeal of the revenue the Court held that the embezzlement by one of the directors or an employee of the business of the assessee during the ordinary course of business would be a business loss irrespective of the criminal prosecution of the director or employee. The final outcome of the criminal proceedings or recovery of the amount in question would not determine the claim of the assessee in the assessment year 2012-13 when it was written off as a business loss. The Tribunal had rightly held it to be a business loss as it was treated to be only a pilferage of the assessee-company’s funds by a director on the board of the company. (AY. 2012-13)

    PCIT v. Saravana Selvarathnam Trading And Manufacturing Pvt. Ltd. (2019) 415 ITR 146 (Mad) (HC)

  17. S. 32 : Depreciation – Additional depreciation – Revision of orders prejudicial to revenue – Tribunal allowed assessee’s claim for additional depreciation by following order of jurisdictional High Court – Revision is held to be not valid. [S.263]

    AO allowed assessee’s claim for additional depreciation. CIT passed revision order and directed the AO to reframe assessment. Tribunal setaside the revisional order. High Court affirmed the order of Tribunal following the jurisdictional High Court in CIT v. Continental Ware Housing Corporation (Nhava Sheva Ltd. (2015) 374 ITR 645
    (Bom) (HC)
    and CIT v. Murli Agro Products Ltd (2014) 49 taxmann.com 172 (Bom) (HC). Revenue authorities, however, pointed out that Tharnataka High Court in
    Canara Housing Development Co. v. Dy CIT (2014) 49 Taxmann.com 98 (Karn)(HC) on similar issue had taken a different view. High Court held that the Tribunal was bound by decision of jurisdictional High Court. (AY.2006-07)

    PCIT v. Jitendra J. Mehta (2019) 104 Taxman.com 448 / 263 Taxman 6 (Bom) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Jitendra J. Mehta (2019) 263 Taxman 5 (SC)

  18. S.32 : Depreciation – Unabsorbed depreciation – Carry forward and set off – Eligible and for carry forward and set off against business profits. [S.32(2)]

    Dismissing the appeal of the revenue the Court held that the Tribunal was justified in directing the Assessing officer to allow carry forwardand set off unabsorbed depreciation against the business profits. (Followed General Motors India(P)Ltd()354ITR244(Guj)(HC)PCITv. AssociatedCables(P)LtdITANO293of2016dt 02-08-2018, CIT v. Confidence Petroleum (I) Ltd ITA No 582 of 2014 CIT v. Milton’s (P) Ltd ITA No 2301 of 203, Times Guaranty Ltd. v. Dy DIT, ITA No 841 of 2011 and 842 of 2011 of 2011) (AY. 2008-09)

    CIT v. Associated Cables (P.) Ltd. (2019) 105taxmann.com 113 / 263 Taxman 251 (Bom) (HC)

    Editorial: SLP of revenue is dismissed; CIT v. Associated Cables (P.) Ltd. (2019) 263 Taxman 250 (SC)

  19. S. 32 : Depreciation – Intangible asset – Non-compete fee – The expression “or any other business or commercial rights of similar nature” used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include non-compete rights – Eligible for depreciation. [S.32(i(ii)]

    Dismissing the appeal of the revenue the Court held that, rights acquired under a non-compete agreement gives enduring benefit & protects the assessee’s business against competition. The expression “or any other business or commercial rights of similar nature” used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include non-compete rights , hence eligible depreciation. Followed (2018)PCIT v. Ferromatic Milacron India (P) Ltd (2018) 99 Taxman.com 154 (Guj)(HC) (ITA No. 556 of 2017, dt. 11.06.2019)

    PCIT v. Piramal Glass Ltd (Bom)(HC), www.itatonline.org

  20. S. 35 : Scientific research – Weighted deduction – Research and Development – Expenditure on development of “Research and Development’ facility was allowable even though approval of concerned Ministry of Central Government was under consideration or awaited. [S.35(2AB)]

    Assessee submitted that approval from concerned Ministry of Central Government for year in question was under active consideration and awaited. The Revenue disallowed assessee’s claim on the ground that it did not produce approval from the prescribed authorities for the current year. However, such approval was available for both the periods prior and subsequent to the current year. On appeal to the Tribunal, the assessee produced Form 3CM approving the in-house Research and Development facility. The approval was from 1-4-2003 to 31-3-2005. The Tribunal held that the approval received for the subsequent years as such should be looked into for the earlier years on retrospective basis. The Tribunal granted weighted deduction. On appeal by the revenue dismissing the appeal the Court held that the assessee could not be punished for bureaucratic delay and since approval was on record for period anterior and posterior to year in question, claim of weighted deduction was allowable under section 35(2AB). (AY. 2003-04)

    CIT v. TVS Electronics Ltd. (2019) 263 Taxman 164 (Mad)(HC)

  21. S. 36(1)(vii) : Bad debt – Held to be allowable though the principal amount debited to the principal amount never appeared as a debt on account of trade.

    Following the order in ITA No 1024 of 2018 dt 13-08 2018, in assesses own case appeal of the revenue is dismissed. Order of Tribunal allowing the bad debt is affirmed. (AY. 2003-04)

    PCIT v. Gujarat Lease Financing Ltd. (2019) 105 taxmann.com 156 263 Taxman 351 (Guj) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Gujarat Lease Financing Ltd. (2019) 263 Taxman 350 (SC)

  22. S.37(1) : Business expenditure – Capital or revenue – Replacement of components of existing machinery to maintain efficiency and production capacity – Held to be revenue expenditure.

    Dismissing the appeal of the revenue the Court held that replacement of components of existing machinery to maintain efficiency and production capacity is held to be revenue expenditure. (AY. 2009-10)

    CIT v. Gujarat Narmada Valley Fertilizer and Chemicals Ltd. (2019) 416 ITR 144 (Guj)(HC)

  23. S. 37(1) : Business expenditure – Capital or revenue – Legal and professional expenses – Litigation expenses – Buy back of shares – Allowable as revenue expenditure.

    Assessee company debited legal and professional expenses incurred in relation to buyback of shares of company from its shareholders which pertained to reduction of share capital of company. AO held that expenditure incurred partook character of capital nature. Tribunal held that expenses incurred were in connection with existing business of assessee company and cannot be held to be enhance capital structure. High Court affirmed the order of the Tribunal. (AY. 2004-05)

    PCIT v. Bayer Vapi (P) Ltd. (2019) 264 Taxman 182 (Guj)(HC)

  24. S. 37(1): Business expenditure – Cash credits – Bogus purchases – Despite admission by the assessee that the purchases were mere accommodation entries, the entire expenditure cannot be disallowed. Only the profit embedded in the purchases covered by the bogus bills can be taxed. The GP rate disclosed by the assessee cannot be disturbed in the absence of incriminating material to discard the book results. [S.68, 69,143(3)]

    The AO had made the addition on the ground that the assessee’s purchases were found to be bogus. The entire purchase amount was therefore, added to the assessee’s income. The Tribunal, however, restricted to the said sum of Rs.2,21,600/-. The Tribunal recorded that the AO has not rejected either the purchases or the sales made out of the said purchases. The Tribunal therefore, was of the opinion that the addition should be restricted to 10% of the total purchases. On appeal the High Court held that the Tribunal held that the Department had not rejected the instance of the purchases since the sales out of purchase of such raw material was accounted for and accepted. With above position, the Tribunal applied the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the entire expenditure. Accordingly the order of Tribunal is affirmed. (ITA No. 413 of 2017, dt. 15.07.2019) (AY. 2005-06)

    PCIT v. Paramshakti Distributors Pvt. Ltd. (Bom) (HC),
    www.itatonline.org

  25. S. 37(1) : Business expenditure – Cost of print and publicity – cost of production – Feature films – Expenditure were incurred after production and certification of film by Censor Boardwas – received – Not governed by Rule 9A – Allowable as revenue expenditure. [R.9A, 9B]

    AO held that expenditures were incurred by the assessee after issuance of certificate of Censor Board and, hence, he disallowed the assessee’s claim holding that such expenditure was not allowable deduction in terms of rule 9A and rule 9B. CIT(A) held that any expenditure which was not allowable under rule 9A could not be granted in terms of S. 37(1) of the Act. Tribunal allowed the claim of the assessee. On appeal by the revenue the Court held that expenditure on cost of print and publicity were incurred after production and certification of film by Censor Board was received. Accordingly the said expenditure is not governed by Rule 9A hence allowable as revenue expenditure. Court also held that even if the Commissioner’s contention that the expenditure would fall within rule 9A has to be accepted, there would be no implication of the assessee’s tax liability, since in the instant case, the feature film was exhibited long before the completion of 90 days period before the end of financial year. Even as per rule 9A, such expenditure was otherwise allowable. Be that as it may, on interpretation of the relevant statutory provisions, the Tribunal is absolutely correct. (AY. 2006-07, 2009-10)

    CIT v. Dharma Productions (P.) Ltd. (2019) 263 Taxman 585 / 308 CTR 809 / 177 DTR 321 (Bom.) (HC)

  26. S.40(a)(ia) : Amounts not deductible – Deduction at source – Rejection of Books ofaccount – Estimation of profit @ 8% of turnover – No disallowance can be made u/s 40 of the Act. [S.145(3)]

    Court held that once the books of account were rejected and the profit was estimated at 8 per cent. of the turnover, the books of account could not be relied upon for the purpose of making addition under the provisions of S. 40 of the Act. (AY. 2004 -05)

    ACIT v. Salauddin (2019) 414 ITR 335 (Pat)(HC)

  27. S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Cash credits – Liabilities doubted – Cannot be taxed u/s 41(1) [S.68]

    In the balance sheet the assessee had shown huge amount of sundry creditors. The AO doubted the genuineness of creditors appearing in balance sheet and taxed the said amount u/s 41(1) of the Act. Tribunal upheld the addition. On appeal allowing the appeal of the assessee the Court held that if existence of liabilities was doubted, same could have been disallowed in year in which it was claimed, or could have been treated as unexplained cash credit in hands of assessee under S. 68, but same could not be taxed under S. 41(1), inasmuch as if liability itself was not genuine, question of remission or cessation thereof would not arise. (AY.2010-11)

    Dattatray Poultry Breeding Farm (P.) Ltd. v. ACIT (2019) 263 Taxman 324 (Guj) (HC)

  28. S. 43B : Certain deductions on actual payment – Payment of interest on delayed payment of custom duty is part of duty – Allowable as deduction in the year of payment.[S.37(1)]

    Dismissing the appeal of the revenue the Court held that Payment of interest on delayed payment of custom duty is part of duty – Allowable as deduction in the year of payment. Followed Mahalaxmi Sugar Mills Co v. CIT (1980)123ITR429(SC)(ITANo.809of2017,dt. 27.08.2019) (AY. 2007-08)

    PCIT v. M. J. Export Pvt. Ltd. (Bom)(HC), www.itatonline.org

  29. S. 45(4) : Capital gains – Conversion of firm to Pvt. Ltd. company – revaluation and transfer of assets from firm to company – Same partners as share holders – No dissolution of firm – No transfer – Not liable to capital gains tax. [S.2(47), 45]

    Dismissing the appeal of the revenue the court held that when the firm converted in to company by revaluation of assets from firm to company and the partners remained as share holders there is no transfer as contemplated under S. 2(47) and 45(4) of the Act. Accordingly not liable to capital gains tax. Followed CIT v. Texspin Engineering and Manufacturing Works (2003) 263 ITR 345 (Bom) (HC)
    (AY. 2009-10)

    CIT v. Ram Krishnan Kulwant Rai Holdings P. Ltd. (2019) 416 ITR 123 (Mad) (HC)

  30. S. 45(4) : Capital gains – Retirement – Allotment to a partner of his share in assets of partnership after deduction of liabilities is not transfer – Not liable to capital gains tax. [S.2(47) (vi)]

    Allowing the appeal of the assessee the Court held that, when a partner retires and there is transfer of his interests in the partnership assets to him towards his share in the assets, the same cannot be brought to tax as capital gain by transfer of capital asset. (AY. 2004-05)

    National Company v. ACIT (2019) 415 ITR 5 / 263 Taxman 511 (Mad.)(HC)

  31. S. 54 : Capital gains – Profit on sale of property used for residence – Ownership of land – Housing complex wassituated on a piece of land which was occupied by Co-operative Housing Society under a long term lease – Exemption cannot be denied in respect of sale of flat in a society. [S.45]

    Assessee was an owner of flat in a society. Residential building in which assessee’s flat was situated, had been constructed by housing society on leased land. AO denied the exemption on ground that the asseee had not transferred land along with flat. Tribunal allowed the claim. On appeal the Court held that in case of a constructed building of a Co-operative Housing Society, member owns constructed property and along with other members enjoys possessory rights over land on which such building is situated therefore merely because housing complex was situated on a piece of land which was occupied by Co- operative Housing Society under a long term lease, would make no difference.

    PCIT v. Rahul Uday Tuljapurkar (2019) 264 Taxman 36 (Bom) (HC)

  32. S. 54EC : Capital gains – Investment in bonds – Part consideration in escrow account – Invested in the year of receipt – Entitle to exemption.[S.45]

    Dismissing the appeal of the revenue the Court held that the part consideration which is kept in the escrow account to avoid litigation is taxable in the year of receipt. The assessee has made investment with in specified time the entitle to exemption. (AY. 2008-09)

    CIT v. Mahipinder Singh Sandhu (2019) 416 ITR 175 (P&H) (HC)

  33. S. 68 : Cash credits – Bogus share capital – Shell company – Huge premium – Failure to produce the subscribers and based on the statement of the Director that entire invest was bogus – Addition is held to be justified. [S.132(4)]

    Dismissing the appeal of the assessee the Court held that, no rational person with sound mind will invest huge amount in the share subscription of a paper/shell company having no worthwhile business/project in hand at such a huge premium. The onus is on the assessee to prove the genuineness of the transaction as well credit worthiness of the share subscribers. The failure to produce the subscribers and statement of the director that the entire investment is bogus justifies the addition. (ITA No. 438 of 2017, dt. 22.07.2019) (AY.2007-08)

    Royal Rich Development Pvt. Ltd. v. PCIT (Bom) (HC)

  34. S. 68 : Cash credits – Share capital – Two foreign nationals – Directors of the company – Identity of share applicants and genuineness of money infused is established – Deletion of addition is held to be justified.

    Court held that the AO did not dispute veracity of documents produced and two individuals who had applied for shares, were made directors of assessee company. Accordingly the assessee had discharged onus that was placed upon it to disclose identity of share applicants and genuineness of money infused. Order of Tribunal is affirmed.

    PCIT v. E-Smart Systems (P.) Ltd. (2019) 105taxmann.com 158 / 263 Taxman 374 ( Delhi) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. E-Smart Systems (P.) Ltd. (2019) 263 Taxman 373 (SC)

  35. S. 68 : Cash credits – Non- Resident – If the assessee is non- resident amount found deposited in a foreign bank is not taxable in India either u/s 68 or u/s 69 of the Act. [S. 6(6) 69]

    Dismissing the appeal of the revenue the Court held that, if the assessee is non-resident amount found deposited in a foreign bank is not taxable in India either u/s 68 or u/s 69 of the Act. (ITA No. 107 of 2017, dt. 22.04.2019)

    PCIT v. Binod Kumar Singh (Bom)(HC), www.itatonline.org

  36. S. 69 : Unexplained investments – Statement on oath – Assets were not found – Merely on the basis of statement in the course of search no addition can be made. [S.132(4)]

    Dismissing the appeal of the revenue the Court    held that, when no incriminating materials or documents had been brought on record merely on the basis of statement on oath addition cannot be made. (AY. 2006-07)

    CIT v. Dilbagh Rai Arora (2019) 263 Taxman 30 / 308 CTR 502 (All)(HC)

  37. S. 80G : Donation – Charitable activities – Application of u/s 80G(5) cannot be rejected when registration continued. [S.11AA, 12A, 80G(5)]

    Assessee trust was registered under S. 12A of the Act. It claimed deduction under S.80G of the Act. AO rejected assessee’s claim holding that there was no proof of charitable activities being carried on by assessee. Tribunal, however, found that for last three years details had been provided to show that charitable activities were being carried on. Registration under S. 12A continued in favour of assessee. Tribunal allowed assessee’s claim. High Court upheld Tribunal’s order.

    CIT v. Babbar Charitable Trust (2019) 106 taxmann.com 159 / 264 Taxman 30 (All)(HC)

    Editorial: SLP of revenue is rejected, CIT v. Babbar Charitable Trust (2019) 264 Taxman 29 (SC)

  38. S.80G : Donation – When registration is granted application u/s 80G(5) cannot be rejected. [S.12AA, 80G(5)]

    CIT (E) rejected assessee’s application u/s 12AA of the Act . High Court held that as there was no adverse material against assessee to come to conclusion that it was not a charitable institution or organization it is entitle to registration (CIT v. Lok Sewa Sansthan Samiti Sonebhadra ITA No 139 of 2011 dt 2-07 2013). Following the order of granting of registration the Court held that once registration is granted application u/s 80G(5) cannot be rejected.

    CIT v. Lok Sewa Sansthan Samiti Sonebhadra (2019)105 taxmann.com 202 / 263 taxman 496 (All) (HC)

    Editorial: SLP of revenue is dismissed, CIT v. Lok Sewa Sansthan Samiti Sonebhadra (2019) 263 Taxman 495 (SC)

  39. S. 80IA : Industrial undertakings – Manufacture – Converting herbs into a certain herbal product by manual process – Purchase of plant and machinery and consumption of electricity are not mandatory requirements – Entitle to deduction.

    Assessee which is in business of converting herbs into a certain herbal product by manual process. It used some chemicals and small machinery and most processes of its manufacturing did not require electricity. AO denied the exemption. Tribunal held that purchase of plant and machinery and consumption of electricity are not mandatory requirements to claim deduction and manufacturing of herbal product by assessee would amount to manufacture of a different commercial article. Order of Tribunal is affirmed by High Court. (AY. 1996-97 to 1998-99)

    CIT v. Cavinkare (P.) Ltd. (2019) 263 Taxman 740 (Mad.)(HC)

  40. S. 80IA : Industrial undertakings – Gross or net – Net of interest excluding expenditure incurred in earning such interest income which should be excluded for purpose of deduction.

    Dismissing the appeal of the revenue the Court held that only be net of interest excluding expenditure incurred in earning such interest income which should be excluded for purpose of deduction. Followed ACG Associated Capsules PvtLtdv.CIT(2012)343ITR89(SC)

    PCIT v. Gujarat Paghuthan Energy Corporation (P.) Ltd. (2019) 263 Taxman 255 (Guj)(HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Gujarat Paghuthan Energy Corporation (P.) Ltd. (2019) 263 Taxman 254 (SC)

  41. S. 80IA : Industrial undertakings – Infrastructure development – Agreement with a nodal agency established by State Government Deduction cannot be denied. [S.80IA(4)]

    Dismissing the appeal of the revenue the Court held that, deduction could not be denied merely on ground that State Government had created a nodal agency for working out finer details and nitty-gritty of infrastructure development and assessee had entered into agreement with said nodal agency. (AY. 2012-13)

    CIT v. Ranjit Projects (P.) Ltd. (2019) 104 taxmann.com 391 / 263 Taxman 4 (Guj) (HC)

    Editorial: SLP of revenue is rejected, CIT v. Ranjit Projects (P.) Ltd. (2019) 263 Taxman 3 (SC)

  42. S. 80P : Co-operative societies – Co-Operative Bank – Assessee must substantiate that its main object of incorporation continues to be fulfilled in relevant assessment year – Benefit is not allowable solely on basis of certificate of registration – Assessee is not entitled to deduction if it ceases to be of specified class of society in any year even if it was eligible for initial years. [80P(4)]

    Allowing the appeal of the revenue the Court held that, the assessee which claims the status and the benefits of a primary agricultural credit society would have to substantiate that its main object of incorporation continues to be fulfilled. It has to obtain a certificate from the competent authority by producing the relevant facts and figures including the balance-sheet and profit and loss account to show that it satisfies the requirements of the second proviso to section 2(oa) of the 1969 Act, to claim the status of a primary co-operative agricultural society. The certificate of registration of a society as primary agricultural credit society is not conclusive evidence that the primary object of the principal business undertaken by that society is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities, and the society is not entitled to deduction under section 80P merely on the strength of the certificate of registration issued under section 8(1) of the 1969 Act. On a claim for deduction under section 80P of the 1961 Act, by reason of sub-section (4) thereof, the Assessing Officer has to conduct an enquiry into the factual situation as to the activities of the assessee- society and arrive at a conclusion whether or not the benefits can be extended in the light of the provisions thereunder. (AY. 2007 -08 to 2010-11 2012-2013)

    CIT v. Poonjar Service Co-Operative Bank Ltd. (2019) 414 ITR 67 (FB)(Ker) (HC)

    Editorial: ITO v. Ettumanoor Service Co-Operative Bank Ltd. (2016) 52 ITR 132 (SN) (Cochin) (Trib) ITO v. Sahyadri Cohin, Co-Operative Credit Society Ltd (2017) 60 ITR 135 (Cochin) (Trib) is reversed.

  43. S. 92C : Transfer pricing – Arm’s length price – Mutually agreed procedure (MAP) adopted by Governments of India and USA in relation to US based transactions for determination of ALP could also be adopted for determining ALP of on – US based transactions.

    Dismissing the appeal of the revenue the Court held that, the Asseessee had 96% international transactions with US based AEs and rest were with non-US based AEs. There was no distinction between US and non-US based transactions. US Govt entered in to Mutually Agreed Procedure for determining tax in two countries. CBDT, in later years agreed that such transfer pricing in relation to US based transactions could safely be adopted for purpose of assessee’s non-US based transactions to which the aseessee agreed under Advance Pricing Agreement. Tribunal held that for determining ALP of non-US transactions said MAP between India and US could be applied. High Court up held the order of the Tribunal. (AY. 2007 -08)

    PCIT v. J. P. Morgan Services India (P) Ltd (2019) 263 Taxman 141 (Bom) (HC)

  44. S. 119 : Central Board of Direct Taxes – Refund claims and carry forward the losses – Delay in filing of return – Refusal to condone the delay would cause genuine hardship to assessee – Rendering substantial justice is the paramount consideration of the Courts as well as the authorities rather than deciding on hyper technicalities. [S.139(9)]

    Court held that upon being properly advised, the assessee filed the correct return of income in the correct form for the assessment year 2009-10 on March 24, 2015 declaring a loss of Rs. 7,91,66,338. Thus, it was because of circumstances beyond its control that the assessee could not file the return of income under section 139(9) of the Act within the specified time. The assessee had made out a case of genuine hardship for admitting the claim after the expiry of the period specified under the Act. The Board ought to have exercised its powers under clause (b) of sub-section (1) of section 119 of the Act and condoned the delay in filing the return of income. The order dated May 30, 2018 passed by the Board under section 119(2) (b) was liable to be quashed. Circular No 9 of 2015 dt 9-06 -2015) Court also observed that rendering substantial justice is the paramount consideration of the Courts as well as the authorities rather than deciding on hyper technicalities. (2015) 374 ITR 25 (St). (AY. 2009-10)

    Surendranagar District Co-Operative Bank Ltd. v. DCIT (2019) 416 ITR 294 (Guj) (HC)

    Editorial: SLP of revenue is dismissed DCIT v. Surendranagar District Co-Operative Bank Ltd (2019) 416 ITR 296 (SC).

  45. S. 132 : Search and seizure – Validity – Initiation of search proceedings was not based upon any information or other material – Authorisation is held to be invalid and quashed. [Art.226]

    A search was conducted in case of assessee. Assessee challenged the search action. Allowing the petition the court held that, there was nothing on record to indicate that any belief had been formed by competent authority to effect that assessee had in his possession any money, bullion, jewellery or other valuable article or thing which would not have been disclosed by him for purposes of Act. Accordingly the warrant of authorization is quashed held to be in valid.

    Laljibhai Kanjibhai Mandalia v. PDIT(I) (2019) 263 Taxman 604 (Guj.)(HC)

  46. S. 132(4) : Search and seizureStatement on oath – Addition made on the basis of statement on oath – Subsequent retraction- Statement recorded during the course of action which was in presence of independent witness has overriding effect over the subsequent retraction – Addition is held to be valid. [S. 131, 132, 292C]

    A search was carried out at business premises of assessee-company on 11-0-2014. In course of search proceedings, statement of director Shri Bannala of assessee-company was recorded under S. 132(4) admitting certain undisclosed income. Subsequently on 4-12-2014 statement of the Director was again recorded. In the return of income the amount disclosed was not offered. Non disclosure of income in the return of income will amount to retraction of the statement. AO made addition to assessee’s income on basis of statement given by its director. Confirming the addition the Tribunal held that that statement had been recorded in presence of independent witness hence the retraction was not valid. On appeal High Court held that mere fact that director of assessee-company retracted statement at later point of time, could not make said statement unacceptable and burden lay on assessee to show that admission made by director in his statement was wrong and such retraction had to be supported by a strong evidence showing that earlier statement was recorded under duress and coercion. On facts as the asessee has failed to discharge the burden order of Tribunal is affirmed.

    Bannalal Jat Constructions (P.) Ltd. v. ACIT (2019) 106 taxmann.com 127 / 264 taxman 6 (Raj) (HC)

    Editorial: SLP of assessee is dismissed, Bannalal Jat Constructions (P.) Ltd. v. ACIT (2019) 264 Taxman 5 (SC)

  47. S. 133A : Power of survey – Income from undisclosed sources –Disclosure in the course of survey – Project completion method –Addition can be made only in the year of completion of project – Deletion of addition is held to be justified.[S.69A,145]

    Dismissing the appeal of the revenue the Court held that the Tribunal was justified in confirming the order of the Commissioner (Appeals) deleting the addition made by the Assessing Officer on account of the undisclosed income of ` 26,05,00,000 disclosed during the course of survey under section 133A, on the ground that since the assessee followed the project completion method for offering the income to tax, the amount would be subjected to tax upon completion of sale, though the amount had been received earlier from the buyer and in view of the finding of the Commissioner (Appeals) that the assessee in fact, had offered such income to tax in the later years as and when the sale deeds were executed. In his statement the partner of the assessee had agreed that the sum was the undisclosed income of the assessee for the assessment year in question, and had added a clarification that it would be subject to execution of the sale deeds.

    CIT v. Happy Home Corporation (2019) 414 ITR 524 (Guj)(HC)

    Editorial: SLP of revenue is dismissed CIT v. Happy Home Corporation (2019) 411 ITR 38 (ST) (SC).

  48. S.143(3) : Assessment – Alternative remedy – Writ against the assessment order is not valid since the assessee had an alternative remedy before Appellate Authority [S. 246A, Art. 226]

    Assessee filed a writ petition challenging assessment order as well as demand notice issued by the AO. High Court dismissed the petition on the ground that the assessee had an alternative remedy of appeal before appellate authority.

    MaheshKumarAgarwalv.PCIT(2019) 105 taxmann.com 272 / 263 Taxman 469 (Orissa) (HC)

    Editorial: SLP of the assessee is dismissed and passed the order stating that no coercive steps will be taken for a period of four weeks from the date of the order in order to avail of the alternative remedy provided. Mahesh Kumar Agarwal v. Pr. CIT (2019) 263 Taxman 468(SC)

  49. S.143(3): Assessment – Income from undisclosed sources – real estate business – Purchase of land – Alleged cash receipts – Price of the land was paid with other entries in the bank and there was nothing to show that a cash was received in excess of the agreement – Deletion of addition is held to be justified.[S.69]

    Dismissing the appeal of the revenue the Court held that the price of the land was paid with other entries in the bank and there was nothing to show that a cash receipt was received by the assessee. The Tribunal was justified in deleting the additions.

    CIT v. Prestige City Developers P. Ltd. (2019) 415 ITR 149 (Raj)(HC)

    Editorial: SLP of the revenue is dismissed CIT v. Prestige City Developers P. Ltd (2018) 406 ITR 36 (St)

  50. S.147 : Reassessment – After the expiry of four years – Penny stock – Shares – No failure to disclose all material facts – Merely on basis of information received from Investigation Wing without conducting any independent enquiries. [S.69A,148]

    Allowing the petition the Court held that, there was no failure on the part of the assessee to disclose material facts. It was fond that at relevant time period, there was no company by name of Nivyarh Infrastructure & Telecom Services Ltd was in existence and merely on basis of information received from Investigation wing without conducting any independent enquiries issue of notice for initiating reassessment proceedings is held to be bad in law (AY. 2011-12)

    South Yarra Holdings v. ITO (2019) 263 Taxman 594 (Bom.)(HC)

  51. S. 147 : Reassessment – With in four years – Change of opinion – Details were submitted in the original assessmentproceedings – Reassessment for purpose of verification and investigation is held to be not valid.[S.148]

    Allowing the petition the Court held that the AO has passed the original assessment order by calling the information and getting the confirmation from the parties. The AO cannot reopen the assessment on the ground that further verification and investigation was required. On the basis of the very same material, the assessment could not be reopened on some change of opinion. In the facts and circumstances of the case, the notice of reassessment was not valid. (AY. 2013-14)

    Jarun Pharmaceuticals Pvt. Ltd. v. ITO (2019) 416 ITR 249 (Guj)(HC)

  52. S. 147 : Reassessment – Non disclosure of receipt – The attempt of further verification would amount to rowing inquiry – Reassessment is bad in law. [S. 143(1),148]

    Allowing the petition the Court held that, even in a case where the return is accepted u/s 143(1) without scrutiny, the fundamental requirement of income chargeable to tax having escaped assessment must be satisfied. Mere non-disclosure of receipt would not automatically imply escapement of income chargeable to tax from assessment. There has to be something beyond an unintentional oversight or error on the part of the assessee in not disclosing such receipt in the return of income. In other words, even after non-disclosure, if the documents on record conclusively establish that the receipt did not give rise to any taxable income, it would not be open for the AO to reopen the assessment referring only to the non disclosure of the receipt in the return of income. The attempt of further verification would amount to rowing inquiry. (AY. 2011-12) (WP No. 1230 OF 2019, dt. 25.06.2019)

    The Swastic Safe Deposit and Investment Ltd. v. ACIT (Bom)(HC),
    www.itatonline.org

  53. S.148 : Reassessment – The officer recording the reasons and the officer issuing notice has to be the same person- Any inherent defect therein cannot be cured – The fact that the assessee participated in the proceedings is irrelevant. [S.147, 148(2),292B]

    Allowing the petition the Court held that the officer recording the reasons u/s 148(2) for reopening the assessment & the officer issuing notice u/s 148(1) has to be the same person. If the reasons are recorded by the DCIT but the notice is issued by the ITO, the reassessment proceedings are invalid. The s. 148 notice is a jurisdictional notice. Any inherent defect therein cannot be cured u/s 292B. The fact that the assessee participated in the proceedings is irrelevant. Accordingly the notice issued u/s 148 and all proceedings pursuant thereto including the assessment order are quashed. (CA. No. 230 of 2019, dt. 09.04.2019)

    (AY. 2011-12)

    Pankajbhai Jaysukhlal Shah v. ACIT (Guj)(HC), www.itatonline.org

  54. S. 148 : Reassessment – Notice  Mere issue of a notice is not sufficient – service of notice is essential – If thepostal authorities return the notice unserved, the Dept has to serve under Rule 127(2) using one of the four sources of address (such as PAN address, Bank address etc). The failure to do so renders the reassessment proceedings invalid. [S. 127, 147, 149, 282 Rule, 127]

    Petitioner never filed the return of income since she did not have any taxable income. The AO issued the notice u/s 148 which was returned with a remark “Left”. Assessment was passed ex-parte. The AO started recovery proceedings. On getting the information telephonically about certain despatches by the Department she rushed from Jabalpur to Mumbai and gathered basic information. The assessee challenged the reopening of the assessment and consequential actions taken by the department. Allowing the petition the, Court held that mere issue of a s. 148 notice is not sufficient. Service is essential. If the postal authorities return the notice unserved, the Dept has to serve under Rule 127(2) using one of the four sources of address (such as PAN address, Bank address etc). The failure to do so renders the reassessment proceedings invalid. Followed
    Y. Narayan Chetty v. ITO (1959)35ITR388(SC)(WPNo.513of2019,dt. 16.07.2019) (AY. 2011-12)

    Harjeet Suraprakash Girotra v. UOI (Bom)(HC), www.itatonline.org

  55. S. 148 : Reassessment – Notice issued in name of deceased assessee – Department attempting to correct error by changing name of entity in reasons to believe” – Not curable defects notice is invalid –Failure to issue notice u/s 143(2) with in
    prescribed time – Reassessment is in valid [S.143(2) 147,159, 29BB]

    The notice was issued in the name of deceased assessee and an attempt was made by the revenue to correct error by changing name of entity in reason to believe. On writ allowing the petition the Court held that in the absence of any provision in the Act, to fasten the liability upon a deceased individual assessee and in the absence of any pending or previously instituted proceedings, the Department could not impose the tax burden upon the legal representative. Court also held that the omission to issue the mandatory notice under section 143(2) rendered the reassessment void. The reassessment notice, the consequential proceedings and the reassessment order passed were to be quashed. (AY. 2010-11)

    Rajender Kumar Sehgal v. ITO (2019) 414 ITR 286 (Delhi)(HC)

  56. S. 151 : Reassessment – Sanction for issue of notice – Sanction order indicated non-application of mind to reasons recorded for reopening, therefore, reopening notice was bad in law and quashed. [S.147, 148]

    An information was received from ADIT (In) that during search conducted in case of Himanshu Verma Group it was found that Himanshu Verma Group was engaged in activity of providing bogus accommodation entries and that assessee was also a beneficiary of Himanshu Verma Group. On basis of such information, reopening notice was issued against assessee. CIT also granted sanction under S. 151 of the Act. It was found that reasons recorded in support of reopening notice recorded activity Himanshu Verma Group group in providing accommodation entries while order granting sanction proceeded on basis that it was assessee who was engaged in providing accommodation entries. Court held that it is a settled position in law that grant of sanction by CIT under S. 151 is not a mechanical act on his part but it requires due application of mind to reasons recorded before granting sanction. Accordingly the Court held that the sanction order indicated non-application of mind to reasons recorded for reopening hence reopening notice was bad in law and quashed. (AY. 2011-12)

    My Car (Pune) (P.) Ltd. v. ITO (2019)263 Taxman 626 (Bom.)(HC)

  57. S. 153B : Assessment – Search and seizure – Limitation – Order of assessment was despatched on last day prescribed – Not barred by limitation. [S.132]

    Court held that in a block assessment where the officer passes the order on the last day of limitation and dispatches it after office hours, it cannot be said to be a factor vitiating the order or enabling the limitation period to be applied.

    Rajan Jewellery v. CIT (2019) 414 ITR 621 (Ker) (HC)

  58. S. 194C : Deduction at source – Contractors – Placement fees/ carriage fees – work contract and not fees for technical service [S.194J]

    The question before the High Court was “Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the placement fees/carriage fees paid to cable operators/MSO/DTH Operators are payments for work contract covered u/s 194C and not fees for technical service u/s 194J, without appreciating that the service received by the assessee are technical in nature? Following the order in
    CIT v.UTV Entertainment Television Ltd (2017) 399 ITR 443 (Bom) (HC), decided in favour of the assessee. (AY. 2009-10)

    CIT v. Times Global Broadcasting Co. Ltd. (2019) 105 taxman.com 313 / 263 Taxman 466 (Bom)(HC)

    Editorial: SLP of revenue is dismissed, CIT v. Times Global Broadcasting Co. Ltd. (2019) 263 Taxman 465 (SC)

  59. S. 197 : Deduction at source – Certificate for lower rate – Quasi judicial – Must be supported by valid and cogent reasons- Orders passed by a statutory authority under “dictation” of a superior officer or anyone else is bad in law. [R.28AA]

    Court held that an order u/s 197 is quasi- judicial & must be supported by valid & cogent reasoning. It has to be based on objective criteria and relevant material. On facts, there is arbitrariness and non-application of mind at various levels which vitiates the certificate. The reasons do not conform to the requirement of s. 197 r. w. Rule 28 AA. The settled legal position is that orders passed by a statutory authority under “dictation” of a superior officer or anyone else is bad in law. The Court directed the AO for issuance of a lower withholding certificate under Section 197(1) of the Act afresh in accordance with law. (W.P.(C) 7744/2019 and CM APPL. 32145/2019 (stay), dt. 29.07.2019)

    Bently Nevada LLC v. ITO (2019) 107 taxmnn.com 440 (Delhi)(HC),
    www.itatonline.org

  60. S. 220 : Collection and recovery Assessee deemed
    indefault
    Stay – Issue decided in favour of assessee by CIT (A) in other proceedings- Pendency of appeal before CIT (A) – AO cannot pass the order to deposit 20 % of tax in dispute – Stay was granted against recovery of demand.

    During the pendency of appeal the AO demanded the 20% of tax in dispute, though the issue was decided in favour of assessee by CIT(A) in other proceedings . On writ the Court held that AO cannot pass the order to deposit 20% of tax in dispute and stay was granted against recovery of demand.

    ARCIL Retail Loan Portfolio 001-D- Trust v. Pr. CIT(2019) 264 Taxman 61(Bom)(HC)

  61. S. 220 : Collection and recovery – Stay – Pendency of appeal before CIT(A) – 20% of the disputed demand – Consideration is not received cannot be a ground for lifting the rigor of the requirement of deposit of 20% of the disputed tax pending in appeal. [S. 220(6)]

    Court held that the decision of the authorities to demand payment of 20% of the disputed demand is in consonance with the department’s circulars. There are no extra ordinary reasons for imposing condition lighter than one imposed by the authorities. The contention that the assessee that he received no consideration and no tax could have been demanded from him is subject matter of the Appeal proceedings and cannot be a ground for lifting the rigor of the requirement of deposit of 20% of the disputed tax pending appeal.( WP No.1887 of 2019, dt. 15.07.2019)

    Kalpana Ashwin Shah v. ACIT (Bom)(HC), www.itatonline.org

  62. S. 220 : Collection and recovery – Stay – Pendency of appeal before CIT( A) – AO cannot proceed mechanically in calling upon
    assessee to remit 20 per cent of demand without examining appropriateness of facts and circumstances of case – Order wassetaside. [S.132, 153A, 220(6)]

    Assessee filed an appeal against assessment order and also filed an application seeking a stay of recovery of disputed demand. AO passed an order under S. 220(6) to pay 20 per cent of disputed demand of tax as a pre- condition for grant of stay of recovery. On writ the Court held that grant of stay is conditional upon satisfaction of three primary aspects, i.e., existence of a prima facie case, financial stringency demonstrated and established by assessee and balance of convenience in matter. Since the AO proceeded mechanically in calling upon assessee to remit 20 per cent of demand without examining appropriateness of facts and circumstances of case order passed by the AO was set aside. (AY. 2011-12 to 2017-18)

    Uthangarai Sri Vidya Mandir Educational and Social Welfare Trust v. ACIT (2019) 263 Taxman 422 (Mad.)(HC)

  63. S. 226 : Collection and recovery – Stay – Pendency of appeal before CIT (A) – Similar addition was decided in favour of other assessee by the CIT(A) – AO cannot direct the Assessee to deposit 20 percent of tax demanded.[S.246A]

    AO passed the order making certain disallowances. Pending such appeal, assessee requested to keep tax demand in abeyance. AO rejected the application and directed to deposit 20 per cent of tax demand. On writ the court held that since same disallowances and additions made under similar circumstances in case of other similar trusts were deleted by CIT(A) revenue should not recover the tax in dispute when the appeal is pending before CIT(A). (AY. 2016-17)

    ARCIL Retail Loan Portfolio 001-D-Trust v. PCIT (2019) 263 Taxman 508 (Bom.)(HC)

  64. S. 226 : Collection and recovery – Stay – Pendency of appeal before CIT(A) – Non speaking order – Garnishe notices to Banks was quashed and attachment of Bank account was lifted. [S.226(3)]

    Allowing the petition the Court held that the order of the Assessing Officer rejecting the stay petition filed by the assessee was non- speaking and merely made reference to the non-payment of 20 per cent of the tax demand by the assessee. The order in question was unacceptable on all counts and was to be quashed in limine. The notices issued under section 226(3) to the assessee’s banks by the Assessing Officer were also quashed and the attachment of the bank accounts was lifted forthwith.

    Oren Hydrocarbons Pvt. Ltd. v. ACIT (2019) 414 ITR 52 (Mad)(HC)

  65. S. 234B : Interest – Advance tax – Non-resident – Entire tax was to be deducted at source – Not liable to pay interest for failure to pay advance tax.

    High Court decided issue regarding interest payable under S. 234B in assessee’s favour. Followed
    CIT (IT) v. Shanghai Electric Group Co. Ltd.In[ITA No. 409-410 of 2018, dt. 9-4-2018 and also DIT v. Jacabs Civil Incorporated (2001) 330 ITR 578
    (Delhi) (HC), DIT v. GE Packaged PowerINC(2015)373ITR65(Delhi)(HC)CITv. ZTE Corporation(2017)392 ITR 80(Delhi)(HC)
    .

    CIT (IT) v. Shanghai Electric Group Co. Ltd. (2019)105 taxmann.com 311/ 263 Taxman 476 (Delhi) (HC)

    Editorial: SLP is granted to the revenue, CIT (IT) v. Shanghai Electric Group Co. Ltd. (2019) 263 Taxman 475 (SC)

  66. S. 237 : Refunds – Mismatch – Department cannot withhold refund payable to assessee on the ground that the computer system could not rectify the error
    – Directed to release the refund.

    Assessee had deducted and deposited TDSon payment under old TAN as well as new TAN due to human error. It resulted in TDS mismatch. Computer system could not rectify said error as well as duplication of entry. On writ the Court held that the department could not withhold refund payable to assessee and directed the department to release refund amount payable to assessee. (AY. 2007-08 to 2010-11)

    Vodafone Idea Ltd. v. Dy. CIT (2019) 263 Taxman 680 (Bom.)(HC)

  67. S. 244A : Refund – Interest on refunds – Filing of Form 29B not essential for processing of return and granting of refund. [S.154]

    Filing of Form 29B for computation of tax under MAT is not essential for processing of the return and issuing of refund. Where income was determined and refund calculated in accordance with Form 29B filed belatedly, interest on such refund could not be denied on the ground that the delay in grant of refund was attributable to the assessee since it had filed Form 29B belatedly. Interest on refund was payable to the assessee from the date of filing of the revised return of income. (AY. 2002-03)

    HHA Tank Terminal (P) Ltd. v. ACIT (2019) 177 DTR 300 (Ker.)(HC)

  68. S. 252 : Appellate Tribunal – Departmental promotion (DPC) – Assistant registrar – The Dept is expected to follow up the proposals to fill up the posts of Assistant Registrars in such quota as well as for issuing promotions for the posts of Deputy Registrars so that all these pots to the extent possible can be filled up at the earliest.

    In a PIL filed before the Bombay High Court the Court held that ,the work of important Tribunal like Income Tax Appellate Tribunal (ITAT) should not be allowed to suffer on account of shortage of administrative staff. There is no lethargy on the part of the Dept in filing up said posts. The Dept is expected to follow up the proposals to fill up the posts of Assistant Registrars in such quota as well as for issuing promotions for the posts of Deputy Registrars so that all these pots to the extent possible can be filled up at the earliest. (WP. No. 2873 of 2018, dt. 27.08.2019)

    All India Federation of Tax Practitioner (AIFTP) v. UOI (Bom)(HC),
    www.itatonline.org

  69. S. 254(1) : Appellate Tribunal – Duties – The Tribunal should not make general observations that there are “contrary decisions”- Tribunal to be specific about the decisions and make a mention of the citation in the order and not make general observations.

    Court held that the Tribunal should not make general observations. This statement led us to direct counsel to examine the law and bring to our attention any decision contrary to the view taken by the Supreme Court in Mahalaxmi Sugar Mills 123 ITR 429 etc. We are now informed by Counsel that there are no contrary decisions.

    All this effort and time would have been saved if the Tribunal had made specific reference to contrary decisions or not stated so in the absence of referring to the citations. We request the Tribunal to be specific about the decisions and make a mention of the citation in the order and not make general observations. (ITA No. 809 of 2017, dt. 27.08.2019) (AY. 2007-08)

    PCIT v. M. J. Export Pvt. Ltd. (Bom)(HC), www.itatonline.org

  70. S. 254(1) : Appellate Tribunal – Duties – When any concession is made by the Authorised representatives on behalf of the assessee the Tribunal should take an affidavit from asssessee and on counsel on behalf of assessee or at least a written endorsement made on record of case duly signed by them – Court also stated that the order to be circulated to all the members of the ITAT and also new members to be appointed.

    Court held that when any concession is made by the Authorised representatives on behalf of the assessee the Tribunal should take an affidavit from asssessee and on counsel on behalf of assessee or at least a written endorsement made on record of case duly signed by them. Copy of the order is sent to the President ITAT for circulation to all the Benches and also directed Secretary the Ministry of law and Justice to bring to the notice of the all the new members to be appointed. (AY. 2006-07)

    Ramesh V. v. ACIT (2019) 177 DTR 105 / 104 taxmann.com 292 (Mad.)(HC)

  71. S. 254(1) : Appellate Tribunal  – Duties – Directions – ITAT should take appropriate steps – and expedite hearing in old appeals.

    Petitioner approached the High Court for getting the direction to dispose the appeal which are pending for more than five years. Court held that, President/ Sr. VP of the ITAT should take appropriate steps and expedite hearing in old appeals. A tabular statement indicating the age of the old appeals as well as an action plan of the ITAT with respect to the likely time for their disposal, having regard to the priorities that ITAT may set in this regard, shall also be filed in court. (W.P.(C) 2477/2019, dt. 10.04.2019)

    Nokia Solutions and Networks Italia Spa v. DDIT (Delhi)(HC),
    www.itonline.org

  72. S.254(1) : Appellate Tribunal – Duties – Ex parte order – Even if the assessee could not appear , the Tribunal could have decided the appeal on merits – The Tribunal ought to have restored the appeal on miscellaneous application filed by the assesseeCourt also directed to send the copy of the Judgement to the President of the Tribunal as well as Law Secretary in the Ministry of law and Justice so that the same may be brought to the notice of all the Members of the Tribunal. [ITATR. 1963, R.24]

    Allowing the appeal of the assessee, The Court held that, even if the assessee could not appear, the Tribunal could have decided the appeal on merits. When the miscellaneous application is filed by the assessee, the Tribunal ought to have restored the appeal. Tribunal is directed to decide the issue on merits. The Court also observed that the fact finding Tribunals should not shirk their responsibility to decide the case on merits because the view and reasons given by such Tribunals are important for the Constitutional Higher Courts to look into while deciding the substantial question of law under S.260A of the Act arising from the Tribunal’s orders. A legal and binding responsibility lies upon the Tribunal to decide the appeal on merits irrespective of the appearance of the assessee or his counsel before it or not. Court also directed to send the copy of the Judgement to the President of the Tribunal as well as Law Secretary in the Ministry of law and Justice so that the same may be brought to the notice of all the Members of the Tribunal and the new appointees in the Tribunal at the time of their recruitment its self. The Tribunal may also get it circulated to all the existing members of the Tribunal so that, such orders resulting in serious miscarriage of justice should not be repeated by any member of the Tribunal. (AY. 2010-11)

    Ritha Sabapathy (Smt) v. Dy.CIT (2019) 308 CTR 417 / 263 Taxman 84 (Mad) (HC)

  73. S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Grounds raised and not given up remains un decided – Tribunal to either adjudicate on or to direct the AO to consider the additional evidence – Judgement of the Tribunal gives rise to an error on the face of the record , which is rectifiable.[S.254(1)]

    Where the assessee’s application for additional evidence was admitted by the Tribunal, it was duty bound to either adjudicate on the basis of such additional evidence itself or direct the AO to consider the additions on the basis of such additional evidence. Not following either of these two routes amounts to a mistake apparent from record. Order of the Tribunal set aside. (AY. 2012-13)

    Rolls Royce Marine India (P) Ltd. v. ITAT (2019) 178 DTR 358 / 107 taxmann.com 26 (Bom.)(HC)

  74. S. 254(2A) : Appellate Tribunal – Stay – Stay of demand would not stand vacated after expiry of a period of 365 days, if delay in disposal of appeal was not attributable to assessee.[S.254(1)]

    Revenue raised the question as to whether Tribunal’s order was to be treated as void- ab-initio in light of third proviso to section 254(2A) which provided that stay of demand would stand vacated after expiry of a period of 365 days, even if delay in disposal of appeal was not attributable to assessee. Following the order in
    PCIT v. Carrier Air Conditioning and Refrigeration Ltd. [2016] 387 ITR 441 (P & H) (HC)
    appeal of the revenue was dismissed.

    PCIT v. BMW India (P.) Ltd. (2019)105 taxmann. com 135 / 263 Taxman 340 (P& H) (HC)

    Editorial : SLP of the revenue is dismissed as infructuous as the main appeal is disposed by the Appellate Tribunal, PCIT v. BMW India (P.) Ltd. (2019) 263 Taxman 339 (SC)

  75. S. 260A : Appeal – High Court – Jurisdiction – Bombay High Court does not have jurisdiction to entertain appeals in respect of order passed by the Bangalore Bench of the Tribunal, notwithstanding the fact that an order was passed under S.127 transferring the assessee’s case from AO at Bangalore to AO at Pune. [S. 116, 124,127]

    Held by High Court that:

    1. Since Tribunals and High Courts are not listed under S.116 of the Act Sections 124 and 127 will have no bearing in deciding the jurisdiction of the High Courts which will have jurisdiction over the orders of Tribunal;

    2. jurisdiction of the Court to which the appeal would lie under the Act would be decided by the seat of the Tribunal (ie in which State it is), hence Bombay High Court does not have jurisdiction to entertain appeals under S. 260A in respect of order passed by the Bangalore Bench of the Tribunal, notwithstanding the fact that an order was passed under S.127 transferring the assessee’s case from AO at Bangalore to AO at Pune (ITA No.1142 of 2016 dt. 26-02-2019) (AY.2008-09)

    PCIT v. Sungard Solutions (I) (P) Ltd. (2019) 308 CTR 22 / 176 DTR 57 (Bom)(HC)

  76. S. 260A : Appeal – High Court – Pendency of petition for rectification before Tribunal is not relevant to decide the maintainable of appeal before High Court.[S.254(2)]

    Court held that while deciding the appeal under S. 260A of the Act wherein, the court on being prima facie satisfied that there were substantial questions of law to be decided, had admitted the appeal, by order dated December 21, 2018. In such circumstances, the pendency of a petition for rectification under section 254(2) could have no impact on the appeal. The appeal was maintainable. (AY. 2010-11)

    Daimler India Commercial Vehicles P. Ltd. v. DCIT (2019) 416 ITR 343 (Mad)(HC)

  77. S. 260A : Appeal – High Court – Jurisdiction – Original Assessment in Delhi–Centralised at Ghaziabad after Search action – Punjab and Haryana High Court has no territorial jurisdiction to hear appeal. [S.143(3), 153A]

    The Deputy Commissioner, Ghaziabad passed an assessment order under section 153A read with section 143(3) and made similar additions as in the original assessment. The Commissioner (Appeals) allowed the appeal filed by the assessee against this order. The Tribunal dismissed the appeal filed by the Department against the order of the Commissioner (Appeals). On appeal by the revenue the Court held that the initial process of assessment was started in New Delhi and the final assessment was made by the Assessing Officer at Ghaziabad. Therefore, the Punjab and Haryana High Court lacked territorial jurisdiction to adjudicate the matter. The Department was directed to file appeal before the competent court. (AY.2008-09)

    CIT v. ABC Papers Ltd. (2019) 414 ITR 668 (P&H) (HC)

  78. S. 263 : Commissioner – Revision of orders prejudicial to revenue – AO examined the claim in original assessment proceedings Rule of consistency is applied – Revision is held to be not valid. [S.143(3),80HHC]

    Court held that AO examined the claim in original assessment proceedings. Similar claim was allowed in earlier assessment years. Rule of consistency is applied and revision is held to be not valid. (AY. 1999-2000 to 2001-02)

    CIT v. Kohinoor Foods Ltd. (2019) 414 ITR 249 (Delhi)(HC)

  79. S. 263 : Commissioner – Revision of orders prejudicial to revenue – On money – Order passed by the AO after detailed enquiries Revision is held to be bad in law.[S.69]

    AO passed the order by making certain addition. CIT passed a revisional order under on ground that AO had failed to carry out proper inquiries with respect to assessee’s on money receipt. Tribunal set aside the order of the CIT. High Court upheld Tribunal’s order. (AY.2010-11)

    PCIT v. Shree Gayatri Associates (2019) 263 Taxman 673 (Guj) (HC)

    Editorial : SLP of revenue is dismissed, PCIT v. Shree Gayatri Associates (2019) 263 Taxman 672 (SC)

  80. S. 264 : Commissioner – Revision of other orders – Application for condonation of delay cannot be dismissed for technical reasons – Principle of substantial justice- Matter remanded. [S.80P]

    Allowing the petition the Court held that the Commissioner while passing the order ought not to have rejected the application for condonation of delay as well as the revision petition. It was not in dispute that the Commissioner himself had granted exemption in subsequent years to the assessee and the Central Board of Direct Taxes’ Instruction No. 13 of 2006, dated December 22, 2006, clearly laid down that up to six years’ application for refund can be entertained, but in the present case it was only two years. The order was not justified. Court also observed that, it is well-settled that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. Matter remanded to the Commissioner. (AY. 2008-09, 2012-13,2013-14)

    Kammavari Credit Co-Operative Society Ltd. v. ACIT (2019) 416 ITR 180(Karn)(HC)

  81. S. 264 : Commissioner – Revision of other orders – Amount mistakenly paid as tax – Revision is not maintainable – Duty of the revenue to refund the amount- Substantial justice should prevail over technical considerations. [S.119]

    The assessee, a bank, paid fringe benefits tax in respect of contribution to an approved pension fund. The Tribunal had held for assessment year 2006-07 that fringe benefits tax was not payable on such contribution. The assessee thereupon filed an application for revision under section 264. The application was rejected on the ground of delay. On a writ the Court held that S. 264 was not applicable. But section 119 could have been invoked. The authority ought to have posed only one question to himself, i. e., whether the assessee was liable to pay the tax in question or not. If he was not liable to pay the tax in question, the Department had no business to retain it even if it was wrongly paid. It is well-settled that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay. The Income- tax Department represents the sovereign power of the State in matters of taxation. Whether the Department had illegally collected the tax from the citizen or whether the assessee mistakenly paid the tax to the Department, the consequence is one and the same. If the assessee had mistakenly paid, it is a case of illegal retention by the Department It is a well- settled principle of administrative law that if the authority otherwise had the jurisdiction, mere non-quoting or misquoting of the provision will not vitiate the proceedings. The respondent, the Principal Commissioner was directed to pass orders afresh under section 119 of the Act. (AY. 2007-08)

    Karur Vysya Bank Ltd. v. CIT (2019) 416 ITR 166 (Mad)(HC)

  82. S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Immunity from penalty – Explaining manner in which undisclosed income derived – Paying tax and interest – Deletion of penalty is held to be valid.[S.132(4)]

    Dismissing the appeal of the revenue the Court held that the assessee explained the manner in which undisclosed income derived and paid the tax and interest. Deletion of penalty is held to be valid. (AY.2011-12)

    PCIT v. Ravani Developers (2019) 415 ITR 91 (Guj) (HC)

  83. S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Manner of earning of earning of undisclosed income was substantiated – Deletion of penalty is held to be justified. [S.132(4)]

    Dismissing the appeal of the revenue the Court held that; during course of assessment proceedings the assessee had submitted several documents/communications to substantiate manner in which undisclosed income was derived, hence the Tribunal is justified in deleting the penalty levied by the AO. (AY. 2012-13)

    PCIT v. Bhavi Chand Jindal (2019) 105 taxann.com 77 / 263 Taxman 242 (Delhi)(HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Bhavi Chand Jindal (2019) 263 Taxman 241 (SC)

  84. 170. S. 271(1)(c) : Penalty – Concealment – Explanation 5 -Disclosed undisclosed income in the course of the statements under section 132(4), specifying the manner of earning it from real estate business and paid tax with interest for which no time frame is fixed in Explanation 5(2) Levy of penalty is held to be not justified. [S.132(4),158BC]

    Court held that, clause (2) of Explanation 5 appended to section 271(1)(c) of the Act has not changed with the amendment of law with effect from June 1, 2003 changing the procedure of assessment in the case of search under section 132 . The filing of the returns after the notice is issued to the assessee after search under section 158BC of the Act does not, for the purpose of clause (2) of Explanation 5 to section 271(1)(c) of the Act, mandate the assessee to pay such tax admitted by him to be payable with interest on the undisclosed income admitted by him in the course of search in the statements under section 132(4) of the Act. The only change brought about with effect from June 1, 2003 is in the procedure in the filing of returns and in the assessment for each year independently rather than in the assessment for a block of period as was the position prior to June 1, 2003. Accordingly the assessee satisfied all the three conditions, namely (a) disclosure of undisclosed income in the course of the statements under section 132(4) of the Act ; (b) specifying the manner of earning it from real estate business ; and (c) payment of tax with interest for which no time frame is fixed in Explanation 5(2). The assessee was entitled to the immunity from penalty under section 271(1)(c). As regards the agricultural income the question of fact hence deletion of penalty by Tribunal is held to be justified. (AY. 2002-03 to 2008-09)

    Duraipandi and S. Thalavaipandian (AOP) v. ACIT (2019) 415 ITR 437 (Mad) (HC)

  85. S. 276B : Offences and prosecutions – Failure to pay to the credit tax deducted at source Mere delay in depositing TDS within the time limit prescribed in S. 200 & Rule 30 is an offense sufficient to attract S. 276B. The fact that the TDS has been deposited subsequently does not absolve the offense. The fact that penalty u/s 221 has not been levied is not relevant because there is an admitted delay in depositing TDS. [S. 200, 221, R.30]

    Company had deducted tax at source for the Financial Years 2010-2011 and 2011-2012, but had failed to remit the same to the Central Government account as per the provisions of Chapter XVII-B of the Act. Considerable delay of more than one year, that too, in consequence of survey conducted by the Department and repeated reminders. Since, the explanation given by the accused for delay in remittance of TDS was not acceptable, the Commissioner of Income Tax (TDS) after giving sufficient opportunity to the accused, passed an order under Section 279 of the Act authorizing the complainant. Assessee moved the petition to quash the proceedings. Dismissing the petition the Court held that, Mere delay in depositing TDS within the time limit prescribed in S. 200 & Rule 30 is an offense sufficient to attract S. 276B. The fact that the TDS has been deposited subsequently does not absolve the offense. The fact that penalty u/s 221 has not been levied is not relevant because there is an admitted delay in depositing TDS. (CR P.868/2014, dt. 26.04.2019)

    Golden Gate Properties Ltd. v. DCIT (Karn)(HC),
    www.itatonline.org

  86. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Concealment penalty is deleted – Quashing of prosecution is automatic – The High Court can exercise its inherent jurisdiction to quash the prosecution and not indulge in the empty formality of directing the assessee to approach the Trial Magistrate. [S.271(1)(c), 278]

    Allowing the petition the to quash the Criminal proceedings for wilful attempt to evade tax the Court held that, if the assessee’s appeal against levy of penalty u/s 271(1)

    for concealment of income is allowed by the Appellate Tribunal and has become final, the quashing of prosecution is automatic. The High Court can exercise its inherent jurisdiction to quash the prosecution and not indulge in the empty formality of directing the assessee to approach the Trial Magistrate. Accordingly the prosecution proceedings against the firm and partners are quashed.Followed K. C. Builder v. ACIT (2004) 265 ITR 562 (SC) (CRMP No. 2075 of 2018, dt. 26.06.2019)

    System India Casting v. PCIT (Chhattisgarh)(HC),
    www.itatonline.org

  87. S. 281B : Provisional attachment – Recovery of tax – Over 21 Per Cent of demand already collected – Assessments concluded–No justification to continue with provisional attachment.[S.226(3)]

    Allowing the petition the Court held that once the assessment was complete there would be no justification for continuing with the order under section 281B. Over 21 percent of demand already collected. Assessment is concluded hence no justification to continue with provisional attachment. Referred Instruction F. No. 404/22/2004-ITCC, and CircularNo.179, datedSeptember30,1975(1976)102ITR9(St) (AY. 2005-06 to 2016-17)

    Dabur Invest Corp. v. ACIT (2019) 416 ITR 282 (Delhi)(HC)

  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)

Dear Friends,

The recession is the major issue which has to be addressed by the Government. The slowdown in the economy is hurting all the segments and it is important that the negative sentiment regarding the slowing economy has to be checked in time. The government is working hard to improve the sentiment and has been interacting with the trade and industry, Professionals, Economist and others about the steps needed for putting the economy on the fast track.

The Finance Minister Smt. Nirmala Sitaraman has on 20.09.2019 given a major surprise by announcing the Tax reliefs in the corporate tax rate and other relief which had a wide impact. The amendments has been carried out through a Tax ordinance issued by Government of India. The major relief announced are –

  • Corporate tax rate has been slashed.

  • Manufacturing company which are incorporated after 1st October, 2019 may chose to pay tax @ 15%. The effective rate which surcharge / cess will be 17.01%.

  • Domestic company to pay tax @ 22%. The effective rate which surcharge / cess will be 25.17% provided they will not avail any exemption or incentive.

  • Listed company that announced Buyback before 5th July, 2019 will not have to pay tax on Buyback of shares.

  • MAT rate reduced from 18% to 15%.

The finer prints are contained in the ordinance issued and the same should be seen. The benefit given are really great and it would definitely jump start the economy in a big way.

AIFTP welcomes the concession given by the Union Finance Minister and also request that concessions are also required for the individual tax payer also. The penalty provisions should also be rationalized.

AIFTP is having the next National Tax Conference and NEC Meeting at Varanasi in November, 2019 and thereafter there will be Mumbai convention in December, 2019. All the Members are requested to join the programmes in large numbers.

Wish you all the best and a very happy Dusshera and Ram Navmi.

Dr. Ashok Saraf
National President, 
AIFTP

TO AVOID HARASSMENT, DEPARTMENT
WILL HAVE TO CHANGE ITS ATTITUDE

Speaking to fresh Indian Revenue Service recruits last month, President Ram Nath Kovind had stated that the honest taxpayer is a partner of the taxman and not his adversary. Further he expressed that “ you have a policy and regulatory role, but you are principally a service provider”. “Please be sensitive to the demands and dignity of the person – the honest tax payer – who is coming to you for a service”.

Even, the Finance Minister Nirmala Sitharaman assured India Inc. that businesses will not face any harassment by tax officials and that a new system has been put in place to make officials accountable for their communication with the assessee. The Minister also articulated the government’s intent to respect wealth creator, a sentiment that Prime Minister Narendra Modi shared in his Independence Day speech.

The Minister said a new centralized computer system has been set up for issuing income tax orders, notices and summons with a unique document identification number or DIN effective from October 01, 2019.

This is one way in which fears of harassment of assessee can be addressed. Unless a notice or documents carries a DIN, it need not be taken seriously by the assessee at all, she said.

Thus, there would be paradigum shift for doing assessment. Therefore, it would be imperative for Department to change its behavior and attitude, the officers would be accountable for their communication. So they would be responsible for the assessment. Thus, in New India, we hope to have assessment without harassment.

Till date the Poor conduct of tax officers and staff is believed to have drawn lot of complaints from taxpayers, damaging the image of the department A number of complaints about their high handed and rude conduct, the tax department has asked officers and staff to well behave with taxpayers.

Even courts have blamed the Department for their high handedness. The Bombay High Court in Coca Cola India Ltd. v. Addl CIT and others [205 ITR 419] had commented as under:

Before parting, we would like to record our total dissatisfaction regarding the manner in which authorities below have proceeded to enforce the demand totally ignoring the parameters laid down by this court in the case of KEC International Ltd. [251 ITR 158] while disposing of the stay application. Moreover, attaching the bank accounts of the petitioner even before communicating the order passed on stay application is totally high handed. We hope that the Revenue shall ensure that in future such instances do not occur again – otherwise, the court will have no option but to take appropriate action in accordance with law”

That judgment was delivered on October 19, 2005 but still, Department has not shown any improvement in their behavior. Recently, in Vodafone India Ltd. v. CIT (TDS) [400 ITR 516 (Bom)] refusal of stay of disputed demand merely on the ground that assesse had funds was held not justified in the light of Board Circular F. No. 404/72/93 – ITCC dated February 29,2016 requiring automatic stay where 15% of the disputed tax is paid. In this context of the fact, that it is not the case of revenue that assessee was delaying the appeal, the High Court directed that no coercive step for recovery of disputed amount of ₹ 43.79 crores should be taken pending in the first appeal before Commissioner (Appeals). Similarly, in Bidar Nirmati Kendra v. Pr. CIT [98Taxmann.com 217 (Kar),] prior to taking matter in appeal by assessee his bank account was attached for tax recovery in excess of prescribed minimum limit which was to be deposited by petitioner, same was to be treated as high handed collection by revenue and not sustainable.

Therefore, on February 26, 2019 while taking over responsibility of the Chairman CBDT. Shri P. C. Mody addressed as under:

our immediate priority, will be maximizing Revenue Collection. We need to widen and deepen the tax base, ensuring simultaneously, the optimums utilization of physical as well as human resources.

This must be done without any harassment or high handedness on the part of Officer or Officials. Our conduct must be impeccable, friendly, yet objective – without fear or favour – as we move towards becoming a non – adversarial regime

Timely delivery of quality tax payer services shall be prime area of focus. Continuous and converted efforts must be made to address and redress all public grievances within the prescribed time-limit. Systematic reforms shall continue to be undertaken, especially to redress grievances of small taxpayers, such as: Increased automation of process, e-filing, centralized processing of tax returns, and other bulk operations. Expediting Dispute Resolution, Tax Payer Education and Litigation Management shall also be areas of focus and concern.

We shall continue to strive towards greater transparency accountability and improved voluntary compliance as we roll out a Digital Administration”.

Similar observation has been made by Shri Neena Kumar, the principal director of general of income tax (administration and taxpayer services), and has stressed the necessity of soft skills among employees.

It is important that behavior of officers and staff shall be courteous, polite and above reproach” He also stated that a number of complaints were received by the taxpayer services directorate and CBDT regarding harassment , misconduct and high – handedness of officers and staff. Such behavior earned the bad name to the Department. Therefore, he emphasized that “such incidents damage the image and reputation of income tax department to position itself as a service oriented organization”.

Another way of harassment to taxpayer is also caused by fixing collection targets for individual officers. When 90% of collection comes from advance tax and TDS, 5% from self assessment tax and only 5% from post – assessment collections, therefore there is no necessity to allot collection target to individual officers. The US did away with individual collection in 1959, still collection has not stopped. If collection targets are fixed. Officers make excessive assessments and collect taxes out of illegal demands are raised that taxpayers are unable to pay 20% of the demand. This leads to harassment in the form of attachment of bank accounts and properties.

Thus, our compliments to Mrs. Sitaraman for steps taken to improve ease of living and ease of doing business including pre-filling and faceless scrutiny of income tax returns. This is much needed announcement to build confidence with the tax payer.

H. N. Motiwalla
Editor

Simplified Analysis of the Supreme Court ruling on Basic Wages for Provident Fund Computation.

The Honorable Supreme Court of India have passed a Judgment on 28th February, 2019 in case of Regional Provident Fund Commissioner (II), West Bengal v. Vivekananda Vidyamandir & Others. [Civil Appeal No 6221 of 2011]. A bench of Justice Shri Arun Mishra and Justice Shri Naveen Sinha ruled that employers cannot segregate ‘special allowance’ from basic wages for purpose of PF deductions.

It’s a judgment on the definition of ‘basic wages’ for the purposes of calculating Provident Fund contributions. This is a very important judgment as it impacts on cost to companies (Employers) and take home salary of employees.

1. PF contribution is payable on all amounts paid to employees, except on certain amounts. PF is payable on Dearness Allowance.

2. PF is not payable on House Rent Allowance (HRA).

3. PF is not payable on any allowance which is variable and not universal in nature like Overtime, Statutory Bonus, Commission, Incentive, Leave Encashment, etc.

To Conclude, PF is payable on Gross Salary, reduced by HRA and any variable allowance.

Certain other points to be considered:

  • There is no effective date specified by the PF Department for application of rulings in the Judgment.

  • This Ruling has not touched upon the impact of those contributing PF on amounts exceeding ₹ 15,000/- per month which is the statutory wage 
    limit.

  • This Ruling impacts companies employing foreign nationals qualifying to be International Workers (i.e. other than Indian passport holders) where the statutory wage ceiling of ₹ 15,000/- per month does not apply.

  • Currently, there is no clarity on whether this will have any retrospective effect on companies contributing PF on amounts lesser than ₹ 15,000/- per month.

Some Examples for the Calculation of Salary after the SC Judgment:

Case Calculation PF Computation
Example No.: 1

In case when Gross Salary is less than ₹ 15,000/- Per Month.

Basic + DA 12000
Special Allowance other than DA 1500
HRA 600
Overtime 400
Gross 14500
PF is now payable on Gross Salary minus OT, HRA, Statutory Bonus and other variable allowances.

Old PF Contribution – 
12,000 X 12% = 1440/-

New PF Contribution – 12000+1500=13500, 
13500 X 12% =1620/-

Example No.: 2

In case when Gross Salary is more than ₹ 15,000/- Per Month, but Basic is less than ₹ 15,000 per month (Example 1).

Basic + DA 13000
Special Allowance other than DA 1800
HRA 4000
Overtime 400
Gross 19200
PF is now payable on Gross Salary minus OT, HRA, Statutory Bonus and other variable allowances.

Old PF Contribution – 
13,000 X 12% = 1560/-

New PF Contribution – 13000+1800=14800, 
14800 X 12% =1776/-

Example No.: 3

In case when Gross Salary is more than ₹ 15,000/- Per Month, but Basic is less than ₹ 15,000 per month (Example 2, Where Statutory Wage limit becomes applicable).

Basic + DA 14000
Special Allowance other than DA 1900
HRA 5000
Overtime 800
Gross 21700
PF is now payable on Gross Salary minus OT, HRA, Statutory Bonus and other variable allowances.

Old PF Contribution – 
14,000 X 12% = 1680/-

New PF Contribution – 14000+1900=15900, 
15900 X 12% =1908/- ( PF Ceiling Cap can be kept upto 
15000 X 12% = 1800/-)

Example No.:4

In case when Gross Salary is more than ₹ 15,000/- Per Month, and Basic is also more than ₹15,000 per month, and Management Currently Contributes PF on restricted / Statutory wages Ceiling.

Basic + DA 20000
Special Allowance other than DA 3000
HRA 6000
Overtime 1200
Gross 30200

 

Old PF Contribution – 
15,000 X 12% = 1800/-New PF Contribution – 
15,000 X 12% = 1800/-

(NO CHANGE)

(PF Ceiling Cap 
15000 X 12% = 1800/-)

Example No.:5

In case when Gross Salary is more than ₹15,000/- Per Month, and Basic is also more than ₹ 15,000 per month, and Management Contributes PF on actual Basic.

Basic + DA 25000
Special Allowance other than DA 5000
HRA 10000
Overtime 4000
Gross 44000

 

Old PF Contribution – 
25,000 X 12% = 3000/-New PF Contribution – 
25,000 X 12% = 3000/-

(NO CHANGE)

Since SC Judgment

has not touched upon the impact of those contributing PF on amounts exceeding ₹15,000 per month which is the statutory wage limit.