Registered document – Time from which it operates – Registration Act 1908, S. 47
Deed of confirmation was executed on 3-8-1999 by owners in favour of purchase of flats. It was presented on same date for registration. On 3-5-2001 registration fee was paid. Deed of confirmation was duly registered on 3-1-2005. Deed of confirmation is operative from 3-8-1999 in view of section 47 of Registration Act.
Mahendra Valji Rathod v. National Radio and Electronics Company [2019(5) Mh.L.J. 795(BOM)(HC)]
Will – Genuineness of will – Execution of will : Succession Act of 1925, S. 63(c) and Evidence Act, S. 68
Will must be proved by attesting witnesses. In the present case witnesses had only identified thumb impression of deceased on Will. In absence of evidence on record that after testator put her thumb impression on document of Will, attesting witnesses put their signatures on said document, it cannot be held that there was attestation by two witnesses. Evidence is held to be insufficient so far as section 63(c) of Succession Act is concerned.
It is well settled that execution of a document does not mean mechanical act of signing the document or getting it signed but an intelligent appreciation of the contents of the document and signing in token of acceptance of those contents.
Allegation that Will in question is forged Burden of proof is on person making such allegation.
Dilip s/o Devidas Kachare v. Prabhavatibai W/O Ratnakar Dudggikar [2019(5) Mh.L.J. 338 (Nagpur)(HC)]
Mortgage by conditional sale. Transfer of property Act, 1882 ss 54 and 58(c) :
It is settled law that, section 58(c) contains the definition of a mortgage by conditional sale. It is with the greatest difficulty in many cases that such mortgages can be distinguished, from sale with a condition for repurchase. As cl (c) of section 58 indicates, the real point of difference between the two kinds of transactions is that, in the case of a mortgage by conditional sale, the sale is only ostensible, whereas, in the case of an out and out sale, it is real. The ostensible or real nature of transaction can, however, be only determined by finding out the intention of the parties. Thus, the intention of the parties is to be gathered for deciding the character of the document.
Bhagubai Nana Dhondge (deceased) through the Legal Heirs Chandrakant Shivaji Dhondge and others v. Shantabai w/o. Dasharath Suryawanshi and others. [2019(5)Mh.L.J. 393(BOM)(HC)]
Registered Document – Registration Act, 1908, S. 49 – Mohammedan Law – oral gift – Condition
A registered document carries with it a presumption that it was validly executed. It is for party challenging genuineness of transaction to show that transaction is not valid in law.
Under the Mohammedan law, no doubt, making oral gift is permissible. The conditions for making valid oral gift under the Mohammedan law are:- (i) there should be wish or intention on the part of the donor to gift; (ii) acceptance by the donee; and (iii) taking possession of the subject matter of the gift by the donee. The essentials of a valid and complete gift under Mohammedan law have been succinctly laid down in Abdul Rahim and Others v. Sk. Abdul Zabar and Others (2009) 6 SCC 160 as under:-
“13. The conditions to make a valid and complete gift under the Mohammedan law are as under:
(a) The donor should be sane and major and must be the owner of the property which he is gifting.
(b) The thing gifted should be in existence at the time of hiba.
(c) If the thing gifted is divisible, it should be separated and made distinct.
(d) The thing gifted should be such property to benefit from which is lawful under the Shariat.
(e) The thing gifted should not be accompanied by things not gifted i.e. should be free from things which have not been gifted.
(f) The thing gifted should come in the possession of the donee himself, or of his representative, guardian or executor.
It is also well settled that if by reason of a valid gift the thing gifted has gone out of the donee’s ownership, the same cannot be revoked. The donor may lawfully make a gift of a property in the possession of a lessee or a mortgagee. For effecting a valid gift, the delivery of constructive possession of the property to the donee would serve the purpose. Even a gift of a property in possession of trespasser is permissible in law provided the donor either obtains and gives possession of the property to the donee or does all that he can to put it within the power of the donee to obtain possession.
Jamila Begum (D) Thr. L.RS. v. Shami Mohd (D) Thr. L.RS. and Another [2019(4)Mh.L.J. 500(BOM)(HC)]
Mortgage by conditional sale or sale with option to repurchase: Transfer of property, 1882, Sec. 58(c)
Whether an agreement is a mortgage by conditional sale or sale with an option for repurchase is a vexed question to be considered in the facts of each case. The essentials of an agreement, to qualify as a mortgage by conditional sale, can succinctly be summarised. An ostensible sale with transfer of possession and ownership, but containing a clause for re-conveyance in accordance with section 58(c) of the Act, will clothe the agreement as a mortgage by conditional sale. The execution of a separate agreement for reconveyance, either contemporaneously or subsequently, shall militate against the agreement being mortgage by conditional sale. There must exist a debtor and creditor relationship. The valuation of the property, and the transaction value, along with the duration of time for reconveyance, are important considerations to decide the nature of the agreement. There will have to be a cumulative consideration of these factors, along with the recitals in the agreement, intention of the parties, coupled with other attendant circumstances, considered in a holistic manner. The language used in the agreement may not always be conclusive.
Ganpati Babji Alamwar (D) By Lrs. Ramlu and Others v. Digambarrao Venkatrao Bhadke and Others: AIR 2019 Supreme Court 4292
Jurisdiction of National Consumer Dispute Redressal Commission (NCDRC) – Imposition of statutory due arising out of “deficiency in service” can be determined by consumer fora: Consumer Protection Act, 1986, Sec 2(1)(g), 2(1)(o)
The validity of the imposition of a statutory due arising out of a “deficiency in service”, can be undertaken by the consumer fora as per the provisions of the Act. The decision of this Court in the case of HUDA v. Sunita (AIR Online 2005 SC 256, wherein it was held that NCDRC has no jurisdiction to adjudicate the legitimacy of the aforementioned statutory dues, was rendered without considering any of the previous judgments of this Court and the objects of the Act. Consequently, the law laid down in the aforesaid case does not hold good before the eyes of law, and is thereby overruled.
The court noted that those exactions, like tax, and cess, levied as a part of common burden or for a specific purpose, generally may not be amenable to the jurisdiction of the Consumer Forum. However, those statutory fees, levied in lieu of service provided, may in the usual course be subject matter of Consumer Forum’s jurisdiction provided that there is a ‘deficiency in service’ etc.
Punjab Urban Planning and Development Authority (Now Glada) v. Vidya Chetal: AIR 2019 Supreme Court 4357
Auction sale of property of debtor – Forfeiture of earnest money deposit : Recovery of Debts Due to Banks and Financial Institutions Act 1993, Ss. 29, 25
Failure by successful bidder to deposit entire bid amount on 15th day from date of sale of property of debtor. Successful bidder seeking extension of time to pay entire bid amount on ground of failure to disclose encumbrances on property before conducting auction sale. Sale was on ” as is where is” basis Recovery officer has no power to grant extension. Forfeiture of earnest money, proper.
Kumar Urban Development Pvt. Ltd. v. Indian Bank and Others: AIR 2019 Bombay 244
Declaration of title – Title acquired by virtue of registered document cannot be unsettled by mere declaration.
Parties in joint possession of suit property. Defendant claiming absolute ownership as he paid entire consideration for purchase of property And at time of registration, plaintiff fraudulently inserted his name as one of
co-purchasers. Plaintiff himself declared that he did not pay any consideration money Relinquishment of title by one of co-sharer in whose name registered title deed exists, cannot be said to be collateral transaction. Ownership can only be relinquished by deed which is also compulsorily registerable. Moreover defendant failed to make any attempt within three years from registration of said deed or within period of limitation from date of declaration made by plaintiff to get deed of relinquishment or release or rectification executed by plaintiff. Claim of absolute ownership by defendant, not tenable as barred by limitation u/Art. 113 of Limitation Act. Title acquired by virtue of a registered document cannot be unsettled by a mere declaration.
Paritosh Kumar Basu v. Sandhya Basu and Others: AIR 2019 Calcutta 292
Sale certificate – stamp duty – sale certificate issued by Authorised officer of Bank – Is liable for stamp duty under Art. 18(c) r.w. Art. 23 of Sch. 1: Stamp Act 1899, S.47-A
The Sale Certificate issued by the Authorised Officer of the bank cannot be agnated with the Sale Certificate issued by a Civil or Revenue Court. The nomenclature given to the document issued by the Authorized Officer would be irrelevant for exemption from payment of stamp duty and the same will not be covered under Article 18-C Schedule 1 of the Stamp Act. Therefore, the Sale Certificate issued by one who is neither Civil or Revenue Officer would not fall u/s. 17(2)(xii) of the Registration Act and the Sale Certificate issued by the Authorized Officer is liable for stamp duty on the market value as per Article 18-C read with Article 23 of Schedule 1 of the Stamp Act. If proper stamp duty is not paid for the said Sale Certificate and registered as required under law, then it is only a still born child and does not confer any right to the petitioner whatsoever. When the Sale Certificate is not properly stamped and registered, it is a void document and no right would vest upon the petitioner based on the same. In the case of the property being under-valued, then, the Registering Authority is entitled to refer the matter to the Collector under Section 47-A of the Stamp Act. Therefore, in respect of the Sale Certificate issued by the Authorized Officer of the bank, Section 47-A of the Stamp Act is applicable.
Dr. R. Thiagarajan v. The Inspector General of Registration, Santhome, Chennai and other: AIR 2019 MAD 274
Overriding effect – Proceeding under SARFAESI Act holds primacy over MPID Act – Recovery debt – Priority of charge – Right of secured creditor to realise secured debts shall have priority over all debts and Govt. Due
It is evident that debt which is secured under the provisions of a statute becomes the first charge over the property in question and has to give away to a crown debt, which is in the nature an unsecured debt.
Kulbir Singh Dhaliwal and Others v. U.T. Chandigarh : AIR 2019 Punjab and Haryana 151
Claim for, by society or flat purchasers Construction was completed Full occupancy certificate and completion certificate already granted. Failure by promoter to execute conveyance deed though period of five years from first date of agreement of sale already lapsed Order granting deemed conveyance to society, proper.
Mayfair Housing Pvt. Ltd. v. State of Maharashtra and Another: AIR 2019 Noc. 684 (Bom)
Suit by minor – Through next friend – Joint family property –Civil P. C. 1908, O.32, R. 1:
Sale by Karta of joint family property. Failure to prove legal necessity. Failure to prove that he was heavily indebted. Karta selling land though not having other source of income. Suit for partition and separate possession filed by minor children of Karta through next friend cousin against Karta and purchasers of property Maintainable. Such sale not binding on other members of joint family.
Sangnath Mahalingappa Ambulge and Others v. Babu Sidling Ambulge And Others: AIR 2019 Noc. 685(Bom)
S. 2(7A) : Assessing Officer – Jurisdiction – The Addl. CIT is an Assessing Officer, he can act as such only if there is a notification issued by the CBDT u/s. 120(4)(b) or if there is an order u/s. 127 transferring jurisdiction from the DCIT to the Addl. CIT – In the absence of either, the assessment order is without jurisdiction and has to be quashed as null and void – No estoppel against the law – Additional ground of assessee on jurisdictional issue is allowed.
[S. 2(28c), 120(4) 127, 254(1)]
Allowing the additional grounds raised by the assessee the Tribunal held that, though, by virtue of the retrospective amendment to S. 2(7A), the Addl. CIT is an Assessing Officer, he can act as such only if there is a notification issued by the CBDT u/s. 120(4)(b) or if there is an order u/s. 127 transferring jurisdiction from the DCIT to the Addl CIT. In the absence of either, the assessment order is without jurisdiction and has to be quashed as null and void. The fact that the assessee co-operated is irrelevant because there is no estoppel. The argument of the Dept. that as the order is passed by a higher officer, there is no prejudice to the assessee is not acceptable. The matter also cannot be remanded back. (ITA No. 3927/Mum/2017 dt. 16-8-2019)(AYs. 2003-04, 2004-05)
Tata Communications Ltd. v. Addl. CIT (Mum)(Trib.), www.itatonline.org
S. 2(24)(iv): Income – The value of benefit or perquisite – Success fee paid by company Tirumala Milk products Pvt. Ltd. to Barclays Bank could not be treated as perquisites. [S. 48(1)]
Assessee, was holding 10.34 per cent of shares in company Tirumala Milk products Pvt. Ltd. During year, assessee along with all other individual shareholders decided to sale his shares in Tirumala Milk Products Pvt. Ltd. BSA International. Tirumala Milk products Pvt. Ltd. had appointed Barclays Bank as a financial advisor for evaluating value of its shares, searching a potential buyer, etc. On finalization of sale transaction, Tirumala Milk products Pvt. Ltd. paid success fee to Barclays Bank. The AO held that the assessee being shareholder of 10.34 per cent had got indirect benefit from services of Barclays Bank which required to be taxed in hands of assessee under S. 2(24)(iv) of the Act. CIT(A) held that provision is not applicable hence deleted the addition. On appeal by the revenue the Tribunal affirmed the order of the CIT(A). (AY 2014-15)
ACIT v. Danda Brahmanandam (2019) 179 ITD 38 (Vishakha) (Trib.)
S. 2(24)(xi) : Income – Business income – Key man insurance policy – Accrual or receipt basis – Bonus on Keyman Insurance Policy taxable on receipt basis.
[S. 5, 28(vi), 10(10DD), 145]
Tribunal held that the proceeds from LIC are exempt under S. 10(10D) except if the amount is received on a Keyman Insurance policy, if the amount is received from a pension policy and the premium paid is more than 20 per cent. of the sum assured in any year. The proceeds from the insurance company in respect of Keyman Insurance policy would be taxable only on receipt basis. In terms of the provisions of S. 2(24)(xi) read with S. 28(vi), the amount of bonus on keyman insurance policy is to be taxed on receipt basis only. Hence taxing the income on accrual basis was not valid.
(AYs. 2006-07, 2009-10, 2010-11, 2011-12).
Dy. CIT v. Impulse International P. Ltd. (2019) 71 ITR 28 (SN) (Delhi)(Trib.)
S. 4 : Charge of income-tax – Capital or revenue – Subsidy received from Government is a capital receipt not chargeable to tax – Rule of consistency to be followed.
The assessee had received grant/financial assistance from the Government of India. The assessee had recorded the same as capital receipt and not offered to tax which was accepted by the Department from AY 2006-07 till AY 2013-14. However, for AY 2014-15 the Department in the assessment has considered the receipt as revenue in nature and made an addition on account of the same. The Tribunal after going through the facts and circumstances of the case and relying on the decision of Apex Court in case of CIT v. Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 362 (SC) and in the case of CIT v. Chaphalkar Brothers Pune (2018) 400 ITR 279 (SC) held that grants given for specific purpose to be applied for capital outlays is capital in nature and not chargeable to tax. Further the Tribunal, placing reliance on the decision of Radhasaomi Satsang v. CIT (1992) 193 ITR 321) (SC) and CIT v. Neo Poly Packs (P) Ltd. (2000) 245 ITR 492 (Delhi) (HC) noted that the Apex Court has laid down the principle of rule of consistency. Thereby in absence of any material change justifying the Revenue to take different stand view, the same view as accepted by earlier years should continue to prevail till there is some material change in facts. (AY. 2014-15)
Chhattisgarh Mineral Development Corporation Ltd. v. ACIT (2019) 69 ITR 75 (SN) (Raipur)(Trib.)
S. 4: Charge of income-tax – Subsidy – Refund of octroi – Capital receipt – Not chargeable to tax. [S. 2(24)(xviii), 43(1), 56]
The receipt of a subsidy in the form of refund of octroi is a capital receipt and not a revenue receipt in the hands of the assessee if the subsidy goes to reduce the cost of assets being material/purchases and the receipt of such a subsidy will be on capital account. Applied CIT Chaphalkar Brothers (2018) 400 ITR 279 (SC) (AY. 2012-13)
Dy. CIT v. Mas India P. Ltd. (2019) 74 ITR 72 (SN) (Pune)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – Management service fees from its Indian subsidiaries – Not taxable as fees for technical services and not as dividend – Reimbursement of expenses – DTAA – India – Swedish [S. 9(1)(iv), Art. 10, 12]
Assessee-Swedish company received management service fees from its Indian subsidiaries, department’s view that said receipts were in nature of Fees for Technical Services (FTS). Alternate, case of the department was, said receipts to be treated in nature of dividend taxable under DTAA between India and Sweden as well as u/s. 9(1)(iv). Tribunal held that, management service fees from its Indian subsidiaries is neither taxable as fees for technical services nor as as dividend. Reimbursement of expenses is not taxable in the absence of any permanent Establishment in India. (AY. 2009-2010)
Sandvik AB v. DIT (2019) 178 ITD 128 (Pune)(Trib.)
S. 10(1) : Agricultural income – Growing h igh yielding hybrid seeds – Agricultural activity – Entitled for exemption.
The assessee produced high yielding hybrid seeds. It purchased seeds and then produced hybrid seeds in the net houses and marketed the seeds. The AO held that the activity carried on by assessee was not agricultural activity and treated the receipts as income of assessee and denied the exemption. The CIT(A) deleted the addition. Dismissing the appeal of the revenue the Tribunal held that growing of hybrid seeds could never be held to be non-agricultural activity. Accordingly entitled for exemption.
(AYs. 2012-13, 2013-14).
Dy. CIT v. Genuine Seeds P. Ltd. (2019) 74 ITR 7 (SN) (Pune)(Trib.)
S. 10(38): Long term capital gains from equities – Penny stocks – Burden is on the revenue to show with evidence the chain of events and live link of the assessee’s involvement in the scam including that he paid cash and in return received exempt Long term capital gains – Denial of exemption is held to be not justified – Addition cannot be made as unexplained income – Addition cannot be made on estimated commission for alleged accommodation entries. [S. 45, 68, 69C]
The AO treated the transactions of sale of shares of listed companies as bogus and added the sale proceeds as unexplained income u/s. 68 of the Act and also added commission u/s. 69C for alleged accommodation entries. CIT (A) confirmed the order of the AO. On appeal allowing the appeal of the assessee the Tribunal held that the fact that a scam has taken place in some penny stocks does not mean that all transactions in penny stocks can be regarded as bogus. In deciding whether the claim is genuine or not, the authorities have to be guided by the legal evidence and not on general observations based on statements, probabilities, human behaviour, modus operandi etc. The AO has to show with evidence the chain of events and live link of the assessee’s involvement in the scam including that he paid cash and in return received exempt Long term capital gains. Addition cannot be made as unexplained income. Addition cannot be made on estimated commission for alleged accommodation entries. (Note: Sanjay Bimalchand Jain v. PCIT (2018) 89 Taxman.com 196 (Bom) (HC) is distinguished) (ITA No. 3427-3429/Mum/2019, 3311-3313/Mum/2019/3426/Mum/2019/3264/3265/Mum/2019/3247/3248/Mum/2019, dt. 1-10-2019)(AY. 2012-13)
Vijayattan Balkrishan Mittal v. DCIT (Mum) (Trib) www.itatonline.org
S. 11: Property held for charitable purposes – Surplus from the property held for charitable purpose – Cannot be taxed – When such activities done on such property are ancillary to the main object of the charitable organization – Corpus donation from members is entitle to exemption [S. 2(15), 11(1)(d), 12AA]
Assessee has been granted registration under S. 12AA of the Act. As per the MOA of the organization its main object is to engage itself in establishing harmony between the construction industry and the Govt. bodies, financial institutions for promoting healthy growth and development of the construction industry. To attain this objective it performed certain ancillary activities like organized fairs, exhibitions and several other inter-connected activities. In such fairs there was the participation of members as well as non-members of the organization for certain consideration. It was brought to the notice of the Tribunal that it was expressly mentioned on the invoice that even if any surplus is realised by the assessee, it would be transferred to the “Infrastructure Fund” of the assessee. The Tribunal held as this surplus was realised by the assessee while performing the activities ancillary to the main object, the surplus realised is corpus in nature under S. 2(15) and not income and hence not chargeable to tax in the hands of the assessee. (AY 2012-13)
CREDAI Bengal v. ITO (2019) 56 CCH 123 / 72 ITR 672 (Kol.) Trib.)
S. 11 : Property held for charitable purposes – Business income Incidental to object of Trust – Providing transport to students and staff working for society is incidental to achieve object of providing education i.e. object of society and not in nature of business – Entitle to exemption. [S. 2(15), 11(4A)]
During the year society charged transport fee for providing facility to students and staff for transport to and from school to respective houses of children in given routes. During assessment proceeding, AO disallowed the said fees on the premise that the aforesaid activity amounts to business in view of proviso to S. 2(15) of the Act and thus assessee would not be entitled for exemption under S. 11(4A) of the Act. AO further noted that surpluses generated from running of transport business were neither distributed among students nor was reduced from fee of next year and the institution can also run without the transport facility. On assessee’s appeal to CIT(A) no relief was granted. On assessees appeal to Tribunal held that the activity of running school buses exclusively for the students and staff, is an intrinsic part of the activity of running a school. These activities of the assessee are not in nature of business in as much as transport is also incidental to attainment of main object of Assessee trust of the education Therefore, provisions of S. 11(4A) would not be applicable. (AY. 2010-11)
Delhi Public School Ghaziabad Society v. ACIT (2019) 69 ITR 31 (SN) (Delhi) (Trib)
S. 12AA : Procedure for registration – Trust or institution – CSR activities are charitable in nature – Eligible for registration. [S. 15, Companies Act, 2013, S. 8]
Assessee filed application for registration u/s. 12AA, the Act. CIT(E), rejected the application on the ground that merely to comply with requirement of Corporate Social Responsibility (CSR) of its parent company and, activities carried out by assessee did not partake meaning of public charitable company as defined u/s. 2(15) of the Act. On appeal the Tribunal held that as per S. 8 of Companies Act, 2013, CSR activities are public charitable activities per se the objects of assessee were to establish and run educational institutions like schools, colleges, apprentice training, practical training classes, vocational training, boarding facilities, NGO, gurukuls, teaching classes, etc., and the same fall under charitable activities in terms of s. 2(15). Hence assessee eligible for registration u/s. 12AA of the Act.
Escorts Skill Development v. CIT (2019) 178 ITD 32 (Delhi) (Trib.)
S. 12AA : Procedure for registration – Trust or institution – Surplus generated – Registration cannot be denied. [S. 2(15)
Allowing the appeal of the assessee the Tribunal held that when an educational institution carries on activity of education primarily for educating persons, and merely it making profit would not lead to conclusion that it ceases to exist solely for educational purposes and becomes an institution for purpose of making profit. Since surplus generated by assessee had been ploughed back for furtherance of its object of carrying out educational activities, hence rejection is not justified to grant registration to assessee-society.
Sanatam Dharam Educational Charitable Society v. CIT (2019) 178 ITD 242 (Asr.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – For the calculation of average investments only those investments from which exempt income is derived. Assessee did not derive any exempt income matter remitted back to AO. [R. 8D]
Assessee made suo motu disallowance under Rule 8D. AO computed disallowance under rule 8D(2)(iii). For the calculation of average investments only those investments from which exempt income is derived. Assessee did not derive any exempt income matter remitted back to AO. (AY. 2012-13)
Cox & Kings Ltd v. Addl. CIT (2019) 55 CCH 75/ 69 ITR 45 (SN) (Mum) (Trib)
S. 28(i) : Business loss – Advance to subsidiary – Subsidiary has gone to liquidation – Loss is allowable as business loss.
[S. 2(13), 37(1)]
When the assessee has advanced funds to its subsidiary and the subsidiary has gone into liquidation then the funds advanced to such subsidiary must be treated as a business loss if they are advanced on the grounds of commercial consideration and commercial expediency.
Dy. CIT v. Pioneer Investcorp Ltd. (2019) 72 ITR 376 (Mum.) (Trib.)
S. 28(i) : Business loss – loss on account of shifting in securities – Fall in the value of investments allowable as a deduction irrespective of change in classification of investments to comply with RBI guidelines. [S. 37(1)]
During the year, assessee bank had shifted certain securities from Account for Sale (AFS) to Held to Maturity (HTM) in order to comply with the RBI guidelines in preparation of accounts. AO disallowed the claim on the ground that RBI guidelines are not binding while computing taxable income and the CIT(A) confirmed the same.
Before the Tribunal, assessee submitted that as on date of shifting of securities, the diminution in the value of securities was claimed as deduction and investments held by the banking companies are treated as stock-in-trade and therefore fall in value of securities should be allowed as deduction based on the principle of statutory valuation stock that stock-in-trade should be valued at cost or market whichever is less.
Relying on assessee’s own case for previous year and Madras High Court decision in case of CIT v. Karur Vysya Bank Ltd. (2005) 273 ITR 510 (Mad) (HC), Tribunal held that the fact that the assessee bank has shifted the investment from one category to another is of no relevance, in as much as, fall in value of investment is held to be allowable as deduction. (AYs. 2012-13, 2014-15)
City Union Bank Ltd. v. ACIT (2019) 74 ITR 644 (Chennai)(Trib.)
S. 32: Depreciation – Income from house property – Properties continued to form block of assets – Depreciation is not allowable. [S. 2(11)]
Dismissing the appeal the Tribunal held that merely because properties continued to form block of assets depreciation is not allowable as there is no business income during the year and the income is assessed as income from house property (AY. 2013-14)
Emco Dyestuff (P.) Ltd. v. DCIT (2019) 178 ITD 111 (Mum)(Trib.)
S. 32: Depreciation – No turnover during the year – Depreciation cannot be disallowed
The AO disallowed depreciation on the asset on the ground that the assessee had not carried out any business activity during the year. The CIT(A) deleted the disallowance holding that the assets were business assets of the assessee. On appeal the Tribunal held that merely because there was no turnover during the instant year that could not be a reason for disallowance of deprecation once the asset was already put to use in the preceding years. The depreciation being a statutory allowance cannot be disallowed. (AYs. 2010-11, 2011-12)
Dy. CIT v. Jammu Metalic Oxides Pvt. Ltd. (2019) 72 ITR 449 (Jaipur) (Trib.)
S. 32 : Depreciation – POS TERMINALS are in the nature of computers – Entitled to depreciation at 60% [S. 2(11), 2 (13)]
POS TERMINALS are in the nature of computers and not in the nature of office equipment and would therefore be eligible for depreciation @60% and not 15%. Hon’ble Delhi High Court in the case of Pr. CIT v. Connaught Plaza Restaurant has held that POS TERMINALS are in the nature of computers and therefore depreciation is allowable @60%. (AY 2009-10)
Dy. CIT v. Oxigen Services India P. Ltd. (2019) 69 ITR 63 (SN) (Delhi)(Trib.)
S. 32 : Depreciation – LED Panel – Rate of depreciation is allowable as applicable to computer. [Information Technology Act, 2000, S 2(1)]
The Tribunal held that the term ”computer” has not been defined in the Act. However, it has been defined in Section 2(1) of Information Technology, Act. The LED Panel more or less fits to the definition of computer as given in Information Technology Act, 2000 and upheld the order of the CIT(A). (AY. 2006-07)
Dy. CIT v. Kumudam Publications P. Ltd. (2019) 70 ITR 41 (SN) (Chennai)(Trib.)
S. 32 : Depreciation – Car purchased in the name of director – Reflected in the balance sheet of the Company – Depreciation is allowable.
Allowing the appeal of the assessee the Tribunal held that the car was purchased in name of a director in order to reduce incidence of indirect taxes, levies etc., however, it was duly reflected in balance sheet of assessee-company. Accordingly the depreciation is allowable to the company. (AY 2013-14)
Shree Laxmi Estate (P.) Ltd. v. ITO (2019) 178 ITD 98 (Mum.)(Trib.)
S. 35D : Amortisation of preliminary expenses – Deduction granted earlier years – Deduction to be allowed for balance period.
The deduction once granted to the assessee for earlier years under Section 35D of the Act would entitle the assessee to amortise the expenses for the balance period under the said section as per the decision of the Supreme Court in Shasun Chemicals and Drugs Ltd. v. CIT  388 ITR 1 (SC). (AYs. 2005-06, 2007-08)
Dy. CIT v. Sahara Care Ltd. (2019) 74 ITR 117 (Delhi)(Trib.)
S. 36(1)(vii) : Bad debt – Provisions for bad and doubtful debts – Reduced from advance account in the balance sheet allowable as deduction to the extent of write off. [S. 36(1)(viia)]
Allowing the appeal of the assessee the Tribunal held that CIT(A) erred in combining the provisions of S. 36(1)(vii) and S. 36(1)(viia). Tribunal observed that CIT(A) considered only the provisions of bad and doubtful debts debited to profit and loss account and ignored the write off of bad debts debited to provisions for bad and doubtful debts and reduced from advance from the Balance Sheet which also constitutes write off. Accordingly, Tribunal remanded the issue back to the file of the AO for limited purpose of verifying the amount of write off debited to provisions of bad and doubtful debts and reduced from advance account in the balance sheet and allow the same as deduction to the extent of write off. (AYs. 2012-13, 2014-15)
City Union Bank Ltd. v. ACIT (2019) 74 ITR 644 (Chennai)(Trib.)
S. 37(1): Business expenditure – Asset management company – Set up of business – Approval from SEBI – Expenditure is allowable though it had not actually commenced its business. [S. 2(13)]
When the assessee has received approval from SEBI to act as an Asset Management Company then it can be said to have set up its business and even though it has not actually commenced its business all business expenses incurred by it are allowable because its business has been set up. (AY. 2013-14)
Dy. CIT v. PPFAS Asset Management P. Ltd. (2019) 72 ITR 41 (SN) (Mum.)(Trib.)
S. 37(1) : Business expenditure – Product registration expenses – Allowable as revenue expenditure.
If the assessee has incurred product registration expenses for the purpose of registering its product and is a trader and not a manufacturer and such expenditure is of a recurring nature then such expenses are not towards purchasing a capital asset nor any benefit is derived which is of an enduring nature and therefore such expenses are entirely allowable as revenue expenditure. (AY. 2013-14)
Dy. CIT v. Sharda Cropchem Ltd. (2019) 178 DTR 83/ 71 ITR 141/199 TTJ 960 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Expenditure on issue of bonus shares – Held to be allowable as revenue expenditure.
Expenditure on issue of bonus shares is held to be allowable as revenue expenditure.
Dy. CIT v. Sharda Cropchem Ltd. (2019) 178 DTR 83/ 71 ITR 141/199 TTJ 960 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Puja donation – Local entities – Charities – Allowable as business expenditure.
Puja donations made by the assessee to various local entities primarily towards community celebrations in order to build goodwill within the community and to ensure smooth conduct of business are allowable as deduction.
Dy. CIT v. Stewarts and Lloyds of India Ltd. (2019) 74 ITR 677 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Sales promotional expenses – Held to be allowable as business expenditure. [Medical Council (Professional Conducts, Etiquettes and Ethics) Regulation Act, 2002]
Expenses incurred by pharmaceutical company on distribution of articles to stockists, distributors, dealers, customers and doctors are allowable as business expenditures. (AY. 2013-14)
Aristo Pharmaceuticals (P.) Ltd. v. ACIT (2019) 178 ITD 147 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Pre-operative expenses –advertisement, marketing and promotion expenses to keep products fresh in minds of public – No enduring benefit – Allowable as revenue expenditure.
The assessee was engaged in trading in high-end kitchen appliances, cooling and coffee machines and laundry and floor care appliances. The Assessing Officer observed that the assessee had not commenced business during the first seven months of the year 2010-11. He disallowed the expenditure of the first seven months as pre-operative expenses. The CIT(A) deleted the addition on account of pre-operative expenses. On appeal the Tribunal held that (i) the assessee had commenced its business in the previous year relevant to the earlier assessment year. Therefore, the expenses considered as pre-operative expenses by the Assessing Officer had to be treated as legitimate business expenditure for the year 2010-11. (ii) He was satisfied with the advertisement, marketing and promotion expenses incurred by the assessee. Public memory is very short and companies had to incur advertisement expenditure year after year to keep their products fresh in the minds of the public. Such expenditure could not partake of the character of giving any enduring benefit. The Assessing Officer had erred in treating such expenditure as creating an intangible asset.
Dy. CIT v. Miele India P. Ltd. (2019) 72 ITR 149 (Delhi)(Trib.)
S. 37(1) : Business expenditure – Liquidated damages – Interest – Breach of agreement and not breach of law – Corporate club membership fees – Allowable as deduction. [S. 35ABB]
The assessee claimed a deduction under section 35ABB on account of payments made to the Department of Telecommunications towards liquidated damages and interest thereon paid. The Assessing Officer disallowed the claim of the assessee holding that liquidated damages and interest paid thereon were penal in nature and not allowable under section 35ABB. The assessee claimed deduction of payments to various clubs as membership fee, said to have been incurred wholly and exclusively for the purpose of business. The Assessing Officer disallowed the amounts observing that the assessee had tried to link the personal expenses with business expenses and that the expenditure incurred in the club were not wholly and exclusively for the purpose of business. The CIT(A) deleted the disallowances. On appeal: Held, (i) that the assessee paid liquidated damages and interest thereon due to breach of the agreement and not a breach of law. Thus, the expenditure claimed did not fall within the Explanation to S. 37(1). Since it was incidental to business, it could not be disallowed. (ii) That considering the expenditure incurred and the nature of the industry, the amount incurred by the assessee for corporate club membership fees was for business promotion and no disallowance could be made. (AY. 2010-11).
Dy. CIT v. HFCL Infotel Ltd. (2019) 71 ITR 93 (SN) (Delhi)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Burden is on assessee to prove recipient declared income in its gross income – Interest to be calculated for the period of default. [S. 201(1), 201(IA)]
The AO held that the assessee had not deducted tax at source and had made a short deduction of tax. Accordingly, he disallowed the sum under section 40(a)(ia) of the Act. The CIT(A) confirmed the order of the AO. On appeal Tribunal held that according to the special audit report, admittedly, the assessee had not deducted tax at source for the payments made. Considering the amendments to section 40(a)(ia), the assessee had to prove that the recipient had declared the income in its gross income. Since the Assessing Officer had not initiated proceedings under S. 201(1), the assessee had not submitted any documents. Hence, the Assessing Officer was directed to delete the addition made under S. 40(a)(ia) and to calculate the interest under S. 201(1A) for the period of default. (AYs. 2007-08, 2008-09)
Dy. CIT v. Janapriya Engineers Syndicate Ltd. (2019) 70 ITR 370 (Hyd.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Amendment to effect that if tax deducted at source paid on or before due date for filing return disallowance not warranted – Retrospective in operation –Remitting tax deduction at source amount before due date for filing return – No disallowance can be made. [S. 139(1)]
Tribunal held that the effect of the amendment by the Finance Act, 2010 is that the assessee deducting tax either in the last month of the previous year or first eleven months of the previous year shall be entitled to deduction of the expenditure in the year of incurring it, if the tax so deducted at source is paid on or before the due date for filing the return under S. 139(1). Merely because an appeal had been preferred against the judgment of the High Court which took the view that the amendment to the provisions of S. 40(a)(ia) by the Finance Act, 2010 with effect from April 1, 2010 was retrospective in its operation and was applicable from April 1, 2005, it could not be the basis not to follow the binding decision of the High Court. Since the tax deduction at source had been remitted on or before the due date of filing of return by the assessee, no disallowance under S. 40(a)(ia) could be made and the entire addition made by the AO should be deleted. (AY. 2005-06).
Dy. CIT v. Janani Tours and Resorts P. Ltd. (2019) 70 ITR 51 (SN) (Bang.)(Trib.)
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Contribution and commission of directors – Directors are paying tax at maximum marginal rate – No disallowances can be made. [S. 36(1)(ii), 37(1), 40A(2)(b), 115-0, Companies Act, 1956, S. 198, 309]
The AO held that the assessee had paid commission expenses in excess of the market rates and disallowed the amount under S. 36(1)(ii). He considered that an amount as excessive and made addition under the provisions of S. 40A(2)(b). For the assessment year 2010-11 he held that the assessee had tried to evade dividend distribution tax under S. 115-O by giving commission which was far more excessive. On appeal the Tribunal held that the assessee was not bound by section 198 and section 309 of the Companies Act, 1956 as the assessee was neither a public company nor a private company which was the subsidiary of a public company nor received any payment beyond the provisions of sub-section (1)(a) of section 309. In terms of the Board resolution a maximum commission of 27 per cent over the turnover can be paid to the directors whereas the total payments was only 1.25 per cent. of the value of the export orders achieved by them. The AO had not brought anything on record nor gathered any evidence about the contribution of the directors which went contra to the payments they received. There was no doubt about the qualifications and contribution of the directors for obtaining the orders and increasing the turnover. The payment of commission had been the practice of the company for the past seven years. The directors who had been receiving commission paid tax at the maximum marginal rate and no revenue leakage could also be found based on the tax payments. Increase in personal expenses and comparing it with the increase in directors remuneration could not be accepted as a methodology to calculate the reasonable remuneration. The company could determine the rates of salary, remuneration, commission as long as it did not infract any law in force. Hence the addition made by the AO was deleted. (AYs. 2006-07, 2009-10, 2010-11, 2011-12).
Dy. CIT v. Impulse International P. Ltd. (2019) 71 ITR 28 (SN) (Delhi)(Trib.)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – liability on account of trade payable is not written back in profit and loss account – No cessation of liability – Addition cannot be made.
When the assessee has not written back the liability on account of trade payables in its Profit and Loss A/c and proceedings with respect to the winding up of the assessee company are pending before an authority (AAIFR) then no liability can be fastened upon the assessee as there has been no cessation of liability.
Dy. CIT v. Pasupati Fabrics Ltd. (2019) 74 ITR 411 (Delhi)(Trib.)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Trade payables outstanding for more than three years in the books – Addition cannot be made as remission or cessation of trading liability.
Dismissing the appeal of the revenue the Tribunal held that outstanding trade payables in its books of account for last three years addition cannot be made as remission or cessation of trading liability. (AY. 2013-14)
DCIT v. Sri Radhakrishna Shipping Ltd. (2019) 179 ITD 139 (Mum.) (Trib.)
S. 43CA: Transfer of assets – other than capital assets – Full value of consideration – Stock in trade – Agreement value – Stamp valuation – Agreement to sell flats/offices – Under construction – No transfer of land or building – Provision is not applicable.
The assessee, engaged in construction of a commercial project, entered into agreement to sell flats/offices (which were under construction) and there was no transfer of any land or building or both in favour of buyers in year. Tribunal held that, provisions of S. 43CA are applicable only when there is transfer of land or building or both. Accordingly agreement to sell entered in to under construction flats provision is not applicable. (AY. 2014 -2015)
Shree Laxmi Estate (P.) Ltd. v. ITO (2019) 178 ITD 98 (Mum.)(Trib.)
S. 45 : Capital gains – Long term capital gains – Off market transaction – Legal requirements complied with – Addition cannot be made as cash credit. [S. 2(47), 68]
If the sale of shares has been carried out as an off market transaction then that per se would not make the assessee liable to pay long term capital gains tax if the price at which the sale is made has been intimated to SEBI, the delivery of shares has been carried out, contract notes have been received, and the transaction is carried out through recognized brokers through account payee cheques. Addition cannot be made as cash credit. (AY. 2007-08)
Dy. CIT v. R. K. Commercial Ltd. (2019) 74 ITR 541 (Kol.)(Trib.)
S. 45 : Capital gains – Long term – Period of holding – Date of execution of sale deed to be considered for the holding period and not date of receipt of occupation certificate – Assessable as long term capital gains.
Assessee and other three companies had purchased four commercial properties by way of separate sale deeds. Subsequently all the aforesaid companies amalgamated with assessee and assessee became owner of all the four properties. Subsequently, assessee sold all properties to Bank and offered the gain derived from such sale as LTCG. AO treated gain derived from sale of such properties as STCG since he computed the holding period for such properties from the date of issue of occupation certificate. However, CIT(A) overruled the same holding that upon execution of sale deeds the right, title and interest over properties were transferred to Assessee hence assessee should be deemed to be owner of properties from date of execution of registered sale deeds. Tribunal held that merely because occupation certificate was issued by competent authority at a later stage, for whatever reason, it would not mean that assessee has not held property from date of execution of registered sale deeds. Assessee was holding properties from date of execution of registered sale deeds i.e., for a period of more than 36 months prior to date of transfer. Hence gains derived from sale of properties had to be assessed as LTCG. (AY. 2010-11)
Crescent Realtors P. Ltd. v. Dy. CIT (2019) 72 ITR 57 (SN) (Mum.)(Trib.)
S. 45 : Capital gains – Capital receipt – Professional goodwill – Business income – Compensation – Amount received against termination of right – Held to be capital receipt [S. 2(14), 4, 28(ii(a), 55]
Assessee received certain amount from a company which he claimed as professional goodwill. AO held that said amount was received by assessee on account of relinquishment of his rights in management of a company accordingly taxed under S. 28(ii)(a) of the Act. CIT (A) deleted the addition. On appeal by revenue the Tribunal held that since AO had not established that assessee was person who was managing whole or substantially whole of affairs of company, invocation of section 28(ii)(a) failed. The Tribunal also held that even, assuming that amount received by assessee was relatable to relinquishment of any managerial right, cost of any such managerial right being indeterminate, provisions relating to computation of capital gain were not workable and, consequently, amount could not be taxed under S. 45 of the Act also. (AY. 2009-10)
DCIT v. Dr. Sandeep Dave (2019) 179 ITD 51 (Raipur) (Trib.)
S. 48 : Capital gains – Loan liability of mortgaged property – Doctrine of over-riding title – Not deductible from sale consideration while computing the capital gains. [S. 45, 47(xii), 48(1), SARFAESI ACT, 2002, S. 13]
There was difference of opinion on the allowability of loan liability of mortgaged property is allowable deduction or not. The matter was referred to third member. Third member held that the payment towards discharge of outstanding loan liability out of the sale proceeds of mortgaged property is a mere application of income and not a diversion of sale proceeds by overriding title. The assessee cannot claim such application as deduction for the purpose of computing capital gains in terms of s. 48 of the Act. The legal position prevailing prior to SARFAESI Act is also germane even after the enactment of SARFAESI Act (ITA No. 4964/Mum/2013, dt. 05-09-2019)(AY. 2010-11)
Perfect Thread Mills Ltd. v. DCIT (2019) 183 DTR 25 (TM)(Mum)(Trib)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Value determined by registering authority – AO is bound to make a reference to Valuation Officer before adopting, without objection raised by the assessee – Matter remanded to the AO to refer the matter to Valuation Officer for determination of market value. [S. 45]
The assessee sold its office premises. The registering authority determined the market value of the assessee’s office premises for the purpose of stamp duty at higher value than shown in the agreement. The AO adopted this value as deemed consideration and computed the capital gains. CIT(A) up held the addition. On appeal the Tribunal held that the AO is duty bound to make a reference to the Valuation Officer before adopting the value of assets determined by the stamp valuation authority for the purpose of computing capital gains even without there being any objection raised by the assessee. The AO was directed to decide afresh after making a reference to the District Valuation Officer for determination of the market value of the property sold by the assessee. Relied Sunil Kumar Agarwal v. CIT (2015) 372 ITR 83 (Cal) (HC) (AY 2007-08)
Ara properties P. Ltd v. Dy. CIT (2019)75 ITR 12 (SN) (Trib.) ((Kol.) (Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Lease hold rights – Stamp valuation is not applicable – Addition is held to be not applicable. [S. 45]
Tribunal held that the property sold by the assessee in the building was leasehold property and the addition made by the AO and confirmed by the CIT(A) by invoking the provisions of S 50C is held to be not sustainable. (AY 2007-08)
Ara properties P. Ltd v. Dy. CIT (2019) 75 ITR 12 (SN) (Trib.) ((Kol.) (Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Purchase of property – Applicable to seller and not purchaser – Unaccounted income invested in the purchase of property [S. 56(2)(x), 132, 153C]
S. 50C is applicable in the case of the seller of the property to take into consideration the valuation of the property as per the value adopted by the Registration Authority and there is no provision under the Income -tax Act to deal with a situation in respect of the purchase of the property. If there is no other material brought on record to justify the conclusion that assessee company made unaccounted investment in purchase of the property no addition can be made. S. 56(2)(x) of the Income-tax Act was inserted into the Act with effect from 1st April 2017 and cannot apply retrospectively.
Dy. CIT v. Sutlej Agro Products Ltd. (2019) 70 ITR 33 (SN) (Delhi)(Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – Short term – Long term – Date of acquisition – Date of allotment letter and not conveyance deed – Entitled to exemption [S. 2(29A), 2(29B), 2(42A), 2(42B), 45, 54F]
The assessee sold a plot of land and claimed exemption u/s. 54 of the Act. The exemption was denied on the ground that it was short term capital gains which was affirmed by the CIT(A). On appeal the Tribunal held that in terms of Circular No. 471 dated October 15, 1986 the date when the letter of allotment was issued shall be considered as the date of acquisition of the asset. Merely because there was a change in the nature of immovable property, the principles for determining the date of acquisition could not change. The AO was directed to consider the date of allotment on May 31, 2002 as the date of acquisition of the asset. Thus what was transferred by the assessee was a long-term capital asset and not a short-term capital asset. The profit or gain on sale of the asset shall be considered as long-term capital gains. Relied PCIT v. Vembu Vaidyanathan (2019) 413 ITR 248 (Bom) (HC). Accordingly the assessee is held to be entitled to deduction under S. 54 or 54F of the Act. Matter remanded to CIT(A) to decide the issue. (AY. 2013-14)
Bhawna Sharma (Smt) v. DY. CIT (IT) (2019) 75 ITR 7 (SN) (Delhi) (Trib.)
S. 56 : Income from other sources – Bonus shares – Provisions of S. 56(2) (vii)(c) would not apply to bonus shares. [S. 56(2)(vii) (c)]
The assessee received bonus shares from BIPL without taking any consideration for these shares and 1,47,357 right shares were allotted to the assessee at the face value of ₹ 10 per share. The AO applied provisions of S. 56(2)(vii) and made an addition on account of the difference between the fair market value of the bonus shares received by the assessee and the actual consideration at which they were allotted to the assessee as income from other sources. The CIT(A) deleted the addition stating that provisions of S. 56(2)(vii)(c) would not apply to bonus shares. On appeal the Tribunal upheld that order of the CIT(A). (AY 2010-11)
DCIT v. Mamta Bhandari (Smt.) (2019) 178 ITD 89 (Delhi)(Trib.)
S. 56 : Income from other sources – Share Premium – Share application money received from non-residents – Provisions of S. 56(2)(viib) is not applicable – Additions cannot be made as cash credits. [S. 56 (2) (viib), 68]
Assessee received share application money from non-residents. The AO held that act of receiving share application money in excess of authorized share capital of assessee was not in accordance with law and, therefore, money received could not be considered as towards share application money accordingly he treated money received from non-residents as income of assessee and brought same to tax under head income from other sources.
The Tribunal. Held that, the details of receipt of share application money on various dates given. Further assessee had applied to the ROC for increase in authorized share capital of equity shares and application money received from various share applicants was converted into equity shares under Board Resolution allotting shares to the various share applicants. Hence, there is no provision for invoking S. 68. Further provisions of 56(2)(viib) are applicable only for receipt of consideration for issue of shares from a resident and not in the case of a non-resident. (AY. 2015-16)
Edulink (P.) Ltd. v. ITO (2019) 178 ITD 174 (Bang.)(Trib.)
S. 56 : Income from other sources – Shares issued at premium – DCF method – Commercial expediency has to be seen from point of view of businessman – Addition is held to be not justified. [R. 11UA(2)]
Tribunal held that as per clause (i) of the Explanation to section 56 the FMV is to be determined in accordance with such method as may be prescribed. The method to determine the FMV is further provided in rule 11UA(2). The assessee has an option to do the valuation and determine the fair market value either on DCF Method or NAV Method. The assessee being a ‘start-up company’ having lot of projects in hand had adopted DCF method to value its shares. If the statute provides that the valuation has to be done as per the prescribed method and one of the prescribed methods has been adopted by the assessee, then Assessing Officer has to accept the same and in case he is not satisfied, then there is no express provision under the Act or rules, where Assessing Officer can adopt his own valuation in DCF method or get it valued by some different Valuer. Accordingly, appeal of the Assessee was allowed and the addition was deleted. (AY. 2015-16)
Cinestaan Entertainment (P) Ltd. v. ITO (2019) 180 DTR 65/ 200 TTJ 459 (Delhi) (Trib.)
S. 56 : Income from other sources – Foreign company – DCF Method – Receipt of property less than aggregate fair value of the property – S. 56(2)(viia) cannot apply to a foreign company as Rule 11U(b)(ii) (prior to 1-4-2019) which defines “balance sheet” was not applicable to a foreign company – If the computation provisions cannot apply, the charging section cannot apply. The amendment to Rule 11U with effect from 1-4-2019 is prospective in nature – Rejection of DCF method is held to be not proper. [S. 56(2) (viia), Rule 11UA(b) (ii)]
The AO made addition u/s. 56(2)(viia) of the Act by treating the difference between the fair value of the shares and the purchase price of shares of the shares by the assessee. CIT(A) confirmed the order of the AO. Tribunal held that rejection of DCF method is held to be not proper. Tribunal held that S. 56(2)(viia) cannot apply to a foreign company as Rule 11U(b)(ii) (prior to 01-04-2019) which defines “balance sheet” was not applicable to a foreign company. If the computation provisions cannot apply, the charging section cannot apply. The amendment to Rule 11U with effect from
1-4-2019 is prospective in nature. (Followed CIT v. B. C. Srinivasa Shetty (1981) 128 ITR 294 (SC), CIT v. Official Liquidator Palai Central Bank Ltd. (In liquidation) (1985) 1 SCC 45). (ITA No. 1703/Mum/2019, dt. 16-10-2019)(AY. 2015-16)
Keva Industries Pvt. Ltd. v. ITO (Mum.)(Trib.), www. itatonline. org
S. 56 : Income from other sources – Valuation of shares – substantiation of the fair market value on the basis of the valuation done by the assessee simply cannot be rejected where the assessee has demonstrated with evidence that the fair market value of the asset is much more than the value shown in the balance sheet. [S. 56(2) (viib), R. 11UA]
Allowing the appeal of the assessee the Tribunal held that the valuation of shares should be made on the basis of various factors and not merely on the basis of financials. The substantiation of the fair market value on the basis of the valuation done by the assessee simply cannot be rejected where the assessee has demonstrated with evidence that the fair market value of the asset is much more than the value shown in the balance sheet. (ITA No. 7262/Del/2017,
dt. 27-09-2019) (AY. 2014-15)
India Convention and Culture Centre Pvt. Ltd. v. ITO (Delhi.)(Trib.), www. itatonline.org
S. 56 : Income from other sources – The assessee has the option to determine the fair market value of shares either under the Discounted Cash Flow (DCF) method or the Net Asset Valuation (NAV) method. [56(2)(viib), R. 11UA]
Allowing the appeal of the assessee the Tribunal held that the assessee has the option to determine the fair market value of shares either under the DCF method or the NAV method. The assessee’s choice is binding on the AO. While the AO can scrutinize the working, he cannot discard the assessee’s method and substitute another method (Vodafone M-Pesa Ltd v. PCIT  92 taxmann. com 73 (Bom) referred) followed Rameshwaram Strong Glass (P) Ltd. v. ITO (2018) 172 ITD 571 (Jaipur) (Trib) DCIT v. OZoneland Agro Pvt. Ltd. (Mum.) (Trib.) www. itatonline.org; Medplus Health v. ITO (ITA No. 871 /Hyd /2015, Regal Builtech Pvt. Ltd. v. ACIT (7505/ Del/ 2018). (ITA No. 3521/Mum/2018,
dt. 22-08-2019)(AY. 2013-14)
Narag Access Pvt. Ltd. v. DCIT (Mum.)(Trib.), www.itatonline.org
S. 68 : Cash credit – Impounding of documents found during search – Satisfactory explanation is furnished – Addition cannot be made. [S. 132, 153A]
If the documents found during the course of the search satisfactorily explain the income of the assessee no addition can be made under S. 68 of the Act as there is no unaccounted income lying in the hands of the assessee. (AY 2013-14)
Dy. CIT v. Pumarth Commodities P. Ltd. (2019) 69 ITR 52 (SN) (Indore)(Trib.)
S. 68 : Cash credit – Share premium – Addition made merely on basis of statement of a person recorded u/s. 131 by DIT (Invt.) and there was no any other evidence on record – Addition is held to be not justified. [S. 131]
The assessee-company received share application money/share premium from its Managing Director and one company. The AO observed that on basis of statement recorded by Investigation Wing of department of one MS u/s. 131 it was found that share application money/share premium received by assessee was nothing but accommodation entries. On basis of said statement, AO made additions u/s. 68. It was noted that impugned addition was made only on basis of statement of MS recorded by Investigation Wing u/s. 131.
On appeal Tribunal held that other than statement of MS, no other material evidence was referred either by AO or CIT(A). U/s. 131, authorities are not empowered to administer oath to deponent, therefore, such a statement recorded u/s. 131 had no evidentiary value. Hence, addition made merely on basis of statement recorded u/s. 131 without there being any other material available on record, was unjustified. (AYs. 2013-14, 2015-16)
Lalithaa Jewellery Mart (P.) Ltd. v. ACIT (2019) 178 ITD 503 (Chennai)(Trib.)
S. 68 : Cash credits – Share premium – Share applicants proved their creditworthiness and source of funds for investing – Addition is held to be not valid.
Tribunal held, that the share applicants have proved their creditworthiness and source of funds hence deletion of addition is held to be justified. (AY 2013-14)
Dy. CIT v. HSM Steels P. Ltd. (2019) 70 ITR 47 (SN) (Hyd. )(Trib.)
S. 68 : Cash credits – Bank deposits – Funds withdrawn from bank four months ago for purchase of a property but due to non-materialised of property transaction, money was redeposited in bank account, addition cannot be as cash credits.
The AO held that assessee had deposited certain amount in his bank account. Assessee explained that he had withdrawn said funds from his bank account four months ago and since a transaction relating to purchase of property did not materialise, he redeposited funds in his bank account. The AO rejected explanation and added amount deposited in bank account to his taxable income.
On appeal Tribunal held that, there was no instance, reference, argument or evidence to suggest that funds were not available with assessee. There could be no blanket period which could be judicially considered to be a reasonable time for redepositing funds in bank account. Mere fact that there was a gap of about four months in re-depositing funds by itself would not lead to conclusion that explanation given by assessee was not acceptable. Accordingly the addition was deleted. (AY. 2009-10)
Baljit Singh. v. ITO (2019) 178 ITD 12 (Chd)(Trib.)
S. 68 : Cash credits – Share capital – Share premium – Additional grounds – Photocopies of blank share transfer forms, blank signed receipts etc., necessary for transfer of shares found with assessee are not admissible as evidence u/s. 61 of Evidence Act and not incriminating in nature – All investors are assessed & have filed confirmations with trail of funds – AO did not make further inquiry into the documentary evidences or verify the trail of source of funds – Addition is held to be not justified. [S. 132(4), 145A, 153A Evidence Act, S. 61].
Tribunal held that photocopies of blank share transfer forms, blank signed receipts etc necessary for transfer of shares found with assessee are not admissible as evidence u/s 61 of Evidence Act and not incriminating in nature. All investors are assessed & have filed confirmations with trail of funds. AO did not make further inquiry into the documentary evidences or verify the trail of source of funds-Addition is held to be not justified. Decision in PCIT v. NRA Iron and Steel (2019) 103 taxmann. com 48(SC) and decision in NDR promoters Private Limited (2019) – TIOL – 172 (Delhi) (HC) is considered. (ITA Nos. 3741 to 3746/Del/2019 (assessee) ITA Nos. 5264 to 5269/Del/2019 (Revenue), dt. 31-10-2019) (AY. 2012-13 to 2017-18)
Agson Global Pvt. Ltd. v. ACIT (Delhi)(Trib), www.itatonline.org
S. 69 : Unexplained investments – loose sheet found during search not in handwriting of assessee or of any of family members – No statement recorded from author of loose sheet regarding contents and no enquiries conducted with buyer of flat – Addition is held to be not valid. [S. 132]
Tribunal held that a loose sheet was found evidencing the on money consideration for sale of the flat. The loose sheet was not in the handwriting of the assessee or of any of the family members. No statement was recorded from the author of the loose sheet regarding the contents and no enquiries were conducted with the buyer of the flat. The assessee had never agreed or accepted that he had received the sale consideration over and above the amount recorded in the registered document and no evidence was found with regard to receipt of cash. Therefore, the addition was unsustainable. (AY. 2012-13 and 2013-14).
Dy. CIT v. Kotu Sarat Kumar (2019) 71 ITR 147 (Vishakha)(Trib.)
S. 69 : Unexplained investments – Search and seizure – Bogus purchases – Diary – Contents of a seized document are to be read in toto, and it is not permissible on part of an AO to dissect same and therein summarily accept same in part and reject other part. [S. 132, 292C]
During course of search and seizure a diary was seized from office premises of assessee-company, a part of said group. Assessee surrendered an amount towards bogus bills booked during various years in its books of account. AO held that company had made unexplained investments in various capital assets by incurring expenditure in cash and treated unexplained investment/expenditure as income of assessee from undisclosed sources, and brought same to tax under head other sources. AO adopted a self-suiting approach and had accepted part of contents of seized document, i.e., to extent same revealed that assessee had made investment towards construction/furnishing of hotel building, however, he had whimsically declined to take cognizance of fact that said investment, as per said seized document, was sourced from cash that was received back by assessee against payments made towards bogus purchases. CIT (A) partly deleted the addition. On appeal by revenue and cross appeal by the assessee, the Tribunal held that approach adopted by AO was not justified and held that contents of a seized document are to be read in toto, and it is not permissible on part of an AO to dissect same and therein summarily accept same in part and reject other part. and deleted the addition. (AY. 2011-12)
DCIT v. Kanakia Hospitality (P.) Ltd. (2019) 179 ITD 1 (Mum.) (Trib.)
S. 69 : Unexplained investments – Search and seizure – Gold and silver ornaments – Found in premises of assessee belonging to assessee’s wife and his mother – Gold and silver ornaments inherited – Addition cannot be made.
The Tribunal held, that once the AO had found the explanation was reasonable, there was no case for making the addition in the hands of the assessee. The Assessing Officer had accepted the explanation of the assessee that the gold jewellery and silver articles found in the premises of the assessee belonged to the assessee’s wife and his mother and were inherited. There was no case for making the addition in the hands of the assessee. Merely because of non-furnishing of wealth-tax returns, the Assessing Officer could not make the addition in the hands of the assessee when it was explained to the Assessing Officer that the jewellery belonged to his wife and mother. If at all the addition was required to be made it should be made in the hands of the right person duly initiating the proceedings. The assessee had filed wealth-tax returns for the assessment years 2009-10 and 2010-11, which had been accepted by the Department without making any addition. Therefore, there was no case for making the addition on account of gold and jewellery found during the course of search in the hands of the assessee. (AYs. 2012-13, 2013-14).
Dy. CIT v. Kotu Sarat Kumar (2019) 71 ITR 147 (Vishakha)(Trib.)
S. 69A : Unexplained money – Income from undisclosed sources – unexplained cash – Cash flow statement accepted in wealth-tax assessment not to be discarded – Cash balance available as on date of search treated as explained.
Tribunal held that as on the date of search, a sum was found in cash in the residence of the assessee, which the assessee explained as representing the book balance and stated that there was no unaccounted or unexplained cash. In support of the availability of the cash balance, the assessee filed a cash flow statement for the financial years 2007-08 to 2012-13, which indicated that there was a huge cash balance available with the assessee for the year ended March 31, 2012 and March 31, 2013. The assessee filed the wealth-tax returns in response to the notice issued by the AO under section 17 of the Wealth-tax Act, 1957 and the assessments were accepted by the Department taking the cash balance as per the wealth-tax returns and no defects were found. Therefore, the cash flow statement could not be discarded. Neither the Assessing Officer nor the CIT(A) had found any defect in the cash flow statement submitted by the assessee during the wealth-tax proceedings. Therefore, the cash balance available as on the date of search was treated as explained and no addition was warranted. (AYs. 2012-13, 2013-14).
Dy. CIT v. Kotu Sarat Kumar (2019) 71 ITR 147 (Vishakha)(Trib.)
S. 69B : Amounts of investments not fully disclosed in books of account – Unexplained investment – Purchase of land – Addition merely on presumption is held to be not justified.
Tribunal held that the Department found the agreement to sale with the schedule of payments. There was no proof for payment in cash and by cheque. Apart from that, there was no evidence to show that the assessee had actually made the payment except the schedule of payments mentioned in the agreement. The AO made the addition only on presumption that the payment would have been made. The assessee denied that it had actually made any further payments and submitted that the transaction had not gone through. But no details were submitted. The Department had not found anything to show that the landlords actually received the payments. The additions could be made only based on actual evidence and not based on presumptions particularly, Therefore, the addition was to be deleted. (AYs. 2007-08, 2008-09
Dy. CIT v. Janapriya Engineers Syndicate Ltd. (2019) 70 ITR 370 (Hyd.)(Trib.)
S. 69C : Unexplained expenditure – Bogus purchases – AO cannot blow hot & cold by disallowing the purchases from a party as bogus while treating sales to same party as genuine – Entire purchases cannot be disallowed – Percentage of addition to gross profit is held to be justified.
Tribunal held that AO cannot blow hot & cold by disallowing the purchases from a party as bogus while treating sales to same party as genuine. Addition is held to be not justified. Percentage of addition to gross profit is held to be Considered NK Proteins Ltd. v. CIT (2017 TIOL l23 –SC-IT), NK Industries Ltd v. DCIT (2016) 72 taxann.com 628 (Delhi) CIT v. La Medica (2001) 117 Taxman 628 (Delhi)(HC) Ganesh Rice Mills v. CIT (2007) 294 ITR316 (All) (HC), Vijay Proteines Ltd v. ACIT (2015) 58 taxmann. com 44 (Guj) (HC) Sanjay Oil cake Industries Ltd. v. ACIT (2009) 316 ITR 274 (Guj) (HC) (ITA No. 3741to 3746/Del/2019 (assessee) ITA No. 5264 to 5269/Del/2019 (Revenue), dt. 31-10-2019) (AY. 2012-13 to 2017-18)
Agson Global Pvt. Ltd. v. ACIT (Delhi)(Trib), www.itatonline.org
S. 69C : Unexplained expenditure – Purchase of land – Addition of same payments made in hands of landowners – Addition on protective basis not sustainable. [S. 143(3)]
In the course of assessment proceedings, the AO based on the seized documents and sworn statement of the director of the assessee, made an addition of ₹ 6.30 crore as unexplained expenditure under S. 69C of the Act. The CIT (A) directed the AO to delete the addition. On appeal : Held, that the AO had already made addition in the hands of the assessee and the same payments to land owners could not be made as addition in the case of the assessee on protective basis. The findings of the CIT(A) is held to be justified. (AYs. 2007-08, 2008-09)
Dy. CIT v. Janapriya Engineers Syndicate Ltd. (2019) 70 ITR 370 (Hyd.)(Trib.)
S. 71 : Set off loss – One head against income from another – Borrowing funds and making investments in business also paying interest – No evidence assessee diverted funds for non-business purpose – Intra head losses can be set off
The assessee was engaged in the business of running a hotel and made investments in V Hotels. It borrowed funds from a co-operative bank for the purpose of making investments in V Hotels. He declared interest from other sources and claimed deduction of the interest paid on unsecured loans and on bank loans and set off the resultant loss against the income from other sources, business and capital gains under S. 71 of the Act. The CIT(A) deleted the disallowance. On appeal the Tribunal held that the assessee had borrowed the funds and made investments in the business. The AO did not make out a case that the assessee had diverted the funds for non-business purpose. Business consideration was the decision of the assessee and not the AO. The assessee made the investments for the purpose of business and paid the interest. The income under the head “Income from other sources” resulted in a loss which was claimed for set off under section 71. Intra head losses were allowable to be set off against other sources of income in the same assessment year. Therefore the addition was deleted. (AY. 2012-13, 2013-14).
Dy. CIT v. Kotu Sarat Kumar (2019) 71 ITR 147 (Vishakha)(Trib.)
S. 92B : Transfer pricing – Arm’s length price – Corporate guarantee given to associated enterprises – Arm’s length commission on such guarantee restricted to 0.5%. [S. 92C]
The assessee gave corporate guarantee to its associate enterprises (“AE’s”) who received loans from a bank which were guaranteed by the assessee. The assessee charged commission @0.5% of the amount of guarantee given to the AE’s. The AO made adjustment to such commission @1.77 as against 0.5% charged by the assessee. The Tribunal held that the issue is squarely covered by the Tribunal in assessee’s own cases for immediately preceding years and hence the adjustment should be restricted at 0.5%. (AY. 2012-13)
Cox & Kings Ltd. v. Addl. CIT (2019) 55 CCH 75/ 69 ITR 45 (SN) (Mum.) (Trib.)
S. 92C : Transfer pricing – Arm’s length exemption – Tax exemption – Arm’s length price on international transactions deserve to be determined. [S. 10A, 10B, 92]
Question before the Special Bench was “whether or not the provisions of section 92 can be invoked in a situation in which income of the assessee is eligible for tax exemption or tax holiday and thus not actually chargeable to tax in India, or in a situation in which there cannot be any motive in manipulating the prices at which international transactions have been entered in to ?”
Special Bench held that even if an assessee is eligible for tax exemption at the rate of hundred per cent under section 10A/10B of the Act, then also the arm’s length price on international transactions deserve to be determined under S. 92C of the Act. (ITA Nos. 1352, 1258, 1822 & 1874/Ahd/2011-2012 & 2014, dt. 24-10-2019)(AYs. 2006-07 to 2008-09)
Doshi Accounting Service Pvt. Ltd. v. DCIT (SB)(Ahd) (Trib) www.itatonline.org
S. 92C : Transfer pricing – Arm’s length price – International transactions – Benchmarking of transactions – Comparable – Back office support services – Company providing consultancy business solution and testing and high end business process outsourcing services – Cannot be held to be comparables.
Assessee providing back office support services, company providing high end data analytics and customised process solution and leading Indian provider of knowledge process outsource services functionally different. High end diversified services. Company having income from translation charges. Company having lower employee cost to sales than assessee. Company having different financial year ending. Company under serious indictment in fraud cases. Company providing consultancy business solution and testing and high end business process outsourcing services is held to be not comparables. (AY. 2007-08).
Dy. CIT v. Morgan Stanley Advantage Services P. Ltd. (2019) 74 ITR 456 (Mum.)(Trib.)
S. 127 : Power to transfer cases – Opportunity of hearing – Assessee’s case was transferred from one AO to another AO having offices in different localities/places, notice had to be given to assessee – Order is held to be void ab initio and barred by limitation. [S. 127(1), 143(2), 292B]
The assessee, individual, filed his return declaring certain taxable income. The return was processed u/s. 143(1) and subsequently, the case was selected for scrutiny under CASS. Thereafter, the Addl. CIT, Kurnool, transferred the files to Addl. CIT (IT-II) Hyderabad, stating that the jurisdiction of the case vested with the AO Hyderabad since the assessee was a non-resident. AO issued a notice u/s. 143(2) and 142(1) and completed the assessment u/s. 143(3). The assessee preferred an appeal before the Commissioner (Appeals) challenging the jurisdiction of the AO at Hyderabad on making the assessment and also the additions made by the AO. Tribunal held that where assessee’s case was transferred from one Assessing Officer to another Assessing Officer having offices in different localities/places, notice u/s. 127(1) had to be given to assessee and it was only Principal Director General or Principal Commissioner who could transfer case u/s. 127. Order is held to be void initio and barred by limitation. (AY. 2011-12)
Vijay Vikram Dande Kurnool. v. ADIT (2019) 178 ITD 139 (Hyd.) (Trib.)
S. 133A : Power of survey – Undisclosed income – Loose papers – Bona fide mistake by director in surrendering income – Set off of expenditure is allowable. [S. 115BBE]
Dismissing the appeal of the revenue the Tribunal held that during the course of survey loose paper referred to certain details of health camp income and expenditure. On the basis of these documents income worked out to ₹ 2,10,13,228 (gross receipt ₹ 3,26,00,730 less expenses) but inadvertently the director during the course of survey while admitting the undisclosed income comprising of income and expenses and surrendered the income at
₹ 4,41,88,232 which was a bona fide mistake as the income on the basis of the loose papers was desired to be surrendered. Therefore the addition was deleted. As regards the set off of the expenditure of ₹ 19,70,923 had been explained by the assessee before the authorities and the account mainly included salary paid to the director and others at
₹ 17,97,199 which had been duly offered to tax by the director and others in their respective returns. The expenditure of ₹ 19,70,923 had been claimed against the income from organising health camp which was also the part of the business activity of the assessee. Therefore the set off of the expenditure was allowed. (AY. 2013-14).
Dy. CIT v. Dthri Health Care P. Ltd. (2019) 69 ITR 17 (SN) (Indore)(Trib.)
S. 133A : Power of survey – unaccounted receivables – Surrender of income Deemed income – Categorization/characterization of income surrendered – business income – Set off of losses was to be allowed [S. 69A 69B]
The assessee in this case was deriving income from manufacturing and sale of different types and sizes of autoparts. That during the impugned assessment year the assessee’s premises was surveyed under the provisions of section 133A of the Act, whereupon it was noticed that there were unaccounted receivables. The same was surrendered by the assessee. However, at the time of finalization of the accounts, as at the close of the year, though the additional income surrendered during survey proceedings was credited as income, the same was offset with the brought forward business losses from the preceding assessment year, resulting in the return of nil income for the impugned assessment year, and claim of carry forward of losses of the balance. In the assessment proceedings the Assessing Officer treated the additional income surrendered as deemed income under the provisions of section 69A and 69B of the Act separately without allowing setoff of the same with the business losses of the assessee. The Ld. CIT(A) held the case in favour of the assessee. On revenue appeal, the Tribunal held that the assessable as business income of the assessee and set off of losses was to be allowed against the same as rightly claimed by the assessee. (AY. 2013-14).
Dy. CIT v. Mehta Engineers Ltd. (2019) 177 DTR 140 (Chd.)(Trib.)
S. 143(3): Assessment – Ad hoc addition – No understatement by assessee – Addition on ad hoc basis at 50% is held to be not sustainable.
Tribunal held that there was no understatement of receipts by the assessee. Further, in first round of appeals no addition in this regard for called for by Tribunal and the same was not controverted by lower authorities. The net income from drama company as a percentage of gross receipts cannot be as high as has been held by CIT(A). In absence of any comparable case put forth the by the authorities below, the ad hoc addition sustained by CIT(A) cannot be justified. (AY. 1995-96 to 1998-99).
C. L. Chandradhara. v. CIT (2019) 55 CCH 0468/ 71 ITR 246 (SMC)(Bang.)(Trib.)
S. 143(3): Assessment – If the case is selected for limited scrutiny of a specific issue, the AO has no jurisdiction to make additions or disallowances on other issues.
Allowing the appeal of the assessee the Tribunal held that the case is selected for limited scrutiny of a specific issue, the AO has no jurisdiction to make additions or disallowances on other issues. (434/CHD/2019, dt. 12-9-2019)(AY. 2014-15)
Vijay Kumar v. ITO (SMC) (Chd)(Trib), www.itatonline.org
S. 143(3) : Assessment – Unaccounted sales – Addition can be made only after the consideration of purchases and ancillary expenses – Addition is restricted to only profit margin.
Assessee company was engaged in the milk processing business. A search was conducted at the premises and documents reflecting unaccounted sales for a period of 20 days were discovered. The assessee company claimed that the unaccounted portion was handed over to the director of the company to deal with in his individual capacity. To this the director also confirmed in affirmative stating that he had already offered to tax the income from such milk, which was acknowledged by the AO. However, the AO, without any justification and without bringing any documents on record considered that such unaccounted sales was done for 2 AY’s rather than 20 days only and accordingly made an addition to the income of the assessee company. Also the assessee contended that the AO, in his whims and surmises, has considered the extrapolation only for 2 AY’s, if he was so confident about the seized documents and the income therein, he should have extrapolated for the entire block of six years. It was held that, here as the income from the unaccounted milk was already declared by the director and tax was paid on it, the addition made was completely unjustified and was to be deleted.
(AYs. 2011-12, 2012-13)
ACIT v. Creamy Foods Ltd. (2019) 55 CCH 377 /70 ITR 59 (SN) (Delhi) (Trib.)
S. 145 : Method of accounting – Works contract tax (TDS) – When sale is offered corresponding amount of works contract is allowable as deduction. [S. 37(1)]
When the work is executed and sales accounted for and offered to tax in the year, deduction claimed for the corresponding amount of works contract tax incurred on such erection sales or works receipts is allowable. (AY. 2004-05)
Dy. CIT v. Stewarts and Lloyds of India Ltd. (2019) 74 ITR 677 (Kol.)(Trib.)
S. 145 : Method of accounting – Percentage completion method – Corresponding expenditure incurred in relation to unbilled sales – Sales include sub contract charges – Provision to be made – Rule of consistancy to be followed.
The amount of unbilled sales if represents revenue booked in the accounts on the percentage completion method for incomplete contracts at the end of the year and corresponding expenditure incurred in relation to the unbilled sales including subcontract charges is also provided for in the accounts and this method is followed by the assessee consistently in the earlier years then the claim of the assessee is allowable. (AY. 2004-05)
Dy. CIT v. Stewarts and Lloyds of India Ltd. (2019) 74 ITR 677 (Kol.)(Trib.)
S. 147 : Reassessment – Within four years – Reopening for taxing Bogus share capital – Even in a S. 143(1) intimation, the AO is not entitled to reopen on the ground that the assessee has received “huge share premium” which was not “examined” by the AO. The AO cannot reopen in the absence of tangible material that shows income has escaped assessment. [S. 68, 143(1)]
The assessment was reopened under S. 147. Accordingly, notice under section 148 was issued to the assessee. The Assessing Officer noted that during the relevant period the assessee company introduced a sum of ₹ 1,36,50,000/- on account of share application and added the entire amount under section 68 of the Act. The CIT(A) held that the basic requirement of reopening of the assessment i.e., “reason to believe” is not fulfilled at the time of recording the reasons for reopening. An appeal filed by the Revenue is against the order of CIT(A). The Tribunal held that there is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. (AY 2009-10)
Dy. CIT v. Kargwal Products P. Ltd. (2019) 69 ITR 77 (SN) (Mum.)(Trib.)
S. 148 : Reassessment – Notice – Notice has been issued on wrong premise, reopening of assessment is not valid – Notice cannot be issued for certain examination
Tribunal held that the main premise i.e. non filing of return of income on the basis of which AO has sought approval for reopening was incorrect as assessee has already filed return of income. Further, relying on various judicial precedents held that the case should not be reopened for verification. The AO never made an opinion that there was escapement of income in the hands of assessee since even in the reasons it was mentioned that the reopening is for examination and even in the assessment order, the AO also made the aforesaid addition in the hands of assessee on protective basis. Accordingly, considering the aforesaid, reopening of assessment was held as invalid. (AYs. 1996-97, 1997-98)
Computerland Integrators (India) Ltd. v. Dy. CIT (2019) 180 DTR 17 (Delhi)(Trib.)
S. 151 : Reassessment – Sanction for issue of notice – Share capital – Share premium – Approval – mechanical approval mentioning “ Yes” – Non application of mind – Reassessment is held to be bad in law. [S. 147, 148]
Allowing the appeal of the assessee the Tribunal held that if the PCIT, while granting approval for issue of notice u/s. 148, has only mentioned “YES”, it establishes that the approving authority has given approval to the reopening of assessment in a mechanical manner without due application of mind. On this count the reassessment is not sustainable in the eyes of law and needs to be quashed. Followed, United Electrical Company (P) Ltd. v. CIT (2002) 258 ITR 317 (Delhi) (HC) CIT v. S. Goyanka Lime & Chemical Ltd (2015) 64 taxmann.com 313 /(2016) 237 Taxman 378 (SC) (ITA No. 1061/Del/2019, dt. 02-12-2019) (AY. 2009-10)
Blue Chip Developers (P) Ltd. v. ITO (Trib.)(Delhi), www.itatonline.org
S. 153: Assessment – Limitation – Special audit under section 142(2A) is not in accordance with law, time limit for making assessment cannot be extended for time taken for special audit. [S. 142(2A)]
Tribunal held that though the notice directing special audit referred to accounts of both
AY 2008-09 and 2009-10, the financial statements of only AY 2009-10 were considered for special audit. Thus, the AO did not apply his mind and mechanically adopted the figure of AY 2009-10 and passed the order under section 142(2A) of the Act for AY 2009-10 without realizing that he is dealing with AY 2008-09. Therefore, the Tribunal noted that if the period taken for special audit is not excluded, the assessment order passed by the AO would be time barred. Further, the Tribunal remarked that even though order under section 142(2A) of the Act is not appealable, it is well within the rights of Tribunal to consider all material aspects which were considered while framing the assessment order. Accordingly, since the order framed under section 142(2A) was not for concerned AY 2008-09, the Tribunal quashed the assessment order as it was barred by limitation.
Consulting Engineering Services India (P) Ltd. v. ACIT (2019) 175 DTR 217 / 198 TTJ 21 (Delhi)(Trib.)
S. 153A : Assessment – Search – No incriminating material was found – Addition cannot be made. [S. 68, 132]
When no incriminating material is found during the course of the search no addition can be made against the assessee and the addition if any made by the Assessing Officer is without jurisdiction. (AYs. 2011-12, 2014-15, 2015-16)
Dy. CIT v. Pacific Industries Ltd. (2019) 72 ITR 634 (Jodh.)(Trib.)
S. 153A : Assessment – Search – Share application money – No incriminating material was found – Addition cannot be made – Opportunity to cross examination must be given of the entry operators. [S. 68, 132]
When no incriminating material is found during the course of the search then the additions if any made by the Assessing Officer are unsustainable and are liable to be deleted.
The assessee must be allowed to cross examine third party entry operators who make statements which are relied upon by the AO while passing an assessment order and in the absence of such cross examination no addition can be levied.
If undisclosed income has already been added to the total income of the share applicant then the same income cannot be added to the income of the investee company and be subject to double taxation. (AY. 2008-09 to 2013-14)
Dy. CIT v. Rashmi Metaliks Ltd. (2019) 72 ITR 226 / 201 TTJ 160 (Kol.)(Trib.)
S. 153A : Assessment – Search or requisition – Assessment for relevant year completed – No addition could be made. [S. 68, 132]
The assessee was a group concern and subjected to search and seizure action under S. 132 of the Income-tax Act, 1961. The Assessing Officer initiated proceedings under S. 153A pursuant to the and made various additions under section 68 on account of share application money and special deposits against the issue of preferential equity shares treating them as accommodation entries availed of by the assessee from entry providers. The CIT (A) deleted the major part of the addition on the ground that the Assessing Officer had no material in his possession but confirmed the addition in respect of which the statement of the entry provider was with the Assessing Officer. On appeal: Held, (i) that the addition made by the Assessing Officer under section 153A was not sustainable and liable to be deleted when the assessment for the assessment year 2010-11 had been completed and was not pending as on the date of the search. (ii) That the assessee had repeatedly requested and demanded the cross-examination of the witnesses whose statements were relied upon by the Assessing Officer in the assessment order. The denial of cross-examination was a gross violation of the principles of natural justice. (iii) That once the assessee had produced the relevant documentary evidence in support of the then in the absence of any contrary material the addition was not sustainable. The Assessing Officer made an addition in respect of share capital received from three companies but it was deleted by the Commissioner (Appeals) for want of supporting material as well as statement of alleged entry operator. On appeal: Held, that the assessee had produced all the relevant documentary evidence to establish the identity, creditworthiness and genuineness of the transactions. Hence in the absence of any discrepancy or otherwise any material or record, the addition made by the AO was not justified. (AYs. 2010-11, 2011-12)
Dy. CIT v. Jammu Metalic Oxides Pvt. Ltd. (2019) 72 ITR 449 (Jaipur (Trib.)
S. 153A : Assessment – Search or requisition – Share application moneys – no evidence of receipt of unsecured loan – In the absence of incriminating material found during search – Addition on account of share application money is held to be not justified. [S. 68, 132(4)]
The assessee was engaged in the business of marble mining and selling. A search and seizure action under S. 132 of the Income-tax Act, 1961 was carried out at the residential premises of its partner including other group concerns of the assessee. During the search action, A in his statement recorded under S. 132(4) admitted taking accommodation entries in the form of long-term capital gains. The Assessing Officer made an addition on account of unsecured loans received by the assessee from the three parties aggregating to ₹ 76,65,206 under S. 68. The CIT(A) deleted the addition holding that during the search A made disclosure of income in the form of long-term capital gains in his individual capacity and there was no clinching evidence for routing the unaccounted income through unsecured loan during the search, and it was not legally tenable to make addition in the absence of incriminating material found during the search. The addition having been made on the basis of third-party information, the CIT(A) deleted the addition on the merits. On appeal: Held, that the Assessing Officer had not brought out any defect or discrepancy in the evidence brought on record by the assessee. Therefore, the addition made by the Assessing Officer in the assessment year was without jurisdiction. Thus, the assessment order was invalid, consequent upon which the entire addition made therein were deleted. (AYs. 2010-11 2014-15 to 2016-17).
Dy. CIT v. Krishna Marble (2019) 72 ITR 418 (Jodhpur)(Trib.)
S. 154 : Rectification of mistake – Failure to consider the Judgement of High Court or Supreme Court – Mistake apparent from record -Can be subject matter of rectification though the claim is not made during original assessment proceedings or appellate proceedings.
Failure to consider the Judgment of High Court or Supreme Court is a mistake apparent from record which can be subject matter of rectification though the claim is not made during original assessment proceedings or appellate proceedings. (AY. 2013-14)
Dy. CIT v. Sharda Cropchem Ltd. (2019) 178 DTR 83/ 71 ITR 141/199 TTJ 960 (Mum.)(Trib.)
S. 154 : Rectification of mistake – Reassessment – After conclusion of reassessment proceedings addition cannot be made by taking aid of explanation 3 to S. 147. [S. 147, 148]
Assessment which was completed u/s. 143(1) was reopened u/s. 148 and disallowed the travelling expenses Subsequently the AO issued the notice u/s. 154/155 of the Act and made addition in respect of difference of closing stock. Order of the AO is affirmed by CIT(A). On appeal the Tribunal held that the AO cannot, after conclusion of proceedings u/s 147, take aid of Explanation 3 to S. 147 to make any addition u/s. 154. If the Dept’s argument is accepted that u/s. 154 the AO is empowered to deal with escapement of income even after the S. 147 assessment is completed, it would empower the AO to go on making one addition after the other by taking shelter of Explanation 3 to S. 147 endlessly. Such a course is not permissible. (ITA No. 5886/Del/2015, dt. 11-10-2019)(AY. 2007-08)
JDC Traders Pvt. Ltd. v. DCIT (Delhi)(Trib), www.itatonline.org
S. 160 : Representative assessee – Transparent entities – When an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection –DTAA – India – Netherlands [S. 10(38), 45, Art. 13]
The assessee is a trustee of ING Emerging Markets Equity Based Funds (INGEMEF) which is registered with the Securities and Exchange Board of India as a sub account of ING Assets Management BV, a registered Foreign Institutional Investor (FII). There is no dispute that INGEMEF is a tax transparent entity, in the sense that while INGEMEF is not taxable in its own right, the constituents of INGEMEF are taxable in respect of their respective shares of earning. The form of its organization is FGR. i. e. Fonds voor Gemene Rekening, which literally means funds for joint account, and this form of organization, under the Dutch law, is in the nature of a contractual arrangement between the investors, fund manager and its custodian. The investors in this case are three entities- namely, ING Institutioneel Emerging Equity Market Fund (INGIEEMF, in short) with a participation share of 53.86%; Nationale-Nederlanden Levensverzekering Maatschappij NV (NNLNV, in short) with a participation share of 19.66% and ING Beleggingfondsen Paraplu N. V. (INGBPNV, in short) with the participation share of 26.48%. These three investors thus account for 100% of INGEMEF ownership. The funds so held by INGEMEF are invested through the custodian, i.e. the assessee who is legal owner of the investments on behalf of the investors, made on the advice of the fund manager ING Asset Management BV (INGAMBV, in short). The AO denied the benefit of exemption of DTAA, which was affirmed by CIT(A). On appeal Ground before the Tribunal is “Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals erred in upholding the action of the Deputy Director of Income Tax (IT) in denying the benefit of Article 13 of the India – Netherlands Double Taxation Avoidance Agreement (“DTAA”) and consequently, taxing the capital gains amounting to ₹ 23,38,08,365/– as per the Income Tax Act, 1961.”
The Honourable Tribunal considering the provisions of the DTAA held that when an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection. Accordingly the capital gains is not table in India and entitle to the benefit of DTAA. (Linklaters LLP 9 ITR (Trib) 217 (Mum) followed). (ITA No. 7119/Mum/2014, dt. 27-11-2019)
ING Bewaar Maatschappiji BV v. DCIT (Mum.)(Trib.), www.itatonline.org
S. 194H : Deduction at source – Commission or brokerage – SIM distributors – Not liable to deduct tax at source – Roaming charges – Process of roaming does not require human intervention and cannot be considered as a technical service – Not liable to deduct tax at source. [S. 194J]
Allowing the appeal of the assessee the Tribunal held that discount extended to pre-paid SIM distributors on transfer of pre-paid SIM cards/talk time is not liable to deduct tax at source. Tribunal also held that process of roaming does not require human intervention and cannot be considered as a technical service hence not
liable to deduct tax at source. (AYs. 2007-08 to 2013-14)
Vodafone Idea Ltd. v. ACIT (2019) 179 ITD 207 (Chd.) (Trib.)
S. 195 : Deduction at source – Non-resident – Income deemed to accrue or arise in India – Royalty – Doctrine of treaty override – DTAA – India – Singapore [S. 9(1)(vi), Art. 12]
The Grievance of the revenue is the learned CIT(A) erred in holding that the assessee did not have tax withholding obligation in respect of payments of ‘bandwidth services’ to Reliance Jio Infocomm Pte. Ltd., Singapore. The question raised in the grounds of appeal is “Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in holding that tax was not required to be deducted at source on the payment made by the assessee to Reliance Jio Infocomm Pte. Limited, Singapore (RJIPL) for availing bandwidth services as it did not amount to income of the payee by way of royalty u/s. 9(1)(vi) of the IT Act, 1961 read with Article 12 of India-Singapore DTAA?”
Honourable Tribunal explained entire law on whether the retrospective amendments to the definition of “royalty” in s. 9(1)(vi) of the Act can have bearing on the interpretation of the same term in the DTAAs explained with reference to the doctrine of “treaty override” and the Vienna Convention (CIT v. Siemens Aktiongessellschaft (2009) 310 ITR 320 (Bom) (HC) explained). Appeal of revenue is dismissed. (ITA Nos. 6331 to 6334/Mum/2018, dt. 15-11-2019) (AY. 2018-19)
ACIT v Reliance Jio Infocomm Ltd. (Mum.)(Trib.). www.itatonline.org
S. 206C : Collection of tax at source – Sale of scrap – Tax cannot be collected at source on those items which are capable of being used as such without any modification. [S. 206 (1)]
The AO observed that, assessee failed to collect tax at source on certain items at time of sale of scrap arising on dismantling of ships and hence he passed an order u/s. 206C(1) directing assessee to collect tax at source along with interest.
Tribunal held that, tax was not required to be collected at source on those items which could be used as such without modification. Items sold which were capable of being used as such without any modification would fall outside purview of Explanation (b) to S. 206C.
ACIT v. Bansal Ship Breakers (P.) Ltd. (2019) 178 ITD 473 (Ahd.)(Trib.)
S. 253 : Appellate Tribunal – Powers – Delay of 571 days – Mistake of counsel may be taken in to account in condonation of delay. [S. 253(1), 254(1), Limitation Act, 1963, S. 3, 5]
The difference of opinion has arisen in the matter to relating to condoning the delay in filing of appeal by the assessee before the Tribunal. The appeal filed by the assessee was barred by limitation by 571 days. The question referred was “Whether, in the facts and circumstances of the case, the explanations furnished by the assessee for not filing the appeal within the prescribed period of limitation would constitute sufficient cause or not and accordingly whether the delay in filing the appeal should be condoned or not”
On reference third member held that mistake of counsel may be taken into account in condoning delay. Claim that the delay was caused by Counsel not communicating the order has to be accepted unless it is shown that blame put on counsel is with mala fide intentions in order to cover up mistake/lapse on the part of the assessee. As per human conduct and probabilities, a professional counsel cannot be expected to admit his lapses as it may affect his reputation. Also, if the appeal is adjudicated on merits, refusing to condone the delay is an error. Case laws referred;
(a) Collector, Land Acquisition v. Mst. Katiji & ors (1987) 167 ITR 471(SC)
(b) CIT v. West Bengal Infrastructure Development Finance Corp. Ltd ((2011) 334 ITR 269)(SC)
(c) Bhivchandra Shankar More v. BaluGangaram More (2019) 6 SCC 387 (SC)
(d) Elnet Technologies Ltd v. DCIT (2018) 259 Taxman 593 (Mad) (HC) taxmann. com 219)(Mad)(HC)
(e) Sivalogam Steels (P) Ltd v. CESTAT (2016) 70 taxmann. com (301)(Mad) (HC))
(f) E-Governance Society v. CIT (E) (2019) 261 taxman (289)(HP)(HC)
(g) Lahoti Overseas Ltd v. DCIT (ITNo. 3786/Mum/2012dt 18-03-2016)(Mum) (Trib) www.itatonline.org
(h) Vijayeswari Textiles Ltd. v. CIT (2002) 256 ITR 560 (Mad.) (HC)
(i) Esha Bhattachrjee v. Managing Committee of Raghunathpur Nafar Acadey & Ors (CANOs. 8183-8184 of 2013 dt 13-09-2013 (SC))
(j) G. Ramegowda Major and others v. Special Land Acquisition (1998) 2 SCC (2)142 /1988 AIR 897 (SC)
(k) Oriental Aroma Chemical Industries Ltd v. Gujarat Industrial Development Corporation (2010) 5 SCC 459
(l) Improvement Trust Ludhiana v Ujagar Singh and Ors. (2010) 6 SCC 786
(m) State of Kerala v. Krishna Kurup Madava Kurup AIR 1971 Ker 211 (215) (ITA No. 169/Asr/2015, dt. 29-10-2019) (AY. 2006-07)
Bhagwati Colonizer Pvt. Ltd. v. ITO (TM) (Amritsar) (Trib)
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 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)(AYs. 2008-09 & 2009-10)
Atlas Copco (India) Limited v. DCIT (Pune)(Triib.),
S. 254(1) : Appellate Tribunal – Suggestions on how to remove hindrances to India’s goal to become a $5 Trillion economy. Cash credits – Cash sales – Vouchers of day to day was not examined – Matter remanded for verification. [S. 68, 115BBE]
ITAT offers suggestions on how to remove hindrances to India’s goal to become a $5 Trillion economy. Violations of tax laws by new assessees occur because of lack of proper advice. Instead of letting these sparks of economic change stifle and die due to fear of compliances, they should be assisted by the State. (i) Set up a Tax Advisory Cell consisting of public spirited Revenue officers with strong ethics, full awareness of tax laws and people skills (ii) Identify new successful businesses as the agents of economic change (e.g. Haldiram, Lijjat Papad) and assist them, (iii) Create a Tax Compliance Scheme specially for the benefits of these new ventures so as to address their past lack of compliance. As regards addition as cash credits in respect of cash sales matter remanded to the AO for verification. (ITA No. 1224/CHD/2018, dt. 29-08-2019)(AY. 2014-15)
Asha Gandhi v. ITO (SMC) (2019) 182 DTR 173/ 75 ITR 36 / 201 TTJ 900 (Chad.)(Trib.),
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’s 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 is 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. 20-8-2019)(AY. 2003-04)
Anandkumar Jain v. ITO (Mum.)(Trib.), www.itatonline.org
S. 254(1) : Appellate Tribunal – Remand Assessment – Order giving effect – AO must comply the direction of the Tribunal [S. 2(8), 143(3), 250]
If the ITAT has passed an order remanding the matter to the file of the AO then the AO is duty bound to pass a valid order in conformity with the directions given by the ITAT and the AO cannot pass any order in disregard of such directions. (AY. 2001-02)
Dy. CIT v. Punjab Beverages (P) Ltd. (2019) 174 DTR 329 (Chd.)(Trib.)
S. 254(1) : Appellate Tribunal – Respondent can defend on the grounds, though no appeal is filed – Search and seizure – Jurisdiction issue. [S. 132, 153A, ITAT R. 27]
Even though the assessee has not appealed against the order of a lower authority it may still defend such an order on the grounds decided against him if the grounds are otherwise in his favour. (AY. 2011-12, 2014-15, 2015-16)
Dy. CIT v. Pacific Industries Ltd. (2019) 72 ITR 634 (Jodh.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Share capital – share premium – AO conducted detailed inquiry – Revision is held to be not valid [S 68, 133(6)]
Assessee company entered into a transaction to issue share capital at a huge premium and received shares (instead of money) held by the subscribers as investments in other companies. These shares (investments) were clearly shown in the balance sheets as investments and return filings of the subscribing companies in the earlier years. The AO decided to peruse the transaction in detail to decide as to whether addition needs to be made under section 68. In the assessment proceedings under section 147 the AO raised various queries and also issued notices to subscribing companies under section 133(6). The AO was satisfied with the responses but sent a proposal to the PCIT to take action under section 263 on various reasons recorded by the AO. The PCIT without applying any independent mind of his own took action to re-peruse the above transaction as the subscribing companies did not have revenues justifying the amount of investments held by them. The Tribunal held that the AO had conducted detailed inquiries from the parties directly and there was no need to exercise revisionary jurisdiction under section 263. The PCIT did not conduct any prima facie enquiry by himself so as to reach a conclusion that the inquiry conducted by the AO was deficient or lacking. Accordingly the impugned revisionary order was quashed. (AY. 2010-11).
Conton Textiles Mills Pvt. Ltd. v. PCIT (2019) 55 CCH 600 / 72 ITR 85 (Delhi) (Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Method of accounting construction contract – Completion method – Allocation of expenses – Accounting standard AS-7 – Revision is held to be not justified.
Assessee returned loss which was allowed by AO. CIT held that change in accounting policy resulted in declaration of loss from Projects and he directed AO to examine issues and pass de novo assessment in accordance with law. Tribunal held that construction of assets was required to be completed in accordance with time-line given in contracts, i.e., 22 months and 24 months respectively and work undertaken by assessee was convergence of various technological designs and functions for purposes of main battle tank training and construction of simulator was high end technical asset for purposes of training on battle tank and would definitely fall within definition of ‘construction of an asset’ and, thus, Accounting Standard 7 would be applicable to such an activity. Accordingly on facts, there was no fault in shifting of accounting policy by assessee accordingly the revision order is held to be not valid. (AY. 2008-09)
CAE India (P.) Ltd. v. CIT (2019) 177 ITD 780 (Bang.) (Trib.)
S. 271(1)(b) : Penalty – Failure to comply with notices – Alleged bank account not belong to assessee – No failure on part of assessee – No penalty can be levied. [S. 142(1), 273B]
On information received by department from ADIT (Inv.) it was alleged that the assessee held bank account in HSBC Bank, Geneva, Switzerland. The Assessing Officer has issued notice under S. 142(1) of the Act requiring assessee to furnish requisite information in respect of alleged bank account or submitting consent letter for obtaining account statement from the Bank. As the assessee had not submitted the consent letter, the AO has invoked penalty under S. 271 (1)(b). The Tribunal held that penalty should not be levied as assessee has a reasonable and bona fide belief in terms of S. 273B that there had been no violation of notice under section 142(1) for non-compliance on part of assessee. The Tribunal observed that the details of bank accounts which the assessee possessed outside India has already been disclosed by the assessee and thus there was no non-compliance under S. 142(1) of the Act and thus, no penalty can be levied under S. 271(1) (b) of the Act. (AYs. 2006-07 to 2012-13)
Charu Modi Bhartia v. DCIT (2019) 177 DTR 1/ 104 taxmann. com 390 (Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Surrender of income voluntarily – Penalty cannot be levied.
Penalty can be levied only if there is concealment of income or inaccurate particulars of income have been furnished. The onus is on the Assessing Officer during penalty proceedings to prove that the assessee has either concealed its income or furnished inaccurate particulars of income. If the assessee has made an incorrect claim in the return that would not mean that the assessee has concealed income or furnished inaccurate particulars of income. If surrender is voluntary then penalty proceedings cannot be initiated against the assessee.
Dy. CIT v. Shehla Ahmad (Smt.) (2019) 74 ITR 523 (Luck.)(Trib.)
S. 271(1)(c): Penalty – Concealment – Interest on fixed deposit receipts – Messing commission – Shown as exempt income – Levy of penalty is held to be not valid. [S. 148]
Tribunal held that the said issue was debatable and assessee was unaware of the decision of Apex Court on the said issue while filing return of income pursuant to notice under section. 148 of the Act. However, assessee accepted the addition and payed taxes as well as interest on the same pursuant to decision of Apex Court. Thus, it does not amount to concealment of particulars of income and furnishing inaccurate particulars when all necessary details were already furnished by assessee at the time of filing original return. At the most assessee has put forth a wrong claim at the time of filing return pursuant to reopening under Section 148 of the Act and has never concealed the particulars of income or furnished inaccurate. Thus, Tribunal relying on previous year’s decision in assessee’s own case deleted penalty. (AY. 2006-07)
Dehradun Club Ltd. v. Dy. CIT (2019) 69 ITR 30 (SN) (Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Explanation given by the assessee is not proved to be false – Levy of penalty is held to be not valid. [S. 69A, 271AAA]
A search and seizure operation was carried out by the department at the business premises of the aforesaid Group as well as residential premises of the promoters and directors of the company but no incriminating material was found during the search action. During the assessment proceedings, the Assessing officer had asked about the sources of the aforesaid income offered/declared by the assessee regarding which the common explanation given by the assessees was that the same was from speculation in the sale/purchase of the agricultural land, and since, no records were being maintained by the assessee in this regard, the income was offered under section 69A ‘subject to no explanation’. As the assessees could not satisfactorily explain the sources of income, the Assessing officer, therefore, invoked the Explanation 1 to section 271(1)(c) and initiated penalty proceedings and levied the penalty under section 271(1)(c). There was no material on record to indicate that the particulars furnished by the assessee were factually incorrect. Under the circumstances, even otherwise, on merits, the penalty under section 271(1)(c) is not attracted in this case. (AY. 2008-09 to 2012-13)
Dy. CIT v. Kulwant Singh (2019) 180 DTR 177/ 199 TTJ 545/ 104 taxmann.com 340 (Chd.) (Trib.)
S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Common appeal filed – Wrong advice – Delay was condoned – Matter remanded. [S. 246A, 271(1)(c)]
Assessee had received orders imposing penalty u/s. 271(1)(c) as well as u/s. 271AAA for relevant year. As per the advice of his CA, assessee had filed a common appeal against both these orders. On realizing that a separate appeal was to be submitted by assessee against order imposing penalty u/s. 271AAA, assessee filed appeal seeking condonation of delay in filing said appeal. The CIT(A) dismissed appeal holding that ignorance of law cannot be a justifiable reason. Tribunal held that, CA. had advised assessee to file one common appeal, since assessee could not be penalized for no fault of its own, thus the order was remitted back to the CIT(A) to verify facts whether assessee had challenged penalty imposed u/s. 271(1)(c) and 271AAA by filing a single appeal and if said pleading was found to be correct, said mistake being a technical mistake. Accordingly the delay was condoned and matter was remanded to CIT(A) to decide on merit. (AY 2011-2012)
Vijay Kumar Sood v. DCIT (2019) 178 ITD 251 (Chd.)(Trib.)
S. 4 : Charge of income-tax – Compensation awarded by Motor Accident Claims Tribunal – Interest on compensation awarded up to date of order of Tribunal or Court is held to be not taxable – Provision for deduction at source is not charging section.
[S. 56(2)(viii) 145A(b), 194A, Motor Vehicles Act, 1988, S. 171]
Petitioner when he was 8 years old while crossing the was road knocked down by a speeding vehicle. He was in coma for six months. Compensation was determined after 36 years after the accident. Motor Accident Tribunal awarded compensation within three months and the rate of interest payable was 12 per cent per annum on the unpaid amount. The insurance company before depositing the tax deducted the tax at source at 10 per cent on interest component. The petitioner filed the return and claimed the refund on the ground that the tax was wrongly deducted. The petitioner moved the petition challenging the vires of sections 194A(3)(ix), and (ixa) as also section 145A(b) and 56(2) (viii) of the Act. When the petition was pending the AO has passed the order. The petition was amended accordingly. Allowing the petition the Court held that awarding interest for delayed computation of compensation is therefore an integral part of this exercise. Interest awarded in motor accident claims cases is, thus, compensatory in nature and forms part of the compensation itself hence not taxable. Court also held that clause (viii) of sub-section (2) of section 56 by itself would not make the receipt of interest on compensation chargeable to tax as income from other sources, if such receipt is not income. Clause (b) of section 145A of the Act does not make interest on compensation or enhanced compensation taxable if it is otherwise not exigible to tax. It merely provides for the point of time when it would be subject to tax if otherwise taxable. The provision for deduction of tax at source is not a charging provision. It only provides for deduction of tax at source on payment of a sum, which, in the hands of the payee, is income. If the payee has no liability to tax on such income, the liability to deduct tax at source in the hands of the payer cannot be fastened. The provision for deducting tax at source cannot govern the taxability of the amount which is being paid. Accordingly the question of deduction of tax at source would arise only if the payment is in the nature of income of the payee. (AY. 2016-17)
Rupesh Rashmikant Shah. v. UOI (2019) 417 ITR 169 (Bom) (HC)
S. 9(1) : Income deemed to accrue or arise in India – Business connection – Royalty – Broadcasting services –Subscription – TV channel operator from customers – Receipt was not for transfer of any copyright in literary, artistic or scientific work – Can not be categorized as royalty income- International taxation – DTAA- India – Singapore [S.9(1) (vii), Copyright Act 1957, S.2(y), 14, 37 Art 5, 12]
Assessee is a Singapore based company and operated TV channels through different agencies. Assessee received a part of subscription charges paid by customers which enable customers to view channels operated by assessee. Dismissing the appeal of the revenue the Court held that this was not a case where payment for any copyright in literary, artistic or scientific work was being made, nor assessee was parting with any copyrights therefore payment could not be categorized as royalty.
(Followed Set Satellite (Singapore) P. Ltd. (2008) 307 ITR 205) (Bom) (HC) Dy.CIT v. Set India (P) Ltd (ITA No. 4372 /Mum/ 2004 dt. 25-4-2012)
CIT v. MSM Satellite (Singapore) Pte. Ltd. (2019) 265 Taxman 376 (Bom) (HC)
S. 10(23C) : Educational institution – Withdrawal of exemption – Collection of capitation fee – Notice of withdrawal containing unspecified allegation – Notice and consequent order is held to be not valid. [S.10 (23C) (vi) S. 132]
A writ petition against the order was dismissed. On appeal against the single judge order allowing the appeal the Court held that, in the notice for withdrawal of exemption except stating that there was a raid on December 16, 2015 and documents were seized from the premises and that a considerable part of the amount belonging to the assessee-trust had been misused for personal use of the trustees, no other details were forthcoming. The Revenue had not given reasonable opportunity to the assessee to put forth its case effectively. In the circumstances, the notice dated November 28, 2017 was unsustainable in law. The consequent order of withdrawal of exemption was also not valid. Court also observed that a notice to be valid in law, should be clear and precise so as to give the party concerned adequate information of the case he has to meet. The adequacy of notice is a relative term and must be decided with reference to each case. The test of adequacy of the notice will be whether it gives sufficient information so as to enable the person concerned to put up an effective defence. If a notice is vague or it contains unspecified or unintelligible allegations, it would imply a denial of proper opportunity of being heard. Natural justice is not only a requirement of proper legal procedure but also a vital element of good administration.
Navodaya Education Trust. v. UOI (2019) 417 ITR 157 (Karn)(HC)
Editorial : Decision in Navodya Education Trust v. UOI (2018) 405 ITR 30 / 253 Taxman 412 / 302 CTR 381 / 165 DTR 16 (Karn.)(HC) is reversed.
S. 10A : Free trade zone – Disallowance of expenses – Enhanced profit due to statutory disallowances – Entitle to deduction. [S.40(a)(ia)]
Tribunal held that disallowance made under section 40(a)(ia) would not affect assessee’s liability to tax because even if said amount was disallowed and added to income, same would be exempted under section 10A. High Court upheld Tribunal’s order. (Followed CIT v Gem Plus Jewellery India Ltd. (2011) 330 ITR 175 ( Bom) (HC) (AY. 2006-07) (Supreme Court followed CIT v. HCL Technologies Ltd 2018 (6) SCALE 524)
PCIT v. BMC Software India (P.) Ltd. (2019) 109 taxmann.com 277 / 266 Taxman 179 (Bom)(HC)
Editorial: SLP of revenue is dismissed, PCIT v. BMC Software India (P.) Ltd. (2019) 266 Taxman 178 (SC)
S. 10B: Export oriented undertakings – Derived from – Dividend income, profits on sale of fixed assets, profits on sale of investments, excess provision return back, duty drawback and interest income could be said to have direct nexus with the income of the business of the undertaking – Eligible for deduction. [S.10A, 10B(4)]
Dismissing the appeal of the revenue the Court held that, the dividend income, profits on sale of fixed assets, profits on sale of investments, excess provision return back, duty drawback and interest income could be said to have direct nexus with the income of the business of the undertaking. Although they might not partake of the character of profits and gains from the sale of articles, they could be termed income derived from the consideration realised by the export articles. In view of the definition of “income from profits and gains” incorporated in sub-section (4), the Tribunal committed no error in granting the benefit of exemption under section 10B. (AY. 2006-07)
PCIT v. Dishman Pharmaceuticals and Chemicals Ltd. (2019) 417 ITR 373 (Guj) (HC)
S. 11 : Property held for charitable purposes – Charitable activities results in a surplus does not mean that assessee exists for profit- If the surplus is ploughed back into the same charitable activities, the assessee cannot be said to be carrying out commercial activities in the nature of trade, commerce or business – Entitle to exemption. [S.2(15) 12, 12AA]
The question raised before the High Court was “Whether the Hon’ble ITAT has erred in not taking cognizance of the latest amendment in the nature of the proviso to section 2(15) of the I.T. Act inserted with effect from
1-4-2009?” After considering the provisions and case laws the High Court held that, the fact that the carrying on of charitable activities results in a surplus does not mean that assessee exists for profit. “Profit” means that owners have a right to withdraw the surplus for any purpose including personal purpose. However, if the surplus is ploughed back into the same charitable activities, the assessee cannot be said to be carrying out commercial activities in the nature of trade, commerce or business. The fact that the assessee has dealings with, & share of profits from, BCCI (a commercial entity) does not affect its charitable status. (C/TAXAP/268/2012 dt. 27-9-2019)
DIT(E) v. Gujarat cricket Association (2019) 183 DTR 367 (Guj)(HC),www.itatonline.org
S. 11 : Property held for charitable purposes – Application of income – Adjustment of excess expenditure of earlier years against income of current year amounts to application of income – Entitled to exemption. [S.2(15) 11(1) (a)]
Dismissing the appeal of the revenue the Court held that adjustment of excess expenditure of earlier years against income of current year amounts to application of income – Entitled to exemption. Followed CIT (E) Ohio University Christ College ( 2018)408 ITR 352 (Karn) (HC) (AY. 2012-13)
CIT (E) v. Agastya International Foundation. (2019) 417 ITR 539 (Karn) (HC)
S. 12A : Registration – Trust or institution – providing basic services of domain name registration charging annual subscription fees and connectivity charges – Incidental to main objects of assessee – Entitled to exemption [S.2(15) 10(23C)(iv), 260A, Companies Act, 1956, S.25]
Dismissing the appeal of the revenue the Court held that the the assessee had been incorporated without any profit motive. The services provided by the assessee were of general public utility and were towards membership and connectivity charges and were incidental to its main objects. The assessee (though not a statutory body) carried on regulatory work. Both the appellate authorities had concluded that the assessee’s objects were charitable and that it provided basic services by way of domain name registration, for which, it charged subscription fee on an annual basis and also collected connectivity charges. No question of law arose. (AY. 2009-10)
CIT (E) v. National Internet Exchange of India. (2019) 417 ITR 436 (Delhi) (HC)
Editorial: SLP is granted to the revenue, CIT (E) v. National Internet Exchange of India. (2019) 412 ITR 41 (St)
S. 12AA : Procedure for registration – Trust or institution – Mere resolution of governing body to benefit followers of a particular religion – Cancellation of registration is not justified.
The assessee is an educational institution which was granted registration under section 12AA in April, 1985. A notice to cancel the registration was issued in August, 2011 and the registration was cancelled by the Commissioner and this was confirmed by the Tribunal. On appeal to the High Court held that the ground for cancellation of registration was that in some of the subsequent governing body meetings some resolutions were passed in benefit of the Christian community. The order of cancellation had been passed by the Commissioner without recording any satisfaction, either on the issue of the activities of the school being not genuine or that they were not being carried out in accordance with the objects for which the institution had been set up. The order of cancellation of registration was not valid.
St. Michaels Educational Association v. CIT (2019) 417 ITR 469 (Patna) (HC)
S. 28(i) : Business income – Income from house property –Leasing of shops in a mall along with various other facilities – Assessable as business income and not as income from house property. [S.22]
Assessee-company is engaged in business of leasing out shop space in shopping malls. Assessee has shown income received from leasing out of shops and other commercial establishments as business income. AO assessed the income as income from house property. Tribunal held that the assessee is providing various facilities and amenities apart from giving shopping space on lease accordingly assessable as business income. Dismissing the appeal of the revenue the Court held that since it was not a case of giving shops on rent simplicitor rather assessee desired to enter into a business of renting out commercial space to interested individuals and business houses, amount in question was rightly brought to tax as business income. (AY 2008-09)
(Editorial : Raj Dadarkar & Associates (2017) 394 ITR 592 (SC) is distinguished)
PCIT v. Krome Planet Interiors (P.) Ltd. (2019) 265 Taxman 308 (Bom) (HC)
S.28(i) : Business income – Client code modification – (CCM) – Shifting of profits – Addition as income on the basis of alleged doubtful transaction is held to be not valid – Deletion of addition the Tribunal is affirmed. [S.69, 143(3)]
The assessee is a member of Multi Commodity Exchange of India Ltd. (MCX) and National Commodity and Derivative s Exchange of India. The assessee is carrying on trading activities both on derivatives and delivery based transactions on its own account as well as on behalf of various clients. AO has added the entire amount of doubtful transactions by way of assessee’s additional income on the basis of clients code modification. CIT(A) deleted the addition on the ground that all the clients are having PAN and regularly filing their returns and profits were taxed in their hands. Clients are not related parties. Modification was around 3% of the total transactions. All of them were complied with KYC norms. Tribunal affirmed the order of CIT(A). On appeal by the revenue, dismissing the appeal the Court held that, even if the Revenue’s theory of the assessee having enabled the clients to claim contrived losses is correct, the Revenue had to bring on record some evidence of the income earned by the assessee in the process, be it in the nature of commission or otherwise. Adding the entire amount of doubtful transactions by way of assessee’s additional income is wholly impermissible. The fate of the individual investors in whose cases the Revenue could have questioned the artificial losses is not known. Accordingly the appeal of the revenue is dismissed. (ITA No. 1257 of 2016, dt. 15-1-2019) (AY. 2006-07)
(Editorial: Order of Mumbai Tribunal in ITO v. Pat Commodity Services P. Ltd (ITA No 3498 /3499/Mum/ 2012 dt 7-8-2015) (AYs. 2006-07, 2007-08) is affirmed.
PCIT v. Pat Commodity Service Pvt. Ltd. (Bom)(HC), www.itatonline.org
S.32: Depreciation – Installation of windmill – 80% depreciation allowed on Civil Construction, electrical and other non-integral part of installations – Held to be allowable.
Revenue contended that the depreciation is allowable at 15% and not 80% claimed by the assessee. Dismissing the appeal of the revenue the Court held that windmill was erected in the desert area of Rajasthan which required special foundation of reinforced cement concrete and that said reinforced cement concreate formed integral part of windmill. Referred CIT v. Herdilla Chemicals Ltd. (1995) 216 ITR 742 (Bom) (HC). Court followed ITA NO 1326 of 2010 dt 14-6-2017. (ITA No. 1769 of 2016 dt. 30-1-2019)
PCIT v. Mahalaxmi Infra Projects Ltd ( Bom) (HC) www.itatonline.org.
S. 36(1)(iii) : Interest on borrowed capital – Commercial expediency – Inter – corporate deposits – Lower rate charged on inter – corporate deposits than that paid – No disallowances can be made. [S.37(1)]
Dismissing the appeal of the revenue the Court held that due to commercial expediency charging of lower rate of interest on inter corporate deposits than that paid by assessee is held to be justified. There cannot be any universal rate or rule in this regard. No question of law arises. (AY. 1994-95)
CIT v. Apollo Tyres Ltd. (No. 2) (2019) 219 ITR 546 (Ker) (HC)
S. 36(1)(iii) : Interest on borrowed capital – Production of milk – Loan for setting up joint venture company with Central Government Agency and State Government entity – Allowable as deduction.
Dismissing the appeal of the revenue the Court held that, the setting up of a joint venture company with a Central Government agency and a State Government entity was not beyond the purview of the business operations of the assessee. In such circumstances, the interest paid in respect of the funds borrowed by the assessee had to be regarded as a payment made for the purpose of the business of the assessee and a permissible deduction under S. 36(1)(iii) of the Act. (AY. 2000-01, 2003-04)
CIT v. Keventer Agro Ltd. (2019) 416 ITR 482 (Cal) (HC)
S. 37(1) : Business expenditure –Scientific research – The direction of the State Government for payment of contribution came just before the end of the financial year, entire expenditure is allowable on accrual basis – Claim cannot be disallowed under S. 35(1)(ii) as assessee did not claim weighted deduction.
[S. 35(1) (ii)]
Held by High Court that, though the contribution made to the Institute of Road Transport was paid after the end of the financial year, since the liability was incurred during the financial year relevant to 1992-93, the same is allowable under s. 37(1) on the basis of mercantile system and there was no question of disallowance by invoking S. 35(1)(ii) since no weighted deduction was claimed by assessee. (AY. 1991-92, 1992-93)
CIT.v. Tamil Nadu State Transport Corporation (Madurai) Ltd (2019) 179 DTR 161 (Mad)(HC)
S. 37(1) : Business expenditure – Accounts – Rejection –Apportionment of proportionate expenditure between two units – Each of the expenses allocated by the assessee has been rightly reflected in the books of account of both the units – AO was not justified in computing profits of both the units on the basis of allocation of proportionate expenditures, in the ratio of their respective turnover to the combined turnover. [S. 10B(7), 145]
Held by the High Court that:
1) Tribunal found that the AO has not pointed out any specific defect or mistake in the books of account so as to justify invocation of S. 145 of the Act.
2) Activity of non-EOU unit is largely trading, whereas in the case of EOU unit, it is manufacturing and production. Each of the expenses allocated by the assessee has been rightly reflected in the books of account of both the units, hence the AO was not justified in computing profits of both the units on the basis of allocation of proportionate expenditures, in the ratio of their respective turnover to the combined turnover. (AYs. 2005-06, 2006-07)
CIT v. Mineral Enterprises Ltd. (2019) 310 CTR 612/174 DTR 256 (Karn)(HC)
S.37(1) : Business expenditure – Contribution to recognized provident fund – Payment of pension to retired employees –As per scheme approved by the Government which had statutory force, hence, it would fall within the general deductions under
S. 37(1) and cannot be brought under S. 36(1)(iv) and (v) of the Act [S. 36(1)(iv), 36(1) (v)]
Held by the High Court that:
1) Payment of pension to retired employees was made as per scheme (Employees Retirement Regulations) approved and notified by the Government of India, which has statutory force and the assessee is bound by the terms and conditions contained in the regulations, any infraction or violation will result in various other civil consequences. Hence, the nature of deduction claimed in respect of the payments made in terms of the statutory regulation would fall within the general deductions under s. 37 and cannot be brought under ss. 36(1)(iv) and (v);
2) Further, assessee having been granted similar benefit for earlier years, the same cannot be denied for the subsequent years, especially when, the nature of payment is in the same fashion in terms of a statutory regulation. (AYs. 2010-11, 2012-13)
CIT v. V. O. Chidambaranar Port Trust (2019) 311 CTR 227 / 180 DTR 329 / 266 Taxman 141 (Mad)(HC)
S. 37(1) : Business expenditure – Setting up of business and starting commercial activities – Commencement of research and development and construction of factory – Business is set up Entitled to deduction of operating expenses, financial expenses and depreciation – Appellate Tribunal – Power. [S.28(i), 32, 254(1)]
Court held that once the business is setup the assessee is entitled to deduction of operating expenses, financial expenses and depreciation. Court also held that when there was no dispute with regard to the date on which the assessee had set up its business the Tribunal had no jurisdiction to unsettle the finding of the date on which the business of the assessee was set up. (AY. 2010-11)
Daimler India Commercial Vehicles P. Ltd. v. DCIT (2019) 416 ITR 343 (Mad)(HC)
S.40(a)(ia) : Amounts not deductible – Deduction at source – Amendment to S. 40A(ia) by Finance Act, 2010 permitting deposit of tax deducted at source till due date for filing return is retrospective in operation.
[S 139(1), 260A]
Dismissing the appeal of the revenue the Court held that the amendment to S. 40(a)(ia) by the Finance Act, 2010 was retrospective in operation with effect from April 1, 2005. The various High Courts had taken the view that the provision being a machinery provision, retrospective effect being given to it was appropriate. There was no reason as to why such view should be departed from. No question of law arose. Followed CIT v. Naresh Kumar (2014)362 ITR 256 (Delhi) (HC), CIT v. Omprakash R. Chaudhary (2014)3 ITR –OL 282 (Guj) (HC) CIT v. Sri Scorpio Engineering Ltd (2016) 388 ITR 266 (Karn) (HC), CIT v. Virgin Creations (ITA No 302 of 2011 dt 23-11-2011) (Cal) (HC) (AY. 2009-10)
CIT v. Shraddha and S. S. Kale, Joint Venture. (2019) 417 ITR 439 (Bom) (HC)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Waiver of loan Cannot be assessed as cessation of liability or as business income.[S.28(iv)]
Dismissing the appeal of the revenue the Court held that argument of Revenue that loan taken from agents/dealers is on revenue account or that on waiver of the loan, its character undergoes a change and it becomes on revenue account is not correct. Ss. 28(iv) & 41(1) cannot apply if the loan is on capital account and the assessee has never claimed any deduction therefor in the past (Solid Containers Ltd. v. Dy CIT (2009) 308 ITR 417 (Bom) (HC) distinguished, CIT v. Mahindra and Mahindra Ltd. (2018) 404 ITR 1 (SC) followed). (ITA No. 896 of 2017,
dt. 25-9-2019) (AY. 2009-10)
PCIT v. Colour Roof (India) Ltd.(Bom)(HC), www.itatonline.org
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Old unpaid liability for sundry creditors – Exhaustion of period of limitation may prevent filing of recovery proceedings in a Court of law, nevertheless it cannot be stated by itself that the liability to repay the amount had ceased – Addition cannot be made.
Dismissing the appeal of the revenue the Court held that, it is well settled through series of judgments that merely because a debt has not been repaid for over three years, would not automatically imply cessation of liability. Exhaustion of period of limitation may prevent filing of recovery proceedings in a Court of law, nevertheless it cannot be stated by itself that the liability to repay the amount had ceased. Such liability cannot be termed as bogus. (ITA No. 1288 of 2016, dt. 4-1-2019) ( AY. 2010-11)
PCIT v. Pukhraj S. Jain (Bom)(HC), www.itatonline.org
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Merely because period of three years expired from arising of the liability would not automatically mean that the liability has ceased – Order of Tribunal is affirmed.
Dismissing the appeal of the revenue the Court held that merely because period of three years expired from arising of the liability would not automatically mean that the liability has ceased. Order of Tribunal is affirmed. (ITA No. 1769 of 2016 dt 30-1-2019)
PCIT v. Mahalaxmi Infra Projects Ltd. (Bom) (HC) www.itatonline.org.
S. 45 : Capital gains – Transfer – Allotment letter – Long term – Short term – Assessee in possession of sheds since date of allotment – Assessee Paying Amounts Due Under Agreement – Sale deed executed on 11-1-1996 – Transfer of sheds in same year – Assessable as long-term capital gains [S.2(42A) 2(47)(v)]
Allowing the appeal the Court held that the agreement between the Corporation and the assessee referred to the assessee as the “lessee purchaser”. The agreement specifically stated that the price of the sheds had been tentatively fixed by the Corporation and part of this had already been paid by the assessee and the balance amount was agreed to be paid in installments. Further, the agreement stated that the Corporation had transferred the property to the assessee by way of lease for the time being with the ultimate object of selling the property to the lessee purchaser, but on the fulfilment of the terms and conditions laid down therein. There was no allegation that the assessee had flouted the terms and conditions laid down by the Corporation. Considering the totality of the factual matrix, it was to be held that the assessee had been holding the property ever since the date of allotment, i.e., August 11, 1988. It should be treated as a long-term capital asset and the gains arising therefrom should be assessed at low tax effect.
South India Minerals Corporation. v. ACIT (2019) 417 ITR 306 (Mad) (HC)
S. 64 : Clubbing of income – Minor child – Provision coming into force with effect from 1-4-1976 cannot be given retrospectivity and be made applicable to previous accounting year 1975-76 corresponding to assessment year 1976-77 [S. 64 (1)(iii)]
Question before the larger Bench was “whether the Tribunal was correct in holding that the share income of the minor sons of the assessees from the partnership was to be computed in the hands of their father in the assessment year 1976-77, under section 64(1)(iii) when the accounting year of the assessees had come to an end on August 10, 1975 and on December 31, 1975 respectively”
Court held that for deciding the liability under a particular provision of the Act, the date of accrual of the income would be relevant. If the provision comes into force in a particular financial year, it would apply to the assessment for that year but cannot be made applicable in respect of assessment for a previous year.
Section 64(1)(iii) was introduced with effect from April 1, 1976. The tax liability under the provision could therefore be charged on the assessee, in the assessment which was to be made for that accounting year, i.e., 1976-77, which would be done in the assessment year 1977-78. The Amending Act introducing a new tax liability which came into force with effect from April 1, 1976 could not be given retrospectivity and be made applicable to the previous accounting year, i.e., 1975-76 corresponding to the assessment year, i.e., 1976-77. Matter was remanded to division Bench for disposing the matter. (AY. 1976-77) (Editorial: Judgement in Badri Prasad v. CIT (1990) 185 ITR 307 (Patna) (HC) is overruled.
Loknath Goenka v. CIT (2019) 417 ITR 521(FB) (Patna) (HC)
Narmada Devi v. CIT (2019) 417 ITR 521(FB) (Patna) (HC)
S. 68 : Cash credits – Bank deposits – Bank statement was produced before appellate authorities – Deletion of addition is held to be valid.
Dismissing the appeal of the revenue the Court held that bank statements were produced before appellate authority authenticity of which was not in question or doubt. Accordingly the order of Tribunal is affirmed.
Dy. CIT v. Pushpak Merchants (P) Ltd. (2019) 108 taxmann.com 174/ 265 Taxman 433 (Chhatisgarh) (HC)
Editorial : SLP of revenue is dismissed, DCIT v. Godavari TIE UP (P.) Ltd. (2019) 265 Taxman 432 (SC)
S.69 : Income from undisclosed sources – Penny stock – Return of 491% – Bogus long term capital gains – Stock Exchange has identified Cressanda Solutions Ltd as penny stock being used for obtaining bogus long term capital gains – No evidence of actual sale except contract notes issued by share Broker were produced – Denial of exemption is held to be justified. [S.10(38), 45]
Appellant booked Long Term Capital gain (LTCG) of ₹ 73,77,806/- and sought exemption under S. 10 (38) of the Act. AO denied the exemption. AO found transaction pertaining to purchase of shares by Appellant of Smartchamps IT and Infra Ltd., which was merged with Cressanda Solutions Ltd., to be bogus transaction by holding that Cressanda Solutions Ltd. was penny stock. CIT(A) and Appellate Tribunal also confirmed the order of AO. On appeal it was submitted that the Appellant had made cheque payment for purchase of 1500 shares of Smartchamps IT and Infra Ltd. in assessment year 2012-13, and that investment was accepted by department. It was further submited that Appellant had produced all relevant materials before Assessing Officer, namely, documentation relating to opening of DMAT account; purchase of shares of Smartchamps IT and Infra Ltd., contract notes, and other relevant documents. Dismissing the appeal of the assessee the Court held that, the analysis of balance sheet and P&L account of the Co. shows that astronomical increase in share price which led to returns of 491% for assessee was completely unjustified. The EPS & other financials parameters cannot justify price at which assessee claims to have sold shares to obtain Long term capital gains. It is not explained as to why anyone would purchase said shares at such high price. Accordingly the order of Tribunal is affirmed. High Court also observed that Bombay Stock Exchange has identified Cressanda Solutions Ltd. as penny stock being used for obtaining bogus long term capital gains and no evidence of actual sale except contract notes issued by share Broker were produced. Accordingly no question of law. (ITA 841/2019, dt. 17-9-2019) (AY. 2014-15).
Suman Poddar v. ITO (Delhi)(HC), www.Itatonline.org
Editorial: SLP of assessee is dismissed Suman Poddar v. ITO (SLP No 26864/2009 dt 22-11-2019
S. 80IA : Industrial undertakings – Two manufacturing units – Deduction at 30% of eligible business – Not on total income. [S. 80AB]
Dismissing the appeal of the revenue the Court held that the understanding of the Department with regard to the scope of section 80AB to enable them to reckon the deduction at 30 per cent, confining it to the lower extent of the total income from all sources, instead of reckoning it as 30 per cent. of the business profits from the eligible business, was wrong and misconceived. No question of law. (AY. 1995-96)
CIT v. Apollo Tyres Ltd. (No. 5) (2019) 416 ITR 571 (Ker) (HC)
S. 80IB(10) : Housing projects – Condition that completion certificate must be obtained within four years from local authority – Amendment is not retrospective – Not applicable prior to 1-4-2005 – Order of Tribunal quashing the reassessment is held to be valid. [S.147, 148]
Dismissing the appeal of the revenue the Court held that prior to April 1, 2005, section 80-IB(10) of the Income-tax Act, 1961 provided only three conditions for the eligibility for the deduction. There was no such condition that the project in question should be completed and completion certificate obtained within the period of four years. The condition was imposed by the amendment with effect from April 1, 2005. The condition will be applicable prospectively and not retrospectively. Accordingly once it had come on record by the fact finding authority that there was no such condition to have the completion certificate within four years from the local authority granting approval of the projects, the reassessment proceedings taken against the assessee were held to be bad in law. (Followed CIT v. Brahma Associates (2011) 333 ITR 289 (Bom) (HC), CIT v. Sarkar Builders (2015) 375 ITR 392 (SC)) (AY. 2005-06, 2007-08).
PCIT v. Sahara States, Gorakhpur. (2019) 418 ITR 168/ 310 CTR 457 (All) (HC)
S. 80IB (11A) : Undertaking – Business of processing, preservation and packaging of fruits or vegetables – Business of manufacturing and exporting honey is eligible to claim deduction.
The assessee firm which is engaged in the business of manufacturing and exporting honey. It claimed deduction under S. 80-IB(11A) in respect of benefit received under Vishesh Krishi and Gram Udyog Yojana (VKGUY). AO denied the deduction om the ground that the VKGUY scheme is part of Foreign Trade Policy 2009-14 framed by the Government of India, Ministry of Commerce and Industry. Tribunal also up held the view of the AO. On appeal High Court held that perusal of the scheme would suggest that the objective of the scheme was to promote export of agricultural produce and their value added products, minor forest produce and their value added variants, Gram Udyog products, forest based products and other produces as maybe notified. In relation to exports of such products, benefits in the form of incentives would be granted at the prescribed rate. The objective behind granting such benefit was in order to compensate high transport cost and to offset other disadvantages. In clear terms, thus, the Government of India realized that the products such as agricultural produce, minor forest produce and Gram Udyog products as also forest based products would have high transport cost and would be accompanied by various other disadvantages. In order to make the export of such products viable, the Government of India decided to grant certain incentives under the said scheme. The clear objective behind the scheme was, thus, to reduce the cost of its procurements and to neutralize certain inherent disadvantages attached to such products. Accordingly the court held that the assessee’s claim of deduction under section 80IB(11A) in relation to the benefits received by the assessee under VKGUY scheme upon the export of its agro products was to be allowed.
Pioneer Foods & Agro Industries. v. ITO (2019) 265 Taxman 53 (Mag) (Bom) (HC)
S. 92C : Transfer pricing – Guarantee commission – Comparison can be made between guarantees issued by commercial Banks as against a corporate guarantee issued by a holding company to benefit of its Associated enterprises – Bench mark fixed by TPO at 3 per cent is held to be correct. [S. 92CA (3), R.10B]
SLP was granted to the revenue. Glenmark Pharmaceuticals Ltd. (2017) 397 ITR 30(St)/ 250 Taxman 391 (SC). Dismissing the appeal of the revenue the Court held that Benchmark fixed by TPO at 3 per cent on account of guarantee commission is held to be correct. Comparison can be made between guarantees issued by commercial banks as against a corporate guarantee issued by a holding company to benefit of its Associated enterprises.
(Note: Order of Tribunal in Glenmark Pharmaceuticals Ltd. v. Add. CIT (2014) 43 taxmann.com 191/ 62 SOT 79 (URO) (Mum) (Trib) is affirmed.)
CIT (LTU) v. Glenmark Pharmaceuticals Ltd. (2019) 265 Taxman 237 (SC)
Editorial: Order in CIT (LTU) v. Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439/85 taxmann.com 349 (Bom.)(HC) is affirmed partly.
S. 115O : Domestic companies – Tax on distributed profits – Charging section – No need for issuance of notice before making a demand – Profits distributed to shareholders is deemed to be dividend – Reduction on share capital can be effected by buying back shares – Advance Ruling cannot be given if an enquiry is pending against the assessee – Writ will not normally be issued if there is alternative remedy [S.2(22) 245R, Art. 226]
Dismissing the petition the Court held that section 115-O had been issued to the assessee and it had been given sufficient opportunity to be heard. Prima facie the buy-back of shares pursuant to the order of the company court would not give rise to capital gains and had to be treated as dividend. The assessee had an alternate remedy of filing an appeal against the order. A writ would not issue to quash the order.
Cognizant Technology Solutions India P. Ltd. v. DCIT, LTU (2019) 416 ITR 462 (Mad) (HC)
S. 115O : Domestic companies – Tax on distributed profits – Charging section – No need for issuance of notice before making a demand – Profits distributed to share holders is deemed to be dividend – Reduction on share capital can be effected by buying back shares – Advance Ruling cannot be given if an enquiry is pending against the assessee – Writ will not normally be issued if there is alternative remedy – Liberty is given to file an appeal. [S.2(22), 245R, 246A, Art. 226 Companies Act, 1956, S.391, 393]
Dismissing the petition against single judge order the Court held that appeal against AO’s Order holding that the transactions made pursuant to the buy back agreement in consequence to the approval of the scheme under sections 391 to 393 of the Companies Act requires to be taxed under S. 115-O on the premise that it would constitute dividend and not capital gain is maintainable. Court also held that single Judge, though rightly dismissed the writ on the ground that alternate remedy is available, was not correct in going into the merits of the case, at this stage, while granting liberty to file an appeal. (WP. No. 2063 of 2019 dt. 6-9-2019)
Cognizant Technology Solutions India (P) Ltd. v. DCIT (2019) 418 ITR 576/310 CTR 515/181 DTR 371 (Mad.)(HC)
Editorial: Order of single Judge in Cognizant Technology Solutions India (P) Ltd. v. DCIT (2019) 416 ITR 462 (Mad.) (HC) is partly affirmed.
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 ₹ 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. 9-6-2015) 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).
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).
S. 132A : Powers – Requisition of seized assets – Cash seized under guidelines issued by Election Commission – Election commission finding that seizure was not valid – Income-Tax Authorities had no jurisdiction to requisition such cash [S.132, Art. 226]
The assessee was a proprietorship concern engaged in wholesale trading of ready-made garments. A flying squad entered his business premises claiming knowledge about huge cash lying with the assessee which according to them was meant for use in elections for influencing voters in violation of the election laws and guidelines. No notice had been received by him in this regard and thus, the authority of the flying squad was unknown. The proprietor of the assessee handed over the cash which was a collection of payments received from different customers and meant for different purposes. The cash was not even counted by the flying squad, who simply collected the cash, prepared a seizure list and left the business premises. The Committee constituted under the guidelines of the Election Commission concluded that the seized cash had no connection with the election. Meanwhile the cash was requisitioned under a warrant of authorisation issued under section 132A of the Income-tax Act, 1961. On a writ the Court held that the proceeding was an outcome of a raid conducted under the guidelines of the Election Commission of India and the seizure was not a consequence of a raid made by the Income-tax authorities under section 132 of the Act, nor could any order be passed in purported exercise of jurisdiction under section 226(3) of the Act. Even otherwise, the seizure itself was without sanction of law which was apparent from the fact that no first information report or complaint was instituted as provided under clause 4 of the Guidelines nor was the case submitted to the court of competent jurisdiction within 24 hours nor did the Committee constituted under the Guidelines take any decision to order seizure of the cash, in the absence of any first information report/complaint instituted in terms of clause 16(i). The order of requisition was not valid.
Indian Traders. v. State of Bihar (2019) 417 ITR 95 (Pat) (HC)
S.143(2) : Assessment – Notice – Non service of notice with in limitation period – Order is bad in law – Provision of S.292BB cannot be invoked since assessee neither appeared nor co-operated in inquiry during assessment proceedings as the order was passed u/s. 144 of the Act – [S.144, 292BB, Art 226]
Assessee had filed the return of income, notice under section 143(2) dated 24-8-2017 served on 19-12-2017. The assessment was completed u/s. 144 on 19-12-2018. The assessee filed the writ petition on the ground that the notice was served beyond limitation period hence the order is bad in law. Revenue submitted that notice dated 24-8-2017 was dispatched to address of assessee and copy of speed post acknowledgment was placed on record for having dispatched same. It was also submitted that e-Portal of department showing date of service as 19-12-2017 could not be considered as service date by ignoring service of notice made through speed post by department. It was found that the copy of speed post acknowledgment neither bore signature of assessee nor indicated date of dispatch/service and, thus it was a vague and inchoate document. Further, copy of e-portal showing date of service of notice as 19-12-2017 could not be disputed by department on ground that there was some technical error in e-Portal maintained by department. As regards applicability of section 292BB, since assessee neither appeared nor co-operated in inquiry during assessment proceedings, provisions of said section would not apply. Accordingly the assessment order based on invalid notice, could not survive and same was liable to be quashed. (AY. 2016-2017)
Nittur Vasanth Kumar Mahesh v. ACIT (2019) 265 Taxman 277 (Karn) (HC)
S. 143(2) : Assessment – Notice – Issue of notice beyond period prescribed in proviso to S.143(2) – Assessment is barred by limitation.
For relevant year, assessee filed its return on 30-9-2004. Six months period prescribed in proviso to section 143(2) would end on 30-9-2005. Notice under section 143(2), read with section 142(1) was issued on 8-8-2006. In the petition the Court held that in view of proviso to section 143(2), notice was issued after expiry of prescribed time period and, thus, same was clearly hit by limitation. Accordingly entire proceedings including assessment order passed by Assessing Officer under section 143(3) was quashed. (AY. 2004-05)
Bihar Police Building Construction Corporation (P.) Ltd. v. P CIT (2019) 265 Taxman 373 (Patna) (HC)
S. 145 : Method of accounting – Stock valuation of gold – LIFO method of valuation – Recognised in law – No substantial question of law. [S.260A]
Assessee is engaged in business of manufacturing and selling of gold ornaments who followed LIFO method of valuation. AO held that assessee undervalued stock which was below average cost price of gold and made certain addition to assessee’s income. Tribunal having accepted assessee’s explanation, deleted addition made by AO. High Court affirmed the order of Tribunal. (AY. 2010-11)
CIT v. Sharad Mohanlal Shah ( 2019) 108 taxmann.com 35 (Guj) (HC)
Editorial: SLP of revenue is dismissed, CIT v. Sharad Mohanlal Shah (2019) 265 Taxman 539 (SC)
S. 145 : Method of accounting – Stock valuation – Cash credit limits – Discrepancy in stock as per books of account of assessee and that shown in bank statements – Deletion of addition is held to be justified.
AO made addition to assessee’s income on account of discrepancy in stock as per books of account of assessee and that shown in bank statements. Tribunal deleted said addition by taking a view that assessee had tendency to show higher value of stock in bank statements in order to enjoy higher cash credit limit. High Court upheld order passed by Tribunal.
PCIT v. Janam Steel and Alloys (2019) 108 taxmann.com 349 / 265 Taxman 552 (Guj) (HC)
Editorial: SLP is granted to the revenue; PCIT v. Janam Steel and Alloys (2019) 265 Taxman 551 (SC)
S. 145 : Method of accounting – Valuation of stock – Goods ready for shipment had not been transferred – Declaration made in accordance with provision of sales tax is not relevant for the purpose of income-tax Act – Valuation of stock at cost or market price at the option of assessee – Held to be valid.
Tribunal took a view that since title of goods ready for shipment had not been transferred to foreign buyers, value of those goods could be included in stock in hand at cost or market price, at option and as per regular practice of assessee. Revenue raised a plea that for sales tax purpose value of goods lying at port was taken at invoice value and, thus, same value was to be adopted for tax purposes. High Court rejected revenue’s plea by holding that sales tax computation and declaration would be made in accordance with provisions of Sales-tax Act and same would not make any difference for valuation of stock under provisions of Act.
PCIT v. Jindal Stainless Ltd. (2019) 109 taxmann.com 144/ 266 Taxman 188 (Delhi) (HC)
Editorial: SLP of revenue is dismissed; PCIT v. Jindal Stainless Ltd. (2019) 266 Taxman 187 (SC)
S. 147 : Reassessment – After the expiry of four years – Shah Commission’s report – Merely on basis of Shah Commission’s Report opining that there was under – invoicing of export price by iron ore miners and exporters, reassessment could not be initiated when there was nothing to indicate that any particular income had accrued to anyone as a result of price difference – Notice based on report of Commission is held to be not valid [S.148]
The petitioner was carrying on business of mining and export of iron ore. After scrutiny, assessment order under section 143(3) was passed. Reassessment proceedings were initiated after the expiry of four years on basis of information of Shah Commission Report that there was under invoicing of export by exporters of iron ore, Assessing Officer initiated reassessment. The reasons for reopening the assessment was as under (i) There was under invoicing of exports by the assessee, (ii) alternatively, mining activity being illegal, income arising from it ought to be assessed as inform other sources and (iii) escapement of income from assessment was on account of failure on the part of the assessee to disclose wholly and truly all material facts necessary for the assessment. On writ allowing the petition the Court held that since under-invoicing was nothing but a matter of expression of opinion by Commission, Assessing Officer could not follow same as primary for reopening assessment. As Assessing Officer had not applied his mind to this aspect of matter, reassessment order was to be quashed as there was nothing to indicate that any particular income has accrued to anyone as a result of such difference in prices. As regards the allegation of illegality the Court held that when the income from the activity of mining and exporting ore arose also when it was assessed to tax there was nothing to suggest that the activity was illegal. Accordingly the notice of reassessment was held to be invalid. Ratio in Raymond Woollen Mills Ltd. v. ITO (1996) 236 ITR 34 (SC) is distinguished. (AY. 2008-09)
Sesa Sterlite Ltd v. ACIT (2019) 417 ITR 334 / 107 taxmann.com 338 (Bom)
S. 147 : Reassessment – Export business – No new material – Notice under direction of Commissioner – Reassessment is held to be not valid. [S80HHC, 148]
The AO allowed the claim u/s. 80HHC after considering the submission of the assessee. Despite a strong reply to the audit objection, the AO upon requiring him to take “remedial action forthwith”, had issued notice dated February 17, 2000, i.e., on the very next day, under section 148 of the Act, seeking to reopen the assessment. Tribunal quashed the reassessment proceedings. On appeal by the revenue dismissing the appeal the Court held that the material on record indicated that there was no independent application of mind on the part of the Assessing Officer. The notice was not valid. Distinguished IPCA Laboratories Ltd. v. Dy. CIT (2001) 251 ITR 420 (Bom) (HC) (AY. 1995-96)
CIT v. Narcissus Investments P. Ltd. (2019) 417 ITR 512 (Bom)(HC)
S. 147 : Reassessment – With in four years – Transfer of leasehold rights – Allegation that the transaction is not genuine – No new material – Reassessment is held to be not valid. [S. 45, 56, 148]
Allowing the petition the Court held that undisputedly, the assessee had disclosed the transaction of having received a sum of ₹ 40.51 crore from Morarji Textiles Ltd. under a deed evidencing transfer of leasehold rights in the land. Not only in the return, but during the assessment also, the assessee had made such disclosures. This transaction was also examined by the Assessing Officer during assessment. In the reasons recorded itself, the Assessing Officer had referred to this transaction as emerging from the assessment records. Thus, in clear terms, the assessee had offered such receipt to tax. In the notice for reassessment the Assessing Officer held that the leasehold rights belonged to Morarji Textiles Ltd. itself and therefore, Morarji Textiles Ltd was wrong in claiming that it had purchased such rights from the assessee. He recorded the satisfaction that the income of the assessee to the tune of ₹ 40.51 crore chargeable to tax had escaped assessment. The entire issue had been examined by the Assessing Officer during the original scrutiny assessment. No material outside of the assessment records was shown to have been brought to the notice of the Assessing Officer. He only referred to the order of the assessment passed by the Assessing Officer of Morarji Textiles Ltd such assessment was based on the documents which were already part of the assessment in the case of the assessee. The notice of reassessment was not valid. (Distinguished Kalyani Maviji and Co. v. CIT (1976) 102 ITR 287 (SC), and Phool Chand Bajrang Lal v. ITO ( 1993) 203 ITR 456 (SC))
Integra Garments And Textiles Ltd. v. ITO (2019) 418 ITR 139 / 310 CTR 570(Bom) (HC)
S. 147 : Reassessment – Within four years – Change of opinion Interest income – Income from other sources – Adjustment of interest income against interest expenditure and remaining amount was transferred to work-in-progress account –Reassessment is held to be not valid. [S.56, 148]
Assessee was engaged in business of development of real estate projects. Assessee filed its return wherein it adjusted interest income against interest expenditure and remaining amount was transferred to work-in-progress account. Assessing Officer completed assessment under section 143(3) accepting assessee’s treatment of interest income. Subsequently, Assessing Officer initiated reassessment proceedings taking a view that interest income earned by assessee had to be taxed as income from other sources. On writ allowing the petition the Court held that since entire question of taxing assessee’s interest income was minutely scrutinized by Assessing Officer during original assessment proceedings, in such a case, in absence of any new material, reopening of assessment would be based on mere change of opinion. Accordingly the reassessment proceeding was quashed. (AY. 2013-14)
Rubix Trading (P.) Ltd. v. ITO. (2019) 108 taxmann.com 176 /265 Taxman 424 (Bom) (HC)
Editorial: SLP of revenue is dismissed, CIT v. Rubix Trading (P.) Ltd. (2019) 265 Taxman 423 (SC)
S.147 : Reassessment – Survey – Merely on the basis of statement of partner addition cannot be made in respect of difference between stamp valuation and sale price of property on basis of such offering made by partner – Reassessment was quashed. [S.43C, 45, 133A. 148]
AO reopened the completed assessment. On writ the Court held that the assessee did not make voluntary surrender of any additional income. Partner never admitted that flats were sold at a price higher than what was reflected in documents. Court held that the entire approach of the Assessing Officer is wholly incorrect. As is well known, section 50C would enable the revenue to bring to tax by way of deemed capital gain difference between the stamp valuation and the sale price of a capital asset. For obvious reasons, this provision of section 50C would not apply in case of a builder for whom immovable property is in nature of stock-in-trade and not capital asset. To overcome this difficulty, the legislature had inserted section 43CA under Finance Act, 2013 with effect from 1-4-2014. This provision would enable the revenue to tax the income arising out of sale of stock by a deeming fiction where subject to certain conditions, stamp valuation of such stock would substitute the actual receipt thereof. In absence of any such statutory provisions, giving rise to the deeming fiction, the revenue cannot tax any amount which has not been received by a seller of an immovable property at the time of sale. In plain terms, in this statement, the partner never admitted that the flats were sold at a price higher than what was reflected in the document. However, in absence of voluntary surrender by the assessee of any additional income, it was simply not possible for the revenue to make any addition on the ground of the difference between the stamp valuation and the sale price of the property in question. As noted, section 43CA was inserted with effect from 1-4-2014 and therefore, had no applicability to the assessment year in question. The attempt on the part of the Assessing Officer to make the addition with the aid of the statement of the partner of the assessee and reference to the correct stamp valuation, is simply invalid. What the Assessing Officer wishes to do is to adopt a stamp valuation for the properties in question, superimpose the statement of the partner of the assessee of the declaration of certain additional income and extrapolate such statement to fit within the scheme of section 43CA. Accordingly the notice of reopening of assessment is set aside. Consequently, the order of assessment is rendered invalid.
Zain Constructions. v. ITO (2019) 265 Taxman 82 (Mag) (Bom) (HC)
S. 147 : Reassessment – Within four years – Change of opinion – Write off of foreign receivable debts – Pending for approval – Reassessment is held to be not valid. [S. 36(1(vii), 148]
Assessee company was engaged in business of manufacturing pharmaceutical machineries. Assessment was completed u/s. 143(3) wherein the AO allowed the claim for bad debts. Subsequently, AO initiated reassessment proceedings on ground that assessee did not obtain permission from RBI for writing off of foreign receivables as bad debts and, thus, such claim of bad debts could not be allowed. On writ allowing the petition the Court held that as regards foreign debts, assessee had explained that application for permission to write off bad debts was already made to RBI and AO had accepted assessee’s contention that upon application of RBI pending final approval, debts could be written off. Accordingly there was no failure on part of assessee to disclose all material facts at time of assessment, initiation of reassessment proceedings merely on basis of change of opinion was not justified. (AY. 2013-2014)
Chamunda Pharma Machinery (P.) Ltd. v. ACIT (2019) 265 Taxman 83 (Mag (Guj)(HC)
S. 147 : Reassessment – Reasons for issue of notice must be given – Objections must considered by passing speaking order – Reassessment is held to be not valid – Existence of alternative remedy would not bar issue of writ [S. 148, Art. 226]
Allowing the petition the Court held that the reasons for re-opening the assessments had not been furnished to the assessee. The orders of reassessment had been passed without hearing the assessee and a consequent demand notice had also been issued. There had been a breach of the principles of natural justice and the procedure required to be adopted for passing assessment orders on reassessment and demand orders had not been followed. Therefore, an exceptional case had been made out for invoking power under Article 226 of the Constitution of India. Both the orders being unsustainable the assessment and demand orders were liable to be quashed. (AYs. 2012-13 to 2016-17)
North Eastern Electric Power Corporation v. PCIT (2019) 416 ITR 425 (Meghalaya) (HC)
S.147 : Reassessment – Notice –Order passed without disposing of objections raised by assessee – Reassessment Order is set aside to consider the objections.
Allowing the petition the Court held that, the AO passed a reassessment order under S. 147 of the Act, pursuant to the notice issued under S. 148 without disposing of the objections filed by the assessee against the reopening of the assessment. Accordingly the reassessment order was to be set aside. The AO was to consider the objections raised by the assessee to the reopening of the assessment under S. 147 and dispose of those objections by a reasoned order. (AY. 2011-12)
Surendra Kumar Jain. v. CIT (2019) 416 ITR 340 (Delhi) (HC)
S.147 : Reassessment –Amalgamation of companies – Change of previous year allowed by AO – Reassessment proceedings on ground that AO was not aware of amalgamation of companies – Held to be not valid [S.148]
Court held that the documents produced by the Department made it clear that the Assessing Officer was in the know of the amalgamation proceedings. The request for change of previous year specifically indicated that the amalgamation process was on and that the companies expected the order of the High Court approving the scheme of amalgamation, shortly. In such circumstances, there was no warrant to assume that the assessment order was passed without knowledge of the amalgamation. The reassessment proceedings were not valid.
(AYs. 1983-84 to 1985-86)
CIT v. Harrisons Malayalam Ltd. (2019) 416 ITR 509 (Ker) (HC)
S. 147 : Reassessment – Survey – Retraction – Notice based solely on statement recorded during survey – Held to be not valid.
[S. 132 (4), 133A (iii), 148]
Allowing the petition the Court held that the utility of a statement recorded in the course of survey is limited to the extent to which it is useful or relevant to any proceeding under the Act. A statement recorded in the course of survey can, at best, support a proceeding for reassessment. It cannot be the sole basis for reassessment. Accordingly, as the department had yielded no tangible incriminating material reassessment based solely upon the sworn statement recorded under section 133A from one of the partners which he had retracted later. The notice of reassessment was not valid. (AY. 2013-14 to 2015-16)
A. Thangavel Nadir Stores v. ITO (2019) 417 ITR 50 (Mad) (HC)
S. 147 : Reassessment – Failure to follow the procedure laid down in GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) and to pass a separate order to deal with the objections – Renders the assumption of jurisdiction by the Assessing Officer ultra vires.
The AO without making any order disposing of the objections filed by the Appellants, proceeded to make an assessment order dated 26th March, 2004. Tribunal affirmed the order of the AO. High Court admitted the following substantial question of law. “Whether on the facts and in the circumstances of the case, the Income-Tax Appellate Tribunal ought to have held that since the respondent did not furnish to the appellant the reasons recorded for reopening of the assessment for the assessment year 1997-98 and did not comply with the mandatory preconditions laid down by the Hon’ble Supreme Court in GKN Driveshaft (India) Ltd. v. ITO (2003) 259 ITR page 19, the reassessment order was bad in law as being opposed to the principles of natural justice ?”
Allowing the appeal the Court held that, it is mandatory for the AO to follow the procedure laid down in GKN Driveshafts (India Ltd. v. ITO (2003) 259 ITR 19 (SC) and to pass a separate order to deal with the objections. The disposal of the objections in the assessment order is not sufficient compliance with the procedure. The failure to follow the procedure renders the assumption of jurisdiction by the Assessing Officer ultra vires (Bayer Material Science (P) Ltd. v. Dy. CIT (2010)382 ITR 333 (Bom) (HC) & KSS Petron Pvt. Ltd. v. ACIT (Bom)(HC) (ITXA No. 224 of 2014 dt 20-03-2017 www.itatonline.org followed). (TA No. 63 of 2007, dt. 30-08-2019) (AY. 1997-98)
Fomento Resorts & Hotels Ltd. v. ACIT (Bom)(HC)(Goa Bnech), www.itatonline.org
S. 147 : Reassessment – Export business – No new material – Notice under direction of Commissioner – Reassessment is held to be not valid. [S80HHC, 148]
The AO allowed the claim u/s. 80HHC after considering the submission of the assessee. Despite a strong reply to the audit objection, the AO upon requiring him to take “remedial action forthwith”, had issued notice dated February 17, 2000, i.e., on the very next day, under section 148 of the Act, seeking to reopen the assessment. Tribunal quashed the reassessment proceedings. On appeal by the revenue dismissing the appeal the Court held that the material on record indicated that there was no independent application of mind on the part of the Assessing Officer. The notice was not valid. Distinguished IPCA Laboratories Ltd. v. Dy. CIT (2001) 251 ITR 420 (Bom) (HC) (AY.1995-96)
CIT v. Narcissus Investments P. Ltd. (2019) 417 ITR 512 (Bom)(HC)
S. 147 : Reassessment – Change of opinion – Export receivables could be written off during the pendency of the application for approval from the Reserve Bank of India – Claim of bad debt was allowed after scrutiny – Reassessment is held to be not valid. [S. 36(1)(vii), 148]
Allowing the petition the Court held that the notice of reassessment was based on the ground that the allowance for bad debt was erroneous. During the original assessment proceedings, the Assessing Officer had considered the claim of the assessee in detail. The assessee had submitted all the required details called for by the Assessing Officer in respect of the claim of bad debts written off including the bad debts written off pertaining to export receivables. The Assessing Officer had formed an opinion that the bad debts from export receivables could be written off during the pendency of the application for approval from the Reserve Bank of India and he could not have formed a different opinion that income had escaped assessment because the assessee did not have permission from the Reserve Bank of India to write off the bad debts from the export receivables. The notice was not valid. (AY. 2013-14)
Chamunda Pharma Machinery Pvt. Ltd. v. ACIT (2019) 417 ITR 671 (Guj) (HC)
S. 147 : Reassessment – Bogus purchases – Manufacture of diamonds – Information received from Director (Inv) – Statement of searched party – Not discharging the burden –Natural justice – No prayer was made by the assessee before the Assessing Officer to summon Pravin Jain for his cross-examination – Reassessment is held to be valid – On merit the Tribunal confirmed the addition of 15% of alleged bogus purchases. [S.10AA, 132(4), 148]
Dismissing the appeal the Court held that the view taken by the Tribunal was based on the facts proved by the statement under section 132(4) of Pravin Jain, the party in respect of whom the search was conducted. The assessee despite being provided opportunity failed to prove the genuineness of the transactions and to produce the parties from whom such transactions were made with their books of account for verification. Indisputably, the Assessing Officer at the subsequent stage had relied upon the statement of Pravin Jain recorded under section 132(4) based on which he had called upon the assessee to prove the genuineness of the transactions. As regards the contention of the assessee that it was not provided opportunity to cross examine Pravin Jain the party who had given the statement, firstly, the Assessing Officer himself had required the assessee to produce the representative of the concerned parties along with their books of account and he had failed to produce them. Secondly, no such prayer was ever made by the assessee before the Assessing Officer to summon Pravin Jain for his cross-examination. No question of law arose. On merit the Tribunal confirmed the addition of 15% of alleged bogus purchases. (AY. 2007-08)
Goenka Jewellers. v. CIT (2019) 417 ITR 686 (Raj)(HC)
Editorial: SLP of assessee is dismissed Goenka Jewellers v. CIT (2019) 416 ITR 77 (St)
S.147: Reassessment – Change of opinion – Information was furnished in the original assessment proceedings –Reopening of assessment on same issue amounts to change of opinion hence untenable – Amounts to Change of Opinion and untenable. [S. 148]
Allowing the petition the Court held that the reopening of the assessment is nothing but a change of opinion. The then Assessing Officer, upon due consideration of all the necessary details and information furnished by the assessee had not made any addition in respect of the transaction of receipt of ₹ 6 crore or the repayment of that amount while he made the assessment under section 143(3). The action of reopening of the assessment merely based on change of opinion was untenable. The notice issued under section 148 was to be quashed and set aside. (AY. 2011-12)
Rajendra Suganchand Shah. v. ACIT (2019) 417 ITR 583 (Guj) (HC)
S. 148 : Reassessment – Notice issued to deceased person – Legal Representative of such person not waiving right to notice – Notice is held to be invalid. [S. 147, 292B]
Allowing the petition the Court held that a notice under section 148 is a jurisdictional notice and existence of a valid notice under section 148 is a condition precedent for exercise of jurisdiction by the Assessing Officer to assess or reassess under section 147 of the Act. Notice issued to deceased person and when the legal Representative of such person not waiving right to notice. Notice is held to be invalid and consequently, the provisions of section 292B of the Act would not be attracted. (AY. 2012-13)
Nanduben Ratilal Patel. v. DCIT (2019) 417 ITR 31 (Guj) (HC)
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
S. 151 : Reassessment – Sanction for issue of notice – Sanction by CIT instead JCIT – Reassessment is held to be bad in law. [S.147, 151]
Dismissing the appeal of the revenue the Court held that as the Act provides for sanction by the JCIT, the sanction by the CIT does not meet the requirement of the Act and the reopening notice is without jurisdiction. The fact that the sanction is granted by a superior officer is not relevant. Followed Ghanshyam K. Khabrani v. ACIT (2012) 346 ITR 443 (Bom) (HC) (ITA No. 1035 of 2017,
dt. 11-05-2019) (AY. 2008-09)
PCIT v. Khushbu Industries (Bom)(HC), www.itatonline.org
S. 153C : Assessment – Income of any other person – Search prior to 1-6-2015 – S.153C as amended w.e.f. 1-6-2015 is not applicable – Limitation – Notice issued for the assessment years beyond six assessment years would be beyond jurisdiction –Writ is maintainable. [S.132, 153A, 153B Art. 226]
Allowing the petition the Court held that the search was conducted in all the cases on a date prior to June 1, 2015. Therefore, on the date of the search, the Assessing Officer of the person in respect of whom the search was conducted could only have recorded satisfaction to the effect that the seized material or belonged to the other person. The hard disc containing the information relating to the assessees admittedly did not belong to them, therefore, as on the date of the search, the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C in case of the assessees, did not exist. The notices under section 153C were not valid. As regards alternative remedy the Court held that the assessees had responded to the notices under section 153C of the Act and after receipt of the satisfaction notice, objected to the jurisdiction of the Assessing Officers in issuing such notices. The Assessing Officers, in majority of the cases had rejected the objections and it was at this stage that the assessees had approached the court challenging the notices. When the proceedings were claimed to be wholly without jurisdiction, the alternative remedy would not operate as a bar to a writ petition. The writ petition was maintainable. As regards the limitation the Court held that, section 153B provides for the limitation for completion of assessment and neither provides for nor imposes any restrictions or conditions on the period of limitation for preparation of the satisfaction note under section 153C of the Act and consequent issuance of notice to the other person. Admittedly, such satisfaction had not been recorded at the time of or along with the initiation of proceedings against the person in respect of whom the search was conducted under section 153A of the Act. Accordingly the relevant date for computation of the six assessment years in respect of which notice was required to be issued was the immediately preceding assessment year relevant to the previous year in which such search was conducted or requisition was made. If notices under section 153C of the Act had been issued for assessment years beyond these six assessment years they would be beyond jurisdiction. (AYs. 2008-09 to 2014-15)
Anilkumar Gopikishan Agrawal v. CIT (2019) 418 ITR 25 (Guj) (HC)
S. 153C : Assessment – Income of any other person – Search – Search took place prior to date of amendment – Burden is on department to prove seized documents belonged to assessee – Statement of searched party containing information relating to assessee – Documents are not belonging assessee – Wrongly assumed jurisdiction – No question of law. [S. 68, 132(4)]
Dismissing the appeal of the revenue the Court held that the search and the issuance of notice under section 153C pertained to the period prior to June 1, 2015 and section 153C as it stood at the relevant time applied. The change brought about prospectively with effect from June 1, 2015 by the amended section 153C(1) did not apply. Therefore, the onus was on the Department to show that the incriminating material or documents recovered at the time of search belonged to the assessee. It was not enough for the Department to show that the documents either pertained to the assessee or contained information that related to the assessee. The Department had relied on three documents to justify the assumption of jurisdiction under section 153C against the assessee. Two of them, viz., the licence issued to the assessee by the Director, Town and Country Planning and the letter issued by him permitting the assessee to transfer such licence, had no relevance for the purposes of determining escapement of income of the assessee for the assessment year 2005-06. Consequently, even if those two documents could be said to have belonged to the assessee they were not documents on the basis of which jurisdiction could be assumed by the Assessing Officer under section 153C. The third document, the statement made by the searched party during the search and survey proceedings, was not a document that “belonged” to the assessee. While it contained information that “related” to the assessee, it could not be said to be a document that “belonged” to the assessee. Therefore, the jurisdictional requirement of section 153C as it stood at the relevant time, was not met. No question of law arose. (AY. 2005-06)
CIT v. Dreamcity Buildwell P. Ltd. (2019) 417 ITR 617 (Delhi) (HC)
S. 154 : Rectification of mistake – An order of rectification, on the basis of the law declared by the Supreme Court or the High Court is permissible – Non-resident – Shipping business – option to assessee – Interest can be levied.
[S.172, 234B, 234C]
The assessee was a non-resident shipping company, represented by its agent at that point of time, who filed an option under section 172(7) to be assessed regularly under the provisions of the Act, before the expiry of the assessment year. The order of assessment was passed levying interest under section 234A, but not levying interest under sections 234B and 234C. Thereafter, noticing Circular No. 9 of 2001 dated July 9, 2001, a rectification order was passed levying interest under sections 234B and 234C. The order of rectification was set aside by the Commissioner (Appeals) and this was confirmed by the Tribunal. On appeal the Court held that the rectification was made on the basis of a decision of the Supreme Court which was the declared law even when the original order which was rectified was passed. Circular No. 730 dated December 14, 1995 had lost its significance and validity, on the Supreme Court authoritatively speaking on the provision under section 172(7) and the effect of the option exercised, in A. S. Glittre D/5 I/S Garonne v. CIT (1997) 225 ITR 739 (SC). There was hence an error apparent on the face of the record. The order of rectification was valid. (AY. 1996-97)
CIT v. Norasia Lines (Malta) Ltd. (2019) 416 ITR 271 (Ker)(HC)
S. 179 : Private company – Liability of directors – There was nothing on record to suggest that tax dues could not be recovered from company and same could be attributed to any gross neglect, misfeasance or breach of duty on part of assessee in relation to affairs of company, impugned recovery proceedings deserved to be quashed
Assessee was a director of the company. For relevant year, Assessing Officer completed assessment in case of said company giving rise to certain tax demand, During pendency of appellate proceedings, AO issued a notice to assessee under S. 179 seeking to recover tax dues of company. The Assessee raised a plea that there was nothing on record to suggest that tax dues could not be recovered from the company and same could be attributed to any gross neglect, misfeasance or breach of duty on part of assessee in relation to affairs of company. AO rejected the application of the assessee. On writ the Court held that in order to apply provisions of sub-section (1) of section 179, first requirement is that tax dues cannot be recovered from private company and even in such a case, it is open for concerned director to prove that such non-recovery cannot be attributed to any gross negligence, misfeasance or breach of duty on his part in relation to affairs of company, since aforesaid requirements were not satisfied in assessee’s case, impugned order passed by AO was set aside. (AY. 2015-16)
Vanraj V. Shah. v. DCIT (2019) 266 Taxman 137 (Bom) (HC)
S. 220 : Collection and recovery – Assessee deemed in default – Stay – Rejection of stay application and directing to pay 20 per cent of demand, without application of mind is held to be bad in law. [Art. 226]
Court held that rejection of stay application for stay on demand and directed assessee to pay 20 per cent of amount demanded by relying wholly on CBDT Instruction No. 1914 dated 2-2-1993, impugned order being passed without application of mind was to be set aside. Directed to pay only 10 per cent of demand. (AY. 2012-13)
Zinzuwadia and Sons. v. DCIT (2019) 265 Taxman 261 (Guj) (HC)
S. 220 : Collection and recovery – Assessee deemed in default – Pendency of appeal before CIT(A) – Stay of demand – The power of the AO to review the situation every six months, would not authorize him to lift the stay previously granted after full consideration and insist on full payment of tax without the assessee being responsible for delay in disposal of the appeal or any other such similar material change in circumstances. [S.220(6), 254(2A)]
The AO stayed the recovery proceedings when the appeal was pending before the CIT( A) on payment of 15% of tax in disputes. Thereafter he lifted the stay granted earlier relying on the judgement of Supreme Court in Asian Resurfing of Road Agency v. CBI (AIR 2018 SC 2039) and directed to pay all pending demands within seven days. The petitioner approached PCIT. PCIT also rejected the application for stay. The petitioner fled writ petition challenging the order of PCIT & AO. While passing the ad interim order of stay the Court held that the Dept. is not right in relying upon the decision of the Supreme Court in Asian Resurfing of Road Agency Pvt Ltd v. CBI (AIR 2018 SC 2039) to contend that any stay against recovery granted would automatically lapse after six months. This is neither the purport of the judgment of the Supreme Court, nor the observations made in the said judgment in the context of civil and criminal litigation can be imported in present set of quasi judicial proceedings. The power of the AO to review the situation every six months, would not authorize him to lift the stay previously granted after full consideration and insist on full payment of tax without the assessee being responsible for delay in disposal of the appeal or any other such similar material change in circumstances. By way of ad interim relief, the impugned orders dated 22.1.2019 and 11-2-2019 are stayed. The respondents are prevented from carrying out any further recoveries pursuant to the order of assessment in respect of the petitioner for assessment year 2013-14. (WP No. 542 of 2019, dt. 28-02-2019) (AY. 2013-14)
Editorial : It seems the department has accepted the order of High Court. Accordingly the final order was passed on 4-4-2019 which reads as under “Learned counsel for the petitioner stated that on instructions that the issues in the present petition have been resolved. He therefore does not press this petition. Disposed as not pressed. Interim relief, if any, stands vacated.”
Oracle Financial Services Software Ltd. v. DCIT (Bom)(HC), www.itatonline.org
S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Warrant of arrest – Issue of warrant of arrest without issuing show cause notice did not fulfil requirements prescribed under Rule 73(1) of Schedule II of Act – Held to be ultra vires and quashed. [Schedule II, rule 73(1)]
The assessee filed petition to quash issue of warrant of arrest which was issued by TRO, Debts Recovery Tribunal. Without show cause notice being warrant of arrest was procedurally ultra vires. Allowing the petition the Court held that considering the the provisions of rule 73(1) of Second Schedule of the Act it is evident that no order for the arrest and detention in civil prison of a defaulter shall be made unless the Tax Recovery Officer has issued and served a notice upon the defaulter calling upon him to appear before him on the date specified in the notice and to show cause as to why he should not be committed to civil prison, unless the Tax Recovery Officer is satisfied for the reasons which are mentioned in clauses (a) and (b) of sub-rule (1) of rule 73 of Schedule II of the Act. In the instant case, the impunged notice does not fulfil the requirements prescribed under rule 73(1) of Schedule II of the Act, inasmuch as, no specific show-cause notice has been given to the assessee asking him to show cause as to why he should not be detained in civil prison. Accordingly order is procedurally ultra vires hence quashed and set aside.
Lalith Kumar Ramani v. Recovery Officer (2019) 265 Taxman 305 (Karn)(HC)
S. 226 : Collection and recovery – Modes of recovery – Joint savings account with husband- TRO cannot issue notice to bank for marking said bank account for lien towards arrears of tax liability of her husband, without issuing a notice to assessee.
[S. 226(3)(iii), Art. 226]
The petitioner was holding joint account with her husband. The TRO issued notice to the bank account of the petitioner for lien towards the arrears of tax liability of the husband of the petitioner. On writ the petitioner contended that no notice was served on the petitioner in terms of S. 226(3)(iii) of the Act. Allowing the petition the Court held that issue of notice under sub-section (3)(iii) of section 226 which is sine qua non for recovery of tax hence the notice was quashed. (AY. 1999-00 to 2006-07) (Single Judge Order dt. 18-07-2019)
Beena Muralidhar (Mrs.) v. TRO (2019) 266 Taxman 219 (Karn) (HC)
S. 244A : Refund – Interest on refunds – Claim was made first time before Tribunal – Claim was allowed in remand proceedings by CIT (A) – Refund order was not delayed for any period attributable to assessee, Tribunal is justified in allowing interest to assessee. [S. 244A(1)]
Assessee had not claimed certain expenditure before Assessing Officer but eventually raised claim before Tribunal. In remand proceedings CIT(A) granted additional benefit claimed by assessee which resulted in refund. Tribunal held that delay could not be attributed to assessee and therefore, directed payment of interest. On appeal revenue contended that by virtue of section 244A(2), since delay in proceedings resulting in refund was attributable to assessee, assessee would not be entitled to such interest. The Court held that there was no allegation or material on record to suggest that any proceedings were delayed on accounts of reasons attributable to assessee. Accordingly the order of Tribunal is affirmed.
CIT v. Melstar Information Technologies Ltd. (2019) 106 taxmann.com 142/ 265 Taxman 50 (Mag) (Bom)(HC)
S. 245C : Settlement Commission – Settlement of cases – Conditions – Pendency of the assessment – An assessment would be pending till such time as the assessment order is served upon the assessee – Rejection of petition is held to be not valid. [S. 245A (b), 245(C) (1), 245D(1)]
Writ petition has been filed against the order of the Settlement Commission rejecting an application for settlement filed by the petitioner primarily on the ground that no proceedings were pending on the day. Allowing the petition the Court held that for purposes of making an application for settlement, a case i.e. an assessment would be pending till such time as the assessment order is served upon the assessee. The assessee is entitled to proceed on the basis that till the service of the assessment order, the case continues to be pending with the AO. Therefore, it was open to him to invoke the provisions of Chapter XIXA of the Act (CIT v. ITSC (2015) 375 ITR 483 /58 taxmann.com 264 (Bom) (HC) & Yashovardhan Birla v. Dy. CIT (2016) 73 Taxmann.com 5 / 289 CTR 482 (Bom) (HC) followed, V.R.A. Cotton Mills (P) Ltd. v. UOI ( 2013) 359 ITR 495/33 taxmann.com 675 (P&H) (HC) & Shlibhadra Developers v. Secretary 2016 10 TMI 778 (Guj) (HC) distinguished). The application for settlement is restored to the file of the Commission at the stage of S. 245D(1) of the Act. The period of 14 days as provided in S. 245D(1) of the Act, will run from the date this order is first communicated by either of the parties to the Commission.” Consequently, order dated 14-02-2019 is set aside. Petition stands disposed of. (CWP No. 5307 of 2019 (O&M), dt. 22-10-2019)
M3M India Holding Pvt. Ltd. v. ITSC (P &H) (HC), www.itatonline.org
S. 250 : Appeal – Commissioner (Appeals) – Procedure – It is statutorily imperative to give a personal hearing while disposing of an appeal – Ex-parte order passed by CIT(A) confirming the addition is set aside. [Art. 226]
CIT(A) confirmed assessment order however while disposing of its appeal, opportunity of personal hearing was not granted. On writ the Court held that it is statutorily imperative to give a personal hearing while disposing of an appeal. Since, in instant case notice of hearing sent to assessee had returned unserved, in interest of justice, it was appropriate to give another opportunity of personal hearing to assessee. Accordingly the matter remanded. (AYs. 2008-09, 2009-10)
Gemini Film Circuit v. CIT (2019) 266 Taxman 216 (Mad) (HC)
S. 252 : Appellate Tribunal – Members – Qualification – Appointment – Process of selecting only few applicants for purposes of interview, while rejecting others without any intelligible differential being applied in classification was not discriminatory and violative of article 14 of Constitution [Income-Tax Appellate Tribunal Members (Recruitment and Conditions of Service) Rules, 1963, R.4]
Committee resolved to call for interview 24 most experienced applicants from profession i.e., practicing advocates and others (from list prepared in decreasing number of experience) belonging to unreserved category against 9 unreserved posts. Petitioner filed petition challenging selection process for post of Member of Tribunal on the ground that process of selecting only few applicants for purposes of interview, while rejecting others without any intelligible differential being applied in classification was discriminatory and violative of Article 14 of Constitution. Dismissing the petition the Court held that Rule 4A of 1963 Rules empowers Selection Board to evolve its own procedure and aforesaid rule is not subject matter of challenge before Court therefore, decision of Committee to shortlist candidates was reasonable and not arbitrary.
Puneet Sharma. v. UOI (2019) 265 Taxman 311 (Delhi) (HC)
S. 254(1) : Appellate Tribunal – Powers – Claim for deduction which is not made in return or revised return – Tribunal has power to allow deduction. [S. 139(1), 139(5)]
Dismissing the appeal of the revenue the Court held that since the time to file the revised return had lapsed , for claiming that the incentive subsidies be treated as capital receipts instead of revenue receipts as claimed in the return following the decision in CIT v. Britannia Industries Ltd. (2007) 386 ITR 677 (Cal), Tribunal is justified in allowing the claim though no revised return under S. 139(5) was filed before the AO. (AY. 2010-11)
CIT v. Ankit Metal and Power Ltd. (2019) 416 ITR 591 (Cal) (HC)
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
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 assessee and 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 assessee and 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 all the new members to be appointed. Copy (AY. 2006-07)
Ramesh, V. v. ACIT (2019) 177 DTR 105/ 104 taxmann.com 292 (Mad.)(HC)
Ramu, S. v. ACIT (2019) 177 DTR 105 (Mad.)(HC)
S. 254(2): Appellate Tribunal – Rectification of mistake apparent from the record – Substantial justice – High Court has the power to condone the delay in filing of miscellaneous petition – Matter remanded to Tribunal to decide on merit. [S.254(1), 271(1)(c) Art. 226]
The assessee filed the miscellaneous petition mainly on the ground that the assessee was under the impression that the appeal was partly allowed by the Appellate Tribunal; the assessee did not realise that substantial relief was not granted by the Tribunal and only a consequential order was passed following the order of the respondent. The assessee had realised that he was entitled to substantial relief in view of the dictum of the court in the case of CIT v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Karn) (HC)) to the effect that the notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) , i.e., whether it was for the concealment of income or furnishing of inaccurate particulars of income and mere notice sent in a printed form without mentioning the grounds would not satisfy the requirement of law. The assessee’s case fell under the exceptional category for exercising power under Articles 226 and 227 of the Constitution of India to interfere with the order passed by the Tribunal dismissing the miscellaneous petition only on the ground of delay. The delay had to be condoned.
Muninaga Reddy. v. ACIT (2019) 417 ITR 699 (Karn)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Grounds raised and not given up remains undecided – Tribunal to either adjudicate on or to direct the AO to consider the additional evidence – Judgment 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)
S. 254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Duties – Dismissal of the appeal for non-prosecution has resulted in failure of justice – Order requires to be rectified – Delay of 497 days in filing the miscellaneous application was condoned, though the Tribunal has no power to condone the delay beyond six months – Cost of ₹ 5,000 is imposed on the assessee. [S. 254(1) Art. 226, 227]
Allowing the petition The Court held, dismissal of the appeal for non prosecution has resulted in failure of justice accordingly the order requires to be rectified. Court condoned the delay of 497 days in filing the miscellaneous application, though the Tribunal has no power to condone the delay beyond six months. Cost of ₹ 5,000 is imposed on the assessee. Order of Tribunal is set aside and restored to the file of the Tribunal. Followed Practice Strategic Communications India (P) Ltd v. CST ILR 2016 Kar 4493. (AY. 2011-12)
Karuturi Global Ltd v. Dy. CIT (2019) 310 CTR 146/ 181 DTR 14 (Karn) (HC)
S. 254(2A): Appellate Tribunal – Stay – Power – Tribunal has the power to modify the stay order – Dismissal of stay application is held to be not justified on the ground that the Tribunal has no power to modify the stay order as the order is not passed u/s 254(1) – On facts only a part of interest amount has still remain unpaid. Rejection of application is held to be not justified. [S.254(1), 254(2)]
Assessee filed an application for stay of demand. The Tribunal directed the assessee to pay ₹ 7 crore per month. The assessee filed the petition to modify the order of stay and early hearing of appeal. The Tribunal dismissed the petition on the ground that there was no error pointed out in the order of the Tribunal and the stay order is not being passed under S.254(1) of the Act, the petition for modification/rectification u/s 254(2) would not lie. After referring the judgement in ITO v. M. K. Mohammed Kunhi (1969) 71 ITR 815 (SC) the Court held that the Tribunal has the power to consider the relief sought by the assessee. However considering subsequent events in view of fact that demand of tax and interest was substantial and, assessee had complied with direction issued by Tribunal in respect of payment of tax, stay application could not be dismissed merely on ground that a part of interest amount still remained unpaid. (AYs. 2008 -09 to 2014-15 )
Royal Sundaram General Insurance Co. Ltd. v. DCIT (2019) 266 Taxman 298 (Mad) (HC)
S. 254(2A) : Appellate Tribunal – Stay – In cases where there is stay of recovery of demand of tax, the Tribunal should deal with the appeals pending before it on a higher priority. The Tribunal should consider forming a separate list of such cases which should be heard on priority after arranging the cases on the basis of their seniority as well as the quantum involved in the stay. [S.254(1)]
Court held that, in cases where there is stay of recovery of demand of tax, the Tribunal should deal with the appeals pending before it on a higher priority. The Tribunal should consider forming a separate list of such cases which should be heard on priority after arranging the cases on the basis of their seniority as well as the quantum involved in the stay. (ITA 916/2019, dt. 21-10-2019)
PCIT v. Nokia Solutions & Networks India Pvt. Ltd. (Delhi)(HC), www.itatonline.org
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)
S. 260A : Appeal – High Court – Open remand – Remanding matter to AO without recording any finding – No question of law. [S.35D, 254(1)]
Dismissing the appeal of the revenue the Court held that no finding had been arrived at by the Tribunal and it was only an “open remand”. No prejudice was caused in any manner and it was possible for the Department to raise the relevant contentions and question of law before the Assessing Officer even with reference to section 35D. That apart insofar as no finding had been rendered by the Tribunal as to the applicability of section 35D the appeal did not involve any “substantial question of law” so as to call for interference of the court in exercise of power under section 260A. (AY. 1994-95)
CIT v. Apollo Tyres Ltd. (No. 1) (2019) 416 ITR 519 (Ker) (HC)
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]
High Court held that, 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. Jurisdiction of the Court to which the appeal would lie under the Act would be decided by the seat of the Tribunal (i.e., 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)
S. 264 : Commissioner – Revision of other orders – Revision petition seeking rectification of return accepted by department in respect of which intimation is sent under section 143(1) is maintainable –DTAA – India Spain [S. 9(1)(i), 143(1), 154 Art. 12, 13]
The petitioner earned service fees for providing management related services to a foreign company EIPL and submitted that income being in the nature of Fees For Technical Services (FTS) was taxable at rate of 20 per cent under Article 13 of the DTAA between India and Spain. The Assessing Officer by an intimation under section 143(1) processed the return of income. Thereafter, the assessee it realised that while referring to article 13 of the DTAA it had failed to refer to clause 7 of the Protocol appended to the DTAA in terms of which if a further concessional rate of tax was charged in terms of the agreement between India and another member of the OECD, by India after 1-1-1990, wherein India limits its taxation at source on FTS to a rate lower than that provided in Article 13 of the DTAA, then the said rate shall apply under the DTAA to the petitioner as well. Consequently, the petitioner filed the revision petition under section 264 before the Commissioner seeking to revise the order under section 143(1) claiming it to be prejudicial to the petitioner’s interest. The Commissioner (IT) held that no amount was payable by the assessee in terms of the intimation under section 143(1) and, therefore, no prejudice was caused to the assessee in terms thereof and that if the assessee was of the view that its income was chargeable to tax at 10 per cent ‘it should have mentioned the same in its return of income or should have subsequently filed revised return’. It was held that section 264 cannot be invoked to rectify the assessee’s mistake, if any.
It was contended that for the purposes of section 264, a revision petition seeking rectification of the return accepted by the department in respect of which intimation is sent under section 143(1) is maintainable. Court held that the intimation under section 143(1) was prejudicial to the interest of the assessee. It must be noted here that although the tax calculated as payable in the return filed and accepted by the department by sending intimation under section 143(1) is nil, it cannot be said that no prejudice is caused to the assessee. The assessee has voluntarily paid tax at the rate of 20 per cent in terms of the Indo-Spain DTAA as tax on FTS and, therefore, there was no further tax to be paid at the time of filing of the return. However, it is not even denied by the department that the assessee committed a mistake and should have paid tax at 10 per cent, even though, this extra 10 per cent paid by the assessee was of its own volition, it was indeed prejudicial to the assessee. Consequently, all the ingredients of section 264 stand attracted. Accordingly, a revision petition under section 264 by the assessee before the Commissioner against the intimation under section 143(1) is maintainable. (AY. 2014-15)
EPCOS Electronic Components S.A v. UOI (2019) 266 Taxman 23 (Delhi) (HC)
S. 271(1)(c) : Penalty – Concealment – Recording of satisfaction – In applicable portions are not struck off – Levy of penalty is held to be not valid
Dismissing the appeal of the revenue the Court held that Levy of penalty u/s. 271(1)(c) is not valid if (i) there is no record of satisfaction by the AO that there was any concealment of income or that any inaccurate particulars were furnished by the assessee or (ii) If the notice is issued in the printed form and the inapplicable portions are not struck off. Followed, CIT v. Samson Perinchery (2017) 392 ITR 4 (Bom)(HC) & PCIT v. New Era Sova Mine (ITA No. 70 of 2018 dt 18-06-2019)[2019 SCC OnLine Bom 1032(Bom) (HC)]. Distinguished, Mak Data v. CIT (2013) 358 ITR 593 (SC) (TA No. 24 of 2019, dt. 11-11-2019)
PCIT v. Goa Coastal Resosts & Recreation Pvt. Ltd.(Bom)(HC), www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Legal representative – After initiation of penalty proceedings death of the assessee – Penalty proceedings cannot be continued against his legal representatives. [S.159]
Dismissing the appeal of the Revenue the Court held that, since the provisions of section 271(1)(c) of the Income-tax Act, 1961 depend upon the guilty animus or mens rea on the part of the assessee, the legal representative cannot be held liable to defend those penalty proceedings or be held guilty of any mens rea. Therefore, unless the penalty proceedings are concluded against a living assessee, the legal heirs cannot be held liable to face those proceedings or pay any sum determined as penalty payable under section 271(1)(c).
CIT v. S. Gowri ( Smt ) (2019) 417 ITR 45 (Mad) (HC)
Editorial: SLP of revenue is dismissed CIT v. S. Gowri (Smt) (2019) 417 ITR 45 (SC)
S. 271B : Penalty – Failure to get accounts audited – Audit report was available with AO on date of completion of assessment – Reasonable cause – Penalty not warranted. [S.273B]
Allowing the appeal the Court held that the explanation offered by the assessee could be taken as reasonable cause for his failure to file the audit report within time. The reasons assigned by the assessee for the delay in filing the audit report were not found to be false or with any mala fide intention. It was a technical breach. The audit report was very much available with the Assessing Officer on March 29, 2015, the date of completion of the assessment under section 143(3). This was not a fit case for imposing penalty under section 271B. (AY. 2012-13)
P. Senthil Kumar v. CIT (2019) 416 ITR 336 (Mad) (HC)
S. 271D : Penalty – Takes or accepts any loan or deposit – Otherwise than by account payee cheque or account payee bank draft – Journal entries – Transaction bona fide – Not liable penalty. [S.269SS, 269 T]
Dismissing the appeal of the revenue the Court held that even though liability recorded in books of account by way of journal entries i.e. crediting amount of party to whom monies payable and debiting account of a party from whom monies were receivable in books of account was in contravention of provisions of section 269T, yet in that case penalty was not leviable for reason that transaction was bona fide and was not to evade taxes.
PCIT v. Shakti Foundation. (2019) 107 taxmann.com 459/ 265Taxman 243 ( Raj) (HC)
Editorial: SLP is granted to the revenue , PCIT v. Shakti Foundation (2019) 265 Taxman 242 (SC)
S. 275: Penalty – Concealment – Limitation – Appeal effect order having been passed by AO on 22nd May, 2001 – The six month period of limitation will begin to run from that date – Penalty order passed by AO on 26th April, 2018, passed beyond six months, was barred by limitation. [S.271(1)(c), 275 (1)(a)]
Allowing the Writ, the High Court held that the appeal effect order having been passed by AO on 22nd May, 2017, the six-month period of limitation under S. 275(1)(a) of the Act will begin to run from that date (not from the date of 31st Oct., 2017 as claimed to have been received by ITO, Judicial-II), hence penalty order passed by AO on 26th April, 2018, passed beyond six months, was barred by limitation under
S. 275(1)(a). (AYs. 2002-03 to 2006-07)
GE Energy Parts Inc. v. DCIT (2019) 310 CTR 729 / 181 DTR 337 (Delhi) (HC)
S. 277 : Offences and prosecutions – False statement – Verification – Search – Additions made in block assessment based on discrepancy in stocks – Prosecution is not valid. [S. 132, 136, 158BC, 276C (1), 278B, CRPC, 1973, S. 482,
The assessee had filed returns for the assessment years 1993-94, 1994-95, 1995-96 and 1996-97 which were accepted. There was a search action in December, 1995. Proceedings were initiated under S. 158BC. Additions were made on the basis of excess stock discovered. Complaints were filed under S. 276C(1) and 277 read with
S. 278B. On a writ the Court held that the order of block assessment referred to difference in stock found during the course of search. The assessee had an explanation for it which was rejected. On the facts of this case, it could not be said that with mala fide intention and to evade tax, stock in the stock book was not shown by the assessee. Accordingly the criminal complaint was quashed. (AY. 1993-94 to 1996-97)
N. R. Agarwal Industries Ltd. v. JCIT (2019) 416 ITR 578/ 306 CTR 153 (Guj) (HC)
S. 279 : Offences and prosecutions – Sanction – Chief Commissioner – Wilful attempt to evade tax – Non-technical offence – False statement in verification – Reduction of penalty by CIT (A) – Prosecution cannot proceed – Compounding of offences – Application for compounding to be considered by committee specified in circular – DGIT has no jurisdiction to reject the application. [S. 119, 120, 276C(1), 273B, 277, 279(IA), 279(2) Art. 141]
The assessee was alleged to have concealed the declaration of endowment in a foreign country in his return of income filed for the assessment year 2002-03 and thereby wilfully attempted to evade tax, penalty and interest and prosecution was launched against him for offences under sections 276C(1) and 277. The assessee filed an application for compounding of the offences. Meanwhile the penalty imposed on him was reduced by the Commissioner (Appeals) and this was confirmed by the Tribunal. The application for compounding was rejected by the Director General of Income-tax. On a writ petition to quash the order the Court held that even if the Director General of Income-tax was of the view that the application was required to be rejected in the preliminary stage itself, there was a duty cast on him to forward such a compounding application to the committee, who was vested with the jurisdiction to handle the application and not assume such powers on himself. Likewise, when one among the two offences, namely, section 276C(1) had been classified as a non-technical offence, for the compounding of which powers were vested with the committee, the Director General of Income-tax would have no powers to go into the merits of the compounding application. The Director General of Income-tax had exceeded his jurisdiction in taking up the assessee’s compounding application. Just because the order reducing the penalty had been put under challenge in appeals, it could not be said that the order reducing the penalty itself had been kept under abeyance. In this background, it could only be said that the assessee would be entitled to the benefit of section 279(1A) of the Act and the mere challenge to the order reducing the penalty may not suffice to deny such a benefit. The rejection of the application for compounding was not justified. (Followed Prem Dass v. ITO (1999) 236 ITR 683 (SC)/(1999) 5 SCC 241 (Order of single Judge dt. 28-8-2019) (AY. 2002-03)
K. M. Mammen v. DIT (2019) 418 ITR 157 (Mad) (HC)
Wealth-tax Act, 1957
S. 2(ea)(v): Urban Land – Appeal – Maintainability – Low tax effect – Question of law has now been settled by the Supreme Court – Repeated instances of such question of law arising does not arise at all, since the WT Act is no more in force – In such circumstances though the question of law has to be answered in favour of the Revenue, there need be no recovery steps taken for reason of the appeals being below the monetary limits. [S.260A, 268A]
On appeal and considering the Department’s contentions, (a) that even though the monetary limits of appeals may be less, the tax authorities have the discretion to file appeals, ignoring the tax effect, if there is a substantial question of law which is repeatedly arising and (b) issue is already settled in favour of Revenue by Supreme Court’s decision, Giridhar G. Yadalam v. CWT (2016) 384 ITR 52 (SC), it was held that by High Court that:
1) In all the assessment years question of law has now been settled by the Supreme Court hence repeated instances of such question of law arising does not arise at all, also because of the fact that WT Act is no more in force.
2) Though the question of law has to be answered in favour of the Revenue (following binding precedent of SC), there need be no recovery steps taken for reason of the appeals being below the monetary limit at the time of filing of the appeals itself and in such circumstances present appeal is not therefore maintainable. (WT Nos. 105, 107, 138, 143, 164, 167, 183 of 2009 dt. 15-2-2019).
CWT v. Meera Jacob (Smt) (Decd.) (2019) 180 DTR 94 (Ker)(HC)
S. 18(1)(c) : Penalty – Concealment – In the absence of any proof to show that there was an attempt on the part of the assessee to conceal the particulars or to furnish inaccurate particulars, the levy of penalty was not justified by invoking the deeming provision of Expln. 3 to S. 18(1)
Dismissing the appeal of the High Court that in the absence of any specific finding of the AO or the CIT(A) that no reasonable cause has been shown by the assessee for not filing voluntary return, levy of penalty under S. 18(1)(c) was not justified by invoking the deeming provision of Expln. 3 to S. 18(1). Order in Shanti Ramanand Sagar v. CIT (2017) 88 Taxmann.com 72 (Bom) (HC) is distinguished. (AY. 1997-98, 1998-99)
CIT v. Rajwanti Properties (P) Ltd (2019) 310 CTR 113 / 181 DTR 1 (Mad)(HC)
S. 56 : Income from other sources – Capital or revenue – Amount received for relinquishing secretaryship of educational society cannot be treated as a capital receipt – Assessable as income from other sources.
Amount received by assessee for relinquishing secretaryship of educational society cannot be treated as a capital receipt. The question of the principle of capital asset being invoked does not arise. The receipt is assessable as income from other sources. It may have been a different matter if it was a case of life time appointment of the assessee as Secretary of the concerned Institution but no such evidence was produced by the assessee. (BP 1-4-1990 – 14-7-2000)
(CA 8594/2010, dt. 21.11.2019)
H. S. Ramchandra Rao v. CIT (SC) www.itatonline.org
Editorial : Order in CIT v. Ramachandra Rao (2011)330 ITR 322 (Karn ) (HC) is affirmed)
S. 68 : Cash credits – Bogus share capital – Ex parte order – Recall of ex-parte order – A power of attorney holder is an agent and Principal Officer u/s. 2(35) – If a Chartered Accountant is granted a Power of Attorney holder service upon him of a notice is valid – If a notice is duly served upon the litigant through its authorized representative, and it was provided sufficient opportunity to appear before the Court and contest the matter but the litigant chooses to let the matter proceed ex parte, the order cannot be recalled. [S. 2(35) 261, 262, Art. 136]
Application was filed for re-call of the judgement dt. 5-3-2019 in C.A. No. 2463 od 2019 PCIT v. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) on the ground that the applicant company was not served with the Notice of SLP at the registered office of the company, nor was a copy of the SLP served on the applicant company. The applicant learnt the judgement dated 5-3-2019 passed by the Court from a news clipping published in the Economic Times on 7-3-2019 and the application for re -call was filed on 12-3-2019. The applicant on inspection found that the affidavit of service by the Revenue department on 19-12-2018 showed an acknowledgement receipt by Mr Sanjeeva Narayan the Chartered Accountant of the appellant company on 13-12-2018. Chartered Accountant affirmed the receipt of the service however due to health not handed over the copy to the applicant. In an affidavit filed by the revenue it was brought to the notice of the Court that Mr. Sanjeev Narayan has appeared before the tax authorities even after surgery. Court held that Mr. Sanjeev Narayan admittedly being the power of Attorney holder of the Applicant, NRA Iron & Steel Pvt. Ltd. for the AY. 2009-10, was the agent of the assessee and hence and hence notice could be served on him as the agent of the assessee-company. Court also observed that Mr. Narayan appeared before the Income-tax authorities to represent the applicant company and its sister concerns on various dates prior to his surgery i.e. on 14-12-2018, 21-12-2018, 28-12-2018 and 29-12-2018. Court also held that a Power of Attorney holder is an agent and Principal Officer u/s. 2(35). If a Chartered Accountant is granted a Power of Attorney holder, service upon him of a notice is valid. Accordingly the Court held that the applicant company having failed to make out any credible or cogent ground for Re-call of the judgement dt 5-3-2019, the application for recall is dismissed. (CA No. 2463 of 2019, dt. 25-10-2019).
PCIT v. NRA Iron & Steel Pvt. Ltd. (2019) 311 CTR 263 / 183 DTR 60 (SC) www.itatonline.org
S. 69 : Unexplained investments – Bogus purchases – Assessemnt – Addition cannot be made without providing a copy of the statements and opportunity of cross Examination – Initial burden is discharged by the assessee by producing various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their income-tax return. [S.68, 143(3)]
Dismissing the review petition on merits the Court held that disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their income -tax return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. (RP No. 22394 of 2019 in CA Nos. 9604-9605 of 2018, dt. 21-8-2019)
CIT v. Odeon Builders Pvt. Ltd. (2019) 311 CTR 258/ 183 DTR 25 (SC) www.itatonline.org
S. 143(2) : Assessment – Notice –Mere mentioning of new address in the return of income is not enough. If change of address is not specifically intimated to the AO, he is justified in sending the notice at the address mentioned in PAN database – If the notice is sent within the period prescribed in s. 143(2), actual service of the notice upon the assessee is immaterial – CIT(A) is directed to decide the appeal on merits. [S.250, 282, 292BB]
The assessee participated in the assessment proceedings. However, the assessee challenged the notice under sections 143(2) and 142(1) of the Act on the ground that the said notrices were not served upon the assessee as the assessee company never received those notrices and subsequent notices served and received by the company were beyond the period of limitation prescribed under proviso to S.143 of the Act. The AO has not accepted the contention of the assessee. On appeal the CIT(A) held that the order is bad in law, however the appeal was not decided on merits as regards the merits of the addition. Order of CIT(A) is affirmed by the Tribunal and High Court. On appeal by the revenue allowing the appeal the Court held that mere mentioning of new address in the return of income is not enough. If change of address is not specifically intimated to the AO, he is justified in sending the notice at the address mentioned in PAN database. If the notice is sent within the period prescribed in S. 143(2), actual service of the notice upon the assessee is immaterial. Order of High Court and Tribunal is set aside and CIT (A) is directed to decide the appeal on merits on other grounds. (AY. 2006-07) (CA No. 8132 of 2019, dt. 18-10-2019)
PCIT v. Iven Interactive Ltd. (2019) 311 CTR 165 /182 DTR 473 (SC), www.itatonline.org
Editorial : Order in PCIT v. Iven Interactive Ltd. (Bom) (HC), (ITA No. 94 of 2016 dt. 27-6-2018) is set aside.
S. 143(3): Assessment – Undisclosed income – Admission by a letter without prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co. and not by the assessee – It is not the case of the Dept. that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee. [S.69]
Question raised before the High Court was “whether the Income tax Appellate Tribunal was correct in law deleting the undisclosed income of the assessee as recorded by the Securities and Exchange Commission in USA ?”
High Court reversed the order of the Tribunal placing reliance on two letters written by the assessee and assumed that it was in the form of admission of non-disclosure and an offer was given by the assessee to pay tax and penalty as the case may be. Reversing the order of the High Court the Supreme Court held that a letter written in refutal of allegations contained in a news item without prejudice offer cannot be treated as admission of non-disclosure or as an unconditional offer to pay tax. Also, the disclosure is by the USA Co. and not by the assessee. It is not the case of the Dept. that the amount has been received in the accounts of the assessee or spent for and on behalf of the assessee so as to be treated as undisclosed income of the assessee. (Note : Order in CIT v. Goodyera India Ltd. (Delhi) (HC) (ITA No. 223 of 2005 dt. 28-4-2008) is set aside. (CA Nos. 7703-7707 of 2012, dt. 16-10-2019)
Goodyear India Ltd. v. CIT (2019) 311 CTR 260/ 183 DTR 57 (SC), www.itatonline.org
S. 246A : Appeal – Commissioner (Appeals) – Appealable orders –Denial of liability – Not confined only to the lability to be assessed u/s 143(3) of the Act- Liability to pay tax u/s 115Q is also appealable order – Alternative remedy is available – Writ is not maintainable. [S. 15QA, 143(3), Art. 226]
The expression “denies his liability to be assessed” in S. 246A takes within its fold every case where the assessee denies his liability to be assessed under the Act. It is not confined to the liability to be assessed u/s. 143(3) but applies also to the liability to pay tax u/s. 115QA. If there is adequate appellate remedy, a Writ Petition under Article 226 cannot be entertained. Order of High Court is affirmed. (CIT v. Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) & CIT v. Chhabil Dass Agarwal ( 2013) 357 ITR 357 (SC) followed). (CA No. 8945 of 2019 @ SLP(C) No. 20728 of 2019, dt. 22-11-2019)
Genpact India Private Ltd v. DCIT (2019) 111 taxmann.com 402 (SC), www.itatonline.org
Editorial: Order in Genpact India Private Ltd v. DCIT ( 2019) 108 taxann.com 340 (Delhi) (HC) is affirmed.
S. 260A : Appeal – High Court – Delay of 1,754 days – No knowledge of passing of order which was stated in the affidavit – Contents of the affidavit was not disputed by the respondent – Delay was condoned – Matters are restored to the file of High Court to decide the appeals on merit in accordance with law.
The appeal of the assessee was delayed by 1,754 days before the High Court against the order of the Appellate Tribunal. In the application for condonation of delay the assessee stated that they had no knowledge of passing the order dated 29-12-2003, until they were confronted with the auction notices in June 2008 issued by the competent authority fixing auction of the properties of the appellant. First time orders of the Tribunal was filed on 24-7-2008 by the revenue. Appellant has filed the appeal along with condonation delay on 24-10-2018. The application was supported by the affidavit. Condonation of delay was dismissed by the High Court. Allowing the appeal the Apex Court held that stand of the applicant in the affidavit that they had no knowledge about the passing of the order is not expressly refuted by the respondent, the question of disbelieving the stand of the applicant cannot arise. For this reason, indulgence should be shown to the applicant by condoning the delay. Accordingly the delay was condoned and the appeals were restored to the file of High Court to decide in accordance with law. (CA Nos. 6671-6676 of 2010, dt. 7-11-2019)
Senior Bhosale Estate (HUF) v. ACIT (SC), www.itatonline.org
S. 260A : Appeal – High Court – Tribunal order passed after High Court remanded the matter – Remedy against that order is by filing an appeal under S. 260A and not by way of SLP to Supreme Court. [S. 10A(6), 260A, 261]
The Tribunal held that assessee was not entitled to the benefits of section 10A(6) of the Act for three AYs. The High Court noted that assessee had not claimed any deduction in these years and remanded the matter to the Tribunal. Subsequently the Tribunal passed final order. Remedy of the assessee lay in filing an appeal under S.260A of the Act to the High Court. Thus, Supreme Court held that it could not interfere with the order of the High Court. (SLP (C) No. 26334 of 2017 dt. 22-4-2019) (AYs. 1993-94 to 1995-96)
CIT v. Phoenix Lamps Ltd (2019) 179 DTR 121 / 263 Taxman 338 (SC)
S. 260A : Appeal – High Court – Delay in filing appeal on account of difference in opinion between two officers and the time taken in obtaining legal opinion was condoned on payment of cost.
The Supreme Court condoned the delay in filing appeal which delay was on account of difference in opinion between two officers and the time taken in obtaining legal opinion. (CA No. 863 of 2019; dt. 14-1-2019)
CIT (E) v. Progressive Education Society (2019) 308 CTR 198 (SC)
Interpretation – Precedent – Recalled order cannot be relied upon as precedent.
Court held that since the relief upon order had already been recalled, fresh decision made on its basis flawed. Accordingly the order is set aside and matter remanded to CESAT CA No. 10950 of 2017 dt. 1-8-2019
CIT of CX. CUS & S. T. v. Bakelite Hylam Ltd. (2019) (27) G.S.T.L. 641 (SC)
Interpretation – Allied law
No estoppel against law – Concession in law which is contrary to the statutory rules is not binding on the litigant.
A concession given by Counsel, if it is a concession in law and contrary to the statutory rules, is not binding on the litigant for the reason that there cannot be any estoppel against law (see also Himalayan Co-operative Group Housing Society v. Balwan Singh (2015) 7 SCC 373 Bharat Heavy Electricals Ltd v. Mahendra Prasad Jakhmola & V. Ramesh v. ACIT (Mad) (HC) (CA No. 7577 of 2019 dt. 26-9-2019)
Directorate of Elementary Education v. Pramod Kumar Sahoo. (SC), www.itatonline.org
Contempt of Courts Act, 1971
S.2(a):Contempt of court – Advocate – Held to be proper – Judicial independence and courage to be shown while delivering the justice. [S. 12]
Dismissing the petition in respect of contempt proceedings against an Advocate the Court held that debarment from entering court premises / debarment from making appearances in addition to, or in substitution of imprisonment and fine under the Contempt of Courts Act is held to be valid. Followed Mahipal Singh Rana v. State of U.P (2016) 8 SCC 335. Court also observed that in the instant case the advocate has acted contrary to the obligations. He has set a bad example before others while destroying the dignity of the court and the judge. The action has the effect of weakening of confidence of the people on courts. The judiciary is one of the main pillars of democracy and is essential to peaceful and orderly development of society. The Judges have to deliver justice in a fearless and impartial manner. He cannot be intimidated in any manner or insulted by hurling abuses. Judges are not fearful saints. They have to be fearless preachers so as to preserve the independence of the judiciary which is absolutely necessary for survival of democracy.
Rajesh Tiwari, Advocate v. Alok Pandey, Chief Judicial Magistrate (2019) 6 SCC 465
West Bengal Sales Tax Act, 1994 -Service tax – Finance Act 1994.
S.2(30): Club – Mutuality – A club registered as a ‘company’ u/s. 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members – when a club supplies goods to its members, there is no “sale” and sales-tax cannot be levied – From 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members’ clubs in the incorporated form. [S. 2(5), 2(10) 2(30), Constitution of India, Art. 366 (29-A), 367, Contract Act, 1872, S. 2(d), Companies Act, 1956, S. 25(1)(b), Income-tax, 1961, S. 2(24)(vii), 2(31), 44, 45, Indian Contract Act 1872, S.2(d), General Clauses Act, 3 (42), Finance Act, 1994, S. 65 (105) (zze), 65B (37), 66B, 66D 68]
This Appeal arises out of a reference order by a Division Bench of this Court, in State of West Bengal v. Calcutta Club Limited (2017) 5 SCC 356. Three questions to be answered by a larger Bench as follows: “(i) Whether the doctrine of mutuality is still applicable to incorporated clubs or any club after the 46th Amendment to Article 366 (29-A) of the Constitution of India? 30.2. (ii) Whether the judgment of this Court in Young Mens Indian Assn. [CTO v. Young Mens Indian Assn., (1970) 1 SCC 462] still holds the field even after the 46th Amendment of the Constitution of India; and whether the decisions in Cosmopolitan Club [Cosmopolitan Club v. State of T.N., (2017) 5 SCC 635 : (2009) 19 VST 456 (SC)] and Fateh Maidan Club [Fateh Maidan Club v. CTO, (2017) 5 SCC 638 : (2008) 12 VST 598 (SC)] which remitted the matter applying the doctrine of mutuality after the Constitutional amendment can be treated to be stating the correct principle of law? 30.3. (iii) Whether the 46th Amendment to the Constitution, by deeming fiction provides that provision of food and beverages by the incorporated clubs to its permanent members constitute sale thereby holding the same to be liable to sales tax?”
After considering various case laws the Court held that a club registered as a ‘company’ u/s. 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members. The ratio decidendi in Bacha F. Guzdar v. CIT (1955) 27 ITR 1 does not apply to such clubs. When a club supplies goods to its members, there is no “sale” and sales-tax cannot be levied (Bangalore Club v. CIT (2013) 350 ITR 509 (SC), ITO v. Venkatesh Premises Co-operative Society Ltd. (2018) 402 ITR 670 (SC) Court also held that from 2005 onwards, the Finance Act of 1994 does not purport to levy service tax on members’ clubs in the incorporated form. The appeals of the Revenue are, therefore dismissed. WP (C) No. 321 of 2017 is allowed in terms of prayer (i) therein. Consequently, show-cause notices, demand notices and other action taken to levy and collect service tax from incorporated members’ clubs are declared to be void and of no effect in law. ( CA No. 4184 of 2009, dt.03-10-2019)
State of West Bengal v. Calcutta Club Ltd. (2019) 182 DTR 409/ 311 CTR 121/ 2019 (29 ) G.S.T.L 545 (SC).www.itatonline.org
Chalo Mumbai movement has culminated in the successful Convention at Hotel Sahara Star, Mumbai. It is heartening that probably for the first time we had participants from the vast stretch of areas like Amalapuam, Angul, Azamgarh, Berhampore, Bilaspur, Bokaro, Hardoi, Kankavali, Karauli, Kolhapur, Mainpuri, Parbhani, Raipur, Rewa, Rourkela, Sahajanpur, Sindhudurg, Una, Vijaywada, Vellore, Yavatmal etc. Bonding with the delegates from such a vast geographical expanse was enriching experience.
In the message in the Convention paper book, I have thanked each and every member connected with the Convention whether directly or indirectly. I need not repeat what I have stated in the message in the Convention souvenir.
I extend my sincere gratitude to the entire fraternity of AIFTP including the Past Presidents’ Collegium and the present President Dr. Ashok Saraf for reposing trust in me to be the President of this unique Association. Unique – because it’s the only National Association with 7,800 plus members of all genres of Tax Consultants, i.e. CA, Advocates and Tax practitioners. I am humbled and honoured assuming the Presidentship of this august Association.
Dr Ashok Saraf has been a successful President and the benchmark set by him is not easy to emulate. However, it would be my endeavour to ensure that I fulfil the faith and trust reposed in me.
AIFTP (Federation) is founded by the doyens of the profession with the golden objective of spreading education in the matters relating to tax laws, other laws and accountancy. So far, we have been successful in achieving the first objective of spreading knowledge of tax laws. However, we should also concentrate on spreading the knowledge of other laws as also accountancy. As for other laws, Insolvency and Bankruptcy code 2016, International Taxation Laws, the Competition Act 2002, the Customs Act etc. are few of the examples. These are the areas where our members can provide professional service in addition to Direct & Indirect Tax. The knowledge of other laws would include the general laws like Evidence Act, Limitation Act, General Clauses Act, Right to Information Act, etc.
I would like to add that expanding the area of education to the management and use of Information Technology tools for speedy and efficient professional service is also the need of the hour.
Holding two-day National Conference can happen only twice or thrice in a year. However, if we wish to spread the wings of the AIFTP, we will have to go to the smaller cities and towns. The ideal way to achieve this is to motivate the Zones to have Study Circle meetings, workshops on intricate issues, half-day or one-day seminar on the current burning topics. The aim should not be to gather the delegates in large numbers but to concentrate on imparting the knowledge to the smaller group of delegates (around 100 to 150) in interactive sessions. This would ensure the active participation of the delegates while providing insight of the subject.
Webinars on current topics saves the time, money and energy of the Members to travel to the venues for conferences and seminars. Our office is equipped with such IT enabled services. I wish to hold at least one webinar in a month. Such webinars also enable the participants to raise questions to the speakers. Live wire streaming of the study circles and Workshops would also help the Members situated in far-off places to actively participate in debates.
Our Association has been publishing books on various topics of direct and indirect taxes. In the Convention paper book we have given a list of about 41 books published under the banner of AIFTP. The latest one on GAAR – General Anti Avoidance Rules – was released on 14th December 2019 at the hands of Hon’ble Shri Justice Ujjal Bhuyan.
I would invite the interested members to contribute in designing, structuring and giving inputs / services for future publications. We can also have short publications which would cost around ` 100/- and would serve as ready reckoner on the subject covered by the publication.
The website of the Federation would be updated with the latest information on the Direct & Indirect Tax. With the help of Senior Past President, Dr. K. Shivram, Senior Advocate, we wish to start the online facility on Indirect Taxes akin to ITAT online under the Direct Taxes.
While the studies take care of wealth management, with my experience, I am aware of the fact that we, the professionals, are very poor in health management. The Zones holding seminars and conferences can ensure that at least 20 to 30 minutes are devoted to the discussion and lectures by eminent doctors / physical trainers on various day-to-day health issues / tips on fitness and healthy eating habits.
Friends, the list is unending – let us begin well to end well.
Merry Christmas & Happy New Year. Enjoy your vacation with family and friends!
Nikita R. Badheka
National President-Elect, AIFTP
Happy New Year 2020
I wish a very Happy, Healthy and very Prosperous New Year 2020 to all my brothers and sisters of AIFTP.
I would like to convey my thanks to the members of collegium for deposing confidence in me and allowing me an opportunity to serve the fraternity.
More than 1230 delegates have attended the convention at Guwahati which displays the love and affection shown to me by the members of the AIFTP. The AIFTP being an Apex body of the tax professionals across the country, each and every member of the National Executive is expected to be a role model to the tax practitioners, therefore I have taken many tough decisions only in the interests of the AIFTP.
I have enjoyed each and every conference organized by the AIFTP. Further, we have made many representations to the Government from time in the year 2019 and a number of our representations have been accepted by the Government. This year has been a very memorable year for me.
I express my gratitude to the entire executive body i.e. Vice Presidents, Chairmen of all the zones and members of NEC, Chairmen and Members of various committees who have discharged their assignments sincerely and for extending their full co-operation in functioning of the organization.
I have great satisfaction of serving the AIFTP, for one year as National President. For the educational activities of the AIFTP I am always available to the members of the Federation whenever my services are desired. The National Executive Committee of the AIFTP consists of many leaders from all the Zones and all have the Zeal and ability to lead the association in the future.
My best wishes to Mrs. Nikita Badheka for being unanimously elected as National President for the succeeding year 2020.
Thanking you all.
With best wishes,
Dr. Ashok Saraf
The Government of India had introduced the Taxation (Amendment) Ordinance, 2019 on September 20, 2019. Several amendments were made to the Income-tax Act, 1961 through this Ordinance. Changes such as cut in corporate tax rate for domestic companies as well as for manufacturing companies were announced. Also MAT rate had been reduced from 18.5% to 15% from the financial year 2019-20, i.e., assessment year 2020-21.
Thereafter on November 21, 2019, “The Taxation Laws (Amendment) Bill, 2019” has been introduced to replace the aforesaid ordinance. However, the bill makes confusion because it says that MAT will be applicable “for previous year commencing on or after April 1, 2020”.
Which means that reduction in rate of MAT would apply from the assessment year 2021-22 instead of Assessment year 2020-21. Therefore, before passage of bill into Act, it should be clarified by the Ministry of Finance that reduction in rate of MAT would apply from which year because many corporate assessees have done their planning based on lower rate of MAT.
In order to enable Indian Manufactures become competitive, the government had introduced the Ordinance that comprised of three tax measures:
(i) New manufacturing companies set up after October 1, 2019 will enjoy lower rate of income tax @ 15% and will be spared of MAT.
(ii) Existing companies which claim no deduction or exemption will pay an income tax of 22% (which works out to 25.17% including cess and surcharge) and no MAT would be applicable to them.
(iii) Companies that continue to claim exemption and deductions will have to pay lower rate of MAT @ 15% as against @ 18.5%.
So, the Ordinance said that the lower MAT will be effective immediately (i.e. from Assessment year 2020-21) while the Bill states that the reduced MAT will come into force from assessment year 2021-22 (that is the previous year commencing on or after April 1, 2020), Thus, there appears to be a one year deferral in the MAT rate reduction.
Therefore, it is suggested that while passage of bill into Act, in the proviso to section 115JB(1)(a) the word “previous” should be omitted to clear that the reduced rate of MAT would apply from assessment year 2020-21.
Differences between Ordinance and Act
A ‘Bill’ can be considered as initial stage of an Act. Bill is a proposal to make a new law. Usually, Bill is in the form of a document that summaries what is the policy behind the proposed law and what is to be the proposed law.
A Bill can be introduced by government itself or proposed by a member of the Parliament. The Bill is placed in the Lower House of the Parliament and after discussions once it has been passed, the Bill goes to the Upper house for approval. Once the Bill gets passed by the Upper House it is sent to the President for his assent. Finally a Bill becomes a Law (Act) of the land once it has been passed by the parliament and also gets assent from the President.
The term ‘law’ in general refers to the set of regulations or rules to be followed. Law can be in the form of an act, ordinance, order, bye-laws, rule, regulation etc. An act is a subset of law.
Ordinances are temporary laws that are circulated by the President of India on the recommendation of the Union Cabinet. They can only be delivered when the Parliament is not in session. They enable the Indian Government to take immediate legislative action.
At times, when the legislature of the Union is not in session and there is a need to make a legislation (Act) in emergency. In such cases, the Government refers a proposal to the President or Governor, and if they approve of them, it becomes an Ordinance. Legally, an Ordinance is the equal to Act. It can be seen as a temporary law till its expiry or till it is repealed or it is approved by the legislature.
H. N. Motiwalla
|Sr. No.||Name of Members||Profession||Zone|
|1||Franson Michael Edakulathur||T.P.||South|
|2||Prateek Kumar Agarwal||CA.||East|
|3||Deelip Vitthaldasji Zanwar||S.T.P.||West|
|4||Vijay Kumar Rara||Adv.||East|
|9||Bhoopendar P. Maheshwari||CA.||West|
|10||Satish Dattatray Kale||T.P.||West|
|11||Krunal Bhupendra Katwala||CA.||West|
|13||Allu Radha Krishna||Adv.||South|
|14||D. M. Bhattad||T.P.||South|
|15||Siddharth S. Surana||GSTP||Central|
|17||Devendrakumar Govindbhai Patel||Adv.||West|
|18||Jinesh S. Vanzara||CA.||East|
|21||Ankit Bharat Shah||Adv.||West|
|22||Rajesh Pd Singh||Adv.||East|
|23||Krishna Kishore Valluri||Adv.||South|
|24||Chakka Venkata Subba Rao||GSTP||South|
|25||Shahabaz Mohammedrafiq Galgali||Adv.||South|
|27||Varis V. Isani||Adv.||West|
|28||Rajeev S. Joshi||Adv.||West|
|29||Mukund L. Dhunisingani||Adv.||West|
|31||Pranjal Sudhir Waghmare||CA||West|
|32||Rakesh Kumar Sharma||Adv.||Central|
|36||Sowdagar Khaja Reehan UZ Zama||GSTP||South|
|37||Rabindra Kumar Panigrahi||Adv.||East|
|38||Suman Kumar Prusty||Adv.||East|
|39||Dr. Narendra Kaler||Adv.||Central|
|40||Ravi Dineshkumar Desai||Adv.||West|
|43||Dharmnath V. Avhad||Adv.||West|
|44||Anil Adarsh Jain||Adv.||North|
|46||Sunil Dattatray Choramale||Adv.||West|
|52||Raghavendra Rao SVS||Adv.||South|
|56||Umag Vasantlal Panchal||Adv.||West|
|58||Preetam R. Batra||CA.||West|
|59||Ram P. Poddar||Adv.||Central|
|61||Ravi Madhukar Kandekar||I.T.P.||South|
|66||Fenil Paresh Shah||CA||West|
|67||S. Sankar Ganesh||GSTP||South|
|69||Zulfequar Amir Husain||CA.||West|
|71||Pratik Rajendra Shah||GSTP||West|
|80||Bhagat Singh Tomar||CA.||North|
|85||Prasanta Kumar Panigrahi||Adv.||East|
|87||Narayanan P. Potty||Adv.||South|
|89||Swapnil Dutt Vyas||Adv.||Central|
|93||Nimesh B. Shah||Adv.||North|
Please take notice that elections to National Executive body of AIFTP for 2020 & 2021 shall be held at Mumbai as per the schedule detailed as under:-
Date of Notice
Availability of Nomination Form
Last Date of Filing Nominations
Scrutiny of Nomination Forms
Publication Valid Nominations
Withdrawal of Nominations
Declaration of Final List of Candidates
Date of Elections
Rule 6. Qualifications of the Office bearers and members of the national executive committee
The election/co-option as provided in rules 10(1), (2), (3) and (4) as a member of the National Executive Committee or any of the office bearers shall be subject to the following
1. Member of the National Executive Committee
Any individual life member or a representative of the association member that may be nominated in terms of rule 5(C)(ii), who is in practice of direct and/or indirect taxes for more than five years and who has been a member of the Federation for at least two years can file his/her nomination form for the election at the Ordinary General Meeting.
Rule 14. TERM OF THE NATIONAL EXECUTIVE COMMITTEE
The term of the NEC elected in accordance with Rule 10 shall be two calendar years commencing from 1st day of January that follows the date of the election at the Ordinary General Meeting. Subject to other rules and regulations and the election rules framed by the National Executive Committee under rule 7, the general body at its ordinary general meeting shall elect not more than fifty (50) consenting members duly proposed and seconded, in the prescribed nomination form, to constitute a National Executive Committee of the Federation for the ensuing term of two calendar years commencing from the 1st January that follows the date for the ordinary general meeting.
Provided however that the number of members to be elected from each zone shall be determined in accordance with rule 7(3). The format of the prescribed nomination form along with the election rules shall be available with each zone office for the benefit of the existing eligible members.
ALL INDIA FEDERATION OF TAX PRACTITIONERS RULES FOR ELECTION TO THE NATIONAL EXECUTIVE COMMITTEE
1. The National Executive Committee shall arrange for the election of the members of the next Executive Committee, as and when an ordinary General Body meeting is called under Rule of the Constitution.
2. The National Executive Committee shall fix the date and the time up to which and the place or places where nominations for the purposes of the aforesaid election shall be received. If by the date and the time fixed by the National Executive Committee, no nominations are received or sufficient nominations to fill all the posts of the National Executive Committee are not received, nominations for all the posts, or nominations falling short for filling all the posts shall be called for at the time of the General Body meeting. In the latter case Chairman of the General Body meeting shall have all the powers to do the needful in the matter. Members can be nominated for election even in absentia.
3. If at the General Body meeting sufficient numbers of nominations are not forthcoming to fill all the posts on the National Executive Committee the General Body shall be entitled to empower the National Executive Committee to fill the vacancies by nominations at its subsequent meetings. Such nominations shall be in addition to co-option referred to in Rule 10(2).
4. Any life member and any representative nominated in terms of rule 5(c)(ii), shall be eligible to seek election to the National Executive Committee. His name shall be proposed and seconded by any member of the Federation.
“Provided further that it shall be the duty of the each Member of the National Executive Committee including office bearers to attend 50% or at least two meetings of the National Executive, whichever is less in a calendar year. The defaulting member shall not be eligible for election or nomination or co-option to be a NEC member in the next NEC.
*Provided that any member who have already opted to be on the Zone Managing Committee for the ensuing term shall not be eligible to file nomination for NEC. Requisite declaration shall be annexed with the nomination form.
5. If more nominations are received than the total number of posts on the National Executive Committee, there shall be election, unless any member withdraw his nomination/s before the announcement of voting at the General Body meeting, so that the total number of nominations are equal to or less than the total number of posts on the National Executive Committee.
6. *The Election Officer, after the expiry of the time notified for receiving the nomination forms, shall scrutinise all the forms and notify, all valid and invalid nominations with reasons for invalidity of any of the forms in the list, with the help of electronic media. He shall also announce the zonewise list of valid nominations alongwith the maximum number required to be elected in terms of Rules 7(3) and 14, “at least five days before the actual date of voting.”**
* Added on 24th December, 2016
** Added on 6th October, 2018
7. If on withdrawal of any nomination/s, all the posts on the National Executive Committee cannot be filled, the General Body shall be entitled to empower the next National Executive Committee to fill the vacancies as provided in Rule 3 of these Rules.
7A. *The members existing on the date of issue of the notice convening the AGM, will only be eligible to vote at the said meeting. Such list of members shall be made available by the Secretary General to the Election Officer.
*Any member admitted thereafter will not be eligible to vote at the election however he can attend and take part in the discussions on any other item on agenda of the AGM.
8. Election to the National Executive Committee shall be by secret ballot.
9. Chairman of the General Body meeting shall appoint one or more scrutinisers from amongst the members present at the Meeting or otherwise. The scrutiniser/s, so appointed, shall have all the powers to conduct the election and report the result thereof to the Chairman of the meeting.
10. Before the close of the General Body meeting, the result of the election shall be declared by the Chairman of the meeting.
* Added on 24th December, 2016
Chief Election Officer
NOTICE OF ORDINARY GENERAL MEETING
October 25, 2019
NOTICE is hereby given that an Ordinary General Meeting as provided in Rule 10 of the Rules & Regulations of the All India Federation of Tax Practitioners will be held on Friday, the 13th December, 2019 at Khadayata Bhuvan, Plot No. 32, Hanuman Road, Near Parle English Medium School, Vile Parle (E), Mumbai – 400 057 (Maharashtra) at 3.30 p.m. to transact the following agenda as prescribed in Rule 8.
A G E N D A
1. Welcome address and opening remarks by the President, Dr. Ashok Saraf.
2. To confirm the proceedings of previous OGM held on 1st December, 2017 at Jabalpur.
3. To elect 50 members to the National Executive Committee for the term 2020 & 2021 in accordance with Rule 7(3) read with Rule 10(1) & 10(2) and Rule 14 of the Rules & Regulations.
4. To receive the report of the Election Officer and declaration of election result.
5. To consider suggestions from the members in respect of rendering better service to the members and for overall progress of the AIFTP.
6. To transact any other business that may be raised with the permission of the Chair
For All India Federation of Tax Practitioners
Anand Kumar Pasari
1. At the National Executive Committee meeting held on 22nd June, 2019 at Tirupati, Shri Ganesh Purohit (Immediate Past President) is appointed as Chief Election Officer. The Chief Election Officer has already issued Notice for election in AIFTP Times for the month of October, 2019 at Page No. 4. The above notice is issued consequent to the Notice by the Chief Election Officer.
2. Copy of the updated Memorandum of Association and Rules and Regulations can be obtained from the Head Office at Mumbai or downloaded from Official website of the Federation www.aiftponline.org
Members are requested to read the same before filing the nomination.
3. Nomination form can be downloaded from the website of the Federation or on request may be obtained from the Head Office at Mumbai from Monday, 11th November, 2019 onwards.
4. Nominations are hereby invited for the membership of National Executive Committee from all eligible members in terms of amended Rules 10(1), 10(1A), 10(1B) and 14 subject to numerical limit as provided in Rule 7(3) for each Zone. The number of members to be elected from each zone will have their contest amongst the candidates from that zone but all members from all zones will be eligible to vote for all the five zones.
5. Any member who have already opted to be on the Zonal Managing Committee for the ensuing term shall not be eligible to file nomination for NEC. Requisite declaration to this effect shall be annexed with the nomination form.
6. Nomination form duly filled in, affixed with photo, and requisite non-refundable deposit Cheque or confirmation of RTGS of ₹ 2000/-, duly proposed and seconded MUST REACH the registered office of the Federation on or before Monday, 2nd December, 2019 up to 5:00 p.m.
7. The Nomination Forms would be scrutinized by the aforesaid Election Officer on Tuesday, 3rd December, 2019 and would notify all valid and invalid nominations on the electronic media
8. Candidate may withdraw the nomination on or before Sunday, 8th December, 2019 up to 5.00 p.m. and Declaration of Final List of Candidates would be notified on the electronic media and conduct the election if warranted at Mumbai (Maharashtra) at the time of OGM on Friday, 13th December, 2019
9. As per clause 10(3) of the Constitution of the Federation, the Chairman of the respective zone shall be ex-officio member of the National Executive Committee. Hence Chairman elect is not required to file the nomination for the National Executive Committee.
10. The Chief Election Officer declares that as per the membership of respective zones as on 25th September, 2019 maximum number of candidates who can be elected to NEC as per rule 7(3) of the Constitution are as under:—
Members as on 25-10-2019
Max. 16 members can be elected
11. As per Rule 10, clause 6 of the Constitution of the Federation, any individual life member or a representative of the Association member who is more than 5 years in practice and who has been a member of the Federation for at least two years can only file the nomination for NEC.
12. The National Executive Committee Meeting will be held once in three months at different places in the country, along with two-day conference. The Executive Committee Members have to bear personally the expenses of travelling, stay and delegate fees of the conference and also devote time for the welfare of the Federation. Persons of integrity and who can afford to spend time and money for the welfare of the profession are only requested to file the nomination. Please note that it is mandatory to attend at least 50% of NEC meetings in a year or else they shall not be entitled to file nomination for re-election to NEC.
13. The National Executive at its first meeting after election shall elect from amongst its members the following Office Bearers for one calendar year i.e. for the year 2020 only, (Rule 10 Clause 4 read with clause 6 read with amended Rule 11), however the term of National Executive will continue to be that of two calendar years as per Rule 14.
1. One President 2. One Deputy President 3. Five Vice Presidents (one from each zone)
4. One Secretary General 5. One Hon. Treasurer and 6. Five Hon. Joint Secretaries (one from each zone)
14. For further clarification the members may contact the Secretary General, Chairman of respective zone or Registered Office.
Scope of exemption about Storage and Warehousing of fruits under GST
The facts are that the querist, amongst others, involved in warehousing of wet dates in his warehouse.
Till 30-9-2019, querist was paying GST on warehousing charges collected from the customers.
On 30-9-2019, the Government has issued Notification No. 21/2019 Central Tax – (Rate). The relevant part of said notification is as under:
“[TO BE PUBLISHED IN THE GAZZETE OF INDIA, EXTRAORDINARY, PART II,
SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
Notification No. 21 /2019- Central Tax (Rate)
New Delhi, the 30th September, 2019
G.S.R……(E).– In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue), No. 12/2017- Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 691(E), dated the 28th June, 2017, namely:–
In the said notification,–
(i) in the Table, —
(a) against serial number 7, in the entry in column (3), for the words and brackets, “twenty lakh rupees (ten lakh rupees in case of a special category state) in the preceding financial year”, the following words, brackets and figures shall be substituted, namely, –
“such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)”;
(b) after serial number 9A and the entries relating thereto, the following shall be inserted namely:—
Services provided by and to Fédération Internationale de Football Association (FIFA) and its subsidiaries directly or indirectly related to any of the events under FIFA U-17 Women’s World Cup 2020 to be hosted in India.
Provided that Director (Sports), Ministry of Youth Affairs and Sports certifies that the services are directly or indirectly related to any of the events under FIFA U-17 Women’s World Cup 2020.”;
(c) against serial number 14, in the entry in column (3), after the word “below”, the words “or equal to” shall be inserted;
(d) against serial number 19A, in the entry in column (5), for the figures “2019”, the figures “2020” shall be substituted;
(e) against serial number 19B, in the entry in column (5), for the figures “2019”, the figures “2020” shall be substituted;
(f) after serial number 24A and the entries relating thereto, the following serial number and entries relating thereto shall be inserted, namely:—
Heading 9967 or Heading 9985
Services by way of storage or warehousing of cereals, pulses, fruits, nuts and vegetables, spices, copra, sugarcane, jaggery, raw vegetable fibres such as cotton, flax, jute etc., indigo, unmanufactured tobacco, betel leaves, tendu leaves, coffee and tea.
2. This notification shall come into force with effect from the 1st day of October, 2019.
[F. No. 354/136/2019 -TRU]
Under Secretary to the Government of India
Note:- The principal notification was published in the Gazette of India, Extraordinary, vide notification No. 12/2017 – Central Tax (Rate), dated the 28th June, 2017, vide number G.S.R. 691 (E), dated the 28th June, 2017 and was last amended by notification No. 13/2019 – Central Tax (Rate), dated the 31st July, 2019 vide number G.S.R. 540(E), dated the 31st July, 2019.”
In light of above notification, querist is of view that the warehousing charges related to wet dates are getting exempted and no GST is required to be charged by querist.
The querist has sought opinion about correctness of above understanding.
I have gone through the above notification. Earlier (i.e. prior to 1-10-2019) there was Notification no. 11/2017- Central Tax (Rate) and others by which warehouse charges for agricultural produces were given exemption.
There was ambiguity as to whether warehouse charges for wet dates will be exempt as agriculture produce. The Government has issued clarification vide circular no. 16/2017-GST dated 15-11-2017. However, there was no specific mention of wet dates and hence some of the suppliers continued to charge GST to their customers.
The notification dated 30-9-2019 appears to be specifically issued to clear ambiguity about above matter. The earlier notification referred to agricultural produce and a doubt was lurking whether wet dates will fall in the said category or not.
However, now the above notification dated 30-9-2019 is in reference to specific category, like warehousing of cereals, pulses, fruits etc.. So, if it can be said that the warehouse charges are for fruits, the said warehouse charges will be exempt under above notification.
The nature of wet dates is required to be seen. As informed, it is covered as agricultural produce as it is sold in same form without any processing.
In dictionaries and in common parlance also wet dates are understood as ‘fruits”.
The definition in following dictionaries can be referred for sake of indication.
Date palm (redirected form Date (fruit)
also found in : Thesaurus, Encyclopedia.
Thesaurus Antonyms related words Synonyms Legend:
Switch to new thesaurus
Noun 1. date palm –
tall tropical feather palm tree native to Syria bearing sweet edible fruit
date – sweet edible fruit of the date palm with a single long woody seed.”
“Fruit[ froot ]
noun, plural fruits, (especially collectively) fruit.
1. any product of plant growth useful to humans or animals.
2. the developed ovary of a seed plant with its contents and accessory parts, as the pea pod, nut, tomato, or pineapple.
3. the edible part of a plant developed from a flower, with any accessory tissues, as the peach, mulberry, or banana.
4. the spores and accessory organs of ferns, mosses, fungi, algae, or lichen.
5. anything produced or accruing; product, result, or effect; return or profit:”
In Merriam Webster dictionary
“Fruit noun, often attributive
Definition of fruit
(Entry 1 of 2)
1a: a product of plant growth (such as grain, vegetables, or cotton) the fruits of the field)
b (1): the usually edible reproductive body of a seed plant
especially: one having a sweet pulp associated with the seed the fruit of the tree..”
Wet date is fruit. The term ‘fruit’ is not preceded by any adjective like “raw fruits” or “processed fruits” etc.
Therefore, all fruits, whether raw or processed or finished fruits are covered.
It covers fresh fruits as well as dry fruits. Whenever the Government wants to restrict the category to “raw” then it is so specifically mentioned like, in relation to “vegetable fibre” in above notification. Therefore, wet date, being fruit, it is covered by above notification and become exempt from GST.
Of course, the consequences of being exempt supply, will apply.
It also be noted that the invoice should specifically narrate about storage/warehouse charges for wet dates, to avoid any future ambiguity.
Therefore in my opinion the storage/warehousing charges for wet dates are exempt under above notification.