Proposed List
Sr. No. Name of Members Profession Zone
1 Maddi Manmohan Rao Adv. East
2 Simarpreet Singh Jaggi CA. North
3 Ashwini Kumar Lakhotia Adv. Central
4 Sandeep Kumar Miglani Adv. North
5 Pranay Disawal Adv. Central
6 Arjun Gupta Adv. West
7 Rajeev Kumar Adv. East
8 Ramesh V. Shah CA. West
9 Priyanshi Desai Adv. West
10 Shyam Sunder Jaluka Adv. Central
11 Raman Ramesh Somani CA. West
12 Kanchan Singha Adv. East
13 Sudhir Halakhandi CA. Central
14 Prasanna Shenoy CA. South
15 Amit Gopalprasad Bhatiya CA. West
16 T. Ramesh Adv. South
17 Satish Sareen CA. Central
18 Prashant Gupta CA. North
19 Tushar Hemani Sr. Adv. West
20 Annamalai Krishnamurthi GSTP South
21 Pankaj Sharma CA. Central
22 Lalitha Krishnamurthy GSTP North
23 Ankit Tripathi Adv. North
24 Rahil Dhawan CS. North
25 Bhumit Kantilal Rathod ITP West
26 Pawan Agarwal CA. East
27 Shilvi Khandelwal CA. Central
28 Gagan Agarwal CA. East
29 C. A. Sanjeevirajan CA. South
30 Dinesh Chandra Gupta Adv. Central
31 Pushpendra Kumar Srivastava Adv. North
32 Shishir Shukla CA. North
33 Onkar Nath Tandon CA. North
34 N. Muralikumaran Adv. South
35 Siddharth Agarwal Adv. East
36 Soma Gana CA. East

 

Central 8
South 5
East 7
North 9
West 7
Total 36
  1. Issuance of look out circular – Restriction on traveling abroad – Validity – communication of an order adverse only then it would come into effect:

    LOC issued at instant of Bank against petitioner guarantor for default in payment of loan availed by company run by her husband and others. Copy of LOC never furnished to petitioner till same was filed in court . Petitioner not an accused in any criminal case

    . Action of Bank in seeking issuance of LOC to prevent petitioner from leaving country on ground that she was a guarantor and that loan was more than Rs. 100 cores,

    The Court observed that it is not in dispute that the copy of the LOC was never furnished to the petitioner till it was filed for the first time by respondent No.2 along with its written response in Court. It is not in dispute that the Office Memoranda providing the issuance of LOC do not contain any provision for supply of copy of the LOC to the subject of the LOC or supply of reasons for issuing of the LOC.

    In State of West Bengal v. AB.K. Ltd (2015) 10 SCC 369 the Supreme Court held that there should be communication of an order adverse to a citizen and only then it would come into effect.

    Without communicating the LOC to the petitioner, the respondents cannot seek to en- force it as it would not have any effect in law.

    How the petitioner can be termed as an ‘accused’ as is mentioned in the LOC when admittedly no criminal case has been initiated in any court in the country against her. Merely looking at the quantum of loss caused to a banker, it cannot be presumed that there was a fraud committed by the borrower/ guarantor, moreso when no criminal case allegging fraud has even been filed against the borrower/ guarantor. Suspicion cannot take the place of proof.

    Action of respondent authority in issuing LOC against petitioner in a mechanical way also arbitrary and violative of Art. 14. LOC set aside.

    Poonam Paul vs Union Of India And Others, AIR 2022 PUNJAB AND HARYANA 131

  2. Succession female Hindu dying intestate-Right of inheritance Property – Cannot be waived on basis of statements made in previous suit or any sort of statements or admission made by co-owner especially when such relinquishment or disclaimer is not in writing. Hindu Succession Act 1956 S. 15(1)(2) – Transfer of Property Act 1882, S. 5

    A disclaimer means any writing which disclaims, refuses, renounces, or disclaims any interest that would otherwise be taken by a beneficiary. Therefore, the statements made in the previous suit or any sort of statements or admission in the present suit as well, by no stretch of imagination be said to be a waiver/ relinquishment of the defendant’s right of inheritance or his co-ownership over the suit property left behind by his late mother of both the plaintiffs and defendant.

    Surajit Majumder and others v. Majumder Manojit : AIR 2022 TRIPURA 28

  3. Torts Medical negligence – Claim for – compensation Claimant-

    Mother seeking compensation for physical

    pain and mental agony underwent by her for period of nine months after delivering child due to alleged negligence by respondent doctor . Claimant had to undergo a three stage surgery to ad dress tear of rectum . First stage surgery was colostomy, second stage surgery was CPT-repair and third stage surgery was co lostomy closure. This situation could have been averted by hospital by immediately shifting Petitioner to Coimbatore Medical College Hospital . Claimant was forced to spend towards surgery expenses, medicine expenses, travel expenses and also rental expenses . She also faced untold hardship in not being able to take care of her new born baby effectively for nine months Negligence on part of hospital for not taking proper care of claimant and for having failed to shift her. Claimant held entitled to compensation of Rs. 5 Lakhs.

    S. Bhanupriya v. State of Tamilnadu and ORS. : AIR 2022 (NOC) 646 (MAD.)

  4. Insurance coverage for mental illnesses – Mental illnesses cannot be treated differently from physical illnesses – Insurance policies also cannot discriminate between these two type of illnesses

    United Nations Convention on Rights of

    People with Disabilities prohibited any form of discrimination in respect of mental illnesses or any other disabilities. The Convention recognises mental disabilities as a form of disability and enshrines the principle of non-discrimination towards such disabilities. The Convention not only recognises the need for non-discrimination qua disabilities in general, but also specifically refers to medical insurance, under Art.25. Insurance Regulatory and Development Authority of India (IRDAI) has a duty to ‘control’ and ‘regulate the terms and conditions of insurance policies. It also has the duty to protect the interest of policy holders and ensure that they are not disadvantaged in any manner. Thus, it is the IRDAI’s function to ensure that laws that are enacted for the benefit of policy holders are fully given effect to by the insurance companies. It is also the IRDAI’s admitted position that the provisions of Section 21(4) of the MHA, 2017 are liable to be given effect to. This is also confirmed th by IRDAI in its circular. Thus, the IRDAI’s stand is that insurance is liable to be provided for mental illnesses upon the enactment of the MHA, 2017. Insurance companies had to make provision for mediclaim insurance for treatment of mental illnesses on the same basis as treatment available for physical illnesses. The NICL and IRDAI have filed affidavits from which it is clear that the in sured amount has now been paid to the Petitioner. The crux of the above provisions, circulars and affidavits clearly is that mental illnesses cannot be treated differently from

    physical illnesses. Insurance policies also cannot discriminate between these two types of illnesses. The reasons for the non- discriminatory provisions between mental and physical illnesses are not far to seek. While physical illnesses are manifested in the human body in some form, mental illnesses do not always have visible physical manifestations. However, mental illnesses can also be debilitating and destructive. The recent pandemic also highlights this beyond any doubt. Circumstances leading to patients requiring isolation, healthy persons being subjected to lock-downs, work from home conditions, loss of employment leading to lack of confidence for long durations have led to several mental problems. Such mental conditions need to be dealt with immediately. Availability of insurance for mental disabilities or conditions is, therefore, not only important but is an essential need. It is also made clear by Court that National Insurance Company Limited (NICL) and all insurance companies are liable to give effect to S.21(4) of the MHA, 2017 with effect from the date when it has come into force i.e., 29 May, 2018. Mental illnesses ought to be covered without any discrimination.

    Shiksha Nischal V. National Insurance Company Limited and another: AIR 2022 (NOC) 692 (Del.)

  5. Corporate Guarantor – Liability

    – Initiation of corporate insolvency resolution process – Insolvency and Bankruptcy Code 2016 sections 5(5A) & 7 :

    Liability of guarantor is co-extensive with

    that of principal borrower . Under Sec.7 of IBC, CIRP can be initiated against Corporate entity who has given guarantee to secure dues of non-corporate entity as financial debt accrues to corporate person, in respect of guarantee given by it, once borrower commits default. Since company extended corporate

    guarantee for loans availed by borrowers, on failure of borrowers to repay loans, company became liable to repay loan . The court relied on decision in case of Laxmi Pat Surana v. Union Bank of India & anr (2021) 8 SC 481. It was open to the Financial Creditor to proceed against the guarantor without first suing the Principal Borrower. Initiation of CIRP against company held proper.

    K. Paramasivam v. Karur Vysya Bank Ltd. and another : AIR 2022 SUPREME COURT 4127

  6. Consumer Protection – Unfair trade practice – Non delivery of new Car despite payment of full consideration and delivering a defective or used Car instead, is ‘unfair trade practice’ – Consumer Protection Act 1986 , S.2(1)(r) :

    The appellant herein original complaint

    booked a new car and as such paid the entire sale consideration. Therefore, when the complainant customer booked a new car and paid the sale consideration of a new car, the dealer was supposed to and/or bound to deliver the new car. Instead, the dealer delivered the used car which was used as “Demo Test Drive Vehicle”. Even as per the findings recorded by the National Commission the car which was delivered was a defective car. Even to deliver the defective car against the new car was also not permissible. Not to deliver the new car despite the full sale consideration paid and/or to deliver the defective car can be said to be unfair trade practice. It can even be dishonesty on part of dealer . It is against morality and ethics Dealer directed to deliver new car against previously deposited amount with costs of Rs.1,00,000/-.

    Rajiv Shukla v. Gold Rush Sales and Services Ltd. and another. AIR 2022 SUPREME COURT 4184

  7. Recovery of dues – Small and Medium Enterprises Development Act (27 of 2006), Ss. 17, 18 :

    Certain amount was payable on account of sale of plant and machinery As the respondent failed to make payment a reference to Facilitation Council for conciliation was made.

    A conjoint reading of the provision make it amply clear that a reference to Facilitation Council for conciliation and subsequent arbitration if required, is not barred on account of the presence of an arbitration agreement providing for a different method of constituting Arbitral Tribunal. An dispute can be referred to Facilitation Council, mere provision for reference to arbitration in C1.38 of Agreement would not bar reference of such dispute to Facilitation Council. Once registered, status of petitioner would be that of registered enterprise and all provisions of the Act would apply with full force. Facilitation Council directed to consider claim of the petitioner and adjudicate same.

    M/s. Dalapathi Constructions, A.P. v. State of Andhra Pradesh and others. : AIR 2022 ANDHRA PRADESH 150

  8. Marking of evidence – Admissibility of document Unstamped and unregistered document – Registration Act 1908 S.17.

    Defendant relied on an unstamped and

    unregistered release deed. The Trial Court impounded document and levied penalty and did not mark it as evidence. Even if a document is not registered, said document can be marked in evidence and admissibility is left open for consideration at appropriate stage, the Order rejecting marking of unregistered document as evidence was quashed. The Trial Court directed to mark said document subject to relevancy and admissibility.

    Veerasangayya Gadigayya Mulimath and others v. Veerupakshayya Irayya Ganachari and others. AIR 2022 KARNATAKA 222

Sr. No. Name of Publication   Rate (Rs.)
Edition Members Non-Members Courier Charges per copy
1. 75 Landmark Judgements of Honorable Supreme Court and High Courts under GST Laws Aug., 2022 280.00 315.00 100.00
2. Handbook on Taxation of Partnership Firms & Limited Liability Partnerships: Frequently Asked Questions Dec., 2021 725.00 945.00
3. Reassessment Law, Procedure & Practice (Practical Guide) Dec., 2020 Free Available on website 100.00
4. 151 Landmark Judgment of the Honorable Supreme Court Oct., 2020 Available on website Available on website
5. GAAR General Anti-Avoidance Rules Dec., 2019 640.00 720.00 100.00

Research Team

63. S. 2(22)(e): Deemed Dividend – To be assessed only in hands of Shareholder of lender company, and not in the hands of company who is not a shareholder in the lender company, though closely held company, and having common shareholders holding more than20% shares in each company.

Assessee Company had shown unsecured loan which was in the nature of Inter corporate Deposit, from another company having common shareholders, wherein common shareholders were holding 50% share in assessee company and holding more than 20% share in lender company. However, the assessee company was not holding any share in the lender company.

The learned AO treated the unsecured loan as deemed dividend under section 2(22)(e) by observing that both parties were closely held company and having common shareholders holding more than 20% shares in each company. The learned CIT(A) deleted the addition made by A.O.

Tribunal, upheld the order of CIT(A), stating that the provisions of sec 2(22)(e) can only be invoked in case of a shareholder who is holding substantial interest, and as appellant assessee is neither the beneficial owner or an registered owner provisions of sec 2(22)(e) cannot be invoked on assessee. (ITA No. 2259/Ahd/2016 (AY. 2007-08) dt 28.02.2022

DCIT v. Amit Intertrade (P) Ltd (2022) 194 ITD 585 (Ahmedabad)(Trib.)

64. S. 9 r. w. Article 13 of India- Mauritius DTAA – Income deemed to accrue or arise in India – Concept of beneficial ownership being a sine qua non to entitlement to treaty benefits, cannot be inferred or assumed in the absence of specific provision to that effect

The assessee is a company based in Mauritius and sold shares of an Indian company during the year and earned long term capital gains which was claimed exempt by the assessee taking benefit of India-Mauritius DTAA. The AO held that the assessee is a subsidiary of a Cayman Islands company and has no independent existence and its entire activities were controlled by its affiliates. Accordingly, AO held that the entire scheme of purchase and sale of shares was designed for the benefit of Cayman Island entity and lifted the corporate veil and denied treaty benefit to the assessee holding that the assessee is not the beneficial owner of the shares. DRP upheld the addition made by AO.

Tribunal held that unlike in Article 10 or 11 of the India-Mauritius DTAA, which specifically provides for beneficial ownership of interest or dividend in order to be entitled for treaty protection, there is no such provision in Article

13 of the DTAA. Therefore, Tribunal has remitted the matter back to AO for deciding the fundamental issue as to whether the requirement of beneficial ownership can be read into Article 13 of the India-Mauritius DTAA and only if the answer is affirmative, the question of beneficial ownership of shares can be examined by way of passing a speaking order by the AO.

Blackstone Fp Capital Partners Mauritius V Ltd. v. Dy.CIT (International Taxation) (2022) 217 TTJ 753

/ 214 DTR 158 (Mum)(Trib)

65. Sec 9 r/w Article 12 of India- USA DTAA: (i) When there is no make available of technology, skill or knowledge involved in carrying out services to the Assessee, payment received cannot be characterized as Fee for Technical services.

(ii) The payment made by the assessee on behalf of its AE to third party vendors outside of India, when reimbursed to the Assessee, cannot be taxed as royalty as the same were pure reimbursement and not an income in hands of the Assessee.

i. The Assessee is a US based company which was in the business of providing design and development services and engineering services of vehicle safety norms. The Assessee had an agreement of sub-contracting with the AE in question, to provide for the services as aforementioned, concerning the vehicle safety norms for a certain brand of cars in India & for a certain sum of

It was the contention of the AO that such services were in the nature of technical services and the revenue so received ought to be treated as FTS/Royalty in terms of the article 12 of India-US DTAA. This contention found support and was upheld by the Hon’ble DRP.

The Hon’ble ITAT held that, the technology would be considered as made available only when the person acquiring such knowledge is possessed of the same enabling him to apply in future at his own, without any aid by the service provider. Without the existence of this

element, there is no make available to the service recipient and hence the engineering services cannot be taxed in India as FTS/Royalty in view of the relevant article of the India-US DTAA.

ii. The Assessee made purchases of software on behalf of all its group companies from the third-party vendors. Out of the payments made, some were allocated as recoverable from the AE in question. The same were reimbursed by the AE at cost basis without any profit whatsoever. The AO treated this reimbursement of software charges as income from Royalty under section 9(1)(vi) and article 12 of the India-US DTAA which was upheld by the DRP.

The Hon’ble ITAT held that, the revenue has not made any case that the reimbursement had in it embedded any profit element. Also, that the Assessee was neither the ultimate beneficiary of the sums received nor has any services been given in this connection. Hence the reimbursement towards software charges cannot be taxed as royalty, as the same does not represent any income at the hands of the assessee. AY: 2015-16

Autoliv ASP Inc. v. DCIT, ITA No. 8126 (Delhi) of 2018

66. S. 9 : Accrual of income – fees received as per academic year – accounting as per financial year – fees accounted for as advance received and taxable only in the year when the corresponding services are rendered. [S. 9]

Assessee ran two schools which had academic years from August to May and June to March respectively. However, the assessee maintained books as per the financial year i.e. April to March. The tuition fee collected by the assessee for the period relating to the academic year that falls in the succeeding financial year was recorded as an advance received and shown as a liability in the financial statements. However, the AO taxed this amount as the assessee followed mercantile system of accounting.

On appeal, the Ld. CIT(A) deleted the addition made by relying on the decision of the Hon’ble SC in the case of Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 91 Taxman 340/225 ITR 802 Ld. and held that if the receipts pertaining to a period beyond the financial year are included in the income of the year, the same would lead to distortion of income.

On Departments appeal before the Hon’ble Tribunal, the Tribunal relied on the decision of the Hon’ble Delhi HC in the case of Dinesh Kumar Goel [2011] 9 taxmann.com 188/197 Taxman 375/331 ITR 10 (Delhi) and held that income accrues only when the right is accrued by rendering of services and not by promise for services. Where the right to receive is anterior to the rendering of services, the income would accrue only on the rendering of services. Thus, the Tribunal confirmed the decision of the Ld. CIT(A).

DCIT v. Alcatel Lucent International (2022) 194 ITD 368 (Delhi)(Trib.)

67. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Shipping business – Indian company an agent of independent status – Cannot be assessed as Agency PE of the assessee – DTAA-India – Mauritius [Art. 5(5)]

Held that since Indian company was an agent of independent status, it could not be considered as constituting agency PE of assessee. Order of CIT (A) is affirmed. (AY. 2013-14)

DCIT v. Arc Line. (2022) 193 ITD 263 (Mum) (Trib.)

68. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – Support service – Outsourcing of work to India would not give rise to a fixed place PE – DTAA-India- Mauritius [Art.5]

Held that Indian entity was remunerated at arm’s length price by assessee, which was also accepted by TPO of both entities, assessee had no business connection in India in terms of section 9(1) and had no PE and, thus, no further attribution of profits was to be made. (AY. 2012 -13)

ESPN Star Sports Mauritius SNC Compagnie v. DCIT (2022) 193 ITD 275 (Delhi) (Trib.)

69. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty Business of transmitting telecommunication signals to/from its customers – Income earned was not in nature of royalties – Not liable to tax in India – DTAA- India-USA [Art. 12(3)]

Held that business of transmitting telecommunication signals to/from its customers, income earned was not in nature of royalties within ambit of Explanation 2 to section 9(1)(vi) and article 12(3) of India -USA and it was not liable to tax in India. (AY. 2015 -16)

Intelsat Corporation v. ACIT (2022) 193 ITD 259 (Delhi)(Trib.)

70. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Consideration for resale /use of computer software – Payment is not payment of royalty – Not taxable in India – Not liable to deduct tax at source – DTAA- India-USA [S. 195, 201(1), 201(IA Art. 12)

Dismissing the appeal of the asseasee the Tribunal held that the amount paid by assessee Indian end-users/distributors to non- resident computer software manufacturer/ suppliers as consideration for resale/use of computer software through EULAs/distribution agreement was not payment of royalty for use of copyright in computer software and, thus, said payment did not give rise to any income taxable in India. The assessee is not required to deduct tax u/s 195 of the Act hence not held to be assessee in default under section 201(1) & 201(IA) of the Act. (AY. 2011-12, 2012-13)

DCIT v. Petrofac Engineering Services (P.) Ltd. (2022) 193 ITD 532 (Chennai) (Trib.)

71. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Right to use of copy right in a program – Information products and services – Not royalty – DTAA-India-USA [Art. 12]

Assessee is engaged in business of providing information products and services containing global business and financial news to organisations worldwide. It had appointed its AE on a principal to principal basis for distributing its products in Indian market and accordingly, received purchase price at arm’s length price. Assessing Officer treated said Indian receipts as royalty under provisions of act as well as India-USA DTAA. On appeal the Tribunal held that payments made for acquiring right to use product itself, without allowing any right to use copyright in product were not covered within scope of royalty the assessee had only granted access to its database and received payments for right to use of copyright in a program’ and not right to use program itself. Addition was deleted. (AY. 2015 -16)

Dow Jones & Company Inc. v. ACIT (2022) 193 ITD 564 (Delhi) (Trib.)

72. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Merely provided alloys, lease rentals received for such leasing out of alloys could not be treated as royalty – DTAA-India-USA [Art. 12]

Assessee-company, formed and incorporated in USA, was engaged in manufacturing glass fiber in India. During year, assessee had leased out alloys including rhodium and platinum owned by it to two companies in India, namely, OCIPL and OCIIPL and received lease rentals in respect of same – OCIPL and OCIIPL further sent same to OCSPL, a Singapore based company, for re- fabrication of bushings. Assessing Officer held that receipts of assessee on account of lease rentals was taxable as royalty as per section 9(1)

(vi) and article 12(3) of DTAA as it was earned out of leasing out license to use intellectual rights of economic beneficial rights of drawing and design of bushings. On appeal the Tribunal held that the assessee merely provided alloys, therefore, consideration for alloys could not be treated as royalty under section 9(1)(vi) as well as article 12 of DTAA between India and USA. (AY. 2013-14, 2014-15)

Owens-Corning Inc. v. DCIT (IT) (2022) 193 ITD 824 (Mum)(Trib.)

73. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – amount received for embedded software supplied along with the telecommunication equipment cannot be treated as royalty

Assessee is a company leading in tele- communication equipment and infra-structure manufacturer and supplier and derived income

from supply of tele-communication equipment. During the year, income in nature of fee for technical services (FTS) was offered by Assessee to tax in India. However, income derived from supply of telecommunication equipments to customers in India on offshore basis was not offered to tax as royalty on plea software is inextricably linked to the equipment supplied and that Assessee does not have any Permanent Establishment (PE) in India in terms of Article 5 of India- France DTAA. The AO held that Assessee has a PE in India in terms of Article 5 of Tax-Treaty and attribution of profit to PE can be made only in respect of supply of hardware. The AO by relying on the decision of AO in own case for AY 2006-07 held that software embedded to equipment is taxable as royalty under the Act as well as Treaty.

The Tribunal noted that the CIT(A) had reversed the decision of AO after considering the decision of AY 2006-07 which was not only reversed by the Tribunal but also upheld by the Hon’ble Delhi High Court. Further, the said decision was also upheld by the Apex Court while deciding the issue alongwith the case of Engineering Analysis Centre of Excellence Private Ltd. (432 ITR 471). Further, Tribunal relied on the orders of co-ordinate bench in own case for earlier years, wherein it was held that the amount received for embedded software supplied along with the telecommunication equipments cannot be treated as royalty. Also, the AO in subsequent year in own case had following decision of Apex Court in case of Engineering Analysis Centre of Excellence Private Ltd., not made any addition. Thereby, the Revenue appeal was dismissed.

DCIT v. Alcatel Lucent International (2022) 194 ITD 368 (Delhi)(Trib.)

63. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL)-Not assessable as fees for technical services – DTAA-India-USA [Art. 12(4)]

Assessee-foreign company provided offshore maintenance and support services to Power Grid Corporation of India Ltd. (PGCIL). Assessing Officer held that services rendered by assessee to PGCIL were taxable as fees for included services (FIS) under section 9(1)(vii) of the Act. On appeal the Tribunal held that since nature of services provided by assessee were repetitive in nature, it could not be conducted that such services make available any technical knowledge, expertise, skill, know-how or processes to PGCIL thus, receipts from PGCIL would not qualify as fees for included services under article 12(4)(a) and 12(4)(b) of India US DTAA. (AY. 2008-09 to 2014-15)

GE Energy Management Services Inc. v. ACIT (IT) (2022) 193 ITD 485 / 215 TTJ 7 (Delhi) (Trib.)

64. S. 9(1)(vii): Income deemed to accrue or arise in India – Fees for technical services – Royalty –  Reimbursement of expenses

– Costs recovered by assessee a non-resident for third party software which was integrated into assessee’s information technology infrastructure used for rendering services to an Indian company, would be taxable as fees for technical services/Royalty –  DTAA-India-Switzerland. [S. 9(1)(vi), 12]

Held that costs recovered by assessee a non- resident for third party software which was integrated into assessee’s IT infrastructure used for rendering services to an Indian company would be taxable as fees for technical services/ Royalty as per DTAA between India and Switzerland. on the facts of the case neither

undiluted benefit of software cost was passed on to RIPL nor did assessee recover amount as it is from RIPL authorities below were fully justified in including Rs. 3.89 crores in total income of assessee and charging it to tax at 10 per cent in parity with assessee suo motu offering Rs.20.04 crores to tax at same rate. (AY. 2016-17)

Rieter Machine works Limited v. ACIT (IT) (2022) 193 ITD 687 /93 ITR 447/ 217 TTJ 726 (Pune) (Trib)

65. S. 11: Charitable Trust – Registration granted u/s. 12A- Amendment to objects of trust- CIT(Exemption) approved objects- Exemption u/s. 11 valid. (S. 10(1)] , 12A, 13(1)(d))

Assessee was granted registration under Section 12A of the Act on 25 April 1975 and in year 1986, Assessee made certain modifications and amended the objects of the trust. The AO denied exemption under Section 11 of the Act on the ground that the Assessee has amended the objects without intimating the CIT(Exemption) and thus has violated the registration granted under Section 12A of the Act. Further the AO also held that the trust was formed for the benefit of a particular community and thus attracted Section 13(1)(d) of the Act. In the meanwhile, the CIT(Exemption) initiated proceedings for withdrawal of registration under Section 12A of the Act and then subsequently dropped the proceedings. Aggrieved by the AO order, the Assessee preferred an appeal before the CIT(A). The CIT(A) upheld the order of AO and denied exemption under Section 11 of the Act.

On appeal to the Tribunal, the Tribunal held that the main object for which the trust was registered was for the benefit of the members of the Daivadnya community. The purpose and objects of the trust was never changed or modified. The amended object clause was also for the benefit of members of the Daivadnya

community. The CIT (Exemption) approved the objects of the trust for registration under Section 12A which means that he was satisfied that it is not a particular group, rather, it is for the benefit of whole members of the Daivadnya community. Even after amendment to the object clause, there is absolutely no change. Accordingly, CIT(Exemption) initiated the proceedings for withdrawal of registration and then subsequently dropped the proceedings. Thus, the assessment order is void and thus, the Tribunal directed the AO to consider the exemption as per section 11 of the Act.

Daivadnya Samjonnati Parishad Mahajanwadi Mandal v. ITO (2022) 184 ITD 152 (Mum.)(Trib.)

66. S. 11 : Charitable Trust – Deficit – Allowed to be carry forward – Explanation 2 to Section 10(23C) applicable from AY 2022-2023

– Not applicable for year under consideration.

The Assessee had claimed deficit during the year under consideration and had also carry forward earlier year ’s deficit. However, the Ld. AO disallowed such carry forward of deposit holding that provision of Section 11 of the Act does not permit determination of deposit. On appeal to CIT(A), the CIT(A) relied on jurisdictional High Court judgment and various judicial precedents and allowed the deficit of the Assessee to be carried forward. Aggrieved by the same, the Department preferred an appeal before Tribunal.

The Tribunal relied on the decision relied by CIT(A) in case of MIDE (ITA No. 2652 of 2011) dated 20 March 2013 which is also approved by Supreme Court held that the deficit should be allowed to be carry forward in case of Assessee. Further, the Tribunal also drew attention to Explanation 2 to Section 10(23C) of the Act which states that income required to be applied or accumulated during previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding

to the previous year. However, the Tribunal further stated that the amendment is applicable from 1 April 2022 i.e. AY 2022-2023 and thus will not be applicable to the year under consideration.

DCIT (Exemption) v. UTI Institute of Capital Markets (2022) 194 ITD 149 (Mum.)(Trib.)

67. S. 11 : Property held for charitable purposes – Application for registration for pending before CIT(E) – Pendency of appeal before CIT(A) – Justified in rejecting exemption [S.12A(2), 12AA]

Assessee was registered under Societies Registration Act and main object of assessee society was imparting education. Assessee was not registered under section 12AA. It filed its return of income claiming exemption under section 11. Assessing Officer disallowed same on ground that assessee was not registered under section 12A and made addition treating corpus fund receipts/donations as income of assessee. CIT(A) affirmed the addition. On appeal before the Tribunal the assessee contended that an application in Form no. 10A seeking registration under section 12A/12AA was pending before Commissioner (E) during course of appellate proceedings before Commissioner (Appeals) and same was granted by Commissioner (E) subsequently and, therefore, assessee was eligible to get benefit as per amendment in proviso of section 12A(2) of the Act. On appeal the Tribunal held that the assessee was unable to explain specific purpose for which such corpus fund was said to receive by it. Further since assessee society was not registered under section 12A/12AA, Assessing Officer was justified in rejecting exemption under section 11 and making addition treating corpus fund receipts/ donations as income of assessee. (AY. 2014-15)

Bhagawan Sree Mahayogi Lakshmamma Educational Society, Adoni v. ITO (2022) 193 ITD 591 (Hyd) (Trib.)

68. S. 12AA : Procedure for registration – Trust or institution- Education – Providing education and training in field of remote sensing for preservation of environment through optimization of land use and natural resources – Specialized post-graduate degree – Constituted education for charitable purpose – Entitled [S. 2(15)]

Held that the assessee society which is providing education and training in field of remote sensing for preservation of environment through optimization of land use and natural resources and it also provided specialized post-graduate degree courses in that subject in association with a recognized university, it will, therefore, be clear that objectives of assessee constituted education for charitable purpose as understood under section 2(15) of the Act Entitled registration. (AY. 2019-20)

Haryana State Remote Sensing Application Centre v. CIT (E) (2022) 193 ITD 706 / 94 ITR 10 (SN) (Delhi) (Trib.)

69. S. 14A : Disallowance of expenditure – Exempt income – Interest – Own capital and free reserves – More than investments- No disallowance is to be made [R. 8D]

Held that own capital and free reserves of assessee were much more than investment made by assessee which was yeilding exempt income to it, a presumption would arise that investment was made out of interest free funds generated or available with company . No disallowance under section 14A is to be made (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

70. S. 23: Income from house property –  Annual value – Builder – Unsold flats – Stock in trade – No addition can be made on account of deemed rental income could be made in respect of unsold stock of flats held as stock in trade up to assessment year 2017-18. [S. 22,  23(5)]

Held that where assessee had been showing income derived from sale of flats as and when they were sold and flats remaining unsold were shown as inventories in balance sheet of assessee as stock-in-trade no addition on account of deemed rental income could be made in respect of unsold stock of flats held as stock in trade upto assessment year 2017- 18. Amendment had been brought in statute in section 23(5) from assessment year 2018- 19 providing a moratorium period of two years, hence, no addition could be made for assessment year 2018-19. (AY. 2016-17 to 2018 -19)

Pegasus Properties (P.) Ltd. v. DCIT v. (2022) 193 ITD 514 (Mum)(Trib.)

82. S. 32: Depreciation – Additional depreciation – Put to use in earlier year – 20 per cent of actual cost of plant or machinery – Put to use less than 180 days – 50 percent of additional depreciation allowable. [S. 32(1)(iia)]

Assessee engaged in manufacturing of ball bearing and rubber products acquired and installed certain plant and machinery. Assessee claimed depreciation at rate of 50 per cent of allowable additional depreciation i.e. at rate of 10 per cent instead of 20 per cent of actual cost. Assessing Officer disallowed the additional depreciation on the ground that machinery was installed in earlier year. CIT (A) allowed the additional depreciation. On appeal the Tribunal held that very objective of insertion of a new proviso to section 32(1) is to remove discrimination and therefore it could be safely said that same is just a curative amendment and even under section 32(1) there is no provision prohibiting balance additional depreciation in succeeding year. (AY. 2015-15)

DCIT v. National Engineering Industrial Ltd. (2022) 193 ITD 420 (Kol) (Trib.)

83. S. 35AB : Know-how – Technical know-how – Allowed in initial year – Balance of claim in succeeding 5 years should be allowed as deduction without adjudicating on admissibility of claim.

Held that once claim was allowed in first year of payment of lump sum consideration, balance 5 instalments had to be allowed as deduction in succeeding 5 years without necessity of looking into admissibility or otherwise of claim. (AY. 2000-01, 2001-02)

Mercedez-Benz India (P.) Ltd. v. DCIT (2022) 193 ITD 624 (Pune)(Trib.)

84. S. 35AD: Deduction in respect of expenditure on specified business – Hotel – The assesseee need not to construct entire building by itself or own building and land – Eligible deduction on the amount spent in the part of construction of building. [S. 35AD(4)]

Assessee engaged in business of running hotels and resorts. It claimed deduction under section 35AD on ground that it had incurred expenditure towards construction of new Five Star Hotel. The Assessing Officer disallowed the expenditure on the ground that the assessee

did not build hotel building and had been operating same on leasehold land and building and intention of section 35AD is to promote fresh investment but not to accommodate old investments and give tax benefits. CIT (A) confirmed the disallowances. On appeal the Tribunal held that section 35AD do not specify that assessee has to construct entire building by itself or own building and land. Provisions only specify that specified business should be in nature of building and operating a new hotel of 2 star or above category as classified by Central Government. From lease deed produced by assessee it was apparent that assessee was also required to spend considerable amount for constructing a portion of building such as interior civil works, plumbing works, electrical works and other civil work relating to erecting equipment, elevators, fire fighting equipment, etc. Therefore, it could not be said that assessee had not participated in constructing building, though basic civil structure was constructed by lessor. Therefore, where entire investment made by assessee was for constructing a portion of building and for operating a new hotel of category specified under Act, assessee would be entitled for benefit of deduction under section 35AD and accordingly, Assessing Officer was to be directed to grant deduction to assessee under provisions of section 35AD of the Act. (AY. 2012-13)

Taj GVK Hotels & Resorts Ltd. v. ACIT (2022) 193 ITD 304 (Hyd)(Trib.)

85. S. 35DDA : Amortisation of expenditure – Voluntary retirement scheme – Slump sale – Allowable as deduction [S. 50B]

Assessee sold one of its division under slump sale and paid VRS payment to workers of said division. Assessee claimed VRS expenditure under section 35DDA. The Assessing Officer denied said claim. On appeal the Tribunal held that section 35DDA would not prevent assessee from claiming deduction with respect to VRS expenditure even in case of slump sale. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum)(Trib.)

86. S. 36(1)(iii) : Interest on borrowed capital – Land – Interest cost on capital asset – Not put to use – Not allowable as revenue expenditure. [S. 43(1)]

Assessee purchased a piece of land from Gujarat Industrial Development Corporation. Assessee was required to make part payment for purchase of land in 12 quarterly instalments along with interest at rate of 12.5 per cent. Assessee treated amount of balance payment as loan in its books of account on which interest was incurred.

Assessing Officer worked out amount of interest pertaining to such acquisition of land and added same to total income of assesse. On appeal the CIT (A) held that interest directly related to capital assets being land and therefore same had to be capitalized. On appeal the Tribunal held that as per Explanation 8 to section 43(1) entire interest cost if incurred in connection with capital asset has to be capitalized. Therefore, where interest cost was incurred by assessee with respect to capital asset being land which was not put to use in year under consideration, it could not have been allowed as revenue expenditure. (AY. 2004-05 & 2011-12)

Khyati Chemicals (P.) Ltd. v. DCIT (OSD)(2022) 193 ITD 446 (Ahd)(Trib.)

87. S. 36(1)(vii) : Bad debt – Unutilized CENVAT and Service Tax credit – Not allowable as bad debt – Failure to establish irrecoverable during year under consideration the amount not allowable as business loss. [S. 28(i), 36(2), 37(1)]

Held that unutilized CENVAT and Service Tax credit could not be considered as trade debts of assessee, deduction for same on being written off could not be allowed under section 36(1)(vii), read with section 36(2). Further, since assessee had not been able to bring anything on record to establish that unutilized CENVAT and Service Tax credit amount in question had become irrecoverable during year under consideration, same could not be allowed as business loss in that year. (AY. 2015-16)

Meena Circuits (P.) Ltd. v. ACIT (2022) 193 ITD 318 (A

88. S. 36(1)(iii) : Investment made by the holding company into equity of subsidiary company through the aid of the borrowings, is in the nature of furthering business interests and hence cannot be disallowed as funds diverted for non-business purposes.

The Assessee is a company which is into the business of Toll collection and repairs and maintenance of the roads. The Assessee out of its borrowings had invested into the equity capital of another company. The AO was of the opinion that there was no commercial expediency in the investment made and that the same was a capital transaction without any relation to the revenue generated. And thus held the belief that this would entail disallowance of the interest as the borrowed funds had been utilized for non-business purposes.

The Assessee asserted that the investment in its wholly owned subsidiary was for the purpose of business and so interest allowable. The Ld. CIT(A) held that the holding company has made investment in furtherance of its business interest. When both the holding company and subsidiary are in the business of toll collection, such an investment is a strategic investment to wrest control over the subsidiary.

The advantage derived may not be in money terms but wresting control over the board of directors of the subsidiary is an advantage in itself, which furthers the business interest of the holding company. There being nexus between the expenditure and purpose of the business, the interest on borrowed funds cannot be disallowed.

The Hon’ble Tribunal held that – an equity investment is inherently and materially different vis-a-vis an interest free loan and advance. In concurrence with the findings of the CIT(A), the Hon’ble Tribunal declined to interfere in the matter, holding the position of the CIT(A) as correct. (AY 2017-18)

ACIT v. Rideema Toll (P.) Ltd, (2022) 194 ITD 439 (Mum)(Trib.)

89. S.37(1): Business expenditure –  ESOP Scheme – Discount on shares allotted by assessee to its employee under ESOP Scheme is revenue

Held that Commissioner (Appeals) was justified in deleting addition on account of disallowance of ESOP expenses by holding notional discount on shares issued under ESOP scheme as revenue expenditure. (AY. 2014-15)

ACIT v. People Strong HR Services (P.) Ltd. (2022) 193 ITD 105 (Delhi) (Trib.)

90. S.37(1): Business expenditure – Professional fees – Prior period expenditure – Expenses pertaining earlier year – Crystallized during the year – Allowable as deduction – Commission payable – Expenses pertaining to earlier year – Not allowable as [S. 145]

Held that expenses had arisen and crystallized in year under consideration when bills for same by concerned parties were raised on

assessee, even though said expenses pertained to earlier year, assessee would be entitled to claim deduction for same in year under consideration when liability on account of said expenses had arisen and crystallized. Commission payment no evidence was brought on record hence not allowable as deduction. (AY. 2015-16)

Meena Circuits (P.) Ltd. v. ACIT (2022) 193 ITD 318 (Ahd) (Trib.)

91. S.37(1): Business expenditure  – Real estate business – Expenses for certification work, management consultancy, fees for appearance before Tax Authorities and company secretarial work as professional fee – Allowable as

Held that professional fees paid for certification work, management consultancy, fees for appearance before Tax Authorities, company secretarial work are allowable as business expenditure. (AY. 2005 -06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum) (Trib.)

92. S.37(1): Business expenditure – Annual share listing fees paid to stock exchange – Allowable as revenue expenditure – Community development donation – Allowable as business expenditure.

Held that annual share listing fees paid to stock exchange is allowable as revenue expenditure. Expenditure incurred on community development which included donation for festivals, construction of market, cash paid for Puja, construction of water tanks and renovation of roads so as to maintain good relationship with villagers of nearby places where it was carrying on its drilling operation, said

expenditure incurred by assessee was wholly and exclusively incurred for business purposes and was driven by business prudence, thus, same was to be allowed as business expenditure. (AY. 2011-12, 2012-13)

DCIT v. Great Eastern Energy Corporation Ltd. (2022) 193 ITD 404 (Delhi) (Trib.)

93. S.37 (1): Business expenditure – Capital or revenue – Corporate Social Responsibility expense – Explanation 2 to section 37(1) inserted by Finance Act, 2014 with effect from 1-4-2015 is prospective in

Held that Explanation 2 to section 37(1) inserted by Finance Act, 2012 with effect from 1-4-2015 is prospective in nature and; accordingly, prior to 1-4-2015, CSR expenses incurred by assessee were to be allowed as revenue in nature. (AY. 2013 -14)

NTPC-SAIL Power Co. (P.) Ltd. v. DCIT (2022) 193 ITD 473 (Delhi) (Trib.)

94. S.37(1): Business expenditure – Capital or revenue – Royalty paid as percentage of sale in consideration of supply of Technical Know-how is allowable as revenue expenditure- Telephone and travelling expenditure – Self-made vouchers – Disallowance of 10 % of expenditure is held to be not

Held that royalty paid in case of running business and in terms of number of vehicles sold there was no increase in capacity and existing productivity, therefore, royalty paid to extent of 2.75 per cent of number of vehicle sold was a revenue expenditure. Disallowance of Disallowance of 10 % of expenditure is held to be not valid when there is no allegation of bogus expenditure. (AY. 2000-01, 2001-02)

Mercedez-Benz India (P.) Ltd. v. DCIT (2022) 193 ITD 624 (Pune) (Trib.)

95. S.37(1): Business expenditure – Provision for warranty – Replacement of batteries – Allowable as deduction – Sales promotion expenses – Expenditure for giving valuable gifts to certain parties – Disallowance cannot be made on ad-hoc basis – Travelling expenses of partner for personal trip – Not allowable as business [S. 145]

Held that provision consistently for replacement of batteries qua computers and in past, whatever provisions remained unutilized were offered as income by assessee, assessee would be entitled to claim deduction of provision for warranty for replacement of batteries in toto. Allowable as deduction. Held that expenditure for giving valuable gifts to certain parties and claimed it as sales promotion expenditure and had shown bills and vouchers for purchases and all details had been maintained scientifically, expenditure incurred by assessee could not have been disallowed on ad hoc basis. Held that travelling expenses of partner for personal trip is not allowable as business expenditure (AY. 2012-13, 2014-15)

ACIT v. Armee Infotech (2022) 193 ITD 728 (Ahd.) (Trib.)

96. S.37 (1): Business expenditure – CSR expenses – Welfare of local community and thereby improving corporate image  – Allowable as business  expenditure – Expenditure incurred towards Pooja and purchase and distribution of sweets for Pooja was allowable as business expenditure.

Assessee-company had incurred CSR expenses towards payments for yagyashala, drinking water hut, purchase of PC for village Collectorate, donation for eye camp, donation/ expenses for Gram Panchayat, payment to Gram Vikas Samiti, development and beautification of village pond and donation to a school for physically handicapped etc. Tribunal held that these CSR expenses were incurred for welfare of local community and thereby improving corporate image therefore such CSR expenses incurred by assessee was allowable as deduction. Tribunal also held that expenditure incurred towards Pooja and purchase and distribution of sweets for Pooja was allowable as business expenditure. (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

97. S.37(1) of the Income Tax Act, 1961 – Expenses incurred for production of tele serials and films carries no enduring advantage nor creates any asset and thus, are revenue in nature

The Assessee is into the business of production and marketing of tele serials and tele films. The assessment had been completed u/s 143(3). However subsequently the case got re-opened u/s 147 of the Income Tax Act, 1961 where in the AO opined that the deduction claimed by the Assessee on production expenses of tele serials as revenue was incorrect, and that the same qualified as a capital expenditure. This prompted the AO to disallow the expenses claimed and provide for 25% depreciation on the expenses treating it as capital in nature.

The Assessee before the Ld. CIT(A) relying on the judgement of the Delhi HC in CIT v. Television Eighteen India Ltd. [2014] 46 taxmann. com 283, contended that the expenditure incurred for production of tele serials and films are revenue expenditure, because income derived from exhibition of tele serials is recognized as income from operations and thus, any expenditure incurred for production of such feature films is revenue in nature, which cannot be considered as capital in nature. The Ld. CIT(A) in concurrence with the averments of the Assessee and further placing reliance on the judicial precedents, stated that the expenses had no enduring benefit to the assessee and that the production expenses for tele serials were revenue in nature.

The Hon’ble Tribunal held that, the revenue derived from exhibition of tele serials is offered as income from operations but may be in one or two or three years, however, except cost of production of feature films, the assessee does not have any other major expenses. Therefore, in case where assessee involved in production and exhibition of tele serials, expenditure incurred for production of tele serials cannot be considered as capital in nature, because it does not give enduring benefit to the assessee and it also does not lead to creation of any asset since the major expenditure of the assessee involved in production and exhibition of tele serials, is cost of production of said tele serial, same needs to be allowed as revenue expenditure as and when such expenditure has been incurred by the assessee, despite the revenue from exhibition of tele serial or film being spread over for more than one year. AY 2009-10;

ACIT v. Radaan Media Works (I) Ltd, [2022] 194 ITD 505 (Chennai)(Trib.)

98. S. 37(1): Business expenditure – Commission paid to agents on supply to Government departments for various activities associated with supply – Disallowance on ground that there cannot be any middlemen for procurement of orders for Government supplies – Held not justified.

Assessee manufacturer of patented medicines paid commission to agents for obtaining supply order from Government agencies. AO disallowed the commission being non-genuine on ground that:

  1. Assessee had shown commission expenditure for reducing the actual profit, and
  2. That, there cannot be any middlemen for procuring orders for Government

CIT(A) deleted the disallowance on facts, stating that :

  1. Commission agents are involved in pre- tender and post tender work. Their use of persuasive skills in garnering Government orders, their involvement in getting all the conditions of contract being properly complied and their help are al parts of commercial expediency.
  2. Assessee, had submitted a detailed note on various tasks performed by agents, and also PANs of agents, supporting vouchers, confirmations, deducted TDS wherever applicable
  3. In the case of Assessee, there is no allegation of illegal gratification or commission payment to governments which is against the public policy.
  4. That, the reasoning of AO, that, there cannot be any middlemen for procurement of orders for government supply ignoring the factual submissions, is not justified.

Tribunal, deleted the addition stating that, CIT(A) has considered and narrated all the

factual submissions in detail in his order, and having being satisfied, the addition was deleted by him, and held there is no infirmity in the order of learned CIT(A).

(ITA No. 547&548/Ind/2018 (AY. 2009-10 & 2010-11) dt 21.02.2022

DCIT v. Alpha Laboratories (P) LTD (2022) 217 TTJ 1 (Indore)(UO)(Trib.)

99. S. 37(1): Business expenditure – Allowability of Legal fees to defend Lawsuit for infringement of patent rights – Allowabilty of amount paid for settlement of suit – Held allowable as Revenue

Assessee company engaged in manufacturing and trading of healthcare and nutraceutical products had incurred expenditure for :

  1. Expenses for maintenance of patents and to safeguard its patent products,
  2. settlement amount paid against suit for infringement of patent rights
  3. Legal Fees paid to defend the existing patent rights

All the above payments were claimed as revenue expenditure , and shown under the head exceptional items.

The learned AO treated the said expenditure as capital expenditure, on observing that said expenditure has resulted in higher sales & increasing of profits in subsequent years, which has the benefit of enduring nature.

The learned CIT(A) , held that deduction for expenditure incurred on litigation as well as the settlement amount paid is a Revenue expenditure.

Tribunal, upheld the order of CIT(A), stating that such expenditure incurred for protection of

its business and IPR cannot be held as an capital expenditure, even if it results into an higher profits and increase in sales, and enduring benefit.

(ITA No. 28 & 29/Mum/2020 (AYs. 2010-11 & 2011-12) dt 07.01.2022

DCIT v. Omni Active Health Technologies Ltd (2022) 194 ITD 783 (Mum)(Trib.)

100. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Fes for technical services- Sales commission to foreign agents – Permanent Establishment (PE) in India -Not liable to deduct tax at source- OECD Model Convention Arts. 5, 7 , 12 – DTAA-India-Australia [S. 9(1)(i), 9(1)(vii), 195 Art. 7]

Held that the Assessing Officer was not correct in law in holding that commission was paid to agents for rendering technical services in form of managerial services and since foreign agents did not have permanent establishment in India, no business profit was taxable in India. Disallowance was deleted. (AY. 2010-11, 2012-13)

Deccan Creations (P.) Ltd. v. DCIT (2022) 193 ITD 5 (Bang) (Trib.)

101. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident attorneys – Professional fees – Reimbursement of expenses – No obligation to deduct tax at source – Disallowance was deleted – Article 12 of the OECD Model [S. 9(1)(vii), 195]

Held that payment made towards reimbursement of expenses there is no  obligation to deduct tax at source. Disallowance was deleted. Payment made to foreign attorneys are not chargeable to tax under the provisions of section 195. Therefore the assessee was not required to withhold tax on the payments made. Disallowance u/s 40(a)(i) is deleted. (AY. 2015  -16)

Chander mohan Lall v. ACIT (2022) 193 ITD 352/ 215 TTJ 498 (Delhi) (Trib)

102. S. 40(a)(ia): Amounts not deductible – Deduction at source – Interest to an NBFC – Certificate was produced before CIT(A) – Matter was remitted to file of Assessing Officer to examine and verify said [S. 194A, 201(1)]

Held that the Commissioner (Appeals) had failed to take same into consideration the certificate which was produced before him. Matter remitted to file of Assessing Officer to examine and verify said certificate. (AY. 2013 -14)

Amit Mehra v. ITO (2022) 193 ITD 109 (Delhi) (Trib.)

103. S. 40(a)(ii) : Education cess allowability – Finance Bill 2022 – Overruled Jurisdicational High Court and other judicial precedents- Finance Bill has not received enactment – Assessee at liberty to move rectification application

The Assessee raised additional ground for allowing deduction towards Education cess. The Tribunal held that the Tribunal in the assessee’s own case for earlier years has allowed such additional ground by relying on the judgment of Hon’ble jurisdictional High Court in Sesa Goa Ltd. v. JCIT as well as the judgment of Hon’ble Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd. and Another v. JCIT (2018) (102 CCH 202) (Raj-HC). The Finance Bill 2022 has proposed amendment to neutralize the effect of above mentioned judgments granting deduction of education cess with retrospective effect from 1 April 2005. However, the amendment proposed in the Finance Bill, 2022 is yet to take the shape of an enactment, but practically it will become operative very shortly on the Hon’ble President of India granting assent to the Finance Bill. However, the Tribunal did not grant such deduction of education cess and gave liberty to the Assessee to move rectification application in case the proposed amendment in the Finance Bill is either not enacted or enacted prospectively so as to align our decision with the resultant modification.

DCIT v. Atlas Copco (India) Ltd. (2022) 213 DTR 1 (Pune)(Trib.)

104. S. 40A (2): Expenses or payments not deductible – Excessive or unreasonable – Salary paid to daughter of Director – Disallowance is held to be not justified.

Assessing Officer disallowed claim for deduction of salary paid to daughter of director. On appeal the Tribunal held that the Assessing Officer did not disclose as to how said expenditure was found by him to be either excessive or unreasonable having regard to fair market value of services which were rendered by her for legitimate needs of business of assessee company. Disallowance was set aside. (AY. 2014-15)

Kimaya Impex (P.) Ltd v. ITO (2022) 193 ITD 710 (Mum)(Trib.)

105. S. 40A(3) : Business disallowance – Payments to state government entities by way legal tender is covered by exception as per rule 6DD(b) – Not liable for Disallowance u/s 40A(3). (r.w.rule 6DD)

Assessee engaged in retail business of purchase/ sell of wines made cash payment exceeding 20,000/- to entities which were state Govt companies. AO disallowed the payments on ground of contravention of 40A(3). Tribunal upheld the decision of CIT(A), deleting the disallowance, on ground that the payments which were made in legal tender to state Govt undertakings are covered by exception carved out in rule 6DD(b), and same cannot be disallowed u/s 40A(3). (ITA No. 489/ASR/2017 (AY. 2014-2015) dt 21.02.2022

DCIT v. Vinod Arora (2022) 194 ITD 605 (Amritsar)(Trib.)

106. S.43(5) : Speculative Transactions – Forex Derivative Loss – Hedging contract for fluctuations in foreign currency by exporter having huge receivables – Loss suffered treated as revenue expenditure – Held allowable as business

Assessee exporter entered into hedging contract with Bank to hedge foreign currency risk to minimize possible fluctuation in foreign currency, which resulted in Loss, and was treated as business loss, since covered by proviso (d) to sec 43(5) of the Act.

The learned AO treated the loss as speculative Loss, and opined that proviso does not give blanket exclusion to all derivatives contracts, but only to contracts covered in recognised stock exchange, and disallowed the Loss.

On appeal by revenue, the Tribunal held that the hedging transactions entered into by assessee, to minimize the possible loss from fluctuation in foreign currency, and the profit or loss arising

on account of appreciation or depreciation, would be a trading profit/loss, if the foreign currency is held by assessee on revenue account or as a trading asset or as a part of circulating capital embarked in the business, and the underline asset is more than the amount of forward contracts entered into by the assessee. In the instant case, assessee achieved the export turnover which is much more than the amount of derivatives contract with the bank, and as held by CIT(A) after considering all the facts, the loss incurred is in nature of business loss, and not speculative loss which is covered u/s 43(5). (ITA No. 357/CHNY/2020 (AY. 2009-10) dt 10.02.2022.

DCIT v. Kunnam Granite Works (2022) 194 ITD 238 (Chennai)(Trib.)

107. S. 43(6) : Written down value – Demerger – Accounted by both entities on written down value – Entitle to depreciation on written down value [S. 32]

Assessee took over assets and liabilities of a company incorporated by Government of Uttar Pradesh, namely, UPJVNL during its demerger. Assessee claimed depreciation on WDV of such assets. Assessing Officer disallowed same on ground that assessee had taken over assets without corresponding any liability i.e. assets were taken over by UJVNL from UPJVNL free of cost. On appeal the Tribunal held that demerger led to division of assets in a fixed ratio which was duly accounted for by both entities as per WDV and that there was no twice claim of depreciation on said assets by both companies. Entitled to depreciation on WDV of said assets took over by it. (AY. 2014-15)

ACIT v. Uttaranchal Jal Vidyut Nigam Ltd. (2022) 193 ITD 454 (Dehradun)(Trib.)

108. S.43B: Deductions on actual payment – Service tax payment – For granting deduction only when amount of such tax, , is actually paid by assessee, that deduction will be allowed. [S. 43B(a), 145A(ii)]

Held that incurring of liability to pay tax, duty, cess or fee, etc., in a particular previous year is not a relevant criterion for granting deduction, and when amount of such tax, etc., is actually paid by assessee, then only deduction will be allowed to assessee. (AY. 2014-15)

Shirode Automobiles (P.) Ltd. v. ACIT (2022) 193 ITD 777 / 217 TTJ 382 (Pune) (Trib.)

109. S. 44AD : Presumptive taxation – Civil construction business – depreciation – Rejection of books of account and estimate of income applying rate of 8 percent – No separate claim of depreciation is allowable [S. 32, 144]

Assessee, a civil contractor, filed his return of income declaring total income. Assessing Officer rejected books of account and estimated income by applying rate of 8 per cent of total contract receipts and disallowed the depreciation. On appeal the Tribunal held that when the income is estimated no separate claim of depreciation is allowable. (AY. 2014-15)

Sudhakar Pandey v. ACIT (2022) 193 ITD 557 (SMC) (All.) (Trib.)

110. S. 44B : Shipping business – Non- residents – Service tax receipts do not form part of receipts for computation of income.

Held that service tax receipts do not form part of receipts for computation of income. (AY. 2011-12)

DCIT v. Schlumber Solutions (P.) Ltd. (2022) 193 ITD 293 (Dehradun)(Trib.)

111. S. 44BB : Mineral oils – Non -Resident Computation – Service tax being statutory levy should not form part of gross receipts.

Held that Service tax being statutory levy should not form part of gross receipts as per provisions of section 44BB of the Act. (AY.2005 -06, 2006-07)

DCIT (IT) v. Deepwater Pacific 1 Inc. (2022) 193 ITD 11 (Dehradun)(Trib.)

112. S. 44BB: Mineral oils – Computation – Contract with ONGC for replacement of well fire shut down panels at offshore platform on a turnkey basis – Amounts were remitted directly to UAE by ONGC – DRP erred in apportioning 10 per cent of gross receipts as taxable income- Section 44BB did not override provisions of section 5 of the Act- DTAA -India-USA [S. 5, 9(1)(i), Art. 5, 7]

Assessee, a UAE based company, was engaged in a contract with ONGC for replacement of well fire shut down panels at offshore platform on a turnkey basis . It submitted that all these activities were carried out in Dubai and thus, related revenues were not taxable in India under section 5 read with section 9 and under article 5 read with article 7 of India-USA DTAA. Assessing Officer held that entire project was turnkey project and, hence, no bifurcation could be made in income accruing inside and outside India and total income was income accruing in India under section 5 but as assessee had not maintained books of account, Assessing Officer estimated income at 25 per cent of gross receipts. DRP applied deemed profit rate of 10 per cent of gross revenue of assessee under section 44BB. On appeal the Tribunal held that Whether since

engineering designs were prepared entirely at assessee’s specialities outside India and sent to ONGC from UAE and amounts were remitted directly to UAE by ONGC and keeping in view supply of material outside India, designs conducted, list of material and presence of employees in India, DRP erred in apportioning 10 per cent gross receipts as taxable income as provisions of section 44BB do not override provisions of section 5 of the Act. (AY. 2008-09, 2009-10)

Petronash FZE. v. ADIT (IT) (2022) 193 ITD 846 (Dehradun)(Trib.)

113. S. 45 : Capital gains – Short term – Transfer – Joint Development Agreement (JDA) – Construction of an apartment project – Merely a license for developer to enter property- Provisions of section 53A of Transfer of Property Act and provisions of section 2(47)

(v) would not be applicable to JDA – Not liable to capital gains tax – Failure to file JDA agreement – Reassessment notice is valid [ 2(47)(v)), 147, 148, Transfer of Property Act, 1882, S. 53A]

Assessee builder had entered into a Joint Development Agreement (JDA) with developer for construction of an apartment project in respect of a land owned by it. Assessing Officer took view that assessee had purchased land for investment purposes and held same as capital asset and thus, by invoking provisions of section 2(47)(v), Assessing Officer held that there was transfer of asset within meaning of section 53A of Transfer of Property Act and accordingly, computed short term capital gain and assessed same in hands of assessee. On appeal the Tribunal held that what was given was not possession contemplated under section

53A of Transfer of Property Act, 1882, but was merely a license for developer to enter property. Thee assessee had given permissive possession and not legal possession as contemplated within meaning of section 53A,therefore, provisions of section 53A of Transfer of Property Act and provisions of section 2(47)(v) would not be applicable to JDA and thus, capital gains assessed in hands of assessee under section 2(47) (v) were liable to be deleted. Reassessment is held to be valid. (AY. 2006 -07)

Anugraha Shelters (P) Ltd. v. DCIT (2022) 193 ITD 119 (Bang) (Trib.)

114. S. 45 : Capital gains – Transfer – Joint development agreement

– Neither any consideration received nor handed over possession of immoveable property during relevant assessment year – Not liable too be assessed as capital gain [S. 2(47)(v), 45(2), Transfer of Property Act, 1882 S. 53A]

Assessee had entered into a development agreement, to extend her land for joint development with a company. Development agreement provided that an amount of Rs. 7 crores was to be paid to assessee and possession of property was to be handed over to developer by assessee, Assessing Officer held that as per section 2(47)(v) read with section 53A of Transfer of Property Act said transaction had culminated into transfer of immovable property thereby attracting long term capital gain. On appeal CIT (A) allowed the appeal. On appeal by the Revenue the Tribunal held that the assessee had only entered into a joint development agreement with promoter and when her share in developed property was sold, she would be benefitted by gain or loss .On facts, assessee would not be liable to be taxed for entering into a joint development agreement when neither assessee

had received any consideration nor handed over possession of immovable property during relevant assessment year. (AY. 2013-14)

DCIT v. Nagam Suguna (2022) 193 ITD 436 (Hyd) (Trib.)

115. S. 48: Capital gains – Computation – Amount paid for removing encumbrance to a property without which sale or transfer could not be effected, is allowable as [S. 48(1)]

Held that amount paid for removing encumbrance to a property without which sale or transfer could not be effected, is allowable as deduction under section 48(i) of the Act. (AY. 2013-14)

Mahesh Pratapsingh Asher v. ACIT (2022) 193 ITD 336 (Mum)(Trib.)

116. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Reference to DVO- Where the reference is made DVO the Assessing Officer completed the assessment adopting deemed sale consideration before receipt of valuation report by DVO – Matter remanded – For purpose of computing exemption under section 54F, deeming fiction provided under section 50C could not be enlarged. [S. 45, 48, 54F]

Tribunal held that before adopting deemed

consideration, it is the duty of Assessing Officer to refer valuation to DVO, in case assessee files objection for adopting deemed consideration. Where the Assessing Officer had referred valuation to DVO, Assessing Officer could not have completed assessment by adopting deemed

sale consideration as per provisions of section 50C before DVO determined value of property. Matter remanded. Tribunal also held that section 50C is only applicable for determining full value of consideration as defined under section 48 and thus, for purpose of computing exemption under section 54F, deeming fiction provided under section 50C could not be enlarged. Matter remanded. (AY. 2016-17)

Baskarababu Usha. (Mrs.) v. ITO (2022) 193 ITD 573 (Chennai) (Trib.)

117. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Guidance value to be taken on the agreement for sale and not on the date of Registration – Proviso to section 50C(1) inserted by Finance Act, 2016 is retrospective.[S. 45]

Assessee entered into a registered Joint Development Agreement dated 1-3-2013, pursuant to which it had also entered into a MOU dated 8-4-2013 as per which assessee had paid a part of sale consideration on date of such MOU, guidance value had to be computed as prevailing on date of MOU dated 8-4-2013. The Assessing Officer computed the capital gains on the basis of date of registration of document. On appeal the Tribunal held that proviso to section 50C (1) deals with cases where date of agreement fixing amount for consideration and date of registration for transfer of capital asset are not same and in such cases, value adopted or assessed or assessable by stamp valuation authority as on date of agreement is to be taken for purposes of computing full value of consideration for such transfer. Followed CIT v. Vummudi Amarendran [2020] 429 ITR 9[2021] 277

Taxman 243 (Mad) (HC) (AY. 2014-15)

Bellandur Chikkagurappa Jayaramareddy v. ACIT (2022) 193 ITD 757 (Bang) (Trib.)

118. S. 54: Deduction from capital gains – Merely because sale agreement describes the property as land, the same would not deny deduction under section 54 if assessee has proved that the property sold was a building with land appurtenant thereto

The assessee is an individual and non-resident during the year. Assessee sold a residential house and computed long term capital gain and purchased a new residential house property and incurred expenditure to make it habitable and claimed exemption under section 54 of the Act. The AO noticed that at the time of execution of sale deed, assessee described the property as a plot and therefore the exemption claimed by the assessee under section 54 cannot be allowed. Further, assessee did not produce any evidence to show satisfaction of condition under section 54F and therefore the same also was not allowed to the assessee. The CIT(A) allowed the claim of deduction under section 54F but restricted the cost of making the house habitable holding that the said amount was incurred for luxury items and thus not allowable as deduction.

Tribunal noted that the assessee had furnished valuation report from a registered valuer and also filed house tax and water tax receipts to justify that the property that was sold was a building along with land and not only land. Accordingly, Tribunal held that merely because in the sale deed and agreement, the description of the property was mentioned as land, the same could not go against the assessee to deny benefit of deduction under section 54 of the Act. However, even Tribunal did not grant deduction for the additional cost incurred to make the house habitable as the same was incurred for luxury items as held by CIT(A).

Charu Agarwal and Anr. v. Dy. CIT (International Taxation) And Anr. (2022) 194 ITD 478 / 216 TTJ

428 (Delhi)(Trib.)

119. S.54F: Capital gains – Investment in a residential house – Residential house – Purchase of residential property on first floor of a complex having shops constructed on ground floor – Entitle to exemption. [S. 45]

Assessee purchased a property on first floor of a complex having shops constructed on ground floor and claimed exemption. Assessing Officer denied the exemption considered property to be of commercial nature. Commissioner (Appeals) confirmed the order of Assessing Officer. On appeal the Tribunal held that the assessee had purchased property as a residential property and registering authority had also registered said purchase considering it as a residential property.

-Electricity Department had also considered use of said premises as a residential use and had charged electricity rates accordingly. Further, Municipal authorities had also charged property tax treating it as a residential property. Denial of exemption was held to be not valid. (AY. 2010 -11)

Ashok Kukreja v. ITO (2022) 193 ITD 888 (Indore) (Trib.)

120. S. 54 read with S 54F – Capital Gains – Deduction while computing capital gains from sale of Industrial plot with office cum residential area without necessary attributes of residential house cannot be taken under section 54 but under section 54F of the Act

The Assessee, an individual, filed ROI wherein he declared LTCG on sale of immovable property an NIL after claiming deduction under section 54 of the Act. The assessee had sold a property comprised of plot of land with an office-cum-residential structure built upon it (i.e. office built up on the ground floor and

residential area on the first floor). The AO held that the plot sold by assessee was an industrial plot as apparent from documents submitted and not a residential house and accordingly denied deduction under section 54 of the Act and granted deduction under section 54F of the Act and accordingly recomputed the capital gain at certain amount as against NIL as computed by assessee. CIT(A) upheld the order of AO.

Tribunal observed that the limited dispute was whether the assessee has transferred a residential house or not. Tribunal held that as per the sale deed, it can be noticed that what is transferred is an industrial plot along with construction thereon, and not a residential plot. Further, the construction did not have all necessary attributes of a residential house in terms of bedrooms and kitchen facility. Accordingly, Tribunal held that the same cannot be held to be a residential house and therefore assessee was not eligible for exemption under section 54 but was eligible for exemption under section 54F of the Act.

Chain Singh Mundra v. ITO (2022) 194 ITD 718 / 216 TTJ 761 / 211 DTR 377 (Chd)(Trib)

121. S. 55A : Capital gains – Reference to valuation officer – Prior to 1-7- 2012, no reference to DVO could be made under section 55A where AO was of view that FMV of property as on 1-4-1981 was less than value declared by assessee. [S. 45]

Assessee converted land into stock-in-trade and part of it was sold. Assessee computed long-term capital gains on said sale. Assessing Officer on doubting assessee’s valuation made a reference to DVO to value land as on 1-4-1981 as well as on date of conversion and enhanced amount of long-term capital gain. On appeal the Tribunal held that FMV as on 1-4-1981 and as on date of conversion of land was duly supported

by valuation report of registered valuers. Since prior to 1-7-2012, no reference to DVO could be made under section 55A where Assessing Officer was of view that FMV as on 1-4-1981 was less than value declared by assessee, substitution of FMV by Assessing Officer could not be held in accordance with law. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum) (Trib.)

122. S. 56: Income from other sources – Share capital at premium –

Discount cash flow method (DCF) – Net asset method (NAV) – AO could not adopt NAV method merely for reason that there was deviation in actual figures from projected figures shown in DCF method – Deletion of addition is [S. 56(2)viib), R. 11U, 11 UA]

Assessee issued share capital at premium and valued shares adopting discounted cash flow method (DCF method). Assessing Officer directed assessee to furnish valuation of shares as per rules 11U and 11UA by using net asset method (NAV) on ground that actual performance of assessee-company showed losses whereas DCF statement showed projected profits. Assessing Officer held that there was wide variation between valuation of shares as per NAV method and DCF method and thus, made additions under section 56(2)(viib) of the Act. CIT (A) deleted the addition. On appeal the Tribunal held that for purpose of determining fair market value of unquoted shares provisions of rule 11UA (2) gave right to assessee to exercise options available for valuation of shares, therefore, Assessing Officer could not withdraw DCF method exercised by assessee by adopting NAV method of valuation merely for reason that there was deviation in actual figures from projected figures the Assessing Officer was

not justified in rejecting the method adopted by the Assessee required to examine method adopted by assessee and additions. (AY. 2013-14)

Dy.CIT v. Credtalpha Alternative Investment Advisors (P.) Ltd. (2022) 193 ITD 502 / 94 ITR 596/ 215 TTJ 801/ 210 DTR 100 (Mum) (Trib.)

123. S. 56 : Income from other sources – Fair market value of property

– Purchase of property – Stamp valuation – Addition was not valid – Matter remanded. [S. 56(2) (vii)(b)(ii)]

During year, assessee made on investment towards purchase of a property. Assessing Officer held that market price of said property as per Stamp Valuation Authority was higher hence made addition u/s 56 of the Act. On appeal the Tribunal held that the as property under consideration was situated in a slum area, market value of same was much lower than value of other buildings in neighbouring areas hence the Assessing Officer should have referred the matter to valuation Officer. Matter remanded.(AY. 2014-15)

Kiran R. Sawlani v. ITO (IT) (2022) 193 ITD 852/ 215 TTJ 654 (Mum)(Trib.)

124. S. 68: Cash credits – Share application money – Not furnished explanation about nature and source of credit- Addition is confirmed.

Assessing Officer made addition as cash credits in respect of share application money received by the assessee on the ground that the identity and creditworthiness of creditors and genuineness of transactions were not found to be established. CIT (A) deleted the addition. On appeal by the Tribunal held that parties in whose name such credit was recorded in books of assessee did not give any explanation about

nature and source of such credit hence addition made by Assessing Officer under section 68 was restored . (AY. 2012-13)

ITO v. Parsoli Motor Works (P.) Ltd. (2022) 193 ITD 585 (Ahd.)(Trib.)

125. S. 68: Cash credit – Share Capital – Share application money from share applicant companies – All basic relevant documents produced to prove identity, creditworthiness and genuineness of transactions – Impugned additions u/s 68 deleted

The assessee company received substantial amount of share application money from companies, and during scrutiny all the documents called upon were furnished, and notice u/s 133(6) issued to share applicant companies were complied with, and investigation/examination of Director of share applicant companies has not thrown up any contrary facts.

The learned AO made additions u/s 68 on ground that 2 of the share applicant companies had meagre income and were only engaged in providing accommodation entries.

Tribunal, upheld the order of CIT(A) deleting the addition u/s 68 , on ground that :

  1. the share applicants are income tax assessee’s,
  2. the share applicants are having substantial creditworthiness which is represented by a capital and reserve,
  3. share application money was made by account payee cheques,
  4. in none of the transactions there were cash deposits before issuing cheques to the assessee company,
  5. there is no finding of involvement of any hawala operator or entry provider,
  6. the statement of director of share applicant company has not been rebutted or discredited by the (ITA No. 2922/ Ahd/2016 (AY. 2012-13) dt 25.01.2022

DCIT v. Gandhi Capital (P) Ltd (2022) 194 ITD 396 (Surat)(Trib.)

126. S. 69C: Unexplained expenditure – Bogus Purchases – When Sales are not doubted, 100% disallowance for bogus purchases cannot be done, drawing adverse inference for inability to produce suppliers, as no sales is possible without actual purchase

The learned AO added 100 % of the amount paid as sub contract charges, on ground that,

  1. onus cast upon assessee was not proved either during the assessment proceedings or remand proceedings, and assessee failed to substantiate his claim of
  2. Assessee by making purchase through grey market got savings on account of non payment of tax at expenses of exchequer

Tribunal, upheld the order of CIT(A) restricting the disallowance to 12.5%, stating that assessee having provided the documentary evidence for the purchases, adverse inference cannot be drawn due to inability of assessee to produce the suppliers, and the disallowance of 12.5% out of bogus purchases meets the end of justice.(ITA No. 6224/Mum/2018 (AY. 2012-13) dt 25.03.2022

DCIT v. DBM Geotechnics and Construction (P) Ltd (2022) 194 ITD 579 (Mum)(Trib.)

127. S. 69C: Unexplained expenditure – Bogus purchases – Sales accepted – Disallowance restricted to 5% of aggregate value of alleged bogus purchases.

Assessee made purchases from two parties, however, same were disallowed on ground that purchases so made were not genuine. Assessee in support of its claim of having made genuine purchases, placed on record, copy of confirmation of aforementioned parties and also placed on record copy of invoices pertaining to purchases claimed to have been made – However, on a perusal of invoices, it was found that nowhere, details of lorry receipt number and date, vehicle number etc. was mentioned therein. The Assessing Officer disallowed the purchases. On appeal the Tribunal held that since sales of assessee company had been accepted by department, it could be safely concluded that assessee had purchased goods in question not from aforementioned parties but at a discounted value from open/grey market . Therefore, disallowance was restricted to 12.5 per cent of aggregate value of impugned purchases. (AY. 2014-15)

Kimaya Impex (P.) Ltd v. ITO (2022) 193 ITD 710 (Mum)(Trib.)

128. S. 80GGC: Contribution – Political parties – Failure of done to use it for object for which eligible – No disallowance can be made in the hands of donor.

Held that when the funds were given by assessee as donation to political parties and charitable Institutions (donees) under section 80GGC could not have been disallowed treating same as bogus on ground that donees failed to use it for object which had been eligible to receive donation. Act nowhere puts obligation upon donor to ensure how funds are utilized by donee towards their objects. (AY. 2012-13, 2014-15)

ACIT v. Armee Infotech. (2022) 193 ITD 728 (Ahd) (Trib.)

129. S. 80IA : Industrial undertakings – Infrastructure development – loss of one eligible unit is not to be adjusted or set off against profit of another eligible unit – Captive power plant – Market value of power supplied by assessee to steel division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers.

Held that while computing deduction under

section 80-IA, loss of one eligible unit is not to be adjusted or set off against profit of another eligible unit. Tribunal also held that the Assessee had established a captive power plant in State of Chhattisgarh to supply electricity to its steel division, for purpose of section 80-IA deduction, market value of power supplied by assessee to steel division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers. (AY. 2011-12)

DCIT v. Godawari Power & Ispat Ltd. (2022) 193 ITD 869 (Raipur)(Trib.)

130. S. 80IA: Industrial undertakings

– Infrastructure development – A partnership firm – engaged in works contract – not eligible to claim deduction as section 80IA (4)(i) applies only to an enterprise being a company

The Assessee is a contractor for Indian Railways and carried on the work of construction of rail over bridges (ROB), foot over bridges (FOB) etc. The Assessee had claimed deduction under section 80IA(4) of the Act on the ground that work executed by it was in capacity of a developer and not a contractor, which was denied by AO on the ground that w.e.f. 1 April

2000, the provisions of section 80IA(4) were amended whereby deduction would not be applicable if it is in nature of works contract. The CIT(A) relying on the decisions of co- ordinate bench of Tribunal allowed the claim. Aggrieved, Revenue was in appeal before the Tribunal.

The Tribunal noted that the issue was squarely covered against the Assessee in own case for AY 2008-09, wherein the Tribunal had held that for a taxpayer to be eligible to claim section 80IA(4) deduction, the provisions of sub-section 4(i)(a) to (c) cumulatively needs to be satisfied. Accordingly, since the Assessee was a partnership firm and not a company as per section 4(a)(i), it was not eligible to claim deduction under section 80IA(4) of the Act. Further, on the issue of contractor v/s developer, the Tribunal held that on merits, as per amendment to section 80IA(4), an Assessee which is into works contract is not eligible to claim deduction in view of section 80IA(13) of the Act. Since the Assessee could not controvert to the submissions of Revenue, the appeals filed by the Revenue were allowed.

DCIT v. M/s Eshwarnath Construction (2022) 194 ITD 592 (Chennai)(Trib.)

131. S. 90 : Double taxation relief

– Foreign Tax credit – Salary income – Rule 128(9) of Rules does not provide for disallowance of Foreign Tax Credit in case of delay in filing Form No. 67

– Filing of Form No. 67 is not mandatory but a directory requirement – DTAA-India

-Australia [S. 91, 139(1), 154, 192, R. 128(9), Form no 67, Art. 24(4)(a)]

Assessee-individual offered to tax salary income earned for services rendered in Australia and claimed foreign tax credit for taxes paid in Australia under section 90 read with article 24

in a revised return of income. Assessee filed Form 67 in support of claim of foreign tax credit. Revised return of income was processed by Centralized Processing Centre (CPC) electronically and claim of FTC was disallowed. Assessee filed a rectification application before Assessing Officer and submitted that credit for FTC as claimed in return should be given. Assessing Officer upheld disallowance on ground that assessee had failed to furnish Form 67 on or before due date of furnishing return of income as prescribed under section 139(1) which is mandatory according to rule 128(9). CIT(A) affirmed the order of CIT(A). On appeal the Tribunal held that filing of Form No. 67 is not mandatory but a directory requirement and DTAA overrides the provisions of the Act and Rules cannot be contrary to the Act. Issue is not debatable. In view of legal position the assessee had right to claim Foreign tax Credit. (AY. 2018-19)

Brinda RamaKrishna. (Ms.) v. ITO (SMC) (2022) 193 ITD 840 (Bang)(Trib.)

132. S. 92C: Transfer pricing – Arm’s length price – CUP method – Applying of ‘QUOTE’ from third party for economic analysis using CUP method was not a justifiable method – Matter remanded.

The assessee had sub-contracted work to MIOL in relation to a contract awarded by ONGC to assessee. However, subsequent to a global acquisition by group to which assessee belonged MIOL had become a part of said group and, consequently, an AE of assessee. CUP method had been applied by assessee to determine arm’s length price for inter- company transactions between assessee and its AE in relation to availing of sub-contractor services. TPO held that assessee had applied CUP method by using a QUOTE from a third party and since a quotation may not be a good base to apply CUP method in normal

circumstances, TNMM was MAM. Tribunal held that – CUP method is most direct and reliable way of applying arm’s length principle and price an inter-company transaction but applying of ‘QUOTE’ from third party for economic analysis using CUP method was not a justifiable method, matter was set aside to file of Assessing Officer to determine ALP using CUP method taking into consideration appropriate comparable. (AY. 2011-12)

DCIT v. Schlumber Solutions (P.) Ltd. (2022) 193 ITD 293 (Dehradun)(Trib.)

133. S. 92C : Transfer pricing – Arm’s length price – Comparable – Filter – Filter applied by TPO was to be included in list of comparable regardless of fact that it was low margin earning [S. 133(6)]

Assessee is engaged in providing software development services to its AEs. TPO identified

17 comparable companies and computed additions on account of determination of ALP. CIT (A) excluded one company from list of comparable on ground that it was in multiple businesses and segmental information was not available. On appeal the Tribunal held that since, said company passed 75 per cent software development services filter applied by TPO, same was to be included in list of comparable regardless of fact that it was low margin earning company. (AY. 2005-06)

Infor (Bangalore) (P.) Ltd. v. DCIT (2022) 193 ITD 478 (Bang) (Trib.)

134. S. 92C : Transfer pricing – Arm’s length price – Resale Price Method (RPM) – Resale of goods imported from its AE to third party customers without any value addition – Resale Price Method (RPM) is Most Appropriate Method (MAM).

Held that resale of goods imported from AE to third party Indian customers without any value addition, in such case, Resale Price Method (RPM) would be Most Appropriate Method (MAM) to determine ALP of said transaction. Directed the Assessing Officer to apply Resale Price Method (RPM). (AY. 2015-16)

Randox Laboratories India (P.) Ltd. v. ACIT (2022) 193 ITD 609 / 94 ITR 163 (Bang)(Trib.)

135. S. 92C: Transfer pricing – Arm’s length price – Related transactions constituted 96.30 per cent of total turnover for which margin was agreed to be 15.85 percent under MAP resolution – Same rate to be applied for non USA related transactions under EDS segment.

Assessee, a subsidiary of US based company undertook engineering design services (EDS) for its AEs. Assessee submitted that issue related to transfer pricing adjustment made in respect of EDS had been settled through Mutual Agreement Procedure (MAP) and margin was determined at 15.85 per cent for USA related transactions. Tribunal held that since USA related transactions constituted 96.30 per cent of total turnover of EDS segment for which margin was agreed to be 15.85 per cent under MAP resolution, same rate was to be adopted for non-USA related transactions under EDS segment. (AY. 2011-12)

Textron India (P.) Ltd. v. DCIT (2022) 193 ITD 829/93 ITR 58 (SN)(Bang)(Trib.)

136. S. 92C : Transfer pricing – Arm’s length price – Aggregation is not a rule of blind application and should be applied (on scientific or rational basis) only when the characteristic of ‘closely-linked’ is satisfied.

Transfer pricing adjustments were made in respect of instances where sale price to AEs were lower than those charged to non-AEs. The assessee argued that cherry-picking of transactions done at lower prices and ignoring the transactions done at higher prices is unwarranted and that the transactions should be aggregated and average prices for AEs and Non-AEs be worked out.

On appeal, the Tribunal held that rule 10A(d) defines transaction as including a number of closely linked transactions and therefore, aggregation is possible only if the characteristic of ‘closely-linked’ is satisfied. Further, it observed that the OECD Guidelines prescribe that ideally the arm’s length principle should be applied on a transaction by transaction basis and aggregation is allowed only when separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Accordingly, the Tribunal concluded that aggregation is not a rule of blind application and should be applied (on scientific or rational basis) only when the characteristic of ‘closely-linked’ is satisfied. Since the assessee had failed to give any scientific or convincing reason for aggregation and annual averaging of the prices except for favorable arithmetical calculation. The Tribunal further went on to explain how blanket application of aggregation/ averaging would be detrimental to both the taxpayers and the Department.

During the course of the appellant proceedings, the assessee contended that alternatively the transaction can also be benchmarked using TNMM. However, it did not give a go-bye to CUP and selected TNMM during the appellant proceedings. Accordingly, the Tribunal observed that the assessee is putting equal force on both the methods and such flip-flop is inadmissible.

Accordingly, the Tribunal remanded the issue with a direction that the assessee make its choice of method crystal clear and TPO take necessary action after affording the assessee an opportunity of being heard. (ITA Nos. 2682 & 2683 (Ahd.) of 2016 dt. 15-06-2022) (AY. 2011-12 & 2012-13)

DCIT v. Gujarat Microwax (P.) Ltd. (2022) 218 TTJ 432 (Ahd)(Trib.)

137. S. 92(1), 92C: Transfer Pricing Adjustment – Receipt of Commission – TNMM Rejected – Other Method applied – Received Commission at ALP – Addition deleted

The Assessee recorded international transaction of Receipt of Commission amounting to Rs. 44,29,79,820. The Assessee had benchmarked the said transaction using TNMM method. The TPO adopted ‘Other Method’ and had attributed amount of profit to marketing effort in the overall manufacturing segment of the Assessee under Rule 10AB for determining ALP and made transfer pricing adjustment, On appeal to CIT(A), the CIT(A) deleted the addition by relying on earlier years’ order without discussing any merits. Aggrieved by the same, the Department preferred an appeal before Tribunal.

The Tribunal held that the TPO’s approach in attributing profit in Other Method was incorrect since the TPO only considered Marketing expense and Manufacturing expense while computing profits instead he should have also considered Material Cost and Depreciation since they also contribute to generation of income in the same way as the Manufacturing and Marketing expense. If all the four costs are taken together the percentage of Marketing profit to sale will reduce as compared to that computed by TPO and when such percentage of marketing profit is applied to sales the resultant gross

amount which should have been received by Assessee as commission comes to 42.38 crores and Assessee has received Rs. 44.30 crores and thus, the transaction is at ALP.

The Tribunal also held that CIT(A)’s reliance on earlier year’s Tribunal order is misplaced since there is difference in facts like TPO applied Other Method as most appropriate method only for year under consideration and not for other years. Also for earlier years, the amount of sale considered for determining ALP consisted of sale of manufactured traded goods and commission as compared to year under consideration which comprised of manufactured goods and has no components of traded goods or commission. However, as stated earlier, the transfer pricing addition under “Other Method” as per Rule 10AB was not justified.

DCIT v. Gujarat Microwax (P.) Ltd. (2022) 218 TTJ 432 (Ahd)(Trib.)

138. S. 139: Return of income – There could be several reasons for not getting the statutory audit/tax- audit done within prescribed time

– unless there is specific/express provision which stipulates that if the audit is not done within prescribed time – the loss shall not be allowed to be carried forward, the scope of the statute cannot be expanded.

Assessee is engaged in business of Manufacturing of Engineering goods and filed its return of income and enclosed provisional financial statements along with its return of income as accounts were not audited by that time. Assessee’s accounts were finally audited which were filed with Revenue during course of original assessment proceedings. However, the Assesse did not file revised return of income after getting its accounts audited with

revised figure of income (loss) post audit. Revenue initiated proceedings against assesse for infringement of provisions of Section 44AB for not getting tax-audit done within prescribed time and the AO completed the assessment proceedings by accepting returned loss but with the rider that the loss returned cannot be allowed to be carried forward on the ground that the same was arrived provisionally without audit. The CIT(A) allowed the appeal of assessee but the Tribunal set aside the order passed by CIT(A) and restored the matter to the file of AO since the AO had not taken any support of provisions of the Act to show that Assessee was not entitled to carry forward the loss. Accordingly, matter was set-aside to the AO with directions to assess the income/loss of the assesse on the basis of audited financial statements.

In second round of proceedings, the AO did not allow carry forward of business loss as no revised return was filed but allowed loss on account of depreciation. The CIT(A) in second round had held that the return was filed with the time limit and hence Assessee will be eligible to carry forward business loss. Aggrieved, the Revenue filed an appeal with the Tribunal.

The Tribunal noted that Explanation to Section 139(9) clearly stipulates that tax-audit report as well audited accounts are to be accompanied with return of income, otherwise return will be a defective return and consequences are also stipulated u/s 139(9). However, the provision of Section 139(9) did not stipulate that such return which is not accompanied with the prescribed documents shall be treated as non-est, but it is treated as a defective return. The AO is under obligation u/s 139(9) to issue notice to the assesse giving fifteen days’ time or such further extended time to rectify the defect, and once the assesse rectifies the defect within stipulated time, the return will be treated as valid return. It is only when the assesse fails to rectify the defect within stipulated time, then the return will be treated as invalid return and it will be deemed that the assesse has never filed return of income. It is also an admitted position that the audited accounts and tax- audit return was filed by the assesse during the course of assessment proceedings, albeit the assesse did not file revised return of income.

The Tribunal held that if the assesse has not got its statutory audit done under Companies Act, 1956 within the prescribed time, or has not got its tax audit done under the provisions of Section 44AB there are penal provisions provided under the statute for such non- compliances.

There could be several reasons for not getting the statutory audit/tax-audit done within prescribed time, but unless there is specific/ express provision which stipulates that if the audit is not done within prescribed time, the loss shall not be allowed to be carried forward, the scope of the statute cannot be expanded. Accordingly, the order of CIT(A) was confirmed and the Revenue’s appeal was dismissed.

DCIT v. Bramhos Aerospace (Thiruvananthapuram) Ltd (2022) 194 ITD 561 (Cochin)(Trib.)

139. S. 140A: Self-assessment – Failure to deposit admitted self-assessment tax – Financial difficulty – Levy of penalty is not valid [S. 140A (3), 221(1)]

Dismissing the appeal of the Revenue the tribunal held that amended section 140A(3) with effect from 1-4-1989 does not envisage any penalty for non-payment of self-assessment tax, hence, no penalty as per post-amended sub- section (3) to section 140A read with section 221(1) could have been imposed on assessee for its failure to deposit its admitted self-assessment tax liability. Tribunal also held that where acute financial stringency which was further supplemented by absence of any other source of income had triggered failure on part of assessee to discharge its admitted self-assessment tax

liability at time of filing its return of income, and for a period thereafter, no penalty under section 221(1) read with section 140A(3) could have been imposed.(AY. 2011-12, 2012-13)

DCIT v. Karanja Terminal & Logistic (P.) Ltd. (2022) 193 ITD 385 / 215 TTJ 41 (Mum) (Trib.)

140. S. 143(3): Assessment – Charge of income-tax – Order passed by National Company Law Tribunal under section 31 of Insolvency and Bankruptcy Code, 2016 has overriding effect over anything inconsistent contained in Income- tax Act and it shall be binding on all respective entities including other stakeholders, which include Central Government, State Government and other local bodies – Matter remanded to the Assessing Officer. [S. 4, Insolvency and Bankruptcy Code, 2016, S 31, 238]

Assessee-company, engaged in the business of

Railway Siding Utilization Activity, filed return of income. The Assessing Officer completed assessment after making various additions. The Commissioner (Appeals) confirmed the additions. On appeal before the Tribunal the assessee raised additional ground and submitted that in the light of the order of the National Company Law Tribunal and peculiar facts of the case, the Tribunal would ascertain that realisable tax liability of assessee for the assessment year under consideration, i.e., assessment year 2010- 11 as Nil. The order passed by the National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code, 2016 has overriding effect over anything inconsistent contained in the Income-tax Act and it shall be binding on all the respective entities including other stakeholders, which include

Central Government, State Government and other Local Bodies. Since the present appeal involving assessment year 2010-11 relates to the period prior to the acquisition of control by the Resolution Applicant over the assessee- company pursuant to this plan, all dues under the provisions of the Income-tax Act, 1961 including taxes, duty, penalties, interest fines, cesses, etc. shall stand extinguished by virtue of the order of the National Company Law Tribunal and all proceedings including the appellate proceedings pending on the date of the order of the National Company Law Tribunal including the present proceedings relating to the prior period to the date of order shall stand extinguished and all consequential liabilities, if any, should be deleted and should be considered to be not payable by the company. In the light of the order of the National Company Law Tribunal (NCLT) dated 12-2-2018 passed in assessee’s case, it would be fit to restore the case for the assessment year under consideration to Assessing Officer for taking necessary action in accordance with law.

Palogix Infrastructure (P.) Ltd. v. (2022) 193 ITD 329 (Kol) (Trib.)

141. S. 143(3): Assessment – Protective assessment – Excess cash recovered from registered office of assessee – No substantive addition was made in hands of any other person – Addition u/s 69A would not survive. [S. 69A, 132]

During course of search proceedings at registered office of assessee, excess cash was found. The assessee explained that cash belong to Fisher Health Resorts (P) Ltd. Assessing Officer, made the addition on protective basis under section 69A of the Act. On appeal the Tribunal held that no substantive addition had been made in hands of Fisher Health Resorts (P) Ltd or in hands of any other person.

Accordingly protective addition made in hands of Assessee Company did not survive and thus addition made in hands of assessee on protective basis under section 69A was deleted. (AY. 2016-17 to 2018-19)

Pegasus Properties (P.) Ltd. v. DCIT v. (2022) 193 ITD 514 (Mum)(Trib.)

142. S.143 (3): Assessment – Provision for gratuity – Disallowed in the return – Addition is held to be not valid. [S. 37(1)]

Held that in the return of income filed along with computation of income the provision for gratuity which had been debited in profit/loss account had been disallowed by assessee itself and no claim for provision for gratuity had been made by assessee while filing its return of income, addition made towards provision for gratuity was not valid. (AY. 2019-20)

Shakti Apifoods (P.) Ltd. v. Assessing Officer (2022) 193 ITD 751 (Chd.)(Trib.)

143. S. 144C: Reference to dispute resolution panel – Draft assessment order with demand notice – Initiating penalty proceeding – Draft assessment order being contrary to provisions of section 144C could not survive in eyes of law. [S. 156, 271(1)(c)]

Assessing Officer passed draft assessment order which was accompanied with demand notice issued under section 156 and notice initiating penalty proceeding under section 271(1)(c), draft assessment order passed by Assessing Officer being contrary to provisions of section 144C could not survive in eyes of law. (AY. 2013-14)

Cisco Systems Services B.V. v. DCIT (IT)(2022) 193 ITD 809 (Bang) (Trib.) 

144. S. 145: Method of accounting – Real estate business – Percentage completion method – Not justified in rejecting the method of accounting followed by the Assessee.

Assessee is engaged in real estate business. Assessee converted its land held as capital into stock-in-trade and constructed building on this land. During, relevant assessment year, assessee entered into agreement for sale of these premises and for purpose of revenue recognition followed percentage completion method of accounting. Assessing Officer rejected said methodology and estimated business profits on sale of land as well as profits from construction activities separately on ground that land was converted into stock- in-trade and premises including undivided share in land was sold to various buyers during year. On appeal the Tribunal held that project was completed to extent of 11 per cent during relevant assessment year as certified by architect and same was recognised as revenue in books of account. Since method adopted by assessee was recognized method of accounting as per accounting standards issued by ICAI and this method was consistently followed in subsequent years to recognize revenue, Assessing Officer was not justified in rejecting methodology adopted by assessee for revenue recognition. (AY. 2005-06)

Peninsula Land Ltd. v. DCIT (2022) 193 ITD 366 (Mum)(Trib.)

145. S. 149 : Reassessment – Time limit for notice – amendment made by the Finance Act, 2012 – increase time limit from six to sixteen years – also applicable for any assessment year beginning on or before the 1st day of April, 2012 and will have retrospective applicability

The Assessee is an individual and a Chartered accountant in whose residential premises search and seizure operation was carried in August 2011. In this proceedings, there was allegation of income from an asset located outside India that the assessment for the assessment year 1990-2000 was reopened on 27th March 2015. The Assessee had challenged the validity of proceedings on the ground that as on 1st July 2012, i.e. when enhancement in time limit for reopening assessment from six to sixteen years was introduced in section 149, the assessment had reached finality. The CIT(A) accepted the position of the Assessee and held that even though the period for reopening the assessments in case of income from assets located outside India stood increased to 16 years with effect from 1st July 2012, it could only take prospective effect and the assessments having already reached finality i.e. till AY 2005-06, will remain unaffected by this amendment. Aggrieved, the Department filed an appeal before Tribunal.

The Tribunal noted that the statutory provisions are quite clear and unambiguous and section 149(1)(c) provides that no notice for reassessment can be issued if “more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment”. As for the retrospective application of this provision, Explanation to Section 149 unambiguously provides that “the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012”.

The Tribunal held that interpretation adopted by the CIT(A) is thus clearly contrary to the specific words of the statute and unambiguous intent of the legislature. Tribunal further concluded that so far as escaped income from an asset outside India is concerned, any completed assessment can be reopened as long as sixteen

years have not elapsed from the end of the relevant assessment year. Admittedly, that is not the position in the present case, as the relevant assessment year was completed on 31st March 2000, and the assessment was reopened on 27th March 2015. Thereby, the Tribunal reversed the findings of the CIT(A) and allowed the contentions of the Revenue.

However, since the CIT(A) had not considered the issue on merits, the matter was restored back to CIT(A) to decide on merits with timeline to complete the same within 180 days from date of service of Tribunal order.

DCIT v. Dilip J. Thakkar (2022) 216 TTJ 121) (Mum)(Trib.)

146. S. 149: Income escaping Assessment – Time Limit – Notice for re-assessment in relation to any asset situated outside India – Retrospective applicability of Sec 149(1)(c) introduced on 01.07.2012 upheld.

AO issued notice u/s 148 for A.Y 1999-2000 by taking shelter of sec 149(1)(c), which came into effect from 01.07.2012, which extends the period to 16 years, where income in relation to any asset located outside India, has escaped assessment.

Assessee challenged the reopening, on ground that same has been done beyond the limitation period of 6 years, as by the time s 149(1)(c) was introduced, the time limit for issue of notice u/s 148 as per the law prevailing on that day has expired. CIT (A), accepted the plea of assessee, and held that assessment for AY 1999-2000 could not be reopened beyond six years by invoking the provisions of Sec 149(1)(c).

Tribunal on appeal by Revenue held that the amendment in sec 149(1), introduced w.e.f 01.07.2012, is thus expressly stated to be retrospective in nature, and there is no bar on

the validity of the retrospectively of the taxing statute as long as it is clearly specified to be so. (ITA No. 967/MUM/2020 (AY. 1999-2000) dt 15.03.2022

DCIT v. Smt Mitali R Lakhanpal (2022) 194 ITD 424(Mum)(Trib.)

147. S. 149 : Limitation – Reassessment – Issue of Notice u/s 148 for

A.Y 1999-2000 – Retrospective applicability of Sec 149(1)(c) introduced on 01.07.2012 – Held, assessment for AY 1999-2000 could not be reopened beyond six years by invoking sec 149(1)(c)

AO issued notice u/s 148 for A.Y 1999-2000 by taking shelter of sec 149(1)(c), which came into effect from 01.07.2012, which extends the period to 16 years, where income in relation to any asset located outside India, has escaped assessment.

Assessee challenged the reopening, on ground that same has been done beyond the limitation period of 6 years, as by the time s 149(1)(c) was introduced, the time limit for issue of notice u/s 148 as per the law prevailing on that day has expired. CIT (A), accepted the plea of assessee, and held that assessment for AY 1999-2000 could not be reopened beyond six years by invoking the provisions of Sec 149(1)(c).Tribunal held that the Reassessment has been rightly quashed by CIT(A). (ITA No. 969/Mum/2020 (AY. 1999 – 2000) dt 14.02.2022

DCIT v. Smt Indira D Thakkar (2022) 217 TTJ 529 (Mumbai)(Trib.)

148. S. 153A: Search & Seizure – Impugned addition on landowner of on-money declared by developer before settlement commission – Held addition on basis of cloud data, in absence of any evidence rightly deleted.

Addition was made u/s 68 on Assessee a landowner based on on-money declared by developer on basis of cloud tally data found during search on developer. AO made additions stating that assessee has not given any proof that no such amount of on-money was received, and simple denial is not acceptable. Further when developer has owned up the transaction, the same is correct for other party. The CIT(A) deleted the additions.

On appeal the Tribunal held that addition made is rightly deleted by CIT(A) for following reasons :

  1. In search of the appellant, no document or material was found to indicate that assessee has received any on-money, and hence said cloud data can’t be used against
  2. The documents and cloud data were seized from the business premises of developer, and not from residence of assessee, so, same can be considered as true only in respect of that person, more so when developer has not stated that the on-money recorded in tally data has been shared with the
  3. It was also noted that no new facts have been brought by the revenue in controverting the order of the learned CIT(A),

(ITA No. 1299 to 1301/Jp/2019 (AY. 2013-14 to 2015-16) dt 03.01.2022

DCIT v. Late Smt Pushpa Goyal (Through Legal Heir, Shri Munna Lal goyal) (2022) 217 TTJ 65 (Jp) (UO)

149. S. 154: Rectification of mistake – Interest – Compensation on Agricultural land – Failure to claim statutory deduction – Mistake apparent hence amenable for rectification [S. 57(iv), 143(1)]

Assessee was entitled for a statutory deduction of fifty per cent of interest income, but he failed to raise such a claim in his return, he moved an application under section 154 before Assessing Officer. Assessing Officer rejected the claim. On appeal the Tribunal held that since assessee had in his return of income duly reflected interest on compensation qua compulsory acquisition of his agricultural land, failure on his part to raise a claim for deduction under section 57(iv), being clearly in nature of glaring, apparent, patent and obvious mistake from record, rendered order passed by Assessing Officer amenable for rectification under section 154 and, thus, Assessing Officer was directed to allow assessee’s claim for deduction under section 57(iv) of the Act. (AY. 2012-13)

Dhanesh Kumar Jain. v. ACIT (2022) 193 ITD 1 (Delhi)(Trib.)

150. S. 154 : Rectification of mistake – Un utilisation of MODVAT – Order of Assessing Officer and Commissioner (Appeals) got merged with order of Tribunal – Rejection of rectification application is justified [S.254(1)]

Dismissing the appeal of the assessee the Tribunal held that where order of Assessing Officer and Commissioner (Appeals) got merged with order of Tribunal, rectification of a mistake being apparent from record could only be effected in order of Tribunal and not in order of Assessing Officer or Commissioner (Appeals). (AY. 2004-05 & 2011-12)

Khyati Chemicals (P.) Ltd. v. DCIT (OSD)(2022) 193 ITD 446 (Ahd.)(Trib.)

151. S. 195 : remittance of amounts collected on behalf of foreign universities – not in the nature of FTS – amount paid for teaching in or by educational institutions is not FTS – The expression ‘teaching in or by educationalinstitution’ cannot be confined to the activity of imparting the instructions alone. [S. 195]

The assessee imparts instructions in India as per

the syllabus set by the foreign universities, and subsequently, foreign universities are conducting the examinations before issuing the degrees. For this, the assessee collected examination fee and fees for syllabus from students and remitted the same to non-residents without making any deduction u/s. 195. However, the AO was of the opinion that skilled educational services were rendered by these foreign universities to the assessee and, therefore, such services fell in the ambit of the expression ‘FTS’ under the India- UK and India-Switzerland DTAAs and tax was deductible u/s. 195. On appeal the CIT(A) held that the assessee is only a pass through entity in the sense that they are only collecting the exam fee on behalf of the foreign universities and no TDS was warranted u/s. 195.

On Department appeal, the Hon’ble Tribunal held that the definition of ‘fee for technical services’ does not include any amount paid for teaching in or by educational institutions. The expression ‘teaching in or by educational institution’ cannot be confined to the activity of imparting the instructions alone, in a broader sense, teaching includes not only imparting the instructions but also the verification of the extent of perception of such instruction by the pupil and thereby includes the activity of examinations also. In this sense, this particular activity fell in the ambit of the exemption clause

i.e. Article 13(5)(c) of the India-UK DTAA and

Article 12(5)(a) of India-Switzerland DTAA which exempted the amounts paid for teaching in or by the educational institutions. Hence, the Tribunal upheld the decision of the CIT(A).

DCIT v. Hyderabad Educational Institutions (P.) Ltd. (2022) 195 ITD 746 (Hyd.)(Trib.)

152. S. 195: Deduction at source – Non- resident – Transponder service fee – Not in nature of royalty in hand of recipient – Not liable to deduct tax at [S.9(1)(vii), 195(2)]

Dismissing the appeal of the revenue the Tribunal held that transponder charges were not in nature of royalty in hands of recipient despite amendment to section 9(1)(vi) and, therefore, there was no liability on part of assessee to deduct TDS on payments. Followed PCIT v. NEO Sports Broadcast (2019) 107 taxmann.com 17

(Bom)(HC) (AY. 2015-16, 2016-17, 2020-21)

ACIT (IT) v. Viacom18 Media (P.) Ltd. (2022) 193 ITD 716 (Mum) (Trib.)

153. S. 195 :Deduction at source – Non- resident – Income deemed to arise in India – Computer software through EULA/distribution agreement, is not payment of royalty for use of copyright in computer software and, thus, same does not give rise to any income taxable in India – Not liable to deduct tax at source- DTAA-India-USA [S. 9(1)(vi), Copy Right Act, 1957, S. 14(a), 14(b), 52(1)(aa), Art. 12(4)(b)]

Held that the amount paid by assessee

Indian end user/distributors to non-resident computer software manufacturers/suppliers, as consideration for resale / use of computer software through EULA/distribution agreement,

is not payment of royalty for use of copyright in computer software and, thus, same does not give rise to any income taxable in India. Not liable to deduct tax at source. (AY. 2009-10)

Bain & Company India (P.) Ltd. v. ITO (TDS) (2022) 193 ITD 787 (Delhi) (Trib.)

154. S.234E: Fee – Default in furnishing the statements – Amendment in section 200A by way of insertion of clause (c) was only with effect from 1-6-2015 – Levying late fee for f period prior to 1-6-2015 is not valid [S. 200A]

Held that amendment in section 200A by way of insertion of clause (c) was only with effect from 1-6-2015 and therefore no fees would be payable by assessee for any period prior to 1-6-2015. Accordingly levying late fee prior to 1-6-2015 would not be sustainable. (AY. 2013 -14 to 2015-16)

Bhaskar Roy v. ITO (2022) 193 ITD 668 (Kol)(Trib.)

155. S. 251: Appeal – Commissioner (Appeals) – Powers – Assessee could not level baseless allegations against CIT (A) – Matter remanded. [S.250]

Held that Commissioner (Appeals) repeatedly granted adjournments on all applications moved by assessee but assessee remained unrepresented and thereafter, on basis of material available on record order was passed. Assesse could not level baseless allegations against CIT (A). Order was set aside solely on grounds that taxpayer should not suffer on account of either his ignorance or inability due to some extenuating circumstances on account of which he could not come clean with all his facts and explanations qua issues before revenue. (AY. 2012-13)

Abdul Wahab v. ITO (2022) 193 ITD 746 (SMC)  (Delhi)(Trib.)

156. S. 254(2): Appeal (Tribunal) – Rectification – mistake apparent – Department filed miscellaneous application contending that certain vital submissions made were ignored/not considered by the Tribunal – Tribunal held that the miscellaneous application moved by revenue is not maintainable, as there is no mistake apparent from the

After pronouncement of the Order by Hon’ble Tribunal, Revenue moved the miscellaneous application stating that there are certain apparent mistakes of fact and law which deserves to be rectified u/s 254(2)of the Act. Revenue further alleged that vital submissions were ignored or not considered by the Tribunal, and reliance placed on various decisions were also not taken into consideration.

Tribunal held that the miscellaneous application is not maintainable, based on following :

  1. That, all the relevant findings and the arguments advanced by the counsels, including rejoinder have been discussed in detail in the order,
  2. That, all the submissions and the case laws relied upon by the counsel for revenue find the place in the impugned order,
  3. That, the correctness of the decision cannot be challenged by revenue in grab of rectification petition u/s 254(2), and it appears that department wants to get the order passed by the Tribunal reviewed which is not permissible, as Tribunal has no power or inherent right to review or modify its order.
  4. That, the mistake should be apparent from the record, which is patent, self- evident, glaring and obvious, and whose discovery is not dependent on argument or elaboration and does not require complicated process of investigation, arguments or proof, which needs rectification.
  5. In the instant case since there is no mistake apparent on record the misc application moved by the department is not maintainable.

(Misc Appln Nos. 31 to 33/Chd/2020 in ITA Nos 706,707 & 709/Chd/ 2018 (AYs. 2008-09, 2010-11 & 2012-13) dt 18.03.2021

DCIT v. Sanjay Singal (2022) 217 TTJ 18 (Chd) (Trib.)

157. S. 263: Revisionary proceedings – Revision cannot be made by CIT pursuant to order under section 147 on any other issue if the issue for which reopening was done does not survive

The assessee filed Return of Income (‘ROI’) declaring NIL income which was processed under section 143(1) of the Act. Subsequently, the Assessing Officer (‘AO’) reopened the assessment mentioning in the reasons for reopening that assessee has transferred capital asset (an industrial plot) during the year, income from which has escaped assessment. However, on completing the reassessment proceedings, the learned AO passed the assessment order accepting the Returned income of the assessee.

Subsequently, on perusing the reassessment order, Commissioner of Income Tax (‘CIT’) issued notice under section 263 of the Act to initiate revisionary proceedings on a new issue of taxability of Long Term Capital Gains (‘LTCG’) from sale of shares and deduction claimed under section 54/54F etc and according made addition.

Tribunal observed that reassessment was made on the issue of capital gains from sale of

industrial plot on which the CIT did not find any error. However, CIT took up altogether new issue of taxability of LTCG from sale of shares.

Tribunal relied on decisions of Delhi Tribunal in case of Ranbaxy Laboratories Ltd (336 ITR 136) (Del) and Bombay High Court in case of Jet Airways India Ltd (331 ITR 236) (Bom) and held that if no addition is being made on the point for which assessment has been reopened, then any other addition cannot be made. Therefore, CIT cannot explore any other issue under section 263 which cannot even be explored by the AO in reassessment proceedings and accordingly quashed the order of CIT.

Binal Parixit Patel v. Pr. CIT (2022) 217 TTJ 10 (Ahd)(Trib)

158. S. 263: Commissioner – Revision of orders prejudicial to revenue – Business expenditure – Corporate social responsibility expenses – Amendment brought by way of Explanation 2 to section 37(1) by Finance Act, 2014, with effect from 1-4-2015 is not retrospective in nature – Revision is held to be not valid [S. 37(1)]

The Assessee expenditure incurred towards same as corporate social responsibility (CSR) expense. Assessing Officer allowed the said expenditure. Principal Commissioner invoked revision jurisdiction on ground that CSR expenses claimed by assessee was not incurred wholly and exclusively for its business purposes as per provisions under section 37(1) of the Act. On appeal the Tribunal held that amendment brought by way of Explanation 2 to section 37(1) by Finance Act, 2014, with effect from 1-4-2015 providing for disallowance of CSR expenditure was not retrospective in nature. Therefore expenditure incurred by assessee towards CSR was allowable as deduction for both relevant assessment years 2013-14 and 2014-15. Revision is held to be not valid. (AY. 2013-14, 2014-15)

Garden Reach Ship Builders & Engineers Ltd. v. PCIT (2022) 193 ITD 649 (Kol)(Trib.)

159. S.270A : Appeal (Tribunal) – Maintainability – Order imposing Penalty u/s 270A – Appeal filed directly before Tribunal under general provisions of S 246A(1) (q)- Held appeal filed against such penalty order directly before Tribunal is not maintainable.

Assessee filed the Appeal against Penalty order u/s 270A levied by AO, directly before Tribunal on pretext that Sec 246A which lists out the appealable orders before the CIT(A) does not refer to an order passed by AO u/s 270A, whereas Sec 253(1)(a) which sets out provisions for appeals before Tribunal , specifically refers to order passed u/s 270A.

Learned DR took objection, and stated that the Appeal should be first filed before CIT(A).

Tribunal held that the objection of DR is correct, as Sec 246A(1)(q) included in orders appealable before learned CIT(A), “an order imposing a Penalty under chapter XXI” and chapter XXI of I T Act,1961 covers ss 270 to 275, and thus Sec 270A is covered by said provision, and dismissed the appeal as not maintainable.

Tribunal, on assessee’s seeking intervention of Tribunal and seeking liberty to file appeal before CIT(A), stated that there is no cause of action for intervention, and it is for the assessee to file Appeal with condonation petition.(ITA No. 2072/Mum/2021 (AY. 2017-18) dt 17.05.2022)

Desmond Savio Theodore Fenandes v. ITO (2022) 217 TTJ 84 (Mumbai)(UO)(Trib.)

160. S. 271(1)(c) : Concealment – Return of Income filed showing

Loss under normal provisions, and Tax was paid on Income as per provisions u/s 115JB – Loss was reduced on account of prior period adjustments, of an expenditure not set-off against prior period income, as per order u/s 147 r.w.s 143(3) – No change to Income under MAT – Penalty levied by AO deleted

The penalty levied by AO which was deleted by CIT(A), in view of the fact that the assessee’s income under the regular provisions of the Act is loss even after disallowance of claim of prior period expenditure, while its income under the MAT regime is positive and remains unchanged after order u/s 147r.w. 143(3), as the issue is covered by circular no 25 of 2015 dt 31.12.2015, which being a benevolent circular, is binding on IT authorities u/s 119.

On Appeal Tribunal held that the appeal filed by revenue against order of CIT(A) deleting the levy of penalty is not maintainable. (ITA No. 251/Jab/2018 (AY. 2008-09) dt 23.03.2022

DCIT v. Madhya Pradesh Power Generating Co Ltd (2022) 217 TTJ 875 (Jab)(Trib)

161. S. 271(1)(c) : Penalty – Concealment – Not referring specific charge in the notice or assessment order – Levy of penalty is not valid.

Held that the Assessing Officer had neither mentioned in assessment order nor in his penalty notice as to whether penalty was initiated for concealment of income or for furnishing inaccurate particulars of income and he had also not mentioned in order that he intended to levy penalty under Explanation 5 of section 271(1)(c), said penalty under section 271(1)(c) was not justified and was to be deleted. (AY. 2014-15, 2015-16)

Chandra Suresh Kothari v. DCIT (2020) 193 ITD 547 (Nagpur)(Trib.)

162. S. 271AAB: Penalty – Search initiated on or after 1st day of July, 2012 – Surrender of income

– Neither surrendered income nor penalty was initiated on the basis of undisclosed income found during search – Levy of penalty is not valid. [S.132]

Held that where assessee had neither made any surrender of any undisclosed income during search, nor penalty had been initiated on basis of undisclosed income found during such search, impugned order of Assessing Officer imposing penalty on assessee under section 271AAB did not pass mandate of provisions of section 271AAB, therefore, same being bad in law was to be quashed. (AY. 2014-15, 2015-16)

Chandra Suresh Kothari v. DCIT (2022) 193 ITD 547 (Nagpur)(Trib.)

163. S. 271B : Penalty – Failure to get accounts audited – Project completion method – Advance received – Not turnover or gross receipt – Bonafide belief – Failure to get audited – Levy of penalty is not valid [S. 44AB]

Assessee, an individual, engaged in business of construction filed her return of income declaring loss. Assessing Officer held that the assessee was a developer and had incurred huge expenditure by way of compensation as well as received advance for various projects and, therefore, looking at total business receipt, assessee should have got her accounts audited under section 44AB, which admittedly was not done by assessee; hence, he initiated penalty proceedings under section 271B of the Act. CIT (A) affirmed the order of the Assessing Officer. On appeal

the Tribunal held that assessee was following project completion method, assessee had shown cost of project as work-in-progress and advances received for sale of property had been disclosed and thus, was under a bona fide belief that provisions of section 44AB did not apply and hence, no audit under section 44AB was got done. This being a reasonable cause penalty levy of penalty is not valid. (AY. 2012-13)

Sushila Sureshbabu Malge (Smt.) v. ITO (2022) 193 ITD 416 (Mum)(Trib.)

164. S.271D: Penalty – Takes or accepts any loan or deposit – Amount received from husband – Purchase of plot – Family arrangement – Levy of penalty is not valid [S. 269SS, 273B]

Held that the assessee offered explanation that payment towards construction expenses like purchase of construction material and payment to labourers were required to be incurred in cash. Further, all transactions including cash transactions were duly documented in registered sale deed. Also pooling of family funds was done by assessee due to her family’s requirement and as she didn’t have any known sources of funds. Tribunal held that since assessee offered a reasonable explanation justifying said cash transactions, penalty could not be levied under section 271D for violation of section 269SS of the Act. (AY. 2009-10)

Meera Devi Kumawat. (Smt.) v. JCIT (2022) 193 ITD 250 (Jaipur)(Trib.)

165. S. 14, 31 of Insolvency and Bankruptcy Code, 2016: Moratorium period – Continuation of pending suits during moratorium period prohibited – Department and Assessee appeal dismissed – Liberty to file appeal afresh after completion of moratorium

The Assessee’s case is pending before The Insolvency Professional in terms of Insolvency and Bankruptcy Code, 2016 and moratorium period has been declared as per Section 14 of the Code. The Tribunal held that as per Section 14 of the Code, institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority shall be prohibited during the moratorium period. The period of moratorium shall have the effect from the date of such order till completion of corporate insolvency resolution process.

As per Section 31 of the Code, resolution plan shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in resolution plan. Thus, this will prevent authorities, regulatory bodies including direct and indirect tax department from questioning resolution plan. Thus, the Tribunal dismissed the appeal filed by Revenue and Assessee with the liberty to file appeal afresh after completion of moratorium period upon revival of Corporate Debtor as per Resolution Plan as approved by the Adjudicating Authority or upon appointment of the Liquidator as the case may be.

DCIT v. Global Softech Ltd. Raghuvanshi Mill and Anr (2022) 217 TTJ 1 / 212 DTR 133 (Mum.)(Trib.)

162. S. 10 (23C) : Educational institution – Medical university – Statement of accountant of a promoter / sponsor – Books of account – Refusal of registration and approval under section 80G is held to be not valid [ S. 10(23)(vi), 12AA, 80G (5)(vi)]

Assessee, a medical university, created under State Act, had filed an application seeking approval under section 80G(5)(vi) and exemption under section 10(23C) .It had a sponsor/promoter which was a public medical charitable trust . On the basis of statements made by accountant of the sponsor the exemption was denied. Tribunal allowed the exemption. On appeal High Court affirmed the order of the Tribunal.

CIT v. Pacific Medical University (2022) 137 taxmann.com 207 (Raj.)(HC)

Editorial: SLP of Revenue dismissed, CIT (E) v. Pacific Medical University (2022) 286 Taxman 358 (SC)

163. S.10B : Export oriented undertakings – Agreement with Central Government – Ministry of Commerce granting hundred percent export oriented unit – Entitle to exemption – Exemption cannot be denied merely on the ground that the assessee has not claimed exemption in return of income. [S. 10A, 139, Industrial (Development & Regulation) Act, 1951 S. 14]

Assessing Officer denied benefit of exemption under section 10B on ground that assessee was not approved by concerned statutory Board as a hundred per cent export oriented undertaking as required under Explanation to section 10B of the Act. Commissioner (Appeals) allowed appeal. On revenue’s appeal, Tribunal referred that an agreement was entered into between assessee and Central Government wherein there was a reference to a resolution passed by Ministry of Commerce granting status of hundred per cent export oriented unit to assessee . Further CBDT had issued a clarification dated 9-3-2009 to effect that power to grant approval under section 14 of Industrial (Development & Regulation) Act, 1951 had been delegated to Development Commissioner and approval granted by Development Commissioner shall be considered valid for purpose of exemption under section 10B. Affirmed the order of CIT (A) . On appeal High Court affirmed the order of Tribunal. The assessee had not claimed exemption under section 10A in its return of income, however, Tribunal after examining the factual matrix and pointed out similarities between section 10A and section 10B and after taking note of legal position came to conclusion that assessee was entitled to relief under section 10B and was also entitled for benefit of exemption under section 10A of the Act. Tribunal also held. Revenue cannot take advantage of assessee’s mistake in not claiming exemption in return of income, thereby denying exemption. On appeal High Court affirmed the order of Tribunal. (AY. 2007- 08, 2008-09)

PCIT v. Wizard Enterprises (P.) Ltd. (2022) 286 Taxman 112 (Cal)(HC))

164. S. 12AA: Procedure for registration – Trust or institution – Cancellation of registration is not valid on the ground which was not contained in show cause [S. 115BBC]

Dismissing the appeal of the Revenue the Court held that cancellation of registration is not valid on the ground which was not contained in show cause notice. Order of Tribunal is affirmed.

CIT v. Guru Nanak Education Trust (2022) 286 Taxman 350 (Cal)(HC)

165. S. 12AA : Procedure for registration – Trust or institution- Educational institution – Failure to file return – Matter was remanded back to file of Commissioner (E) with direction to grant registration under section 12A if objectives and activities of assessee were found to be same – Order of Tribunal [S.12A]

Assessee, an educational institution, had filed an application before Commissioner (E) seeking registration under section 12A of the Act. Commissioner (E) rejected the application of on ground that assessee had not filed return of income and had not obtained permission from Central Board of Direct Taxes while earning income abroad and, thus, it had violated provisions of Act. Tribunal held that for next assessment year 2020-21, assessee had been granted registration by Commissioner (E) under section 12A and remanded matter back to file of Commissioner (E) with direction to grant registration under section 12A if objectives and activities of assessee were found to be same. On appeal High Court affirmed the order of the Tribunal. (AY. 2019-20)

PCIT v. Jawaharlal Nehru Technological University. (2022) 286 Taxman 231 (Telangana)(HC)

166. S.14A : Disallowance of expenditure – Exempt income – Failure to record satisfaction – Invoking rule 8D is not justified – Disallowance proposed by the assessee is affirmed [R. 8D]

Held that where Assessing Officer failed to record its satisfaction with regard to claim of assessee that it had incurred any expenses in earning exempt income the disallowance under section 14A by invoking rule 8D made by Assessing Officer was unjustified, however, disallowance to extent of Rs. 1.61 lakhs which was proposed by assessee itself was up held. (AY. 2009-10)

Essilor India (P) Ltd v. Dy. CIT (2022) 286 Taxman 385 (Karn.)(HC)

167. S. 14A: Disallowance of expenditure – Exempt income – Only expenses proportionate to earning of exempt income could be disallowed [R. 8D]

Dismissing the appeal of the Revenue the Court held that only expenses proportionate to earning of exempt income could be disallowed. (AY. 2011 – 12)

PCIT v. Karnataka State Financial Corporation Ltd. (2021) 127 taxmann.com 115 (Karn)(HC)

Editorial : Notice issued in SLP filed against order of High Court, PCIT v. Karnataka State Financial Corporation Ltd. (2022) 286 Taxman 356 (SC)

168. S. 14A : Expenditure incurred in relation to exempt income- Although Section 14A is retrospective reopening cannot be made w.e.f 1-4-2001 and revision cannot be made when there is no expenditure incurred in relation to exempt income[S. 2(22)(e) of the Income tax Act, 1961]

Revision under Section 263 can only be made when the order of the AO is erroneous or prejudicial to the Revenue. When revision was ordered to be carried out by the AO, by the revisional authority, even though no expenditure was incurred in relation to exempt income, and the revisional authority ought to have stated atleast prima facie what the expenditure was, the revisional order is not sustainable and the appeal is to be dismissed.(T.C.A. No. 421 of 2012 decided on 2.8.2021)(AY: 2002-2003)

CIT v. Accel Limited [2022] 446 ITR 47 (Mad)(HC)

169. S. 32: Depreciation – Claim of depreciation as permissible – Deletion of disallowance was proper.

Assessing Officer disallowed claim of depreciation on premise that assessee had made a double claim as depreciation for relevant assessment years was claimed separately under head ‘Social Overhead’ over and above depreciation already claimed under section 32 of the Act. Tribunal held that depreciation claimed in profit and loss account was depreciation claimed as per Companies Act, 1956 and was claimed by providing relevant depreciation schedule which was given as annexure to computation of total income and the assessee had added back depreciation as per profit and loss account and thereafter claimed depreciation which is permissible under section 32 of the Act. On appeal High Court affirmed the order of Tribunal](AY. 2003-04, 2004-05, 2005-06)

PCIT v. Eastern Coalfields Ltd. (2022] 286 Taxman 487 (Cal)(HC)

170. S.35DDA: Amortisation of expenditure – Voluntary retirement scheme – Accrued liability – Allowable as deduction [S. 43(2), 145]

The assessee implemented a Voluntary Retirement Scheme (VRS) for its employees. Liability towards compensation for employees covered under VRS worked out to Rs. 12.83 crores the said amount was amortized over a period of 60 months started from accounting year 2000-01 and this was reflected in balance sheet as at 31-3-2001. During assessment year 2001-02 assessee claimed deduction of Rs. 2,56,70,399, i.e., one-fifth of aforesaid amount of Rs. 12.83 crores. Assessing Officer disallowed claim of deduction of Rs. 2,56,70,399 and only allowed actual payment made during assessment years 2001-02, i.e., Rs. 17,22,059 and balance amount was treated as contingent liability on ground that what could not be ascertained or quantified could not be treated as expenditure. Commissioner (Appeals) affirmed order of Assessing Officer holding amortization of accrued liability as capital expenditure. Tribunal concurred with view of Commissioner (Appeals) that only amount paid during year had to be taken into consideration and not entire amount payable under VRS . On appeal the Court held that in view of definition of ‘paid’ under section 43(2) that contemplates an accrual liability Tribunal erred in treating liability under VRS not as an accrued one but in proceeding on basis that only amount actually paid during assessment year 2001-02 could be allowed. Order of lower authorities are set aside. (AY. 2001-02)

Tata Refactories Ltd v. CIT (2022) 286 Taxman 577/ 213 CTR 405/ 326 CTR 469 (Orissa)(HC)

171. S.37(1): Business expenditure – Buyback of shares – Amount over and above face value of shares to departing group of shareholders – Allowable as revenue expenditure [S. 263]

Dismissing the appeal of the Revenue the Court held that held that in terms of directions issued

by CLB, assessee-company paid certain amount over and above face value of shares to departing group of shareholders, amount so paid was to be allowed as revenue expenditure. Followed CIT v. Bramha Bazar Hotels Ltd (2015) 235 Taxman 195 (Bom)(HC) (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398( Bom)(HC)

Editorial : SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

172. S.37(1): Business expenditure – Buyback of shares- Amount over and above face value of shares to departing group of shareholders – Allowable as revenue expenditure [S. 263]

Dismissing the appeal of the Revenue the Court held that held that in terms of directions issued by CLB, assessee-company paid certain amount over and above face value of shares to departing group of shareholders, amount so paid was to be allowed as revenue expenditure. Followed CIT v. Bramha Bazar Hotels Ltd (2015) 235 Taxman 195 (Bom)(HC) (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398(Bom)(HC)

Editorial: SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

173. S.37(1): Business expenditure – Amount paid represented fee for participation in training programmes – Allowable as business expenditure [40A(9)]

Indian Institute of Coal Management (IICM) conducted education and training programmes for different corporate bodies in general and companies in coal sector in particular. Employees of assessee-company participated in management and technical development programmes, workshops and seminars conducted by IICM with a view to improve their skills and expertise against huge sum/certain fee which was shown under head ‘Miscellaneous expenses’. Assessing Officer held that contribution to IICM was sum paid by assessee as an employer which was not allowable under section 40A (9) of the Act. On appeal CIT(A) affirmed the order of Assessing Officer. on further appeal the Tribunal held that payment made by assessee-company represented fee for participation in training programmes, organised by IICM and contribution made by assessee- company towards training had direct nexus with nature of business of assessee and, therefore, it was allowable as expenditure wholly and exclusively for purpose of business of assessee, since sum paid to IICM was crystalised as liability of assessee during relevant previous year, said sum, was revenue expenditure incurred for training of employees/executives and was not hit by provisions of section 40A(9) of the Act. Order of Tribunal is affirmed by the High Court. (AY. 2003-04, 2004-05, 2005-06)

PCIT v. Eastern Coalfields Ltd. (2022] 286 Taxman 487 (Cal)(HC)

174. S.43B: Deductions on actual payment – Loan from its two promoters, Government of TamilNadu and IL&FS- Public financial institutions – Matter remanded to Assessing Officer. [S. 254(1)]

Tribunal allowed assessee’s claim on ground that promoters were not covered by definition of ‘public financial institution’ as per Explanation 4 to section 43B and thus, provisions of section 43B(d) read with Explanation 3C would not be attracted in assessee’s case where interest

liability was accrued but not paid. Court held that since Tribunal had not verified whether IL&FS was a public financial institution or not and merely held that both promoters were not covered under definition of ‘public financial institutions’, orders were to be set aside and matter was to be remanded to Assessing Officer. (AY. 2003-04 to 2011-12)

CIT v. Tamil Nadu Water Investment Co. Ltd. (2022) 286 Taxman 600 (Mad.)(HC)

175. S.43B: Deductions on actual payment – Employees’ and employers contribution – Paid before due date of filing of return Allowable as deduction [S. 139(1)]

Dismissing the appeal of the Revenue the Court held that both employees’ and employer’s contributions are covered under amendment provided by Finance Act, 2003 to section 43B, thus, payments thereof were subject to benefits of section 43B and were to be allowed as deductions . Order of Tribunal affirmed. Followed CIT v. Ghatge Patil Transports Ltd (2014) 368 ITR 749 (Bom) (HC). (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398 (Bom)(HC)

Editorial: SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

176. S.43B: Deductions on actual payment – Statutory corporation – Obligation of agent to account for and pay amounts collected by him on behalf of principal is purely fiduciary- Disallowance is not valid [Electricity Supply Act, 1948, S. 5]

Amount remained in hands of assessee till date of assessments, Assessing Officer treated said

amount as income. On appeal High court held that liability to pay and corresponding authority of State to collect tax (flowing from a Statute) is essentially in realm of rights of sovereign, whereas obligation of agent to account for and pay amounts collected by him on behalf of principal is purely fiduciary hence, section 43B could not be invoked for making assessment of liability of assessee-corporation under Act with regard to amount collected by it as an agent of State towards tax payable by consumers of electricity to State. Followed Kerala State Electricity Board v. Dy.CIT (2010) 329 ITR 91 /(2011) 196 taxman 1 (Ker)(HC) (AY. 2006-07 to 2009-10)

PCIT v. Kerala State Electricity Board (2022) 137 taxmann.com 85 (Ker)(HC)

Editorial: Notice issued in SLP filed by Revenue, PCIT v. Kerala State Electricity Board. (2022) 286 Taxman 438 (SC)

177. S.43B: Deductions on actual payment – Service tax – Deduction available on actual payment.

Dismissing the appeal of the Revenue the Court held that Service tax deduction could be granted only upon actual payment and not on accrual as is provided under section 43B of the Act. (AY. 2013-14)

PCIT v. Zuberi Engineering Co. (2022) 286 Taxman 686 (Raj)(HC)

178. S. 45 : Capital gains Full value of consideration – Deductions Consideration on sale shares including sum held in Escrow Account offered to tax – Receiving reduced sum from Escrow Account after Completion of assessment – Whole amount credited in book not taxable as capital gains – Only actual amount received taxable – Entitled to refund of excess tax paid – Recomputation can be less than the returned income – Proviso to section 240 is not applicable – The assessee can be asked to pay only such amount of tax which is legally due under the Act and noting more – Entitle to refund of excess tax paid [S. 48, 264, Art. 226]

The assessee computed the capital gains on sale of shares taking into account the proportion of the total consideration which included the escrow amount which had not been received by the time returns were filed but were received by the promoters but were still parked in the escrow account. The income declared by the assessee was accepted in the scrutiny assessment. The assessee stated that subsequent to the sale of the shares certain statutory and other liabilities arose for the period prior to the sale of the shares and according to the agreement, certain amount was withdrawn from the escrow account and it did not receive the amount. The assessee filed an application under section 264 before the Principal Commissioner and submitted that the capital gains were to be recomputed accordingly reducing the proportionate amount from the amount deducted from the escrow account and that an application under section 264 was filed since the assessment had been completed by the time the amount was deducted from the escrow account.

The Principal Commissioner rejected the assessee’s application. On writ allowing the petition the Court held that that capital gains was computed under section 48 of the Act by reducing from the full value of consideration received or accrued as a result of transfer of capital asset, cost of acquisition, cost of improvement and cost of transfer. The real income (capital gains) could be computed only by taking into account the real sale consideration, i. e., sale consideration after reducing the amount withdrawn from the escrow account. The amount was neither received nor accrued since it was transferred directly to the escrow account and was withdrawn from the escrow account. When the amount had not been received or accrued it could not be taken as full value of consideration in computing the capital gains from the transfer of the shares of the assessee. The purchase price as defined in the agreement was not an absolute amount as it was subject to certain liabilities which might have arisen on account of certain subsequent events. The full value of consideration for computing capital gains would be the amount which was ultimately received after the adjustments on account of the liabilities from the escrow account as mentioned in the agreement. The liability as contemplated in the agreement should be taken into account to determine the full value of consideration.

Therefore, if the sale consideration specified in the agreement was along with certain liability, then the full value of consideration for the purpose of computing capital gains under section 48 of the Act was the consideration specified in the agreement as reduced by the liability. The full value of consideration under section 48 would be the amount arrived at after reducing the liabilities from the purchase price mentioned in the agreement. Even if the contingent liability was to be regarded as a subsequent event, it ought to be taken into consideration in determining the capital gains chargeable under section 45. Such reduced amount should be taken as the full value of consideration for computing the capital gains under section 48. If income did not result at all, there could not be a tax, even though in book keeping, an entry was made about hypothetical income which did not materialize. Therefore, the Principal Commissioner ought to have directed the Assessing Officer to recompute the assessee’s income irrespective of whether the computation would result in income being less than the returned income. CIT v. Shoorji Vallabhdas and co.(1962) 46 ITR 144 (SC), relied.

Court also held that reliance by the Principal Commissioner on the provisions of section 240 to hold that he had no power to reduce the returned income was erroneous because the circumstances provided in the proviso to section 240 did not exist. The proviso to section 240 only provides that in case of annulment of assessment, refund of tax paid by the assessee according to the return of income could not be granted to the assessee. The only thing that was sacrosanct was that an assessee was liable to pay only such amount which was legally due under the Act and nothing more. Therefore, the assessee was entitled to refund of excess tax paid on the excess capital gains. (AY.2011-12)

Dinesh Vazirani v. PCIT (2022) 445 ITR 110 (Bom) (HC)

179. S. 45 : Capital gains – Transfer – Immovable property – Unregistered agreement – Joint development agreement – Payment from developer – Not assessable as capital gains [S. 2(47)(v), Transfer of Property Act, 1882, 53A]

During assessment year under an unregistered agreement the assessee received certain payment from developer of property. The Assessing Officer held that the assessee has handed over the possessing of property to developer and assessed the amount as capital gains. Commissioner (Appeals) held that full amount payable under agreement had accrued to assessee in assessment year 2009- 10 hence affirmed the order of the Assessing Office. Tribunal held that after amendment to section 53A of Transfer of Property Act, 1882 which was amended by Amendment Act, 2001 which stipulates that if an agreement like joint development agreement is not registered then it shall have no effect in law for purposes of section 53A of the Act. Accordingly deleted the addition.

On appeal High Court held that in light of law laid down by Supreme Court in case of CIT v. Balbir Singh Maini (2017) 398 ITR 531/ 251 Taxman 202 (SC) to effect that if development agreement is not registered it shall have no effect in law for purposes of section 53A which bodily stood incorporated in section 2(47)(v) of the Act. Accordingly the Tribunal was right in allowing assessee’s appeal and granting relief. (AY. 2009-10)

PCIT v. Shelter Project Ltd.( 2022) 445 ITR 291/ 286 Taxman 392 (Cal)(HC)

180. S. 48 : Capital gains – Sale consideration – Fair market value deemed to be full value of consideration in certain shares – Transfer of a plot of land – Joint Development agreement – Not ascertainable – Guidance value of land would be appropriate mode to determine full value of consideration – Provision of section 50D came in to force with effect from 1-4-2013 is not applicable for the year under consideration. [S. 45, 50D]

The assessee was entitle to receive 26% of the constructed area as per the terms of the JDA . The Assessing Officer computed the long term capital gains qualifying the consideration as the cost of consideration of 26% of the constructed area and allotted to the assessee as per the JDA dated 11-5 -2009 treating the cost of construction as the full value of consideration. On appeal the CIT (A) held that the guidance value as the full value of consideration, which was affirmed by the Tribunal. On appeal by the Revenue the Court held that when the consideration is not ascertainable, guidance value of land would be appropriate mode to determine full value of consideration. Court also held that provision of section 50D came in to force with effect from 1-4-2013 is not applicable for the year under consideration. Appeal of Revenue was dismissed. (AY. 2006-07, 2010-11)

PCIT v. CPC Logistics Ltd (2022) 286 Taman 38 (Karn)(HC)

181. S. 68: Cash credits – Reconciliation of statement – Supported by evidence – Order of Tribunal was affirmed. [S. 260A]

Dismissing the appeal of the Revenue the Court held that Tribunal re-examined entire facts and in particular reconciliation statement filed by assessee and found that reconciliation and explanation was duly supported by evidence which were on record. (AY. 2006-07)

PCIT v. AHW Steels Ltd. (2022) 286 Taxman 330 (Cal)(HC)

182. S. 68: Cash credits – Unsecured loans – Established genuineness and credit worthiness – Deletion of addition was justified.

Dismissing the appeal of the Revenue the Court held that the assessee has established genuineness and credit worthiness of the lenders. Deletion of addition was justified. (AY. 2004-05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

183. S. 68 : Cash credits – Shares of Raj Darbar Group brought back the shares at much lower rate at which the shares were allotted – Addition was made not on the basis of seized materials or statements – Deletion is held to be justified [S. 132, 153C]

Proceedings under section 153C were initiated against assessee. During post-search enquiries, it was gathered that 25 companies applied and allotted shares of assessee-company and later family members/companies of Raj Darbar group bought back shares at a much lower price. Assessing Officer treated amount received from companies as unexplained cash credit under section 68 of the Act. on the basis of extensive enquiries made by Investigation Wing.

On appeal the Tribunal held that the Assessing Officer had not made use of any seized documents while making additions to total income of assessee under section 68 and on other hand, had used extensive enquiries made by Investigating Wing, as basis to make said addition, since no seized material or statement had been relied upon by Assessing Officer while making addition the addition deleted. High Court affirmed the order of the Tribunal. Relied on CIT v. Kabul Chawla (2015) 234 Taxman 300/ (2016) 380 ITR 573 (Delhi)(HC) (AY. 2003-04)

PCIT v. Vikas Telecom Ltd. (2022) 286 Taxman 238/ 209 DTR 373/ 324 CTR 341 (Delhi)(HC)

184. S. 69: Unexplained investments – Recorded in the books of account – Deletion of addition is held to be

Dismissing the appeal of the Revenue the Court held that the investment was financed by bank which was explained at stage of assessment and recorded in account books. Order of Tribunal affirmed. (AY. 2004-05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

185. S. 69: Unexplained investments – Search and Seizure – Seizure of Jewellery – Consignee – Payments were accounted – Addition was held to be not justified- Directed to release of seized jewellery. [S. 132, 153C, Art. 226]

The assessee is in the business of Gold Jewellery – During search conducted at premises of

one Shri Suresh Kumar it was found that a consignor, one Parva Kundan & Diamonds PvtLtd. dispatched a package containing gold jewellery weighing 524.500 gms which was to be received by assessee as consignee. Said gold jewellery was seized. The Assessing Officer initiated proceedings under section 153C and made additions in assessee’s income for seized value of gold jewellary by treating same as unaccounted investment .On writ against the said order the Court held that the assessee purchased said gold from Parva Kundan & Diamonds Pvt Ltd for which payment was made through banking channels and purchases were duly accounted for in books of account of assessee. Accordingly said purchases could not be termed as unaccounted investments and seized gold jewellery was directed to be released in favour of assessee. (AY. 2018-19)

Rakeshkumar Babulal Agarwal v. PCIT (2022) 286 Taxman 617/213 DTR 15 (Guj)( HC)

186. S. 69B : Amounts of investments not fully disclosed in books of account – Stock – Value of stock shown in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 – No explanation was offered – Order of Tribunal was affirmed. [S.145]

Assessee was engaged in manufacturing and trading of edible oils and grains . Assessing Officer found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and difference was to extent of Rs. 2.71 crores and assessee despite opportunity afforded could not either reconcile difference or explain reasons therefor, treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B of the Act. Commissioner (Appeals) deleted the addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3- 2005.

Tribunal held that assessee was bound to explain difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and same was not done. Tribunal held that once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources. Order of Tribunal is affirmed. (AY. 2005 -06)

Suraj Bhan Oil (P.) Ltd. v. DCIT (2022) 286 Taxman 680 (MP)(HC)

187. S.69C: Unexplained expenditure – Whether findings of Tribunal can be interfered with when there is no question of law or perversity in factual findings

If the Tribunal upholds the CIT (A)’s order to restrict gross profit to 2.5% of turnover as the assessee could not produce certain documents owing to there being a flood in Chennai and is reasonable then there is no substantial question of law and no interference is called for in the order of the tribunal (T.C.A. No. 103 of 2022 decided on 8.6.2022)(AY: 2014-2015)

Ankit Ispat (P.) Ltd. v. ACIT [2022] 446 ITR 157 (Mad)(HC)

188. S. 80IA : Industrial undertakings – Infrastructure development – Electricity distribution – Expenditure on network of a new transmission or distribution line- No requirement of capitalization of said expenditure in books of account – Deduction allowable [S.800IA(4)(iv)]

The assessee, a power distribution company, had incurred expenditure on network of a new transmission or distribution line. Allowing the appeal of the assessee the Court held that there was no requirement of capitalization of said expenditure in books of account so as to claim deduction under section 80-IA(4)(iv) of the Act. Followed Bangalore Electricity Supply Company Ltd. v. Dy. CIT (20021) 431 ITR 606 (Karn)(HC) (AY. 2006-07)

Mangalore Electricity Supply Company Ltd. v. Dy. CIT (2022) 136 taxmann.com 428 (Karn.)(HC)

Editorial : Notice issued in SLP filed against the order of High Court , Dy. CIT v. Mangalore Electricity Supply Company Ltd. (2022) 286 Taxman 566 (SC)

189. S. 92C : Transfer pricing – Arm’s length price – Foreign comparable – Guidance note by ICAI and transfer pricing guidelines issued by OECD do not prohibit foreign AE to be a tested party – Foreign AE could be selected as a tested party- Where segmental results are available, adjustment can be made only on basis of individual transaction and not on aggregation [S.92E]

Held that Indian Transfer Pricing guidelines issued by Institute of Chartered Accountants of India vide guidance note on report under section 92E by ICAI and transfer pricing guidelines issued by OECD do not prohibit foreign AE to be a tested party. Therefore, where on consideration of FAR profile of both Assessee Company and AE, Tribunal held that Assessee Company was a more complex entity when compared to its foreign AE, said foreign AE could be selected as a tested party. Order of Tribunal is affirmed. Court also held that, where segmental results are available, adjustment can be made only on basis of individual transaction and not on aggregation basis. (AY. 2012-13, 2013 -14)

PCIT v. Almatis Alumina (P.) Ltd. [2022] 445 ITR 632 / 286 Taxman 378 / 214 DTR 185/ 326 CTR 849 (Cal)(HC)

190. S. 115JB : Book profit – Electricity Company – Company engaged in generation and supply of electricity – Not required to prepare its profit and loss account and balance sheet as per Parts II and III of Schedule VI of Companies Act – Provision of book profit not applicable.

Dismissing the appeal of the Revenue the Court held that since assessee was governed and ruled by different Acts and Rules, it was not required to prepare its profit and loss account and balance sheet as per Parts II and III of Schedule VI of Companies Act; hence, provisions of section 115JB could not be invoked. Order of Tribunal affirmed. (AY. 2010-11)

PCIT v. Atria Power Corporation Ltd. (2022) 138 taxmann.com 270 (Karn)(HC)

Editorial: SLP granted to Revenue; PCIT v. Atria Power Corporation Ltd. (2022) 286 Taxman 636 (SC)

191. S. 115JB: Book profit – Statutory Corporation – Provision is not be applicable to a statutory corporation constituted by notification of State of Kerala. [Electricity Supply Act, 1948, S. 5]

Dismissing the appeal of the Revenue the Court held that provision is not be applicable to a statutory corporation constituted by notification of State of Kerala, pursuant to powers vested in it by virtue of section 5 of Electricity Supply Act, 1948. Followed Kerala State Electricity Board Dy. CIT (2010) 329 ITR 91 / (2011) 196 taxman 1 (Ker)(HC) (AY. 2006-07 to 2009-10)

PCIT v. Kerala State Electricity Board (2022) 137 taxmann.com 85 (Ker)(HC)

Editorial: Supreme Court has dismissed case filed the department and held the High Court Order (2022) 447 ITR 193 (SC)

192. S. 115JB: Book profit – Retention money – Not to be included in computing book profits.

Dismissing the appeal of the Revenue the Court held that retention money is not to be included in computing book profits. Followed CIT v. Simplex Concrete Piles (India) (P.) Ltd. (1989) 179 ITR 8 (Cal)(HC). (AY. 2013-14)

PCIT v. MC Nally Sayaji Engineering Ltd. (2022) 286 Taxman 673 (Cal)(HC)

193. S. 139: Return of income – Difficulties in uploading Audit report – Revenue was directed to attend the technical glitches in portal at the earliest Art. 226]

Writ petition was filed on account of technical glitches in the Portal which the Chartered Accountants are facing and difficult to up load the audit report. The High Court directed the Revenue to attend the technical glitches in portal at the earliest.

Chartered Accountants Association v. UOI (2022) 286 Taxman 116 (Guj)(HC)

194. S. 143(2) : Assessment – Notice – Transfer from ITO, Ward-3 to ITO, Ward-4 – Order passed by ITO, Ward-4 without issuing notice under section 143(2) of the Act – Order is null and void [S.120, 143(3)]

The case of assessee was transferred from jurisdiction of ITO, Ward-3 to ITO, Ward-4 . ITO, Ward-4 who had jurisdiction over assessee during relevant assessment year framed scrutiny assessment under section 143(3). Tribunal held that the order was passed only in pursuance to notice under section 143(2) which was issued by ITO, Ward-3 who had no jurisdiction over assessee at relevant time, since no notice was issued under section 143(2) by ITO, Ward-4, assessment order passed by him would be without any jurisdiction and would be null and void. (AY. 2007-08)

PCIT v. Nopany & Sons (2022) 286 Taxman 388 (Cal)(HC)

195. S. 144B: Faceless Assessment – Cash credits – Video conferencing Natural justice – Opportunity of hearing – Matter remanded to Assessing Officer to pass a speaking order on [Art.226]

Assessee challenged the order on the ground of violation of principles of natural justice inasmuch as though it requested Assessing Officer to permit it to participate through Video Conferencing but said facility was not extended. Court held that since the order had been passed without giving an opportunity of personal hearing through Video Conferencing the order was quashed and matter remanded. (AY. 2018- 19)

Arun Excello Foundations v. NFAC (2022) 445 ITR 642 / 286 Taxman 574 (Mad.)(HC)

196. S. 144B : Faceless Assessment – Best judgment assessment – Natural justice – Directed to afford due opportunity of hearing before passing final assessment order – Reassessment – Notices were set aside – Directed to consider objections and pass the order giving an opportunity of hearing [S. 144 147, 148, 156, 270A, Insolvency and Bankruptcy Code, 2016, Art. 226]

On a writ petition against the orders passed under section 144 read with section 144B and section 270A, the demand notice under section 156 of the Income-tax Act, 1961 for the assessment year 2018-19 on the grounds that they had been passed without granting the assessee an opportunity of personal hearing and without considering the legal effect of the assessee having emerged out of the corporate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code, 2016 and the reassessment notices issued under section 148 for the assessment years 2013- 14 to 2017-18. The court set aside the orders passed under section 144 read with section 144B and section 270A and the demand notice issued under section 156 of the Income-tax Act, 1961 for the assessment year 2018-19 and remanded the matters to the Assessing Officer for giving an opportunity of personal hearing to the assessee before passing the final order. In respect of the notices issued under section 148 for the assessment years 2013-14 to 2017-2018, the Assessing Officer was to consider the objections raised by the assessee giving an opportunity of hearing. Matter remanded.( AY.2013-14 to 2018- 19)

Vadraj Energy (Gujarat) Ltd. v. ACIT (2022) 445 ITR 15 (Bom)(HC)

197. S. 144B : Faceless Assessment – Natural justice – Opportunity of hearing – High Court set aside assessment for de novo consideration, with a direction to concerned authority to pass assessment order and strictly comply with mandatory provisions prescribed under section 144B, considering all submissions made by assessee and also granting a personal hearing [S. 143(3), 144B(7), Art. 226]

Assessee filed writ petition challenging faceless assessment order on ground that opportunity of personal hearing was not granted. High Court set aside assessment for de novo consideration, with a direction to concerned authority to pass assessment order and strictly comply with mandatory provisions prescribed under section 144B, considering all submissions made by assessee and also granting a personal hearing.

Praful M. Shah v. NAFC (2022) 136 Taxmann.com 295 (Bom)(HC)

Editorial: Notice issued in SLP filed by assessee, Praful M. Shah v. NAFC (2022) 286 Taxman 263 (SC)

198. S. 144B : Faceless Assessment – Advance received from clients – For failure to file proper reply the assessment was made by making huge addition – On writ the order was quashed subject to assessee depositing a sum of Rs 5 crores – Directed the assessee to file reply in reassessment proceedings. [S. 69A, 143, Art. 226]

The asseessee is an IATA agent engaged in booking tickets for its clients received advances from clients for being paid to various airlines. The Assessing Officer added made addition u/s 69A of the Act treating the advances as unexplained investment for failure to respond any of the notices. On writ the assessee contended that two officers handling accounts and tax related issue had left assessee and thus the assessee could not reply to notices. It was also contended that the assessee will have to wound up if order remained. High Court quashed the order subject to assessee depositing a sum of Rs 5 crores – Directed the assessee to file reply in reassessment proceedings (AY. 2018 -19)

Hermes I Tickes (P) Ltd v. Dy. CIT (2022) 286 Taxman 18 (Mad)(HC)

199. S. 144B: Opportunity of personal hearing – Must be exercised judiciously especially in high stakes matters. [Article 226 of the Constitution of India, 1950]

Opportunity of personal hearing must be granted to the assessee in certain circumstances (high stakes matters) and at the same time the revenue must ensure that the assessment order is not a replica of the draft assessment order. Hence, the assessment order is quashed with a direction to reframe the order. (R/Special Civil Application No. 7461 of 2021 decided on 24.1.2022)(AY: 2018-2019)

Dastan Residency (Through Joga Singh Kalra) v. National E-Assessment Centre [2022] 446 ITR 571 (Guj)(HC)

200. S. 144C: Reference to dispute resolution panel – Draft assessment order – Limitation – No objection raised by assessee – Assessment order passed on 27-9-2021 – Barred by limitation [Art. 226]

Allowing the petition the Court held, that the Deputy Commissioner had passed the draft assessment order dated April 19, 2021 under section 143(3) read with section 144C of the Act proposing to make an addition. By letter dated May 15, 2021, forwarded to him by e-mail on May 17, 2021, the assessee informed him that it would not be opting for the Dispute Resolution Panel route and instead would pursue the normal appellate channel. The communication was received by the Deputy Commissioner on May 17, 2021 and therefore, the time limit under sub-section (4) of section 144C of the Act would expire on June 30, 2021.

Even if the submission of the Deputy Commissioner that e-mail dated May 17, 2021 was not uploaded in the Income- tax Business Application system were accepted and that the e-mail had to be ignored, still, the draft order having been received by the assessee on April 19, 2021, the thirty day period provided under sub-section (2) of section 144C of the Act would have expired on May 18, 2021 which would mean the time limit under sub-section (4) of the Act expired on June 30, 2021. On facts the order had been passed on September 27, 2021. Neither Circular No. 8 of 2021 nor Notification No. 74 of 2021 dated June 25, 2021 ([2021] 435 ITR (St.) 24) or press release dated June 25, 2021 would help the Deputy Commissioner. The assessment order dated September 27, 2021 had been passed beyond prescribed time limit. Order was quashed. (AY.2015-16)

Renaissance Services Bv v. Dy. CIT (IT) (2022)445 ITR 27 (Bom)(HC)

201. S. 145: Method of accounting – Records were destroyed by fire – Rejection of books of account not justified. [S. 133A]

Dismissing the appeal of the Revenue the Court held that in course of search conducted at business premises of assessee survey team had seized electronic data and other records but there was no finding that any entry therein was false or fabricated and the assessee was able to substantiate with official records to show that there was a fire accident in said premises which had destroyed records. Order of Tribunal is affirmed. (AY. 2004 -05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

202. S.147: Reassessment – After the expiry of four years – Audit objection – Security deposit – Interest expenditure – Change of opinion – Reassessment was quashed .[ S. 37(1), 148, Art. 226]

Allowing the petition the Court held that basis for reopening assessment was merely audit objections relying on the documents already filed before the Assessing Officer. There was no failure on part of assessee to truly and fully disclose facts, it could not be said that Assessing Officer had reasons to believe that income had escaped assessment. Reassessment was quashed. The AO cannot take recourse to reopen to remedy the error resulting from his own oversight relied Gemmeni Leather Stores v. ITO (1975) 100 ITR 1 (SC)) (AY. 2012 -13)

Glaxosmithkline Pharmaceuticals Ltd. v. ACIT (2022] 286 Taxman 324 (Bom)(HC)

203. S.147: Reassessment – After the expiry of four years – Provision for sales and operating expenses – No failure to disclose material facts – Reassessment notice was not valid [S. 148, 226]

Allowing the petition the Court held that the assessee provided all details called for including breakup of various expenses like provisions for sales return and other operating expenses and assessment was completed accordingly. All points, which had been raised in reasons for reopening, were raised by Assessing Officer during original assessment proceedings and all documents and details were provided to Assessing Officer .Reassessment notice was not valid. (AY. 2012-13)

Halite Personal Care India (P.) Ltd. v. DCIT (2022) 286 Taxman 464 (Bom)(HC)

204. S.147: Reassessment – After the expiry of four years – Rate of depreciation – Software licence – Audit information – Reassessment notice was quashed [ S. 32, 148, Art. 226]

Reassessment notice was issued on the ground that excess claim of depreciation was made by assessee at rate of 60 per cent in respect of software licences instead of 25 per cent. On writ allowing the petition the Court held that identical objection, as raised in reasons for reopening, was raised and communicated to assessee by way of audit queries and assessee had provided clarifications to Assessing Officer. Reassessment notice was quashed. (AY. 2012-13)

Maharashtra State Power Generation Company Ltd. v. DCIT (2022) 286 Taxman 333 (Bom)(HC)

205. S.147: Reassessment – After the expiry of four years – Business expenditure – Leased assets – Repurchase expenses – No failure to disclose material facts- Reassessment notice is not valid [S. 37(1), 148, Art. 226]

Held that during course of scrutiny assessment, Assessing Officer had made specific query as regards leased assets repurchase expenses and solicited explanation and documents and in compliance thereto, assessee furnished requisite information and documents. Once it becomes evident that Assessing Officer had raised query and reply thereto was furnished by assessee, endeavour on part of revenue to reopen assessment is fraught with two infirmities, namely, it cannot be said that income escaped assessment on account of failure to make a true and full disclosure of material facts (in cases where proviso operates) and reassessment would then fall in realm of mere change of opinion on basis of very same material, which is legally impermissible. Reassessment notice was quashed. (AY. 2006-07)

Mangalore Refinery and Petrochemicals Ltd. v. DCIT (2022) 286 Taxman 607 (Bom)( HC)

206. S.147: Reassessment – After the expiry of four years – Capital gains – No failure to disclose material facts – Reassessment notice was quashed [S. 45, 54, 148, Art. 226]

Allowing the petition the Court held that a specific query during the assessment proceedings was raised calling upon the assessee to provide a statement of capital gains and exemptions claimed along with evidence supporting the claim of exemption by a notice. The assessee provided all the details including a copy of the sale agreement. Subsequently, the assessee provided further details. Thereafter, the Assessing Officer issued a fresh notice under section 142(1) of the Income-tax Act, 1961 seeking further details on the immovable properties owned by the assessee. These details were also provided. In the assessment order, accepting the assessee’s explanations and return of income, it was mentioned specifically that benefit of deductions and exemption under section 54 of the Act was one of the reasons for scrutiny under computer assisted scrutiny selection and the assessee was issued notices and the assessee also provided all details online. Therefore, all the material relied upon by the new Assessing Officer proposing the reopening were available with the Assessing Officer when the assessment order dated December 15, 2018 was passed. Exemption had been granted. Reassessment notice was quashed. (AY.2016-17)

Gagan Omprakash Navani v. ITO (2022) 445 ITR 147 (Bom)(HC)

207. S.147: Reassessment – After the expiry of four years – Capital gains – No failure to disclose material facts – Reassessment notice was quashed [S. 45, 54, 148, Art. 226]

Allowing the petition the Court held that a specific query during the assessment proceedings was raised calling upon the assessee to provide a statement of capital gains and exemptions claimed along with evidence supporting the claim of exemption by a notice. The assessee provided all the details including a copy of the sale agreement. Subsequently, the assessee provided further details. Thereafter, the Assessing Officer issued a fresh notice under section 142(1) of the Income-tax Act, 1961 seeking further details on the immovable properties owned by the assessee. These details were also provided. In the assessment order, accepting the assessee’s explanations and return of income, it was mentioned specifically that benefit of deductions and exemption under section 54 of the Act was one of the reasons for scrutiny under computer assisted scrutiny selection and the assessee was issued notices and the assessee also provided all details online. Therefore, all the material relied upon by the new Assessing Officer proposing the reopening were available with the Assessing Officer when the assessment order dated December 15, 2018 was passed. Exemption had been granted. Reassessment notice was quashed. (AY.2016-17)

Gagan Omprakash Navani v. ITO (2022)445 ITR 147 (Bom)(HC)

208. S. 147: Reassessment – After the expiry of four years – Bad debts – Change of opinion – No tangible material – Reassessment was quashed [S. 36(1)(vii), 148]

Dismissing the appeal of the Revenue the Court held that reassessment proceedings had been initiated without any tangible material evidence, unearthed subsequently, which assessee did not produce at time of original assessment under section 143(3) of the Act. Reassessment proceedings were based on change of opinion hence the Tribunal was right in allowing appeal filed by assessee. (AY. 1998-99)

CIT v. Trichy Steel Rolling Mills Ltd. (2022) 286 Taxman 595 (Mad.)(HC)

209. S. 147 : Reassessment – With in four years – Interest free loans to sister concern – Charge of interest – Change of opinion – Reassessment notice was quashed [S. 36(1)(iii), 148, Art. 226]

Held that issue of loan being given to group companies either at low interest rate or no interest rate was a subject matter of consideration by Assessing Officer during original assessment proceedings and assessee had provided party wise details along with address of parties to whom loans/advances were given and interest received on such loans and nature of loans/advances had been considered in assessment order, reopening of assessment by Assessing Officer on ground that interest should be charged at 12 per cent per annum on loan given to sister concern and therefore this interest income had escaped assessment, being a mere change of opinion on very same material, was not justified. Reassessment notice was quashed. (AY. 2017-18)

Parinee Realty (P.) Ltd. v. ACIT (2022] 286 Taxman 337 (Bom)(HC)

210. S. 147 : Reassessment – With in four years – Depreciation – Information from Directorate of Income Tax, Intelligence & Criminal Investigation – Goodwill, trademarks and patents and Brands – Reopening of assessment on basis of very same material to take a different view was not justified – Reassessment notice was quashed [S. 32, 148, Art. 226]

Assessment was sought to be reopened in case of assessee on ground that revenue received certain information from Directorate of Income Tax, Intelligence & Criminal Investigation, Chennai, from where it was found that acquisition of Brands and Goodwill as claimed by assessee was incorrect and said transfer had not been established and thus, assessee had claimed incorrect depreciation. On writ allowing the petition the Court held that facts pertaining to acquisition of Goodwill, trademarks and Patents and Brands were not only available before Assessing Officer at time of original assessment, but were also analysed by him during course of assessment proceedings. Assessing Officer after considering all points passed assessment order, accepting fact that transfer had been established and there was proper acquisition of Brands and Goodwill, as claimed by assessee. Hence where on consideration of material on record, one view was conclusively taken by Assessing Officer, it would not be open to reopen assessment based on very same material with a view to take another view. Notice for reassessment was quashed. (AY. 2012-13)

Preethi Kitchen Appliances (P.) Ltd. v. ACIT (2022) 286 Taxman 483 (Bom)(HC)

211. S. 147 : Reassessment – With in four years – Speculative transactions – loss of cancellation of forward contract – Change of opinion – Reassessment notice was quashed [S. 43(5), 148, Art. 226]

The Assessing Officer sought to reopen assessment in case of assessee as on verification of records, he observed that Schedule 31 in profit and loss account showed that assessee company had debited a sum of Rs. 1070.42 lakhs towards ‘net loss of cancellation of forward contract’ . According to Assessing Officer, this amount of Rs. 1070.42 lakhs was speculation loss and should not have been allowed against regular business income. On writ the Court held that all these details were available before Assessing Officer who passed assessment order and between date of order of assessment sought to be reopened and date of formation of opinion by Assessing Officer, nothing new had happened. It was merely a fresh application of mind by a different Assessing Officer to same set of fact. Accordingly the notice for reopening assessment and order passed disposing of objections was quashed and set aside. (AY. 2012- 13)

Parle Products (P.) Ltd. v. ACIT (2022) 286 Taxman 235 (Bom)(HC)

212. S. 147 : Reassessment – With in four years – Sale of shares – Business income – Capital gains – Change of opinion – Reassessment notice was quashed [S. 28(i), 148, 154 226]

Assessing Officer passed assessment order under section 143(3) dated 31-12-2007. Rectification order under section 154 dated 6-5-2009 was also passed. Subsequently assessment was reopened and order under section 143(3) read with section 147 dated 18-12-2009 was passed. Thereafter assessee received a notice dated 31-3-2010 under section 148 from Assessing Officer alleging that he had reason to believe that assessee’s income chargeable to tax for assessment year 2005-06 had escaped assessment within meaning of section 147 of the Act. Assessing Officer also rejected assessee’s objections to reopening On writ allowing the petition the Court held that the entire basis of forming an opinion that there had been an escapement of assessment was that profit arising out of sale of shares by assessee was nothing but business income and, therefore, profit arising out of sale of shares held by assessee in group companies would be treated as assessee’s income from business and not profit arising out of sale of investment – It was also noted that in assessment order dated 31-12-2007 passed under section 143(3) same point raised in reasons for reopening had been discussed and considered . Reassessment notice on basis of change of opinion which could not be a ground for reopening. Reassessment notice was quashed. (AY. 2005-06)

Tata Sons Ltd. v. CIT (2022) 286 Taxman 587 (Bom)(HC)

213. S. 147: Reassessment – Bad debt – Rural branch – Withdrawal of claim in subsequent year – Reassessment is not valid [S. 36(1) (viia), Art. 226]

During assessment, Assessing Officer sought clarification on allowability of claim u/s 36(1(viia) of the Act. The claim was allowed. The Assessing Officer proposed to reopen assessment on ground that during assessment proceedings for assessment year 2010-11 when assessee was called upon to submit details of rural branches and advances, assessee had withdrawn claim for deduction under section 36(1)(viia) of the Act hence the assessee was likely to have claimed incorrect deduction as many branches initially projected as rural branches were not rural branches as prescribed in Explanation (ia) to clause (viia)of the Act. On writ the Court held that since specific queries were raised related to allowability of deduction under section 36(1)(viia) and upon consideration of same claim was allowed for relevant assessment year, reassessment on premise that it was likely that assessee claimed incorrect deduction in past assessment year without any tangible material would be in nature of guess. Accordingly the notice for reassessment was to be quashed. (AY. 2006 -07)

HDFC Bank Ltd. v. ACIT (2022) 445 ITR 196 / 286 Taxman 365 (Bom)(HC)

214. S. 147: Reassessment – Speaking order – Order passed without passing a speaking order – Order was set aside – Directed to pass speaking order [S. 143(3), 148, Art. 226]

Allowing the petition the Court held that once a notice under section 148 was issued and reasons were given thereafter, it was incumbent on part of revenue to have passed a speaking order. Accordingly the reassessment order passed by Assessing Officer was to be set aside and remanded back to Assessing Officer to pass a speaking order. (AY. 2011-12) (SJ)

Fast Finance (P) Ltd v. ACIT (OSD) (2022) 286 Taxman 455 (Mad.)(HC)

215. S. 147 : Reassessment – Capital gains – Profit on sale of property used for residence – Investment in six residential flats – Change of opinion – Reassessment is not valid [S. 45, 54, 148, Art. 226]

Assessee claimed exemption under section 54 which was allowed. Thereafter, a notice under section 148 was issued to assessee on ground that documents relating to acquisition of new property showed that it related to six residential flats and since under section 54, exemption is not allowed if assessee purchases more than one residential house from capital gain accrued from sale, assessee was not eligible for section 54 exemption. On writ allowing the petition the Court held that the assessee had provided all evidences to justify that when he purchased flat, it was one residential unit and that issue of deduction under section 54 was a subject matter of consideration by Assessing Officer during assessment proceedings. Accordingly the reopening of assessment was quashed on the ground of change of opinion. (AY. 2016-17)

Gagan Omprakash Navani v. ITO (2022) 286 Taxman 668 (Bom)(HC)

216. S. 147: Reassessment – Failure to show remuneration and interest on capital received from partnership firm – Reassessment notice was quashed [S.28 (i), 148, Art. 226]

Assessee was a partner in a firm. Assessing Officer reopened assessment on ground that she failed to show remuneration and interest on capital received from partnership firm in return of income filed. Assessee filed objections pointing out that she had not received any income in form of remuneration and interest on capital from partnership firm and, therefore, there was no question of adding such income or showing such income in return of income. Assessing Officer disposed of objections raised by assessee on ground that assessee had received share of profit from firm and such share received by assessee as per partnership deed would include remuneration and interest on capital which had not been debited from profit and loss account of firm On writ the Court held that Tribunal while deciding appeal of aforesaid partnership firm in respect of assessment year 2011-12 adjudicated controversy as regards deduction of remuneration and interest on partners’ capital not claimed by partnership in its profit and loss account and held that there was no good ground to tax remuneration and interest on capital in hands of partners. Accordingly the reopening of assessment was quashed and set aside. (AY. 2006-07)

Mamta Bhavesh Deva v. ITO (2022) 286 Taxman 692 (Guj)(HC)

217. S.148: Whether notices issued for AY 2013-2014, 2014-2015, 2015-2016 are within limitation if case is not covered under Section 149(1) (b). [S.149 of the Income Tax Act, 1961]

In view of the statement of the ld. Additional Solicitor General and paragraphs 6.2 and 7.1 of the Boards Circular dated 11.5.2022 and since the case does not attract Section 149(1) (b), the notices issued under Section 148 for the AY’s 2013-2014, 2014-2015, 2015-2016 would be beyond limitation and liable to be quashed. (Writ Tax No. 347 of 2022 decided on 17.5.2022) (AY: 2014-2015)

Ajay Bhandari v. UOI [2022] 446 ITR 699 (All) (HC)

218. S. 148 : Whether notice issued to a dead person is valid when the person has merged/amalgamated with another company and has ceased to exist

In view of the decision of the Supreme Court in Maruti Suzuki it is clear that a notice cannot be issued to a person that does not exist and such a defect is not a curable defect as per the provisions of Section 292BB of the Act when the AO had knowledge that the noticee had ceased to exist due to amalgamation and has issued notice under Section 148 highlighting the same.(Writ Petition No. 2742 of 2019 decided on 10.8.2021)(AY: 2012-2013)

Alok Knit Exports Ltd. v. Dy. CIT [2022] 446 ITR 748 (Bom)(HC)

219. S. 148: Notice issued under Section 148 is valid if assessee has failed to fully and truly disclose material facts necessary for assessment (S. 147)

If the assessee fails to fully and truly disclose material facts, the factum of producing account books and other documents before the AO simplicitor would not amount to full and true disclosure. In view of fresh information received from the investigation wing it cannot be said that the assessee has made a full and true disclosure during assessment proceedings nor can it be said review is taking place when no ‘opinion’ has been formed in the first place. (Writ Tax No. 48 of 2022 decided on 11.4.2022)

(AY: 2013-2014)

Ambuj Foods Pvt. Ltd. v. Pr. CIT [2022] 446 ITR 294 (All)(HC)

220. S. 148: Reopening of assessment – No change of opinion if matter not examined during assessment proceedings – No need to examine suppression of material facts at the writ stage – there is prima facie information with the AO that income chargeable to tax has escaped assessment. [Section 147 of the Income Tax Act, 1961]

The AO had not formed any opinion about payments made to the assessee in the form of reimbursement of expenses during the assessment proceedings. Hence there is no change of opinion. The AO had prima facie reason to believe income chargeable to tax has escaped assessment and whether or not there was failure to disclose cannot be examined before the high court in writ jurisdiction.(Writ Tax No. 41 of 2022 decided on 18.4.2022)

Distributors India (South) v. UOI [2022] 446 ITR 163 (All)(HC)

221. S.148: Reopening of assessments – Where income is alleged to have escaped assessment in absence of jurisdictional infirmity matter to be adjudicated by AO.

It is for the assessee to produce books of account, documents and other evidence before the AO for him to adjudicate whether income has escaped assessment and no interference is called for when there is no jurisdictional infirmity in the reopening notice.(W.P. Nos. 5597, 5609 of 2022, W.M.P. Nos. 5695, 5699, 5701 and 5702 of 2022 decided on 16.3.2022)(AY: 2013-2014;2015-2016)

Bengal Tiger Line (India) Pvt. Ltd. v. Dy. CIT [2022] 446 ITR 331 (Mad)(HC)

222. S. 150 : Assessment – Order on appeal – Reassessment – Deemed dividend – Addition deleted – Finding – Direction – Left open for the Assessing Officer in the hands of shareholders – Order cannot be construed as direction [S. 147, 148, 153, Art. 226]

Commissioner (Appeals) passed an order deleting addition of deemed dividends and left it open for Assessing Officer to make assessment of such deemed dividend in hands of petitioner shareholders of assessee-company. The Assessing Officer issued notice under section 150 of the Act on the ground that the order of CIT(A) contained the direction as contemplated u/s 150 of the Act. On writ allowing the petition the Court held that the said order could not be said to have issued any directions as contemplated under section 150 of the Act. Court als0 observed that the finding in order of Commissioner (Appeals) was recorded without granting petitioners an opportunity of being heard, accordingly the reopening notices issued on basis of said order by invoking provisions of section 150 were quashed. (AY. 2010-11)

Dinar Tarcar v. ACIT (2022) 286 Taxman 638/ 213 DTR 57/ 326 CTR 310 (Bom.)(HC)

223. S. 153C: Assessment – Income of any other person – Search – Violation of principle of natural justice – Responded to notice – Order was set aside [S.132, 142(1), Art. 226]

A notice under section 153C was issued calling upon assessee to submit return in accordance with section 140 within one day .On very next day notice under section 142(1) had been issued calling upon assessee to respond within two days. Assessee, notwithstanding short time, responded by way of a trail mail, however order under section 153C had been made by saying that assessee had not responded to section 142(1) notice of the Act. On writ allowing the petition the Court held that section 142(1) notice and response to same is so integral a part of assessment that it cannot be given a go-by and violation of same certainly qualifies as violation of principle of natural justice. Further since impugned orders proceeded with assessment saying that assessee had not responded though assessee had responded notwithstanding short time given for responding, there was violation of principle of natural justice and, therefore the order was set aside. (AY. 2017-18, 2018-19, 2019 -20) (SJ)

PCIT v. PraveenKumar Pathi (2022) 286 Taxman 458 (Mad)(HC)

224. S. 194A: Deduction at source – Interest other than interest on securities – Compensation awarded by Motor Accident Claims Tribunal (MACT) – Compensation exceeded 50 thousand – Tax deducted and deposited – MACT could not have directed Insurance Company to pay said amount yet again for its payment to claimants. [S.194A (ix), Art, 226]

Held that where interest component on compensation awarded by Motor Accident Claims Tribunal (MACT) exceeded Rs. 50 thousand and, Insurance Company deducted TDS and deposited same with Central Government, it had carried out mandate of clause (ix) of section 194A and had not committed any illegality, thus, MACT could not have directed Insurance Company to pay said amount yet again for its payment to claimants.

Bajaj Allianz General Insurance Co. Ltd. v. M.A.C.T. Kathua (2022) 286 Taxman 98 (J & K and Ladakh)(HC)

225. S.194IC: Deduction at source – Payment under specified agreement Compensation received on Acquisition of Land for Public Project under an agreement – Award – Assessee not specific person under Section 46 – Compensation received not liable to Deduction of tax at source

– Deductor to file correction statement of Tax Deducted – Department to process statement

– Tax Deducted at source to be refunded [S. 139, 194L, 199, 200(3), 200A(d), 237, Rule 37BA(3)(i),

Right to Fair Compensation and Transparency in land Acquisition, Rehabilitation and Resettlement Act, 2013 S. 46, 96, Art. 226]

NHRCL acquired the land of the assessee purportedly under an agreement and deducted tax at source from the compensation paid. Thereafter, a supplementary deed was entered into between the assessee and the NHRCL under which some additional amount was paid to the assessee and tax was deducted from that part of the compensation also. The assessee requested NHRCL to reverse the

tax deducted on the ground that no tax was deductible. NHRCL replied that exemption from tax was not applicable to the compensation on the land acquired from the assessee and that the tax deducted from the payment made to the assessee was duly deposited with the Department. According to the assessee her income was exempted from tax and she could not fill Schedule TDS-2 and hence could not make an application under section 199 of the 1961 Act read with rule 37BA(3)(i) of the Income-tax Rules, 1962 whereas according to NHRCL the assessee had to file a return and claim refund. On a writ allowing the petition the Court held that the income received by the assessee on account of the property acquired by NHRCL by private negotiations and sale deed was exempted from tax. According to the public notice issued for acquisition of land through direct purchase and private negotiations by the office of the Sub-Divisional Officer for implementing the project, while purchasing the land directly for the project the compensation would be fixed by giving 25 per cent. Enhanced amount of the total compensation being calculated for the land concerned in terms of the provisions of sections 26 to 33 and Schedule I to the 2013 Act. Undisputedly, the land was acquired for a public project. A policy decision had been taken by the State Government under its Government Resolution dated May 12, 2015 for acquiring the property by private negotiations and purchases for implementation of public project. The methodology was also provided. The computation of compensation had to be under the provisions of the 2013 Act which was introduced to expedite the acquisition for the implementation of the project. If the parties would not agree with the negotiations and direct purchase, then compulsory acquisition under the provisions of the 2013 Act had to be resorted to. The 2013 Act also recognised the acquisition through an agreement. NHRCL was not a specified person within the meaning of section 46 of the 2013 Act and the provisions of the section would not be attracted. Therefore, since the exemption under section 96 of the

2013 Act would apply and no tax can be levied on the amount of compensation NHRCL should not have deducted tax from the amount of compensation paid to the assessee. Balakrishnan v. UOI (2017) 391 ITR 178 (SC) and VIswanathan M. v. CCIT WP (C) No. 3227 of 2020, dated 18- 2-2020 relied on. Court also held that it was not possible for the court to arrive at a conclusion as to whether the assessee was required to file return or not. NHRCL had already deducted tax which it ought not to have been deducted. Therefore, (i) NHRCL should file a correction statement as provided under the proviso to sub-section (3) of section 200 of the 1961 Act to the effect that the tax deducted by it was not liable to be deducted, (ii) the Department shall process the statement including the correction statement that might be filed under section 200A more particularly clause (d) thereof and (iii) the parties should thereafter take steps for refund of the amount in accordance with the provisions of the 1961 Act and the 1962 Rules. Circular No. 36 of 2016, dated October 25, 2016 (2016) 388 ITR (St.) 48)

Seema Jagdish Patil v. National Hi-Speed Rail Corporation Ltd. (2022)445 ITR 382 (Bom)(HC)

226. S. 195 : Deduction at source – Non-resident – Foreign companies – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent- DTAA [S.115JA, 166, 195(2), 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act, directing payer company, Google Cloud India Pvt Ltd (GCI) to deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent . Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022 -23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

227. S. 195 : Deduction at source – Non-resident – Foreign companies  – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent-DTAA [S.115JA, 166, 195(2), Art. 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act, directing payer company, Google Cloud India Pvt Ltd (GCI) to

deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent. Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022-23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

228. S. 195 : Deduction at source – Non-resident – Foreign companies – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent- DTAA [S.115JA, 166, 195(2), 197, 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act , directing payer company, Google Cloud India Pvt Ltd (GCI) to deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent. Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022-23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

229. S. 197 : Deduction at source – Certificate for lower rate – Dividend – Rate of tax – Dividend received by a Switzerland based company from Indian company- Lower withholding tax rate of 5 per cent instead of 10 per cent in view of MFN clause – DTAA -India-Switzerland. [S. 9(1)(iv), Art. 10, Art. 226]

Assessee filed an application under section 197 before Assessing Officer seeking to issue a certificate authorising assessee to receive dividend income from an Indian company subject to lower withholding tax rate of 5 per cent as applicable under India-Switzerland DTAA read with protocol and Most Favoured Nation (‘MFN’) clause. Application was rejected and directed to deduct tax at rate of 10 percent. On writ the Court held that the dividend received by a Switzerland based

company from Indian company will bear a lower withholding tax rate of 5 per cent instead of 10 per cent in view of MFN clause and DTAA between India and Switzerland and therefore, certificate prescribing rate of 10 per cent was to be set aside and a certificate under section 197 would be issued in favour of assessee indicating rate of tax on dividend as applicable upon assessee at 5 per cent.

Cotecna Inspection SA v. ITO (2022) 286 Taxman 342 (Delhi)(HC)

230. S. 201: Deduction at source – Failure to deduct or pay – Limitation – Order is barred by limitation – limitation of two years as prescribed in section 201(3), as it existed prior to its substitution by Finance Act, 2013 with effect from 1-10-2014, would [S.200, 201(3), 201(IA)]

Assessing Officer for assessment year 2009-10 initiated proceedings under section 201 and issued a notice dated 8-2-2016 to assessee for delay to deduct tax at source. Assessee objected to proceedings on ground that limitation for passing an order under section 201(1) and section 201(1A) would be two years from end of relevant financial year. The Assessing Officer rejected contention and held that section 201(3) was substituted by Finance Act, 2013 with effect from 1-10-2014 and, therefore, limitation of seven years from end of relevant financial year was applicable. Commissioner (Appeals) held that limitation prescribed under section 201(3), as it existed prior to amendment vide Finance Act, 2013, would apply hence barred by limitation. Tribunal affirmed the order of CIT (A). On appeal the High Court affirmed the and held that order passed under section 201 dated 30-3-2016 was barred by limitation. (AY. 2009-10)

ACIT v. ACER India (P)(Ltd (2022) 286 Taxman 570/ 215 DTR 35 (Karn)(HC)

231. S. 220(6) : Stay of Demand – Assessee not liable to deposit monies pursuant to assessment order when there is a failure to follow the principles of natural justice.

In view of the decision of the Supreme Court in LG Electronics, the CIT(A) being a quasi judicial authority, an amount lesser than 20% can also be demanded and there is no obligation to deposit an amount as per CBDT Circular dated 31.7.2017 i.e 20%. Failure to observe principles of natural justice would result in remand to the authority which has decided the stay application.(W.P. No. 13926 of 2022 decided on 22.4.2022)(AY: 2017-2018)

APR Jewellers Pvt. Ltd. v. CIT [2022] 446 ITR 275 (Telangana) (HC)

232. S. 245D : Settlement Commission – Settlement of cases – Procedure

– Application – Court in writ jurisdiction cannot scrutinize or re appreciate facts, evidence or findings of Settlement Commission in reaching to its conclusion for allowing claim in settlement application. [S. 245D(1), Art. 226]

The assessee-company, filed a settlement application relating to assessment year 2012-13 before the Settlement Commission for settlement of its income tax matters by disclosing certain income. The application was proceeded with under section 245 D(1) of the Act . The Settlement Commission called for a report under rule 9 of the Income-tax Settlement Commission (Procedure) Rules, 1997 from the Principal Commissioner. In the said report, the Commissioner/petitioner objected to the settlement of the case of assessee alleging that the assessee had not made true and correct

disclosure of its undisclosed income before the Settlement Commission. The petitioner also alleged that the assessee was compelled to disclose its undisclosed income arising out of unrecorded business transactions only when the existence of the same was brought to light by the survey operation and alleged that had the survey not been conducted and the documents not seized, the assessee would not have disclosed any unaccounted income voluntarily. The Settlement Commission allowed the application of assessee, holding that once the documents had been impounded in the course of survey, contents of the documents would be presumed to be true as per provisions of section 292C and once the applicant had disclosed the profit/income as per notings on those documents, any further probe or query in the matter would serve no purpose. The Revenue filed writ petition . Dismissing the petition the Court held that the petitioner could not make out any exceptional case in this writ petition for exercising constitutional writ jurisdiction of this Court under article 226 for scrutinizing or reappreciating the facts, evidence or findings of the Settlement Commission in reaching to its conclusion of allowing the claim of the assessee made in settlement application and further the Court in exercise of its constitutional jurisdiction under article 226 cannot substitute the findings of the Settlement Commission with its own findings and come to a different conclusion. The Court also observed that the petitioner could not demonstrate before the Court any legal infirmity in decision making process in course of impugned income tax settlement proceeding. Writ petition was dismissed. (W.P.O. 289 of 2017 dt. 14-9 -2021)(SJ)

PCIT v. Settlement Commission (2022) 286 Taxman 129 (Cal)(HC)

233. S. 246A : Appeal – Commissioner (Appeals) – Appealable orders – Pre-deposit – For entertaining an appeal it is not mandatory for pre deposit of tax in dispute [S. 144, 144B,220(6), 246A, Art. 226]

The petitioner filed writ against the order passed u/s 144 of the Act. High Court held that for filing an appeal before CIT (A) it is not mandatory to pre-deposit of 20% of tax in dispute. The Court also held that it is open to Assessing Authority to make a demand and the petitioner need not construe that such insisting of demand is a pre-deposit required for entertaining appeal under section 246A of the Act . The writ was dismissed.

K 553 v. Thutharipalayam Primary Agricultural Co-operative Credit Society Ltd. v. CIT (2022) 286 Taxman 677 (Mad)(HC)

234. S. 260A: Appeal – High Court – Not discussed on merits – Order of High Court set aside-Matter remanded. [Benami Property Transaction Act, 1988, S. 49]

High Court except reproduction of observations made by Tribunal, there was no further independent reasoning given by High Court and nothing had been further discussed on merits and even substantial question of law had also not been framed, order of High Court under section 260A was to be quashed and set aside and matter was to be remitted to High Court for adjudication afresh.

CIT v. State Bank of Bikaner and Jaipur (2022) 286 Taxman 569 (SC)

235. S.260A: Appeal to High Court – Expenditure incurred towards – ISO certificate revenue in nature – Subsidy received towards administrative expenses capital in nature [r.w.s. 37, 43)

Expenses towards ISO certificate is revenue in nature and receipt of subsidy towards administrative expenses incurred for developing infrastructure facilities is capital in nature. (R/Tax Appeal No. 130 of 2022 decided on 24.1.2022)(AY: 2010-2011)

CIT (Exemptions) v. Narmada Clean Tech Ltd. [2022] 446 ITR 366 (Guj)(HC)

236. S.260A : Appeal to High Court – In absence of evidence that the assessee is the owner of the wind mills no disallowance can be made towards business [S.37]

Where there was no evidence to show that the assessee was the owner of the wind mills such that amounts were received by the assessee and the same amounts were paid towards electricity charges; any amount paid by the assessee was only towards consumption charges for electricity supplied to it and was allowable as business expenditure.(T.C.A. Nos. 695 of 2009 and 1100 to 1103 of 2010 decided on 9.6.2022)(AY’s:2000- 2001; 2001-2002; 2002-2003; 2003-2004)

CIT v. Tube Investments Of India Ltd. [2022] 446 ITR 676 (Mad)(HC)

237. S. 260A: Appeal to High Court – Matter to be remanded to AO to see whether ILFS is public financial institution and then only will Section 43B be applicable. [S. 43B]

The AO has to examine whether ILFS is a public financial institution and hit by Section 43B(d) when interest payments made to ILFS would not be allowed as a deduction since it is not actually paid.(T.C.A. Nos. 1406 of 2008, 1382, 1383 of 2009, 87, 483 of 2011, 619 of 2014, 928, 929 and 941 of 2015 decided on 15.2.2022)(AY:2003-2004; 2004-2005; 2005-2006; 2006-2007; 2007-2008;2008- 2009; 2009-2010; 2010-2011; 2011-2012)

CIT v. Tamil Nadu Water Investment Co. Ltd. [2022] 446 ITR 546 (Mad)(HC)

238. S. 263: Commissioner – Revision of orders prejudicial to revenue – Share application money – Revision order is held to be valid [S. 68, 69]

Dismissing the appeal the Court held that Revision order passed by the CIT setting aside assessment order with a direction for requisite inquiries doubting said share capital raised with such high premium. Referred Pragati Financial Management (P.) Ltd. v. CIT (2017) 394 ITR 27 (Cal)(HC) and held that even under non-amended provisions of section 68 prior to insertion of proviso to section 68, which was added by Finance Act, 2012, providing for enquiry of sum credited by assessee, an Income- tax Officer was not precluded from making an inquiry as to true nature and source of sum found credited in books even if same was credited as receipt of share application money . (AY. 2009-10)

Neelkantha Commosales (P.) Ltd. v. ITO (2022) 286 Taxman 48 (Cal)(HC)

239. S. 263: Commissioner – Revision of orders prejudicial to revenue Deemed dividend – Loans and advances to shareholders – Unsecured loan from Group Company – Paid back with interest in same year – Revision is held to be not [S. 263]

Assessee received unsecured loan from its group companies during relevant assessment year. The assessment was completed u/s 143(3) of the Act. Commissioner set aside assessment order by invoking section 263 on ground that section 2(22)(e) would be applicable on loan received by assessee as same were deemed dividend and directed Assessing Officer to re-compute assessee’s income. Tribunal set aside the order on the ground that the assessee paid off loan with interest in same year itself. Furthermore,

details of shareholders holding more than 10 per cent shares were provided by assessee- company during assessment proceedings and Assessing Officer after taking into consideration all relevant documents held that section 2(22) (e) would not be applicable in case of assessee. On appeal High Court affirmed the order of Tribunal. (AY. 2012-13)

PCIT v. Suprabha Industries Ltd. (2022 286 Taxman 156 / 211 DTR 157/ 325 CTR 757 (Cal)(HC)

240. S. 264: Commissioner – Revision of other orders – Powers – Capital gains – Full value of consideration – Escrow account – Consideration received less than the amount credited in the account – Only actual consideration taxable – Power of Principal Commissioner not restricted to allowing relief only up to returned income – Re computation results in income less than returned income – Section 240 not applicable – Entitle to refund of excess tax paid [S.45, 48, 240, 264, Art. 226]

The assessee computed the capital gains on sale of shares taking into account the proportion of the total consideration which included the escrow amount which had not been received by the time returns were filed but were received by the promoters but were still parked in the escrow account. The income declared by the assessee was accepted in the scrutiny assessment. The assessee stated that subsequent to the sale of the shares certain statutory and other liabilities arose for the period prior to the sale of the shares and according to the agreement, certain amount was withdrawn from the escrow account and it did not receive the amount. The assessee filed an application under section 264 before

the Principal Commissioner and submitted that the capital gains were to be recomputed accordingly reducing the proportionate amount from the amount deducted from the escrow account and that an application under section 264 was filed since the assessment had been completed by the time the amount was deducted from the escrow account. The Principal Commissioner rejected the assessee’s application. On writ allowing the petition the Court held that that capital gains was computed under section 48 of the Act by reducing from the full value of consideration received or accrued as a result of transfer of capital asset, cost of acquisition, cost of improvement and cost of transfer. The real income (capital gains) could be computed only by taking into account the real sale consideration, i. e., sale consideration after reducing the amount withdrawn from the escrow account. The amount was neither received nor accrued since it was transferred directly to the escrow account and was withdrawn from the escrow account. When the amount had not been received or accrued it could not be taken as full value of consideration in computing the capital gains from the transfer of the shares of the assessee. The purchase price as defined in the agreement was not an absolute amount as it was subject to certain liabilities which might have arisen on account of certain subsequent events. The full value of consideration for computing capital gains would be the amount which was ultimately received after the adjustments on account of the liabilities from the escrow account as mentioned in the agreement. The liability as contemplated in the agreement should be taken into account to determine the full value of consideration. Therefore, if the sale consideration specified in the agreement was along with certain liability, then the full value of consideration for the purpose of computing capital gains under section 48 of the Act was the consideration specified in the agreement as reduced by the liability. The full value of consideration under section 48 would be the amount arrived at

after reducing the liabilities from the purchase price mentioned in the agreement. Even if the contingent liability was to be regarded as a subsequent event, it ought to be taken into consideration in determining the capital gains chargeable under section 45. Such reduced amount should be taken as the full value of consideration for computing the capital gains under section 48. If income did not result at all, there could not be a tax, even though in book keeping, an entry was made about hypothetical income which did not materialize. Therefore, the Principal Commissioner ought to have directed the Assessing Officer to recompute the assessee’s income irrespective of whether the computation would result in income being less than the returned income. CIT v. Shoorji Vallabhdas and co. (1962) 46 ITR 144 (SC), relied. Court also held that reliance by the Principal Commissioner on the provisions of section 240 to hold that he had no power to reduce the returned income was erroneous because the circumstances provided in the proviso to section 240 did not exist. The proviso to section 240 only provides that in case of annulment of assessment, refund of tax paid by the assessee according to the return of income could not be granted to the assessee. The only thing that was sacrosanct was that an assessee was liable to pay only such amount which was legally due under the Act and nothing more. Therefore, the assessee was entitled to refund of excess tax paid on the excess capital gains.

Section 264 of the Income-tax Act, 1961 does not restrict the scope of powers of the Principal Commissioner to restrict relief to an assessee only to the returned income. Where the income can be said not to have resulted at all, there is neither accrual nor receipt of income even though an entry might, in certain circumstances, have been made in the books of account.

It is the obligation of the Department to tax an assessee on the income chargeable to tax under the Act but if higher income is offered to tax, it is the duty of the Department to compute the correct income and grant the refund of taxes erroneously paid by the assessee. There is no provision in the Act which provides, if the assessed income is less than the returned income, the refund of the excess tax paid by the assessee would not be granted to the assessee. If the returned income shows a higher tax liability than what is actually chargeable under the Act, then the assessee is entitled to refund of excess tax paid by it. (AY.2011-12)

Dinesh Vazirani v. PCIT (2022) 445 ITR 110 (Bom) (HC)

241. S. 271(1)(c) : Penalty – Concealment – Cash credits – Recoding of satisfaction – Show cause notice did not indicate whether there was concealment of particulars of income or furnishing of incorrect particulars of such income – Deletion of penalty is held to be valid [S. 274]

Allowing the appeal the Court held that where show cause notice did not indicate whether there was concealment of particulars of income or furnishing of incorrect particulars of such income the levy of penalty is not valid. Followed Mohd. Farhan A. Shaikh v. Dy. CIT (2021) 434 ITR 1/ 280 Taxman 334 (Bom)(HC).(FB)

Ganga Iron & Steel Trading Co. v. CIT (2022) 286 Taxman 21 (Bom)(HC)

Research Team

  1. S. 36(1)(va) : Contribution collected towards employees PF – deposited in recognised account after the statutory due date, the taxpayer permanently forfeits the deduction for the same. (r.w.s.2 (24)(x) and 43B)

    Here in this case the issue before the Supreme Court was with respect to the interpretation of s. 36(1)(va) and s.43B. Whether deposit of employee’s contribution towards the EPF and ESI after the expiry of the due date under the relevant acts eligible for the deduction.

    The honourable Supreme Court while settling issue observed that, Parliament treated contributions under section 36(1) (va) differently from those under section 36(1)(iv). The latter is described as “sum paid by the assessee as an employer by way of contribution towards a recognized provident fund” and “any sum received by the assessee from any of his employees to which the provisions of section 2(24)(x) apply if such sum is credited by the employer to the employee’s account in the relevant fund or funds on or before the due date.”

    The essential character of an employee’s contribution, i.e., that it is part of the employee’s income, held in trust by the employer is underlined by the condition that it has to be deposited on or before the due date. Since there is a marked distinction between the nature and character of the two amounts – the employer ‘s liability is to be paid out of its income whereas the second is deemed an income, this marked distinction has to be borne while interpreting the obligation of every employer under Section 43B. Accordingly, the benefit of section 43B cannot be made available for the employee’s contribution deposited before the filing of the Income-tax Return.

    Checkmate Services P. Ltd. vs. CIT (Civil Appeal No. 2833 of 2016 dt.12/10/2022, (2022) 448 ITR 518 (SC)

  2. S. 36(1)(vii) :Bad debt – existence of a bad-debt and being written-off as irrecoverable – necessary to claim deduction- Explanation-1- bad-debt shall not include provision for bad and doubtful debt – S. 28(i), 36(2), 37(1)

    Amount paid by Assessee, carrying on business of real estate development, to a builder for acquiring certain commercial premises were written-off as bad debt by its Board of Directors, after 2 years, in the present AY 2009-10 and claimed it as deduction u/s 36(1)(vii).

    The Court analysed the provisions of the S. 36 along with the insertion of Explanation-1 under S. 36(1)(vii) effective from 1.4.1989 and observed that in the present case, the Assessee was not able to satisfy the prescribed conditions that the money advanced was given in its ordinary course of business, that it was in fact a loan given to a builder, or that such bad-debt was written-off as irrecoverable in their books of accounts. Further the court observed that the money advanced to the builder was for acquiring immovable property i.e. capital expenditure and therefore it could not be treated as a business expenditure. Therefore, the Assessee’s claim for deduction u/s 36(1)(vii) of Rs. 10 crores as bad and doubtful debts was not allowed by the Court. Court also held that on the facts of the case the advance written off is not allowable as business expenditure u/s 37(1) of the Act. Southern Technologies vs. JCIT [(2010) 2 SCR 380] relied. (CA No. 5804/ 2022; Date- 25.08.2022) (AY 2009-10)

    PCIT vs. Khyati Realtors Pvt. Ltd. ( 2022 ) 447 ITR 0167 (SC)

  3. S. 245D : Settlement Commission
    • order passed by Settlement Commission without following due procedure- quashed by High Court – irrespective of its compliance made by Assessee
    • upheld by Supreme Court- matter remitted for fresh decision.

      The Supreme Court upheld the order of the Allahabad High Court quashing the order of the Settlement Commission, which was passed without following the due procedure of law, thereby granting immunity to the Assessee from prosecution and penalty under the Act and directing payment of tax along with interest, even though the order of Settlement Commission was complied with by the Assessee. The Allahabad High Court followed the principle that wrong order should not be perpetuated by keeping it alive. However, the matter has been remitted by the Supreme Court to the Interim Board constituted under

      S. 245AA in place of Settlement Commission, as in its opinion the matter requires fresh decision. (CA No.   /2022 arising out of SLP(C) No. 786 of 2016; CA No.   /2022 arising out of SLP(C) No. 3783 OF 2016; CA No.   /2022 arising out of SLP(C) No. 769 OF 2016; Date- 29.08.2022)

      Nand Lal Srivastava & Ors. vs. CIT & Ors. (2022) 447 ITR 0 769 (SC)

  4. S. 260A: Appeal – High Court
    • territorial jurisdiction of a High Court- dependent upon sites of the AO who passed the assessment order- irrespective of transfer of cases u/s 127

      The question before the Supreme Court was with respect to the appellate jurisdiction of High Courts u/s 260A of the Act and whether jurisdiction of a High Court would also change following an order of transfer of ‘cases’ under S. 127.

      The Supreme Court observed that S. 260A of the Act is open textual and does not specify the High Court before which an appeal u/s 260A of the Act would lie. The Supreme Court held that the present issues are covered by the decision of Delhi High Court in case of Seth Banarsi Dass Gupta vs. CIT wherein it was held that the “most appropriate” High Court for filing an appeal would be the one where the Assessing Officer is located. This decision has been followed in various subsequent decisions by various courts.

      It further observed that the power of transfer exercisable under S. 127 is relatable only to the jurisdiction of the Income Tax Authorities under S. 116 not on the ITAT and a High Court. Otherwise, it would imply that the executive has the power to determine the jurisdiction of a High Court, which can never be the intention of the Parliament.

      The Supreme Court therefore concluded that even if the case or cases of an Assessee are transferred in exercise of power under S. 127 of the Act, the High Court within whose jurisdiction the Assessing Officer has passed the original order, shall continue to exercise the jurisdiction of appeal, which is applicable even if the transfer is under S. 127 for the same assessment year(s). Banarsi Dass Gupta v. Commissioner of Income Tax, (1978) 113 ITR 817 (Del) relied. [CA No. 4252/ 2022 & CA No. 4253 OF 2022 with CA No. 3480 OF 2022; Date: 18.08.2022] (AY 2008-09).

      Principal Commissioner of Income Tax vs. ABC Papers Ltd. [2022] 447 ITR 1 (SC)

  5. S.2(9)(a) of Benami Transactions ( Prohibition) Act, 1988: – No procedure for declaring property Benami under Act of 1988 — Amendment Act not made retrospective — Prosecution in respect of a transaction In 2011 is held to be not valid [Benami Transactions (Prohibition) Act, 1988- 3 , 5 , 8; General Clauses Act, 1897- S.6 (c)]

    The Supreme Court has held that the amendments carried out by the Benami Transaction (Prohibition) Amendment Act of 2016 (“Amendment Act of 2016”) in Benami Transactions (Prohibition) Act, 1988 (“Benami Act”) are prospective. The primary issue in the present petition was whether the Amendment Act of 2016 shall have effect to cover transactions entered prior to 2016. The Amendment Act of 2016 sought to rectify the lacunae in the Benami Act through significant amendments. The Amendment Act of 2016 substituted and widened the definition of ‘ benami property’, ‘ benami transaction’ etc. as well as increased the punishment duration from 3 years to 7 years. The Calcutta High Court quashed the proceedings on the ground that provisions of the Amendment Act of 2016 were applicable prospectively and especially those pertaining to criminal proceedings. The Supreme Court held that the vagueness in the charging section i.e.

    S. 3 of Benami Act made it unconstitutional for being manifestly arbitrary and also S. 3(2) of the Amendment Act of 2016 was by also unconstitutional as it was violative of Article 20(1) of the Constitution of India, which requires that criminal punishment / liability cannot be imposed retrospectively. Thus, S. 5 of the Benami Act was declared unconstitutional for being manifestly arbitrary. Or a ‘half-baked provision’. (CA No. 5783 of 2022 from SLP (C ) 2784/2020; Date 23.08.2022)

    Union of India & Anr. vs. Ganpati Dealcom Pvt. Ltd. ( 2022 ) 447 ITR 0108 (SC)

Dear Professional Colleagues, Greetings.

46th Foundation day celebration a unique and a memorable events in the history of the A.I.F.T.P.

Hope everyone is doing great in their professional assignments. Winter has just arrived. There is large drop in temperature in some parts of the country. Stay safe and healthy.

We are still in hangover of the Dwarka National Tax Conference, Darshan of Lord Krishna that we all had enjoyed together. I must say that Dwarka had a special memory in the mind of each one who attended and had the privilege to visit Somnath Temple along with Blue Beach at Dwarka. We also had a very good one day conference on 15-10-22 at Ludhiana (Northern Zone).

I am honoured to share one important information that, we have been able to reach more than 7500 members of the Federation through WhatsApp on the eve of celebration of Foundation Day of AIFTP.

We are pleased to inform that on the occasion of the 46th Foundation Day, we have hoisted the A.I.F.T.P. Flag at Head office (Mumbai) on 11th November, 2022 in Morning in the presence of Past Presidents S/Shri P. C. Joshi, Dr. K. Shivaram, J. D. Nankani and Smt. Nikita Badheka, Zone Chairman Mr. Mitish Modi along with Office Bearers and committee Members of Western Zone. In the evening of 11th day of November Flag of AIFTP was hoisted at Chandigarh in the Presence of Our own Hon’ble Mr. Justice Rajesh Bindal, Chief Justice, Allahabad High Court wherein Past President Smt. Prem Lata Bansal was facilitated.

I am happy to share my feelings of happiness, thanks & gratitude to all my Past Presidents, NEC Members, Zone Chairmen, Vice Presidents, Joint Secretaries & all the Office Bearers of all Zones on the eve of 46th Foundation Day Celebrations Fortnight that all have come forward to celebrate 46th Foundation Day of AIFTP at maximum places throughout the country.

It gives me immense pleasure to inform you all that the Foundation Day is being celebrated all over the country and flag of the Federation was hoisted in over fifty places. This was indeed a special day when the entire AIFTP Family had a chance to reflect not only the beginnings of the Federation and its founders, but also on the significant development since the Federation’s inception. We had celebrated our history and revisited and reconnected with the continuing journey of the Federation. We celebrated the joy of learning as we developed in mind, body and spirit, and we celebrated the bond that we share with past and present members of the AIFTP Family. The day was the completion of 46 years of establishment of AIFTP. The seed of the Federation sowed in 1976 has culminated into a big banyan tree now. I am filled with gratitude when I look upon the tremendous hard work and dedication by all the past office bearers who ensured that while growing and spreading the wings of Federation to each and every part of India, the bond of fraternity remained strong and the Federation continued to achieve its noble goal of educating the members and the public at large.

On the occasion of 46th Foundation Day Fortnight Celebrations alongwith Flag Hoisting of the A.I.F.T.P. at various places across the Country

On 11-11-22, Flag Hoisting at Mumbai (HO), Distribution of AIFTP’s Flag, Food, Sweets and Fruits at Old Age Home at Thanjavur (SZ), Flag Hoisting at Cuttack (EZ), One Day Conference at Cuttack (EZ), Flag Hoisting at Bhavnagar (WZ), Half Day Lecture Meeting at Bhavnagar (WZ), Flag Hoisting at Bharuch (WZ), Flag Hoisting at Vadodara (WZ), Flag Hoisting at Halol (WZ), Cutting of Cake and Enlightening the members about AIFTP at Rourkela (EZ), Distribution of Sweets, Biscuits, School Stationaries, Clothes to Financially Challenged peoples and school Children at Rajahmundry (SZ), Flag Hoisting at Tirupati (SZ), Flag Hoisting at Vijayawada (SZ), Flag Hoisting at Visakhapatnam (SZ), Flag Hoisting and Distribution of daily essentials to 100 students of Orphanage at Kakinada (SZ), Flag Hoisting at Chandigarh (NZ) were done.

On 12-11-22, One Day Conference at Chandigarh (NZ), Flag Hoisting at Vizianagaram (SZ), Flag Hoisting at Ranchi (EZ), One Day Conference at Ranchi (EZ), Flag Hoisting at Tirupur (SZ), Workshop on Taxation at Tirupur (SZ), Distribution of Food Material at Hyderabad (SZ), Flag Hoisting and Cake Cutting at Varanasi (NZ), One Day Conference at Indore (CZ), Flag Hoisting at Pune (WZ), One Day Conference at Pune (WZ) were held.

On 14-11-22, Flag Hoisting at Anand (WZ), Flag Hoisting at Surat (WZ), Flag Hoisting at Junagadh (WZ); On 15-11-22, Flag Hoisting at Vadodara (WZ); On 16-11-22, Flag Hoisting at Perinthalmanna (SZ), Orientation / Awareness Seminar for College Students at Perinthalmanna (SZ) and One Day Seminar at Visakhapatnam (SZ); On 17-11-22, Flag Hoisting at Nagpur (WZ), Blood Donation, Eye Check Up Camp & Free Distribution of Spectacles and Special Guidance Meeting, Flag Hoisting and Footage of AIFTP to Members was discussed at Bangalore (SZ) and Service Utility to School Childrens at Khammam (SZ) were organized.

On 19-11-22, Flag Hoisting at Raxual (EZ), One Day Seminar at Raxual (EZ); On 23-11-22, Flag Hoisting at Ghaziabad (NZ), Health, Eye & Dental Check Up Camp at Ghaziabad (NZ), Half Day Tax Conference at Ghaziabad (NZ) and Finally On 26-11-22, Flag Hoisting at Varanasi (NZ) and One Day Conference (Closing Foundation Day Fortnight) at Varanasi (NZ) has been scheduled.

I would like to convey on heartiest Congratulations to Cuttack (Eastern Zone) Ranchi (Eastern Zone), Indore (Central Zone), Pune (Western Zone), Tirupur (Southern Zone) and Chandigarh (Northern Zone) for organizing One Conference on 11-11-22 and Five One Day Tax Conference in Five Zones simultaneously on 12-11-22 and Presence of the National Team Office Bearers made the Conference Glittery.

CUTTACK organised by Shri Natabar Panda, Vice Chairman, AIFTP (Odisha) (EZ) and had blessed with the presence on Hon’ble Mr. Justice Laxmikanta Mohapatra, Former Chief Justice, High Court of Manipur.

RANCHI Adorned by Smt. Jamuna Shukla, Secretary General & Shri Vijay Kewalramani, National Treasurer.

INDORE Adorned by Shri Pankaj Ghiya, Deputy President.

PUNE Adorned by Past President Smt. Nikita Badheka.

TIRUPUR organized by Shri G. Bhaskar, Vice Chairman, AIFTP (SZ) and Adorned by Immediate Past Secretary General Shri S. S. Satyanarayana.

CHANDIGARH was privileged to have the National President D. K. Gandhi with the blessings of our Past President Smt. Prem Lata Bansal and she was felicitated by the National President for her services in the presence of Hon’ble Mr. Justice Rajesh Bindal, Chief Justice, Allahabad High Court. Shri Sanjay Sharma, Past SG was also present.

NAGPUR was also privileged to have the National President D. K. Gandhi. Shri Santosh Gupta, National Vice President, Shri Chirag S. Parekh, National Joint Secretary, Shri Mitish Modi, Chairman, Western Zone and other office bearers and NEC members were also present.

And Southern Zone viz. Visakhapatnam, Hyderabad, Kakinada, Vijaywada, Tirupati, Vizianagaram, Rajahmundry, Perinthalmanna, Bangalore & Thanjavur also participated in philanthropy work also while organising Many Programs. At Vijaywada programme was conducted in presence of Dr. M. V. Moorthy, Past President.

It was a show of solidarity and expression of Trust and Confidence in my humble request made to all Federation members to make this 46th Foundation Day Memorable one and was because of all of you and in the same way Many more programs shall come till closing ceremony of the 46th Foundation Day Fortnight Celebrations.

As you are all aware the ensuing 25th National Convention at Jaipur is going to take place which would also be a great successful one as the efforts for achieving great success are underway and it is hoped that more than 800 participants would attend Convention.

Finally, the Federation at the National level would certainly be successful in its endeavors to fulfil the wish and desire of the Tax Professionals to achieve excellence in their Profession and Life. I request all of my esteemed Members to renew their subscription for the Direct Tax Journal & Indirect Tax Journal which is a legal voice of the Federation that would benefit the members at large as in Direct Tax and Indirect Tax updating knowledge improvement of professional standards to compete with other professional counterparts and to satisfy clientele in serving them.

As a service to the fraternity, A.I.F.T.P. is proposing to publish a Panel of Speakers on its website. Therefore, all the members of A.I.F.T.P. are requested to kindly send their mobile number and email ID and topic of their specialization on which they can be invited to be speaker at various tax forums or associations.

We are proud to say that any of the speakers of the A.I.F.T.P. are always available for lectures in seminars or conferences or study circles, etc. across India probono i.e. They do not charge for their travel cost or hotel accommodation cost. Kindly send your details to the following email i.e. [email protected]

I feel grateful to be a part of AIFTP. As the President of organization, on this auspicious Day of AIFTP, I pay my gratitude to the founders of AIFTP, who gave us platform where we all

Members of organization work together with the quest for acquiring the Knowledge and Wisdom to spread Ethics Education and Excellence.

Today is the Day to Recall the true purpose of the AIFTP, so my dear all Fellow Members let us take pledge to work together in the interest of all Members of our organization and helping and promoting them to bring excellence and positive change in their life through their profession.

Once again I wish Long Live AIFTP and I wish as Ethical professionals, every moment of our life is for Noble Cause of imparting education and to bring excellence in our profession. I wish success to each one of you for coming forward to work for the cause of Federation.

Wish you success in life.

D. K. Gandhi

National President, A.I.F.T.P.

Dear Friends,

This festive season we all have witnessed the hussel and bussel in the markets at the pre-pandemic level. It is a welcome sign especially when the major economics of the world are reeling under recession due to several factors. The Ministry of Finance on their portal on 1st November, 2022 reported that the revenue for October, 2022 is second highest monthly collection, next only to the collection in April, 2022 and it is for the second time the gross GST collection has crossed Rs.1.50 Lakh crore mark. October also saw the second highest collection from domestic transactions, next only to April, 2022. This in the ninth month and for eight months in a row now, that the monthly GST revenues have been more than the Rs.1.4 lakh core mark. During the month of September, 2022, 8.3 crore e-way bills were generated, which was significantly higher than 7.7 crore e-way bills generated in August, 2022. This bright picture is eclipsed by the snale’s pace at which the appeals are being disposed of at the first appellate level. It is important to note that till now the Appellate Tribunal under the GST regime has not at been constituted.

Under the Direct taxes also, huge number of appeals are pending before the Commissioner (Appeals) stage. The Government has to take immediate steps to rectify this to provide faster dispute resolution of the tax disputes.

Digressing from the tax matters, I am tempted to quote Stephen Covey from The 7 habits of Highly Effective People “The successful person has the habit of doing the things failures don’t like to do. They don’t like doing them either necessarily. But their disliking is subordinated to the strength of their purpose mission, a clear sense of direction and value, a burning “yes” inside that makes it possible to say “no” to other things. It also requires independent will, the power to do something when you don’t want to do it, to be a function of your values rather than a function of the impulse or desire of any given moment”. The above lines are very relevant for we professionals. I personally feel that they aptly describe we professionals.

In the present issue of the All India Federation of Tax Practitioners – Journal we are digesting the important decisions of Tribunal, High Court and Supreme Court. I thank my research time for their valuable contribution. My special thanks to Ms. Neelam Jadhav, Advocate, for helping me in compiling this issue.

K. Gopal,

Editor