S.2(22)(e) : Deemed dividend-Beneficial owner – Prima facie, CIT v. Ankitech Pvt. Ltd. (2012) 340 ITR 14 (Delhi)(HC) and
CIT v. Madhur Housing and Development Company is wrongly decided and should be reconsidered by larger bench
The term “shareholder”, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. The moment there is a shareholder, who need not necessarily be a member of the Company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state that two conditions have to be satisfied, namely, that the shareholder must first be a registered shareholder and thereafter, also be a beneficial owner is not only mutually contradictory but is plainly incorrect. Prima facie, Ankitech/Madhur Housing is wrongly decided and should be reconsidered by larger bench. This being the case, the High Court was prima facie of the view that the Ankitech judgment (supra) itself requires to be reconsidered, and this being so, without going into other questions that may arise, including whether the facts of the present case would fit the second limb of the amended definition clause, the Bench placed these appeals before the Hon’ble Chief Justice of India in order to constitute an appropriate Bench of three learned Judges in order to have a relook at the entire question. (CA Nos. 2068-2071 of 2012, dt. 18-1-2018)
National Travel Service v. CIT ( 2018) 401 ITR 154/ 162 DTR 201 (SC)
S.4 : Charge of income-tax –Mutuality – Co-operative societies – Non-occupancy charges, transfer fees are exempt from tax [S. 2(24)]
Receipts by housing co-operative societies such as non-occupancy charges, transfer charges, common amenity fund charges and certain other charges from their members are exempt from income-tax based on the doctrine of mutuality. The fact that the receipts are in excess of the limits prescribed by the State Government does not mean that the Societies have rendered services for profit attracting an element of commerciality and thus taxable. (CA No. 2706 of 2018, dt. 12-3-2018)
ITO v. Venkatesh Premises Co-op. Society Ltd. (SC), www.itatonline.org
S.4 : Charge of income-tax –Entertainment subsidy – Capital or revenue – A subsidy granted by the Govt. to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. [S. 28(i)]
Dismissing the appeal of the revenue the Court held that; A subsidy granted by the Govt. to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. The fact that the incentives are not available unless and until commercial production has started, and that the incentives are not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery is irrelevant. The object has to be seen and not the form in which it is granted. (CA Nos. 6513-6514 of 2012, dt. 7-12-2017)
CIT v. Chaphalkar Brothers Pune ( 2018) 400 ITR 279/ 300 CTR 113/ 161 DTR 41 (SC)
S.4 : Charge of income-tax –Subsidy – Capital or revenue –Judgment of Delhi High Court in
CIT v. Bhushan Steels And Strips was stayed [S. 28(1), 56]
Supreme Court stays judgment of the Delhi High Court in CIT v. Bhushan Steels And Strips which held that if the recipient has the flexibility of using the subsidy amount for any purpose and is not confined to using it for capital purposes, the subsidy is revenue in nature and is taxable as profits. Court directed, issue of notice. In the meantime, the operation of the impugned judgment shall remain stayed. (SLP Nos. 30728-30732/2017, dt. 20-11-2017)
Bhushan Steeel v. CIT (SC); www.itatonline.org
S.4 : Charge of income-tax – Hindu law – Burden is on the member to establish the property is his individual and not ancestral presumption continues to operate in favour of family
Court held that; as per settled principle of Hindu law there lies a legal presumption that every Hindu family is joint in food, worship and estate and in absence of any proof of division, such legal presumption continues to operate in family. Burden lies upon the member who after admitting existence of jointness in family properties asserts his claim that some properties out of entire lot of ancestral properties are his self-acquired property. On facts the appellants failed to adduce any kind of documentary evidence to prove the self-acquisition of properties nor were they able to prove source of its acquisition, Order of High Court declaring property as joint property of family was upheld.
Adiveppa v. Bhimappa (2017) 250 Taxman 476 (SC)
S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Formula One Grand Prix of India’ event constitute business income, liable to deduct tax at source – DTAA-India-UK. [S. 195, Articles 5, 13]
Dismissing the appeal of the assessee the Court held that; receipt from the Formula One Grand Prix of India’ event constitute business income, liable to tax deduction at source. High Court rightly concluded that based on exclusive nature of access and period for which it was accessed it could be concluded that circuit constituted a fixed place PE of assessee in India.
Formula One World Championship Ltd. v. CIT (IT) (2017) 248 Taxman 192 (SC)
S.10(37) : Capital gains – Agricultural land – Exemption can be claimed even where compensation for acquisition of land is determined based on the agreement between the parties
The issue before the Supreme Court was whether the payment of compensation on agreed terms in respect of the land acquired would be entitled for exemption u/s. 10(37). The Supreme Court dismissed the department’s appeals. Supreme Court observed that the issue was covered by the decision in
Balakrishnan v. UOI (2017 )391 ITR 178 (SC) where it was held that compensation paid on agreed terms would not change the character of the acquisition from that of compulsory acquisition to voluntary sale and the exemption provided under the Act would be available.
CIT v. Special Land Acquisition Officer (2017) 297 CTR 219 (SC)
S.10A : Free Trade Zone – Deduction to be granted before computing gross total income of eligible undertaking and without setting off losses of other units against exempt unit
Dismissing the appeal of the revenue the Court held that; deduction is to be granted before computing gross total income of eligible undertaking and without setting off losses of other units against exempt unit. Followed
CIT v. Yokogawa India Ltd (2017) 391 ITR 274 (SC) (AY. 2009-10)
PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619 (SC)
Editorial : Decision in PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619 (Karn.) is affirmed.
S.12A : Registration – Trust or institution – The CIT has no power to cancel/withdraw/recall the registration certificate granted u/s. 12A until express power to do so was granted by s. 12AA(3). S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate [General clauses Act S. 21]
Allowing the appeal the Court held that the CIT has no power to cancel/withdraw/recall the registration certificate granted u/s. 12A until express power to do so was granted by s. 12AA(3). S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate. (CA No. 6262 of 2010, dt. 16-2-2018)
Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v. CIT(SC), www.itatonline.org
S.14A : Disallowance of expenditure – Exempt income – Rule 8D cannot be held to be applicable retrospectively and cannot be applied to pending assessments [R.8D]
Dismissing the appeal of the revenue the Court held that Rule 8D is prospective in operation and could not have been applied to any assessment year prior to Assessment Year 2008-09. (CA No. 2165 of 2012, dt. 31-1-2018)(AY. 2003-04)
CIT v. Essar Teleholdings Ltd ( 2018) 162 DTR 225(SC)
S.32 : Depreciation – Charitable Trust – Even if the entire expenditure incurred for acquisition of a capital asset is treated as application of income for charitable purposes, assessee is entitled to depreciation and entitled to carry forward [S. 11(1)(a)]
Dismissing the appeal of the revenue the Court held that; even if the entire expenditure incurred for acquisition of a capital asset is treated as application of income for charitable purposes u/s. 11(1)(a) of the Act, the assessee is also entitled to depreciation u/s. 32. The argument that the grant of depreciation amounts to giving double benefit to the assessee is not acceptable. It may also be mentioned that the legislature, realising that there was no specific provision in this behalf in the Income-tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-16. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. For the aforesaid reasons, the Hon’ble Supreme Court affirmed the view taken by the High Courts in these cases and dismissed these matters. (CA No. 7186 of 2014, dt. 13-12-2017)
CIT v. Rajasthan and Gujarati Charitable Foundation Poona ( 2018) 300 DTR 1/ 161 DTR 33 (SC)
S.43B : Deduction on actual payment – Advance deposit of Central Excise duty in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of S. 43B and the assessee is entitled to deduction of the said amount
Dismissing the appeal of the revenue the Court held that advance deposit of Central Excise Duty in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of S. 43B and the assessee is entitled to the benefit of deduction of the said amount. (CA No. 19763 of 2017, dt. 24-11-2017.)
CIT v. Modipon Limited ( 2017) 160 DTR 73/ (2018) 400 ITR 1/ 252 Taxman 123 (SC)
S.80HHC : Export business –Amount received as commission had to be taken into consideration while computing amount of deduction – Matter was set aside to High Court to decide a fresh [S. 260A]
The High Court held that the amount of commission should not be taken into consideration while calculating deduction u/s. 800HHC. While giving the said finding the Court relied upon the judgment in the case of
CIT v. P. R. Prabhakar  276 ITR 176/148 Taxman 231 (Mad.). The said judgment was reversed by the Supreme Court in
P. R. Prabhakar v. CIT  284 ITR 548/154 Taxman 503(SC). Accordingly, the Supreme Court set aside the matter to the High Court to be decided afresh in accordance with law.
Veejay Marketing v. Dy. CIT (2017) 297 CTR 17/ 247 Taxman 151 (SC)
S.80-IB : Industrial undertakings – Initial assessment year – Small scale industrial undertaking – Assessee is not entitled to benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular assessment year even if in initial year eligibility was satisfied
Allowing the appeal of the revenue, the Court held that the incentive meant for small scale industrial undertakings cannot be availed by undertakings which do not continue as small scale industrial undertakings during the relevant period. Each assessment year is a different assessment year. The fact that the object of legislature is to encourage industrial expansion does not mean that the incentive should remain applicable even where on account of industrial expansion, the small scale industrial undertakings ceases to be small scale industrial undertakings. The fact that in the initial year eligibility was satisfied is irrelevant. Accordingly the assessee is not entitled to benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular assessment year even if in initial year eligibility was satisfied. (CA No. 20854 of 2017, dt. 5-12-2017)
DCIT v. Ace Multi Axes Systems Ltd (2017) 160 DTR 353 /299 CTR 441 /(2018) 400 ITR 141/ 252 Taxman 274(SC)
S.119 : Central Board of Direct Taxes – Instructions – Appeal – Low tax effect circular – The CBDT cannot issue any circular having retrospective operation –The fact that the CBDT itself vide Circular dated 10-12-2015 directed that the instruction to withdraw low tax effect appeals will apply retrospectively to pending appeals has no bearing. [S. 260A, 268A]
The question raised in this batch of Appeals is as to whether the instructions/circular issued by the Central Board of Direct Taxes on 9-2-2011 will have retrospective operation or not.
This Court in CIT v. Suman Dhamija (CA.Nos.4919-4920/2015) has held that instructions/circular dated 9-2-2011 is not retrospective in nature and they shall not govern cases which have been filed before 2011, and that, the same will govern only such cases which are filed after the issuance of the aforesaid instructions dated 9-2-2011.
Learned counsel for the respondents relied upon circular dated 10th December, 2015 and specifically relied upon paragraph 10. We are of the considered opinion that the Central Board of Direct Taxes cannot issue any circular having retrospective operation. Respectfully following the above decision, we allow the instant Appeals. The impugned order passed by the High Court dated 2-11-2011 in ITA No. 887/2006 is set aside. The matter(s) is/are remitted back to the High Court for re-adjudication on merits and in accordance with law. (CA No. 6815/2017, dt. 12-10-2017).
CIT v. Gemini Distilleries (2017) 398 ITR 343/ 299 CTR 27/ 159 DTR 63/251 Taxman 324 (SC)
S.244A : Refunds – Interest on refunds – Partial waiver of interest by Settlement Commission the assessee was entitled to interest – When the amount is due to the assessee, there is statutory obligation of the department to refund the amount with interest [Ss. 234A, 234B, 234C, 245D(4)]
Allowing the petition the Court held that, when the amount is due to the assessee, there is statutory obligation of the department to refund the amount with interest. Contention of the revenue that the refund became due to partial waiver of interest by the Settlement hence the assessee is not entitled to interest was rejected (AYs. 1993-94 to 1994-95)
K. Lakshmansa and Co. v. CIT (2017) 399 ITR 657 (SC)
Editorial: Decision in CIT v. K. Lakshmansa and Co. (2010) 323 ITR 617 (Karn.) (HC) was reversed.
S.252 : Appellate Tribunal –Appointment of Tribunal Members under new rules – Interim directions issued regarding the method for selection of Tribunal Members and their terms and period of appointment
The validity of the ‘Tribunals, Appellate Tribunals and Other Authorities (Qualifications, Experience and Other Conditions of Service of Members) Rules, 2017‘ has been challenged in the Supreme Court. The Supreme Court is required to examine whether the Rules, which seek to appoint the Members of the Tribunal for a limited period, and which make the appointment and removal of the Members the sole prerogative of the Government, are valid in law.
The following interim order has been passed by the Supreme Court:
We have heard learned counsel for the petitioners and Mr. K. K. Venugopal, learned Attorney General for India.
In the course of hearing, suggestions for an interim order in respect of Central Administrative Tribunal have been filed. The suggestions read as follows:
“1. Staying the composition of Search-cum-Selection Committee as prescribed in Column 4 of the Schedule to the Tribunal, Appellate Tribunal and Other Authorities (Qualification, experience and Other Conditions of Service of Members) Rules, 2017 both in respect of Chairman/Judicial Members and Administrative Members. A further direction to constitute an interim Search-cum-selection Committee during the pendency of this W.P. in respect of both Judicial/Administrative members as under:
1. Chief Justice of India or his nominee – Chairman b. Chairman of the Central Administrative Tribunal – Member c. Two Secretaries nominated by the Government of India – Members
2. Appointment to the post of Chairman shall be made by nomination by the Chief Justice of India.
3. Stay the terms of office of 3 years as prescribed in Column 5 of the Schedule to the Tribunal, Appellate Tribunal and other Authorities (Qualification, Experience and other Conditions of Service of Members) Rules, 2017. A further direction fixing the term of office of all selectees by the aforementioned interim Search-cum- Selection Committee and consequent appointees as 5 years.
4. All appointments to be made in pursuance to the selection made by the interim Search-cum-Selection Committee shall be with conditions of service as applicable to the Judges of High Court.
5. A further direction to the effect that all the selections made by the aforementioned interim selection committee and the consequential appointment of all the selectees as Chairman/Judicial/Administrative members for a term of 5 years with conditions of service as applicable to Judges of High Court shall not be affected by the final outcome of the Writ Petition.”
Mr. Venugopal, learned Attorney General has submitted that he has no objection if the suggestions, barring suggestion Nos. 4 and 5, are presently followed as an interim measure. On a query being made whether the said suggestions shall be made applicable to all tribunals, learned Attorney General answered in the affirmative.
He would, however, suggest that suggestions Nos. 4 and 5 should be recast as follows:
“4. All appointments to be made in pursuance to the selection made by the interim Search-cum-Selection Committee shall abide by the conditions of service as per the old Acts and the Rules.
5. A further direction to the effect that all the selections made by the aforementioned interim selection committee and the consequential appointment of all the selectees as Chairman/Judicial/Administrative members shall be for a period as has been provided in the old Acts and the Rules.
In view of the aforesaid, we accept the suggestions and direct that the same shall be made applicable for selection of the Chairpersons and the Judicial/Administrative/Technical/Expert Members for all Tribunals.
List after twelve weeks along with W.P.(C) Nos. 120 of 2012; 267 of 2012. (Wp No. 279/2017, dt. 9-2-2018)
Kudrat Sandhu v. UOI (SC), www.itatonline.org
S.260A : Appeal – High Court –Mesne profit – Capital or revenue – Dismissal of the appeal on the ground that the department has not filed an appeal against the Judgment of Special Bench was held to be not justified – High Court was directed to hear the appeal on merits [S.4]
High Court dismissed the appeal of the revenue on the ground that the department has not filed an appeal against the judgment of Special Bench in
Narang Overseas Pvt. Ltd. v. ACIT (2008) 111 ITD 1 (Mum.) (SB) (Trib.). On appeal by the revenue allowing the appeal, the Court held that this was not the correct approach of the High Court : though one authority had followed its own decision in another case and that matter in appeal had been dismissed on technical grounds still the High Court had to decide the question on the merits.
CIT v. Goodwill Theatres P. Ltd. (2018) 400 ITR 566 (SC)
Editorial : Order in CIT v. Goodwill Theatres Pvt. Ltd. (2016) 386 ITR 294 / 241 Taxman 352 (Bom.)(HC) was set aside
S.261 : Appeal – Supreme Court – Observation of the High Court against department was expunged [Ss. 260A, 262]
On appeal by the revenue, adverse observation of the High Court against the department and imposing costs for making assessee contest case in three forums and wasting taxpayers money was held to be uncalled for and expunged .
CIT v. Deutsche Software Ltd. (2017) 399 ITR 570 (SC)
Editor: Decision in CIT v. DSL Software Ltd. (2013) 351 ITR 385 (Karn.) (HC) is affirmed
S.263 : Commissioner – Revision of orders prejudicial to revenue – Share capital – CIT is entitled to revise the assessment order on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned such order cannot be interfered with. [S. 68]
Dismissing the appeal of the assessee the Court held that CIT is entitled to revise the assessment order on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned such order cannot be interfered with. Law laid down in
Subhlakshmi Vanijya Pvt. Ltd v. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) (HC) is affirmed. ( SLP No. 23976/2017, dt. 10-4-2017)
Daniel Merchants Private Limited v. ITO (SC); www.itatonline.org
S.268A : Appeal – Low tax effect circular – A beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively
Dismissing the appeal of the revenue the Court held that; the view of the two-judge Bench in Suman Dhamija & Gemini Distilleries that CBDT’s low tax Circular dated 9-2-2011 cannot be given retrospective effect cannot be followed as it is contrary to the three-judge Bench verdict in Surya Herbal. A beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Circular dated 9-2-2011 has retrospective operation except for two caveats: (i) The Circular should not be applied ipso facto when the matter has cascading effect and/or (ii) where common principles are involved in subsequent group of matters or a large number of matters. ( SLP No. 23-11-2017.
DIT v. S. R. M.B. Dairy Farming (P) Ltd (2017) 160 DTR 129 / 299 CTR 321 / ( 2018) 400 ITR 9 / 252 Taxman 1 (SC)
S.271(1)(c) : Penalty – Concealment – Where income disclosed by assessee in return and income assessed was nil, no penalty was leviable
The Supreme Court dismissed the Department’s appeal against the High Court order wherein the High Court held that no penalty is leviable under section 271(1)(c) of the Act, if the income disclosed in the return and the income assessed is nil.
JCIT v. Classic Industries Ltd. (2017) 247 Taxman 152 (SC)
S.271(1)(c) : Penalty – Concealment – Penalty is chargeable even where no tax is payable but the returned loss is reduced on assessment
Supreme Court following its earlier decision in the case of CIT v. Gold Coin Health Food (P) Ltd. 218 CTR 359 held that penalty can be levied even if no tax is payable on the total income assessed and the loss as returned by the assessee is reduced.
CIT v. Shree Chowatia Tubes (India) (P) Ltd. (2017) 297 CTR 15 / 154 DTR 97/ 247 Taxman 147 (SC)
S.276C : Offences and prosecution – Wilful attempt to evade tax – Return was tampered – Amount involved was less than ₹ 25,000, prosecution ought not to have been initiated [S. 277]
Allowing the appeals the Court held that as the amount involved was below ₹ 25,000, and had been paid with interest long ago, the Circular dated February 7, 1992 squarely applied and no proceedings should have been filed. Proceedings against the appellants were to be quashed.
Magdum Dundappa Lokappa v. Income Tax Dept. (rep by its Income Tax Officer, Angad Kumar) (2017) 397 ITR 145 (SC)
Suresh Sholapurmath v. Income Tax Dept. (rep by its Income Tax Officer, Angad (Kumar) (2017) 397 ITR 145 (SC)
Circulars are binding on the department – When two views are possible, one which favours the assessee has to be adopted.
It is trite that when two views are possible, one which favours the assessee has to be adopted. Circulars are binding on the Department. The Government itself has taken the position that where whole of excise duty or service tax is exempted, even the Education Cess as well as Secondary and Higher Education Cess would not be payable. This is the rational view. (CA. Nos. 2781-2790 of 2010, dt. 10-11-2017.)
SRD Nutrients Private Limited v. CCE (SC), www.itatonline.org
Precedent — High Court — When Bench is disagreeing with decision of Co-ordinate Bench, the matter to be referred to larger Bench
Allowing the appeal the Court held that; when Bench disagreeing with decision of Co-ordinate Bench, the appropriate course of action for the High Court would have been to refer the matter to a larger Bench. Since subsequently, in another case pending before the High Court on the same question, the High Court had referred the matter to a larger Bench, the judgment of the High Court was to be set aside and the appeal remanded to the High Court for decision afresh along with the decision in the other case by the larger Bench. (AY, 2006-07)
Engineers India Ltd. v. CIT (2017) 397 ITR 16 (SC)