1. Concessional Rate of GST

Facts : The Applicant is a Limited Company, engaged in manufacturing of packaging material which includes HDPE Drums and containers and supplies HDPE drums, on receipt of a purchase order from a merchant exporter, raises invoice for supply of said drums on the merchant exporter and delivers the same, as per the merchant exporter’s direction, to the premises of the chemical manufacturer, who manufactures ethyl alcohol and packs the same in the said HDPE drums and the merchant exporter exports the said ethyl alcohol packed in said HDPE drums, within the stipulated time. In this regard, the applicant sought advance ruling in respect of the following question:

Whether they are liable for 0.1% concessional rate of tax under Notification No. 41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter?

Observations & Findings : The Notification No. 41/2017-IT (Rate) stipulates certain conditions for supply of goods to the merchant exporter at concessional rate of GST at 0.1%. To avail the concessional rate of GST, the registered recipient is required to move the goods directly from the place of registered supplier to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported, or to a registered warehouse from where the goods shall be further moved to the Port, Inland Container Deport, Airport or Land Customs Station. In case the merchant exporter procures goods from different registered suppliers, the merchant exporter should move such supplies to the registered warehouse, aggregate such procured goods at the warehouse and should move the goods to the Port, Inland Container Depot, Airport or Land Customs Station from where the goods are exported. In the instant case, the applicant supplies HDPE drums by raising the invoice under Billed to Merchant Exporter and shipped to the manufacturer of the ethyl alcohol. Thus, the impugned goods are not moved directly to the Port, Inland Container Deport, Airport or Land Customs Station or to a registered warehouse, which is a pre-condition for availing concessional rate of GST. Therefore, the applicant is not entitled to supply the impugned goods at the concessional rate of GST at 0.1%.

Ruling : The applicant is not entitled for 0.1% concessional rate of tax (GST) under Notification No.41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter.

[2021 (11) TMI 292 – AAR, Karnataka – M/s Time Technoplase Ltd.]

  1. Input Tax Credit

Facts : Applicant purchases second hand cars (goods) and after minor processing on it such as change of tyres, change of battery, painting, denting, repairs, servicing, internal cleaning, polishing etc, which does not change the nature of the goods, the said goods are sold. Applicant does not claim Input tax credit on purchase of second hand goods and has opted for Margin Scheme and applies GST rate as per Notification No 8/2018- Central Tax (Rate) dt 25/01/2018. The applicant sought the ruling on the following question :

Can Input Tax Credit is allowed on other indirect expenses incurred for the purpose of business such as rent, commission, professional fees, telephone etc.?

Observations & Findings : From a reading of the Notification No. 8/2018 -Central Tax (Rate) New Delhi, the 25th January, 2018, it is seen that the concessional rate under the notification shall not apply, if the supplier of such goods has availed input tax credit as defined in clause (63) of section 2 of the Central Goods and Services Tax Act, 2017, CENVAT as defined in CENVAT Credit Rules, 2004 or the input tax credit of Value Added Tax or any other taxes paid, on such goods. In other words, since the applicant has been availing the benefit of the said notification and paying GST at a concessional rate, they shall not avail Input Tax Credit, as queried.

Ruling : Answered in the negative.

[2021 (10) TMI 1120 – AAR, Maharashtra – M/s Deccan Wheels]

  1. Supply by Charitable Trust

Facts : The applicant is Charitable Trust registered under Maharashtra Public Charitable Trust Act The applicant is registered under section 12AA of the Income Tax Act 1961.

The trust undertakes supply of services to 50 orphans and homeless children by way of shelter, education, guidance, clothing, food and health for the Women and Child welfare. The trust also render services to destitute women who are litigating divorce or homeless or the victim of domestic violence. The trust represents them before legal forums, including lodging FIR at police stations against the culprits, The trust also arrange for counselling them through expert counsellors to bring them out of the trauma and help them to lead normal life.

Major source of income of the trust is from Government of Maharashtra’s Woman and Child Welfare ministry and also the Central Government and other donations from public. The applicant, seeking an advance ruling in respect of the following questions.

  1. Whether applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017?

  2. If answer to above question is affirmative, whether the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government.

  3. If answer to above question 2 is affirmative, what will be the rate at which the GST would be charged?

Observations & Findings : The Sr. No. 1 of Notification No. 12/2017 dated 28-06-2017 exempts the charitable trusts available for charitable activities more specific. While the consideration from only those activities listed in the Notification are exempt from GST, while from the activities other than those mentioned is taxable. Thus, there could be many services provided by charitable and religious trust which are not considered as charitable activities and hence, such services come under the GST net.

Ruling

Question 1:– Whether applicant is required to obtain registration under the Maharashtra Goods and Service Tax Act, 2017?

Answer:- Answered in the affirmative.

Question 2:- If answer to above question is affirmative, whether the applicant is liable to pay GST on the amounts received in the form of Donation / Grants from various entities including Central Government and State Government.

Answer:- Answered in the affirmative in cases of grants received. In case of donations, if the gift or donation is made to a charitable organization; the payment has the character of gift or donation and the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement, then GST is not leviable. In all other cases GST is leviable.

Question 3:- If answer to above question 2. is affirmative, what will be the rate at which the GST would be charged.

Answer- GST would be charged @18%.

[2021 (11) TMI 397 – AAR, Maharashtra – M/s Jayshankar Gramin Va Adivasi Vikas Santha]

  1. Input Tax Credit

Facts : The Applicants are engaged in the business of manufacture and supply of ghee and other products. They have their factory premises at Tamil Nadu and Karnataka having separate GST registration in both the States. The products supplied by them are taxable under the Act and none of the products are either “Exempted” or “Nil rated”. They sell their products through various retail stores across the country and obtain substantial revenue from Export Sales too. With the objective of expanding the market share’, the applicant launched a sales promotional offer to enhance sales of its products. The sales promotional offer was named as ‘Buy n Fly’ scheme. Based on the quantity and value purchases made by retailers from sub stockists, the rewards fixed under the scheme would be awarded by the company to retailers. The applicants sought Ruling on the following question :

Whether the GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name ‘Buy n Fly’ is eligible for Input Tax Credit under the GST law in terms of Section 16 read with Section 17 of the CGST Act, 2017.

Observations & Findings : As per Section 17 (5)(h), goods disposed of by way of gift are not eligible for ITC. The term ‘gift ‘ is not defined in CGST Act, the meaning of the term ‘gift’ as defined in the Gift Tax Act, Is as below:

“(xii) “gift” means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth, ………….”

The promotional rewards were extended by the applicant at their own will voluntarily without any consideration in money or money’s worth on achievement of a set target to the retailers. The rewards are not in the nature of discounts to the products but are in the nature of personal consumables and qualifies to be termed as gifts. It is to be noted that these rewards are announced based on the retailers stocking the targeted products and not on the sales made by the retailers. It is further to be noted here that the rewards are handed out to the successful persons and no tax invoice/any taxation document is raised for such handout. Also, it is stated that the goods are distributed on fulfillment of the conditions of the scheme, with no separate consideration, therefore, the distribution of goods and services to the retailers as per the Scheme is not a ‘Supply’ as defined under Section 7 of the GST Act. Section 17(5)(h) expressly restricts ITC on such gifts, even if they are procured in the course of furtherance of business. Therefore, it is clear that the tax paid on the goods/services procured for distribution as rewards extended by the applicant in the ‘Buy n Fly’ scheme is not available to them as ITC in as much as such rewards have been extended as gifts.

Ruling : The GST paid on inputs/input services procured by the applicant to implement the promotional scheme under the name ‘Buy n Fly’ is not eligible for Input Tax Credit under the GST law in terms of Section 17(5)(g) and (h) of the CGST Act, 2017 and TNGST Act, 2017.

[2021 (10) TMI 1117 – AAR, Tamilnadu – M/s GRB Diary Foods P Ltd.]

  1. Sale of Developed Plots

Facts : The applicant has stated that it is a company formed by industrialists as required by the Telangana State Industrial Infrastructure Corporation Limited (TSIIC) as a special purpose vehicle (SPV) representing the member industrialists with an objective of providing industrial infrastructure by development of land acquired by TSIIC It is informed by the applicant that a sale deed will be executed with TSIIC upon completion of development of internal infrastructure. Similarly the applicant is authorized in turn to sell to individual industrialists after each of his allottee commences commercial operation by executing individual sale deeds. They seek to ascertain whether their activity is within the purview of GST and whether it qualifies the supply under Section 7 of the CGST Act..

  1. Whether in the facts and circumstances the activity of disposal of developed plots of land to allottee members of the applicant from and out of the land received from the TSIIC for specified purpose of industrial development is outside the purview of GST by virtue of the said activity failing under Entry 5 of Schedule III of Central Goods & Service Tax Act, 2017.

  2. Whether in the facts and circumstances the activity of infrastructure development (ID) of land received from the TSIIC for specified purpose of industrial development and undertaken on behalf of allottee members (allottee(s) or the member(s)) does not qualify as a “supply” under Section 7 of the Central Goods & Service Tax Act, 2017.

Observations & Findings : The paragraph 5 of Schedule III includes the sale of land as exempt from levy of GST subject to clause (b) of paragraph 5 of schedule II.

Paragraph 5 of Schedule II deals with levy of tax on immovable property involving the construction of a complex or a building or any civil structure intended for sale. Therefore the exclusive sale of land is exempt from GST except when sold along with a constructed complex or a building or a civil structure.

Further the Clause b of Paragraph 6 of Schedule II deems the composite supply of works contract as supply of services.

The value of such supply of service i.e., the transaction value which is paid or payable should be discernable according to Sec 15 of the CGST Act, 2017. And where the supply of service is for a consideration not wholly in money it shall be determined as per chapter IV of the CGST Rules, 2017.

Therefore the activity undertaken by the applicant for construction of the immovable property would qualify to be a “works contract” if

  1. It is executed in pursuance of a contract or agreement; and

  2. There is a transfer of property in goods in execution of works contract from the contractor to the contractee; and

  3. There is a consideration paid by the contractee to the contractor.

Ruling

  1. If the applicant sells the land after developing by way of erecting a civil structure or a building or a complex then such supply is liable to tax under CGST/SGST Acts. However if land is sold without any development involving any civil structure or building or complex such supply falls under paragraph 5 of schedule III to Section 7(2) of CGST Act, 2017 and hence is exempt from tax.

  2. If the applicant executes works contracts involving transfer of property in goods for a consideration under an agreement of contract such consideration will be liable to tax. However if these elements are missing in execution of a construction it shall not be liable to tax.

[2021 (10) TMI 1061 – AAR, Telangana – M/s TIF Integrated Industrial Parks P Ltd.]

THE SUPREME COURT OF INDIA

UNION OF INDIA

v.

BHARTI AIRTEL LTD.

Special Leave to Appeal (C) No(s). 8654/2020 OF 2021

A M Khanwilkar & Dinesh Maheshwari, JJ

Date of Decision: 28.10.2021

Self assessment—ITC availment —non operability of form GSTR—2A—payment of tax through electronic cash ledger instead of electronic credit ledger in absence of information on the portal—circular allowing the correction in returns only during the period in which mistakes stand noticed challenged —Writ allowed by High Court directing the revenue to pay the refund of tax paid on account of non—availability of information on portal by correcting the returns in the period during the period in which the returns were filed—challenge by revenue before supreme court—held:—duty of asseesse to make self assessment on basis of books and records maintained by him—information on portal is merely facilitator—correction of returns as per section 39(9) can be made only in the period during which mistakes and omissions noticed—swapping of entries in electronic cash ledger and electronic credit ledger not allowed—allowing the correction of returns from backdate would lead to chaos in the tax administration —cascading effect on other stakeholders as well—revenue appeal allowed—section 39 rule 61

The Respondent/Assessee pleaded before the High Court that due to non-operability of Form GSTR-2A at the relevant time (July, 2017 to September, 2017), it had been denied access to the information about its Electronic Credit Ledger Account and consequently, it could not avail Input Tax Credit for the relevant period and discharged the liability of output tax by paying cash. According to the respondent/assessee, this had resulted in payment of double tax due to the failure of department to operationalize the statutory forms for enabling matching and correcting the discrepancies electronically.

Also, challenge was made to Circular No. 26/26/2017-GST dated 29.12.2017 to the extent it restricted the rectification of Form GSTR-3B of the period in which the error had occurred. However, The High Court read down paragraph 4 of the said circular and allowed the respondent/assessee to rectify its returns in Form GSTR-3B for the period in question and further directed that on filing of rectified Form GSTR-3B, the claim would be verified and the revenue shall give effect to the same once it is verified.

The revenue being aggrieved by the said order of the High Court approached Supreme Court.

Held

In the present cases the question which needs consideration is whether impugned Circular dated 29.12.2017 issued by Commissioner (GST) is without authority of law. The impugned circular had been issued under the signatures of Commissioner (GST) but it is notifying the decision of the board taken in the exercise of the powers conferred under section 168(1) of the 2017 Act. Accordingly the argument that the impugned circular had been issued without authority of law needs to be rejected.

It is noted that every assessee is under obligation to self assess the eligible ITC under section 16 and credit the same in the electronic credit ledger defined in section 2(46) read with section 49(2) of the 2017 Act. Under section 59, the registered person is obliged to self assess the tax payable under the Act and furnish return for each tax period as specified under section 39 of the Act. It is an obligation upon the registered person to maintain necessary books of accounts for the relevant period and to file the correct return on that basis. So the eligibility of ITC and discharging of OTL is to be determined in periodic returns based upon the account books based by the assessee himself.

Even before the implementation of GST, the entire liability of tax was being discharged on the basis of calculation of OTL and ITC as per books of accounts maintained by the assesee himself.

Though the operationalization of Form GSTR 2A would have facilitated the filing of return and making the self assessment regarding eligibility of ITC and availment thereof, the conditions specified in circular dated 29.12.2017 regarding rectification of the return in Form GSTR-3B cannot be assailed.

The condition of revising the return in the period in which the mistake or omission has been noticed as contained in para 4 of the Circular is in league with the express provision of section 39(9) which also provides for correction of returns in the month or quarter furnished in which such omission or incorrect particulars are noticed. The High Court has thus erroneously noted that there is no provision in the Act, which restricts such rectification of return in the period in which the error is noticed.

There is no provision regarding refund of surplus or excess ITC in the electronic credit ledger but it does not follow that an assessee who has discharged OTL by paying cash can later on ask for swapping of the entries keeping in view the fact that he was free to pay in cash even where he has surplus amount of credit available to him in the Electronic Cash Ledger. This is a matter of option which having been exercised by the assessee, cannot be reversed.

The court has opined that there is a statutory obligation upon the registered person to maintain Books of Accounts and record within the meaning of Chapter VII of 2017 Rules, which are primary documents and source material on the basis of which self assessment is done by the registered person about its eligibility and entitlement to get ITC and payment of OTL. Form GSTR-2A is only a facilitator for taking an informed decision while doing self assessment. Non-operability of GSTR 2A or any other forms will be of no avail because the dispensation stipulated at the relevant time obliged the registered person to submit returns on the basis of such self-assessent in Form GSTR-3B manually on electronic platform.

The correction can be made in the said returns only in the return for the period during which the omission or incorrect particulars are noticed. So it is not the case of denial of availment of Input Tax Credit at all, as it remains intact and can be availed in the subsequent returns including the next Financial Year.

Accepting the contentions of the assessee would not only result into illegality but in reality would lead to chaotic situation and collapse of tax administration as the revision of returns already filed by the assessee would have cascading effect and would affect the obligations and liabilities of other stakeholders.

The direction issued by the High Court allowing the Writ petitioner to rectify Form GSTR -3B for the period July to September 2017 is in the teeth of express statutory dispensation and thus cannot be sustained.

Resultantly the appeal filed by the revenue is allowed & the impugned order and judgment is set aside.

HIGH COURTS

ORISSA HIGH COURT

BRIGHT STAR PLASTIC INDUSTRIES

v.

ADDITIONAL COMMISSIONER OF SALES TAX (APPEAL) AND OTHERS

[DR. S. MURALIDHAR, CJ & B.P. ROUTRAY,J]

W.P.(C) No.15265 of 2021

Date of Decision: October 4, 2021

Registration—deficiency of reasoning in impugned order—registration cancelled on account of alleged availment of Fraudulent IT—reason mentioned by LPO that cancellation is done to prevent further fraud In interest of govt. revenue—High court unable to appreciate the reason given by LPO—None of clauses a, b, c of Rule 21 attracted—absence of proof of connivance of purchaser and dealer—registration to be restored

A SCN was served upon the petitioner for cancelling the registration on account of alleged availment of ITC fraudulently. The reply filed was said to have been short of satisfactory explanation and consequently registration was cancelled. The application for revocation thereof was filed which was rejected. An appeal was filed which was rejected with the reason that “the preventive measure has been taken by the LPO by cancellation of the registration of the appellate to prevent future fraud or to prevent from recurrence for such the regular claims of the ITC and that is the interest of the Government revenue”. A writ is filed whereby it is held that the Court is not in a position to appreciate the actual reasons that prevailed with either the Appellate Authority or the LPO for cancellation of the Petitioner’s GST registration.

None of the three circumstances outlined in Clauses (a), (b) & (c) of Rule 21 are attracted in the present case.

To attribute fraud in such circumstances to the Petitioner, as a purchasing dealer, the Department would have to satisfy a high threshold of showing that the purchaser indulged in the transactions with the full knowledge that the selling dealer was non—existent. It is to be shown that somehow the purchasing dealer and selling dealer acted in connivance to defraud the revenue. This threshold has not been made in the present case. The Department is now directed to restore the Petitioner’s registration. Petition is allowed.

MADRAS HIGH COURT

CONYBIO HEALTHCARE (INDIA) PVT. LTD.

v.

THE ASSISTANT COMMISSIONER (C.T.) , THE COMMISSIONER OF CUSTOMS

[S.M.SUBRAMANIAM, J]

WP NOS.25475 TO 25478 OF 2010 AND M.P.NOS.1 TO 1 OF 2010

Date of Decision: September 16, 2021

Maintainability of writ—assessment orders passed—writ filed challenging the same—Held that exercising of power under writ ought to be done in exceptional cases—litigants having filed only affidavits, disputed facts cannot be concluded—appellate forums are of more value in fact finding—therefore petitioner relegated to avail remedy of appeal u/s 31 of TNGST Act

A writ is filed against the assessment order passed though a remedy of filing an appeal is available under the Act. It is held that a writ is to be entertained in exceptional cases. Dispensing away with an appellate remedy is to be granted cautiously in view of the fact that the very purpose and object of legislation in providing an appellate authority cannot be diluted.

Moreover, the importance of fact finding by appellate forums is of more value. The litigants have only filed affidavits in the case at hand which are not enough to decide disputed facts…. Therefore, petitioner is bound to prefer an appeal u/s 31 of TN GST Act, 2017

GAUHATI HIGH COURT

SRI SUBHASH KUMAR SINGH

v.

THE STATE OF ASSAM, THE SUPERINTENDENT OF STATE TAX, GUWAHATI

[HITESH KUMAR SARMA, J]

BAIL APPLICATION NO. 2007 OF 2021

Date of Decision: September 15, 2021

Bail—offence u/s 132 of CGST Act, 2017—petitioner already in custody for two months—offence report laid before court—investigation completed—no indication to show evasion for trial or hampering of witness by accused—bail granted with conditions

The applicant was arrested for having committed an offence u/s 132 of CGST Cat. It has been observed that he accused has been in custody for about 65 days, investigation has been completed, the offence report has been laid in the court. Presence of the petitioner may not be required for further investigation. There is nothing on record that indicated that the accused shall evade trail or tamper witness. Therefore bail is granted with conditions applied.

TRIPURA HIGH COURT

SAHIL ENTERPRISES

v.

UNION OF INDIA

[AKIL KURESHI, CJ & S G CHATTOPADHYAY, J]

IA NO.1/2021 WITH WP(C) NO.531/2021

Date of Decision: September 14, 2021

Blocking of electronic credit ledger — Scope of Rule 86A—Held electronic credit ledger cannot be blocked for a period exceeding one year after blocking of as it is a temporary measure—no extension of period possible—for permanent disallowance, adjudication after hearing both parties is to be done

The electronic credit ledger was blocked by the Commissioner under Rule 86A of CGST Rules. The petitioner has filed a petition challenging the vires of section 16(2) .

It is held that under rule 86A subrule 3, it is clearly mentioned that the said attachment cannot continue after expiry of one year. Therefore, the order being temporary is interim measure. If department required a permanent disallowance of credit of accumulated amount if the ledger, t has to give a bi parte hearing before adjudication thereof. Hence there is neither any scope of extension not it can continue after one year.

The same shall be released.

PATNA HIGH COURT

SHASHIKANT SINGH

v.

THE UNION OF INDIA

[SANJAY KAROL, CJ & S. KUMAR, J]

CIVIL WRIT JURISDICTION CASE NO. 6509 OF 2021

Date of Decision: September 9, 2021

Recovery from bank account—malafides alleged on part of department—Held had it been so, original assessment order passed in 2020 would not have been rectified to reduce the amount by passing another order in 2021— respondent intends to protect both assessee and revenue—Original order passed in 2020 quashed only on the ground of non service of notice on GST Portal implying deprivation of opportunity of hearing—petitioner to appear with material before respondent for fresh orders

It is contended that the respondent recovered the amount from the petitioner’s Bank Account and that no adequate opportunity of hearing was afforded to the petitioner before carrying out the impugned action.

The court has refused to accept that there are any malafides of the respondent as the original order passed in 2020 was rectified reducing the quantum of liability by passing another order in 2021 which is indicative that the respondent wants to protect both governments as well as petitioner’s interest.

Only the issue that that the original order passed in 2020 was without opportunity of hearing is considered as there was no information uploaded on the GST Portal (Form DRC 01 and DRC 01A) and the notice cannot be said to have been served upon the petitioner. Only on this ground, the original order is quashed directing the petitioner assessee to appear with all materials before the respondent who shall pass a speaking order.

KARNATAKA HIGH COURT

STERNE INDIA PVT. LTD.

v.

UNION OF INDIA, ADDITIONAL DIRECTOR GENERAL OF GST INTELLIGENCE

[S. SUNIL DUTT YADAV, J]

WRIT PETITION No. 12875 OF 2020 (T—RES)

Date of Decision: September 8, 2021

Provisional attachment- communication of order – Provisional attachment of bank account- communication of the order only to the bank manager- Non adherence to the Rule 159 (2) of CGST Rules observed – absence of communication to petitioner – no reason to accept assertion fo revenue – writ allowed

The petitioner submits that the said factum of provisional attachment of the bank account was learnt by the petitioner only from their banker. It is further submitted that the necessary representation came to be made by the petitioner in terms of Rule 159(5) of the CGST Rules, 2017 seeking release of attachment and defreezing of bank accounts, but such request was neither considered nor any order was passed.

It is observed that the order of provisional attachment is required to be communicated to the party affected for a meaningful exercise of the right conferred under Rule 159(2) of CGST Rules.While the petitioner has drawn attention to Annexure—A addressed to the Bank Manager regarding the provisional attachment of bank account of the petitioner in exercise of power under Section 83 of the CGST Act, it is pointed out that such communication does not have any copy addressed to the petitioner.

Therefore, in light of absence of any material to indicate conclusively that the communication was sent to the petitioner to his address by producing any cogent material enclosing the postal receipt, there is no reason to accept the assertion of Revenue.

DELHI HIGH COURT

MICROMAX INFORMATICS LTD.

v.

UNION OF INDIA & ORS.

[MANMOHAN & NAVIN CHAWLA, JJ]

W.P.(C) 8026/2021 & CM 24992/2021

Date of Decision: September 2, 2021

Transitional credit—validity of amendment dated 18/5/2020—the said amendment prescribes time limit for taking ITC—the petitioner’s case is covered by a judgment given in case of SKH Sheets Metals Components wherein it was held by Delhi High Court that that Petitioner is permitted to revise TRAN-1 Form on or before 30.06.2020 and transition the entire ITC, subject to verification by the Respondents—Thus, the said amendment does not affect the right to claim Transitional credit

The petitioner has challenged the retrospective amendment dated 18.05.2020 by which the provision of Section 128 of the Finance Act, 2020 has been inserted with effect from 1s t July, 2017 to Section 140 of the Central Goods and Service Tax Act, 2017 by prescribing a time limit for taking the input tax credit. The petitioner has also sought the benefit of transitional credit .

The judgment of SKH Sheet Metals Components covers the issue in hand. the amendment does not affect the right of the petitioner to claim transitional credit and it would be unnecessary to deal with the Constitutional challenge to it. Further, the petitioner is at liberty to apply for the transitional credit which shall be dealt with by the department and disposed of by the department in accordance with law.

RAJASTHAN HIGH COURT

MARUTI CASTINGS

v.

UNION OF INDIA, ADDITIONAL DIRECTOR GENERAL DIRECTORATE GENERAL OF GOODS AND SERVICE TAX INTELLIGENCE, COMMISSIONER OF CGST, JOINT COMMISSIONER, CGST, SUPERINTENDENT (ANTI EVASION) CGST

[ARUN BHANSALI, J]

S.B. CIVIL WRIT PETITION NO. 6019/2021

Date of Decision: September 14, 2021

Bank guarantee—whether section 67 could be invoked for release of seized goods—Goods seized on search—Honble court had earlier passed an interim order for goods to be released without insisting for bank guarantee—vacation of the order sought for by respondents contending that the said order is contrary to provisions of section 67 and Rule 140 of the Rules—held qua the nature of interim order passed, the court required the assessee to take recourse to the provisions of the Act and the Rules for release on provisional basis upon execution of bond and furnishing of security as has been prescribed and it was ordered that the orders passed by the High Court which are contrary to the statutory provisions shall not be given effect by the authorities— petitioner himself having applied U/s 67 of the Act for release of goods cannot hold respondents as to be faltering—stay vacated and bank guarantee to be furnished

An order was passed by the Hon’ble Court holding that the petitioner shall not be insisted for submitting bank guarantee for release of goods seized. The respondents filed an application for seeking vacation of the said interim order. The petitioner contends that the action of respondents in resorting to Sec.67(2) of the Act in seizing the goods is not valid. Moreover the said section has no application as it applies only when goods or documents or books are “secreted”. It is further alleged that the respondent has no jurisdiction in the present case as it is contrary to Sec.6 of the Act wherein only DGGI has the jurisdiction in the matter.

It is held that it cannot be said that it is a case of registered person and Sec.67 of the Act cannot be invoked if the circumstances exists.

To say that the documents, books etc. were not secreted is essentially premature. Prima facie the said seizure cannot be said to be illegal for applying Sec.67(6) of the Act.

The plea regarding lack of jurisdiction cannot be continence while dealing with the application seeking vacation of the interim order.

Therefore, a perusal of the above observations indicate that qua the nature of interim order passed, the court required the assessee to take recourse to the provisions of the act and the rules for release on provisional basis upon execution of bond and furnishing of security as has been prescribed and it was ordered that the orders passed by the High Court which are contrary to the statutory provisions shall not be given effect by the authorities. The petitioner himself applied U/s 67 of the Act for release of goods for which the respondents cannot be faulted.

The impugned order is thus modified to the extent that beside surety bond equivalent to value of goods, security in form of Bank Guarantee would be furnished for releasing of seized goods.

ORISSA HIGH COURT

SMRUTI RANJAN SAHOO

v.

STATE OF ODISHA

[D. DASH, J]

BLAPL NO.5883 OF 2021

Date of Decision: September 22, 2021

Bail – Offence u/s 132 of CGST Act – Magnitude of offence high – hampering the objective new tax regime – bail rejected

The petitioner is alleged to have committed a fraud of availing ITC to the tune of Rs 9 crore by creating dummy firms. A bail is sought on the ground that it is resident of the city, has been in custody since June 2021 and cannot tamper the evidence. Keeping him in custody would not serve any purpose.

It is held that the Petitioner is said to have been involved in the above specific economic offences of quite significant magnitude which are considered to be grave. Such dubious roles alleged to have been played by the Petitioner stand in the direction of making hefty unlawful and unimaginable financial gain by giving the show that for such sincere involvement in the business and carrying out the same, his entitlement to the huge sum as incentive in the form of Input Tax Credit (ITC) flowed which he received, but in reality as per the case laid, it is having the tendency of foiling the whole idea behind the introduction of the new Tax Regime to achieve the objective of speeding up the run of the Nation to stand at the forefront having a key position in the economic map of the globe. Therefore, bail is rejected.

CHHATTISGARH HIGH COURT

PARITOSH KUMAR SINGH ALIAS DIWAKAR CHOUDHARY

v.

STATE OF CHHATTISGARH, SENIOR INTELLIGENCE OFFICER DIRECTOR GENERAL OF GST

[NARENDRA KUMAR VYAS , J]

WPCR No. 469 of 2021

Date of Decision: October 1, 2021

Bail—default release u/s 167(2) of Cr.P.C.—arrested but no charge sheet lodged till 60 days— only complaint lodged on 59th day— default bail claimed in view of Section 167(3) of Cr.P.C.—section 173 required filing of report but GST officer are not police officers—hence filing of final report as envisaged u/s 173 does not apply to GST officers— complaint being filed within 60 days no default bail is granted

The petitioner had been arrested for alleged offence committed u/s 132 of CGST Act. After a period of 59days, a complaint is filed by the respondent authority instead of charge sheet as required u/s167(2) of Cr.P.C. Therefore, it is entitled to a default release on bail as the charge sheet was supposed to be filed within 60 days after the investigation.

It is held that section 167(2) of Cr.P.C grant default bail to an accused as a measure to protect him against any malafide and to protect his liberty as enshrined under article 21 of the constitution of India. But the GST officers are not police officers, therefore they are not required to show the final reports envisaged under section 173 of Cr.P.C. Thus no bail is granted as per the sections mentioned above as the complaint required to be filed within 60 days is observed to have been filed.

RAJASTHAN HIGH COURT

KHALID S/O SHRI YASIN KHAN

v.

THE STATE OF RAJASTHAN, THE COMMISSION, COMMERCIAL TAXES DEPARTMENT, ASSISTANT COMMISSIONER, WARD—III, STATE TAX

[SANJEEV PRAKASH SHARMA, J]

CIVIL WRIT PETITION NO. 1342/2021

Date of Decision: May 17, 2021

Confiscation of goods alongwith the conveyance—no opportunity was given for depositing the amount of demand of tax and penalty—Rule 140(1) of the CGST Rules—goods confiscated along with vehicle u/s 129 of CGST Act —While the petitioner assailed the initial action of the respondents before this Court, the respondents in meantime passed an order of demand of Tax and penalty on day x. Said order allowed 14 days time to deposit the amount—further, notice for confiscation of goods issued—as observed, on the date x when the order of demand of tax and penalty was issued, 14 days time had already been lapsed. Virtually, the petitioner has not been given any chance to deposit the tax and penalty—petitioner permitted to get provisional release its goods and vehicle in terms of Rule 140 till the final outcome

The petitioner has assailed the order of the respondent confiscating its goods and vehicle u/s 129 of the Act. While the writ was pending, the respondent passed an order dated 8/2/2/ for tax and penalty payable within a period of 14 days. However, after that a notice for confiscation of goods was issued. The Hon’ble court has observed that when the order for tax and penalty was issued, virtually 14 days had already lapsed depriving the petitioner of the opportunity to pay the amount. The respondents are thus directed to provisionally release the goods if the petitioner fulfils the conditions enlisted in Rule 140(1) of CGST Rules, 2017.

MADRAS HIGH COURT

SHRI TYRES

v.

STATE TAX OFFICER, CHENNAI

[M.SUNDAR, J]

W.P.NO.19756 OF 2021 AND W.M.P.NO.21034 OF 2021

Date of Decision: September 21, 2021

Assessment order—section 73 of CGST Act—order passed without following due procedure—no forms GST DRC 01 and GST DRC 01A issued before passing of impugned order—Held procedure is violative of Rule 142 of CGST Rules causing prejudice to the petitioner— Impugned order set aside

A writ is filed contending that the impugned order passed u/s 73 of the Act was not preceded by Forms GST DRC—01 and GST DRC—01A as required under the Act.

It is observed that the requirements of issue of FORM GST DRC-01 and FORM GST DRC-01A have been statutorily ingrained in the rules made under the CG&ST Act i.e., Rule 142 of the CG&ST Rules, 2017. Non adherence to Rule 142 had caused prejudice to the writ petitioner qua impugned order and therefore it is a rule which necessarily needs to be adhered to. It is not a mere procedural requirement but on the facts and circumstances of this case, it becomes clear that it tantamount to trampling the rights of writ petitioner.The impugned order is thus set aside.

MADRAS HIGH COURT

HEC INDIA LLP

v.

COMMISSIONER OF GST AND CENTRAL EXCISE AUDIT-II, ASSISTANT / DEPUTY COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI

[T.S.SIVAGNANAM AND SATHI KUMAR SUKUMARA KURUP, J.J.]

W.A. NO. 2341 OF 2021

Date of Decision: September 16, 2021

Blocking of credit—non communication of reasons—Electronic credit ledger blocked u/r 86A—no reasons recorded or communicated—Principles of natural justice need to be adhered to while reading the said Rule—appellant ought to be allowed to know reasons and raise objections accordingly—Therefore, respondent directed to communicate reasons in writing for further orders

Before invoking the power under Rule 86-A, the Authority should have reasons to believe that the credit of input tax available in the electronic credit ledger has been fraudulently availed or the assessee is ineligible, on account of anyone of the contingencies in clauses (a) to (d) of Rule 86-A(i). That apart, the Rule contemplates that the said authorities have to record the reasons in writing and not allowed to debit any amount equivalent to such credit in the credit ledger. In the absence any reason, which has been recorded, the invocation of power under Rule 86-A should be held to be unauthorised, illegal and without jurisdiction. The power under Rule 86-A has been invoked and reasons have been recorded that needs to be communicated to the assessee so as to enable the assessee to put forth his objections .It is no doubt true that there is no such procedure provided for under Rule 86-A. Nevertheless it is required to read the principles of natural justice into the said Rule.

Therefore, for an effective representation to be made the Appellant is entitled to know the reasons, based on which the power under Rule 86-A was invoked by the second respondent.

MADRAS HIGH COURT

BRIGHT STEELS

v.

THE STATE TAX OFFICER, INSPECTOR CELL-II, TRICHY

[R.SURESH KUMAR, J]

W.P.(MD)Nos.14395 to 14398 of 2021 And M.P(MD).Nos. 11326, 11330, 11332 and 11333 of 2021

Date of Decision: August 13, 2021

Natural justice—assessment orders passed without complying with provision of section 75 of CGST Act—held opportunity provided twice not availed of—hearing provided third time and objections filed by petitioner—no violation of the provisions—opportunity of hearing is said to have been provided—petition dismissed

The assessment orders passed are challenged on the grounds that no opportunity of hearing is provided as required u/s 75 of the CGST Act. The petitioner was given two or three opportunities to appear but since he took adjournment he was heard finally on the third occasion of opportunity provided.

It is held that Section 75(4) of the Act, has mandated that, only an opportunity of hearing, that means one opportunity shall be given mandatorily to the Assessee for personal hearing .Such one opportunity had been given, and ultimately, the third opportunity also had been given to him where he was permitted to file objection or reply and personal hearing was also given to him was utilised.

It cannot be treated that the respondent has violated the mandatory provisions contained in Section 75(4) of the Act — Petition dismissed.

ALLAHABAD HIGH COURT

SAVISTA GLOBAL SOLUTIONS PRIVATE LIMITED

v.

UNION OF INDIA AND 5 OTHERS

[NAHEED ARA MOONIS & SAUMITRA DAYAL SINGH, JJ]

WRIT TAX NO. — 113 OF 202

Date of Decision: October 6, 2021

Refund—Rule 96A of CGST Rules—Application of refund filed for month of July, 2019—ought to have been processed with in a period of sixty days as per law—processed and refund directed later vide order dated Jan, 2020—writ filed seeking refund still left unpaid—held respondents to grant refund alongwith interest as the order had attained finality—No way to escape liability to pay interest—refund to be paid online or through bank account within a period of one month—writ allowed

The application for refund was filed by the petitioner manually, on 27.09.2019 yet the same was not processed and the refund was not directed to be paid within a period of sixty days therefrom. However it was processed much later and an order directing for refund was passed on Jan 2020.

The respondent claims no interest is due to the petitioner and that the refund may be paid only after due compliance is made by the petitioner and respondent no.6 by logging in the particulars of the refund and the refund order on the GST portal, through online mode, only.

It is held that once the application had been processed and order passed, which has attained finality, the respondents cannot escape the plain effect of the same. They also cannot escape the liability of interest that arises on noncompliance of the same. Respondents are directed to pay the refund within a period of one month

MADRAS HIGH COURT

AYYANAR STEEL TRADING

v.

STATE TAX OFFICER (INTELLIGENCE) , DEPUTY COMMISSIONER (ST) GST

[M.SUNDAR, J]

W.P.NO.18582 OF 2021 AND W.M.P.NOS.19821 & 19822 OF 2021

Date of Decision: September 6, 2021

Assessment order—Natural Justice—Section 75 of TNGST Act—adverse order passed without providing an opportunity of being heard—impugned order set aside as section 75(4) makes it imperative to hear the appellant if it requests as well as if adverse order is being passed—respondent to do denovo exercise in this regard

An order of assessment was passed. It is contended that u/s 75 of TN GST an opportunity of hearing is mandatory before passing an adverse order against the assessee. The respondent contends that such a request is to be made in writing.

It is held that as per section 75(4) of the Act an opportunity is to be provided not only on request but even if adverse order is being passed. Therefore, the respondent is directed to pass a fresh order after hearing the assessee.

CALCUTTA HIGH COURT

SHREE AUTOMOTIVE (P) LTD. & ANR.

v.

JOINT COMMISSIONER OF STATE TAX, GOVERNMENT OF WEST BENGAL & ORS.

[MD. NIZAMUDDIN, J.]

W.P.A. 16781 OF 2019 WITH CAN 1 OF 2020 CAN 2 OF 2020 CAN 5406 OF 2020 CAN 5408 OF 2020

Date of Decision: September 7, 2021

Interest—section 50 of GST Act—held interest is payable on that amount of tax which is paid by debiting the electronic cash ledger in view of retrospective amendment of section 50

The order demanding interest of Rs. 2,51,15,982/- under Section 50 for the period July, 2017 to March, 2018.i is challenged. The petitioner contends that the in view of retrospective amendment of section 50, interest is payable only on the amount of tax paid by debiting in electronic cash ledger.

The court has agreed to the submission and directed the respondent that respondent will recalculate the demand in accordance with law and after taking into consideration the aforesaid amendment of Section 50 of GST Act.

ORISSA HIGH COURT

JYOTI CONSTRUCTION

v.

DEPUTY COMMISSIONER OF CT & GST, BARBIL CIRCLE, JAJPUR AND ANOTHER

[DR. S. MURALIDHAR, CJ & B.P. ROUTRAY JUDGE, J]

W.P.(C) NOS.23508, 23511, 23513, 23514 AND 23521 OF 2021

Date of Decision: October 7, 2021

Pre-deposit—rejection of appeal—section 107 of GSt Act—payment made through debit of ECRL—Not permitted—payment had to be made by debiting cash ledger

In terms of Section 107 (6) of the OGST Act, the Petitioner was required to make payment equivalent to 10% of the disputed amount of tax arising from the order against which the appeal is filed. This payment was required to be made by the Petitioner by debiting its ECL as provided under Section 49(3) read with Rule 85 (4) of the OGST Rules. According to the Department, this liability of pre-deposit could be discharged only by debiting the ECL. However, it was noticed that the Petitioner sought to make payment of the pre-deposit by debiting the ECRL. Considering this to be defective and liable for rejection of the appeal

The court has held that It is not possible to accept the plea of the Petitioner that “Output Tax”, as defined under Section 2(82) of the OGST Act could be equated to the pre-deposit required to be made in terms of Section 107 (6) of the OGST Act. The proviso to Section 41 (2) of the OGST Act limits the usage to which the ECRL could be utilised. It cannot be debited for making payment of pre-deposit at the time of filing of the appeal in terms of Section 107 (6) of the OGST Act.

The Court is unable to find any error having been committed by the appellate authority in rejecting the Petitioner’s contention that the ECRL could be debited for the purposes of making the payment of pre-deposit.

PUNJAB AND HARYANA HIGH COURT

AMANDEEP SINGH BHUI VERSUS INSPECTOR (PREVENTIVE) CENTRAL GOODS AND SERVICE TAX.

CRM-M-29607-2021 (O&M)

Dated.- October 28, 2021

HON’BLE MR. JUSTICE HARNARESH SINGH GILL

Default bail u/s 167 of CrpC- bail granted after 60 days due to failure to present challan – stringent conditions imposed by Chief judicial magistrate – held bail u/s 167(2) is a default bail and a statutory right – following the judgment given by the Apex court , it is observed that such a right of bail is an indefeasible right free from any embargo – no deposit to be asked for in case of default bail – impugned order modified accordingly

The petitioner was granted default bail u/s 167 of CrPC for alleged offences u/s 132 of CGST Act although stringent conditions were imposed while granting it. The revision against the order was declined. Thus, the petitioner has approached the Hon’ble court with a contention that since default bail u/s 167 of CrPC is a statutory right and cannot be impeached by imposition of such stringent conditions like furnishing of in the sum of Rupees One Crore with two sureties in the like amount and furnishing of a bank guarantee/FDR for an amount of ₹ 50 lakh.

It is held that in view of the judgment of the Hon’ble Supreme Court in Saravanan’s case the default bail under Section 167(2) Cr.P.C. cannot be equated with the discretion of the Court under Sections 437, 438 or 439 Cr.P.C., wherein the Court has got ample power to impose any condition as would be deemed fit. The indefeasible right under Section 167(2) Cr.P.C., accrued due to the failure on the part of the investigating agency to complete the investigation and present the challan within the stipulated period would, therefore, be a right free from any inhibition or embargo. The impugned order of the chief judicial magistrate is thus modified accordingly.

  1. S. 2(47) Capital or Revenue – Compensation received on cancellation of builder-buyer agreement pursuant to arbitration award – Capital Receipt taxable as Capital gains [Sec 2(14), 2(47), 4, 45 & 263; Indian Contract Act 1872 sec 55 & 73]

    The assessee invested the amount to acquire a villa under an builder-buyer agreement. For non-delivery of villa assessee filed a plaint before a sole arbitrator for claiming compensation. As per the Award, assessee received Rs.91.33 crores as compensation which was considered as capital receipt taxable as capital gains.

    PCIT in revision proceedings rejected the arbitration award, and held that the agreement and transaction was coloured and sham.

    On appeal Tribunal held that :

    1. Assessee had invested the amount to acquire villa i.e capital asset, and thus having acquired a legal right as per builder-buyer agreement, the compensation received for giving up the said right would amount to capital receipt u/s 2 (47), and compensation cannot be said to have arise in course of any trading activity.

    2. Furthermore, even when there is no clause in the agreement for payment of compensation. Assessee is entitled for general compensation in case of breach of an obligation on the part of the promisor, as per provisions of sec 55 & 73 of the contract Act.

    3. The Award passed, being based on scientific examination of relevant facts, same cannot be rejected, and same is final and binding on the parties, and enforceable as it were the decree of the court. (AY. 2017-18)

    Smt Abha Bansal v. PCIT (2021) 212 TTJ 545 (Del.)(Trib.)

  2. S. 2(47)(v): Transfer – Any transaction involving the allowing of the possession of any immoveable property – Invoking section 53 of Transfer of Property Act – not a transfer

    Where the AO has taken cognizance of the definition of ‘transfer’ u/s 2(47)(v) of the Act read with section u/s 53A of Transfer of Property Act to hold that `transfer’ took place in the year 2008 itself. It was held that the Developer was allowed to enter the property only as Licensee. When title to a part of such property itself was disputed and it vested with Government of Maharashtra at the time of the Agreements in 2008 because of the order of the Competent Authority under the ULC Act, there could have been no question of allowing the Developer any possession for the enjoyment of property as its owner. As there was no transfer of possession at the material time, the case of the AO invoking section 53A of the TPA to brand the transaction as a ‘transfer’ u/s 2(47)(v), automatically fails.

    ITO v. Amit Murlidhar Kamthe L/H of Shri Murlidhar Kamthe

  3. S. 9: Income – Deemed to accrue or arise in India (Shipping, Inland waterways transport) – satisfied requirement of article 4 – entitled to treaty – income earned in India.

    Assessee company, a tax resident of the UAE, was engaged in business of services like ship chartering, freight forwarding, sea cargo services, shipping line agents etc. Assessee chartered ships for use in transportation of goods and containers in international waters, including to Kandla and Mundra ports as indeed other ports in India and elsewhere. The AO noted that as much as 80 per cent of profits of assessee entity were to go to one D, a Greek national, concluded that assessee was not entitled to benefits of Indo UAE tax treaty, and, accordingly, issued a draft assessment order holding that income from operation of ship was taxable in India.

    It was found that Assessee Company had its office in UAE, it was in business there since 2000, it had expatriate employees who had been given a work permit to work in UAE for Assessee Company, and that main driving force of company and its director was an expatriate resident in UAE. Whether since assessee company was a resident of UAE, in terms of requirements of article 4(1)(b) of Indo-UAE tax treaty, limitation of benefits provisions of article 29 of Indo-UAE tax treaty could not be pressed into service and, thus, under provisions of article 8(1) of Indo UAE tax treaty, assessee company was protected from taxation of income in question in India.

    Interworld Shipping Agency LLC. v. DCIT (IT) (2021) 189 ITD 213 (Mum)(Trib.)

  4. S. 9: Income – Deemed to accrue or arise in India (Royalties/fees for technical services – Remittance) – payment made to US based company towards cost reimbursement on which parties had equal right to use and not paid amount to royalty, levy of interest u/s. 201(1A) is unjustified.

    The AO passed order u/s. 201(1) and held that remittance made by assessee to GTRC was nothing but royalty as per provisions of s.9 (1)(vi) as well as in terms of article 12 of DTAA between India and USA.

    Held that, when assessee had explained with support of agreement and copies of invoices that payment made was towards cost reimbursement of joint research project on which both parties had equal right to use and did not amount to royalty as per section 9(1)(vi) and not covered under clause 3 of article 12 as royalties and fees for included services of India USA DTAA. Therefore, levy of interest u/s. 201(1A) was not justified.(r.w.s. 195 and 201 and article 12 of DTAA between India and USA)(AYrs : 2012-13 and 2013-14)

    Pandit Deendayal Petroleum University-PDPU. v. ITO (2021) 189 ITD 110 (Ahd)(Trib.)

  5. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Income from sale of software license held in the nature of Royalty income – ITAT held that income is received on sale of software/license and not for parting with copyright of the software – thus it is not Royalty income as defined under Article 12 of the DTAA.

    The AO sought to assess business income earned by the Assessee on sale of software/license as Royalty income u/s 9(1)(vi) of the Act r.w. Article 12 of the India-USA DTAA. On appeal, the Tribunal held that the transaction was for sale of license/software, where the end-user will have access to and make use of the licensed computer software product and not for parting with copyright the software. Therefore it is not a Royalty income as defined under Article 12 of the India-USA DTAA. Since it is not Royalty, the income is in the nature of business profits of the Assessee. For business profits of a non-resident entity to be taxable in India under Article 7 of the India-USA DTAA, it is necessary that such foreign enterprise must have a permanent establishment (“PE”) in India in terms of Article 5 of the said DTAA. The Tribunal noted the decision of the DRP which held that the Assessee does not have a PE in India and therefore held that provisions of Article 7 are not applicable in the case of Assessee and therefore the income earned on sale of license/software is exempt from tax in India. (AY 2009-10 & 2014-15)

    Ansys Inc. v. ACIT (International Taxation) (2021) 189 ITD 671 (Pune)(Trib.)

  6. S. 11 : Property held for charitable purposes – rental income derived from letting out studio to artists for teaching Indian classical music comes within the ambit of “education” – Assessee is entitled to exemption u/s 11 read with S. 2(15)

    The assessee is a charitable trust registered u/s 12A and 80G of the Act. In the relevant AY, the assessee-trust received studio charges of Rs 16,72,197/- from various artists. The AO held that the studio was rented to the artists with an intention to make profits in the shield of charitable activities and taxed such studio charges as business income of the Assessee under S.11(4A) of the Act. CIT(A) upheld the order of the AO. The Tribunal observed that Assessee is a charitable trust engaged in teaching Indian Classical Music which falls within the field of “education”. Since the trust is engaged in education, the proviso to section 2(15) does not apply as clarified by CBDT Circular No. 11 dated 19.12.2008 even if it involves the carrying a commercial activity. The tribunal noted the history of the Trust observed that the receipts of Rs. 16,72,197/- are at a subsidized fees and the activities of the studios are carried on in order to achieve the main object of the Trust and cannot be construed as a business. Reliance has been placed on the judgement of Madras High Court in the case of Sri Thyaga Brahma Gana Sabha 188 ITR 160 (Mad) court. (AY 2010-11 & 2012-13)

    Acharya Jiyalal Vasant Sangeet Niketan v. ITO (Exemption)(2021) 189 ITD 1 (Mum)(Trib.)

  7. S. 12A: Charitable or religious trust – Registration of (Cancellation) – Assessee unwilling to avail ‘benefit’ of registration ‘obtained’ u/s. 12A cannot be bound to, by action of or by inaction of revenue authorities, continue with said registration

    The Assessee trust registered u/s. 12A in year 1976 sought cancellation of registration u/s.12A in 2015 which was eventually granted in 2019 due to reasons not attributable to assessee. Claimed that it surrendered its registration and, therefore, should not be treated as registered charitable trust, for application of s. 11 tax exemption, with effect from AY 2015-2016. However, revenue authorities submitted that since registration was cancelled vide Pr. Commissioner’s formal order, such cancellation will only have a prospective effect, and, accordingly, trust was required to be treated as a registered trust, for application of section 11 tax exemption, for assessment years 2015-16, 2016-17, 2018-19 and 2019-20, as also assessment year 2020-21.

    Held that, registration having been obtained u/s. 12A was in nature of a benefit to assessee, and if it did not wish to avail that benefit for some reason, benefit could not be forced upon him. Therefore, assessee trust’s voluntary surrender of registration u/s.12A was to be effective from date on which hearing on first show-cause notice proposing to cancel/withdraw trusts registration u/s. 12A was concluded. (r.w.s. 11)

    Navajbai Ratan Tata Trust v. Pr. CIT (2021) 88 ITR(T) 170 / 189 ITD 535 (Mum) (Trib.)

  8. S. 14A: Expenditure incurred in relation to exempt income not includible in total income (General)

    Disallowance u/s.14A is restricted to extent of exempt income earned by assessee-company during relevant year. (r.w. rule 8D)

    Pricewaterhouse Coopers (P.) Ltd. v. ACIT (2021) 189 ITD 329 (Kol)(Trib.)

  9. S. 23: Income from house property – Annual value – Occupied property – excluded – for the purpose of computing notional rent

    Where bungalows out of two buildings developed by assessee were unsold. The department held the same for the purpose of deemed notional rental income on such vacant properties and made addition on under section 23 of the Act. It was held that those flats/bungalows are occupied by the assessee owner; business of property development is carried on by the assessee; the occupation of the flats etc. is for the purpose of business; and profits of such business are chargeable to income-tax. Ergo, all the four conditions for exclusion from section 22 of the Act are cumulatively satisfied in the present case. Therefore, no addition can be made under section 23 of the Act.

    Kumar Properties and Real Estate (P.) Ltd. v. DCIT [2021] 128 taxmann.com 364 (Pune)(Trib.)

  10. S. 24: Income from house property – Deductions – interest on borrowed capital – interest on loan to repay earlier loan – allowable as deduction

    It was held that the CBDT in Circular No. 28 dated 20-8-1969 has explained that when a loan is taken to repay loan taken for construction of a property interest paid on such loan is also deductible in computing under the head income from house property. Further held that, irrespective of the nature of the property whether it is residential or commercial, deduction has to be allowed under section 24(b) of the Act.

    Indraprastha Shelters (P.) Ltd. v. DCIT [2021] 187 ITD 306 (Bang)(Trib.)

  11. S. 28 (iv): Business income – Grant received for specific purpose i.e., for procuring a capital asset, this receipt being in cash could not have been taxed u/s. 28(iv)

    Held that, grant received for specific purpose i.e., for procuring a capital asset, is in nature of a capital receipt, not subject to tax, and this receipt being in cash could not have been taxed u/s. 28(iv).

    Pricewaterhouse Coopers (P.) Ltd. v. ACIT (2021) 189 ITD 329 (Kol)(Trib.)

  12. S. 28(iv) : Business income – Value of any benefit or perquisites – benefit or perquisite arising from the business shall not be in monetary form. (r.w.s.51)

    A sum of Rs. 3 Crores advanced as loan by the director of the Assessee Company for its projects was converted into advance money for sale of property of the Assessee as it was unable to repay the loan. Subsequently the director was unable to pay the balance amount for purchase of the said property and therefore the advance money was forfeited by the Assessee company in terms of sale agreement. The AO held that the sale agreement was a colorable device and that the forfeited amount represents income u/s 28(iv) in the hands of the Assessee. The Tribunal followed the decision of the Mahindra & Mahindra Ltd. (2018) 404 ITR 1 and held that the provisions of section 28(iv) of the Act would not have application to any transaction involving money. In the present case, Rs.3 crores represented advance money forfeited by the assessee and the same also represents cash received on forfeiture of advance money, therefore, section 28(iv) is not applicable to the case. The Tribunal further allowed the claim of the Assessee that the amount would go to reduce cost of the property under section 51 of the Act. (AY 2011-12)

    M/s. Archana Traders Pvt. Ltd. v. ITO (2021) 189 ITD 626 (Bang)(Trib.)

  13. S. 36(1)(iii) : Interest on borrowed capital – disallowance – advance less than available free funds -acquisition of asset – not for business

    Where interest paid for the acquisition of the asset and the asset is not for extension of existing business of the Assessee, it was held that the disallowance of interest expenses cannot be sustained.

    Golf view Homes Ltd. v. ACIT ITA Nos.1037 & 1038/Bang/2019 dated February 10, 2021

  14. S. 37(1) : Business expenditure – Allowability of (Explanation to section 37(1)) – contributed 15 per cent of sale proceeds to SPV account, these payment did not fall under category of penalty.

    The AO disallowed said SPV deduction by observing that as per observations of Supreme Court amount of sale proceeds deducted and retained towards SPV was penal in nature attracting Explanation 1 to section 37(1). The Supreme Court’s decision clearly held that 15 per cent contribution to SPV account was guarantee payment for implementing of R & R plan, which would be deducted from sale proceeds and this was one of conditions for resuming mining operations under Category ‘B’ mine.

    Held that, since 15 per cent of sale proceeds was payable to SPV account, after it accrued to assessee, and fact that, assessee was obliged to part with such portion of income, by virtue of directions of Supreme Court, as a precondition to resume mining operations under Category ‘B’ mine would be application of income and, therefore, should be considered as expenditure incurred for carrying out its business activity. Contribution towards SPV being a requirement to be incurred to continue its business activities, these payments did not fall within category of penalty within ambit of Explanation to section 37(1). (AY 2013 – 14)

    Muneer Enterprises v. ACIT (2021) 189 ITD 7 (Bang)(Trib.)

  15. S. 37(1) : Business expenditure – Allowability of (Commission) – AO failed to considered the letter submitted by recipient wherein confirmed that entire commission paid was for relevant assessment year, matter needs remanded for consideration.

    Assessee claimed expenditure towards sales commission paid to bring foreign tourists to shop of assessee. The AO noted that commission paid for period of 15 months and out of which only 12 months related to year under consideration and remaining 3 months were related to preceding assessment year.

    Held that, AO had not considered letter submitted by Assessee wherein confirmed that amount paid for financial year 2008-09. Hence matter remanded to file of AO for deciding issue afresh. (AY: 2009-2010)

    Jaipur Boutique Carpet v. ITO (2021) 189 ITD 305 (Jaipur) (Trib.)

  16. S. 37(1) : Business expenditure – Factory shifting expenditure – transportation expenditure from one site to another site, did not give any enduring benefit, same could not be treated as capital in nature.

    Transportation expenditure for shifting its factory from one site to another site, did not give any enduring benefit to assessee, same could not be treated as capital in nature, its revenue expenditure in the hands of the Assessee.

    Jayant Packaging (P.) Ltd. v. DCIT (2021) 189 ITD 321 (Chen)(Trib.)

  17. S. 37(1) : Business expenditure – Foreign exchange loss – neither speculative loss within meaning of s.43(5), nor same was notional or contingent in nature, same being loss on foreign exchange derivatives allowed.

    The AO passed order u/s. 143(3) disallowing claim of assessee of loss incurred on foreign exchange.

    Held that, loss incurred on foreign exchange was neither speculative loss within meaning of section 43(5), nor same was notional nor contingent in nature, therefore, said sum being loss on foreign exchange derivatives deserved to be allowed.

    Pricewaterhouse Coopers (P.) Ltd. v. ACIT (2021) 189 ITD 329 (Kol)(Trib.)

  18. S. 37 (1): Business expenditure – Non-compete fees – Paid to individuals who had experience in business of consultancy for not to engage themselves in similar kind of business activities for a period of 3 years, such consideration was independent and not part of cost of acquisition of business, such fee was to be allowed as revenue expenditure.

    The AO passed order u/s. 143(3) and made additions on account of disallowance of non-compete fee.

    Held that, non-compete fees was paid to individuals who had experience in business of consultancy for not to engage themselves in similar kind of business and activities for a period of 3 years, these consideration was independent and not part of cost of acquisition of business paid to shareholders. Therefore, payment of non-compete fees was revenue in character and allowed as business expenditure.

    Pricewaterhouse Coopers (P.) Ltd. v. ACIT (2021) 189 ITD 329 (Kol)(Trib.)

  19. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Commission – Failure to deduct TDS on the commission paid to agents residing outside India – Held that no income has been received or paid inside India, which attracts deduction of TDS in India- disallowance deleted.

    The assessee failed to deduct TDS on the commission paid to agents located outside India, hence the AO assessed a disallowance under section 40(a)(ia) of the Act. It was observed that the commission was paid outside of India. There was no situs in India and also he assessee’s modus operandi showed that he received income in India after deducting of commission made by the buyer outside of India. As a result, no income had been received or paid within India that was liable to TDS deduction, and therefore assessee was not required to deduct TDS in India. In light of the foregoing, the disallowance granted u/s 40(a)(ia) was deleted.

    Ajay Kumar Singh Gaur v. ITO (2021) 189 ITD 696 (Agra)(Trib.)

  20. S. 40(a)(ia): Amounts not deductible – disallowance of software expenses paid to non-residents – the Tribunal observed that the Assessee had only purchased the software, which is a copyrighted article and there is no transfer of copyright, therefore, it is not royalty income as per relevant tax treaty – held, such income is exempt in the hands of software manufacturers/suppliers – therefore no deduction of tax at source u/s 195 of the Act.

    The Assessee was granted a user-license to use the software for its internal business purpose. The Assessee submitted that what is transferred is a copyrighted article and not a copyright itself. Hence, consideration paid is not taxable as royalty under the provisions of the Act. The tribunal observed from the order of AO and CIT(A) that there was only purchase of software which is a copyrighted article and no transfer of copyright and thus such income is not a Royalty income under the relevant tax treaty. Reliance was placed on the decision of Supreme Court in case of Engineering Analysis Centre of Excellence Pvt. Ltd.- Civil Appeal Nos.8733- 8734/2018 wherein it is held the end user can only use the computer programme by installing it in the computer hardware and cannot reproduce the same for sale or transfer and the licence granted vide the End-User License Agreements is not a license in terms of section 30 of the Indian Copyright Act, 1957 (CA) but is a license which imposes restrictions or conditions for the use of the computer software. Therefore, amounts paid by the assessee to the non-resident computer software manufacturers/suppliers as consideration for the resale/use of computer software, is not payment of royalty for use of copyright in the computer software and it is not liable for deduction of tax at source u/s 195 of the Act. (AY 2010-2011, 2011-2012, 2012-2013)

    M/s Altisource Business Solutions Private Ltd. v. ACIT (2021) 189 ITD 369 (Bang)(Trib.)

  21. S. 43B : Certain deductions only on actual payment – disallowance on account of GST remaining unpaid on rent received – matter remanded to CIT(A) for verification of certain facts – if the income is rental income and GST is found not to be included in such rental income then there will be no disallowance- if it is included in rental income then the issue needs to be determined in the light of section 23 of the Act which allows deduction of “local taxes” from rental income on payment basis and it needs to be decided whether the GST is covered under the same or not.

    The audit report for the relevant AY mentioned that GST payable on rent received by the Assessee remained unpaid till the date of Audit report. The Assessee submitted that disallowance u/s 43B could only be made against income from business & profession whereas the GST in his case related to rental income. The return of Income if the Assessee reflected income under both the heads i.e. house property and business and profession. It was further submitted that section 23 of the Act with respect to deduction on payment basis in case of tax paid covered only taxes levied by local authority and it was not relatable to GST levied on rental income. Perusal of computation of income revealed that the assessee reflected rental income excluding the GST component. The Ld. DR was asked as to how any disallowance was possible when the amount of GST itself was not reflected in the return of income. It was observed that The DR requested that these facts needed to be verified. Accordingly, the matter was remanded back to the CIT(A) to determine the above fact as well as whether the income component is rental or from business and profession, if it is rental income whether it has been returned. If it is not returned, there is no occasion of making a disallowance but if it is returned then the issue needs to be determined in the light of section 23 which allows deduction of “local taxes” from rental income on payment basis and if GST is covered under the section. (AY 2018-19).

    Ashok Kumar v. Dy. CIT (Centralised Processing Centre)(2021) 189 ITD 687 (Chandigarh)(Trib.)

  22. S. 45 : Capital Gain – benefit or gain on realization of loan issued in foreign currency on account of foreign exchange fluctuation – is in capital field cannot be held to be in the nature of interest and taxed as income from other sources [S. 2(24)(vi)]

    The Assessee extended a personal interest free loan of USD 2,00,000 (INR 90,30,758/-) to his cousin in Singapore in accordance with the Liberalized Remittance Scheme (“LRS”) of the RBI on 29/03/2010 when the exchange rate was INR 45.14. At the time of repayment of loan i.e. on 24th may, 2012, the exchange rate was Rs. 56.18 and therefore, when the loan amount of USD 2,00,000 was repaid, the cousin actually repaid INR 1,12,35,326/-. The Assessee submitted that it was a personal loan and the repayment thereof was a capital receipt in his hands but the AO did not accept this explanation and brought such benefit or gain to tax under the head Income from Other Sources. The Assessee paid the impugned tax of Rs.22,02,286/- as a matter of abundant caution without conceding to the taxability thereof. The CIT(A) upheld the order of AO and treated the benefit or gain on account of exchange rate fluctuation as interest income of the Assessee which was altogether a different explanation than the one adopted by the AO.

    The Tribunal did not accept the reasoning of the lower authority to tax such benefit or gain. It observed that the lower authorities have erroneously proceeded to hold that the benefit or gain on realization of loan partakes the character of an income under the head income from other sources without going into the foundational plea that the scope of income does not include the gains in capital field. S. 2(24(vi) lays down that “income, includes any capital gains chargeable under section 45”. Thus a capital gain, which is not chargeable to tax under section 45, cannot be included in the Income. It further observed that in the present case, interest as defined u/s 2(28A) was not payable by the cousin of the Assessee on repayment of loan but only the principal debt amount was repaid. The benefit or gain arising to the Assessee was on account of foreign exchange fluctuation which comes in the capital field and therefore such gain is not taxable as it is a capital receipt in the hands of the Assessee. With respect to the stand adopted by the CIT(A) that under the LRS scheme only Rupee denominated loans were permissible to the non-resident close relatives. The tribunal has taken the stand that nothing turns on the fact that only rupee denominated loans were permitted to be extended by the assessee to his close relative NRI/PIO cousin, that such question was beyond the scope of the CIT(A) or the Tribunal. Therefore, the Tribunal deleted the addition. (AY 2013-14)

    Aditya Balkrishna Shroff v. ITO (2021) 189 ITD 587 (Mum)(Trib.)

  23. S. 50C : Applicability – Gap between the date of execution of agreement to sell and sale deed – Sale deed executed in 2007, much later after entering into Agreement for sale in 1993 -, possession given and also major portion of sale consideration was received along with agreement to sale – Capital Gains to be computed based on guidance value of the property as on the date of sale agreement and not as on date of sale deed [S. 2(47), 45, 48]

    Assessee entered into sale agreement on 08.03.1993, received major portion of sale consideration and handed over the possession of property. However, right over the property was transferred by way of sale deed dt 09.03.2007. Assessee had offered the gain in the year under consideration, based on valuation as per agreement to sale i.e. value as on 08.03.1993, and not as per valuation on date of sale deed, which was 09.03.2007 on the ground that there was no transfer of property during the year under consideration.

    The A.O took the view that there was a transfer of property during the year, and also invoked Sec 50C, and computed Long Term Capital gains based on guidance value of the property as on date of sale deed i.e. 9.3.2007.

    On appeal the Tribunal held that the transfer has taken place vide sale agreement dt 08.03.1993, and consequently for purpose of computing Long Term Gain the value as on date of sale agreement has to be adopted, and not the value as on the date of sale deed dt 09.03.2007, and accordingly sec 50C is not applicable based on following :

    Vide agreement to sale, the right over the property was transferred from vendor to purchaser i.e. a right in persona has already been created in favour of purchaser, and seller is restrained from selling said property.

    The purchaser in whose favor right in persona is created has legitimate right to enforce specific performance of the agreement.

    Assessee has produced all the relevant documents for demonstrating the authenticity of the sale agreement with corroborative evidence (AY. 2007-08)

    Prakash Chand Bethala v. DCIT (2021) 212 TTJ 720 (Bang.)(Trib.)

  24. S. 50C: Capital Gain – full value of consideration – the value adopted by the stamp valuation authority on the date of agreement to be taken as full value of sale consideration

    The Assessee owned 2 plots which were purchased on 24-08-2007. The Assessee subsequently entered into a sale agreement dated 12-03-2008 for the sale of both the plots to another company. Accordingly, the Assessee declared a short-term capital gain only in the year under consideration with respect to the sale of plots.

    The AO found that there was a search in case of the buyer had sold these plots after converting into small plots and showed huge profits in its own books which was set off against loss on sale of commodities. Accordingly, the AO sought clarification from Assessee as to why the transaction should not be treated as colorable device and held that the stamp duty value of the property should be considered as sale consideration and accordingly worked out capital gain and made addition.

    The CIT(A) held that there was no incriminating material found during search in case of buyer nor any material has been brought on record by the AO in the present case during assessment and therefore the AO was not justified in making addition in the present case. It was further held that as per the provisions of section 50C of the Act, where date of agreement and date of registration is different (as in the present case) the stamp duty value can be taken but only in case where consideration or part thereof has been received before the date of agreement. However, in the present case, even though the condition laid down by section 50C was not satisfied, CIT(A) held that Assessee’s case is covered by section 50C and hence deleted the addition made by the AO.

    Tribunal upheld the finding of CIT(A) that no addition could be made in the present case in absence of any incriminating material and accordingly deleted the addition made by the AO. However, on merits of the case, Tribunal held that the Assessee had received a small consideration at the time of agreement and therefore CIT(A) finding to the extent that Assessee would get benefit of proviso of section 50C of the Act was incorrect.

    In the result, the addition made was deleted by the Tribunal though on merits of the case, Tribunal ruled against the Assessee.

    ACIT v. M/S. Himalayan Darshan Developers (Gujarat) Pvt. Ltd. (2021) 212 TTJ 738 (Ahd)(Trib.)

  25. S. 54B : Exemption – Allowability to HUF – Exemption available even prior to amendment by Finance Act, 2013 – Amendment is clarificatory in nature – Person includes individual as well as HUF – HUF entitled to benefit of sec 54B.

    Assessee had claimed exemption u/s 54B and u/s 54F which was denied as per Order u/s 143(3). CIT(A) allowed granted partial relief and allowed exemption u/s 54F, but confirmed denial of exemption u/s 54B.

    On appeal the Tribunal held that assessee HUF is entitled to benefit of sec 54B of the Act for following reasons :

    • The word assessee used in s 54B, had always included HUF, and further the amendment brought in by Finance Act, 2013 by inserting “the assessee being an individual or his parent or an (HUF)” was clarificatory in nature.

    • Word ‘person’ as defined in s 2(31) includes individual as well as HUF and therefore HUF was entitled to benefit u/s 54B.

    • Benefit of any doubt in respect of taxability of exemption should be given to assessee rather than to revenue. (AY. 2012-13)

    Sitaram Pahariya (HUF) v. ITO (2021) 212 TTJ 273 (Agra)(Trib.)

  26. S. 54F: Capital gains – Exemptions – investment in house property in name of assessee’s widowed daughter was allowable – direct nexus between sale consideration received and investment in house property.

    Held that, there is nothing in s.54F to show that house should be purchased in name of assessee only. Since there was a direct nexus between sale consideration received and utilized investing in residential house in name of married widowed daughter of assessee, exemption u/s. 54F on amount invested in purchase of residential house in daughter’s name is allowed. (AY 2016 -17)

    Krishnappa Jayaramaiah v. ITO (2021) 189 ITD 15 (Bang)(Trib.)

  27. S. 56(2)(viib): Income from other sources – Issue of shares at a premium – Determination of fair market value – Value to be adopted either as per method prescribed in r. 11UA or FMV arrived by assessee duly substantiated to satisfaction of A.O [I Tax Rules, 1962 r 11UA]

    Assessee had issued shares at a premium based on valuation report from independent chartered accountant as well as from statutory auditor of the company, further supported by reports from civil engineer and property valuer thereby substantiating the fair market value of shares as on date of issue of shares.

    AO during reassessment proceedings, rejected the valuation report, on the ground that said report was not filed during original assessment proceedings, and taxed the premium collected by invoking sec 56(2)(viib).

    On appeal the Tribunal held that :

    • Assessee having exercised the option given as per Expln. (a)(ii) to sec. 56(2)(viib), and having substantiated the fair market value of shares based on valuation report, as on date of issue of shares, there is no scope to invoke provisions of sec 56(2)(viib) to tax share premium collected on issues of shares.

    • Assessee having substantiated share price with the help of valuation report, the timing of filing valuation report is not relevant criteria, nor it alters the situation, to decide whether fair market value of shares issued is substantiated to the satisfaction of AO, the rejection of valuation report on ground that same is obtained subsequent to the date of issue of shares and not being filed during original assessment proceedings is incorrect. (AY. 2013-14)

    Sri Sakthi Textiles Ltd. v. DCIT (2021) 212 TTJ 917 (Chennai)(Trib.)

  28. S. 68: Cash credits – Unexplained investments – Seizure of Banakhat duly signed by the assessee –Addition U/s 68 on account of non-availability of ROI and Bank account of lender – Held that AO has not brought any material or evidence to disprove the genuineness of information submitted by the assessee – the appeal of the revenue is dismissed. [r.w.s. 69 & 153A]

    Assessment was finalized in case of the Assessee u/s 153A r.w.s. 143(3) of the Act and certain additions were made u/s 69 on protective basis and further addition u/s 68 on account of cash credits. During the course of search at the residence of one Sohit Mehta,a signed banakhat was found and seized. It was the case of the Assessee (Co-owner along with wife of the impugned land) that the transaction of sale of land did not materialize and the land deal as per the seized banakhat was ultimately cancelled. It was further submitted that the land was still in the name of the assessee and other two co-owners and the land was not transferred in the name of the buyer mentioned in the banakhat. It was further explained that the amount received was returned back through the broker, through whom the transaction was undertaken, to the parties i.e. Mehul Mehta mentioned in the banakhat. The impugned land was subsequently sold to other parties. However, the assessing officer did not accept the above submission of the assessee and added 40% of part payment received against sale of land, to the total income of the assessee as unexplained income u/s 69 of the Act on the protective basis.

    The Hon’ble bench upheld the order passed by the CIT(A) which states that considering the nature of transaction only substantive addition can be made in the hands of the buyer and the seller on the reasoning that if payments was made by the buyer not out of disclosed sources, the amount has to be added as undisclosed income to the total income of the buyer on substantive basis and at the same time if the receipt of consideration is not disclosed by the seller,the amount has to be added as undisclosed income to the total income of the seller on substantive basis only. Further,it is undisputed fact that Shri Mehul Mehta in whose hands the addition was made on substantive basis had made relevant disclosure in the application for the settlement which has been considered by the Settlement Commission. Therefore, this ground of appeal of the revenue stands dismissed.

    In case of second ground with respect to Addition of Rs 4 Lacs U/s 68 of the Act, the Hon’ble Bench held that because of non-availability of return of income and copy of bank account of the lender the Assessing Officer has treated the unsecured loan amount of Rs 4lacs as unexplained and added to the total income of the assessee U/s 68 of the act. However,assessee furnished additional evidences before CIT(A) in the form of bank statement, confirmation containing the lender full address, documentary evidences of the ownership of agricultural land and it was also explained that since lender was an agriculturist therefore, he was not liable to file any return of income. The assessing officer has not brought any material or evidences on record to disprove the aforesaid facts and evidences submitted by the assessee in support of genuineness of the loan transactions. Therefore, appeal of the revenue is dismissed. (AY 2012-13)

    ACIT v. Shri Karsangiri Buddhgiri Goswami (Diamond Petroleum) (2021) 189 ITD 227 (Ahd)(Trib.)

  29. S. 68 : Cash credits – Addition u/s 68 is not sustainable where the assessee-company has been able to prove the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter

    Search and seizure action was conducted on the premises of a third person i.e. Shirish C. Shah. Therein Assessee Company was found to have received a certain amount from Investor Company, M/s Prraneta Industries Ltd which was allegedly being controlled and managed by the aforementioned third person for providing accommodation entries. The statement of a Promoter of Prraneta Industries Ltd. was recorded where he admitted to providing accommodation entries of the Investor Company after charging a certain commission. The AO did not accept any explanation provided by the Assessee and proceeded to make an addition to the total income of the Assessee primarily on the basis of the aforementioned statement of the Promoter of Prraneta Industries Ltd.

    This reopening proceeding was challenged by the Assessee. The Tribunal observed that the Assessee Company had placed substantial material before the AO to establish the identity of the creditors, their creditworthiness and the genuineness of the transaction. It further observed that the Assessee was not provided an opportunity to rebut the statement made by the third person Shirish Shah and the Promoter of Prraneta Industries Ltd. by stating them to be “confidential” in nature and therefore they cannot be read in evidence against the Assessee. It was also submitted by the Assessee that the Promoter of Prraneta Industries Ltd. later on retracted from his statement and therefore there was no case for reopening of the assessment. It was further submitted that the Indore bench of the tribunal had dismissed the group departmental appeals in case of certain other companies in respect of the same Investor Company, Prraneta Industries Ltd. based on the same information received in search in cases of the third person, Shirish C. Shah and deleted the additions on the merits of the case. The order was further upheld by the Madhya Pradesh High Court and ultimately the Supreme Court. Similar judgments were passed by the Delhi Bench of the tribunal in case of other companies and therefore it was submitted that the present case was covered by these decisions on identical facts.Thus on the basis of facts of the case and law as well as relying upon the decisions of the coordinate benches, the Tribunal ultimately concluded that the Assessee Company has adequately established the identity of the creditors, their creditworthiness and the genuineness of transaction and therefore deleted the addition made u/s 68 of the Act. (AY 2010-11).

    Ancon Chemplast P. Ltd. v. ITO (2021) 189 ITD 156 (Delhi)(Trib)

  30. S. 68 : Cash credit (Loan) – various evidences filed including financial statement of creditor to prove his identity and creditworthiness and genuineness of transactions, merely for reason that loan were received in cash was unjustified.

    The AO made addition u/s. 68 on account of said loan on ground that assessee had failed to explain receipt of said loan amount in cash in its bank account – It was noted that assessee had filed various evidences including financial statement of creditor to prove his identity and creditworthiness and genuineness of transactions – From financial statement of creditor, it was found that amount advanced to company was recorded in loans and advances – Assessee had also explained creditworthiness of creditor by filing his income tax return for relevant assessment year – Assessing Officer except stating that loan was received in cash, made no other observations to reject arguments of assessee that creditor was having creditworthiness to provide loan – Whether on facts, impugned addition under section 68 made by Assessing Officer merely for reason that loan was received in cash was unjustified and same was to be set aside.

    Jayant Packaging (P.) Ltd. v. DCIT (2021) 189 ITD 321 (Chennai)(Trib.)

  31. S. 68 : Cash credit – (Share capital) – Assessee submitted share application form, copy of share certificates, copy of board resolution, certificate of incorporation etc. with respect to all investor and all investor entities had sufficient net worth to make investment, additions as unexplained cash credit was unjustified.

    Assessee is builders and developers had received share capital / share premium from various entities and said receipts were alleged to be bogus in nature and were added its income as unexplained cash credit u/s. 68.

    Held that, when share application form, copy of cheque, cheque deposit slips, copy of bank statement, copy of share certificates, copy of source of funds, copy of board resolution, certificate of incorporation, copy of Memorandum of Association (MOU) etc. were filed with respect to all investor entities, further, all investor entities had sufficient net worth to make investment, its proves assessee had successfully discharged onus cast upon it u/s. 68. Additions were unjustified.

    Moongipa Dev. & Inf. Ltd. v. DCIT (2021) 189 ITD 388 (Mum)(Trib.)

  32. S. 68: Cash credit (Accommodation entity) – AO issued reopening notice merely on basis of information received from department and he had not pointed out as to how investment in question was unexplained income of assessee, order passed by AO was to be quashed.

    The AO received an information from ITO that a search action u/s. 132 was carried out in case of one ‘VI’ Group during which it was found that several companies of group were engaged in providing accommodation entries to various companies in form of share capital, share premium, bogus bills, unsecured loans etc. on commission basis and that one company RTCPL had made bogus investments of certain amount in assessee company, on basis of said information, AO issued reopening notice against assessee and passed reassessment order by making additions u/s. 68 on account of bogus investment.

    Held that, reopening proceedings initiated only an solely on basis of information received from ITO, thus, said assessment order was void ab initio, as AO had not pointed out as to how investment in question was unexplained income of assessee, AO had assumed jurisdiction u/s. 147 in a mechanical manner. (r.w.s.148)

    Kaur Sain Spinning & Weaving Mills Ltd. v. ACIT (2021) 189 ITD 515 (Chd) (Trib.)

  33. S. 68 r.w.s. 37: Cash Credits – onus to explain genuineness of transaction – once Assessee discharges such burden to prove genuineness, burden of proof shifts on the Revenue to prove the contrary – once burden of proof is discharged successfully by Assessee no addition can be made

    The Assessee had received certain unsecured loans from various companies. The repayment of such loans along with interest was done much before the date of initiation of search proceedings. During the search assessment proceedings, the Assessee had discharged its onus by filing various details including name and address and PAN numbers of the creditors to prove identity of creditors. The Assessee had also filed financial statements of creditors to prove creditworthiness along with bank statements to prove the fact that loan transactions are routed through proper banking channels. These loans were also backed by equitable mortgage of immovable properties in favour of the lender. However, the AO disregarded all this and made additions u/s.68 in assessment framed u/s.143(3) r.w.s. 153C of the Act on the basis of statements given by third parties and without providing an opportunity for cross examination of said third party or copy of statement made. On appeal, the CIT(A) deleted such addition and disallowance made.

    The Tribunal held that AO made additions without providing copies of statement recorded from said person and also did not provide opportunity of cross examination, even though the Assessee has specifically requested for the same. It was further observed that denial of the same is a serious flaw which renders the order a nullity in as much as it amounted to violation of the principles of natural justice. Similar view had been upheld by Hon’ble Supreme Court in the case of Kishinchand Chellaran v. CIT [1980] 125 ITR 713

    Further, on merits, the Tribunal relied on the decision of Hon’ble Supreme Court in the case of CIT v Lovely Exports (P) Ltd [2008] 216 CTR 195 and held that the Assessee had discharged its burden cast upon it by Section 68. Once, the Assessee has discharged its initial burden then the burden shifts to the AO to prove otherwise that said sums recorded as unsecured loans in the books of accounts of the Assessee is unexplained credit which represents undisclosed income of the Assessee. Hence, the Tribunal deleted the addition made by the AO and upheld the action of the CIT(A).

    ACIT & Anr. v. CMG Steels Pvt. Ltd. & Anr. (2021) 212 TTJ 109 (Chen)(Trib.)

  34. S. 68: Cash credit (Bank deposits post demonetization) – amount deposited by Assessee-jeweller in its bank account post demonetization – the addition made on account of unexplained income was to be deleted.

    Assessee firm was engaged in business of jewellery trading. A survey under section 133A was conducted at business premises of Assessee by Deputy Director (Investigation) in which he found that Assessee deposited huge sum in high denominations of specified bank notes post demonetization. The Assessee had explained source of cash deposits as cash sales and advances received against sales. However, AO held that said amount was unexplained, cash credits representing unaccounted money was brought into business in disguise of jewellery sales, and, accordingly, made addition under section 68 on account of said cash deposit.

    The Tribunal noted that Assessee had explained source of said amount in question as sales, produced sale bills and admitted same as revenue receipt as well as offered it to tax. There was no defect in purchases and sales and same were matching with inflow and outflow of stock. Further audit report under section 44AB and financial statements clearly showed reduction of stock position matching with sales which clearly showed that cash generated represented sales. Both Assessing Officer and DDIT (Inv.) were unable to find any defects in books of account, trading account, P&L account and financial statements of Assessee.

    Therefore, following the decision in case of CIT v. Associated Transport (P.) Ltd. [1996] 84 Taxman 146/ [1995] 212 ITR 417 (Cal.) the Tribunal held that as the Assessee had sufficient cash in hand in the books of account, there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the said amount as concealed income of the Assessee. Further, as the Assessee had already admitted the sales as revenue receipt, it did not qualify for making an addition u/s 68.

    ACIT v. Hirapanna Jewellers (2021) 212 TTJ 11 (Visakhapatnam)(Trib.)

  35. S. 68: Cash credits – Unsecured Loan – All documents including Financial Statements, confirmations and the transactions were through banking channels – impugned addition was unjustified.

    Where the assessee filed various details including bank statement and financial statement of creditor, confirmation of the creditors and all these transactions are routed through proper banking channel, the assessee has proved identity, genuineness of transaction and creditworthiness of loan creditors. The assessee has discharged its burden caste upon u/s. 68 of the Income-tax Act, 1961. The impugned addition was not justified.

    K.P. Manish Global Ingredients (P.) Ltd v. ACIT [2021] 131 taxmann.com 158 (Chennai)(Trib.)

  36. S. 69: Income from undisclosed sources – Addition based on statement given to survey team on documents found indicating receipt of large amounts – No retraction – Addition upheld.

    Assessee in the statement to survey party, admitted the sum of large receipts as undisclosed receipts, based on documents found during survey. No explanation was offered, nor, the statement was retracted by the assessee, before any authorities, or during the course of assessment proceedings by way of plausible evidence or by any other mode.

    CIT (A) upheld the addition made by A.O. Assessee later before the tribunal raised the ground that

    • admission was extracted under coercion and under influence during survey

    • additions are not backed by any cohesive primary and circumstantial evidence as to its nature and source

    • persons from whom receipts have been purported to be made are unidentifiable, non-existent and are thus a sham and imaginary

    • Survey proceedings and assessment proceedings have been headed by same official, and assessment thus made is biased and unjustified.

    On appeal Tribunal held that the findings recorded by the AO as well as CIT(A), are based on reasonable basis and credible evidences, and assessee not having retracted the statement given to survey team, nor has produced any evidences, the addition made is upheld. (AY.2012-13)

    Sanjay Sultania v. ITO (2021) 212 TTJ 539 (Ctk.)(Trib.)

  37. S. 69A: Unexplained moneys (Loan) – necessary confirmation from such two persons from whom money was received as ‘temporary loan’ was not produced – matter remanded back to decide afresh.

    The AO on examination of cash books of assessee, noticed that whenever there was shortage of cash receipts below Rs.20,000 was shown by assessee in name of RW and PK and therefore he made addition on account of said amounts as unexplained income. The CIT(A) also confirmed same on ground that necessary confirmation from above two persons from whom money was received as ‘temporary loan’ were not produced.

    Held that, since two parties could not deliver required results, advance which was paid by assessee through account payee cheques was repaid by them in small amounts out of their own earnings further assessee had never claimed that it had received temporary loan from these two parties. Therefore, matter remanded back to decide issue afresh. (AY: 2009 –2010)

    Jaipur Boutique Carpet v. ITO (2021) 189 ITD 305 (Jaipur)(Trib.)

  38. S. 69A : Unexplained moneys (Revision) – When during scrutiny assessee had submitted all relevant details regarding loans and advance and explained that said advance was returned back in next year, AO after due verification passed order, invocation of revision u/s.263 by Pr. CIT was unjustified.

    The Pr. CIT invoked revision u/s. 263 on ground that AO had not examined issue related to advance of certain amount given by assessee to one AIP and also had not examined issue related to payments of commission to two persons.

    Held that, when assessee had furnished all relevant details regarding loan and advances given and explained that said advance was returned back in next year and also furnished copy of ledger account, further, assessee had also submitted all evidence and explained services in relation to sales provided by such two persons to whom it paid commission along with copy of sales register, profit and loss account and confirmation of parties before AO. It was again furnished in revision proceedings and that nothing was found wrong against those documents by Pr. CIT. Invocation of revision under section 263 was unjustified. (r.w.s. 263)

    Nilkanth Stone Industries v. Pr. CIT [2021] 189 ITD 718 (Surat)(Trib.)

  39. S. 80-IC : Deductions by way of special provisions – Entitlement to deduction – substantial expansion in the existing unit in line with clause (ix) of sub-section 8 of section 80-IC

    The Assessee is into the business of manufacturing of perfumes, deodorants, cosmetic items and toiletry goods and was claiming deduction under section 80-IC. The Assessing Officer restricted the deduction to 25% instead of 100% claimed by the Assessee on the ground that 100% deduction u/s 80IC is available to the units located in North Indian states for the first 5 years and for the next 5 years @ 25%/35%. The CIT(A) allowed 100% deduction to the Assessee against which the Revenue filed appeal before the Tribunal

    The Tribunal observed that the Assessee was claiming the deduction from the last 5 years and had carried out substantial expansion in the 5th year. Further, in the subsequent years (i.e. 7th to 10th year), the Assessee had also been granted 100% deduction by the CIT(A) and no appeal was filed by Revenue against the same. Since it was not in dispute that the Assessee has carried out substantial expansion in accordance with section 80IC(8)(ix) during current financial year, the Tribunal relied on the decision of the Hon’ble SC in the case of Aarham Softronics (412 ITR 623) and CIT(A) orders for subsequent years and held that the deduction is admissible to the Assessee irrespective of the conditions stipulated for North Indian States as discussed by AO.

    ACIT v. Vanesa Cosmetics (2021) 212 TTJ 712 (Delhi)(Trib.)

  40. S. 92C : Transfer pricing –Computation of arm’s length price – (TP adjustment – Illustration – Management fee) – documents filed to justify and availment of services – have to accept value of management services as claimed by assessee.

    TPO examined timesheet related to charges to AE and observed that there was no clarity regarding services availed or services provided and treated value of management services fee as Nil in absence of supporting evidence of availing such services. Tribunal held that, since assessee had filed documents justifying not only need of services but also availment of services and TPO had failed to take into cognizance of those documents/evidences, there was no merit in order of TPO and hence to accept the value of management services as claimed by assessee.

    Renishaw Metrology Systems Ltd. v. DCIT (2021) 189 ITD 236 (Pune)(Trib.)

  41. S. 92C : Transfer pricing – Computation of arm’s length price – (Comparable – Functional similarity – Marketing support services) – Assessee involved in advertising agency, data not available in public domain for comparability of business support system segment of said company, it could not be compared to marketing support service provider.

    Assessee-company rendered marketing support services to its AE, where a company was involved in advertising agency, but data was not available in public domain for comparability of business support system segment of said company, it should not be selected as comparable.

    Renishaw Metrology Systems Ltd. v. DCIT (2021) 189 ITD 236 (Pune)(Trib.)

  42. S. 92C : Transfer pricing –Computation of arm’s length price – (Comparable, Functional similarity – Marketing support services) – conducting exhibitions and events and most of income from exhibitions and events, should be excluded from comparable list to marketing support service provider.

    The Assessee Company rendered marketing support services to its AE, a company was also involved in conducting exhibitions and events and most of income came from exhibitions and events, it should be excluded from list of comparable.

    Renishaw Metrology Systems Ltd. v. DCIT (2021) 189 ITD 236 (Pune)(Trib.)

  43. S. 92 C: Transfer pricing –Computation of arm’s length price – bona fide expenditure should be incurred while availing services – application of benefit test is not warranted

    During the year under consideration, the Assessee had entered into a transaction for payment of service charges to a related domestic company. The Assessee had applied CUP as the method for benchmarking the said transaction after considering 13 comparable. The TPO rejected the CUP method and alternative benchmarking analysis under TNMM submitted by the Assessee. TPO determined ALP at NIL by using any other method.

    The Tribunal after going through the detailed documentary evidence submitted by the Assessee noted that the TPO had held that services were in the nature of shareholder activity, however, it was sufficient to hold that shareholder activity takes place only when some act or services is done by the shareholder and thereby TPO has himself acknowledged the fact that services were received by the Assessee. Accordingly, the Tribunal after examining the details held that the Assessee had availed services from the related domestic company for running its business operation and there was no need to prove the benefit accruing from the same. The Tribunal held that these services were not shareholders services as alleged by the TPO.

    Further the Tribunal rejected the CUP method applied by the Assessee as the comparables selected by the Assessee for the purpose of benchmarking were not functionally similar to the Assessee. Secondly, the Tribunal also did not accept Assessee’s alternate contention of using other method for benchmarking by placing reliance in case of group companies wherein similar disallowance was deleted by Tribunal by accepting payment as reasonable, wherein the AO had disallowed such payment made to domestic company under section 40A (2) of the Act. The Tribunal while rejecting the contention of the Assessee that such “reasonableness criteria” can be applied to determine ALP, under Rule 10AB, held that the Finance Act, 2012 brought SDT’s in the purview of Chapter X, and the payment of services charges to the domestic company would require determination of ALP under Chapter X and adhere the mechanism provided in the respective methods for benchmarking. Lastly, with regards to Assessee’s contention for adoption of TNMM at the entity level as the most appropriate method for benchmarking SDT at ALP, the Tribunal held that if the transactions are not closely linked, there can be no question of aggregation for the purpose of benchmarking and accordingly rejected the aggregation approach under TNMM.

    Accordingly, the Tribunal held that the mechanism applied by the Assessee or the TPO all the three methods for benchmarking was improper, nothing was left to be adjudicated upon. Accordingly, the issue was set aside to the TPO (without any specific directions on a particular method to be adopted) to redetermine the ALP afresh after giving an opportunity of being heard to the Assessee.

    Adient India (P) Ltd v. Dy CIT (2021) 212 TTJ 777

  44. S. 92C : Transfer pricing – Arm’s length price – corporate guarantee distinct from bank guarantee – average of guarantee fee paid by assessee cannot be questioned

    Where the adequacy of the ALP of the corporate guarantee fees determined by the assessee at 0.43 per cent of the amount of loan by taking the average of the guarantee fees that was paid by the assessee to various banks for standing guarantees on its behalf for certain third parties. It was held that a higher commission is to be paid for obtaining bank guarantee, as they are easily encashable in the event of default as in comparison to corporate guarantee provided by an assessee company to a bank for facilitating raising of loan by its AE. Therefore, the adequacy of the ALP of the corporate guarantee fees determined by the assessee cannot be called in question.

    Greatship (India) Ltd. v. DCIT [2021] 126 taxmann.com 47 (Mum)(Trib.)

  45. S. 115JB : Minimum alternate tax – (Computation provisions) – When income is not reported in its P&L account, could not be said that its prepared in accordance with Part II and III of Schedule – VI to Companies Act. AO is justified to re-compute book profit u/s. 115JB.

    Held that, when books of account of assessee are not in accordance with Part II and III of Schedule VI to Companies Act, 1956, then AO is empowered to tinker with net profit by making additions u/s. 115JB to book profits.

    Jayant Packaging (P.) Ltd. v. DCIT (2021) 189 ITD 321 (Chen)(Trib.)

  46. S. 115JB : Minimum alternate tax – disallowance u/s. 14A r.w. rule 8D is not to be applied while determining book profits u/s. 115JB.

    Disallowance u/s. 14A r.w. rule 8D is not to be applied while determining book profits u/s. 115JB. (AY 2010-2011)

    Jayant Packaging (P.) Ltd. v. DCIT (2021) 189 ITD 321 (Chen)(Trib.)

  47. S. 115-O: Domestic companies – Tax on distributed profits – Refers question of beneficial treaty-rate over DDT to Special Bench

    Assessee (Indian Co.) paid dividend to its shareholders in France and sought to pay DDT at the lower rate prescribed under India-France DTAA by relying upon Delhi and Kolkata Bench rulings in Giesecke & Devrient and Indian Oil Petronas. ITAT admitted the cross-objection filed by the Taxpayer and thereafter, expressed doubt on the correctness of the decisions given by co-ordinate benches of the Tribunal such as,(i) DDT should be considered as a tax on the company and not shareholders, hence treaty protection for resident company not available in the absence of a specific provision (ii) The treaty protection thus sought goes well beyond the purpose of the tax treaties.(iii) Where intended, tax treaty provisions specifically provide for treaty application to taxes like DDT (iii) DTAA is a self-imposed limitation on states’ inherent right to tax and “Inherent in the self-imposed restrictions imposed by the DTAA is the fact that outside of the limitations imposed by the DTAA, the State is free to levy taxes as per its own policy choices”, arose in respect of DDT rate applicable in hands of shareholders. Thus, ITAT frames the question “Whether the protection granted by the tax treaties, under section 90 of the Income Tax Act, 1961, in respect of taxation of dividend in the source jurisdiction, can be extended, even in the absence of a specific treaty provision to that effect, to the dividend distribution tax under section 115-O in the hands of a domestic company?” for approval of the ITAT President for the constitution of a special bench of three or more members.

    CIT v. Total Oil India Pvt Ltd – 212 TTJ 292 (Mumbai) (ITA No. 6997/Mum/2019 dt.15-06-2021) (AY 2016-17)

  48. S 132: Search and Seizure proceedings – AO made addition based on the statement given by third party – No incriminating material found suggesting the payment of on-money consideration-Tribunal Deleted addition (r.w.s.132(4), 132(4A))

    The Assessee had purchased a piece of land along with its group companies from a vendor in Nashik. A search and seizure operation was conducted on the Assessee and its group companies as well as on the vendors of the land purchased by the Assessee. During the search and seizure proceedings on the vendor, certain loose sheets were found and seized on the basis of which AO concluded that on-money received was represented as the amount received over and above the stated consideration as per sale deed from the Assessee and its group companies. Also, on the basis of third party i.e. vendors statements, the AO drew adverse inference that sellers had received cash from group companies over and above the consideration stated in the sale deed. Therefore, the AO made addition of such undisclosed consideration in the hands of the Assessee. The CIT(A) granted partial relief to the Assessee and addition to the extent of amount admitted in the statements recorded u/s 132(4) of the Act by the vendors. Against this order of CIT(A), both the Assessee as well as the Department filed appeal before the Tribunal.

    The Tribunal held that no incriminating material suggesting the payment of on-money consideration to the vendors of the subject land was found in the hands of the Assessee. It also observed that any addition can only be made if there is conclusive evidence brought on record by the AO. The Tribunal also noted that during cross examination of the third party, the statements of such party were clearly contradictory and such contradictory statements had no evidentiary value. It also noted that the third party admitted the receipt of the on-money but nowhere mentioned that they received on-money consideration from the respondent Assessee or its group companies.

    The Tribunal also held that onus lies upon the Department to collect cogent evidence to corroborate the notings on the loose sheets. The additions cannot be made merely on the basis of notings on the loose sheet papers which are in the nature of “dumb documents” having no evidentiary value. In the present case, as a result of search and seizure action in the case of respondent-Assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands. Also, no addition in the assessment can be made merely based on assumptions, suspicion, guess work and conjuncture or on irrelevant inadmissible material.

    Hence the Tribunal held that Department had failed to establish that the Assessee had paid any on-money over and above stated consideration of the sale deed to the vendors of the property and directed to delete the entire addition made.

    Dhananjay Marketing v. CIT & ANR (2021) 212 TTJ 0877 (Pune)(Trib.)

  49. S. 143(3) : Assessment – Disallowance the contribution received from employees towards ESI and EPF – National Faceless Appeal Centre (NFAC) situated in Delhi, though centralised, is bound by the precedents laid down by the HC exercising territorial jurisdiction over the Assessee’s AO.

    The Assessee has claim of deduction on delayed employees’ contribution was disallowed by AO which was upheld by NFAC by relying on Gujarat HC ruling. However, on the same issue ruling is in favour of the Assessee rendered by the Allahabad HC. ITAT holds that National Faceless Appeal Centre (NFAC) situated in Delhi, though centralised, is bound by the precedents laid down by the HC exercising territorial jurisdiction (herein, Allahabad HC) over the Assessee’s AO. Opines that an appeal against an order passed by NFAC lies before the ITAT bench having jurisdiction over Assessee’s AO and “Thus appeal against the tribunal (Agra in present case) shall lie to the Hon’ble Allahabad High Court and therefore the decision rendered by Hon’ble High court is not only binding on the Tribunal but also on NFAC, (though sitting in Delhi) which is deciding the lis pertaining to Agra ITAT Jurisdiction (Allahabad HC Jurisdiction).(ITA No.41 & 42/Agr/2021, dt 14-06-2021) ( AY. 2018 -19, 2019-20)

    Mahadev Cold Storage v. JAO (Agra) (Trib) www.itatonline.org Vinod Thanwerdas Sainani v. JAO – 212 TTJ 801 (Agra) (Trib)

  50. S. 147 : Reassessment – a copy of complete text of the reasons recorded for reopening and the sanction obtained u/s 151 was furnished to the Assessee during the course of hearing-vague and general reasons – no new tangible material on record – sanction u/s 151 suffered from jurisdictional defects – therefore reopening is quashed.

    The Ld AO sought to reopen the Assessment for the relevant AY by way of notice u/s 148 of the Act which was issued beyond four years but within six years from the end of the relevant AY. The Assessee file a letter requesting a copy of reasons recorded together with the sanction from the competent authority in terms of section 151, however, the AO furnished only an extract of such reasons recorded to the Assessee and the copy of the sanction/approval from the competent authority was not provided at all. The objections filed by the Assessee to the reasons recorded for reopening which were disposed of by the AO by way of a separate order on the same day. Further objections filed in respect of such order were dealt with and disposed of by the AO in the reassessment order u/s 143(3)/144C(3) r.w.s. 147 of the Act. The CIT(A) dismissed the grounds raised by the Assessee on the validity of reopening of assessment and assumption of jurisdiction by the AO.

    The Tribunal noted that the full text of reasons recorded for reopening as well as sanction obtained u/s 151 was furnished to the Assessee during the course of the hearing. It observed that in the full text of the reasons recorded, omission on the part of Assessee was mentioned as a general and vague statement without specifically pointing out as to what was the clear omission or failure on the part of the assessee. The reasons started with the word “on verification of records…” which shows that the entire information was available before the AO, therefore there was no tangible material available to form belief that income has escaped assessment. Even the sanction u/s 151 for reopening of assessment u/s 147 suffered from jurisdictional defect. In view of the above, the reopening of the Assessment was quashed. (AY 2007-08)

    ACIT v. M/s. Bharti Axa Life Insurance Company Ltd and Anr (2021) 189 ITD 0450 (Mum)(Trib.)

  51. S. 147 : Reassessment – Notice u/s 148 based on Reason to believe and Existence of material & Rationale belief is a valid Notice even without any conclusive proof – re-opening held to be valid.

    A.O during survey, based on certain documents found that assessee sold a property for a consideration which was much lower, than the guidance value as per provisions of Sec 50C. Based on the material A.O had reason to believe that Income has escaped assessment notice u/s 148 was issued.

    On appeal the Tribunal held that:

    There need not be conclusive proof that there was escapement of income while issuing notice u/s 148, reason to believe is good ground for reopening of assessment, further discovery of the facts during re-assessment, cannot invalidate the notice u/s 148, which when issued was a valid notice. (AY. 2007-08)

    Prakash Chand Bethala v. DCIT (2021) 212 TTJ 720 (Bang.)(Trib.)

  52. S. 147: Reassessment – Change of opinion – Issue not examined during assessment u/s 143(3) –Reopening justified as A.O has overlooked the relevant facts and not taken cognizance of resulting in escapement of Income.

    During the assessment proceedings u/s 143(3) A.O had not considered the difference between the stamp duty value of the property sold vis-à-vis sale agreement value, inspite of the fact that the agreement as well as receipt showing registrable value was part of the records, furnished during assessment proceedings. Reopening u/s 147 on ground of under reporting of capital gains as per provisions of sec 50C, was challenged by the assessee, citing change of opinion on same set of facts and circumstances.

    On appeal the Tribunal held that A.O has rightly exercised its power u/s 147 and the doctrine of ‘change of opinion’ cannot act as embargo, more so when the relevant fact not examined in original proceedings comes to the light of AO subsequent to original assessment.

    The above conclusion was based on following:

    That, the A.O is not supposed to have understood the purport of whole gamut of facts and figures placed before him, or are written somewhere in bundle of voluminous papers/documents filed during assessment proceedings.

    That, when there is no explanation offered for vast difference in sale consideration qua adoptable value is discernible from the record, and thus mere production of records, will not amount to disclosure for the purpose of presuming formation of opinion.

    That, A.O not having made any inquiry for applicability of sec 50C, nor having examined the issue, A.O cannot be said to have formed any opinion on the issue, and thus the doctrine of change of opinion cannot come to the rescue of the assessee.

    That, the assessee cannot claim a vested right arising from a palpably erroneous conclusion owing to non-consideration of significant fact having direct bearing on escapement of income.

    That, when the relevant facts have been overlooked and has not taken cognizance of, resulting in escapement of chargeable income, such omission would not constitute change of opinion, and such assessment order passed cannot be equated with a valid formation of opinion.(AY. 2010-11)

    Rakesh Ambalal Patel v. ITO (2021) 212 TTJ 769 (Ahd.)(Trib.)

  53. S. 147: Reassessment – Sanction u/s 151 – Validity – Approval by Jt CIT – Satisfaction recorded in a mechanical manner without application of mind – Reopening held to be invalid. [S.151]

    The assessee before the Tribunal took the ground that that the impugned assessment Order u/s 143(3) r.w.s 147 was passed without complying with the mandatory conditions u/s 147/148 as envisaged by the Act.

    Tribunal observed that Jt CIT recorded the satisfaction in a mechanical manner without application of mind, and gave approval by simply stating that “Yes, it is approved for 148 action”. Based on the same it was held that the approval was not valid and consequently the reopening of the assessment on the basis of said approval was also not valid. (AY. 2013-14)

    Satnam Singh v. ITO (2021) 212 TTJ 1 (Asr.)(UO)(Trib.)

  54. S. 147 : Re-assessment proceedings – AO made reopening relying upon information received from search proceedings in case of third party – Held reassessment proceedings null and void – Only 153C valid in case of information received from third party (r.w.s.153C)

    Assessee is an HUF and sold its half share in a residential property and offered the capital gains to tax after claiming indexed cost of acquisition. A search & seizure action under section 132 of the Act was carried out in case of buyers and addition was made for unexplained on-money. AO initiated re- assessment proceedings under section 147 of the Act in the hands of the Assessee under the belief that addition made in hands of buyer has direct bearing on the seller as well as they were the recipient of the on-money. Accordingly, AO made addition of half share of alleged on-money received by Assessee and not declared as part of sales consideration and revised the capital gain tax payable by Assessee.

    On appeal, CIT(A) held that the AO had not followed the procedure laid down by the law for reopening proceedings. CIT(A) noted that reasons of reopening provided to Assessee were mechanical in nature and the AO had adjudicated the matter without disposing the objections of Assessee. It was further submitted that AO received the information in respect of the valuation report from the CIT(A) before whom the appeal of the purchaser was pending for adjudication. The AO of the buyer did not find it worth passing on and thus buyers AO did not record his satisfaction in this respect. The CIT(A) who passed the information to the AO, while adjudicating the matter in case of buyer of property granted substantial relief to the buyer and held that the “valuation report of the valuer cannot be taken as yardstick for unaccounted investment. Hence, the basis for reopening the case, i.e., the copy of valuation report, was held to be invalid for the purpose of making any addition in the hands of the buyer by the CIT(A) and accordingly CIT(A) quashed the impugned order.

    Tribunal relied on various decisions and held that reopening on the basis of documents found during course of search of third party premises was invalid and could be done only under section 153C of the Act. Tribunal noted and upheld the findings of CIT(A) and placing reliance on various decisions, including decision of Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd (259 ITR 19) and quashed the assessment.

    ACIT v. M/s. K. S. Chawla & Sons [HUF] and ANR. (2021) 212 TTJ 199 / 203 DTR 180 (Del)(Trib.)

  55. S. 148: Reassessment – Validity vis-à-vis absence of Notice – Issue of Reopening – Based on mechanical satisfaction of PCIT without application of mind – Reassessment not sustainable [S.69, 147, 148 & 151]

    Assessee challenged the reopening notice, primarily on the ground that Notice was not served as per sec 282 of the IT Act. The addition was also challenged on merits, as reason to believe itself was based on wrong footing as power to reopen was exercised mechanically without examining the records.

    The department on the other side argued that non-receipt is not equivalent to non-service, without producing any records or documents to counter the assessee’s objections.

    On appeal the Tribunal held that :

    • As the notice was never served on the assessee, nor the Revenue authorities have given any finding specifying the mode and manner of issuance of notice/s 148, the jurisdiction for reassessment based on such notice is bad in law and be restored to nullity.

    • Even on merits as assessee having sufficiently explained the facts right at the assessment stage, and no infirmity in the evidences relied upon and available on record has been pointed out, assessee is entitled to relief on merits too.

    • Also reopening u/s 148 based on mechanical satisfaction of PCIT without application of mind deserves to be quashed, as an authority vested with onerous powers of reopening u/s 147 and granting of approval is expected to exercise its power consciously, carefully and with full awareness. The public at large cannot be put to the mercies of careless, casual, arbitrary or whimsical exercise of power.(AY. 2010-11)

    Smt Simar Kaur v. ACIT (2021) 212 TTJ 236 (Chd)(Trib.)

  56. S. 148 : Issue of notice – Reasons for reopening – not supplied –directed to supply reasons for reopening and only after disposal of objections, if any, raised, AO would proceed to re compute income of assessee in accordance with law.

    The assessment was reopened, since assessee requested for supply of reasons for reopening of assessment u/s. 148, which were not supplied, the AO was directed to supply reasons for reopening of assessment to assessee and only after disposal of objections, if any, raised by assessee to reopening, AO would proceed to recomputed income of assessee in accordance with law. (r.w.s. 69B)

    Jitender Kumar Gupta (HUF) v. ACIT (2021) 189 ITD 714 (Hyd.)(Trib.)

  57. S. 148: Income escaping assessment – Reopening after expiry of 4 years – Prior mandatory approval and sanction of Pr. CCIT/CCIT/PCIT/CIT

    The Assessee Company filed its Return of Income declaring total income of Rs. 25,27,660. The Assessee AO completed assessment under Section 143(3) of the Act after assessing income at Rs. 26,27,660. Thereafter, Assessee AO reopened the assessment after expiry of four years by issuing notice under Section 148 of the JCIT on 29 March 2014 before taking prior approval of JCIT and had not taken any approval of Pr. CCIT/CCIT/PCIT/CIT and completed assessment under Section 147 r.w.s. 143(3) of the Act on 31 March 2015 determining total income at Rs. 40,84,900.

    Aggrieved by the said order, the Assessee filed an appeal before CIT(A) challenging the validity of reassessment for want of necessary satisfaction of Pr. CCIT/CCIT/PCIT/CIT. However, CIT(A) upheld the order of Assessee AO. Aggrieved by the said CIT(A) order, the Assessee filed an appeal before Tribunal.

    The Tribunal further noted that new provision of section 151(1) amended by the Finance Act, 2015 made it clear and unambiguous that such satisfaction from the Pr. CCIT/CCIT/PCIT/CIT. was required before issuing a notice under section 148 of the Act. The Tribunal further relying on the decision of the jurisdictional High Court in the case of Reliable Finhold Ltd. v. Union of India [2015] 54 taxmann.com 318/229 Taxman 446/[2014] 369 ITR 419 (All.) stated that once reopening was initiated after the expiry of four years from the end of the assessment year and the original assessment was complete under section 143(3) then irrespective of the rank of the AO who reopened the case it was a mandatory condition to satisfy the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Therefore, the reopening in the case was invalid as the AO did not satisfy the mandatory condition as provided under section 151(1). Accordingly, the reopening of the assessment was quashed.

    Aries Marketers (P) Limited v. CIT(A) 212 TTJ 930 (All)(Trib.)

  58. S. 148: Reassessment – Where all the documents were available on the file of the AO during the original assessment no reassessment could be made – no reassessment can be done on the basis of mere change of opinion – no failure on part of the Assessee to fully and truly disclose all material facts renders the reassessment invalid and bad in law. (r.w.s. 50 & 32)

    The Assessee company had sold a built-up property on two plots of land and income from the same was offered to tax as income from long term capital gain in the return of income filed. A notice under section 148 of the Act was issued on 30/03/2015 for reopening the assessment on ground that said property sold by Assessee was included in block of assets on which depreciation was charged and sale consideration was more than WDV of block of assets, thus, such excess between sale consideration and WDV of block of assets was to be taxed as short-term capital gain chargeable under section 50.

    The Assessee challenged the reopening of assessment on the ground that Assessee had made true and full disclosure of the facts regarding the sale of the asset and depreciation thereon during the assessment proceedings itself. The Assessee placed on record all the evidence to show that property was held for a period of more than three years, the rent was received on the said property and no depreciation at all was claimed on the said property.

    As all these documents were part of the return of income and tax audit report filed before the Revenue, the Tribunal held that the Assessee had made a true and full disclosure of the facts regarding the sale of the asset and depreciation thereon and therefore the reassessment made was invalid and bad in law. (AY.2009-10 & 2012-13)

    Anant Raj v. Dy. CIT (2021) 212 TTJ 836 (Delhi)(Trib.)

  59. S. 148: Reassessment – Exemption disallowance u/s. 10(26BBB) – Quashes notice u/s 148 being vitiated on dual count of change of opinion [S. 10(26BBB)]

    The Assessee was partially disallowed exemption u/s 10(26BBB) under the original assessment u/s 143(3). The assessee is incorporation u/s 617 of the Companies Act, 1956, with the objective to work towards welfare and up liftment of ex-servicemen of state of Uttarakhand. Subsequently, the case was reopened u/s 147 of the Act after expiry of four years and the entire claim of exemption u/s 10(26BBB) was disallowed. ITAT opines that it is apparent that action u/s 147 was solely for the purpose of enhancing the disallowance of claim of exemption u/s 10(26BBB) already made in the original assessment u/s 143(3), which is impermissible and not in accordance with spirit of section 147 of the Act. The reasons recorded fail to satisfy the dual jurisdictional requirements as per law. ITAT relies on decision of Hon’ble Uttarakhand High Court in the case of Oil and Natural Gas Corp. Ltd. v. DCIT [2003] 262 ITR 648 and concludes that notice u/s 148 is not in consonance with established legal principles and is vitiated on dual count of change of opinion as well as first proviso to section 147 of the Act.

    Uttarakhand Purv Sainik Kalyan Nigam Limited v. ITO – 212 TTJ 498 (Dehradun) (ITA No.3070/Del/2016, dt. 31.05.2021)

  60. S. 153A : Assessment – Search or Requisition – Search conducted and residential and business premises of the Assessee- held, addition made on account of difference in the value of house property declared by the Assesee in the relevant AY and the valuation provided by the DVO after a gap of so many years and considering the market situation is liable to be deleted. – held, in the case of unaccounted sales no bill is issued and therefore no customer will pay taxes and levies which will result in higher profit to the seller and thus adopted an estimated 2% profit rate for supari business instead of the 5% estimated by AO. – S. 132(4) : Search and seizure – Statement on oath – set-off of income declared by the assessee in the statement recorded u/s. 132(4) of the Act out of undisclosed income computed by the AO is allowed as otherwise it would amount to double addition for the same lapse found in the Books of Accounts – S. 234A & 234B- interest- Default in furnishing return of income & in respect of advance tax respectively – interest is chargeable from the date of expiry of the Notice period given u/s. 153A of the Act to the date of completing the assessment u/s. 153A r.w.s. 143(3) of the Act u/s. 139 of the Act.

    A Search was conducted at the residential premises and the business premises of the Assessees, whose appeals were heard and adjudicated together since common issues were involved. The Assessees constructed House Property in the relevant AYs. The AO made addition towards the difference between the value declared by the assessee in their books of accounts and the valuation report of the DVO. The AR submitted that the difference in the value declared by the Assessee and valuation given in the valuation report is less than 15%. The Tribunal observed that the valuation report was made in F.Y 2016-17 whereas the property was purchased in the F.Y.2013-14 and F.Y.2015-16. The Tribunal held that considering the rise in the property value during this period, inflation as well the fact that the immovable property was registered and the valuation provided by the Assessees was accepted by the Sub-Registrar of the concerned State Govt. Office, the addition made by the AO is liable to be deleted.

    With respect to estimation of income on undisclosed turnover at 5% of Supari business, the Assessee relied upon the decision of a co-ordinate bench in case of M.A. Siddique Vs. DCIT in ITA Nos.62 to 66/Bang/2020, wherein the business of Supari was considered and it was observed that in the case of unaccounted sales no bill is issued and therefore no customer will pay taxes and levies which will result in higher profit to the seller and thus adopted 2% profit rate for supari business. The Tribunal in the present case followed the decision and adopted the profit rate of 2%.

    The AO assessed the undisclosed income in addition to the income voluntarily declared by the assesses in the statement recorded u/s. 132(4) of the Act. It was observed that the AO made independent addition based on the seized material found during the course of survey actions, that there cannot be income addition on account of voluntary disclosure made by the assessee. Hence the Tribunal allowed set-off of income declared by the assessee in the statement recorded u/s. 132(4) of the Act out of undisclosed income computed by the AO as otherwise it would amount to double addition for the same lapse found in the Books of Accounts of the assesses.

    With regard to levy of interest u/s.234A and 234B of the Act, the Tribunal held that interest u/s. 234A is chargeable from the date of expiry of the Notice period given u/s. 153A of the Act to the date of completing the assessment u/s. 153A r.w.s. 143(3) of the Act u/s. 139 of the Act. It further held that the interest u/s. 234B is to be levied only on the additional tax levied on the enhanced income determined u/s. 153A, r.w.s.143 of the Act and therefore the period of charge should be from the date of determination of income u/s. 143(3) r.w.s. 153A to the determination of increased total income u/s. 153A, r.w.s. 143(3) of the Act.

    Ahmed Shareef and ANR v. Dy. CIT (2021) 189 ITD 522 (Bang)(Trib.)

  61. S. 153C : Assessment – Income of any other person – Search – No incriminating evidence found – addition cannot be sustained.

    It was held that since no incriminating material was recovered during the course of search and seizure action, the Ld. CIT(A) has wrongly sustained the addition made by the Ld. AO on account of house hold expenses.

    Smt. Harbhajan Kaur v. DCIT ITA NO. 70 & 71/Chd/2021 dated October 25, 2021

  62. S. 153C: Assessment – Income of any other person – Search – Assessment under S. 147/S.148 – void ab initio

    The Assessing Officer initiated re- assessment proceedings u/s 147 of the Act relying upon the information received based on the certain documents found during the course of search from the premises of a 3rd party. Thus, the assessment is based upon the documents found during the course of search of 3rd party premises, but that can be made only u/s 153C of the Act. The provision of Section 153C of the Act is attracted when there are any incriminating documents pertaining to the assessee which are found during the search of 3rd party premises. The provisions of Section 153C of the Act are non-obstantive provisions and the same specifically excludes the operation of Sec. 147 of the Act, therefore, invoking the provisions of Sec. 147, instead of 153C of the Act appears to be incorrect in legal parlance. When any incriminating documents are found Section 153C is invoked and the same has to be applied by the Revenue authorities as Section 147 has its own separate footing for invoking the provisions. If Sec. 147 is permitted on the basis of documents found in the course of search of 3rd party premises, then the provisions of Sec. 153C of the Act would become redundant. The notice issued u/s 148 of the Act and the consequent assessment framed u/s 147 of the Act is void-ab-initio.

    M/S. K.S. Chawla & Songs (HUF) v. ACIT ITA. 2724 /Del/2015 dated May 18, 2021

  63. S. 153C: Search and Seizure – No incriminating material found towards addition made in respect of AY the proceedings for which are unabated / concluded – addition made for such AYs cannot be sustained

    A search action u/s.132 of the Act was conducted in the residential premises of the Director of Assessee company. During the course of search, documents belonging to the Assessee were seized. Thereafter, the case has been taken up for scrutiny and notice u/s.143(2) & 142(1) of the Act. During the course of assessment proceedings, the AO has made addition towards unsecured loans taken from various companies u/s.68 of the Act, on the ground that the Assessee has failed to prove identity, genuineness of transactions and creditworthiness of the parties. The AO also stated that certain other companies were indulged in providing accommodation entries and Assessee company being one of beneficiary of such entries, loans said to have been received from said companies were being treated as unexplained credit under Section 68 of the Act. Similarly, the AO held that the interest paid on such loans was also bogus and thereby made addition towards interest paid on said loans u/s.37 of the Act.

    Before the CIT(A), the Assessee contended that the AO has made addition Towards unsecured loans without reference to any incriminating material found as a result of search. However, the CIT(A) rejected such contention.

    On further appeal, the Tribunal in light of decision of the Hon’ble Supreme Court in the case of PCIT v Meeta Gutgutia [2018] 96 taxmann.com 468 and subsequent High Court rulings held that, from reading the proviso provided to section 153A it is very clear that assessment years which have already been completed are treated as unabated as on the date of search and for those assessment years the scope of assessment u/s.153A / 153C of the Act is limited to assess income on the basis of incriminating material found as a result of search. As in the present case AO has made additions on the basis of regular return of income filed by the Assessee for the relevant AYs without reference to any incriminating material found as a result of search, the additions made were deleted.

    Asst. CIT & Anr. v. CMG Steels Pvt. Ltd. & Anr., (2021) 212 TTJ 109 (Chen)(Trib.)

  64. S. 154: Rectification of mistake apparent on record – No format prescribed for rectification application – a simple letter can be considered as a rectification application even if it does not mention to be a rectification application – substantial justice prevails over technical consideration – Revenue cannot take undue benefit of the negligence of Assessee with regards to his rights

    During the reassessment proceedings, the Assessee had filed a letter dated 29/02/2016 through which the Assessee filed a revised return along with reasons wherein it excluded the amount of long-term capital gain declared on the sale of the said property. This gain was earlier offered to tax in the original return and subsequently reopening was conducted by AO to treat the same as short term capital gains. This exclusion of capital gain was done due to the failure on part of the buyer to make the payments pursuant to which the Assessee filed a suit before the Hon’ble Delhi High Court for mediation and conciliation. A settlement deed dated 30/05/2015 was executed between the Assessee and the buyer wherein the Hon’ble Delhi High Court cancelled the deeds for sale of above mentioned land. However, the lower authorities rejected this relief to the Assessee by relying on the judgment of the Apex court in CIT v. Sun Engg. Works (P.) Ltd. [1992] 64 Taxman 442/198 ITR 297.

    The Tribunal held that once the sale transaction is reversed and the asset is owned and held by the Assessee being the seller, ostensibly no capital gain can be said to have accrued to the Assessee at all. The sale of the property was cancelled on 06/06/2015 and therefore, the very basis to exclude the LTCG from taxable income was not available at the time of filing the return of income in response to notice under section 148 and in fact, it became available on account of the change in circumstances during the course of hearing in the reassessment proceedings itself.

    Further, the Assessee had also argued that letter dated 29/02/2016 should be considered as a rectification application u/s 154 of the Act. However, the Revenue contended that such letter did not mention to be an application u/s 154 of the Act and therefore, cannot be considered as such.

    The Tribunal held that there is no format prescribed under the law for filing a rectification application u/s 154. It observed that what is relevant is that a mistake is brought to the knowledge of the AO. Further, it is a trite law that when substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. When the substantive law confers a benefit on the Assessee under a statute, it cannot be taken away by the adjudicatory authority on mere technicalities. Hence, too hyper-technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. The Article 265 of the Constitution of India lays down that no tax shall be levied except by authority of law. Hence, only legitimate tax can be recovered.

    An old circular no. 14(XL35) dated 11th April 1955 issued by the CBDT instructs that officers should not take advantage of the ignorance of an Assessee as is one of their duties to assist taxpayer and they should take initiative in guiding the taxpayer. The advice contained in the circular is also legally binding on all the field officers. Therefore, the Tribunal directed the AO to treat the letter dated 29/02/2016 as an application u/s 154 and thereby exclude the long term capital gain on sale of the said property. (AY.2009-10 & 2012-13)

    Anant Raj v. Dy. CIT (2021) 212 TTJ 836 (Delhi)(Trib.)

  65. S. 194C: TDS – provisions of Sec 194C applicable only when assessee has paid or credited any charges covered thereunder – Estimated excessive wastage treated as Making charges – addition u/s 40(a)(ia) for non-deduction of TDS u/s 194C on assumed amount, being excessive wastage treated as making charges, is not sustainable [S.40(a)(ia)]

    Assessee Jeweller engaged in Jewellery manufacturing had reported wastage to the tune of 6.2 %. A.O estimated the normal wastage at around 1 %, thereby treated the wastage difference as making charges by adopting the market rate of gold and disallowed the same u/s 40(a)(ia) for non-deduction of TDS u/s 194C.

    Assessee’s argument before CIT(A), that additions made by A.O towards estimated making charges on the basis of excessive wastage quantified is purely on assumption and suspicion, without there being any material facts to prove that assess has paid making charges by retaining gold with goldsmith did not find any favours.

    On appeal the Tribunal held that :

    • Provisions of Sec 194C are applicable when the assessee has paid or credited any charges covered thereunder. When no payment is debited or credited to respective party’s accounts, then such payment cannot be considered within the ambit of sec 194C or any other TDS provisions.

    • There is no uniform yardstick to quantify the wastage in any process of manufacturing of goods. Further wastage allowed by the assessee to goldsmith is a matter of business prudence/commercial expediency and the same cannot be called upon to question by the AO unless he has evidence to prove that the same is excessive.

    • Since assessee has neither debited making charges into P & L a/c nor credited any amount to parties’ account, the question of application of sec 194C does not arise.

    • Since no Independent evidence has been brought on record by the AO to support his findings, as against assessee having produced necessary evidences to prove that making charges has been separately paid and TDS deducted wherever applicable, the addition cannot be sustained.

    (ITA Nos. 3071 (Chny) of 2017 dt. 31-03-2021 (AY. 2013-14)

    Siva Valli Vilas Jewellers (P) Ltd .v. DCIT (2021) 212 TTJ 101 (Chennai)(Trib.)

  66. S. 194-IA : TDS – Payment of Refundable Security Deposit by developer to Landowners by virtue of JDA – Whether Advance payment not linked to transfer of immovable property liable to TDS u/s 194-IA ? [Sec 201(1)]

    Assessee Company, a developer, entered into JDA cum general power of attorney with landowners, whereby the landowners agreed to transfer a portion of land, in lieu of share in superstructure which is to be constructed by the developer. As per JDA developer is only permitted to enter upon the scheduled property to develop a residential apartment building by way of License which is not to be construed as delivery of possession in part performance of any contract as defined u/s 53A of Transfer of Property Act r/w s 2(47)(v) & (vi). The Developer in turn agreed to pay refundable security deposit. Furthermore, the said deposit as per terms of JDA would be recovered through the sale of the part of the owner’s constructed area.

    A.O held that the refundable security deposit is consideration for transfer of immovable property by the developer to the landowners liable to TDS u/s 194-IA, and treated the assessee, as assessee in default u/s 201(1).

    On appeal the Tribunal held that:

    There was no transfer of immovable property during the year under consideration, as transferee was not able to complete any acts as mentioned in JDA.

    The security deposit cannot be treated as advance payment as same was not linked to transfer of immovable property as enumerated in s 194-IA.

    The existence of income is a sin qua non for attracting TDS provisions and that the refundable security deposit paid did not constitute income in hands of land owners.

    Based on above it was held that assessee was not liable to deduct TDS u/s 194-IA from said refundable security deposit and cannot be treated as assessee in default u/s 201(1) (AY. 2014-15)

    Prestige Estates Projects Ltd v. ACIT (2021) 212 TTJ 23 (Bang.)(Trib.)

  67. S. 195 : TDS – Payment to non-resident abroad – Agency Agreement – Principal and agent relationship – Sales commission for services rendered outside India – Not covered u/s 195 [Sec.5(2), 9(1)(vii),40(a)(i)]

    Assessee Company appointed a sole service provider, to promote the activities and services provided by the assessee company by contacting and reaching out to companies based in UAE, and relationship was purely that of principal and agent. The payment being in nature of sales promotion expenditure for services rendered outside India, thus not falling in category of income received or deemed to be received in India, as well as income accruing or arising or deemed to accrue or arise in India not attracting TDS u/s 195.

    A.O invoked provisions of sec 40(a)(i) and disallowed the commission paid treating the same as Joint venture agreement based on the method of determination of commission amount.

    On appeal the Tribunal held that:

    Fundamental requirement to deduct Tax at source, is that the sum has to be chargeable under the provisions of the Act to cast an obligation u/s 195(1)

    Once the relationship is that of principal and agent, the mode of determination of fees as agreed between two parties cannot be construed as a joint venture, to bring the commission paid under the net of Sec 195, more so when the services were rendered outside India and did not fall in category of income received or deemed to be received in India, and consequently the provisions of sec 40(a)(i) cannot be invoked. (AY. 2013-14)

    Prime Oceanic Pvt. Ltd v. ITO (2021) 212 TTJ 17 (Jp.)(UO)(Trib.)

  68. S. 195: Short deduction of tax-Non provision of PAN- Section 206AA cannot override DTAA in case of payment made to non-resident

    The Assessee was a Government owned company, which was into transportation of goods, passengers, and parcels etc. in domestic and international sector through aircrafts. The Assessee had been regularly filing their TDS return by depositing taxes in time in accordance with the Income-tax Rules, 1962. An order under section 200A of the Act, was passed and thereafter an order under Section 154 of the Act was received by the Assessee for short deduction of TDS on account of non-provision of PAN in case of Engine Lease Finance B.V. (ELFC), a non-resident company, taxed resident in Netherland, was not mentioned at the time of return filing as the foreign company did not have PAN. Assessee claimed to have taken an engine on lease under an Agreement from Engine Lease Finance B.V. The Assessee did not deduct the TDS from the payment but deposited from their account and absorbed it as cost. Aggrieved by the same, the Assessee preferred an appeal before CIT (A). The CIT(A) dismissed the said appeal. Aggrieved by the same, the Assessee preferred an appeal before the Tribunal.

    The Tribunal relying on the decision of Dy. DIT v. Serum Institute of India Ltd. [2015] 56 taxmann.com 1 (Pune – Trib.), Dy. CIT v. Infosys BPO Ltd. [IT Appeal No. 1333 (Bang.) of 2014, order dated 27-9-2019] and the judgment of Hon’ble Delhi High Court in case of Danisco India (P.) Ltd. v. Union of India[2018] 90 taxmann.com 295/253 Taxman 500/404 ITR 539 held that provisions of Section 206AA of the Act does not override beneficial provisions of DTAA between India and Netherland. Thus, the Assessee was entitled to the benefit of the DTAA and had rightly deducted the tax @ 10% instead of 20% as per Section 206AA of the Income Tax Act, 1961.

    Air India Limited v. ITO, 212 TTJ 109 (Delhi)(Trib.)

  69. S. 254(1) : Appeal (Tribunal) – Additional ground – Admissibility – ground relating to mandatory requirement envisaged u/s 151 – legal ground – admitted – [sec 151, ITAT Rules, 1963 r. 11]

    The additional ground was raised by the assessee that the impugned order u/s 147 r.w.s 143(3) was passed without complying with the mandatory requirements and conditions u/s 151.

    Tribunal admitted the additional ground being purely a legal ground which goes to the root of the matter and same does not require fresh facts to be investigated.(AY. 2013 – 14)

    Satnam Singh v. ITO (2021) 212 TTJ 1 (Asr.)(UO)(Trib.)

  70. S. 263 : Revision – Order passed u/s 143(3) r/w sec 153B, after approval from Jt CIT u/s 153D – Revision of Order u/s 263 passed by PCIT without approval of JT CIT is nullity and void ab initio.

    Tribunal held that PCIT has no jurisdiction to proceed u/s 263 against the Order passed u/s 143(3) r/w sec153B, when there is no revision of approval of Jt CIT u/s. 153D. (AY. 2017-18)

    Smt Abha Bansal v. PCIT (2021) 212 TTJ 545 (Del.)(Trib.)

  71. S. 263: Revision – Scope – Admissibility of documents seized from third party – No corroborative evidence brought on record – considered as inadmissible evidence in proceedings u/s 263

    In the assessee’s case, copies of documents, emails and power point presentations were found from the computer of 3rd party being an ex-employee. Furthermore, no incriminating documents or material were found from the possession of assessee.

    In revision proceedings PCIT considered the said documents seized from third party as evidences and proceeded with the proceedings u/s 263.

    Tribunal held that PCIT having proceeded without any corroborative evidences, nor has obtained certificate u/s 65B(4) of the Evidence Act to prove the contents of seized documents, the same is not admissible in evidence, the order u/s 263 is perverse.(AY. 2017-18)

    Smt Abha Bansal v. PCIT (2021) 212 TTJ 545 (Del.)(Trib.)

  72. S. 263: Revision – Erroneous & prejudicial order – A.O examined the documents furnished based on inquiry during Assessment – A.O was convinced and no disallowance against claim made u/s 54F – Revision by PCIT of Assessment order passed u/s 143(3) overturned.

    During the assessment proceedings, A.O sought the details for admissibility of deduction claimed u/s 54F. Assessee furnished all the relevant details and A.O after having examined the documents was convinced and allowed the claim u/s 54F.

    PCIT by raising various objections opined that deduction u/s 54F has wrongly been allowed, and made a case for revision of the assessment order passed u/s 143(3).

    On appeal Tribunal held, that PCIT failed to make out a proper case for revision of the Order passed u/s 143(3), and overturned the order, citing following reasons:

    • Firstly, various objections raised by PCIT has no relevance in the matter, in granting deduction u/s 54F

    • Also the observation of the PCIT, that A.O failed to enquire and verify the issues is not correct, more so, when the assessee on an inquiry furnished all the details, and necessary evidences to corroborate the claim was filed during assessment proceedings which was evident from the order sheet entries

    • Mere doubt cannot lead to revision of an order unless it is proved that AO failed to apply his mind, or that his view was wrong in facts or in law

    • AO having examined the issue, and being convinced, and not making any disallowance the order passed u/s 143(3) cannot be said to be erroneous and prejudicial order (AY. 2014 – 15)

    Satnam Singh v. ITO (2021) 212 TTJ 793 (Pune)(Trib.)

  73. Rule 26 of Income Tax (Appellate Tribunal) Amendment Rules, 2012- upon death of an Assessee during the course of hearing, it is mandatory to file a revised form 36 and the proceedings shall continue by or against, the executor, administrator or other legal representative of the Assessee or by or against the assignee, receiver or liquidator, as the case may be

    During the course of the hearing, Counsel for the Assessee informed that the Assessee had expired. Neither the legal hairs were brought on record nor revised Form 36 were filled by the revenue and on behalf of assessee, despite grant of various opportunities by the Tribunal. The Hon’ble bench relied on the judgement of Shri Ram Chand Arora V. DCIT in IT(SS)A No. 03/Agr/2001 and dismissed the appeals filed by the revenue/assessee, as both the parties failed to file revised form 36 by bringing on record the legal heirs of deceased SH Chironjilala Shivhari. Both the parties are, however, granted liberty to file the application of revival along with revised form 36 parties Rule 26 of Income Tax (Appellate Tribunal) Amendment Rules, 2012. (AY 2003-04 to 2008-09 & 2003-04 to 2009-10)

    ACIT v. Chironji Lal Shivhare and Anr. (2021) 189 ITD 692 (Agra)(Trib.)

  1. S. 2(47) : Transfer – Since all rights in the property, including constructive possession was handed over by the Assessee to purchaser the transaction has rightly been treated as sale or transfer u/s 2(47) of the Act by lower authorities, giving rise to capital gains.

    Allowing Revenue’s appeal, the High Court observed that the relevant clauses of power of attorney suggested that the Assessee has handed over all the rights in the property including constructive possession of property; hence impugned transaction is to be treated as sale / transfer for the purposes of Section 2(47) of the Act giving rise to capital gains. (ITA No. 249 of 2015, dt.19-01-2021) (AY 2006-07)

    CIT v. Mr. Abdul Wahab, (2021) 320 CTR 874 (Karn)(HC)

  2. S. 4 : Charge of income-tax – Crabon credits – Capital receipts – Not taxable.

    Dismissing the appeal of the revenue the Court held that a receipt on sale of carbon emission reduction is a capital receipt. Followed S.P. Spinning Mills Pvt Ltd v. ACIT (2021) 433 ITR 61 (Mad) (HC) ( AY. 2010-11)

    PCIT v. Lanco Tanjore Power Co. Ltd. (2021)434 ITR 671 (Mad)(HC)

  3. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Income will be assessed in the hands of PQR and STU and benefit of article 13 of the India – Netherlands Double Taxation Avoidance Agreement is not admissible to these funds will be assessed in the hands of PQR and STU and benefit of article 13 of the India – Netherlands Double Taxation Avoidance Agreement is not admissible to these funds-DTAA-India-Netherlands. [S. 2(17), 5, 60, 61, 62, 63(a), 160(1)(iv) Art 13]

    The issues raised in five applications being common the matters were heard together and common orders were passed. The main issue involved for consideration was “Whether the Income arising to PQR and STU investment made in India out of the contributions made by ABC. DEF or GHI will be assessed in the hands of ABC, DEF or GHL , as the contributions made by it to PQR and STU will be considered as, revocable transfer under section 61 of the Act ?

    After analyzing the various provisions of the Act and DTAA, the AAR held that (Questions 1 to 5) No, it will be assessed in the hands of PQR and STU and benefit of article 13 of the India – Netherlands Double Taxation Avoidance Agreement is not admissible to these funds. Other queries raised. i.e. Whether the contribution made by participants to the fund will be considered as revocable transfer under section 61 or whether the funds are assessable under section 161 are in the nature of alternative pleas have become infructuous in view of the specific finding that the income is assessable in the hands of the funds.(AAR. Nos. 1358 to1362 dt 21-1-2020)

    ABC, In re (2021)434 ITR 441 (AAR)

  4. S. 9(1)(vii):Income deemed to accrue or arise in India – Fees for technical services – Majority of services technical in nature – Services were ancillary and subsidiary to application or enjoyment of right, property or information for which royalty paid- Chargeable to tax in India – Liable to withhold tax – DTAA-India-USA-Netherlands [S.90, 92 to 92F, 195, Art 12(5)(a)]

    After analyzing the agreements and provisions the AAR held that, The payment to be made by Perfetti India for the cost to be allotted by the applicant is taxable under article 12 (5) (a) of the DTAC between India and Netherlands. Though some of the services are also taxable article 12 (5) of the DTAC, such services are not segregated as they are already taxable under article 12 (5) (a). Accordingly the payment made by the Indian company would be chargeable to tax in India.That the Indian company was liable to withhold taxes under section 195 of the Act on the payments to be made towards the costs to be allocated by the assessee. That as the applicant was liable to tax in India, it was required to file a tax return under the provisions of the Act and the transfer pricing provisions of section 92 to section 92F would be applicable in respect of the payment to be made by the Indian company. (AAR No. 869 of 2010 dt 21-6-2019)

    Perfetti Van Melle Holding B.V., In Re (2021) 434 ITR 101 (AAR)

  5. S. 10A : Free trade zone – Foreign exchange – Deductible from both export turnover and total turnover.

    Dismissing the appeal of the revenue the Court held that the Tribunal was right in holding that the expenditure in foreign exchange was to be excluded from both the export turnover and the total turnover while computing the deduction under section 10A . Followed CIT v. SRA Systems Ltd (2021) 434 ITR 656 (Mad) (HC) (AY. 2006-07)

    PCIT v. Mizpah Publishing Services Pvt. Ltd. (2021) 434 ITR 663 (Mad) (HC)

  6. S. 10A : Free trade zone – Interest charges attributable to delivery of computer software – Excluded from export turnover – Deducted from total turnover – New unit – Entitle to deduction – Brought forward losses and unabsorbed depreciation – Deduction to be allowed before adjusting brought forward losses and unabsorbed depreciation. [S. 10A(2)(i), 10A(2)(ii)]

    Dismissing the appeal of the revenue the Court held that the Tribunal was right in holding that the internet expenses incurred in foreign exchange having been excluded from the export turnover should be reduced from the total turnover for the purpose of computing deduction under section 10A . That the Tribunal was right in holding that the assessee was entitled to deduction under section 10A in respect of the new unit. That the Tribunal was right in holding that the assessee’s claim for deduction under section 10A was to be allowed before adjusting the brought forward losses and unabsorbed depreciation. (AY.2005-06)

    CIT v. SRA Systems Ltd. (2021)434 ITR 656 (Mad) (HC)

  7. S. 10B: Export oriented undertakings – Manufacture of article – Processing of iron ore amounts to manufacture – Entitle to exemption – Determination of market value required verification by the Revenue – The order of remand was justified. [S.10B(7), 80IA(8), 80IA(10)]

    Dismissing the appeal of the revenue the Court held that the Tribunal was right in holding that the assessee was entitled to the benefit under section 10B. Applied CIT v. Sesa Goa Ltd (2004) 271 ITR 331 (SC). Court also held that the assessee had also purchased crude ore, run of mines, from outside parties, that is from the mines belonging to other parties. The price paid by the assessee to these outside parties, according to the Tribunal, could be regarded as the best evidence for determining the market value of the crude ore the assessee extracted from its own mine and used. The Tribunal felt that the determination of market value required verification by the Revenue. The order of remand was justified.

    CIT v. Sesa Goa Ltd. (2021)436 ITR 17 / 203 DTR 97 (Bom) (HC)

  8. S. 10(10D) : Life insurance policy – Keyman insurance policy – Character of Keyman Insurance Policy would not get converted into ordinary Life Insurance Policy despite its assignment by employer company – Amount taxable in hands of employee as ‘perquisite’.

    On appeal the High Court held that basis the provisions of Section 10(10D) of the Act with its Explanation 1 it can be concluded that employee not having paid any premium on keyman insurance policy from his own resources, the character of policy would not get converted into ordinary Life Insurance Policy despite its assignment and therefore, any benefit accruing to the employee upon its surrender or encashment will be taxable in the hands of the Assessee (employee) as “perquisite”. (ITA No.522 of 2017, dt. 04-12-2020) (AY 2007-08)

    Allu Arvind Babu v. ACIT (2020) 320 CTR 444 / 122 taxmann.com 66 (Mad) (HC)

  9. S. 11 : Property held for charitable purposes – Depreciation – Entitle to set off excess application of income of earlier assessment year – Precedent – Commissioner (Appeals and Tribunal must follow the decision of High Court. [S.(2(24), 11(1)(d)), 12(1), 32]

    Allowing the appeal the Court held that a charitable institution is entitled to depreciation. Once assessee was allowed depreciation, it would be entitled to carry forward the depreciation. Court held that the charitable trust is entitled to set off excess application of income of earlier assessment years against income of current assessment year. Court also held that if the judgments and orders of the High Courts are applicable to the facts and circumstances of a case pending before the Commissioner (Appeals), he must follow them without any deviation. Similarly the Tribunal must also follow the judgments and orders of the High Courts. (AY. 2009-10)

    Anjuman-E-Himayat-E-Islam v. ADIT (2021) 436 ITR 139 / 201 DTR 337 (Mad) (HC)

  10. S. 11: Property held for charitable purposes – Donation made for other charitable purposes – Entitle to exemption [S. 2(15)]

    Dismissing the appeal of the revenue the Court held that a cursory glance at the list of beneficiaries would show that there had been donations to charitable and religious institutions only and that philanthropy had been the essence of all the donations. The assessee-trust was entitled to exemption under section 11.(AY.2007-08)

    DIT (E) v. Shanmuga Arts, Science, Technology and Research Academy (Sastra) (2021) 436 ITR 633 (Mad) (HC)

  11. S. 12A : Registration – Trust or institution – Assessee-trust formed with main object of running hospitals for philanthropic purposes having incidental / ancillary object, of running Chitties / Kuries and the income from the business of Chitty/Kuries was fully utilized for the purpose of main object of Assessee-trust ie ‘medical relief’ – Assessee-trust entitled to exemption

    Allowing the appeal, the High Court held that assessee-trust, carrying on the business, was entitled to exemption with respect to income from the business of Chitty / Kuries as such income was fully utilized for the purpose of ‘medical relief’, which is the main object of the assessee-trust, falling under the definition of ‘charitable purpose. (W.P.(C) No.1199 of 2015, dt. 13-11-2020)(AY.2012-13)

    Bharathakshemam v. PCIT (2021) 320 CTR 198 / 199 DTR 113 (Ker) (HC)

  12. S. 12AA: Procedure for registration – Trust or institution – Cancellation of registration – The Principal Commissioner or Commissioner has the power to cancel the registration and has assigned reasons for such cancellation. [S. 11, 12, 12A, Art. 226]

    The Assessee under the writ challenged the cancellation of the registration made under Section 12AA(3). Hon’ble HC opines that the scope of Sections 11, 12, 12A and 12AA of sub-clause (3) empowers the Principal Commissioner or Commissioner even prior to 01.06.2010 to cancel the registration made u/s 12A of the Act, if the Commissioner is satisfied that the activities of such Trust or Institution are not genuine or are not being carried out in accordance with the objects of the Trust or Institution, as the case may be, and he shall pass an order in writing for cancellation of the registration of such Trust or Institution. Herein, the Commissioner of Income Tax has considered the merits and demerits of the case and assigned reasons for cancellation of registration. HC held that the reasons assigned for the purpose of cancellation are undoubtedly in consonance with the powers conferred on the Commissioner under sub-clause (3) to Section 12AA of the Act and therefore, the order of cancellation cannot at any stretch of time be stated as infirm or perverse. (WP No. 7110 of 2008 dt. 26-4-2021)

    Vellore Institute of Technology v. CIT (2021) 436 ITR 483 / 201 DTR 385 / 320 CTR 799 / 280 Taxman 402 (Mad.)(HC)

  13. S. 12AA : Procedure for registration – Trust or institution – Bogus donations – Misuse of registered status – Cancellation of registration is held to be justified [S. 12AA(3), 80G]

    Allowing the appeal of the revenue the Court held that the answers given to the questionnaire by the managing trustee of the assessee-trust showed the extent of misuse of the status enjoyed by the assessee by virtue of registration under section 12AA of the Act. These answers also showed that donations were received by cheque out of which substantial money was ploughed back or returned to the donors in cash. The facts thus clearly showed that those were bogus donations and that the registration conferred upon it under sections 12AA and 80G of the Act was completely being misused by the assessee. An entity which is misusing the status conferred upon it by section 12AA of the Act is not entitled to retain and enjoy such a status. The authorities were therefore, right and justified in cancelling the registration under sections 12AA and 80G of the Act.

    CIT (E) v. Batanagar Education and Research Trust (2021)436 ITR 501/ 204 DTR 217/ 321 CTR 633 (SC)

    Editorial : Order of High Court ITA NO 116 of 2018 dt 8-10-2018 is reversed, Order in Batanagar Education and Research Trust v CIT (E) (2017) 59 ITR 81 (SN) (Kol) (Trib) is affirmed.

  14. S. 14A : Disallowance of expenditure – Exempt income – No exempt income received – Provision is not applicable [R.8D]

    Dismissing the appeal of the revenue the Court held that that since no exempt income had accrued to the assessee the provisions of section 14A did not apply. (AY.2010-11)

    PCIT v. Novell Software Development (India) Pvt. Ltd. (2021) 434 ITR 154 / 202 DTR 370 / 278 Taxman 390 (Karn) (HC)

  15. S. 14A: Disallowance of expenditure – Exempt income – Onus on revenue to prove that disallowance was erroneous – Without examining the accounts disallowance is not justified [R.8D]

    Court held that the onus on revenue to prove that disallowance was erroneous and without examining the accounts disallowance is not justified (AY.2007-08, 2008-09)

    Coforge Limited v. ACIT (2021) 436 ITR 546 / 204 DTR 273 / 322 CTR 10 (Delhi) (HC)

  16. S. 14A : Disallowance of expenditure – Exempt income – Enhancement of disallowance is held to be not valid [R.8D]

    Dismissing the appeal of the revenue the Court held that the Assessing Officer had accepted that the assessee had not borrowed funds. The assessee had deducted certain proportionate expenditure, which the Assessing Officer had not disbelieved or disputed. Volume of investment, the assessee was said to have received charge-free services from banks and other financial institutions with whom it had invested. The Tribunal had correctly deleted the disallowance of Rs.12.29 crores under section 14A of the Act in accordance with rule 8D of the Income-tax Rules.

    CIT v. Sesa Goa Ltd (2021) 436 ITR 17 / 203 DTR 97 (Bom) (HC)

  17. S. 14A : Disallowance of expenditure – Exempt income – No exempt income – Disallowance cannot be made [R.8D]

    When there is no exempt income, no disallowance can be made. (AY. 2007-08 to 2010-11, 2012-13 and 2013-14)

    CIT v. Tamilnadu Road Development Company Ltd. (2021) 436 ITR 323 (Mad) (HC)

  18. S. 14A: Disallowance of expenditure – Exempt income – No dividend income earned – Disallowance cannot be made [R.8D]

    Allowing the appeal the Court held that when there is no dividend income earned, disallowance cannot be made. (AY. 2014-15)

    Tamilnadu Road Development Co. Ltd. v. Dy. CIT (2021) 436 ITR 298 (Mad) (HC)

  19. S. 28(iv) : Business income – Value of any benefit or perquisites – Converted in to money or not – Amalgamation –Excess of net consideration over value of companies taken over – Not assessable as income. [S. 4]

    Dismissing the appeal of the revenue the Court held that the provisions of section 28(iv) of the Act make it clear that the amount reflected in the balance sheet of the assessee under the head reserves and surplus cannot be treated as a benefit or perquisite arising from business or exercise of profession. The difference in amount post amalgamation was the amalgamation reserve and it cannot be said that it was out of normal transaction of the business being capital in nature, which arose on account of amalgamation of four companies, it cannot be treated as falling under section 28(iv). Followed CIT v. Stads Ltd. (2015) 373 ITR 313 (Mad) (HC).(AY.2006-07)

    CIT(LTU) v. Areva T & D India Ltd. (2021) 434 ITR 604 (Mad) (HC)

  20. S. 32: Depreciation – Property acquired in exchange of extinguishment of tenancy rights – Depreciation allowable – Non – Compete fee – Depreciation allowable on principle of consistency.

    Dismissing the appeal of the revenue the Court held that depreciation is allowable in respect of property acquired in exchange of relinquishment of tenancy rights in another property. Court also held that depreciation on non-compete fees is held to be allowable. Followed CIT v. Areva T & D India Ltd. (2012) 26 taxmann.com 266 (Mad) (HC). (AY.2006-07)

    CIT(LTU) v. Areva T & D India Ltd. (2021) 434 ITR 604 (Mad) (HC)

  21. S. 32 : Depreciation – Carry forward and set off – Unabsorbed depreciation on 1-4-2002 can be carried forward and set off without taking into account number of years of such carry forward. [S.32 (2)]

    Dismissing the appeal of the revenue the Court held that unabsorbed depreciation relating to the assessment year 1997-98 to 2000-01 was eligible for set off against income for the assessment year 2005-06. Circular No. 14 of 2001 dated November 9, 2001 ([2001] 252 ITR (St.) 65, 90).(AY.2007-08)

    CIT v. KMC Speciality Hospitals India Ltd. (2021) 436 ITR 534 (Mad) (HC)

  22. S. 32: Depreciation – Building – Road – Entitle to depreciation at 10% – Depreciation on property held on lease – Depends on terms of lease – Matter remanded. [S. 32 (1)(ii)]

    Tribunal is justified in allowing the depreciation at 10% in roads. Court also held that the land on which the facility had been developed by the assessee, was owned by the SIPCOT and the development consisted of providing roads inside the IT Park, establishment of a multi-level car parking, etc. Under the agreement, the assessee had to develop these facilities and maintain them and the period was stated to be 99 years, which is virtually perpetual. Therefore, a deeper examination of the factual issue was warranted. The matter had to be readjudicated by the Assessing Officer, for which purpose, the Assessing Officer had to analyse the agreement dated September 21, 2005 entered into between the assessee and the SIPCOT and not go merely by the nomenclature.(AY. 2007-08 to 2010-11, 2012-13 and 2013-14)

    CIT v. Tamilnadu Road Development Company Ltd. (2021) 436 ITR 323 (Mad) (HC)

  23. S. 35D: Amortisation of preliminary expenses – Demerger – Spin Off – Entitled to amortisation of expenses on demerger.

    The Legislature has used the word assessee having regard to the various ways in which the schemes are structured. Secondly, having regard to the fact that the deduction claimed by the assessee under the provisions of section 35DD of the Act was allowed in the assessment years 2004-05 to 2006-07, it should not have been disallowed in the assessment years 2007-08 and 2008-09. The amounts were deductible. (AY.2007-08, 2008-09)

    Coforge Limited v. ACIT (2021) 436 ITR 546 / 204 DTR 273 / 322 CTR 10 (Delhi) (HC)

  24. S. 37 (1): Business expenditure – Capital or revenue – Commuted and discounted lease rent – Allowable as revenue expenditure.

    Court held that the Tribunal was wrong in applying the matching principle and directing that one-time lease rent should be spread equally over the tenure of the lease. The matching principle, which is an accounting concept, requires entities to report expenses, at the same time, as revenue. The assessee chose to incur the liability of a crystallised amount in the period relevant to the assessment year 2007-08 and the amount allowable as deduction.(AY.2007-08, 2008-09)

    Coforge Limited v. ACIT (2021) 436 ITR 546 / 204 DTR 273 / 322 CTR 10 (Delhi) (HC)

  25. S. 37 (1) : Business Expenditure – Foreign travelling expenses of wife- disallowed.

    Assessee-proprietor claimed expenditure incurred on foreign travel of his wife in capacity of Marketing Executive of proprietorship concern of assessee. It was held that since assessee had failed to prove with relevant documents that his wife was an employee of its proprietary concern and her visit was exclusively for business purpose, impugned expenditure could not be allowed. [AY: 2005-2006]

    Amarnath Reddy v. ACIT (2021) 435 ITR 97 (Mad)(HC)

  26. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Commission paid outside India for obtaining orders outside India – Not liable to deduct tax at source [S.5(2)(b), 9(1)(i)]

    Dismissing the appeal of the revenue the Court held that the associated enterprises had rendered services outside India in the form of placing orders with the manufacturers who were already outside India. The commission was paid to the associated enterprises outside India. No taxing event had taken place within the territories of India and the Tribunal was justified in allowing the appeal of the assessee. Followed CIT v. Toshoku Ltd. (1980) 125 ITR 525 (SC) while dealing with non-resident commission agents has held that if no operations of business are carried out in the taxable territories, the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India. (AY.2013-14)

    PCIT v. Puma Sports India P. Ltd. (2021) 434 ITR 69 (Karn) (HC)

  27. S. 40(a)(ia): Amounts not deductible – Deduction at source – Transport charges – Amendment inserted by the Finance Act, 2010 is applicable to earlier years – No disallowance can be made. [S.139 (1)]

    Dismissing the appeal of the revenue the Court held that the Tribunal was right in deleting the disallowance made under section 40(a)(ia) of the Income-tax Act, 1961 for non-deduction of tax at source on transport charges was to be allowed and in holding that the amendment to section 40(a)(ia) introduced in the year 2010 was applicable retrospectively to the assessment year 2005-06. Followed CIT v. Calcutta Export Co (2018) 404 ITR 654 (SC) (AY.2005-06)

    CIT v. Western Agencies (Madras) Pvt. Ltd. (2021) 434 ITR 613 (Mad) (HC)

  28. S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Payment genuine – Necessitated by circumstances – No disallowance can be made – Block assessment – Addition deleted on facts – No question of law [S. 260A]

    Court held that disallowance under section 40A (3) for the assessment year 2007-08, the decision was made on the facts. Hence no question of law arose. As regards the relief granted to the assessee was on the facts and on the merits of the disallowances made and not on the ground that no incriminating material was available. In one of the cases, the correctness of this decision was tested by the Tribunal and the view taken by the Commissioner (Appeals) had been affirmed. Since the entire dispute revolved on the factual matrix, no question of law, much less a substantial question of law, arose from the order of the Tribunal. (AY.2007-08, 2008-09, 2011-12 to 2014-15)

    CIT v. Jubilee Plot and Housing Pvt. Ltd. (2021) 436 ITR 424 (Mad)(HC)

  29. S. 43B: Deductions on actual payment – Interest payable to Financial Institutions – Rehabilitation plan and accepting debentures in discharge of outstanding interest – Explanation 3C, cannot be invoked – Interest is allowable as deduction- Interpretation of taxing statutes – Retrospective provision for the removal of doubts Cannot be presumed to be retrospective if it alters or changes law as it stood – Ambiguity in language to be resolved in favour of assessee. [S.43D]

    Allowing the appeal, that both the Commissioner (Appeals) and the Tribunal had found, as a matter of fact, that under the rehabilitation plan agreed to between the lender and the borrower, the debentures were accepted by the financial institution in discharge of the debt on account of outstanding interest. The issue of debentures by the assessee was, under a rehabilitation plan, to extinguish the liability of interest altogether. In the assessment of the bank, for the assessment year in question, the accounts of the bank reflected the amount received by way of debentures as its business income. It was clear that interest was “actually paid” by means of issuance of debentures, which extinguished the liability to pay interest. No misuse of the provisions of section 43B was found as a matter of fact by either the Commissioner (Appeals) or the Tribunal. Explanation 3C, which was meant to plug a loophole, could not therefore be invoked on the facts of this case. The High Court was in error in concluding that “interest”, on the facts of this case, had been converted into a loan. The interest was deductible. Court also held that retrospective provision for the removal of doubts cannot be presumed to be retrospective if it alters or changes law as it stood and Ambiguity in language to be resolved in favour of assessee. (AY. 1996-97)

    M. Aqua Technologies Ltd. v. CIT (2021) 436 ITR 582/ 204 DTR 337/ 321 CTR 753/ 282 Taxman 281 (SC)

    Editorial: Decision of the Delhi High Court in CIT v. M. M. Aqua Technologies Ltd (2015) 376 ITR 498 (Delhi)(HC) and CIT v. M. M. Aqua Technologies Ltd (2016) 386 ITR 441 (Delhi) (HC), reversed.

  30. S. 44: Insurance business – Assessee, a third party administrator / agent (TPA) of insurance companies and insurance company are different entities under IRDA regulations – Assessee being a TPA did not fall within purview of business of insurance company

    Held by the High Court, that the Assessee being a third party administrator / agent (TPA) of insurance companies is governed by the provisions of the Insurance Regulatory and Development Authority of India (‘IRDA’). IRDA regulations clearly distinguishes TPA and the insurance company and hence both are different entities under IRDA regulations. Hence, Assessee (TPA) does not fall within the purview of Insurance Company (ITA. No.593 of 2013, dt. 21-10-2020) (AY. 2009-10)

    CIT v. Medi Assist (India) TPA (P.) Ltd. (2021) 320 CTR 868 / 125 taxmann.com 77 (Karn)(HC)

  31. S. 45 : Capital gains – Transaction of sale of shares not liable to tax – Motive of tax avoidance not relevant so long as act within the frame work of law – Transaction not with intent to avid tax – DTAA-India-Mauritius [S. 245R(2), Art 13(4)]

    The question admitted by the AAR was, “Whether on the facts stated facts and law, the capital gains on the proposed sale of shares of Betcon Dicknson India Private Limited by the applicant to Betcon Dickinson Holdings Pte. Ltd would be chargeable to income tax in India in the hands of the applicant, having regard to the provisions of article 13 of the India-Mauritius tax Treaty?

    The application was admitted on 7-1-2015, The AAR held that having regard to the provisions of article 13 of the India -Mauritius tax Treaty. (AAR No. 1396 of 2012 dt 11-9-2019)

    Becton Dickinson (Mauritius) Ltd., In Re (2021) 434 ITR 180 (AAR)

  32. S. 45 : Capital gains Buy-back of shares by Indian subsidiary from German holding company – Liable to tax – Final liability would be lesser of that under normal provisions and under section 115JB – Subsidiary liable to deduct tax at source on payment on buy-back [S.46A, 47(iv), 47A, 49, 115JB, 195]

    AAR held that on the facts of the case, the shares buy-back transaction is taxable under section 46A and exemption under section 46 (iv) is not applicable. As regards the minimum alternative tax liability under section 115JB, the Assessing Officer is required to compute the book profits of the supervisory permanent establishment and the minimum alternative tax liability would be restricted to the profit attributable to such supervisory permanent establishment for the relevant assessment year. The provisions of section 195 would be applicable and PQR India is liable to withhold taxes on the consideration payable for the buy back of shares. (AAR No. 1195 of 2011 dt. 3-10-2019)

    PQR GMBH, IN RE (2021) 434 ITR 382/ 280 Taxman 205 (AAR)

  33. S. 50 : Capital gains – Depreciable assets – Block of assets – Depreciation allowed for 21 years – Not used for business for two years – Asset shown as investment in balance sheet – Gains assessable as short term capital gains [S. 2(11), 2(29A, 2(29B), 45, 50A]

    The High Court held that the depreciable asset forming a part of block of assets within the meaning section 2(11) of the Act would not cease to be a part of the block of assets, that the description of the asset by the assessee in the balance-sheet as an investment asset was meaningless, that so long as the assessee continued business, the building forming part of the block of assets would retain its character as such, no matter that one or two of the assets were not used for the business purposes in one or two years, and that the assessment of the profits on sale of the flat as short-term capital gains was to be confirmed. On appeal Supreme Court affirmed the view of the High Court. (AY.1998-99)

    Sakthi Metal Depot v. CIT (2021)436 ITR 1/ 204 DTR 440/ 322 CTR 9/ 282 Taxman 384 (SC)

    Editorial: Decision in CIT v. Sakthi Metal Depot (2011) 333 ITR 492 (Ker) (HC) affirmed. Refer, Sakthi Metal Depot v. ITO (2005) 3 SOT 368 (Cochin) (Trib.)

  34. S. 50C: Capital gains – Full value of consideration – Stamp valuation – Assessee entered into an unregistered agreement for sale with one NE for purchase of land however later such land was sold through sale deeds to parties other than Assessee – Assessee being merely a consenting party and not a transferor / co-owner of the land, provisions of S/50C cannot be applied to the Assessee.

    Allowing the appeal, the High Court held that where assessee entered into an unregistered agreement for sale with one NE for purchase of land, but later NE sold such land to other party through sale deeds, where assessee was merely a consenting witness, even though assessee had certain rights under agreement, Section 50C of the Act would not apply to assessee since assessee was not a transferor/co-owner of land sold and also because Section 50C does not apply to a case of rights in land. (ITA.No.70 of 2015, dt. 02-02-2021) (AY 2010-11).

    V.S. Chandrashekar v. ACIT, (2021) 129 taxmann.com 273 / 320 CTR 339 (Karn) (HC)

  35. S. 50D: Fair market value deemed to be full value of consideration in certain shares – Non-Resident – Capital gains – Sale of share – Not slump sale – Capital gains chargeable to taxable ten per cent [S.45, 55A, 56(2)(viia), 112(1)(c)(iii)

    AAR held that the capital gains on transfer of equity shares in IEE would be taxable in the hands of the applicant at the rate of 10 per cent. in accordance with section 112(1)(c)(iii) of the Income-tax Act, 1961 (AY. 2013-14)

    Psit Pty Ltd, in re. (2021) 436 ITR 474 (AAR)

  36. S. 72 : Carry forward and set off of business losses – Head of income immaterial while setting off of loss.

    While setting off a business loss carried forward from an earlier assessment year against an income of a subsequent year, what is relevant is that the income should have attributes of a business even if it is assessed under some other head as sub-section (1) of section 1 of 72 does not use the words income under the head “profits and gains of business or profession”. (A.Y. 2003-04)

    Nandi Steels Ltd. v. ACIT (2021) 320 CTR 432 (Kar)(HC)

  37. S. 80IA : Industrial undertakings – Infrastructure development – Scope of S/80IA(5) is limited to determine quantum of deduction under S/80IA(1) by treating ‘eligible business’ as ‘only source of income’ – However, S/80IA(5) cannot be read to limit the deduction only to business income.

    Held by the High Court that the scope of Section 80IA(5) of the Act is limited to determination of quantum of deduction under Section 80IA(1) by treating ‘eligible business’ as the ‘only source of income’. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to ‘business income’. (CA Nos. 2537 of 2016, 1327 to 1329, 1408, 1508 & 1509 of 2021, dt. 28-04-2021) (AY 2002-03)

    CIT v. Reliance Energy Ltd (2021) 127 taxmann.com 69 / 320 CTR 473 (SC)

  38. S. 80IA: Industrial undertakings – Loss – Setting off of Loss of loss-making units against profits of profit-making units – entitle to benefit.

    Court held that the Tribunal was correct in holding that the assessee was entitled to deduction under section 80IA without setting off of the loss of loss-making units against the profits of the profit-making units. Followed CIT v. Karnataka Power Corporation Ltd. (ITA No.778 of 2009 dt.11-9-2015 (AY. 2007-08)

    CIT v. Karnataka Power Corporation Ltd. (No. 1) (2021) 436 ITR 285 (Karn) (HC)

  39. S. 80IB : Industrial undertakings – If there is material available on record before Assessing Officer, even prior to assessment, to prove that there were more than 10 workers then deduction u/s. 80IB cannot be denied if Form No. 10CCB failed to provide details of number of workmen working in each of units

    The High Court held that in case where the Assessee, even prior to the assessment, produced material before the AO, which evidences that each of the units of the Assessee employed more than 10 workers, then Assessee has fulfilled the conditions required for claiming deduction under Section 80IB of the Act and in these circumstances, even though there was an omission on the part of Assessee while filing Form 10CCB the grant of deduction under Section 80IB to the Assessee is justified.

    CIT v. Borkar Packaging (P.) Ltd. (2020) 121 taxmann.com 167 / 320 CTR 792 (Bom) (HC)

  40. S. 80IB(10) : Housing projects –Owner of land outsourcing the construction work – Entitled to deduction.

    Dismissing the appeal of the revenue the Court held that a plain reading of section 8IB(10) of the Income-tax Act, 1961, makes it clear that deduction is available in a case where an undertaking develops and builds a housing project. The section clearly draws the distinction between “developing” and “building”. An assessee who is only an owner of the land and has outsourced the work of construction of the building and had realised the sale proceeds in the form of constructed area is entitled to deduction under section 80IB. Followed CIT v. Veena Developers (2018) 12 ITR-OL 487 (SC) (AY 2006-07 to 2009-10)

    CIT v. Sri Lakshmi Brick Industries (2021) 434 ITR 213 (Mad) (HC)

  41. S. 80-IC : Special category states – Special provisions in respect of certain undertakings – Assessing Officer not justified in denying deduction u/s 80IC of newly established unit merely on basis of consumption of electricity in various units of Assessee as several factors can contribute to the increased profits.

    Held by the High Court that, there was no need to interfere with the findings of Appellate Authorities favoring Assessee, as several factors can contribute to the increased profits and upon consideration of such several factors which were not only pleaded, but made good by the Assessee to conclude that there was no good ground to deny the deduction under Section 80IC of the Act merely on the basis of consumption of electricity in various units of the Assessee. (TA No. 62 of 2014 and 13 of 2015 dt. 29-09-2020) (AY 2006-07 and AY 2007-08). CIT .v. Borkar Packaging (P.) Ltd. (2020) 121 taxmann.com 167 / 320 CTR 792 (Bom) (HC)

  42. S. 90: Double taxation relief – Assessee – Company being a tax resident of Singapore is eligible to the benefits of India-Singapore tax treaty with respect to sale of shares in Indian subsidiary – LOB clause is not applicable as such sale was pursuant to genuine business restructuring and MNC’s activity of being an investment holding company is a bonafide business activity – Hence, no capital gains on sale of shares of Indian subsidiary by a Singapore holding investment company.

    Held by the AAR that (i) there is no provision in the India-Singapore tax treaty which provides that the benefits of tax treaty will be denied if the Company is merely a holding investment company; (ii) holding companies are essential for management of MNCs’ worldwide business interest and such an activity of being a investment holding company is a bonafide business activity; (iii) the affairs of the applicant company were not arranged with the primary purpose of availing tax treaty benefits as the investment was made prior to introduction of protocol exempting tax on capital gains and the control and management was located in Singapore and the decision to sell the investments in Indian entity is pursuant to a genuine business restructuring as such decision is not only for Indian entity but also for other foreign entities. (AAR No.1376 & 1377 of 2012, dt. 25-02-2021)

    BG Asia Pacific Holding Pte Ltd In re (AAR – NCR Bench) (2021) 125 taxmann.com 2 (Del)

  43. S. 92C : Transfer pricing – Arm’s length price – Captive service provider – Depreciation –Transfer pricing officer to exclude depreciation from cost and Comparables [S.32, R. 10B(1)(e)]

    Dismissing the appeal of the revenue the Court held that since the assessee had a policy of charging a higher rate of depreciation as compared to the companies selected by the Transfer Pricing Officer, there was a definite impact on the net margins of the assessee as compared to the comparable companies. There was a need for an adjustment to eliminate the differences in the accounting policies of the appellant and the comparable companies, in terms of rule 10B, especially given that in the benchmarked international transactions were sales by a captive service provider to its associated enterprises, on which depreciation would have no bearing and could be excluded altogether. The direction issued by the Tribunal to the Transfer Pricing Officer to exclude depreciation from the cost of the assessee and of the comparables and directing the Assessing Officer/Transfer Pricing Officer to rework the depreciation was not perverse.(AY.2010-11)

    PCIT v. Novell Software Development (India) Pvt. Ltd. (2021) 434 ITR 154 / 202 DTR 370/ 278 Taxman 390 (Karn) (HC)

  44. S. 115A: Foreign companies – Tax – Royalty – Different agreements – The assessee can opt to be either under statutory provisions or the Double taxation avoidance agreement – DTAA-India-USA [S.90]

    Dismissing the appeal of the revenue the Court held that the Tribunal was right in holding that royalty income received under an agreement entered into before June 1, 2005 and royalty income received under an agreement entered into on or after that date was from the same source and as such the assessee could apply section 115A or the Double Taxation Avoidance Agreement separately for one source of income covered by different agreements. (AY.2007-08, 2008-09, 2013-14)

    CIT (IT) v. IBM World Trade Corporation (NO. 2) (2021) 436 ITR 647 (Karn) (HC)

  45. S. 115JB : Book profit – Amount disallowed u/s. 14A cannot be included [S.14A]

    Allowing the appeal of the assessee the Court held that the disallowance under section 14A of the Act is a notional disallowance and therefore, by recourse to section 14A of the Act, the amount cannot be added back to the book profits under clause (f) of Explanation 1 to section 115JB.(AY:2008-09)

    Sobha Developers Ltd. v. Dy CIT (LTU) (2021) 434 ITR 266 / 278 Taxman 338 (Karn) (HC)

  46. S. 115JB : Book profit –Amendment in Law – Explanation 3 – Not Applicable.

    Section 115JB was not applicable to the assessee in view of Explanation 3 to section 115JB. Followed CIT v. ING Vysaya Bank Ltd (2020) 422 ITR 116 (Karn) (HC) (AY. 2007-08)

    CIT v. Karnataka Power Corporation Ltd. (No. 1) (2021) 436 ITR 285 (Karn) (HC)

  47. S. 119 : Central Board of Direct Taxes – Power to condone the delay

    The assessee, a charitable trust, inadvertently uploaded Form no. 10BB instead of Form no. 10B, owing to which its claim for exemption under sections 11 and 12 was denied. Its application for condonation of delay filed with the Commissioner was rejected in terms of Circular no. 2 of 2020 as the period of delay was more than 365 days. On filing a writ petition, held that the period of 365 days prescribed under the Circular could not be held to be arbitrary. However, the assessee was free to approach the CBDT under section 119(2)(b) to seek condonation of delay.

    Little Angels Education Society v. Union of India (2021) 320 CTR 331 (Bom)(HC)

  48. S. 131 : Power – Discovery –Production of evidence – Reason to suspect regarding concealment of income.

    Before carrying out any action under section 131(1A), it is necessary that the competent authority must have a reason to suspect that any income has been concealed or is likely to be concealed, by any person or class of persons within his jurisdiction. Where no such reason exists, action under section 131(1A) cannot be taken. (A.Y. 2018-19)

    Khem Chand Mukim v. Pr.CIT (2021) 320 CTR 781 (Del)

  49. S. 132 : Search and seizure – Warrant of Authorisation – Search proceedings against company – Application of mind – Warrant of Authorisation is held to be valid [Art. 226]

    Dismissing the petition the Court held that the satisfactions note was clearly concerned with tax evasion activities conducted by the various companies and persons mentioned therein and it had been relied upon by the authority to initiated the proceedings under section 132 . The petitioner’s assertion of having resigned from the company and having nothing to do with it, could not be accepted as a disputed fact in writ jurisdiction, more so when the records of the Registrar of Companies reflected the position to be otherwise. In any event, whether or not the petitioner was connected with the company ; or whether or not the documents reflecting huge amounts of cash transactions stood reflected in the books of account and did not represent undisclosed income was again a question of fact which could be easily taken before the authorities in the adjudicatory proceedings. The action was neither mala fide nor arbitrary or capricious. The note of satisfaction did record reasons calling for necessary authorisation to carry out search and seizure operation. The search and seizure operations carried out by and in terms of section 132 were valid.

    Ajay Kumar Singh v. DGI (Inv) (2021) 434 ITR 352/ 320 CTR 858/ 277 Taxman 633 (Pat) (HC)

  50. S. 132: Search and seizure – Writ Court cannot go into the sufficiency and adequacy of reasons recorded in note of satisfaction hence writ petition challenging warrant of authorization and consequential action of search and seizure has to be dismissed

    Held by the High Court that the Writ Court cannot go into the sufficiency and adequacy of the reasons recorded in the note of satisfaction in terms of Section 132 of the Act since satisfaction note was clearly concerned with tax evasion activities conducted by various companies and persons mentioned therein and same had been relied upon by authority to initiate proceedings under Section 132 of the Act. (CW No. 3792 of 2009, dt. 2-12-2020).

    Ajay Kumar Singh v. DGI (2021) 320 CTR 858 / 124 taxmann.com 518 (Pat) (HC)

  51. S.143(2) : Assessment – Notice – Assessing Officer can issue more than one notices – Writ is not maintainable to quash third notice [Art. 226]

    Dismissing the petition the Court held that Assessing Officer can issue more than one notices. Writ is not maintainable to quash third notice it was not the case of the assessee that no jurisdictional fact existed for the purpose of assuming jurisdiction to issue the show-cause notices. The notices were valid.(AY.2016-17, 2017-18)

    Sumandeep Vidyapeeth v. ACIT (2021) 434 ITR 433/ 200 DTR 393/ 320 CTR 464 (Guj.)(HC)

  52. S. 144B : Faceless Assessment – A notice-cum-draft assessment was to be issued and a personal hearing was to be accorded if there was variation in income – Notification issue by Central Board of Direct Taxes is binding on department – Order was set aside [143(3), Art 226]

    Allowing the petition the Court held that according to the Central Board of Direct Taxes’ Notification dated March 31, 2021, after April 1, 2021, the assessment order could only be passed in consonance with the provisions of section 144B. Therefore, the order, dated April 15, 2021, passed under section 143(3) read with section 143(3A) and 143(3B), the notice of demand issued under section 156 and the notice issued under section 274 read with section 270A for initiating penalty proceedings were to be set aside. The Department should proceed with the assessment process by following the procedure prescribed under section 144B. A notice-cum-draft assessment was to be issued and a personal hearing was to be accorded if there was variation in income. Order was set aside. (AY. 2018-19)

    Gurgaon Realtech Limited v. National Faceless Assessment Centre, Delhi (2021) 436 ITR 280/ 203 DTR 129/ 321 CTR 266 (Delhi) (HC)

  53. S. 144B : Faceless Assessment – Natural justice – Final assessment order was passed before disposal of request for grant of time to file objections to draft assessment order – Order and notice was quashed [S.143(3), 156, 270A, 274, Art 226]

    Allowing the petition the Court held that the final order was passed before disposal of request for grant of time to file objections to draft assessment order. Order and notice was quashed. The National Faceless Assessment Centre could pass a fresh order in terms of the provisions of clauses (vii) to (ix) of section 144B after giving an opportunity of hearing to the assessee, qua the show-cause notice-cum-draft assessment order.( AY.2018-19)

    RKKR Foundation v. National Faceless Assessment Centre (2021) 436 ITR 49 / 282 Taxman 76 (Delhi) (HC)

  54. S. 144C : Reference to dispute resolution panel – Arm’s length price – Remand by Tribunal – Order is valid – Entire procedure under section 144C need not be repeated [S. 254(1), Art 226]

    Dismissing the petition the Court held that Tribunal in clear terms, directed the Assessing Officer to decide the issue regarding the application of method, i. e., whether comparable uncontrolled price method or the transactional net margin method as the most appropriate method. Thus, a specific issue was directed to be decided by the Assessing Officer. Once the procedure had been followed the Tribunal remitted the matter back to decide a particular issue with a specific finding. It was sufficient if the remitted issue was decided by the Assessing Officer/Transfer Pricing Officer and a final assessment order was passed. Repetition of the same procedure would become an empty formality, which was not intended under the provisions. The order passed by the Assessing Officer was valid.(AY. 2012-13)

    Enfinity Solar Solutions Private Limited v. Dy. CIT (2021) 436 ITR 188/ 204 DTR 201/ 321 CTR 716/ 282 Taxman 210 (Mad) (HC)

  55. S. 144C : Reference to dispute resolution panel – Draft assessment order – Tribunal remanding the matter – Assessing Officer passing final order – Passing of draft order is mandatory – Order quashed and remanded [S.92CA(4), 143(3), 254(1)), Art 226]

    Allowing the petition the Court held that when the law mandated a particular thing to be done in a particular manner, it had to be done in that manner. The final assessment order under section 144C read with section 143(3) had been passed without jurisdiction. Once the case was remitted back to the Assistant Commissioner/Transfer Pricing Officer, it was incumbent on their part to have passed a draft assessment order under section 143(3) read with section 92CA(4) and section 144C(1). They could not bypass the statutory safeguards prescribed under the Act and deny the assessee the right to file an application before the Dispute Resolution Panel. The final order was quashed and the case was remitted back to the Assistant Commissioner to pass a draft assessment order.(AY. 2009-10 to 2011-12)

    Durr India Private Limited v. ACIT (2021) 436 ITR 111/ 203 DTR 419 (Mad) (HC)

  56. S. 144C: Reference to dispute resolution panel – Transfer Pricing – Arm’s length price –Draft Assessment order mandatory – Not curable defects – Order quashed [S.143(3), 271(1)(c)

    Allowing the petition the court held that the assessment order had been passed inadvertently by choosing the wrong field in the Department software would not just be an over-simplification, but a wrong statement since the assessment had been styled consciously, as an order of regular assessment only. The section under which the assessment was made was stated to be section 143(3). The total income had been assessed and the order was accompanied by a computation sheet determining the demand payable by the assessee along with interest. Penalty proceedings had been initiated in terms of section 271(1)(c). It was clear that the Assessing Officer had consciously proceeded to pass an order of regular assessment, losing sight of the scheme of assessment in terms of section 144C, which he was statutorily mandated to follow and apply. The order was quashed. (AY.2016-17)

    GE Oil and Gas India Private Ltd. v. CIT (2021) 436 ITR 168 (Mad.) (HC)

  57. S. 144C : Reference to dispute resolution panel – Arm’s length price – Objection considered by the Dispute Resolution panel – Alternative remedy – Every error of an authority is not open to judicial review merely by terming it a “jurisdictional error”, although it may, at a later stage, be set aside for being erroneous- Writ is not maintainable [S.92C, 92CA, 144C(5), 253, Art. 14, 19(1)(g), 226, 265]

    Dismissing the petition the Court held that since an effective alternative remedy was available the writ petition was not maintainable. The directions issued by the Dispute Resolution Panel were binding on the Assessing Officer but that in itself was not a sufficient ground to exercise jurisdiction under article 226. The assessee had the statutory remedy of filing an appeal under section 253 before the Tribunal against the order passed by the Assessing Officer giving effect to the directions issued by the Dispute Resolution Panel under sub-section (5) to section 144C. The reasons given by the Dispute Resolution Panel for upholding the action of the Transfer Pricing Officer could not be analysed in writ jurisdiction and such reasonings would have to be tested before the appropriate forum. The factual background would have to be necessarily evaluated by the Assessing Officer while framing the assessment order. Every error of an authority is not open to judicial review merely by terming it a “jurisdictional error”, although it may, at a later stage, be set aside for being erroneous. (AY.2016-17)

    Sabic India Private Limited v. UOI (2021) 434 ITR 563 /280 Taxman 158 (Delhi) (HC)

  58. S. 145: Method of accounting –Assessee has rightly adopted proportionate completion method as it is engaged in rendering services throughout the entire year.

    Dismissing Revenue’s appeal, the High Court held that the change of method in recognizing revenue (earlier method being invoice to be raised irrespective of services rendered) and adoption of proportionate completion method by Assessee is correct as Assessee is engaged in rendering services in the entire year and in the instant case Assessee is also covered by AS-9 as Assessee does not fall under the category of insurance companies. Hence, Assessing Officer not justified in changing the method adopted by the Assessee and in determining the income on estimated basis. (ITA No.593 of 2013, dt.21-10-2020) (AY. 2009-10)

    CIT v. Medi Assist (India) TPA (P.) Ltd. (2021) 320 CTR 868 / 125 taxmann.com 77 (Karn) (HC)

  59. S. 147: Reassessment – After the expiry of four years – Report of investigation wing – Non application of mind by the Assessing Officer – Notice not valid [S.148, Art, 226]

    Allowing the petition the Court held that the Assessing Officer had not applied his independent mind while recording the reasons that the income had escaped assessment. The original assessment record was with the Assessing Officer. The scrutiny assessment had been challenged by the assessee-company and the appeal was pending before the Appellate Tribunal. As the issue of alleged transaction of Rs. 7,50,055 was earlier added by the Assessing Officer under section 68 of the Act at the original assessment stage, the same amount could not be brought to tax once again in the reassessment proceedings. It was not the case of the Revenue that the transaction as reported by the Investigating Wing, Surat was distinct and had no relation with the earlier scrutiny assessment made under section 143(3) of the Act. Thus, as such there was no tangible material in the hands of the Assessing Officer for reopening of the proceedings. The notice of reassessment was not valid.( AY.2012-13)

    Alliance Filaments Ltd. v. ACIT (2021) 434 ITR 537 (Guj.) (HC)

  60. S. 147: Reassessment – After the expiry of four years – Accommodation entries – Facts disclosed in the original assessment proceedings were false – Notice is held to be valid [S.148, Art 226]

    Dismissing the petition the Court held that the Assessing Officer had examined the information received from the Surat wing and based on the information made inquiries and after independent application of mind, and upon due satisfaction, had reached the conclusion that the alleged transaction with A Ltd. seemed to be a bogus purchase and it was accommodation entries provided at the instance of AM and their group. After the framing of the assessment made under section 143(3) of the Income-tax Act, 1961 tangible material came into the hands of the Assessing Officer through the Investigation Wing and upon perusal thereof, he made independent inquiries and applied his mind and upon due satisfaction, he formed an opinion that the income had escaped assessment. The notice of reassessment was valid.(AY.2012-13)

    Keshav Diamonds Pvt. Ltd. v. ITO (2021) 434 ITR 700 (Guj) (HC)

  61. S. 147: Reassessment – After the expiry of four years – Accommodation entries – Policed diamonds – Subsequent information – Transaction disclosed in the original assessment proceedings were not valid – Sanction obtained – Reassessment was held to be valid [S. 132, 148, 151, Art 226]

    Dismissing the petition the Court held that the subsequent information that transaction disclosed in the original assessment proceedings were not valid and the Assessing Officer presented the reasons recorded for approval of the Principal Commissioner in the prescribed format through the Additional Commissioner. Both officers had perused the reasons recorded and opined that it was a fit case to issue notice under section 148. There was compliance with section 151. The notice was valid.(AY.2012-13)

    Madhav Gems Private Limited v. ITO (2021) 434 ITR 684/ 200 DTR 297 (Guj) (HC)

  62. S. 147: Reassessment – After the expiry of four years – No payment of interest or remuneration – Notice on ground that payments must have been made – Not valid [S.80(IB)(10), 148, Art 226]

    Allowing the petition the Court held that there was no material on record to indicate that the assessee had actually received any interest on capital and remuneration from the firm. The record further indicated that for the assessment year 2010-11, deduction under section 80-IB(10) was claimed without paying any interest on capital and remuneration to partners and such claim was not disturbed by the Assessing Officer. In this view of the matter, the conclusion arrived at by the Assessing Officer that the assessee had claimed deduction without providing interest on capital and remuneration to partners as per clauses 6 and 7 of the deed, and hence income had escaped assessment on account of failure on the part of the assessee in filing of the return of income disclosing fully and truly all material facts, were contrary to law and without jurisdiction.(AY.2011-12 to 2013-14)

    Myhome Developers v. ACIT (2021) 434 ITR 270 (Guj) (HC)

  63. S. 147: Reassessment – After the expiry of four years – Failure to disclose true facts – Share capital – Kolkata based companies –Reassessment notice is held to be valid [S.143(1), 148, Art 226]

    Dismissing the petition the Court held that the return filed by the assessee was accepted without scrutiny. Since there was no scrutiny assessment, the Assessing Officer had no occasion to form any opinion on any of the issues arising out of the return filed by the assessee. The concept of change of opinion would, therefore, have no application. This was not a case where the ITO sought to draw any fresh inference which could have been raised at the time of the original assessment on the basis of the materials placed before him by the assessee as regards the receipt of the share capital and share premium from two Kolkata based companies which were subsequently discovered to be shell companies. The subsequent information, on the basis of which the ITO acquired reason to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts, was relevant, reliable and specific. It was not vague or non-specific. The notice of reassessment was valid.(AY.2011-12)

    Navnidhi Dyeing and Printing Mills Pvt. Ltd. v. ACIT (2021) 434 ITR 334 / 201 DTR 265/ 320 CTR 737 (Guj) (HC)

  64. S. 147: Reassessment – After the expiry of four years – Housing projects – No failure to disclose any material facts – Reassessment is not valid [S.80IB(10) 148, Art 226]

    Allowing the petition the Court held that the order and the materials furnished by the assessee at the stage of original assessment showed that there was conscious application of mind to the issue of deduction under section 80-IB(10) by the Assessing Officer and after considering the evidence and materials, he had thought it not fit to disallow the deduction. Therefore, a mere change of opinion while pursuing the same material by the Assessing Officer while initiating the proceedings, could not be a reason to believe that income had escaped assessment. Once an opinion was formed on the issue of deduction and assessment on the issue was made under section 143 reopening the assessment on the same set of facts and material, without there being any tangible material would be nothing but a change of opinion. The condition precedent for reopening of the assessment beyond the period of four years having not been satisfied the notice issued under section 148 was quashed and set aside.(AY. 2012-13)

    Sarthak Developers v. Dy CIT (2021) 434 ITR 648 (Guj)(HC)

  65. S. 147: Reassessment – Information received from Investigation wing – Non application of mind – Sanction not obtained – Notice is held to be not valid [S.133A, 148, 151, Art 226]

    Allowing the petition the Court held that the reasons recorded for assuming jurisdiction to issue notice under section 148 referred to clause (a) of Explanation 2 to section 147 of the Act, 1961. which applies to non-filing of the return of income but the assessee had filed the return of income, and hence it would not be applicable. Thus the Assessing Officer had recorded the reasons without proper application of mind. There was no reference to approval having been sought from the Addition Commissioner or CIT for issuance of notice under section 148 as provided in section 153. Accordingly In view of the facts and circumstances of the case, the notice dated March 29, 2018 issued under section 148 of the Act, could not be sustained.(AY.2011-12)

    Bharatkumar Nihalchand Shah v. ACIT (2021) 434 ITR 621 (Guj) (HC)

  66. S. 147 : Reassessment – After the expiry of four years – Change of opinion – Short term capital gains – Dividend- Reassessment is held to be not valid. [S. 10(38), 148]

    Dismissing the appeal of the revenue the Court held that all the particulars relating to dividends and short-term capital gains and other particulars were available with the Assessing Officer during the assessment proceedings, which were concluded under section 143(3) of the Act. The Tribunal, on the facts, had recorded that the Department did not bring any material fact before it, which was not disclosed in the original return of income. The reopening of the assessment beyond four years was clearly a case of change of opinion. The reassessment was not valid.(AY. 2008-09)

    PCIT v. M. R. Narayanan (2021) 436 ITR 520 (Mad) (HC)

  67. S. 147: Reassessment – After the expiry of four years – Sale of land – Borrowed satisfaction – Non application of mind before issue of notice – Notice is held to be not valid [S.148, Art 226]

    Allowing the petition the Court held having accepted the entire transaction on the basis of the scrutiny assessment under section 143(3) of the Act the reopening on the basis of some information was not valid in the eyes of law and was liable to be quashed for the reason that the Assessing Officer failed to apply his mind. The reasons were merely recorded by the Assessing Officer on borrowed satisfaction. The source for all the conclusions was the information received from the Deputy Commissioner and that too, based on a search and survey carried out at the residential and business premises in the case of K. Star Corporation. (AY.2011-12)

    Kantibhai Dharamshibhai Narola v. ACIT (2021) 436 ITR 302 (Guj) (HC)

  68. S. 147: Reassessment – After the expiry of four years – Failure to deduct tax at source – Issue not considered in the original assessment – Court cannot adjudicate disputed facts or go in to sufficiency of reasons for reopening – Reassessment notice is valid [S. 9(1)(i), 40(a)(ia), 148, Art 226]

    Dismissing the petition the Court held that mere failure to quote the provision of law would not vitiate the entire reassessment proceedings, though the competent authorities are expected to quote the provisions of law. That certain facts placed by the assessee before the court could not be wholly relied upon. The Department without conducting an enquiry and scrutinizing the documents would not be in a position to place all the facts before the court. Therefore, the scope of interference in initiation of reassessment proceedings would be limited and, the court in such circumstances should refrain from preventing the competent authorities from conducting further enquiry by following the procedures as contemplated on initiation of proceedings under section 147. Reassessment notice is held to be valid. (AY.2007-08) (SJ)

    Sutherland Global Services (P.) Ltd. v. CIT (2021) 436 ITR 122 (Mad) (HC)

  69. S. 147 – Reassessment – Change of opinion – Amount already assessed – reopening is bad in law [S.68]

    Reassessment was sought to be initiated based on information provided by Director (Inv.) that assessee-company had indulged in bogus transaction with one ‘S’ who was an entry provider and income had escaped assessment. It was found that case of assessee was taken up for scrutiny and after a detailed inquiry various additions were made including an addition under section 68 in respect of share capital and share premium received by assessee during year under consideration which included sum received from ‘S’ and, thus, alleged transaction was considered by Assessing Officer under section 68 at original assessment stage. It was held that assumption of jurisdiction on part of Assessing Officer under section 147 to reopen assessment by issuing impugned notice was without authority of law. [AY: 2012-13]

    Alliance Fibres Ltd. v. ACIT (2021) 435 ITR 264 (Guj)(HC)

  70. S. 147 : Reassessment – Non-disclosure of material facts fully and truly – Reopening is bad in law. [S.80IA]

    S. 147 is wide enough to cover under-assessment. It was held that when on account of certain information provided by assessee, a wrong assessment had been made so as to cause loss to revenue, then, it is to be construed that assessee had not disclosed fully and truly all material facts. When prima facie case is made out by department to arrive a conclusion that there is a reason to believe, that income has escaped assessment, then revenue must be permitted to proceed with reopening proceedings and mere reopening would not cause any prejudice to assessee and during adjudication, assessee would get an opportunity to defend his case.(AYs : 2006-07, 2007-08 and 2009-10)

    Aircel Cellular Limited v. DCIT (2021) 435 ITR 660 (Mad)(HC)

  71. S. 147: Reassessment – After the expiry of four years – Objections not been disposed prior to issuance of SCN

    Hon’ble High Court held that there is mandatory requirement that the assessee’s objections raised for reopening of the assessment should be disposed of by the Assessing Officer by a speaking order and the same was not complied with in the present case. The reassessment proceeding under section 147 was vitiated on this ground alone. Further remarks that the letter of approval u/s 151 of the Act for the issuance of notice u/s 148 issued by the Joint Commissioner to the ITO simply stated that “approval is hereby accorded under section 151(2) for initiation of proceeding under section 147”. There was no indication of any application of mind by the authority. The approval accorded under section 151 had to be granted by the Principal Chief Commissioner, or the Chief Commissioner, or the Principal Commissioner, or the Commissioner, if the reopening is beyond four years. Therefore, also the approval issued by the Joint Commissioner was not valid.

    Viresh Hemani v. ITO (2021) 435 ITR 376 (Orissa)(HC) (W. P. (C) No. 15305 of 2014, dt. 23-04-2021)

  72. S. 147: Reassessment – Sub-sequent information about accommodation entry – Reopening justified. (S.69C)

    Assessing Officer received information from ITO of other person that assessee was beneficiary of accommodation entries, and after making independent inquiry and application of mind to relevant material issued reopening notice against assessee. It was held that since Assessing Officer had initiated proceedings not only on basis of information received from concerned department but based upon his independent satisfaction and other available materials and there was material to prima facie come to conclusion that assessee was beneficiary of accommodation entries, impugned notice for reopening of assessment was justified. [AY 2011 -2012]

    Cemach Machineries Ltd. v. ITO (2021) 435 ITR 306 (Guj)(HC)

  73. S. 147: Reassessment – Reassessment based on change of opinion – bad in law. [S. 36(1)(ii)]

    AO issued a reopening notice on ground that assessee company had paid a sum of huge amount to it’s managing director apart from directors remuneration and same was to be disallowed under section 36(1)(ii). It was held that since assessee had made adequate disclosures during original assessment and based on same its assessment was completed and, further, reopening notice issued in case of assessee for subsequent assessment year on similar ground/issue was dropped on ground of change of opinion and same was accepted by revenue, following same view, impugned reopening was also to be set asid. [AY: 2007-2008]

    CavinKare (P.) Ltd. v. DCIT (2021) 435 ITR 396 (Mad)(HC).

  74. S. 147 : Reassessment – Non-application of mind on the part of the AO would vitiate the proceedings.

    The assessee got constructed a residential building and filed a valuation report in the course of the assessment, which came to be accepted by the AO. Subsequently, the AO referred the matter to another valuation officer and obtained his report, the value as per which was marginally higher than that mentioned in the assessee’s valuation report. Held that apart from relying on the valuation report, there was no independent application of mind on the part of the AO which could justify the reassessment. (A.Y. 2003-04)

    Mukul Kumar Singh v. CIT (2021) 320 CTR 237 (Pat)(HC)

  75. S. 148 : Reassessment – Notice – Proper procedure to be adopted – Writ against the notice was dismissed [S.147, Art 226]

    Dismissing the petition the Court held that a writ petition against a notice under section 148 was not to be entertained in a routine manner. The notice could be challenged if the issuing authority had no jurisdiction or if it was issued beyond the period of limitation. If the ground regarding limitation existed, the assessee could raise such issue before the competent authority and not before the court. (AY.2011-12)

    Palaniammal Palaniappan v. ITO (2021) 434 ITR 668 (Mad) (HC)

  76. S. 148 : Reassessment – Notice – Assessee has right to raise objections – Duty of Assessing Officer to consider objections – Failure to consider objections – Matter remanded [S. 147, Art 226]

    Allowing the petition the Court held that although the Assessing Officer had an opportunity at the stage of dealing with the objections to verify the contention of the assessee, which went to the root of the matter, he ignored the issue taking a stance that the factual proposition would be examined at the time of reassessment proceedings after giving sufficient opportunity to the assessee. Therefore the Assessing Officer had no material to suggest that the assessee had made payment in cash to S and thereafter, received the same amount back through the real-time gross settlement mode. The notice of reassessment was not valid. Matter remanded to Assessing Officer.(AY. 2015-16)

    Purshottambhai Bachubhai Pitroda v. Dy CIT (2021) 434 ITR 629 (Guj) (HC)

  77. S. 148 : Reassessment – Notice – Amalgamation of companies – Amalgamating company and amalgamated company operating from same address after amalgamation – Provision of Section 170(2) applicable- Participated in the reassessment proceedings – Notice and reassessment proceedings valid [S. 147, 170(2), Art. 226]

    Dismissing the petition the Court held that on the facts and circumstances established, the assessee had to participate in the reassessment proceedings under section 147 by submitting its documents and evidence to establish its case. After merger with effect from April 1, 2009 both the offices, HCLP and HCLC, were running in the same premises. Further, the acknowledgment of the notice issued by the Assistant Commissioner had not been disputed by the assessee. Therefore, section 170(2) would be applicable and sucsh ground could not be considered for the purpose of quashing the entire proceedings initiated under section 147. Even on the merits, the Assistant Commissioner had established that there was “reason to believe” in view of certain new materials found in the matter of purchased units of mutual funds. This could not establish any acceptable reason for the purpose of assailing the notice issued under section 148. (AY. 2005-06)

    Vama Sundari Investments (Delhi) Private Limited v ACIT (2021) 434 ITR 1 74 (Mad) (HC)

  78. S. 148 : Reassessment – Notice – Hindu Undivided Family – Partition – Sale consideration – Exemption – Reassessment notice to tax capital gains in the hands of Karta is held to be not valid [S.45, 54F, 148, 171, Art 226]

    Allowing the petition the Court held that, where a Hindu family was never assessed as a Hindu undivided family, section 171 would not apply even when there was a division or partition of property which did not fall within the definition. The notice issued under section 148 to the estate of ARP (HUF) co-parceners and the consequential order issued in the name of the assessee as the karta were unsustainable.(AY. 2008-09)

    A.P. Oree (Kartha) v. ITO (2021) 436 ITR 3/ 203 DTR 153/ 282 Taxman 57 (Mad) (HC)

  79. S. 148 : Reassessment – Notice – Death of assessee – Notice issued to deceased assessee – Notice and order not valid [S. 144, 147, 271F, 271 (1) (c), Art 226]

    Allowing the petition the Court held that the notice issued under section 148 having been issued in the name of a dead person, was null and void, and all consequent proceedings and orders, including the assessment order passed under section 144 / 147 and the penalty notices issued under section 274 read with section 271(1)(c) and section 274 read with section 271F, being equally tainted, were set aside.(AY. 2012-13)

    Sripathi Subbaraya Manohara (Mrs.) v. PCIT (2021) 436 ITR 469 (Delhi) (HC)

  80. S. 153A : Assessment – Search – Public Interest Litigation – Allegation of evasion of tax – Filing different petitions on same subject matter – Practice deprecated – Income-Tax Informants Reward Scheme, 2018.[Art 226]

    Dismissing the appeal, that a second writ petition on the same subject matter was not maintainable. The issue of evasion of tax under the tax informant scheme (2018 Scheme) had already been raised in the public interest litigation and the court had already dismissed the identical writ appeal. The modus operandi adopted by the petitioner was that it had filed different writ petitions in respect of the same subject matter which was the subject matter of the public interest litigation. Such a practice deserved to be deprecated. There was no reason to interfere with the order passed by the single judge dismissing the second writ petition.

    India Awake For Transparency v. Chairman, CCBDT (No. 2) (2021) 436 ITR 512 (Karn) (HC)

    Editorial : Decision in Single judge in India Awake For Transparency v. Chairman, CCBDT (No. 1) (2021) 436 ITR 442 (Karn) (HC) affirmed.

  81. S. 153A : Assessment – Search – Block assessment – Failure to hand over seized material by Investigation Officer to Assessing Officer within prescribed time-limit – Notice will not be invalid [S.132, 132 (9A), 153B, Art 226

    The assessee filed writ petition challenging the validity of the section 153A notices dated November 1, 2019 for the assessment years 2013-14 to 2018-19, on the ground that the time frame set out in section 132(9A) , is mandatory and non-compliance therewith would render the notices issued initiating the process of assessment, invalid . Dismissing the petition the Court held that the undisputed position in this case was that the Deputy CIT(Inv) and Assessing Officer were not the same person. The last of the authorisations in this case was on September 4, 2018 and the seized materials ought to have been handed over, in terms of section 132(9A) on or before November 3, 2018. Admittedly, the handing over had been only on August 20, 2019, more than nine months beyond the stipulated date. Though this constituted a gross procedural irregularity, it did not vitiate the notices issued. Thus, the jurisdiction assumed could not be faulted on this score. The notice was valid.( AY.2013-14 to 2018-19)

    Agni Estates and Foundations (P) Ltd v. Dy.CIT (2021) 434 ITR 79 (Mad) (HC)

  82. S. 153A : Assessment – Search-Principle of natural justice must be followed – Notice u/s 143 (2) is not mandatory – Order quashed and set aside [S.143 (2), 158BC, Art 226]

    Allowing the petition the Court held that principle of natural justice must be followed though notice u/s 143 (2) is not mandatory. Accordingly the order quashed and set aside. The Court also observed that that no explanation had been set forth in counter or at the time of hearing to explain why the assessment had been taken up for completion, at the very fag end of limitation and for this reason, the assessments could have been nullified, as a second innings was not to be granted to the Department, merely as a matter of rote. However, solely as a matter of prudence, the court set aside the assessments with a direction to the respondent to issue notices afresh, hear the petitioner and pass orders of assessments within a period of eight weeks with sufficient time being given to the assessee to put forth his submissions on the merits.(AY.2012-13 to 2017-18)

    Kubendran v. Dy CIT (2021) 434 ITR 161 (Mad)(HC)

  83. S. 153C : Assessment – Income of any other person – Search – Service of notice – Notice without recording satisfaction is held to be not valid – Subsequent notice after valid satisfaction is held to be valid – High court can find out whether proper satisfaction is recorded or not, however cannot consider sufficiency of reasons [S.132, 282, 282A, Rule 127, 127A, Art 226]

    Court held that notice without recording satisfaction is held to be not valid however, subsequent notice after valid satisfaction is held to be valid. Court also held that High court can find out whether proper satisfaction is recorded or not, however cannot consider sufficiency of reasons. The provisions of section 282 deal with service of notice in general terms and section 282A with the authentication of notices for service by electronic means. In this case, it was not in dispute that the notice dated September 30, 2019 was a valid notice qua the provisions of sections 282 and 282A read with rules 127 and 127A. The issuance of notice dated June 14, 2019 did not vitiate the proceedings in any way. (AY. 2017-18)

    6th Sense Infrastructure Pvt. Ltd. v. PDIT (2021) 436 ITR 90/ 203 DTR 177 (Mad) (HC)

  84. S. 153C : Assessment – Income of any other person – Search –Satisfaction note issued by the Assessing Officer – Notice under section 153C is held to be valid [S.132, 147, 148, 153A, Art. 226]

    Dismissing the petition the Court held that the progress made on account of certain facts, events and procedures, which were otherwise contemplated under the provisions of the Act, could not be construed as without jurisdiction nor to be termed as legal malice. No mala fides or lack of jurisdiction was identifiable nor established. The section 147 proceedings had been initiated for a particular assessment year and only after invoking section 153C, could the Assessing Officer prepare the “satisfaction note” and reopen proceedings for five assessment years. The assessee had to defend his case before the competent authority in the manner known to law. Such an adjudication with reference to the transactions, seizure and impounded materials could not be undertaken by the High Court under article 226 of the Constitution of India. The notice under section 153C was valid(AY.2014-15, 2015-16) (SJ )

    Karti P. Chidambaram v. PDIT (Inv.) (2021)436 ITR 340/ 204 DTR 18/ 321 CTR 273 (Mad) (HC)

  85. S. 154: Rectification of mistake –grant of refund and consequential interest under Section 244A [S.244A]

    The principal grievance of the petitioner in all the writ petitions was the delay in the disposal of the applications filed by it under Section 154 of the Act, Hon’ble HC disposes the writ petitions are with the following directions: (i) The concerned officer will consider the pending applications filed by the petitioner under Section 154 of the Act. Furthermore, after according a personal hearing to the authorized representative of the petitioner, the concerned officer will dispose of the same, at the earliest, though, not later than four weeks from the date of receipt of a copy of the order.(ii) In case the concerned officer were to agree with the petitioner, he will take consequential steps, albeit, as per law.(iii) The concerned officer will also consider the petitioner’s prayer for grant of refund and consequential interest under Section 244A of the Act.(iv) Needless to add, the concerned officer will pass a speaking order. A copy of the same will be furnished to the petitioner. (W.P.(C) No. 5513/2021 W.P.(C) No. 5514/2021 W.P.(C) No.5515/2021 dt. 27-05-2021) (AY. 2012-13, 2015-16, 2016-17)

    Travelport Global Distribution System BV v. CIT(IT) (2021) 435 ITR 684 (Delhi)(HC)

  86. S. 192 : Deduction at source – Salary – Provision of residential accommodation by employer – Valuation of perquisite – Residential Accommodation provided to regular and contract employees on collection of licence fee according to area of quarters and commensurate with salary of employee – Perquisite – Liable to deduct tax at source [S. 15, 17(2), ITR, 1962, R. 3(1) Art 12, 226]

    Petitioner is an educational institution. The petitioner challenged the provision relating to tax deduction at source, on the ground that the Institution is State within article 12 of the Constitution of India and therefore, in terms of section 17 and sub rule (1) of rule 3 of the said Rules, the value of the accommodation would be licence fees charged and there would be no question of providing any perquisite to the employees, hence not liable to deduct tax at source. Dismissing the petition the Court held that that even if the assessee was treated as State within the meaning of article 12 of the Constitution of India it could not escape the liability to deduct tax at source on the difference between the value of the rent as assessed under rule 3(1) of the 1962 Rules and that collected from the employee by way of licence fee. The ITO’s holding that the assessee was not State within the meaning of article 12 of the Constitution of India was not correct. Since the assessee did not provide rent-free accommodation to its employees, it did not fall under clause (i) of sub-section (2) of section 17. However, if there was any concession in the matter of rent respecting the accommodation provided by the assessee to its employees, it would be covered under clause (ii) of sub-section (2) of section 17. Even proceeding on the basis of the assertion of the assessee that it was “State” within the meaning of article 12 would not bring the assessee within the fold of entry 1 (which would be applicable only in a case where the employer was either the Central or the State Government) in the table below sub-rule (1) of rule 3 of the 1962 Rules. Accordingly residential Accommodation provided to regular and contract employees on collection of licence fee according to area of quarters and commensurate with salary of employee/ Perquisite which is Liable to deduct tax at source

    National Institute Of Technology v. UOI (2021) 434 ITR 361/ 201 DTR 283/ 320 CTR 756 / 278 Taxman 117 (Tripura) (HC)

  87. S. 195 : Deduction at source – Non-resident – Agreement with Indian Import of cars as completely built up units on principal to principal basis – Title and risk in goods transferred at port of delivery, payment made outside India and transaction complete outside India – No business connection – Not liable to deduct tax at source – DTAA – India-Japan [S.9 (1)(i), 195, Art, 5(1)(9)]

    The issue before the AAR was “Whether on the facts and circumstances of the case and in law, whether the applicant. i.e. Honda Motor Co. Ltd would be considered to have a permanent establishment (“PE”) in India by reason of its business transaction and related activities with Honda Siel Cars India ltd (“HSCI”) under the provisions of India-Japan DTAA ?”

    “On the facts and circumstances of the case whether the amount received / receivable by the applicant, i. e. Honda Motor Co Ltd from HSCI as consideration for offshore supply of raw material /components / capital goods and CR-V cars would be liable to tax in India under the provisions of the Act and India-Japan DTAA?”

    “If the answer to question Nos. 1 and 2 above is negative, whether HSCI would be liable to withhold taxes under section 195 of the Act on the payments to be made by HSCI towards the off shore supplies made by the applicant, i.e. Honda Motor Co, Ltd ?”

    The application was admitted on 5-5-2012,

    The AAR held that

    Q.No.1. The applicant , Honda Motor Co Ltd, would not be considered to have a permanent establishment (“PE”) in India by reason of its business transaction and related activities with Honda Siel Cars India Ltd (“HSCI”) under the provisions of India- Japan DTAA.

    Q.No.2. The amounts received / receivable by the applicant from HSCI as a consideration for offshore supply of raw material /components / capital goods and CRV cars would not be liable to tax in India under the provisions of the Act and India-Japan DTAA subject to verifications as mentioned in para 37 of the ruling.

    Q.No.3. Because of answer to question Nos. 1 and 2, the payment to be made by HSCI towards the offshore supplies of parts made by the applicant will not be subjected to withholding of tax under section 195 of the Act. AAR No. 1100 of 2011 dt 23-10-2019 (AR.2009-10)

    Honda Motor Co. Ltd., In re. (2021) 434 ITR 229 (AAR)

  88. S. 197 : Deduction at source –Certificate for lower rate – Double taxation Avoidance Agreement – Protocol – Common interpretation – Deduction of tax at source – Withholding rate tax in respect of dividend would be 5 percent – DTAA-India-Netherland [S.90, 195, Art 226]

    In a writ petition filed by the assessee for lower deduction of tax the issue before the High Court was as to what should be the withholding rate of tax in respect of dividend. On an application made for lower deduction of tax at source, the Assessing Officer held that the tax deductible will be at 10%. On writ the Court held that the Protocol formed an integral part of the Convention. Therefore, plainly read, no separate notification was required, in so far as the applicability of provisions of the Protocol was concerned. The best interpretative tool that could be employed to glean the intent of the contracting States in framing clause IV(2) of the Protocol would be as to how the other contracting State (i.e., the Netherlands) has interpreted the provision. The decree issued by the Kingdom of the Netherlands on February 28, 2012 published on March 13, 2012 clearly showed that the Netherlands had interpreted clause IV(2) of the Protocol appended to the Double Taxation Avoidance Agreement in a manner, which was, that the lower rate of tax set forth in the Double Taxation Avoidance Agreement between India and Slovenia would be applicable on the date when Slovenia became a member of the OECD, i.e., from August 21, 2010, although, the Double Taxation Avoidance Agreement between India and Slovenia came into force on February 17, 2005. Therefore, participation dividend paid by companies resident in the Netherlands to a body resident in India would bear a lower withholding tax rate of 5 per cent. The other contracting State, i.e., the Netherlands had interpreted clause IV(2) in a particular way and therefore in the fitness of things, the principle of common interpretation should apply on all fours to ensure consistency and equal allocation of tax claims between the contracting States. The certificates were not valid. Directed too issue a fresh certificate under section 197 of the Act which would indicate that the rate of withholding tax, in the facts and circumstances of the case would be 5 percent.

    Concentrix Services Netherlands B. V. v. ITO (TDS) 2021)434 ITR 516/ 201 DTR 17/ 320 CTR 361 (Delhi) (HC)

    Optum Global Solutions International B. V. v Dy. CIT (2021)434 ITR 516 / 201 DTR 17/ 320 CTR 361 (Delhi) (HC)

  89. S. 201 : Deduction at source – Failure to deduct or pay – Payment to Non-residents – Application of recipient admitted and pending before Authority for Advance Rulings – While adjudicating the issue, the Authority will adjudicate the jurisdictional issue of chargeability of tax [S. 201(1), 201(IA), 245R, Art 226]

    On writ the Court held that while carrying out the adjudication, the Authority for Advance Rulings would first determine as to whether the remittances in issue were chargeable to tax and pass a speaking order, after giving a personal hearing, if the order passed was adverse to the interests of the assessee, it would not be given effect for four weeks, and if the authority was of the view that it was necessary to await the decision of the Authority for Advance Rulings in the matter concerning the recipient non-resident, it could take this aspect into account as well.(AY.2012-13, 2013-14)

    BT (India) (P) Ltd v. ITO (2021) 434 ITR 279/ 200 DTR 260/ 320 CTR 178 (Delhi) (HC)

  90. S. 201 : Deduction at source – Failure to deduct or pay – Mere entries in accounts – No accrual of income – Not liable to deduct tax at source [S. 40(a)(i), 40(a) (ia), 192, 194C, 201(IA)

    The assessee made provision for general expenses, however not claimed as deduction while filing the return. The Assessing Officer initiate proceedings under section 201 and 201(IA) of the Act and treated the assessee as assessee -in default of the amount made provision. The order of the Assessing officer is affirmed by the CIT (A) and Tribunal. On appeal allowing the appeal the Court held that In the absence of any accrual of income, there is no obligation on the part of the assessee to deduct tax at source. Court also held that the provisions were created during the course of the year and reversal of entry was also made in the same accounting year. The Assessing Officer erred in law in holding that the assessee should have deducted tax at the rate applicable with interest. The Commissioner (Appeals) and the Tribunal were wrong to confirm the order of the Assessing Officer. The assessee was not liable to deduct tax at source.(AY.2012-13)

    Toyota Kirloskar Motor (P.) Ltd. v. ITO (TDS)-LTU (2021) 434 ITR 719 (Karn) (HC)

  91. S. 201(1) and 201(1A) : Deduction at source – Failure to deduct or pay – Proceedings under Section 201(1) and 201(1A) could not have been initiated without concerned officer determining the jurisdictional issue as to whether the remittances made were chargeable to tax.

    Held by the High Court that if the statutory authority exercises the power without determining whether or not it has jurisdiction in the matter, that itself, may, in certain cases, call for interference at this stage by High Court. Also, since 85-90% of the remittances have been made to BT Plc whose application is pending before AAR since 2015, the proceedings have to be adjudicated in the manner that the concerned authority will in the first instance determine as to whether or not the jurisdictional facts obtained in the matter ie whether the remittances in issue are chargeable to tax.

    Further, the High Court stated that in case, the concerned authority feels it is necessary to await the decision of the AAR in the matter concerning BT Plc, it will be free to take this aspect into account as well. (WP (C) No. 3470/2021 of 2016, dt. 19-03-2021)

    BT (India) Private Limited v. ITO & Anr (2021) 320 CTR 178 (Del) (HC)

  92. S. 205: Deduction of Tax at Source – Payee cannot be saddled with demand for the fault of payer of not depositing the TDS.

    It was held that to the extent that tax was deducted by payer company and not remitted by it to Income Tax Department, recovery could be only directed against payer company as it was in default. [AYs. 2011-12, 2012-13 and 2013-14]

    Ashok Kumar B. Chowatia v. DCIT (2021) 435 ITR 449 (Bom)(HC)

  93. S. 220 : Collection and recovery – Assessee deemed in default – Restraints revenue from recovering the amount over and above, as prescribed under CBDT Instructions

    The assessee has filed writ against the Revenue adjustment of Assessee-Individual’s outstanding demand with the refund despite appeal and stay application. HC observed that section 143(1A) of the Act provides that CBDT may make a scheme for centralised processing of returns with a view to expeditiously determining the tax payable by, or the refund due to, the Assessee and that section 143(1B) provides that for giving effect to the scheme pursuant to sub-section (1A), a notification with respect to application or non-application of any provisions relating to processing of return may be issued. Also, Clause 10 under the scheme is not intended to be read out of the context in isolation. Remarks that the scheme pursuant to section 143(1A) will have to be read in the context of the provisions in the Act governing refund and also orders, circulars, instructions issued from time to time by CBDT. Held that “Set off of refund under the clause is to be done by using details of income tax demand lying against the person uploaded on to the system. The exercise of power to have set off / adjustment of refund is regulated by legislative provisions and instructions. The details referred to in the clause would have to correspond to the provisions and instructions operating” Directs Revenue to refund excess amount collected over and above the amount required for stay along with interest. (WP No. 7231 of 2020, dt.25-3-2021) (AY. 2012-13 to 2019-20)

    Vrinda Sharad Bal v. ITO (2021) 435 ITR 129 (Bom.)(HC)

  94. S. 245C : Settlement Commission – Full and true disclosure of income – Not disclosing the income discovered during search – Acceptance of application is held to be not valid – Writ petition is held to be maintainable – Order is held to be perverse. [S.132, 153A, 245D, Art 226]

    Allowing the writ petition of the revenue the Court held that in the instant case, the assessee having knowledge about the search and having received notice under section 153A of the Act, ought to have submitted all such particulars along with the application including the undisclosed income recovered by the Department in the application itself. The assessee had not filed any details regarding the undisclosed income recovered by the Department in her application under section 245C of the Act and therefore, the very application for settlement was certainly not entertainable and the Department had, prima facie, established that the assessee had not approached the Settlement Commission with clean hands. The assessee had not truly and fully disclosed her income and more specifically, the undisclosed income recovered during the search was not made available before the Settlement Commission along with the application. This would be sufficient to reject the application by the Settlement Commission. Contrarily, the Settlement Commission proceeded by adjudicating the issues on the merits on the presumption that the Settlement Commission can pass an assessment order, which is otherwise not permissible under the provisions of section 245C of the Act. Thus, the order passed by the Settlement Commission was perverse and not in consonance with the provisions of the Income-tax Act, 1961. The order was not valid.(AY.2007-08 to 2013-14) (SJ)

    CIT v. ITSC (2021) 434 ITR 546 (Mad)(HC)

  95. S. 245C : Settlement Commission – Settlement of cases – Conditions – Subsequent additional statements could not be relied upon in order to satisfy requirements of S/245C and ITSC has exceeded its jurisdiction in setting aside such issue as regular assessment has to be made in such case.

    Held by the High Court that, (i) an application for settlement cannot be entertained when there are discrepancies and doubt arising as regards true and full disclosure of income by the Assessee approaching ITSC (ii) in order to satisfy requirements of Section 245C of the Act, Assessee has to disclose true and full income at the time of making application and if the Assessee revised its offer before ITSC by declaring additional undisclosed income and ITSC had considered said revised offer then such subsequent additional statements could not be relied upon in order to satisfy requirements of provisions u/s 245C and ITSC has exceeded its jurisdiction hence regular assessment was to be made (WP No.3297 of 2014, dt 11-08-2021) (AY. 2012-13)

    CIT v. ITSC (2021) 127 taxmann.com 367 (Mad) (HC)

  96. S. 245F r.w.s. 234B and 154 : Settlement Commission – Powers – Pursuant to subsequent Supreme Court’s judgment that ITSC cannot reopen its concluded proceedings u/s 154 directing levy of interest u/s 234B of the Act in view of section 245-I, the matter has to be remitted back to ITSC to decide issue afresh

    Allowing the Writ appeal, the High Court held that if the ITSC had granted waiver of interest under sections 234A to 234C, but subsequently rectified its order directing that interest u/s 234B be charged up to the date of order u/s 245D(4) of the Act, then in view of subsequent Supreme Court’s judgment that ITSC cannot reopen its concluded proceedings by invoking Section 154 so as to levy interest u/s 234B of the Act in view of section 245-I, matter has to be remitted back to ITSC to decide issue afresh (WA No 456 of 2018, dt. 15-09-2020) (AY 1988-89 to 1992-93 and 1995-96)

    CIT v. M.A. Jacob & Company (2020) 320 CTR 209 / 119 taxmann.com 232 (Mad)(HC)

  97. S. 245R : Advance rulings – Applicant is not found to be real owner of the transactions – Transactions were designed prima facie for avoidance of tax – Application is rejected-DTAA- India-Israel [S. 9(1)(i), 9(1)(vi), 9(1)(vii), 245N(a)(ii), 245R(2)]

    The question raised before the AAR was, “Whether the applicant is justified in its contention that amount due /received from Ranbaxy Laboratories Limited (‘Ranbaxy India’) is in the nature of ‘business profits’ and is not chargeable to tax in India under the provisions of the Act in the absence of business connection India under the provisions of the Act in the absence of business connection in India as per section 9 (1)(i) of the Act or under the provisions of article 7 read with article 5 of the India-Israel Double Taxation Avoidance agreement (‘DTAA’) in the absence of permanent establishment in India ?”

    “Whether the applicant is justified in its contention that amount due/ received from Ranbaxy India is not taxable as ‘royalty’ or ‘fees for technical services ‘both under the Act or under the relevant provisions of India -Israel DTAA read with Protocol thereto ?”

    The application was admitted on 6-7-2015, The AAR held that the applicant is not found to be real owner of the transactions and income did not accrue in its hand but it was only a case of application of income of BP USA to the applicant. Further, the basic condition of the transaction of the non-resident arising out of the transaction with a resident as stipulated under section 245N(a)(ii) was not fulfilled as the transactions of the applicant were not on account but towards application of income of BP USA. The transactions were also hit by the mischief of clause (iii) of the section 245R(2) of the Act, as they were designed prima facie for avoidance of tax. Accordingly the application is rejected. (AY.2016-17) (AAR.No. 1476 of 2013 dt 25-10-2019)

    BP Israel, In re (2021) 434 ITR 283 (AAR)

  98. S. 245R: Advance rulings – Procedure – Application – Dismisses application as issue pending before ITAT for earlier years

    The Applicant is a non-resident company has entered into two agreements with an Indian company i.e. System Fund Support Services Agreement (SFS) to provide marketing, distribution, marketing and frequency marketing programs and Reservation System Facility Agreement (RSF) to provide reservation systems facility w.e.f. April 1, 2019. The Applicant seeks before AAR that, whether the amount received from Indian Co. for such services is taxable as royalty/FTS. Revenue contends that the issue is already pending before Income-tax Authorities/ITAT and thus, attracts the bar under clause (i) to first proviso to Sec. 245R(2) as the Applicant was already providing various services to Indian hotels relating to hotel management, marketing, and reservation, which were held as FTS/Royalty in earlier AYs where appeal was pending adjudication before ITAT. AAR concludes that the services have been provided by Applicant to the Indian hotels and we don’t find any change in the obligation of Appellant and therefore rejects the application on grounds of pendency of an issue before income-tax authorities applies bar u/s 245R(2) (AAR/NCR/10/2020, dt. 17-02-2021)

    XYZ Inc. In re. (2021) 434 ITR 49 / 200 DTR 17 / 320 CTR 270 (AAR)

  99. S. 245R: Advance rulings – Procedure – Application – Application filed after issuance of notice u/s 142(1), barred u/s 245R (2)

    The Applicant is a company incorporated in UK, entered into project management consulting agreement with GSPC LNG Ltd. for preparation of proposal documents, assistance in bidding process, cost estimation service etc in relation to construction of marine, regas and tank facilities and set up India PO for rendering onshore services. Also, the applicant entered into project technical consulting services agreement with Reliance Industries Ltd. for providing technical review services from outside India in relation to construction of facilities. Before AAR, the question was whether sums received under the contracts for rendering services are not liable to tax as FTS under the applicable DTAA. AAR observes that the notice u/s 143(2) was issued on September 19, 2017 and notice u/s 142(1) was issued on October 23, 2017, whereas application before AAR was filed much later on May 15, 2018 and therefore following Delhi HC rulings in Hyosung Corp. where applications was held to be not maintainable due to as notice u/s 142(1) was issued before filing of application dismisses the application. (AAR No. 11&12 of 2018, dt. 25-01-2021)

    Whessoe Engineering Limited In Re (2021) 433 ITR 124 / 199 DTR 99 / 320 CTR 150 / 279 Taxman 493 (AAR)

  100. S. 245R : Advance rulings – Procedure – Application – Notice – Questions raised in application are not pending before Income-Tax Authority – Issue of notice is not bar to application for this year – Application was admitted [S. 142(1), 143(2)]

    AAR held that the specific question in respect of the nature of services rendered under the agreement or about the taxability of receipts for the services did not form part of any of the questionnaire or notices. Therefore, such notices issued prior to the filing of the application could not be a bar in terms of clause (i) of the proviso to section 245R(2) of the Act, to admission of the application(AY. 2016-17)

    Centrient Pharmaceuticals Netherlands, B. V., IN RE (2021) 436 ITR 54/ 319 CTR 672 (AAR)

  101. S. 246A : Appeal – Commissioner (Appeals) – Pendency of appeal – Recovery of tax – Direction was issued to expedite the disposal of appeal and restraint against recovery of demand until disposal of appeal [S. 143(3), 144B, 156, 226, Art, 226]

    Allowing the petition the Court held that the main issues for consideration in the appeal before the Commissioner (Appeals) under section 246A were limited largely to the inclusion of unsecured loans and share capital as part of the total income of the assessee, the court directed the expeditious disposal of the pending appeal after providing a reasonable opportunity to the assessee, including a personal hearing if so requested. Until such time, the Department was restrained from recovering the demand pursuant to the assessment order under section 143(3) read with section 144B.

    Omkara Assets Reconstruction Private Limited v. ACIT (2021) 436 ITR 40 (Mad) (HC)

  102. S. 246A: Appeal – Commissioner (Appeals) – Stay of demand – 20 % of demand was not paid – Court directed to defer the recovery of demand till disposal of the appeal. [S.80P, 226]

    During the pendency of the appeal, the Assessing Officer rejected the assessee’s application for stay of the demand on the ground that the assessee did not pay the mandatory sum of 20 per cent. of demand before filing the application for stay of demand. On writ the court directed to stay of demand till disposal of the appeal by the Commissioner (Appeals)

    Thaniyam Panchayath Service Co-Operative Bank Ltd. v. ITO (2021) 436 ITR 266 (Ker) (HC)

  103. S. 254(1) : Appellate Tribunal – Duties- Provisions for transitional liability on leave fare concession/Home travel concession, silver jubilee awards to employees and on resettlement Expenses – Submissions not considered – Matter remanded to Tribunal [S. 36, 37(1), 253]

    Allowing the appeal the Court held that the Tribunal had not adverted to the submissions of the assessee and the order passed by the Tribunal was liable to be quashed. The matter was remitted to the Tribunal to afford an opportunity of hearing to the parties and to consider the submissions made by them.(AY2008-09)

    State Bank of India v. JCIT (2021) 436 ITR 653 (Karn) (HC)

  104. S. 255: Appellate Tribunal – Powers of Tribunal – Tribunal cannot transfer case from Bench falling within jurisdiction of a particular High Court to Bench under jurisdiction of different High Court [S. 254(1), ITATR, 1963, R. 4. Art, 226]

    An order dated August 20, 2020 passed by the President of the Tribunal under rule 4 of the Income-tax (Appellate Tribunal) Rules, 1963 directing that the appeals be transferred from the Bangalore Bench of the Tribunal to be heard and determined by the Mumbai Benches of the Tribunal at Mumbai. On a writ petition against the order, a preliminary objection was raised regarding maintainability of the petitions. The Court held that the writ petition was maintainable because the petitioner had no other statutory remedy. Having regard to the mandate of clause (2) of the article 226 of the Constitution, the Bombay High Court had jurisdiction to entertain the petitions. Court also held that the fact that the assessee may have expressed no objection to the transfer of the assessment jurisdiction from the Assessing Officer at Bangalore to the Assessing Officer at Mumbai after assessment for the assessment years covered by the search period, could not be used to non-suit the petitioner in his challenge to the transfer of the appeals from one Bench of the Tribunal to another Bench in a different State and in a different zone. The two were altogether different and had no nexus with each other. That the orders dated March 19, 2020 and August 20, 2020 were wholly unsustainable in law.(AY. 2005-06 to 2008-09)

    MSPL Limited v. PCIT (2021) 436 ITR 199 / 202 DTR 117/ 321 CTR 1 (Bom) (HC)

  105. S. 271(1)(c) : Penalty – Concealment – Furnishing inaccurate particulars of income – Deletion of penalty is held to be justified.

    Dismissing the appeal of the revenue the court held that the observations of Supreme Court in Department’s Special Leave Petition that sum in question not income of assessee. Tribunal was right in upholding order of Commissioner (Appeals) deleting Penalty. (AY. 1991-92, 1992-93, 1993-94)

    CIT v. T. Jayachandran (2021) 436 ITR 269 (Mad.) (HC)

  106. S. 274 : Penalty – Procedure – Where the irrelevant limb in the penalty notice is not struck off, the proceedings are not sustainable.

    An assessee must be made aware of the ground on which penalty is sought to be imposed on him. Where the statutory notice does not specify the limb under which the penal proceedings are being initiated, the subsequent order passed under section 271(1)(c) will be bad in law. (A.Y. 2007-08)

    Mohd. Farhan A. Shaikh v. DCIT (2021) (320 CTR 26) (Bom) (Full Bench)

  107. S. 281 : Certain transfers to be void – Recovery of tax – Family settlement – Pendency of proceedings – Transfer of property is void – Order of attachment is held to be valid [S.158BD, 226(3) Art 226]

    Dismissing the petition the Court held on the facts of the case what was evident was that the so-called transfer of the undivided share in the land by the two brothers namely the paternal uncles of the petitioner in favour of the petitioner’s father had not been proved. In any case such transfer would be contrary to section 281 of the Act, inasmuch as notice under section 158BD had been initiated against the Hindu undivided family of Milapchand Dada as early as July 9, 2001. The family arrangement pursuant to which transfers
    were allegedly affected had to be declared void. There was a recovery
    certificate issued for the same property in favour of the bank. (AY. 1997-98,
    1998-99, 2003-04)

    Apoorva Dadha v. TRO (2021) 436 ITR 225 (Mad) (HC)

  108. S. 281: Certain transfers to be void – Recovery of tax – Attachment of property – Death of seller before executing sale of house property – Attachment of property for recovery of due from firms in which legal heirs were partners for periods subsequent to sale agreement – Tax recovery officer cannot declare transfer void – Non -release of registered sale deed by sub-registrar is not valid [S. 226, Art 226]

    Allowing the petition the Court held that the transfer of the property was on account of the final culmination of the litigation by the order of the Supreme Court. There was only a delay in the execution of the sale deed due to the pendency of the proceedings as the third and fourth respondent’s mother (since deceased) declined to execute the sale deed under the sale agreement dated June 30, 1994. The subsequent tax liability of the fourth respondent and her husband for the assessment years 2012-13 and 2013-14 could not be to the disadvantage of the petitioner, since the petitioner had been diligently litigating since 2004. Therefore, the benefit of the decree in a contested suit could not be denied merely because the seller or one of the persons had incurred subsequent tax liability. The benefit of a decree would date back to the date of the suit. Therefore, the communication dated July 6, 2018 which required the petitioner to obtain clearance could not be countenanced. The tax liability of the firms of which S and her husband were partners arose subsequent to the commitment in the sale agreement dated June 30, 1994. The Sub-Registrar was directed to release the sale deed dated June 29, 2018 and to cancel all the encumbrances recorded against the property in respect of the tax arrears of the firms of the fourth respondent S and her husband.

    J. Manoharakumari v. TRO (2021) 436 ITR 42 (Mad) (HC)

  109. S. 292B : Notice not to be invalid on certain grounds – Notice issued in the name of a dead person is a nullity.

    A notice issued under section 153C of the Act in the name of a dead person is void and cannot be saved by section 292B. The fact that the AO did not have knowledge of the death at the time of issuing the notice is immaterial as even when subsequently the fact of the death was informed to the AO there was substantial period of time within which a fresh notice could have been issued in the name of the legal heir, but that exercise was not done. (A.Ys. 2011-12 to 2017-18)

    Bhupendra Bhikhalal Desai v. ITO (2021) 320 CTR 289 (Guj)(HC)

  110. Article 226 of the Constitution of India – Territorial jurisdiction – Cause of action

    Where, both, the assessee and the assessing authority were outside the jurisdiction of the High Court, then a writ petition would not lie before such Court merely because the order under challenge was passed by a bench of the Settlement Commission of that State. (A.Ys. 1995-96 and 1996-97)

    M/S. Mulberry Silks Limited v. Settlement Commission (2021) 320 CTR 611 and 320 CTR 604 (Mad)(HC)

  111. S. 3 of DTVSV – Assessment Order not under provisions of Section 153A/153C – None search case.

    As per section 3 of DTVSV Act where assessment is made on basis of search, amount payable by assessee would be 125 per cent of disputed tax declared by assessee and where declarant files a declaration in accordance with section 4 in respect of tax arrears, amount payable shall be 100 per cent of disputed tax declared. It was held that where assessee had filed declaration u/s 4 of DTVSV Act, and assessment order passed in case of assessee suggested that case of assessee was selected for scrutiny and notices were issued to it not in pursuant to any search under section 132 or requisition under section 132A, since assessment did not appear to be on basis of search initiated under section 132, order passed by designated authority determining tax payable by petitioner being 125 per cent of disputed tax would be unsustainable. [DTD 27/4/2021]

    Bhupendra Harilal Mehta v. PCIT (2021) 435 ITR 220 (Bom)(HC)

  112. S. 4 : DTVSV – Tribunal recalled its order and restored Revenue’s appeal and posted it for fresh hearing, hence Revenue’s appeal was pending on specified date, i.e., 31-1-2020 and Form Nos. 1 and 2, filed by Assessee were to be considered by the Revenue

    Allowing the Writ petition, the High Court held that the Tribunal’s order (11.05.2020) recalling its earlier order dismissing Revenue’s appeal would have to be construed, metaphorically, as one breathing life into a dead appeal, in the light of the doctrine of ‘relation back’ and consequently the Revenue’s appeal being pending adjudication on specified date, i.e., 31-1-2020, Forms 1 and 2 filed by Assessee with designated authority, under DTVSV Act, 2020 could not have been rejected and hence were to be considered afresh. (W.P.(C) No.3921 of 2021, dt. 26-04-2021) (A.Y.2011-2012)

    Bharat Bhushan Jindal v. PCIT (2021) 320 CTR 766 / 127 taxmann.com 698 (Del)(HC)

  113. S. 4 : Direct Tax Vivad Se Vishwas Act, 2020 – Assessment did not appear to be on basis of search initiated under section 132, hence order passed by designated authority determining tax payable by petitioner being 125 per cent of disputed tax would be unsustainable

    Allowing the Writ petition, the High Court observed that the Assessee had filed declaration under Section 4 of DTVSV Act, and assessment order passed in case of Assessee suggested that case of Assessee was selected for scrutiny and notices were issued to it not in pursuant to any search under section 132 or requisition under section 132A, since assessment did not appear to be on basis of search initiated under section 132, order passed by designated authority determining tax payable by petitioner being 125 per cent of disputed tax would be unsustainable. (WP No. 586 of 2021, dt. 27-04-2021)(AY 2015-16)

    Bhupendra Harilal Mehta v. PCIT, (2021) 320 CTR 483 / 127 taxmann.com 109 (Bom)(HC)

Namaskar,

Dear esteemed fellow members, it is my pleasure indeed to meet all my seniors, colleagues and friends physically. We have commenced physical seminars and meetings all over the country. After completion of Katra Jammu Vaishnov Devi NTC programme, we all assembled in Pune (Maharashtra) to celebrate the 45th Foundation Day of AIFTP alongwith National Executive Committee Meeting. This was a great moment for me to meet you all physically at Pune for the 2 Days programme, which was organized jointly by AIFTP (Western Zone) alongwith with our sister associations.

On 11th November, 2021, we started the programme with Hare Ram Hare Krishna Bajan to get the blessings of Lord Krishna, followed by flag hoisting at the venue. We presented a table flag alongwith a Tie to our Founder Secretary General, Shri P. C. Joshi, Advocate, Past President, AIFTP. The Technical Sessions started at 9.00 am sharp, followed by Lunch and a Maharashtrian Dance Programme. The Inaugural session was chaired by our Hon’ble Dr. Bhagwat Karad, Minister of State Finance of India as the Chief Guest. Shri Satish Magar, National President, CREDAI and who is a renowned realty business man from Pune was our Guest of Honour. The dignitaries lighted the lamp with all Heads of Associations. Hon’ble Dr. Bhagwat Karad, Minister of State Finance of India very clearly said in his speech that the Taxes collected through Income Tax and GST are for the Nation Building and also addressed gathering about the Technical glitches which are to be solved at the earliest possible by the Central Government. He has also expressed that whatever suggestions from the professional bodies are received are welcome. He shall validate and incorporate the same in the upcoming union budget. In the inaugural session the Hon’ble Minister felicitated our Past President Shri P. C. Joshi, Advocate, Mumbai and Retired Hon’ble Mr. Justice J. K. Ranka, Jaipur, Rajasthan who is our member.

The National Tax Conference had around 370 registered delegates from all parts of the country.

Hon’ble Dr. Bhagwat Karad, Minister of State Finance of India inaugurated our 45th year History book titled “Marching Towards Golden Jubilee”. He also unveiled the GST publication. The 45th Foundation Day Celebrations Committee Chairman Shri Kishor Vanjara, Senior Member AIFTP conducted the proceedings of the Foundation Day Celebrations in the presence of galaxy of Past Presidents S/Shri P. C. Joshi, Dr. K. Shivaram, M. L. Patodi, Smt. Prem Lata Bansal, Smt. Nikita R. Badheka.

The 45th Foundation Day Programme started with Video Presentation on Power Point along with Motivational Song of AIFTP. All Past Presidents were hounored at the hands of National President with Pattu Vasthram, Mala, Citation, Memento, AIFTP Silver Dollar, Gift Boxes and Shawl. During the Felicitation Function the power point presentation also added colour to each and every Office Bearer as well as NEC member. Around 70 members attended this felicitation function and all members re-dedicated themselves to AIFTP. Some felicitated members shared their views. The AIFTP Foundation Day Function was well organized by the Committee under the MOC of CA. Rajesh Mehta National Vice President, AIFTP (CZ) & Smt. CA. Jamuna Shukla, NEC Member, AIFTP (NZ). Later, we all attended the Gala Dinner with Musical Programme.

The 2nd day Technical Sessions started at appropriate time, the 9th National Executive Committee Meeting was simultaneously conducted in other hall. The speakers along with the Chairmen were well chosen. All the delegates were enriched with knowledge in various fields of Taxation.

The Valedictory Function was chaired by Shri Dhananjay Akhade, Addl. Commissioner, SGST, Pune Zone. He spoke about some GST burning issues and felicitated all the Pune Team under the Chairmanship of Shri Narendra Sonawane.

The Panel Discussions was the last session and was well attended. The Food arrangements of the two days are also delicious in a grand manner. In this entire year of 2021 of my presidential tenure there is no financial burden on AIFTP. More over in this calendar year Rs. 24 Lakhs is collected particularly for the various awards of upcoming conventions.

The AIFTP members from entire country are requested to join AGM on 20th November, 2021 at 4 p.m. virtually on Zoom Platform. The Padmavibhushan Dr. N. A. Palkhivala Memorial (Virtual) Moot Court Competition and Research Paper is also being conducted on 26th, 27th & 28th November, 2021. Further we are having 4th and 5th of December One Day Tax Conferences at Solapur & Ratnagiri respectively in AIFTP (Western Zone) Maharashtra, a Vindhya Tax Conference at Rewa AIFTP (Central Zone) on 18th & 19th December 2021 and Finally the National Convention at Lucknow, the Capital City of Uttar Pradesh by AIFTP (Northern Zone) is being held on 24th, 25th & 26th December, 2021. Please involve and attend all the programmes and grace all the occasions for the benefit of fellowship and friendship forever.

Long Live AIFTP

Place: Eluru 
Dated: 19-11-2021 

M. Srinivasa Rao
National President, AIFTP

As I was editing the 1st draft of my editorial, the Hon,ble Prime Minister Shri Narendra Modi, in his address to the nation, announced that the process of withdrawing the contentious three farm laws will start in the coming winter session of the Parliament. This announcement of the Hon’ble Prime Minister will have several ramifications and far-reaching consequences in policy-making of our country. Those who were with the present government, for political reasons may have views justifying the action and the opposition may claim victory. However, for professionals like us, who have been calling for reforms in the system to improve governance and efficiency of the government machinery is a let down for them. It seems in a democracy reforms are a difficult task to be performed.

This issue of the journal brings tax companion, wherein we digest decisions of ITAT, High Court and Supreme Court, initially we had planned to bring this issue in the month of October, however, due to unforeseen circumstances the same had to be postponed to the month of November. In this issue we have tried to cover relevant and important case laws. I thank my research team and the editorial team for sparing their valuable time during the festive period to bring this issue in time. I thank all the authors once again.

K. Gopal,
Editor