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S.2(1A) : Agricultural income – Growing of plants in nursery is an agricultural activity as this involves all activities of agricultural farming. [Ss. 147, 148]
Dismissing the appeal of revenue, the Court held that growing of plants in nursery is an agricultural activity as this involves all activities of agricultural farming. Revenue contended that assessee did not submit any document with regard to expenditure incurred towards agricultural operations of nursery. Court held that, where revenue had not raised issue of expenditure on income from flowers and petals of nursery during assessment proceedings and even during appeal, it could not be introduced for first time in appeal under section 260A. (AY. 2007-08)
CIT v. K. N. Pannirselvam (2016) 243 Taxman 219 (Mad.)(HC)
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S.2(14) : Capital asset – Agricultural land – Method of measurement – Distance to be measured taking into account access road – Certificates of Revenue and transport authorities relevant – Certificates that land was beyond specified limit. [Ss. 2(14)(iii)(b), 45, General Clauses Act, 1897, S.11]
Dismissing the appeal of the revenue, the Court held that there could not be any justifiable reason to reject the certificates of the Village Administrative Officer, Deputy Surveyor and the General Manager, Metropolitan Transport Corporation. No reason had been given by the AO for the rejection of the certificates. Method of measurement of distance to be measured taking into account access road. The profit from sale of the land was not assessable as capital gains. (AY. 2009-10)
CIT v. Sakunthala Rangarajan (Smt.) (2016) 389 ITR 103/ 74 taxmann.com 94 (Mad)(HC)
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S.2(22)(e) : Deemed dividend – Loan from subsidiaries –Intermediary between the two subsidiaries – Additions cannot be made as deemed dividend
Dismissing the appeal of revenue, the Court held that in view of the decision of the Division Bench of the Madras High Court made in [Tax Case (Appeal) No. 16 of 2010, dated 17-6-2013], wherein the assessee-company received loans from some of its subsidiaries and advanced money to some of the subsidiaries and on the basis of the available particulars it has been held that the assessee-company is only a intermediary between the two subsidiary companies and no beneficial interest has been accrued to it by the advances between the subsidiary companies and subsidiary companies and consequently the ingredients of section 2(22)(e) is not attracted, the instant Bench is of the considered view that the revenue has not shown sufficient cause or reason to interfere with the order passed by the Tribunal confirming the order passed by the Commissioner (Appeals). Accordingly, the appeal was liable to be dismissed. (AY. 2006-07)
CIT v. Farida Holdings (P.) Ltd. (2016) 243 Taxman 428 (Mad.)(HC)
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S.2(22)(e) : Deemed dividend – Not a shareholder – Not liable to be taxed as deemed dividend
Dismissing the appeal of revenue, the Court held that the assessee is not shareholder of company advancing loan, hence not be liable to be taxed on deemed dividend. (AY. 2007-08)
CIT v. Narmina Trade Investment P. Ltd. (2016) 388 ITR 243 (Bom.) (HC)
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S.5 : Scope of total income – Interest on compensation under dispute – Chargeable to tax only upon resolution of dispute by High Court [S.4]
Allowing the appeal, High Court held that only upon receipt of the final order, the assessee became entitled to withdraw even the interest, which had accrued on such compensation amount which was kept as deposit with the bank and the same would then alone be liable to tax.
Shivanna, M. v. ACIT (2016) 142 DTR 319 (Karn.)(HC)
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S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Income arising by way of slot chartering, would form a part of income from operations of ships, is exempt under Article 8 of India-Singapore DTAA – DTAA – India-Singapore [Article 8]
Revenue, on appeal filed against order of Tribunal, raised following question for consideration of High Court: whether Tribunal was justified in holding that income of assessee, arising by way of slot chartering, would form a part of income from operations of ships, exempt under Article 8 of India-Singapore DTAA. Dismissing the appeal of revenue the Court held that; above question stood concluded against revenue by a decision of Bombay High Court rendered in case of DIT (IT) v. Balaji Spg. UK Ltd. [2012] 211 Taxman 535, therefore, said question did not give rise to any substantial question of law. (AY. 2004-05)
DIT v. APL Co. Pte. Ltd. (2016) 243 Taxman 84 (Bom.)(HC)
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S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – When under offshore contract, equipment was transferred outside India, necessarily taxable income also accrued outside India and, hence, no portion of such income was taxable in India, writ petition of revenue was dismissed
Revenue filed writ petition against an order passed by Authority for Advance Rulings. Whether as point arising under section 9 sought to be urged was covered against revenue by two decisions of Delhi High Court rendered in assessee’s own case, i.e., DIT v. LG Cables Ltd. [2011] 197 Taxman 100 and DIT v. L.S. Cables Ltd. [IT Appeal No. 707 of 2011, dated 30-9-2011], wherein it has been held that (i) since there was no material to show that accrual of income under offshore supply contract was attributable to any operations carried out by assessee, a Korean company, in India and furthermore scope of work under onshore contract was under a separate agreement and for separate consideration, there was no justification to treat onshore contract and offshore contract as a composite contract, and (ii) when under offshore contract, equipment was transferred outside India, necessarily taxable income also accrued outside India and, hence, no portion of such income was taxable in India, writ petition was liable to be dismissed
DIT v. LS Cable Ltd. (2016) 243 Taxman 427 (Delhi)(HC)
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S.10(14) : Special allowance or benefit – Deduction at source – Amounts paid to meet expenses wholly and exclusively for discharging duties of employment – Payments need not be verified – Tax not deductible at source on such payments. [Ss.17(2), 192]
Dismissing the appeal of revenue the Court held that a perusal of section 10(14) of the Income-tax Act, 1961, shows that if any allowance or benefit not being in the nature of perquisite is granted to meet the expenses wholly, necessarily or exclusively incurred in performance of duties, to the extent to which such expenses are actually incurred they would be exempt. Circulars Nos. Q/FD/695/1/90 and Q/FD/695/2/2000 have been issued by the Ministry of External Affairs, Government of India, instructing that if the amount which is stated to have been paid as per diem allowance was not highly disproportionate or not unreasonable, the further verification of the actual expenditure is not to be considered. The resultant effect is that the amount is to be treated as by way of reimbursement of expenses. When the payment is made to meet the expenses incurred and when it is not taxable under section 10(14), merely because the actual expenses were not verified, the character or nature of the payment would not change so as to fall under section 17(2) of the Act. Held accordingly, that the Commissioner (Appeals) and the Tribunal came to the conclusion that the per diem allowance of $ 50 to $ 75 paid by the assessee to its employees on official trips to the USA and Europe to be reasonable and that it would be covered as exempt under section 10(14). The Tribunal was correct in holding that tax was not deductible on such payment. (AYs. 2009-10, 2010-11, 2011-12)
CIT v. Symphony Marketing Solutions India P. Ltd. (2016) 388 ITR 457 (Karn) (HC)
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S.10(23C) : Educational institution – Generation of surplus is not fatal to the grant of exemption, if such surplus is utilised for charitable purposes. The fact that the hospital charges of the assessee, as compared to other commercial establishments, are very nominal, throws further light on its charitable character [Ss. 10(23)(vi), 10(23)(via), 12A, 80G]
The Commissioner of Income Tax rejected the claim of the assessee to renew the exemption granted to it under Section 80G of the Act. Tribunal allowed the claim . On appeal by revenue, dismissing the appeal the Court held that in Visvesvaraya Technological University v. ACIT (2016) 384 ITR 37 (SC), on the first issue, the Apex Court held that if the surplus accumulated over the years is ploughed back for educational purposes, the institution would continue to exist solely for educational purposes and not for the purpose of profit. However, on the second issue, on facts, the Apex Court came to the conclusion that the assessee therein was neither directly nor substantially financed by the Government and thus, not coming under the expression “wholly or substantially financed by the Government”, as appearing in Section 10(23C)(iiiab). Having not agreed with the assessee on the second issue, the appeal was dismissed (Islamic Academy of Education v. State of Karnataka – (2003) 6 SCC 697 and Queen’s Educational Society vs. Commissioner of Income Tax – (2015) 8 SCC 47 referred). In view of the findings of the Apex Court in paragraphs 8 and 9 of its judgment in Visvesvaraya’s case (supra), as reproduced earlier, we unhesitantly conclude that even if substantial surplus is generated, but the same is found to have been ploughed back for building infrastructure/assets, which in turn are used for educational/charitable purposes, the institution would not lose its charitable character. In the case before us, it has not been disputed that the assessee is registered under Section 12A and that it has been held entitled to the grant of exemption under Section 10(23C)(vi) of the Act as per orders of this Court passed in C.W.P. No. 6031 of 2009, upheld by the Apex Court in Civil Appeal No. 9606 of 2013. It has further come on record that the assessee was granted exemption under Section 80G of the Act from the year 1997 till the passing of the impugned order. Further, the finding of the Tribunal, that the assessee has never mis-utilised its funds, has not been assailed before us. The generated surplus having been ploughed back for expansion purposes also remains undisputed by the Revenue as no challenge to the same has been made. In fact, the utilisation of surplus for large scale expansion at the behest of the assessee was also acknowledged by the Commissioner. The Tribunal had further detailed in its order the receipts, expenditure, capital expenditure, income/surplus of receipts over expenditure, income applied for the charitable purposes and percentage of the income applied in a tabulated form, which clearly depicted utilisation of surplus by the assessee for only charitable purposes. (ITA No. 602 of 2010, dt. 23-12-2016)
CIT v. Gulab Devi Memorial Hospital Trust (P & H)(HC);
www.itatonline.org
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S.10A : Free Trade Zone – Hundred per cent Export Oriented Unit –Electronic transmission of software developed from branch office to head office outside India- Entitled to exemption. [Ss. 10A(7), 80HHC, 80-IA(8)]
The absence of a “deemed export” provision in section 10A similar to the one in section 80HHC did not logically undercut the amplitude of the expression “transfer of goods” under section 80-IA(8) which was part of section 10A. Such an interpretation would defeat section 10A(7). The transfer of computer software by the Indian branch to the head office was a sale to the head office out of India and the assessee was entitled to claim benefit of section 10A (AY. 2002-03 )
Dy. DIT v. Virage Logic International (2016) 389 ITR 142 (Delhi)(HC)
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S.10B : Hundred per cent Export Oriented Undertaking – Computation of deduction – Deduction to be given before setting off losses and unabsorbed depreciation [S. 32, 72]
Deduction under section 10B had to be given at the stage when the profits and gains of business were computed in the first instance before setting off losses and unabsorbed depreciation of earlier years.
CIT v. Black and Veatch Consulting Pvt. Ltd. [2012] 348 ITR 72 (Bom.) followed. (AY. 2005-06)
CIT v. BEHR India Ltd. (No. 1)(2016) 389 ITR 419 (Bom.)(HC)
CIT v. BEHR India Ltd. (No. 2)(2016) 389 ITR 459/ 74 taxmann.com 170 (Bom.)(HC)
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S.12AA : Procedure for registration – Trust or institution – Fresh deed was not required to be made and assessee was free to alter or correct mistakes in Trust Deed and, thereafter, comply with procedure prescribed in relevant clause
The assessee filed an application for availing benefits under Income-tax Act. The Commissioner scrutinised documents and intimated the assessee that there were certain defects in the Trust Deed. He called upon the assessee to correct the mistakes in the trust deed by preparing a fresh deed. On writ allowing the petition, the Court held that; fresh deed was not required to be made and assessee was free to alter or correct mistakes in Trust Deed and, thereafter, comply with procedure prescribed in relevant clause.
Yogakshemam Loans Ltd. v. ITO (2016) 243 Taxman 102 (Ker.)(HC)
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S.14A : Disallowance of expenditure – Exempt income – No disallowance with respect to exempt income can be made if the securities are held as stock-in-trade [R & D]
Dismissing the appeal of the Revenue, the Court held that the Tribunal found that the assessee does not have any investment and all the shares are held as stock-in-trade as is evident from the orders of the lower authorities. On those facts the Tribuanl held:- “Once, the assessee has kept the shares as stock-in-trade, the rule 8D of the Rules will not apply.” (AY. 2008-09)(G.A. No 1150 of 2015 ITAT No 52 of 2015 dt. 10-2-2017)
CIT v. G. K. K. Capital Market (P) Limited (Cal.)(HC);
www.itatonline.org
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S.28(i) : Business income –”Setting up of business” and “commencement of business”. All expenditure after “setting up” is deductible business expenditure even if the business has not commenced. A business is “set up” when steps are taken to recruit employees and take premises etc. [S.29]
Dismissing the appeal of revenue, the Court held that all expenditure after “setting up” is deductible business expenditure even if the business has not commenced. A business is “set up” when steps are taken to recruit employees and take premises etc. Followed Western India Vegetable Products Ltd. v. CIT (1954) 26 ITR 151 (Bom.)(HC). (CIT v. 1204 of 2014, dt. 30-1-2017)(AY. 2007-08)
CIT v. Axis Pvt. Equity Ltd. (Bom.)(HC);
www.itatonline.org
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S.28(i) : Business income – Interest earned on short-term fixed deposits is assessable as “profits and gains of business” and not as “income from other sources” [S.56]
Dismissing the appeal of revenue the Court held that the Tribunal records the fact that the three fixed deposits were for a period of 1 day, 28 days and 90 days respectively. Considering the nature of business of the assessee, the Tribunal, was of the view that the interest earned would be taxable under the head ‘Business income’. In support reliance was placed by the impugned order upon the decision of this Court in CIT v. Indo Swiss Jewels Ltd. & Another 284 ITR 389 (Bom.)(HC). In the context of the respondent’s business and the period of fixed deposits, the Tribunal holds the interest earned on them is taxable as business income. In fact this Court in almost similar circumstances in Indo Swiss Jewels Ltd. (supra) has held interest earned on short-term deposits on the money kept apart for the purposes of business had to be treated as income earned from business and could not be treated as income from other sources. Considering the short duration in which the amounts were kept in fixed deposit awaiting use in its business operations would necessarily mean income earned on account of business following the ratio of this Court in Indo Swiss Jewels Ltd. (ITA No. 1162 of 2014, dt. 16-1-2017)(AY. 2011-12)
CIT v. Green Infra Limited (Bom.)(HC);
www.itatonline.org
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S.28(i) : Business income – Income from other sources – Leasing of manufacturing facility for ten years was held to be assessable as business income [S. 22]
Assessee-company was engaged in manufacturing malt. It leased out its entire malting facility to another company for a period of ten years. Authorities below opined that rental income earned by assessee was taxable as income from other source. On appeal allowing the appeal Court held that it was apparent that in terms of lease agreement, assessee retained its interest in plant and machinery and only minor repairs were to be carried out by lessee. Moreover, lessee had to continue its business operations with employees of assessee – Whether on facts, it was clear that assessee wanted to resume its business operations after expiry of period of lease and, therefore, income arising from leasing out of business assets was to be regarded as business income. (AY. 2004-05)
Maltex Malsters Ltd. v. CIT (2016) 243 Taxman 581 (P&H)(HC)
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S.37(1) : Business expenditure – Capital or revenue – Corporate brand building – Expenditure incurred by assessee-company on corporate advertisement to maintain its corporate image which resulted in increased sale of products, was to be allowed as revenue expenditure
Dismissing the appeal of revenue, the Court held that expenditure incurred by assessee-company on corporate advertisement to maintain its corporate image which resulted in increased sale of products, was to be allowed as revenue expenditure. (AY. 2006-07)
CIT v. Asian Paints (India) Ltd. (2016) 243 Taxman 348 (Bom.)(HC)
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S.37(1) : Business expenditure –Bogus purchases – Paid by account payee cheques – Sales was accepted – GP was normal – Deletion of addition by the Tribunal was held to be justified [S. 69C, 260A]
The Assessing Officer made additions on account of certain purchases made by the assessee holding them as bogus and that the assessee failed to prove the genuineness of such purchases in spite of opportunities being granted. The Commissioner (Appeals) found that the books of account of the assessee were duly audited and that they were not considered by the Assessing Officer. The Tribunal found that for all the disallowed purchases, payments were made through account payee cheques and that the assessee had fully co-operated in the proceedings and furnished the necessary particulars. On appeal : Held, dismissing the appeal, that the Commissioner (Appeals) and the Tribunal had concurrently upheld the assessee’s contentions after appreciating the rival contentions. Their decisions essentially determined the questions of fact. No question of law arose. (AY. 2007-08)
CIT v. Anju Jindal (Smt.) (2016) 387 ITR 418 (P&H)(HC)
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S.40(a)(ii) : Amounts not deductible – Rates of tax – Foreign taxes – Amounts not eligible for DTA relief are deductible – Tax paid in Saudi Arabia attributable to income arising or accruing in India is not eligible for relief under section 91, hence disallowance is not attracted – The Explanation 1, is declaratory and has retrospective effect [Ss. 2(43), 35D, 80HHB, 90, 91]
Allowing the appeal the Court held that foreign taxes are not hit by the bar in s. 40(a)(ii) and are deductible on the real income theory. After the insertion of the Explanation to s. 40(a)(ii) by the FA 2006, foreign taxes are not deductible only to the extent they are eligible for relief u/ss. 90 & 91. Amounts not eligible for DTA relief are deductible. The Explanation is declaratory and has retrospective effect. Tax paid in Saudi Arabia attributable to income arising or accruing in India is not eligible for relief under section 91, hence disallowance is not attracted. (AY. 1983-84)
Reliance Infrastructure Ltd. v. CIT (2017) 390 ITR 271/ 145 DTR 233 (Bom)(HC)
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S.40(a)(ia) : Amounts not deductible – Deduction at source –Subscription to e-magazines is not rendering of professional services hence tax is not deductible at source as subscription
Dismissing the appeal of revenue the Court held that ; the Commissioner (Appeals) and the Tribunal had reached a concurrent finding of fact that payments made to B were for subscription to e-magazines and therefore, there was no occasion to deduct tax under the Act. Thus section 40(a)(ia) could not have been invoked. The submission on behalf of the Revenue that B’s magazines/information was backed by solid research carried out by its employees and made available on the website would not by itself result in B rendering any consultative services. It was not the case of the Revenue that specific queries raised by the assessee were answered by B as a part of the consideration of
₹ 4.34 lakhs. The information was made available to all subscribers to e-magazines/journal of B. Therefore, in no way could the payments made to B be considered to be in the nature of any consultative/professional services rendered by B to the respondents. The Tribunal was justified in deleting the disallowance made by the Assessing Officer under section 40(a)(ia) of expenditure incurred by the assessee-company towards payment of data charges to B even though the assessee-company had not deducted tax at source on such payment made to avail of professional services. (AY. 2006-2007)
CIT v. India Capital Markets P. Ltd. (2016) 387 ITR 510 (Bom.)(HC)
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S.45 : Capital gains –Compensation relating to standing trees in the agricultural land – Since acquisition was of the entire land on ‘as is where is’ basis, question of payment of capital gains only on the compensation for standing trees cannot be justified in law [S.2(IA)]
While calculating the valuation of trees, which was done by the Land Acquisition Officer of the Board, part relief had been granted by the authorities with regard to certain kind of trees and also the building and the borewell. But mango trees, which were approximately 12 years of age, were valued separately, and compensation on the same was treated as a separate transaction and was held as taxable.
Overruling the decision of the Tribunal, the High Court held that even though while computing the compensation in relation to such acquisition, the land and tress growth were valued separately, it does not mean that there were two transactions. Thus, the High Court held that splitting one transaction into two for the purpose of taxation would be against law and hence since acquisition was of the entire land on ‘as is where is’ basis, question of payment of capital gains only on the compensation for standing trees cannot be justified in law.
Shivanna, M. v. ACIT (2016) 142 DTR 319 (Karn.)(HC)
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S.50C : Capital gains – Full value of consideration – Stamp valuation – Provision will not be applicable while computing capital gains on transfer of lease hold rights in land and buildings. [Ss. 2(14), 45, 260A]
Revenue has informed that they have not filed appeal before the High Court in Atul J. Puranik v. ITO (2011) 132 ITD 499 (Mum.)(Trib.). Dismissing the appeal of the revenue, the Court held that where the Department had accepted the decision of the court or the Appellate Tribunal on an issue and had not appealed against it, then a subsequent decision following the earlier decision could not be challenged. That the Department had not shown that there were any distinguishing features either in facts or in law in the present appeal from that which arose in the earlier decision of the Appellate Tribunal which was not appealed against. No question of law arose. (AY. 2007-08)
CIT v. Greenfield Hotels and Estates P. Ltd. (2016) 389 ITR 68 / (2017) 77 taxmann.com 308 (Bom)(HC)
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S.54 : Capital gains – Profit on sale of property used for residence – Utilisation of capital gains in construction of residential house within a period of two years would suffice to claim exemption, irrespective of fact neither the sale transaction was concluded nor registration had taken place with in two years. [S.45]
Dismissing the appeal of the Revenue, the Court held that utilisation of capital gains in construction of residential house within a period of two years would suffice to claim exemption, irrespective of fact neither the sale transaction was concluded nor registration had taken place within two years. (AY. 2003-04 )
CIT v. Shakuntala Devi (Mrs.) (Decd.) (2016) 389 ITR 366/ 75 taxmann.com 222 (Karn.)(HC)
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S.54F : Capital Gains – Investment in a residential house – Seven flats – Income from property was assessed as income from House property therefore exemption cannot be denied [Ss.22, 14, 45]
Dismissing the appeal of revenue the Court held that income from these flats was offered to tax under head ‘Income from house property’ in view of specific provisions of section 22, read with section 14. Tribunal held that treatment of income by assessee could not be treated as an act by which assessee had considered seven flats as residential house owned by him and, therefore, denial of claim of assessee for deduction under section 54F was unassailable. (AY. 2009-10)
CIT v. Gregory Mathias (2016) 243 Taxman 25 (Karn.)(HC)
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S.73 : Loss in speculation business – Sale of shares of sister concern – Assessee-company had properly delivered shares at time of selling, transaction would not come under provisions of section 43(5) of the Act and hence case of assessee would not be covered under Explanation to section 73 of the Act [Ss. 2(13), 43(5 )]
On appeal by the assessee, the High Court held that in the present case, as the main activity is only in manufacture and sale of yarn, the purchase of shares, having not been regular, should be construed only as an investment. The High Court further held that since there is no systematic or organised course of activity, no regularity in the transaction and since the purchase is only a one-time activity, it cannot be construed as a speculative transaction. When the purchase of shares cannot come within the definition of business, under section 2(13) of the Act, there is no point in contending that the assessee is engaged in the business much less in a speculative business. Thus, the High Court held that the AO ought to have allowed the loss, as short-term capital loss and set off against the other business income of the assessee-company. When the provisions of section 43(5) of the Act is not applicable, the contention of the revenue that the case of the assessee-company would be covered under explanation to section 73 of the Act, cannot be accepted. In the result, the appeal filed by the assessee is allowed and the order passed by the Tribunal is set aside (AY. 1990-91)
Rajapalayam Mills Ltd. v. DCIT (2016) 241 Taxman 50 (Mad.)(HC)
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S. 80-IA : Industrial undertakings –Windmill – Entitled to deduction without setting off losses/unabsorbed depreciation pertaining to windmill, which were set off in earlier year against other business income of assessee
Assessee claimed deduction under section 80-IA. Tribunal, following decision of Madras High Court in case of Velayudhaswamy Spinning Mills (P.) Ltd. v. Asstt. CIT [2012] 340 ITR 477 held that assessee was entitled to deduction under section 80-IA without setting off losses/unabsorbed depreciation pertaining to windmill, which were set off in earlier year against other business income of assessee. It further held that initial assessment year in section 80-IA(5) would only mean year of claim of deduction under section 80IA and not year of commencement of eligible business. Appeal of revenue is dismissed by the Court. (AY. 2010-11)
CIT v. P.S. Velusamy (2016) 243 Taxman 408 (Mad.)(HC)
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S.80-IB(10) : Housing projects – Proportion deduction on the housing project was held to be proper
Tribunal held that assessee was entitled to deduction under section 80-IB(10) proportionately out of profits in respect of wings ‘A’ to ‘F’; whereas assessee had claimed deduction for entire project, i.e., inclusive of wing ‘G’ and not part of project. Revenue raised following question of law for consideration of High Court as to whether Tribunal was justified in upholding decision of Commissioner (Appeals) in proportionately allowing deduction under section 80-IB(10) out of profits in respect of wings ‘A’ to ‘F’ without appreciating that assessee had claimed deduction for entire project, i.e., inclusive of wing ‘G’ and not part of project. High Court held that above question stood concluded in favour of assessee and against revenue by an earlier decision of Bombay High Court in case of CIT v. Vandana Properties [2013] 353 ITR 36 and, therefore, no substantial question of law arose for consideration. (ITA No. 2244 of 2013 dt. 4-2-2016 )
CIT v. Aakash Nidhi Builders & Developers (Bom.)(HC)
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S.80-IB(10) : Housing projects –Deduction at source – Expenditure added back to income of assessee eligible for deduction. [S. 40(a)(ia)]
Dismissing the appeals of the revenue the Court held that; in view of the scheme of section 40 deduction of tax at source was not effected by the assessee and payment to contractors could not be deducted as the expenditure became inadmissible. The expenditures were added back to the income being eligible income. This income eligible for deduction in terms of section 80-IB(10) only increased by the figure of disallowed expenditure. (AY.2006-07)
CIT v. Sunil Vishwambharnath Tiwari. (2016) 388 ITR 630/ 290 CTR 230 (Bom.) (HC)
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S.91 : Double taxation relief – Income tax must be paid in both countries, for claiming relief [Ss. 35D, 80HHB]
Amount of deduction claimed under sections 80HHD and 35D are not subjected to tax in India but forming part of assessee’s income- Relief under section 91 cannot be granted (AY. 1983-84)
Reliance Infrastructure Ltd. v. CIT( 2017) 390 ITR 271 (Bom.)(HC)
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S.92C : Transfer pricing – Adjustment has to be done only in respect of International Transactions with Associated Enterprises and not an entity level – Revenue should take consistent view
Dismissing the appeal of revenue the Court held that the fact that the assessee has chosen entity level PLI to benchmark the AE transactions and that it has not maintained segmental accounts is irrelevant. If segmental accounts are not available, proportionate adjustments have to be made only in respect of the international transactions with Associated Enterprises Transfer Pricing adjustment has to be done only in respect of International Transactions with Associated Enterprises. The fact that the assessee has chosen entity level PLI to benchmark the AE transactions and that it has not maintained segmental accounts is irrelevant. If segmental accounts are not available, proportionate adjustments have to be made only in respect of the international transactions with Associated Enterprises. Court also noted that during the course of all the above appeals, the fact that two appeals had been admitted on the above issue were not pointed out. Court also observed that the Income Tax Department within the jurisdiction of this Court must adopt a consistent view on issues of law. In this case, we find that the Revenue urges the absence of segmental accounts would warrant entity wise adjustment, when the Revenue had itself in Pedro Araldite Pvt. Ltd. did not canvas the point, as even according to it the issue stood covered by the earlier orders of this Court in favour of the assessee. The Revenue must apply the law equally to all and cannot take inconsistent position in law (de hors the facts) to apply different standards to different assessee. The administration of the tax laws should not degenerate into an arbitrary and inconsistent application of law dependent upon the Assessee concerned. (ITA No. 362 of 2014, dt. 14-8-2016)(AY.2006-07)
CIT v. Alstom Project India Limited (Bom.)(HC);
www.itatonline.org
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S.92C : Transfer pricing – Arm’s length price – Guarantee was not approved by RBI, adjustment was not valid in the absence of an international transaction
The TPO made TP adjustment in respect of guarantee given on behalf of AE in form of pledging of shares. However, the said transaction was not approved by RBI, resulting in non-existence of any guarantee given by appellant. Dismissing the appeal of revenue , the Court held that no TP adjustment could be made in absence of an international transaction.
PCIT v. Adani Enterprises Ltd. (2016) 241 Taxman 542 (Guj.)(HC)
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S.115J : Book profit – Depreciation on revalued asset – Assessing Officer cannot make adjustment [Companies Act, S.350]
Assessee-company claimed depreciation after revaluating its fixed assets. Assessing Officer while computing income of assessee under section 115J held that though net profit shown in profit and loss account was in accordance with provisions of Parts II and III of Schedule VI to Companies Act, 1956, but method of computation of profit and loss was not in consonance with provisions of section 350 of Companies Act, consequently he disallowed excess depreciation and added that amount in profit and loss account. Tribunal relying upon decision of Supreme Court rendered in case of Apollo Tyres Ltd. v. CIT [2002] 255 ITR 273 allowed appeal of assessee. On appeal by revenue, dismissing the appeal the Court held that controversy involved in instant appeal filed by revenue was squarely covered by decision of Supreme Court rendered in case of Apollo Tyres Ltd, therefore, there was no substantial question of law arising for consideration. (AY. 1988-89)
CIT v. J. K. Synthetics Ltd. (2016) 243 Taxman 411 (All.)(HC)
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S.143(2) : Assessment – Notice –Notice served on the old address – Assessment was held to be void [Ss. 282, 292BB, General Clauses Act, S.27]
Dismissing the appeal of assessee the Court held that; the issue of a notice u/s. 143(2) bearing the wrong (old) address of the assessee does not amount to a valid service of the notice u/s. 282 r.w.s. 27 of the General Clauses Act. The non-service of a notice u/s. 143(2) before the expiry of 12 months from the end of the month in which the return was filed renders the assessment void. As the assessee objected to the same before completion of proceedings, the assessment order is not saved by s. 292BB.In the above view, as the position is self evident on a plain reading of section 143(2) of the Act read with section 127 of the General Clauses Act, thus no substantial question of law arises for our consideration. (ITA No. 1382 of 2014, dt. 7-2-2017) (AY. 2006-07)
CIT v. Abacus Distribution Systems (India) Pvt. Ltd. (Bom.)(HC);
www.itatonline.org
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S.143(3) : Assessment – Bogus purchases – Cross examination – A statement by the alleged vendor that the transactions with the assessee are only accommodation entries and that there are no sales or purchases cannot be relied upon by the AO unless the assessee is given the opportunity to cross-examine the vendor. [S.131]
Dismissing the appeal of Revenue the Court held that the question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales/purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs. ( ITA No. 4299 of 2009, dt. 22-2-2011)
CIT v. Ashish International (Bom.)(HC);
www.itatonline.org
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S.143(3) : Assessment – A firm can be partner in another firm and it cannot be held that only natural legal persons can be partners in partnership firm
Allowing the petition, the Court held that the fact that the assessee has been assessed in the status of a partnership firm was not in dispute. Further, even the assessment order passed by the AO under section 143(3) of the Act treated the assessee as a partnership firm. However, the court held that a fundamental error was done by CIT(A) by stating that a firm cannot be a partner in another firm and only legal persons can be partners in a partnership firm. The Court held that there is no such law which says that a firm cannot be a partner in another firm and without expressing any opinion on the power of the CIT(A), the court allowed the Writ and held that a partnership firm can be a partner in another firm. (AY. 2012-13)
Megatrends Inc. v. CIT & Anr. (2016) 287 CTR 687 (Mad.)(HC)
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S.145 : Method of accounting –Weighted average cost of valuing stock is an accepted method of accounting, which is approved by Accounting Standard issued by the ICAI. AO is not entitled to disregard the method if the assessee has consistently followed the said method
Dismissing the appeal of the Revenue, the Court held that, in the case of manufacture of jewellery, weighted average cost of valuing stock is an accepted method of accounting, which is approved by Accounting Standard issued by the ICAI. AO is not entitled to disregard the method if the assessee has consistently followed the said method. (AY. 2009-10) (ITA No. 297 of 2014 dt. 6-3-2017)
CIT v. Uday M. Ghare (Bom) (HC)
www.itatonlne.org.
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S.147 : Reassessment – The Department’s reference to otherwise binding judgments of the Supreme Court could have been the basis of a valid revision under section 263 but could not be the ground for reopening of assessment – No valid reason for reassessment proceedings to disallow claim of deduction under section 80-IA. [S. 148, 80-IA]
It was evident from the reasons recorded by the Department that there was no allusion to tangible material in the form of objective documents or information outside of the concluded assessment and the documents which pertained to it. Without such documents, evidence or tangible material, there could not be a valid reason leading to proper reassessment proceedings by invoking section 147. The Department’s reference to otherwise binding judgments of the Supreme Court could have been the basis of a valid revision under section 263 but could not be the ground for reopening of assessment under section 147. All further proceedings were to be quashed. (AY. 1997-98)
Woodward Governor India Ltd v. ACIT (2016) 389 ITR 50 (Delhi)(HC)
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S.147 : Reassessment – Violation of principles of natural justice –Statement relied without giving an opportunity of cross examination – Reassessment was held to be not valid. [S.148]
Allowing the petition the Court held that the Revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross-examine the deponent on the statements relied upon by the Assistant Commissioner. Quite apart from denial of an opportunity of cross examination, the Revenue did not even provide the material on the basis of which the Department sought to conclude that the loan was a bogus transaction. In the light of the fact that the monies were advanced apparently by account payee cheque and were repaid by account payee cheque the least that the Revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against the assessee before passing the order of reassessment. This not having been done, the denial of such opportunity went to the root of the matter. The order of reassessment was not valid. Followed Andaman Timber Industries v. CCE (2015) 127 DTR 241/ 281 CTR 241/62 taxmann.com 3 (2016) 38 GSTR 117 (SC) (AY. 1983-84)
H.R. Mehta v. ACIT (2016) 387 ITR 561/72 taxmann.com 110 (Bom.)(HC)
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S.151 : Reassessment – Sanction for issue of notice – The mere appending of the word “approved” by the CIT while granting approval to the reopening is not enough – He has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. [Ss. 68, 147, 148]
Dismissing the appeal of revenue the Court held that the mere appending of the word “approved” by the CIT is not sufficient .While the CIT is not required to record elaborate reasons, however, he has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or
formal. (ITA No. 3355/2015, dt. 11-1-2017)
(AY. 2001-02)
PCIT v. N. C. Cables Ltd. (Delhi)(HC);
www.itatonline.org
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S.153A : Assessment – Search – Assessment finalised before date of search – No incriminating material found during search –Allowance of special deduction in initial assessment cannot be disturbed [Ss. 80IA, 132]
Dismissing the appeal of revenue the Court held that assessment was finalised before date of search and no incriminating material found during search, therefore, allowance of special deduction in initial assessment cannot be disturbed. (AYs. 2004-05, 2005-06)
PCIT v. Desai Construction P. Ltd. (2016) 387 ITR 552 (Guj.)(HC)
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S.153A : Assessment – Search –Return must be filed even if no incriminating material discovered during search – Estimation was held to be proper – Gift from relatives cannot be assessed as undisclosed income [S. 132]
Court held as under (1) Return must be filed even if no incriminating material discovered during search. (ii) Additions made by Assessing Officer for assessment years 2002-03 to 2005-06 and 2008-09 on basis of estimation of consultation fees restored- Tribunal’s direction to Assessing Officer to calculate cost of lens at 30 per cent of sale value was held to be proper.(iii) Directions by Tribunal to Assessing Officer to make additions on estimation basis and directions by Tribunal to Assessing Officer to reduce disallowance from 80 per cent. to 30 per cent (iv) Gifts from close relatives, burden of proof of source and creditworthiness discharged by assessee, deletion of additions proper.(v) Cash flow statement of relative not reflecting cost of item. Additions made by Assessing Officer restored (vi) Addition of difference in cost of construction by Assessing Officer restored. (AY. 2002-03 to 2008-09)
CIT v. Dr. P. Sasikumar (2016) 387 ITR 8 (Ker.)(HC)
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S.153A : Assessment – Search –Assessment on basis of statement of third person was held to be not valid without any incriminating found in the course of search proceedings. [Ss. 132,132A]
Dismissing the appeal of the revenue, the Court held that it was not the case of the Revenue that any incriminating material in respect of the assessment year under consideration was found during the course of search. When the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, when the time limit for framing the assessment as provided under section 153 was about to expire, the notice had been issued seeking to make the proposed addition of
₹ 11,05,51,000 not on the basis of material which was found during the course of search, but on the basis of a statement of another person. The Tribunal was correct in deleting the addition. (AY. 2006-2007)
PCIT v. Saumya Construction P. Ltd. (2016) 387 ITR 529 (Guj.)(HC)
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S.153C : Assessment – Income of any other person – Search – The requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue – The non-satisfaction of the condition renders the entire proceedings null and void. [Ss. 69C, 132]
Dismissing the appeal of the revenue, the Court held that the requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue. The non-satisfaction of the condition renders the entire proceedings null and void. The fact that the searched person and the assessee are alleged to be “hand in glove” is irrelevant. In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained. (ITA No. 83 of 2014, dt. 7-2-2017)(AY. 2007-08)
CIT v. Arpit Land Pvt. Ltd. (Bom)(HC);
www.itatonline.org
CIT v. Ambit Reality Pvt. Ltd. (Bom)(HC);
www.itatonline.org
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S.153C : Assessment – Income of any other person – Search – Satisfaction that incriminating material belonged to third person must be recorded – No incriminating material found –Provisions cannot be invoked [S. 132, 132A, 133A, 153A]
Dismissing the appeal of the revenue, the Court held that incriminating material in the seized material was a pre-requisite before power was exercised under section 153C read with section 153A of the Act. The Department had not shown any incriminating material unearthed either during the search or during the requisition or even during the survey which was or might be relatable to the assessee. The Assessing Officer had made disallowances of the expenditure, which were already disclosed, for one reason or the other, but such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances were upheld by the Commissioner (Appeals) and that there was no infirmity in the order of the Appellate Tribunal deleting the disallowances. (AYs. 1998-99, 1999-2000, 2001-02, 2002-03, 2003-04)
CIT v. Veerprabhu Marketing Ltd. (2016) 388 ITR 574/ 73 taxmann.com 149 (Cal.) (HC)
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S.158BC : Block assessment –Search and seizure – Names of assessees not found in warrant, hence the notice issued was held to be illegal [S. 132]
Dismissing the appeals of the revenue ; the Court held that the search should be carried out under section 132(1) in the name of a person before invoking the provision of section 158BC. All the family members were separate assessable legal entities under the Act and in a case where search warrant was issued in the name of G and family, it could not be stretched to cover all the family members, namely spouse and children. It was to be in the name of a specific person to initiate proceedings. When a search action under section 132(1) was to be person specific and when admittedly the names of the assessees did not figure in the warrant, the Assessing Officer had no jurisdiction to issue notice under section 158BC of the Act and thus the issuance of notice was illegal.
CIT v. Surbhi Goel (Mrs.) (2016) 387 ITR 575/243 Taxman 539/290 CTR 14 (Raj.)( HC)
CIT v. Umesh Goel (Smt) (2016) 387 ITR 575/ 243 Taxman 539 / 290 CTR 14 (Raj.)( HC)
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S.164 : Representative assessees – Charge of tax – Beneficiaries unknown – Whether shares are determinable even when even or after the Trust is formed or may be in future when the Trust is in existence, the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees [S. 161]
From the order of the ITAT Bangalore in DCIT vs. India Advantage Fund-VII, the High Court had to consider the following question at the instance of the department:
“Whether, the Tribunal, on the facts and in the circumstances of the case was right in holding that the assessee trust cannot be assessed as on AOP even though the requirements of section 164(1) were not met, in as much as the shares of the beneficiaries were indeterminate/unknown and hence the assessing officer was justified in invoking the provisions of section 164(1) of the Act and make the assessee liable to be assessed at the maximum marginal rate in the status of AOP. Hence it is not relevant whether the necessary ingredients for formation of an AOP are fulfilled by the assessee or not?”
HELD by the High Court dismissing the appeal: the Court held that once shares are found to be determinable . the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees which has already been shown in the present case. (ITA No. 191/2015, dt. 13-2-2015)( AY. 2008-09)
CIT v. India Advantage Fund- VII ( Karn.)(HC) ;
www.itatonline.org
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S.179 : Recovery of tax – Public Limited Company – Liability of director – Notice upon director calling for proof that company is Public Limited Company – For lifting the corporate veil the revenue ought to have prima facie sufficient material – Order was set aside [S. 158BC]
Allowing the petition the Court held that admittedly the company in question was a public limited company. Ordinarily, therefore in terms of section 179, the director of such a company would not be answerable for unpaid taxes of the company. Although the Court in the case of Pravinbhai M. Kheni v. Asst. CIT had recognised limited exceptions under which it may be possible for the Revenue to apply section 179 to the directors of a public limited company by lifting the corporate veil, certain safeguards had been provided to avoid any possible misuse of such powers. The Department had instead of confronting the petitioner with the necessary material and asking him to show cause why the corporate veil should not be lifted and section 179 be applied to him, issued a notice and called upon the petitioner to substantiate the claim that the company was a Public Limited Company. The Department ought not to have questioned such a basic fact. If the Department had wanted to apply the principle of lifting the corporate veil in the context of section 179, it ought to have prima facie sufficient material to confront the assessee on the issue calling upon him to show cause why such powers should not be invoked. The Department was at liberty to take fresh proceedings by issuing appropriate notice, if it so desired
Paras S. Savla v. ACIT (2016) 389 ITR 336/ 244 Taxman 17 (Guj.) (HC)
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S.194H : Deduction at source –Commission – Trade discount – Incentive given only to promote sales is not commission, hence not liable to deduct tax at source [S. 201(1)]
Dismissing the appeal of revenue the Court held that it was evident that beer was sold by the assessee to the Corporation, and the Corporation, in turn, sold the beer purchased by it from the assessee, to retail dealers. The two transactions were independent of each other, and were on a principal to principal basis. No services were rendered by the retail dealer to the assessee, and the incentive given by the assessee to the retailers as trade discount was only to promote their sales. The Tribunal rightly held that in the absence of a relationship of principal and agent, and as there was no direct relationship between the assessee and the retailer, the discount offered by the assessee to the retailers could only be treated as sales promotion expenses, and not as commission, as no services were rendered by the retailers to the assessee. (AY. 2008-09 to 2010-11)
CIT (TDS) v. United Breweries Ltd. (2016) 387 ITR 150 (T&AP)(HC)
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S.194I : Deduction at source – Rent – Payment towards ‘premium’ for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source [Ss. 201, 201(IA) Transfer of Property Act. [S.105]
In all the cases the petitioners received notice from the income-tax authorities, alleging that they were assessed in default in as much as they had failed to deduct tax at source from the interest component paid to the lessor/authority. The Revenue was prima facie of the opinion that these interest amounts resulted income in the hands of the authority which is facially taxable and that the failure of the assessees, in deducting amounts mandated under section 194-I is without legal foundation. The petitioners were served with the notice u/ss. 201, 201(IA) of the Act. Allowing the petitions of the assessees, the Court held that, payment towards ‘premium’ for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source. Referred Circular No. 35/2016 dated 13-10-2016. (WP. (C) 8085/2014, C.M. Appl. 18876/2014, dt. 16-2-2017)
Rajesh Project (India) Pvt. Ltd. v. CIT (Delhi)(HC) ;
www.itatonline.org
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S.220 : Collection and recovery – Assessee deemed in default –Appeal pending – No automatic stay – Application for stay must be filed – Court directed the CBDT to issue direction. Ss. 220(6), 246, 246A]
Court held that the assessee admittedly had filed an appeal with an application for interim stay but the fact remained that the assessee had not approached the Assessing Officer under section 220(6) for the exercise of his discretion to defer the recovery proceedings. The scheme of the Act provides a specific remedy under section 220(6) and that remedy having not been invoked by the assessee, did not entitle him to the protection as had been prayed for on the ground of mere pendency of the appeal or till the disposal of interim stay application.
By the court: It is however open to the Central Board of Direct Taxes to issue guidance to the assessing authority to deal with matters during pendency of appeals filed under sections 246 and 246A so that the recovery of revenue of direct taxes may not suffer a setback and the assessee is equally relieved of unnecessary torture.
(AY. 2012-13)
Uttar Pradesh Bhumi Sudhar Nigam Ltd. v. PCIT (2016) 387 ITR 268 (All.)(HC)
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S.245C : Settlement Commission – Settlement of cases – The return of income and notice u/s. 148 were issued prior to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 coming into force. Application submitted by the assessee offering undisclosed foreign income and assets before Settlement Commission were maintainable. [Ss. 148, 153C, 245BA, Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015]
Allowing the petition the Court held that the action of the Settlement Commission, held that, the assessee had filed their return of income and notice was issued u/s. 148 of the Act prior to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 coming into force w.e.f. 1-7-2015. Thus, the applications submitted before the Settlement Commission were maintainable. (AYs. 2005-06 to 2014-15]
Arun Mammen v. UOI (2016) 290 CTR 644 / 241 Taxman 135 / (2017) 391 ITR 23 (Mad.)(HC)
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S.245C : Settlement Commission – For purpose of maintainability of a settlement application, a case would be pending only as long as order of assessment is not passed and date of dispatch or service of order on assessee would not be material for such purpose [Ss. 153A, 245D]
On 7-1-2014, a search was conducted on the assessee. Thereafter, a notice under section 153A of the Act was issued on 2-7-2014. The assessee filed the return of income in response to such notice on 27-11-2014.
The AO passed the assessment orders for five assessment years in question on 15-3-2016 and the same were sent for service personally, by deputing an Inspector of his office, to the partners of the assessee firm at its office on 15-3-2016. However, the partners refused to receive the orders. A report to this effect was made by the Inspector and placed before the AO, a copy of which was produced along with an affidavit.
On 16-3-2016, the assessee filed application for settlement before the Settlement Commission. Before the settlement bare facts were that the order of assessment dated 15-3-2016 was served on the assessee on 21-3-2016. Thus, according to the assessee, the application for settlement having already been filed on 16-3-2016 even before the orders of assessment were served, such application before the Settlement Commission would be maintainable. Even if such orders were passed on 15-3-2016, as contended by the Department, since the same were not served on the assessee, the assessment proceedings would be deemed to be pending and, therefore, application for settlement would be maintainable.
However, according to the Department, as soon as the orders of assessment were passed. Irrespective of dispatch of the orders of assessment or service thereof on the assessee, application for settlement would not be maintainable.
The High Court held that for the purpose of application under section 245C(1) of the Act, a case would be pending only as long as the order of assessment is not passed. Once the assessment is made by the Assessing Officer by passing the order of assessment, the case can no longer be stated to be pending. Application for settlement would be maintainable only if filed before the said date. Date of dispatch of service of the order on the assessee would not be material for such purpose. High Court dismissed the petitions filed by the assessee. (AYs. 2010-11 to 2014-15)
Shalibhadra Developers v. Secretary & Ors. (2016) 143 DTR 1 (Guj.)(HC)
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S.245R : Advance ruling – Issuance of notice under section 143(2) without any specific queries is not a bar on application for advance ruling
Allowing the petition the Court held that; in the notice issued to the assessee under section 143(2) of the Act, the Assessing Officer only stated that there were certain points in connection with the return of income submitted by the assessee for the Assessment Year 2012-13 on which the Assessing Officer would like some further information. The notice did not address itself to any specific question. It did not disclose application of mind to the returns, except the fact that it had conformed to the instructions which compelled the Assessing Officer to issue a scrutiny notice on account of the international transaction reported by the assessee. Such notices ipso facto would not be sufficient to attract the automatic rejection of application under proviso to section 245R(2). The assessee’s application for advance ruling was to be processed and independently dealt with
on its merits by the Authority for Advance Rulings.
Sage Publications Ltd v. Dy. CIT (IT) (2016) 387 ITR 437 / 73 taxmann.com 85 (Delhi)(HC)
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S.254(1) : Appellate Tribunal –Additional evidence – Deduction at source – Refusal of Tribunal to admit additional evidence was held to be not justified – Assessing Officer directed to examine relevant challan and determine amount of deduction at source [Ss. 40(a)(ia), 192, ITAT Rules, 1963, R. 29]
Allowing the appeal the Court held that ; it was a fit case for the Appellate Tribunal to have exercised its powers under Rule 29 of the Appellate Tribunal Rules, 1963 requiring the production of the challan evidencing the payment of the tax deducted at source in the Government treasury and to have directed the authorities to examine the genuineness of the challan. The order of the Appellate Tribunal refusing to allow the assessee to adduce additional evidence was to be quashed and the Assessing Officer was to examine the challan and accordingly determine the amount of deduction for tax payable. (AY-2010-11)
Haryana State Road and Bridges Development Corporation Ltd. v. CIT (2016) 388 ITR 253/ 243 Taxman 187 (P&H) (HC)
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S.254(1) : Appellate Tribunal –Power – Tribunal has the power to consider issue not raised before Commissioner (Appeals) but raised before it first time
Dismissing the appeal of revenue the Court held that the powers of the Tribunal are wide enough to consider a point which may not have been urged before the Commissioner (Appeals) as long as the question requires to be examined in the interest of justice. Held accordingly, that the Tribunal had not exceeded its jurisdiction in examining the question whether the Assessing Officer was justified in extending the time for the auditor nominated under section 142(2C) of the Income-tax Act, 1961, to submit the audit report.
PCIT v. Nilkanth Concast P. Ltd. (2016) 387 ITR 568/ 241 Taxman 194 (Delhi)(HC)
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S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake
Dismissing the petition the Court held that plea that the appeal was mistakenly withdrawn on the advice of Counsel and that the same should be restored should be backed by evidence. If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake. (WP No. 2966 of 2016, dt. 1-2-2017)
Jayant D. Sanghavi v. ITAT (Bom)(HC);
www.itatonline.org
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S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – The Tribunal is mandated to pass orders within 90 days of the hearing – Delay is not justified on the ground that ‘administrative clearance’ was obtained. The aggrieved party is entitled to seek recall of such an order [Tribunal Rule, 34(5)(c), 34(8)]
The Tribunal passed an order dated 3rd February, 2016 beyond a period of 90 days after the hearing of the appeal was concluded on 22nd September, 2015. The assessee claimed that this was in breach of Rule 34(5)(c) of the Income Tax Appellate Tribunal Rules, 1963 (Tribunal Rules) as also of the binding decision of this Court in Shivsagar Veg. Restaurant v. ACIT 317 ITR 433. It was also claimed that the delay has also resulted in prejudice to the parties as binding decisions of the Coordinate Benches though referred to were ignored in the order dated 3rd February, 2016. Allowing the petition the Court held that the Tribunal is mandated to pass orders within 90 days of the hearing – Delay is not justified on the ground that ‘administrative clearance’ was obtained. The aggrieved party is entitled to seek recall of such an order. (W.P. No. 2889 of 2016, dt. 12-1-2017)(AY. 2009-10)
Otters Club v. DIT (E) (Bom)(HC);
www.itatonline.org
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S.260A : Appeal – High Court – Rule of consistency – Order of Tribunal following earlier decision of Tribunal against which no appeal filed by Department – Appeal therefrom not maintainable. [S. 2(14) 45, 50C]
Where the Department had accepted the decision of the Court or the Appellate Tribunal on an issue and had not appealed against it, then a subsequent decision following the earlier decision could not be challenged. That the Department had not shown that there were any distinguishing features either in facts or in law in the present appeal from that which arose in the earlier decision of the Appellate Tribunal which was not appealed against. No question of law arose. (AY. 2007-08 )
CIT v. Greenfield Hotels and Estates P. Ltd. (2016) 389 ITR 68 / ( 2017) 77 taxmann.com 308 (Bom.)(HC)
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S.260A : Appeal – High Court –Questions which were not raised during assessment or appellate proceedings, cannot be raised first time before High Court [S.2(IA)]
Court held that where revenue had not raised issue of expenditure on income from flowers and petals of nursery during assessment proceedings and even during appeal, it could not be introduced for first time in appeal under section 260A.
CIT v. K. N. Pannirselvam (2016) 243 Taxman 219 (Mad.)(HC)
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S.260A : Appeal – High Court – Cross-objection – Appeal not registered on file of court – Cross-objection is not maintainable. [Code of Civil Procedure, 1908, O.41, R.22(4)]
The Department filed an appeal against the decision of the Tribunal. The assessee filed a cross-objection against it. The appeal was rejected for non-removal of office objection : Dismissing the cross-objection, that the appeal was never registered on the file of the Court. Under Code of Civil Procedure, 1908, O.41, R.22(4), the original appeal was required to be “withdrawn” or dismissed “for default” in order to enable the respondent to maintain its memorandum of cross-objection. The appeal was not dismissed “for default” or “withdrawn” but came to be rejected, not on the merits, but for failure to remove office objections. Compliance with office objections was a necessary process and part of the justice administration system and reflected on the party’s conduct of the case. Non-removal of objections despite repeated adjournments within the time specified signified inability or a conscious decision on the part of a litigant to not pursue the case. It was not open to the cross objector to insist, as of right, that the cross-objection must be heard notwithstanding rejection of the appeal. Therefore, since the appeal was not registered in the file of the court, the cross-objection was not maintainable. Once a case is rejected for non compliance with objections and more particularly after time is extended by the court to remove the objections within the time specified, the appellant loses his remedy of appeal. (AY. 2000-2001)
Cipla Ltd v. ACIT (2016) 387 ITR 52/ 73 taxmann.com 22 (Bom.)(HC)
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S.260A : Appeal – High Court – Territorial jurisdiction of Court – High Court exercising territorial jurisdiction over situs of Assessing Officer has jurisdiction to hear the appeal
The assessee’s registered office was at Dharamshala in Himachal Pradesh. For the Assessment Year 2008-09, notices under sections 142(1) and 143(2) of the Income-tax Act, 1961 were issued to the assessee and the assessment order was passed by the Assessing Officer at Dharamshala. The appeal against the order was filed by the assessee before the Commissioner (Appeals) at Shimla and was allowed. Both the assessee as well as the Department filed cross appeals before the Tribunal at Chandigarh which dismissed the appeal of the Department. On appeal to the Punjab and Haryana High Court : Held, that the Punjab and Haryana High Court had no territorial jurisdiction to adjudicate upon the dispute over an order passed by the Assessing Officer at Dharamshala, Himachal Pradesh. Since the initial process of assessment was started at Dharamshala and the final assessment was made by the Assessing Officer at Dharamshala, Himachal Pradesh, the Punjab and Haryana High Court lacked jurisdiction to adjudicate the matter. (AY. 2008-09)
CIT v. Tibetan Children’s Village. (2016) 388 ITR 126 (P&H) (HC)
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S.263 : Commissioner – Revision of orders prejudicial to revenue – Limitation – Reassessment in respect of items other than item sought to be revised by Commissioner – Period of limitation begins from original assessment – Not from date of reassessment in which item was not dealt with [Ss. 143(3), 147, 148]
Allowing the petition the Court held that the reassessment order was not for review or reassessment of the entire case but only in respect of a particular item. In all other respects, the original assessment order was maintained, and addition made by reassessment order dated March 26, 2015 was added in income assessed in the original assessment order. Though the notice under section 263(1) of the Act referred to the reassessment order, in fact it referred to a discrepancy in the regular assessment order dated October 31, 2011, wherein the incentive of value added tax from Maharashtra Government received by the assessee was allowed to be deducted. This incentive had no concern with the reassessment proceedings in the order dated March 3, 2015. Since the notice issued by the Principal Commissioner was in reference to a discrepancy in the original assessment order dated October 31, 2011 and not the reassessment order dated March 26, 2015, the limitation would run from the date of the regular order of assessment and therefore, the notice was barred by limitation prescribed under section 263(2) of Act, 1961. (AY. 2007-08)
L G Electronics India P. Ltd. v. P. CIT (2016) 388 ITR 135 (All.)(HC)
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S.264 : Commissioner – Revision of other orders – Mistake in tax assessment, even if due to assessee’s mistake, could be corrected in exercise of Commissioner’s revisional powers [Ss. 17(2), 115WA, 143(3)]
The assessee was employed as a General Manager by ONGC, India. ONGC reimbursed conveyance maintenance and repair expenditure (CMRE) and uniform allowance expenditure to the assessee. The Assessing Officer added on 20 per cent of CMRE and 100 per cent on the uniform reimbursement expenses in the income of the assessee. On revision petition before the Commissioner, the assessee argued that the employer ONGC had treated the benefit as fringe benefit under section 115WA and had paid tax accordingly, which was accepted by the Assessing Officer. Thus, the assessee could not be asked to pay tax again because it would amount to double taxation. The Commissioner rejected the revision petition on the ground that the Commissioner in similar cases had confirmed similar disallowance. On petition before the High Court:; allowing the petition the Court held that mistake in tax assessment, even if due to assessee’s mistake, could be corrected in exercise of Commissioner’s revisional powers. Thus, in the result, impugned order dated 22-9-2011 passed by the Commissioner is set aside. The disallowance of 20 per cent of the CMRE benefit and 100 per cent of the uniform allowance made in case of the petitioner by the Assessing Officer is reversed. (AY. 2007-08)
Kamlesh K. Singhal General Manager (MM) v. CIT (2016) 389 ITR 247 / 243 Taxman 250 (Guj.)(HC)
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S. 271(1)(c) : Penalty – Concealment – Revised return – Amount disclosed in the reived return – Levy of penalty was held to be not valid [Ss. 139(1), 153A]
The High Court had to consider the interpretation and application of Section 271(1)(c) of the Act and Explanation 5 thereto. Two broad issues arose for consideration in this regard:
(i) Whether under section 271(1)(c) as it stood prior to the insertion of Explanation 5, levy of penalty is automatic if return filed by the assessee under section 153A of the Act discloses higher income than in the return filed under section 139(1)?
(ii) What would be the position of law after insertion of Explanation 5 and whether it is attracted in the facts of this case?
Dismissing the appeal of the revenue the Court held that the word “concealment – inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of
non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income.
In this case, the AO in his order noted that the disclosure of higher income in the return filed by the assessee was a consequence of the search conducted and hence, such disclosure cannot be said to be “voluntary”. Hence, in the AO’s opinion, the assessee had “concealed” his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has “concealed” his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty. (ITA No. 463/2016 & CM No. 2660/2016, dt. 9-2-2017)(AYs. 2005-06, 2006-07)
PCIT v. Neerj Jindal (Delhi)(HC);
www.itatonline.org
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S.271(1)(c) : Penalty – Concealment – If the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied [S. 260A]
Dismissing the appeal of the revenue, If the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied. The Court also held that the argument of the Dept that CIT v. Nayan Builders and Developers (2014) 368 ITR 722 (Bom.) does not lay down this proposition is not correct. (ITA No. 1498 of 2014, dt. 17–2017)( AY. 2006-07)
CIT v. Advaita Estate Development Pvt. Ltd. (Bom.) (HC);
www.itatonline.org
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S. 271(1)(c) : Penalty – Concealment – Failure by the AO to specify in section 274 notice whether the penalty is being initiated for ‘furnishing of inaccurate particulars of income’ or for ‘concealment of income’ is fatal. It reflects non-application of mind and renders the levy of penalty invalid
Dismissing the appeal of revenue, the Court held that failure by the AO to specify in the section 274 notice whether the penalty is being initiated for ‘furnishing of inaccurate particulars of income’ or for ‘concealment of income’ is fatal. It reflects non-application of mind and renders the levy of penalty invalid. Followed CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar.) (HC). ( ITA No. 1154 of 2014, dt. 5-1-2017)
CIT v. Samson Perinchery (Bom)(HC);
www.itatonline.org
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S.271(1)(c) : Penalty – Concealment – Penalty cannot be levied in a case where the assessee has relied on legal opinion of a professional and there is no tax impact i.e., the loss disallowed in year one is allowed set-off in a later year
Dismissing the appeal of revenue, the Court held that the decision of the Tribunal that the respondent ought not to be made liable for penalty cannot be said to be perverse or absurd. The Tribunal noted that the respondent had claimed the set-off of its business income of
₹ 1.85 crores against the brought forward business losses of the earlier years on the basis of a legal opinion received from a leading firm of Chartered Accountants. The Tribunal found nothing clandestine in the manner in which the opinion was sought. In any event, even our attention was not invited to anything which suggests any mala fides either in the obtaining of the opinion or otherwise. Further, the loss was allowed to be carried forward in the assessment year, namely, Assessment Year 2002-03. Inter alia, in these circumstances, the Tribunal found as a matter of fact that the letter dated 13-12-2006 was voluntary and not merely because a notice had been issued under section 143(2) of the Act. This is a perception on the basis of the facts of the case and warrants no interference. In these circumstances including in view of the fact that there is no financial implication on account of the change in the basis of the claim, no substantial question of law arises in this case.(ITA No. 347-2015, dt. 30-11-2016) (AY. 2004-05)
PCIT v. Atotech India Ltd. (P & H)(HC);
www.itatonline.org
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S.271(1)(c) : Penalty – Concealment – Business connection – Bona fide claim that refund of taxes was held to be not taxable – Levy of penalty was held to be not justified [S.9(1)(i)]
On revenue’s appeal to the High Court the Court held that the two authorities have concurrently come to a finding of fact that the conduct of the respondent assessee was bona fide and its claim that amount received from its affiliated companies on account of C-ICT and Corporate Services is not taxable was based on an interpretation of DTAA. It is a settled position of law that where the issue is debatable then mere making of a claim on the basis of a particular interpretation would not lead to an imposition of penalty. Bearing in mind that for the earlier assessment years the respondent assessee claimed and had been granted refund of taxes deducted at source by the affiliated companies in respect of the payment received by it for Corporate Services and C-ICT Services would also establish that the claim made by the respondent assessee that the income received is not chargeable to tax was a bona fide claim. On facts there is a concurrent finding of there being no concealment of income or furnishing an inaccurate claim of income. In view of the above concurrent finding of fact by the Commissioner (Appeals) and the Tribunal, the proposed question does not give rise to any substantial question of law and, accordingly, appeal was dismissed. (AY. 2006-07)
DIT v. Koninklijke-DSM-NV (2016) 243 Taxman 115 (Bom.)(HC)
