- S.4 : Charge of income-tax – Method of accounting – stock in trade – Development of property – Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching principle –Accounting Standard-9 [Ss. 2(47), 5, 145]
The assessee was engaged in the business of development of property. The Assessing Officer held that the revenue should be recognised at every stage of receipt of sale consideration which was upheld by the CIT(A). On appeal allowing the appeal the Tribunal held that provision relating to deemed transfer as in case of capital assets not applicable to transactions of stock-in-trade. Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching required to be done on accrual basis in respect of income offered to tax. Matter remanded. (AY. 2007-08)
S. K. Properties v. ITO (2017) 53 ITR 607 (Bang) (Trib.)
- S.4 : Charge of income-tax – Accrual – Mercantile system of accounting – Retention money not to be taken into account in computing profits [S. 5, 145]
Certain percentage of contract price retained by customers to be paid on satisfactory performance of contract. Assessee had no right to claim any part of retention money till verification of satisfactory execution of contract therefore retention money not to be taken into account in computing profits. (AYs. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)
- S.4 : Charge of income-tax – Capital or revenue – Share warrants – Receipt of advance amount was forfeited on account of non-payment was a capital receipt
Advance received against share warrants were forfeited on account of non-payment was a capital receipt. (AY. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)
- S.4 : Charge of income-tax – Capital or revenue – Sales tax remission scheme is capital receipt – Subsidy cannot be reduced from actual cost for the purpose of depreciation [S. 32]
Subsidy received as per sales tax remission scheme is capital receipt. The amount is receivable only after commencement of production would not alter character of subsidy. The referable to cost of fixed assets cannot be the ground from reducing subsidy from actual cost for purposes of depreciation. (AY. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)
- S.4 : Charge of income-tax –Accrual – Banking company – Interest on non-performing assets cannot be assessed on accrual basis. [Ss.5, 145]
Dismissing the appeal of the revenue, the Tribunal held that; Interest on non-performing assets cannot be assessed on accrual basis. (AYs. 2009-10, 2010-11)
ACIT v. Tambaram Co-op. Urban Bank Ltd. (2017) 53 ITR 1 (Chennai)(Trib.)
- S.4 : Charge of income-tax –Amount cannot be taxed in hands of assessee merely because offered to tax [S.119, Constitution of India, Article 265]
Amount cannot be taxed in hands of assessee merely because offered to tax. Office memorandum to Ministry of Civil Aviation is no authority in law which cannot be basis to hold an amount taxable. (AY. 2008-09)
Add. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib)
- S.4 : Income chargeable to tax – Diversion of income by overriding title – Passenger service fee – security component – Surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity which is not taxable [Ss. 2(24), 5]
Passenger service fee and security component, surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity therefore not taxable. (AY. 2008-09)
Addl. CIT v. Mumbai International Airport P. Ltd. v. (2017) 53 ITR 169 (Mum.) (Trib.)
- S.9(1)(i) : Income deemed to accrue or arise in India – Business income – Consideration received for licensing of software programmes on the facts of the case cannot be assessed as “royalty” it is to be assessed as business income – DTAA – India – Netherland [Ss. 9(1)(vi), 90(2), Article 7, 12]
On appeal by the assessee to the Tribunal HELD allowing the appeal:
(i) A parallel to practical, every-day examples would be useful. Take, for instance, the example of when one buys a book from Amazon for their Kindle device. In this case, Amazon can transfer the intellectual property of the book to multiple other users simultaneously, but each single transaction would still be a sale. This would also be true of the example of a music CD. The CD is the ‘medium’ by which the intellectual property, viz., the songs, passes to the buyer. The manufacturer can sell it to an end-user or to an intermediate retailer. The same song can be put on countless CDs. This too is a sale. When one buys a car, one buys the technology that is contained in the body of the car; the body is just the medium. On ITunes, when one buys a song, the song is transferred into a format which is accessible to the buyer, a proprietory format that needs a special device or software. Yet it is a sale. Limitless ITunes users can buy the song simultaneously. This is a sale to each of them. In the case of CD containing software, say for example Microsoft Word, the medium would again be the CD holding the intellectual property, which would be the software technology. This would also be a sale, despite the fact that this same software technology could be put on unlimited number of CDs and sold to multiple users simultaneously. Effective control of that particular software on that one CD is passed to the buyer. The buyer could use it, alienate it, destroy it, and do anything at all that he likes with it. If he made illicit copies of it, this would constitute infringement and that in itself would not make the transfer of the software on a CD a service. Even if the buyer transferred this non-transferable software, it would amount to a breach of contract provided in the CD package, just as it would under Monsanto India’s sub-licensing agreement. However, this does not do anything to disqualify the transaction itself from being a sale. These are all sales.
(ii) A perusal of the provisions of the Copyright Act reveals that the computer software is included in the definition of literary work and is covered under the purview and scope of copyright. The exclusive rights to do or authorise the doing of certain acts as mentioned in clause (a) and clause (b) of section 14 vests in the owner of the work such as to reproduce the work, to issue copies, to make translation or adaptation, to sell or give on commercial rental in respect of a work. The internal use of the work for the purpose it has been purchased does not constitute right to use the copy right in work. Our above also finds support from certain other provisions of the Copyright Act.
(iii) In absence of transfer of rights to authorise doing of certain acts as mentioned in sections 2, 13 & 14 of the Copyright Act it cannot be said that there was transfer of copyright. Therefore, in view of these judgments payment on sale of software shall not fall within the definition of ‘royalty’, as per DTAA.
(iv) If we analyse and compare various provisions of the Copyright Act with the relevant clauses of the master agreement, it is noted that the said agreement does not permit HLL to carry out any alteration or conversion of any nature, so as to fall within the definition of ‘adaptation’ as defined in Copyright Act, 1957. The right given to the customer for reproduction was only for the limited purpose so as to make it usable for all the offices of HLL in India and no right was given to HLL for commercial exploitation of the same. It is also noted that the terms of the agreement do not allow or authorise HLL to do any of the acts covered by the definition of ‘copyright’. Under these circumstances, the payment made by HLL cannot be construed as payment made towards ‘use’ of copyright particularly when the provisions of Indian Income-tax Act and DTAA are read together with the provisions of the Copyright Act, 1957.
(iv) It was also argued by the Revenue that provisions of section 9(1)(vi) should be applied, and if these are so applied, then the sale of software shall be covered under Explanation 4 to section 9(1)(vi), and, therefore, the same should be brought to tax as such. In this regard also, it is noticed by us that no corresponding amendment has been made in the provisions of the DTAA. Under these circumstances, the assessee would be entitled to the provisions, which are more beneficial to the assessee out of the provisions of Indian Income-tax Act and DTAA between India and the Netherlands, in view of provisions contained in section 90(2) of the Act. We have already held that as per the provisions of India-Netherlands DTAA, the amount received by the assessee on account of sale of software would not fall within the definition of ‘royalty’ as provided in Article 12(4) of the DTAA. Under these circumstances, it will not be legally permissible for us to refer to the provisions of the Act to decide the taxability of this amount in the hands of the assessee in India. Thus, in our considered view, based upon the facts and circumstances of the case and legal position as discussed above, the impugned amount received by the assessee is in the nature of business profits assessable under Article 7 of India-Netherlands DTAA and would not be taxable as ‘royalty’ under Article 12 of the DTAA. (I.T.A. Nos. 83 & 84/Mum/2007, dt. 21-12-2016)(AY. 1998-99 & 1999-2000)
Qad Europe B. V. DDIT (Mum.) (Trib.); www.itatonline.org
- S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – No operations of the business of commission agent is carried on in India – Not liable to deduct tax at source [Ss.5(2), 9(1)(vii), 195, 201(1), 201(IA)]
Dismissing the appeal of revenue the Tribunal held that no operations of the business of commission agent is carried on in India, the Explanation 1 to Section 9(1)(i) takes the entire commission income from outside the ambit of deeming fiction under section 9(1)(i), and, in effect, outside the ambit of income ‘deemed to accrue or arise in India’ for the purpose of Section 5(2)(b), the assessee is not liable to deduct tax at source. (AY 2010-11)
DCIT v. Welspun Corporation Limited ( 2017) 147 DTR 113 (Ahd.)(Trib.)
- S. 9(1)(i):Income deemed to accrue or arise in India – Business connection – Tribunal held that 2.6% of the total sales for working out the profits attributable to the PE in India as against 3.5% which was applied by the Assessing Officer- Reassessment was upheld – Interest u/s. 234B was deleted-DTAA-India-USA [Articles 5, 7].
Deciding the Group matters of the assessee, the Tribunal dismissed the grounds of the assessee on reassessment, and held that 2.6% of the total sales for working out the profits attributable to the PE in India as against 3.5% which was applied by the Assessing Officer. Entire law explained on whether the deputation of personnel by a foreign company to assist the Indian subsidiaries in negotiations, marketing etc. leads to a “fixed place PE” or a “Dependant Agent PE” under Article 5 of the DTAA and if so, the manner in which the profits of the foreign company are attributable to operations in India. Interest levied u/s. 234B was directed to be deleted. [ITA No. 671/Del/2011, dt. 27-1-2017)(AY. 2001-02)
GE Energy Parts Inc v. ADIT (Delhi)(Trib.);
www.itatonline.org
- S.9(1)(i) : Income deemed to accrue or arise in India – Non-resident – Undersea cable for providing dedicated bandwidth to assessee – Installation beyond territory of India and no operations carried out in India, income did not accrue or arise in India
Dismissing the appeal of the revenue, the Tribunal held that undersea cable for providing dedicated bandwidth to assessee – Installation beyond territory of India and no operations carried out in India, income did not accrue or arise in India. (AYs. 2002-03, 2003-04 )
CIT v. GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
- S.9(1)(i) : Income deemed to accrue or arise in India – Non-resident – Royalty – Transmission of call data and its effective management, Consideration paid to non-resident parties is not royalty
Dismissing the appeal of the revenue, the Tribunal held that non-resident rendering services of transmission of call data and its effective management. No agreement for use or right to use any industrial, commercial or scientific equipment between non-resident and assessee, consideration paid to non-resident parties is not royalty. (AY. 2002-03, 2003-04)
CIT v. GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
- S.9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment – Special skill and knowledge of Managing Director, constituted dependent agent PE in India hence not entitle the benefit of DTAA – DTAA – India – Switzerland [S.90 Art. 5]
The Tribunal held that the assessee was relying on the special skills and knowledge of S who was also the Managing Director of Indian entity, which was carrying on similar functions. S was acting exclusively and almost exclusively for and on behalf of the assessee during the currency of contracts in question. Therefore, S constituted a dependent agent PE of the assessee in India. Assessee is not entitled to benefit of Article 5 of DTAA. Order of Assessing Officer was up held. (AY. 2008-09)
Carpi Tech SA v. ADIT (2017) 183 TTJ 264 (Chennai)(Trib.)
- S.9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services – Functional Permanent Establishment – Installation PE in India-Cannot be taxed as business income – DTAA – India – Netherlands [S.9(1)(i), 9(1)(vii), Art., 5(3), 12(2)]
Allowing the appeal of the assessee the Tribunal held that under section 4 of the Act, the charge to tax is on the total income of every person. Section 5 of the Act explains the scope of total income of every person. Section 5(2) lays down the scope of total income of every person who is a non-resident. Any income received or deemed to be received in India and any income which accrues or arises in India or is deemed to have, accrued and arisen in India shall be included in his total income. Section 9 of the Act lays down as to when income shall be deemed to have accrued or arisen in India. Section 90 of the Act provides that Central Government may enter into an agreement with the Government of any country outside India for avoidance of Double Taxation of income under the Act and under the corresponding law in force in that country. Section 90(2) provides that where such agreement exists with any country outside India, then in relation to an assessee to whom such agreement applies, the provisions of the Act, shall apply only to the extent they are more beneficial to that assessee. India and Netherlands have entered into an Agreement for Avoidance of Double Taxation (DTAA) with effect from 21-1-1989 and therefore the taxability of any income that accrues or arises in India to the assessee who is non-resident in India and a tax resident of Netherlands will have to be determined in accordance with the said DTAA. As to when a non-resident would be considered as having a PE in the other country is generally decided on the basis of the facts in each case, the criteria being the extent to which the Non-Resident has set a firm foot in the soil of the other country. If a non-resident is considered as having a Permanent Establishment (PE) in the other country then income attributable to the PE will be taxed in the other country. As to whether the income attributable to the PE alone has to be taxed in the other country or any other income which accrues to the Non-Resident in the other country having no connection with the PE, can also be brought to tax in the other country, is also laid down in the various clauses of the DTAA between countries. Available Model Conventions differ in this regard. Some provide for taxing profits/income only to the extent that they are attributable to the PE, which is referred to as “No Force of Attraction” principle. Some provide for taxing income/profits from direct transactions effected by the non-resident, provided the transactions are of the same or similar kind as that effected through the PE, which is referred to as “Limited Force of Attraction” principle. Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle. Accordingly the Tribunal held that the sale of equipment and its accessories with software embedded in the equipment cannot be taxed in the hands of the assessee as business income as the assessee does not have a PE in India to which the profits can be said to be attributable. In the circumstances, the revenue cannot bifurcate the consideration towards software and licence embedded in the equipment from the combined sale value of the equipment and accessories and seek to bring to tax the amount bifurcated for software as in the nature of “royalty” as envisaged under section 9(1)(vi) of the Act. (ITA No. 574/Kol/2014, dt. 8-2-2017)
(AY. 2010-11)
HITT Holland Institute of Traffic Technology B.V. v. DDIT ( Kol.)(Trib.);
www.itatonline.org
- S.9(1)(vii) : Income deemed to accrue or arise in India – Payment made towards various IT support services received from the holding Company and associated enterprises of the group concerns are not in the nature of Fees for Technical Services, hence not liable to deduct tax at source–DTAA-India-Canada [S.9(1)(vi), 195, Art. 12]
Dismissing the appeal of revenue ; the Tribunal held that as we have noted earlier, it is not even the case of the Assessing Officer that the assessee, i.e. recipient of services, was enabled to use these services in future without recourse to BT Canada. The tests laid down by Hon’ble Court were clearly not satisfied. The mere fact that there were certain technical inputs or that the assessee immensely benefitted from these services, even resulting in value addition to the employees of the assessee, is wholly irrelevant. The expression ‘make available’ has a specific meaning in the context of the tax treaties and there is, thus, no need to adopt the day-to- day meaning of this expression, as has been done by the Assessing Officer. Accordingly; payment made towards various IT support services received from the holding Company and associated enterprises of the group concerns are not in the nature of Fees for Technical Services, hence not liable to deduct tax at source. (AY. 2013-14)
DCIT v. Bombardier Transportation India Pvt. Ltd (2017) 146 DTR 45 (Ahd.)(Trib.)
- S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for Technical Services – Fees paid with respect to a ‘contract of work’ does not constitute “Fees for Technical Services” and consequently the assessee is not liable to deduct TDS. [S. 195, 201]
Dismissing the appeal of revenue, the Tribunal held that there is a difference between a ‘contract of work’ and a ‘contract of service’. In a ‘contract of work’, the activity is predominantly physical while in a ‘contract of service’, the dominant feature of the activity is intellectual. Fees paid with respect to a ‘contract of work’ does not constitute “fees for technical services” and consequently the assessee is not liable to deduct tax at source. (ITA No. 642/kol/2016,
dt. 4-1-2017) (AY. 2012-2013)
ITO v. Emami Paper Mills Ltd. (Kol)(Trib.);
www.itatonline.org
- S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for Technical Services – Taxability of “Other income” under DTAA – Only income not covered by specific Articles (e.g. alimony, lottery income, gambling income, damages etc.) can be charged as “Other Income”, Fees for Technical Services cannot be taxed as other income – DTAA–India–Thailand- Mauritius [S.90 , Art., 6 to 21, 22]
Dismissing the appeal of the revenue, the Tribunal held that income which is not chargeable under specific provisions of Articles 6 to 21 can be taxed under the residuary provision. Only income not covered by specific Articles (e.g., alimony, lottery income, gambling income, damages etc.) can be charged as “Other income”. Fees for Technical Services cannot be taxed as other income. (ITA No. 673,840,748, 749/Chny/2015, dt. 31-1-2017)(AYs. 2011-12, 2012-13)
DCIT v. Ford India Limited (Chennai)(Trib.)
www.itatonline.org
- S.10(4) : Exemption – Interest earned on non-resident external account is entitled exemption [S.10(4)(ii)]
Assessee a non-resident on deputation to India. Interest earned on non-resident external account. Assessee entitled to exemption. (AYs. 2008-09, 2010-11)
Venkatesh Satyaraj v. DCIT (2017) 53 ITR 406 (Mum.) (Trib.)
- S.10(38) : Long term capital gains from equities – Penny stocks –Shares – Transactions cannot be held to be bogus. [S. 45, 68]
Dismissing the appeal of revenue, Tribunal held that the fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus. (ITA No. 1442/Ahd/2013 & Co. No. 209/Ahd/2013., dt. 6-1-2017)(AY. 2005-06)
ACIT v. Vineet Sureshchandra Agarwal (Ahd.)(Trib.);
www.itatonline.org
- S.10(38) : Long term capital gains from equities – Penny stocks- Shares – Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault [Ss.45, 68]
Allowing the appeal of assessee the Tribunal held that, capital gains from penny stocks – Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault. CIT v. Carbo Industrial Holdings Ltd. (2000) 244 ITR 422 (Cal.)(HC).(ITA No. 1213/Kol/2016, dt. 11-1-2017)(AY. 2005-06)
Surya Prakash Toshniwal HUF v. ITO ( Kol.)(Trib.);
www.itatonline.org
- S.11 : Property held for charitable purposes – statutes of the assessee in the earlier years, no change in facts and circumstances of the case – Entitled to exemption [S.12A]
Assessee formed with the main object of town planning having been granted registration under S. 12A and the revenue having accepted in the earlier years that the activities carried out by the assessee were charitable in nature, it is entitled to exemption under S. 11 in the relevant assessment year. (AY. 2009-10)
ITO v. Moradabad Development Authority (2017) 146 DTR 120 (Delhi)(Trib.)
- S.12AA : Procedure for registration – Trust or institution – If the object of the trust is charitable, registration cannot be denied [S.80G]
Allowing the appeal the Tribunal held that if the object of the trust is charitable registration cannot be denied. Accordingly, the Commissioner was directed to grant registration to the assessee under section 12AA and also grant exemption certificate under section 80G of the Act.
Abacus Foundation v. CIT (2017) 53 ITR 629 (Kol.) (Trib.)
- S.12AA : Procedure for registration – Trust or institution – The activities of Banquet Hall hiring, hospitality (restaurants) and permit room (bar) are prima facie in the nature of carrying on trade, commerce, or business, the DIT is required to conduct detailed enquiry and examination as to the nexus between the activities and trade, commerce or business, matter was set aside to decide de novo [Ss.2(15), 11, 12A]
The DIT(E) cancelled the registration by invoking newly inserted proviso to Section 2(15) of 1961 Act by holding that the assessee’s main object is not for advancement of any other object of general public utility as the assessee is carrying on the activities which are in the nature of trade, commerce or business for consideration therefore, in view of amended provisions of Section 2(15) of 1961 Act. The assessee is not entitled for exemption u/s. 11 of 1961 Act. On appeal by the assessee to the Tribunal held that the activities of Banquet Hall hiring, hospitality (restaurants) and Permit Room (Bar) are prima facie in the nature of carrying on trade, commerce, or business for consideration and are hit by the proviso to s. 2(15). If the receipts from these activities are in excess of the minimum prescribed threshold limit, the DIT is required to conduct detailed enquiry and examination as to the nexus between the activities and trade, commerce or business, following the Hon’ble Bombay High Court in a recent decision in DIT(E) v. North Indian Association, (2017) 79 taxmann.com 410 (Bom.) dated 14-2-2017, wherein, a significant observations in context of amended provisions of Section 2(15) of 1961 Act in para 9 was made contemplating that if the transactions are in the nature of trade, commerce and business are consistent and continuous/regular basis and exceeds threshold limit, as prescribed by statute u/s. 2(15) of 1961 Act, then it is a matter of probe/investigation to come to conclusion that the activities of the trust/institution is not genuine, in the light of amended provisions of Section 2(15) of 1961 Act. Accordingly the matter was set side to decide de novo determination of the issue on merits in the light of the amended Section 2(15) of the Act read with Section 11 of the Act, considering the decision of Hon’ble Bombay High Court in the case of DIT(E) v. North Indian Association (ITA No.602/Mum/2012 & ITA No.4638/Mum/2013, dt. 18-4-2017)(AY. 2009-10)
MIG Cricket Club v. DIT (E) (Mum.)(Trib.) :
www.itatonline.org
- S.14A : Disallowance of expenditure – Exempt income – PMS brokerage fee and other incidental expenses for making investment into shares have not been debited in the P & Loss account – No disallowance can be made
Assessing Officer disallowed the expenses merely following the formula u/s. 14A read with R. 8D. Assessee contended that the expenses relating to investment was debited to personal account which was deducted from capital hence no disallowance can be made. CIT(A) accepted the submission of assessee and deleted the addition. On appeal by revenue; dismissing the appeal of revenue the Tribunal held that PMS brokerage fee and other incidental expenses for making investment into shares have not been debited in the P & L account, hence no disallowance can be made. (ITA No. 3217/Mum/2014 & ITA No. 1411/Mum/2015,
dt. 25-1-2017) (AY. 2010-11, 2011-12)
ACIT v. Sachin R. Tendulkar (Mum.)(Trib.);
www.itatonline.org
- S.14A : Disallowance of expenditure – Exempt income – Disallowance under the Rule 8D is automatic, unless the AO examines the accounts and records the finding why the assessee’s claim/computation is not proper [R. 8D]
Allowing the appeal of the assessee the Tribunal held that Disallowance under the Rule 8D is automatic, unless the AO examines the accounts and records the finding why the assessee’s claim/computation is not proper. (ITA No. 3053/Mum/2015, dt. 3-3-2017)(AY. 2011-12)
Shapoorji Pallonji & Co. Ltd. v. DCIT (Mum.)(Trib.);
www.itatonline.org
- S.14A : Disallowance of expenditure – Exempt income- Securities held as stock in trade has to be considered for computing disallowance, however, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration. [R. 8D]
Disallowance u/s. 14A & Rule 8D has to be made even in respect of securities that are held as stock-in-trade by the assessee. However, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration. (ITA No.681 & 824/Kol/2015,
dt. 3-3-2017.)(A.Y. 2010-11)
Kalyani Barter (P) Ltd. v. ITO (Kol.)(Trib.) :
www.itatonline.org
- S.14A : Disallowance of expenditure – Exempt income – Assessing Officer not recording reasoning for his dissatisfaction with regard to claim of assessee. Authorities ignoring mandate of section 14A. Disallowance was held to be not sustainable [R. 8D]
Assessing Officer not to apply method prescribed by rules straightaway without considering whether claim made by assessee in respect of such expenditure is correct. Satisfaction of Assessing Officer must be arrived at on an objective basis. Assessing Officer not following guidelines of objective satisfaction. Assessing Officer not recording reasoning for his dissatisfaction with regard to claim of assesse. Authorities ignoring mandate of section 14A. Disallowance was held to be not sustainable.
(AY. 2009-10)
JCIT v. J.M. Financial Services Ltd. (2017) 54 ITR 120 (Mum.) (Trib.)
- S.14A : Disallowance of expenditure – Exempt income-No borrowed funds utilised for investment – No disallowance could be made [R. 8D]
Source of investment out of grants received from Government of Karnataka or out of profits earned by assessee. Assessing Officer failing to show direct nexus between borrowed funds and tax-free investments, no disallowance could be made. (AY. 2008-09, 2010-11)
JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd. (2017) 54 ITR 425 (Bang.) (Trib.)
- S.14A : Disallowance of expenditure – Exempt income – Satisfaction was not recorded, disallowance cannot be made. [R. 8D]
Assessing Officer has not recording satisfaction as to correctness of claim or otherwise having regard to accounts of assessee. Disallowance was deleted. (AY. 2008-09)
Addl. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib.)
- S.14A : Disallowance of expenditure – Exempt income –Assessing Officer to consider only those investments which yielded dividend income during previous year, exclude investments which were strategic investments, if own funds sufficient to cover investment, presumption that assessee used in its own funds. [R. 8D]
Assessing Officer not justified in including closing balance of investments in mutual fund while calculating average value of dividend earning investment. Assessing Officer to consider only those investments which yielded dividend income during previous year. Assessing Officer to exclude investments which were strategic investments. If own funds sufficient to cover investment, presumption that assessee used in its own funds. (AY. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)
- S.28(i) : Business loss – The loss on sale of shares of a wholly –owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. [S.37(1)]
Allowing the appeal, the Tribunal held that; The loss on sale of shares of a wholly-owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. (ITA No. 223/Coch/2015 and 189/Coch/2016, dt. 10-1-2017) (AYs. 2010-2011 and 2011-12).
Apollo Tyres ltd. v. ACIT (Cochin)(Trib.);
www.itatonline.org
- S.28(i) : Business loss – Forward contracts on foreign exchange – Loss not a speculation loss
Assessee making gains and loss on account of revaluation and claiming net loss is not a speculation loss. (AY. 2005-06, 2006-07, 2008-09)
ACIT v. Dow Agro sciences India Private Limited (2017) 53 ITR 590 (Mum.)(Trib.)
- S.28(i) : Business loss – Expenditure for provision of liability regarding exchange rate fluctuation was held to be revenue loss [S. 28(i)]
The Tribunal held that the liability was incurred on account of raw material components and hence it was revenue loss. (AY. 2004-05)
ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27 (Delhi)(Trib.)
- S.28(i) : Business loss – Amount fraudulently withdrawn from the account was held to be allowable as business loss
The Tribunal held that AO had not disputed this fact that there was a loss as a result of unauthorised withdrawals made from the bank account in the course of business of the assessee and once such was the position then such sum was eligible for deduction. (AY. 2004-05, 2005-06, 2006-07 )
ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27 (Delhi)(Trib.)
- S.32: Depreciation – Airport operator – Upfront fee for development and modernise airport and collect charges was held to be intangible asset and entitled depreciation
Payment for licence to develop and modernise airport and collect charges is intangible asset and is entitled to depreciation.(AY. 2008-09)
Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.)(Trib.)
- S.32 : Depreciation – Airport operator – Taxiways and aprons – Depreciation is allowable at 15%
Depreciation on taxiways and aprons is allowable at fifteen per cent. (AY. 2008-09)
Addl. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib.)
- S. 32 : Depreciation – Additional depreciation – Cutting & Polishing of diamond amounts to manufacture and eligible for additional depreciation [S.32(1)(iia)
The Tribunal held that cutting and polishing of diamonds amounts to manufacture eligible for additional depreciation under section 32(1)(iia). (AY. 2008-09)
ACIT v. D. A. Jhaveri (2017) 183 TTJ 447 (Mum.)(Trib.)
- S.35 : Scientific research expenditure – Donation to Institute of Life Sciences for research project was held to be not deductible as commercial expediency of donation was not established [S.37(1)]
Donation to Institute of Life Sciences for research project was held to be not deductible as commercial expediency of donation was not established. (AYs. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.35 : Scientific research expenditure – Weighted deduction – Merger – Post-merger expenditure cannot be reduced.
[S. 35(2AB)]
Company merged with assessee incurring expenditure on scientific research. Post-merger all activities of company also activities of assessee. Facility and expenditure approved by prescribed authority. The AO disallowed the claim. Tribunal held that; in-house research and development facility of the assessee was approved by the prescribed authority as provided under section 35(2AB). The expenditure approved by the prescribed authority included a sum of ₹ 1,054.314 lakhs on account of PPL. A copy of Form 3CL was placed on record. By virtue of merger with effect from June 1, 2006, all the activities of the PPL were also the activities of the assessee. As the facility and also the expenditure had already been approved by the relevant authority, post-merger, the expenditure could not be reduced while allowing the deduction under section 35(2AB). Therefore the deduction under section 35(2AB) was allowable even on the expenditure incurred on PPL after January 1, 2006 i.e. the date of its merger. (AY. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.35 : Scientific research expenditure – Clinical trials – Assessee having research and development centre but not approved by prescribed authority Assessee entitled to deduction under section 35(1) and hundred per cent. Deduction under section 35(1)(iv). (AY. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.36(1)(iii) : Interest on borrowed capital – Interest free loans funds, presumption is that such funds came from interest free funds, disallowance of interest was not justified
When the assessee is having sufficient interest free funds and interest-free loans far below interest-free funds, presumption that such investments came out of available interest-free funds and not out of interest bearing funds or overdraft account. Assessee has no onus to prove that advance was not from borrowed funds. Disallowance of interest was not justified. (AY. 2010-11)
Kushalbagh Marbles P. Ltd. v. JCIT (2017) 53 ITR 134 (Jodh.)(Trib.)
- S.36(1)(iii) : Interest on borrowed capital – Investing borrowed funds through its sister concern in shares as stock-in-trade, interest was held to be allowable
The assessee invested the borrowed funds through its sister concern in the shares of VNL. Therefore, the shares in VNL were acquired in the ordinary course of business and were correctly disclosed as stock-in-trade in the balance-sheet, hence the interest paid on borrowed capital was held to be allowable.
Divakar Solar Systems Ltd. v. Dy. CIT (2017) 53 ITR 516 (Kol.)(Trib.)
- S.37(1) : Business expenditure – Business of giving rigs on hire for drilling oil has been set up in earlier years, mobilisation expenses is to be allowed as revenue expenditure
Where assessee imported new rigs to give them on hire for oil drilling and incurred mobilization expenses thereupon to make them operational, said expenses were of revenue nature as rigs were acquired as expansion of existing business and no new business had been set up nor any new source of income had come to existence. (AY. 2009-10)
Dewanchand Ramsaran Industries (P) Ltd. v. ACIT (2017) 146 DTR 25 (Mum.)(Trib.)
- S.37(1) : Business expenditure – Pharma Company – Advertisement and sales promotion expenses – Expenses incurred by assessee could not be reckoned as freebies given to doctors, thus expenditure being purely for business purpose had to be allowed as business expenditure
Expenditure incurred by assessee Pharma Company for customer relationship management, key account management, gift articles, free medicine sample, advertisement and sales promotion was purely for brand recognition and could not be considered as freebies given to doctors. Hence, the same is allowable as business expenditure and were not impaired by Explanation 1 to section 37(1). (AY. 2010-11)
Dy. CIT v. PHL Pharma (P) Ltd. (2017) 146 DTR 149 (Mum.)(Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Stock Options (appreciation rights) are intended to motivate employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse
Allowing the appeal of assessee the Tribunal held that Stock Options (appreciation rights) are intended to motivate employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse. (ITA No. 2283/Del/2013, dt. 4-1-2017)(AY.
2008-09)
Religare Commodities Ltd. v. ACIT (Delhi)(Trib); www.itatonline.org
- S.37 (1) : Business expenditure – Amount paid to State authority – Not payment for infringement or irregularity of law, payment cannot be disallowed. [S. 37(1), Expln., Maharashtra Housing and Area Development Act, 1976 ]
The construction expenses incurred for alleged bogus tenants was disallowed on the ground that the payments was in contravention of, Maharashtra Housing and Area Development Act, 1976. On appeal the CIT(A) held that the proportionate cost of construction was to be disallowed in the year when project was completed. On appeal Tribunal held that since the project was not completed by the assessment year 2008-09, no profit could be assessed for that year therefore no disallowance can be made for the relevant year. The Tribunal also held that expenditure incurred was legal and accordance with law and the amount under Maharashtra Housing and Area Development Act, 1976 was also in the nature of cost of construction and admissible as business expenditure. The payment was either in the nature of fine nor in the nature of penalty. It was not attributable to any irregularity or infringement of law. Therefore the claim was admissible for deduction as
business expenditure. (AYs. 2004-2005 to
2011-2012)
ACIT v. Layer Exports P. Ltd.(2017) 53 ITR 416 (Mum.)(Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Renovation of road is held to be revenue expenditure
Treatment as capital in books of account not relevant, refurbishment expenses of terminals of airport is held to be revenue expenditure. (AYs. 2008-09)
Addl. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib.)
- S.37(1) : Business expenditure – Penalty – Demurrage charges are in the form of punitive charges not illegal payment or payment opposed to public policy, payment being under contractual obligation, allowable as deduction
Dismissing the appeal of the revenue the Tribunal held that demurrage charges are in the form of punitive charges not illegal payment or payment opposed to public policy, payment being under contractual obligation, allowable as deduction. (AY. 2010-11)
Dy. CIT v. Ripley and Co. Ltd. (2017) 53 ITR 541 (Kol.)(Trib.)
- S.37(1) : Business expenditure – Employees stock option scheme – Discount on issues of option allowable – Assessing Officer was directed to work out deduction
Discount on issue of option on employees stock option scheme, the Assessing Officer was
directed to work out the deduction. (AY.2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.37(1) : Business expenditure Capital or revenue – Process of research includes trial run of new drug, experiments on new drug not new line of business, expenses allowable as revenue
Process of research includes trial run of new drug, experiments on new drug not new line of business, expenses allowable as revenue.
(AY. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.)(Trib.)
- S.37(1) : Business expenditure –Capital or revenue – ERP package for recording of manufacturing and accounting is held to be revenue expenditure
ERP package for recording of manufacturing and accounting is held to be revenue expenditure. (AYs. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd) (Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Laying of roads was held to be revenue expenditure
Tribunal held that Laying of roads, facilitating assessee to carry on business effectively which is revenue expenditure. (AYs. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Website development expenses was held to be revenue expenditure
Website development expenses was held to be revenue expenditure, it does not create an asset but only to provide a means for disseminating information about assessee. (AY. 2002-03 )
ITO v. All India Technologies Ltd. (2017) 53 ITR 620 (Kol.) (Trib.)
- S.37(1) : Business expenditure – Liquor business – Privilege fee or special privilege fee paid to Government is held to be deductible
Privilege fee or special privilege fee paid to Government is held to be deductible. (AY. 2010-11)
A.P. Beverages Corporation Ltd. v. DCIT (2017) 54 ITR 228 (Hyd.) (Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Setting up of business – Expenses incurred after business set-up and before commencement of business is revenue expenditure
Dismissing the appeal of the revenue, the Tribunal held that expenses incurred after business set-up and before commencement of business was held to be revenue expenditure. (AY. 2002-03, 2003-04)
CIT v. GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
- S.37(1) : Business expenditure – Contribution to Chief Ministers Fund deductible
Contribution to Chief Minister Fund is held to be deductible. (AY. 2008-09, 2010-11)
JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd. (2017) 54 ITR 425 (Bang.) (Trib.)
- S.37(1) : Business expenditure – Capital or revenue – Project expenses written off is held to be allowable as revenue expenditure
The Tribunal held that the expenditure incurred on the project which was abandoned at the stage of work in progress did not result in creation of any new asset or an advantage of enduring nature and therefore, the said expenditure which has been written off in the books of account are allowable as revenue expenditure. (AY. 2011-12)
Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 (Jp.)(Trib.)
- S.40(a)(i) : Amount not deductible – Deduction at source – payment to non-resident parties for “call transmission services was held to be not liable to deduct tax at source, hence no disallowance can be made. DTAA–India–USA [S. 9(1)(i), 9(1)(vi), 9(1)(vii), 195, Art. 12(2), 12(4)]
Allowing the appeal of assesee the Tribunal held that no disallowance could have been made under section 40(a)(i) of the Act for non-deduction of tax on the payments to non-resident parties, namely, M/s. Kick Communication and M/s. IGTL Solutions. Since in the call connectivity and transmission from end of the Indian Territory at Mumbai to the termination of call in USA, no technical knowledge has been made available to the assessee, respectfully following the decision of the Tribunal in the case of Bharti Airtel Ltd v. ITO, we hold that payment for the services of call transmission through dedicated bandwidth provided by the non-resident parties to the assessee, cannot be termed as Fee for Technical Services under the treaty also, in the hands of the recipients. (ITA No. 1927/Del/2008 & 127/Del/2011, dt. 17-1-2017) (AYs. 2002-03 & 2009-10)
Geo Connect Ltd. v. DCIT (Delhi)(Trib.); www.itatonline.org
- S.40(a)(i) : Amounts not deductible – Deduction at source – Non-resident–DTAA–India & Belgium – Issuing gradation certificate, the payment cannot be characterize as Fees for Technical Services, not liable to deduct tax at source- DTAA-India-Belgium [S. 9(1)(vii], Article 12, 13]
The Tribunal held that the Belgium company is not ‘making available’ its technical knowledge, expertise skill or know how to the assessee in the course of issuing gradation certificate, the payment cannot be characterise as fees for technical services. Taxability of a sum in the hands of recipient on account of subsequent retrospective amendment would not expose the payer of income to an impossible situation of requiring deduction of tax at source on the anterior date of payment of such income. Thus on this count also assessee cannot be held to be in default for not deducting the tax at source. Disallowance was rightly deleted by CIT(A). (AY. 2008-09)
ACIT v. D. A. Jhaveri (2017) 183 TTJ 447 (Mum.)(Trib.)
- S.40(a)(ia) : Amounts not deductible – Deduction at source – Payment of commission to non-resident agents for carrying out activities outside India – No disallowance can be made [Ss. 9(1)(i), 195]
Commission paid by the assessee to the non-resident agents for carrying out business activities outside Indian territories is not taxable in the hands of the latter in India under s.9(1)(i) or under s.9(1)(vii). Hence, the provisions of S.195 are not attracted to such payments. Therefore, commission paid by the assessee cannot be disallowed under s.40(a)(ia) of the Act. (AY. 2009-10)
Dy.CIT v. Troikara Pharmaceuticals Ltd. (2017) 146 DTR 177 (Ahd.)(Trib.)
- S.40(a)(ia) : Amounts not deductible – Deduction at source – Non-resident commission agents were not taxable in India in respect of their commission earnings from orders procured abroad, not liable to deduct tax at source [S.195]. Since no part of the operations of the business of the commission agents is carried out in India, the non-resident commission agents were not taxable in India in respect of their commission earnings from abroad. Hence, the assessee was not under any obligation to deduct TDS from the commission payments to the non-residents. Therefore, commission payments could not be disallowance under s. 40(a)(ia). (AY. 2012-13)
ITO v. Excel Chemicals India Ltd. (2017) 146 DTR 171 (Ahd.)(Trib.)
- S.40(a)(ia) : Amounts not deductible – Deduction at source – The amounts paid by the assessee to the clinical research organisations were not taxable in India. There was no need for the assessee to deduct tax at source- DTAA-India – Canada. [S. 195, Article 12, 15]
Tribunal held that ,tax resident of Canada was only providing final results to its Indian clients by using highly sophisticated bio-analytical know-how, without providing any access whatsoever to the clients to such know-how, fee received by it was business income and not fees for technical or fees for included services or royalty and the assessee having no permanent establishment in India, such income would not be taxable in India by virtue of the relevant provisions of the Double Taxation Avoidance Agreement between India and Canada. The amounts paid by the assessee to the clinical research organisations were not taxable in India. There was no need for the assessee to deduct tax at source. (AYs. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 ( Hyd) (Trib)
- S.40(a)(ia) : Amounts not deductible – Deduction at source – Royalty – Payments made by assessee not in nature of royalty either under domestic law or under DTAA – No disallowance for non-deduction of tax at source- DTAA-India – USA [Art. 12]
Payments made by assessee not in nature of royalty either under domestic law or under DTAA, hence no disallowance for non-deduction of tax at source. (AY. 2002-03, 2003-04 )
CIT v. GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
- S.40A(2) : Business expenditure – Disallowance – Excessive and unreasonable payments – Excess of fair market value – Onus is on Department – No material comparable brought on record – No disallowance could be made
The AO held that assessee had paid interest to the customer of the assessee for the unsecured loan advanced. That payments made to the holding company was unreasonable and in excess of the fair market value and therefore he added 2% u/s. 40A(2).
The Tribunal held that the AO to bring on record to show that in the facts and circumstances of the case, the provisions of section 40A(2) are indeed applicable. Only in such cases, he could disallow to the extent that such payment was found to be excessive or unreasonable in his opinion. In this case, the AO not brought any comparable cases on record to disprove the purchases made from holding company by the assessee.
Divakar Solar Systems Ltd. v. Dy CIT (2017) 53 ITR 516 (Kol.)(Trib.)
- S. 40A(2) : Business expenditure – Disallowance – Excessive and unreasonable payments – Salary and professional fee – furnished full details regarding nature of services provided – No disallowance could be made
Tribunal held that none of these services purported to be rendered by CP was disputed by the Department except merely harping on the technical educational qualification as a pre-requisite for rendering the services. Business expediency in the subject mentioned transaction was proved by engaging a liaison officer who was a trusted person of the management more especially stakes involved in the telecommunications project. For rendering these services at least, no technical qualification was required as the service could be done by experience. Business acumen is developed by a person not by educational qualification but by his or her native intelligence and presence of mind which does not come from education alone. The assessee had made payments to CP disallowed by the Department, which was not rectified even when specifically brought to its notice. The assessee had provided the complete details of nature of services rendered by CP. In the absence of bringing any other evidence to the contrary, no disallowance could be made in the facts and circumstances of the case. Just because the payment was made to a relative of the director, the principles of business expediency did not get disturbed. Even if no difference whether the expenditure was incurred towards relatives or non-relatives per se was incurred wholly and exclusively for the purpose of business. (S.37).
Divakar Solar Systems Ltd. v. Dy CIT (2017) 53 ITR 516 (Kol.)(Trib.)
- S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits –Identity, genuineness and business expediency was explained hence disallowance was held to be not justified
The Tribunal held that the identity and existence of the payees and genuineness of transactions are not at all disputed. It was only because of the insistence of the seller, that the assessee had to pay in cash and the assessee has explained the business expediency of making the cash payments to parties. Followed, Anupam Tele Services v. ITO (2014) 268 CTR 121 (Guj.), Smt. Harshila Chordia v. ITO (2008) 298 ITR 349 (Raj.). (AY. 2011-12)
Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 (Jp.)(Trib.)
- S.41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Waiver of loan taken for acquisition of a capital asset and on capital account cannot be taxed as it is neither on revenue account nor a remission of a trading liability so as to attract tax in the year of remission
Allowing the appeal of the assessee, the Tribunal held that waiver of loan taken for acquisition of a capital asset and on capital account cannot be taxed u/s. 41(1), as it is neither on revenue account nor a remission of a trading liability so as to attract tax in the year of remission. (ITA Nos. 923 & 930/Bang/2009, dt. 13-1-2017) (AY. 2004-05)
JSW Steel Ltd. v. ACIT (Mum.)(Trib.) www.itatonline.org
- S.43(5) : Speculative business – Cash segment and futures segment and final outcome profit – Profit or loss against both segments be adjusted or set off against each other. [S. 73]
Dismissing the appeal of the revenue , the Tribunal held that assessee carrying out transactions in cash segment and futures segment and final outcome profit. Both segments part of composite business of assessee. Business of assessee cannot be segregated to arrive at profit and loss in both transactions independently or separately. Profit or loss against both segments be adjusted or set off against each other. (AY. 2009-10)
JCIT v. J. M. Financial Services Ltd. (2017) 54 ITR 120 ( Mum.) (Trib.)
- S.43B : Deduction only on actual payment – Provision for leave encashment – Stay on decision of High Court – Assessing Officer was directed to decide issue in accordance with final decision of Supreme Court. [S.43B(f)]
Supreme Court ordering stay of decision of High Court holding provision invalid and directing disallowance to be made in terms of provision during pendency of appeal. Assessing Officer to decide issue in accordance with final decision of Supreme Court. (AYs. 2005-06, 2006-07,
2008-09)
ACIT v. Dow Agrosciences India Private Limited (2017) 53 ITR 590 ( Mum.) (Trib.)
- S. 45 : Capital gains – Penny stock – Failure to provide a copy of the statement and cross examination, the addition is bad in law – Direct evidences relating to sale/purchase, brokers note cannot be disregarded
Allowing the appeal of the assessee, the Tribunal held that failure to provide a copy of the statement relied upon and of cross-examination renders the assessment order void. The claim of capital gains from penny stocks cannot be denied on presumption and surmises by disregarding direct evidences relating to the sale/purchase transactions of shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. (ITA Nos. 501 & 502/Ahd/2016, dt. 9-3-2017)(AY. 2008-09)
Sunita Jain (Smt) v. ITO (Ahd.)(Trib.) : www.itatonline.org
- S. 45 : Capital gains – Long term capital gains – Purchase of shares in off market – Sale consideration received should be assessable as long term capital gain and not income from undisclosed sources [S.69]
Assessee having purchased and sold shares through a registered broker which are supported by proper contract notes and demat account and received the sale consideration by account payee cheques, the transactions cannot be treated as bogus and sham, more so as the broker as well as the stock exchange has confirmed the purchase and sale transactions. Thus, the income arising from sale of shares is assessable as long term capital gains. (AY. 2005-06)
Dolarrai Hemani v. ITO (2017) 146 DTR 93 (Kol.)(Trib.)
- S.45 : Capital gains – Business income – Shares transferred from trading to investment account were held for a long time – Surplus arising on sale of shares under investment portfolio was to be brought to tax as capital gains. [S.28(i)]
Where assessee, a stock broker, holding dual portfolio, i.e., investment portfolio and stock portfolio, earned capital gain from sale of shares kept in investment portfolio, in view of fact that assessee did not use borrowed funds for buying those shares and, moreover, it kept shares in question for sufficiently long period of time, income declared by assessee could not be brought to tax as business income. (AY. 2006-07)
Dy. CIT v. Lokenath Saraf Securities (P) Ltd. (2017) 146 DTR 125 (Kol.)(Trib.)
- S. 45 : Capital gains – Long-term or short-term – Letter of allotment – For considering whether an asset is a “long-term capital asset”, the period of holding must be computed on a de facto basis. The letter of allotment, even though not “ownership”, must be taken as the date of holding the asset. [S. 2(14), 2(29A), 2(42A) 2(47), 54, 54F]
Allowing the appeal of the assessee the Tribunal held that S.2(42A) uses the term “held”, the other provisions use the terms “acquired”, “purchased” and “owner”. Accordingly, for considering whether an asset is a “long-term capital asset”, the period of holding must be computed on a de facto basis. The letter of allotment, even though not “ownership”, must be taken as the date of holding the asset. (ITA No. 2291/Mum/2015, dt. 13-2-2017)(AY. 2011-12)
Anita D. Kanjani v. ACIT (Mum.)(Trib.) ; www.itatonline.org
- S.45 : Capital gains – Business income – Portfolio Management Scheme (PMS) – Gains assessable as capital gains and not as business income [Ss. 28(i), 48]
Dismissing the appeal of the revenue , the Tribunal held that share held in Portfolio Management Scheme (PMS) cannot be assessed as business income, it has rightly assessed as capital gains. CBDT Circular No. 4/7 dated 15-6-2007 and Circular No. 6 of 2016 dated
29-2-2016 considered and entire law on the subject is explained. (ITA No. 3217/Mum/2014 & ITA No. 1411/Mum/2015, dt. 25-1-2017) (AY. 2010-11, 2011-12)
ACIT v. Sachin R. Tendulkar (Mum.)(Trib.); www.itatonline.org
- S.45 : Capital gains – Business income – Investor in shares – Long term capital gain was accepted as an investor, short term capital gains cannot be assessed as business income as an trader. [Ss. 10(38), 28(i)]
Dismissing the appeal of the revenue, the Tribunal held that if the AO has accepted the claim for exemption for long-term capital gains and conceded that the assessee is an “investor”, he cannot change his stand and treat the assessee as a “trader” in respect of the claim of short-term capital gains alone. (ITA Nos. 2799 & 2799/Kol/2013, dt. 27-1-2017) (AYs. 2006-07 & 2009-10)
ITO v. Dilip B. Desai HUF (Kol.)(Trib.); www.itatonline.org
- S.45 : Capital gains – The capital gains arising on transfer by a foreign company of shares in another foreign company holding assets in India is liable to tax in India–DTAA–India–UK [S. 2(14), 2(47), 9(1)(i), Article 14]
Dismissing the appeal of the assessee, the Tribunal held that the capital gains arising on transfer by a foreign company of shares in another foreign company holding assets in India is liable to tax in India. The argument that the transfer is a mere re-organisation of assets within the group and that there is no “real income” is not acceptable. The argument that the India-UK DTAA should be given a “static” interpretation and that the retrospective amendment to s. 9 by the Finance Act, 2012 should be ignored is also not acceptable. Where the DTAA provides that the income shall be chargeable to tax in accordance with the provision of the domestic law, the said domestic law has to be the amended law. (ITA No. 1669/Del./2016, dt. 9-3-2017)(AY. 2007-08)
Cairn UK Holdings Ltd. v. DCIT (Delhi)(Trib); www.itatonline.org
- S.45 : Capital gains – Business income – Portfolio management scheme – Principle of consistency – AO was directed to assessee the income as capital gains [S. 28(i)]
Allowing the appeal the Tribunal held that; department consistently in all subsequent years treating sale proceeds as capital gains. Assessing Officer directed to treat income from portfolio management services as capital gains.
(AY. 2008-09, 2010-11)
Venkatesh Satyaraj v. DCIT (2017) 53 ITR 406 (Mum) (Trib)
- S.45 : Capital gains – Search –Purchase and sale of shares –Long-term capital gains was to be accepted. [S. 153A]
Dismissing the appeal of the revenue, the Tribunal held that the Assessing Officer not making any attempt to collect details from return filed by share broker. Assessee selling shares through another broker by dematerialising shares. Dematerialisation of shares would not happen without physical shares, hence long-term capital gains on sale of shares declared by assessee to be accepted. (AY. 2003-04)
CIT v. Asha V. Mehta (Smt.) (2017) 54 ITR 191 (Mum) (Trib)
- S.45 : Capital gains – Sale of shares cannot be assessed as income from undisclosed sources when the broker and stock exchange confirmed the genuineness of transaction [S.69]
The Tribunal held that the assessee having purchased and sold shares through a registered broker which are supported by proper contract notes and demat account and received the sale consideration by account payee cheque, the transactions cannot be treated as bogus and sham. The broker as well as the stock exchange have confirmed the purchase and sale transactions and therefore, the income arising therefrom is assessable as long term capital gains and not as income from undisclosed sources. (AY. 2005-06)
Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.)(Trib.)
- S.48 : Capital gains – Family partition – Indexed cost of acquisition to be computed with reference to year in which previous owner acquired asset and not year in which assessee acquired asset [S.45]
When capital asset is acquired by assessee through family partition, indexed cost of acquisition to be computed with reference to year in which previous owner acquired asset and not year in which assessee acquired asset. (AY. 2010-11)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai) (Trib)
- S.50C : Capital gains – Full value of consideration – Stamp valuation – Right in land – Section would have no application where assessee has transferred only rights in impugned land which cannot be equated to land or building or both. [S.45]
Allowing the appeal the Tribunal held that; section 50C is a deeming provision and it extends only to land or building or both. Section 50C can come into play only in a situation where the consideration received or accruing as a result of the transfer by an appellant of a capital asset, being land or building or both is less than the value adopted or assessed or assessable for the purpose of payment of stamp duty in respect of such transfer. It is settled legal proposition that deeming provision can be applied only in respect of the situation specifically given and, hence, cannot go beyond the explicit mandate of the section. Clearly, therefore, it is essential for application of Section 50C that the transfer must be of a capital asset, being land or building or both. If the capital asset under transfer cannot be described as ‘land or building or both’, then Section 50C will cease to apply. (AY. 2006-07]
Devindraben I. Barot (Smt.) v. ITO (2016) 141 DTR 302 / 159 ITD 162 (Ahd.)(Trib.)
- S.50C : Capital gains – Full value of consideration – Stamp valuation – Agreement to sell – Insertion of proviso to section 50C by the Finance Act, 2016 with effect from 1-4-2017, has retrospective effect [S.45]
Assessee entered into an ‘agreement to sell’ a piece of land on 29-6-2005. Sale deed of land was executed on 24-4-2007. Assessing Officer having invoked provisions of section 50C, adopted stamp duty valuation rate prevailing on date on which sale deed was executed. Accordingly, certain addition was made to capital gain arising from sale of land. It was held that impugned addition was to be set aside and, matter was to be remanded back to Assessing Officer for recomputation of capital gain on basis of stamp duty valuation rate prevailing on date of ‘agreement to sell’ as insertion of proviso to section 50C by the Finance Act, 2016 with effect from 1-4-2017, has retrospective effect. in favour of assessee, matter remanded. (AY. 2008-09)
Dharamshibhai Sonani v. ACIT (2016) 181 TTJ 721 (Ahd.)(Trib.)
- S. 50C: Capital gains – Full value of consideration – Stamp valuation – The stamp duty value on the date of the agreement to sell has to be adopted and not the value on the date of the deed of sale. The proviso to s. 50C, though inserted by the Finance Act 2016 w.e.f. 1-4-2017, has to be given retrospective effect from 1-4-2003 as it is intended to remove an undue hardship and is curative in nature. [S.45]
Allowing the appeal of the assessee the Tribunal held that the stamp duty value on the date of the agreement to sell has to be adopted and not the value on the date of the deed of sale. The proviso to s. 50C, though inserted by the Finance Act, 2016 w.e.f. 1-4-2017, has to be given retrospective effect from 1-4-2003 as it is intended to remove an undue hardship and is curative in nature. (ITA.No.639/Vizag/2013, dt. 23-12-2016)(AY. 2009-10)
Chalasani Naga Ratna Kumari (Smt) v. ITO ( Vizag)(Trib); www.itatonline.org
- S.54 : Capital gains – Profit on sale of property used for residence – Investment within time – Delay in construction due to default of the builder exemption cannot be denied. [S.45]
Asseseee invested within time, however, due to default on part of builder causing delay in construction of flat within time limit prescribed under Act which is beyond control of assessee, assessee is entitled to benefit. (AY. 2010-11)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai)(Trib.)
- S.54 : Capital gains – Profit on sale of property used for residence – Investing gains in house property in United States of America, change in law is only with effect from April 1, 2015 [S.45]
Assessee investing gains in house property in United States of America in previous year relevant to assessment year 2010-11, is entitled to exemption in previous year relevant to assessment year 2010-11. Change of law with effect from April 1, 2015 that property must be purchased only in India is prospective in nature. (AY. 2010-11)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai)(Trib.)
- S.54F : Capital gains – Investment in a residential house – Net consideration invested in the construction of new house before the due date of filing return of income – Construction of the house was also completed within the prescribed time limit of three years – Exemption cannot be denied. [S. 139(1)]
Assessee having sold a property and invested more than the net consideration thereof in a new residential plot even before the due date prescribed under s.139(1) and also completed construction of the house within the time limit of three years under s. 54(1), exemption cannot be denied on the ground that the assessee did not deposit the sale consideration as per the scheme notified by the Government under s. 54F(1) of the Act. (AY. 2010-11)
Nirmala Yadav (Smt.) v. ITO (2017) 146 DTR 63 (Jodhpur)(Trib.)
- S.68 : Cash credits – “On-Money” received by an assessee for sale of agricultural land has to be treated as “agricultural income” and exempted from tax if the facts show that the assessee has no other source for the receipt [S. 2(14), 56]
Dismissing the appeal of the revenue, the Tribunal held that the assessee is an aged person, who had settled down in his native place. He was engaged in agricultural activities on his retirement and there is nothing on record to suggest that the assessee along with his wife were in a position to generate unaccounted income of ₹ 39 lakhs other than on-money on account of sale of agricultural land. The payment of on-money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside. I also place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO v. Dr. Koshy George wherein (2009) 317 ITR (AT) 116 ( Cochin) (Trib.), was held by the Tribunal that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself. (ITA No. 30/Coch/2017, dt. 26-4-2017)(AY. 2013-14)
ITO v. Abraham Varghese Charuvil (Cochin)(Trib) : www.itatonline.org
- S.68 : Cash credits – Penny stocks – A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc. cannot be treated as a bogus transaction [S.45]
Allowing the appeal of the assessee; the Tribunal held that if the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a bogus transaction so as to attract s. 68.( ITA No. 6494/Mum/2014, dt. 2-1-2017)(AY. 2005-06)
Sunil Prakash v. ACIT (Mum)(Trib) : www.itatonline.org
- S.68 : Cash credits – Advances received from customers towards supply of products later adjusted against subsequent sales cannot be assessed as cash credits
Advances received from customers towards supply of products later adjusted against subsequent sales cannot be assessed as cash credits. Assessee cannot force its customers to furnish their permanent account numbers. In case advances not adjusted against subsequent sales assessee should be provided with an opportunity to explain reasons. The Assessing Officer was directed to decide in accordance with law. (AY. 2005-06, 2006-07, 2008-09)
ACIT v. Dow Agro Sciences India Private Limited (2017) 53 ITR 590 (Mum) (Trib.)
- S.68 : Cash credit – Genuineness of gift cannot be disbelieved simply because there was no occasion to make gift
The Tribunal held that the gift falls within the exception clause under section 56(2)(v) as the assessee has filed his bank statement reflecting the amount gifted to him by his co-brother, joint IT return of the donor and his wife and the affidavit of the donor confirming the gift duly notarised in USA, the genuineness of the gift cannot be disbelieved simply on the ground that there was no occasion to make the gift. The Tribunal deleted the addition. (A.Y. 2005-06)
Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.)(Trib.)
- S.69 : Unexplained investments – Survey – Merely on the basis of stock found in the premises additions cannot be made as undisclosed stock when proper explanation was furnished with supporting evidence. [S. 133A]
In the course of survey stock was found in the premises, the explanation was furnished stating that, manufacturer keeping materials in possession of assessee by virtue of agreement between manufacturer, assessee and contractors till dues payable to manufacturer cleared by contractors. Assessee gaining commission which would compensate providing storage facilities to contractors and enhance business prospects of assessee. Assessee and his brother conducting business in same premises. Ownership of such property vested in assessee’s brother therefore addition cannot be made as undisclosed stock of assessee. (AY. 2010-2011)
Niranjan Kumar Agrawal v. ITO (2017) 53 ITR 643 (Patna)(Trib.)
- S.69 : Income from undisclosed sources – Bogus purchases –Burden is on revenue to prove that the transaction is of benami nature, addition was deleted [S.132]
Allowing the appeal of the assessee the Tribunal held that, the Assessing Officer merely rejecting explanation of assessee without bringing any evidence on record to support case of benami nature of transaction. The concerns assessed separately to income-tax therefore the investment made in concerns not proved to have been made by assessee.( AY. 2004-05 to 2008-09)
Ashok Nanda v.DCIT (2017) 54 ITR 54 (Indore) (Trib.)
- S.69A : Unexplained investment – Recurring deposit in joint names of assessee and his wife – Addition of amount and interest was not justified
Allowing the appeal of the assessee the Tribunal held that ; the assessee’s wife having taxable income more than investment in deposits and assessee had sufficient source of income for deposits, therefore addition of amount and interest thereon unsustainable. (AY. 2009-2010)
Anandasayanam P. Pillai v. CIT (2017) 54 ITR 607 (Mum.) (Trib.)
- S.69C : Unexplained expenditure – Bogus purchases: Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus
Allowing the appeal the Tribunal held that; merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus. In the result the purchases made from M/s. Mahaveer Textiles have not been proved to be bogus by the Revenue and the said additions cannot be sustained in the eye of law in absence of any conclusive evidence brought on record.( ITA No. 508/JP/2016, dt. 10-4-2017)(AY. 2007-08)
Beauty Tax v. DCIT (Jaipur)(Trib) : www.itatonline.org
- S.69C : Unexplained expenditure – Bogus Purchases – Purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department – Additions cannot be made without giving an opportunity of cross examination [S.133(6)]
Dismissing the appeal of Revenue, the Court held that ; purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department. The said statements cannot be relied upon without cross-examination of the parties. The fact that the parties did not respond to the s. 133(6) notices is not relevant if the assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc. to establish genuineness of the aforesaid purchases. Addition cannot be made u/s. 69C of the Act. (ITA No. 5194/Mum/2014, dt. 31-1-2017) (AY. 2010-11)
ACIT v. Mahesh K. Shah (Mum.)(Trib.); www.itatonline.org
- S.69C : Unexplained expenditure – Bogus purchases – If the assessee has not discharged the onus of producing the documentation and the suppliers, the AO is entitled to estimate the gross profit. [S. 133(6)145]
Tribunal held that if the assessee has not discharged the onus of producing the documentation and the suppliers, the AO is entitled to estimate the gross profit. The GP estimate should be fair, honest and rational and cannot be arbitrarily applied at the discretion of the AO. Industry comparisons or other rational comparability vis-à vis preceding years GP ratio should be brought on record. The books should be rejected. On facts, GP ratio of 12.5% as applied in Simit P Sheth 356 ITR 451(Guj.) is fair, reasonable and rational after giving credit for the GP already declared. (ITA No. 4463/Mum/2016, dt. 4-4-2017)(AY. 2009-10)
Ratnagiri Stainless Pvt. Ltd. v. ITO ( Mum)(Trib) : www.itatonline.org
- S.69C : Unexplained expenditure – Bogus purchases – Additions was restricted to net profit comparable with that of preceding year
Assessing Officer has made entire purchases u/s. 69C of the Act In appeal CIT(A) restricted the disallowance at 12.5% of the net profits. Department has accepted the order of CIT(A). On appeal by the assessee, the Tribunal restricted the disallowance of net profit rate of 10.43 per cent earned by the assessee in preceding year. (AY. 2010-11)
Arun Shimpi v. ITO (2017) 53 ITR 151 (Mum) (Trib.)
- S.80-IA : Industrial undertaking – Generation of electricity for captive consumption – Market value – Assessing Officer to compute such profits and gains on such reasonable basis as he may deem fit by objective satisfaction and not a subjective satisfaction.
[S.80-IA(8)]
For captive consumption, the assessee computed the market value and recorded in its books of account. Assessee taking rate charged by Electricity Board from customers whereas Assessing Officer applying tariffs determined by State Electricity Regulatory Commission. Tribunal held that; Assessing Officer to compute such profits and gains on such reasonable basis as he may deem fit, by objective satisfaction and not a subjective satisfaction. (AYs. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib)
- S.80-IB(10) : Housing project –Interest income is not derived from and part of business income hence not eligible deduction – In respect of eligible business the assessee is entitled to pro rata deduction
Tribunal held that the assessee has not demonstrating receipt of interest income derived from and part of business receipts to claim, hence not eligible deduction. As regards eligible income the assessee is entitled to pro rata deduction on each of projects. (AY. 2010-11)
Bramha Corporation Ltd. v. ITO (2017) 54 ITR 465 (Pune) (Trib.)
- S. 80-IC : Special category States – Production of electric bikes by assembling imported parts amounts to manufacture and entitled to deduction
The Tribunal held that activity of assembling the parts by the assessee amounted to manufacture and, therefore, the assessee is entitled to deduction under section 80-IC. (AY. 2008-09)
ACIT v. Accura Bikes (P) Ltd. (2017) 183 TTJ 547 (SMC) (Ahd.)(Trib.)
- S.80JJAA : Employment of new workmen – If some workmen were employed for a period less than 300 days in the previous year then no deduction is allowable and such workmen is not a causal work men or workmen employed through contract labour
The Tribunal held that if some workmen were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wages to such workmen because the deduction is allowable for three years including the year in which the employment is provided, and such workmen is not a causal work men or workmen employed through contract labour (AYs. 2005-06 & 2006-07)
Bosch Ltd. v. ACIT (2017) 183 TTJ 215 (Bang.)(Trib.)
- S.90 : Double taxation relief – Where assessee-company receives certain amount from AEs after deduction of tax at source, tax credit has to be allowed to it only to extent corresponding income suffers tax in India
Where assessee-company receives certain amount from AEs after deduction of tax at source, tax credit has to be allowed to it only to extent corresponding income suffers tax in India and it is not correct approach to take into account gross receipts for purpose of computing admissible tax credit. (AY. 2009-10)
Elitecore Technologies (P) Ltd. v. Dy. CIT (2017) 146 DTR 77 (Ahd.)(Trib.)
- S.92A : Transfer Pricing – “Associated enterprise” – The mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises “associated enterprises” so as to subject their transactions to the rigours of transfer pricing law. [Ss. 40A(2)(b), 92CA]
Dismissing the appeal of revenue the Tribunal held that the mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises “associated enterprises” so as to subject their transactions to the rigours of transfer pricing law. Accordingly the Tribunal held that as these enterprises are not associated enterprises, the ALP adjustments in respect of the transactions between these enterprises were wholly unwarranted. For this short reason, and without going any further into the matter, we approve the impugned deletion of ALP adjustment. The plea of the assessee, in cross objection, is upheld and, for that reason, grievance of the Assessing Officer, in appeal, is dismissed as infructuous. (AY. 2008-09)
ACIT v. Veer Gems (2017) 146 DTR 1 (Ahd.) (Trib.)
- S.92A : Transfer Pricing – Associated Enterprises – Even if the conditions of S. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled. [S.92C]
Allowing the appeal of assessee the Tribunal held that; the fact that an enterprise can “influence prices and other conditions relating to sale” does not make it an “associated enterprise” of the assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee and thus does not fulfil the basic rule u/s 92A(1). S. 92A(2)(i) has to be read with s. 92(A)(1). Even if the conditions of s. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled. There is an inadvertent omission , with respect to threshold application of Section 92A(2)(i), whether in terms of a percentage of such sales or otherwise , in the statute .It is the apparent omission which is resulting in wholly avoidable litigation on the applicability of section 92(A)(2) (ITA No. 771/CHNY/2016, dt. 30-11-2016)(AY. 2011-12)
Orchid Pharma Limited v. DCIT (Chennai)(Trib.); www.itatonline.org
- S.92A : Transfer pricing –Associated enterprises – Assessee being a partnership concern could not be said to be controlled by an ‘individual’, hence, clause (j) of s.92A(2) has no application in the present case. [S.92C ]
A partnership concern cannot be said to be controlled by an ‘individual’ and, hence, as per section 92A(2)(j), cannot be an AE of another enterprise run by relative of partners even though it may have a de facto participation in capital, management or control of other enterprise. (AY. 2008-09)
ACIT v. Veer Gems (2017) 146 DTR 1 (Ahd.)(Trib.)
- S.92C : Transfer pricing – Arms length price – Advertisement expenses incurred by the Indian AE towards brand of a foreign company can not be treated as an ” International transaction” and addition can not be made as deemed brand development [S. 2(24) 92B]
The issue before the Tribunal was against attributing a notional income to the assessee on account of compensation for deemed brand development and as compensation for assesses depriving himself the use of his own logo and brand name in the motor vehicles manufactured by the assessee. Analysing the various provisions , the Tribunal deleted the notional addition made by the TPO on the ground that there was no services are performed , the determination of arm’s length price of a service has two components – first of rendition of service and second of a benefit accruing from such services . When the first condition is not satisfied , as in the present case , the matter rests there and there is no question of benchmarking the benefit in isolation , hence an incidental benefit accruing to an AE therefore , cannot be bench marked unless it results of a specific services by the assessee. The Tribunal also held that the accretions in brand value of the AEs brand name is not on account of costs incurred by the assessee ,or even by its conscious efforts and it does not result in impact on income , expenditure , losses or assets of the assessee company , it is not, therefore covered by the residuary component of definition of international transaction either. (AY. 2009-10 , 2010-11) (ITA No. 853/ Chny/2014, 563/Chny/ 2015 dt 27-4-2017
Hyundal Motor India Ltd v. Dy.CIT (Mum.) (Trib.), www.itatonline.org.
- S.92C : Transfer Pricing – Arm’s length price – International transaction can be clubbed, if such transactions are closely connected with each other, contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted
An international transaction can be clubbed/ aggregated with other international transactions if such transactions are closely connected with each other. The onus is on the assessee to establish the justification for clubbing the transactions. If the TPO has not applied TNMM at the entity level and has bench marked the royalty payment on standalone basis and not subjected the cost of production or other transactions to bench marking, the contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted. (IT(TP)A Nos. 159/Bang/2015, 132/Bang/2016 & 86/Bang/2017, dt. 21-4-2017)(AYs. 2010-11 to 2012-13)
Kaypee Electronics & Associates Pvt. Ltd. v. DCIT (Bang.)(Trib.) : www.itatonline.org
- S.92C : Transfer pricing – Arm’s length price – Royalty – Five per cent on domestic sales and eight per cent on export sales to be considered as at arm’s length rate
Tribunal held that in respect of royalty payable to associated enterprise, five per cent on domestic sales and eight per cent. on export sales to be considered as at arm’s length rate. (AY. 2005-06, 2006-07, 2008-09)
ACIT v. Dow Agro Sciences India Private Limited (2017) 53 ITR 590 (Mum) (Trib.)
- S.92C : Transfer pricing – Arm’s length price – Interest on loans – International interest rate fixed being LIBOR linked interest rate to be applied
Tribunal held that Comparable uncontrolled price method is most appropriate method. Reserve Bank of India approval cannot be considered as benchmark for arriving at arm’s length price. Transactions to be considered on commercial principles in international market. International interest rate fixed being LIBOR linked interest rate to be applied. (AY. 2007-08, 2008-09)
Dr. Reddy’s Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
- S.92C : Transfer pricing – Arm’s length price – Interest-free loans to associated enterprise – LIBOR rate applicable and not domestic rate
DRP directed the TPO to compute the upward adjustment applying an arm’s length interest rate of 11 per cent. i.e. 8 per cent plus 3 per cent (Credit spread) .On appeal the Tribunal held that instead of the base rate of 8 per cent. (based on lending rates of banks in India for commercial borrowing), it would be appropriate to apply LIBOR rate and not the domestic lending rate. (AYs. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol)(Trib.)
- S.92C : Transfer pricing –Arm’s length price – Giving guarantee on a loan availed of by its associated enterprises is an international transaction, arm’s length guarantee commission at 0.5 per cent was directed to be adopted against at 2 per cent adopted by DRP
Giving guarantee on a loan availed of by its associated enterprises is an international transaction, arm’s length guarantee commission at 0.5 per cent was directed to be adopted against at 2 per cent adopted by DRP. (AYs. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib)
- S.92C : Transfer pricing – Arm’s length price – Proportion to international transaction bears to the total turnover
The Tribunal held that CIT(A) was justified in directing the AO to make transfer pricing adjustment of the expenses in the proposition which the international transactions bear to the total turnover. (AYs. 2004-05, 2005-06 2006-07)
ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27 (Delhi)(Trib.)
- S. 92CA : Reference to Transfer Pricing Officer – jurisdiction of TPO is extendable to other international transactions which come to his notice during the course of proceedings before him.
Even though original jurisdiction of TPO is confined to international transactions referred to him by AO for determination of ALP, but, such jurisdiction is extendable to other international transactions which comes to his notice during the course of proceedings before him. (AY. 2011-12)
Nikon India (P) Ltd. v. Dy. CIT (2017) 146 DTR 107 (Delhi)(Trib.)
- S.115JB : Book Profits – Waiver of loan cannot be added while computing the book profit [S. 41(1)]
Allowing the appeal of the assessee the Tribunal held that a capital surplus thus, in respect of waiver of loan amount cannot be regarded as being amount available for distribution through the profit & loss account. This follows from the very definition of expression ‘capital reserve’ that it must be accounted directly to the credit of the capital reserve account instead of being credited to the profit & loss account so as to ensure that it is not left for being distributed through the profit & loss account. Accordingly the waiver of a loan is a capital receipt which is part of the capital reserve and cannot be reckoned as working result of the company and therefore, it does not form part of the net profit as per the profit & loss account. Thus, such a capital receipt cannot be taxed as ‘book profit’ as envisaged in terms of section 115JB. (ITA Nos. 923 & 930/Bang/2009, dt. 13-1-2017) (AY. 2004-05)
JSW Steel Ltd. v. ACIT (Mum)(Trib) www.itatonline.org
- S.143(2) : Assessment – Notice – Proper service of the notice u/s. 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorised person appeared on behalf of the assessee before the AO does not mean that the notice was properly served. [S. 143(3)]
Allowing the appeal the Tribunal held that; proper service of the notice u/s. 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorized person appeared on behalf of the assessee before the AO does not mean that the notice was properly served. (ITA Nos. 181 & 426/Kol/2013,
dt. 30-11-2016)(AY. 2008-09)
DCIT v. M. K. Enterprise (Kol)(Trib); www.itatonline.org
- S.143(3) : Assessment – An addition towards income cannot be made merely on the basis of the statement of a third party that an amount has been paid to the assessee in the absence of conclusive evidence [S. 131]
The AO made the addition on the basis of the statement of the seller of the land, who in his statement before the DDIT (Inv.) has stated that the sale consideration was at ₹ 2,10,000/- per bigha and he had received total sale consideration of ₹ 35,00,000/-. The Counsel has not refuted the statement. However, he submitted that the statement was not bona fide but Shri Hanuman Yadav was blackmailing the assessee. He submitted that interestingly the Revenue has accepted the sale consideration of the nearby vicinity. The CIT(A) affirmed the view of the AO in this respect. Now the issue which requires our consideration is whether the addition can be sustained solely on the basis of the statement of Shri Hanuman Yadav, when there is no material placed on record that Shri Hanuman Yadav has made any claim against the assessee in any court of law seeking cancellation of sale deed or filing a recovery suit. The Co-ordinate Bench of the Tribunal after following the ratio laid down by Hon’ble Supreme Court under the similar circumstances in Union of India v. T. R. Verma 1957 SC 882 and Kishan Chand Chellaram v. CIT, 125 ITR 713 (SC) has held in the case of Ghanshyam Das Agarwal v. ITO in ITA No. 1161/JP/2010 that in the absence of any conclusive evidence the document could not have been disbelieved. The D/R could not point out any binding precedent wherein it has been held that the oral statement would override the documentary evidence. Therefore, respectfully following the decision of the Co-ordinate Bench in the case of Ghanshyam Das Agarwal v. ITO in ITA No. 1161/JP/2010, we are of the view that the AO was not justified to make addition solely on the basis of the statement of Shri Hanuman Yadav when there was a registered sale deed and more particularly when the maker of statement has not challenged the sale deed before any court of law. It is also not placed on record whether the sale deed was executed under coercion. Therefore, considering the totality of facts of the present case, we hereby direct the AO to delete the addition. (ITA Nos. 467/JP/2011 and 519/JP/2011, dt. 25-11-2016) (AY. 2007-08)
Sharad U. Mishra v. DCIT ( Jaipur)(Trib) ; www.itatonline.org
- S.143(3) : Assessment –Bogus purchases – One to one relationship/nexus between the purchases and sales has not been established by the assessee, the purchases have to be treated as bogus and 12% of the purchase cost is assessable as profits. [S.69C]
Dismissing the appeal of the assessee the Tribunal held that the assessee has failed to place on record any material evidence to controvert the findings of the CIT(A). In this view of the matter, we uphold the order of the CIT(A) on this issue of bringing to tax in the assessee’s hands the profits embedded in the bogus purchase @ 12% of the purchase cost i.e. ₹ 5,15,377, since the direct one to one relationship/nexus between the said purchases and sales have not been established by the assessee. (ITA No. 2601/Mum/2016, dt. 18-1-2017) (AY. 2009-10)
Kiran Navin Doshi v. ITO (Mum)(Trib); www.itatonline.org
- S.143(3) : Assessment – Dumb documents – On-money – Flats were sold at concessional rates, additional was held to be not justified on mere suspicion. [S.145]
Allowing the appeal of the assessee, the Tribunal held that loose papers which do not have full details are “dumb documents” and have no evidentiary value. The fact that the assessee sold the flats at a concession does not mean that that the difference between sale value and market value can be assessed as income. The onus is on the AO to make inquiries from the buyers and bring incriminating evidence on record to show that the assessee sold flats at a higher rate. Accordingly the addition made on a pure guess without any material or evidence was held to be not justified. (ITA No. 1502/Ahd/2015, dt. 14-2-2017)(AY. 2011-12)
Nishant Construction Pvt. Ltd. v. ACIT (Ahd)(Trib.) www.itatonline.org
- S.143(3) : Assessment – Validity – Return selected for scrutiny in violation of CBDT guidelines – Assessment order passed is ab-initio – void
Return filed by the assessee manually selected for scrutiny without obtaining prior approval of Chief Commissioner of Income Tax being in violation of CBDT guidelines in F. No. 225/93/2009/IT.II, scrutiny assessment made by A.O. was without jurisdiction. (AY. 2008-09)
JCIT v. S. F. Chougale (2017) 146 DTR 213 (Pune)(Trib.)
- S.143(3) : Assessment – Addition made on basis of dumb paper was held to be not valid. [S. 132]
Tribunal held that the addition made on basis of dumb paper was held to be not valid. (AY. 2004-05 to 2008-09)
Ashok Nanda v. DCIT (2017) 54 ITR 54 (Indore) (Trib)
- S.144C : Reference to dispute resolution panel – The lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assessee may file objections with the DRP, seeking its directions to the AO was quashed
Allowing the appeal of assessee the Tribunal held that the lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assessee may file objections with the DRP, seeking its directions to the AO, is only a procedural irregularity, which does not impinge on the jurisdiction on the AO to pass the assessment order. The assessee has no vested right against procedure. However, as the lapse was held to be fatal in Vijay Television 369 ITR 113 (Mad), the same has to be followed. Respectfully following the decision in Vijay Television (P.) Ltd. (supra), we hold the assessment in the present case as bad in law. In consequence, the assessee is only liable for tax on its’ returned income. CIT v. Shelly Products (2003) 261 ITR 367 (SC). The assessment failing, we do not consider it relevant or necessary to address the issue arising in quantum assessment on merits. (ITA No. 818/Mds/2015, dt. 30-12-2016)(AY. 2010-11)
Daewon Kang Up Co. Limited v. DDIT (Chennai)(Trib) ; www.itatonline.org
- S.144C : Dispute Resolution Panel – DRP has the power to entertain a new claim even in absence of a revised return – Direction is binding on the Assessing Officer.[S.139]
DRP has the power to entertain a new claim even in absence of a revised return. Direction issued by Panel is binding on Assessing Officer. DRP directed to treat sales tax remission as capital receipt. Assessing Officer reducing value of sales tax remission from block affixed assets which is violation of the provision. (AYs. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol) (Trib)
- S.147 : Reassessment – On the basis of information from investigation wing in order to verify the genuineness of transaction in modification of clients code, reassessment was held to be bad in law [Ss. 45, 143(3)]
Allowing the appeal the Tribunal held that reassessment, on the basis of information from investigation wing in order to verify the genuineness of transaction in modification of clients code, reassessment was held to be bad in law. (ITA No. 501 & 502/Ahd/2016, dt. 9-3-2017)(AY. 2008-09)
Sunita jain (Smt) v. ITO (Ahd.)(Trib.) : www.itatonline.org
- S.147 : Reassessment – Share application money – Reopening of assessment to make roving inquiry is impermissible and negative burden that purchasers not relatives cannot be put to assessee – Reasons of reopening recorded by Assessing Officer not sustainable [Ss. 68, 148]
Allowing the appeal of the assessee the Tribunal held that the assessee introduced own unaccounted capital through share capital and premium nowhere mentioned in assessment order. There is no material to prima facie indicate assessee’s unaccounted income invested in share capital and there is no live nexus between reasons recorded and income sought to be reassessed. Reopening of assessment to make roving inquiry is impermissible. Negative burden that purchasers not relatives cannot be put to assessee hence reasons of reopening recorded by Assessing Officer not sustainable. (AY.2009-10)
Laxmiraj Distributors Pvt. Ltd. v. ACIT (2017) 53 ITR 376 (Ahd.) (Trib.)
- S.147 : Reassessment – Mutuality – Commissioner (Appeals) presuming assessee did not claim mutuality factually incorrect –Receipts other than interest and rental income from members of assessee, would fall within ambit of mutuality. Order enhancing income not sustainable [S. 4, 11, 148]
Allowing the appeal the Tribunal held that; Commissioner (Appeals) presuming that the assessee did not claim mutuality factually incorrect – Receipts other than interest and rental income from members of assessee, would fall within ambit of mutuality. Order enhancing income not sustainable. (AYs. 2006-07 to
2012-13)
Sports and Cultural Club (Regd.) v. JCIT (2017) 53 ITR 160 (Delhi) (Trib.)
- S.147 : Reassessment – Information from Investigation Wing – No valid notice served upon assessee either through registered post or through affixture, reassessment was held to be not valid [S.148]
Allowing the appeal the Tribunal held that no valid notice served upon assessee either through registered post or through affixture, reassessment was held to be not valid. (AY. 1996-97)
Auram Jewellery Exports P. Ltd. v. ACIT (2017) 54 ITR 1 (Delhi) (Trib.)
- S.147 : Reassessment – Undated reasons – Reopening on borrowed satisfaction was held to be impermissible [S. 148]
Allowing the appeal the Tribunal held that the reasons recorded, it was clear that the reasons were undated, which itself proved that the Assessing Officer had not applied his mind. Nothing appeared in the reasons recorded suggesting that the Assessing Officer had made any positive enquiry before coming to the conclusion that the income chargeable to tax had escaped assessment. The Assessing Officer had reopened the case on the basis of borrowed satisfaction, which was not permissible under the law. The reassessment proceedings were invalid. (AY. 2004-05)
Charanjiv Lal Aggarwal v. ITO ( 2017) 54 ITR 349 (Amritsar) (Trib)
- S.153A : Assessment – Search – No incriminating material found at time of search and when original assessment was completed additions cannot be made in pursuance of search proceedings. [S.143(3)]
Where the assessment proceedings were completed prior to date of search on basis of original return and no incriminating documents were found for the relevant year, the Assessing Officer could not and ought not to have examined in assessment proceedings under section 153A. Claim to treat as capital receipt sales tax remission brought to tax in original assessment, cannot be subject matter of determination of total income under section 153A. (AY. 2003-04 to 2011-12)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.) (Trib.)
- S.153A : Assessment – Search – On money – Noting in seized papers – Additions cannot be made as undisclosed income – Additions cannot be made on the basis of estimate and extrapolation theory – Accounting Standard 7 is not applicable when sale of flats on ownership basis – Receipt is taxable only in the year when possession of flats or occupation certificate is given where assessee follows projection certificate. [S. 132, 145A]
Dismissing the appeal of the revenue, the Tribunal held that merely on the basis of noting in seized papers additions cannot be made as undisclosed income, when purchasers have denied making any cash to the assessee. Additions cannot be made on the basis of estimate and extrapolation theory. Affidavits filed by assessee not to be rejected on ground that he produced no documentary evidence. Accounting Standard 7 prescribing method of accounting of construction contracts in books of contractors is not applicable when the assessee carrying on construction activity on ownership basis and not in pursuance of any contract with a contractee. When assessee follows project completion certificate, receipts taxable only in year in which project completed and possession of flat or occupancy certificate given for flat. (AY. 2004-2005 to 2011-2012
ACIT v. Layer Exports P. Ltd. (2017) 53 ITR 416 (Mum)(Trib.)
- S.201 : Deduction at source – Person to whose account credit for such tax deducted at source to be given is not identifiable, provisions of tax deduction at source not applicable – Assessing Officer to verify whether payee identifiable and amount payable to him ascertainable [S.201(1A)]
Allowing the appeal, the Tribunal held that ; person to whose account credit for such tax deducted at source to be given is not identifiable, provisions of tax deduction at source not applicable – Assessing Officer to verify whether payee identifiable and amount payable to him ascertainable. (AYs. 2010-11, 2011-12)
Apollo Tyres Ltd. v. Dy. CIT (2017) 163 ITD 177 / 54 ITR 1 (Delhi)(Trib.)
- S.206AA : Requirement to furnish Permanent Account Number – AO rightly raised demand on deductor on its failure to apply 20 per cent TDS rate when payee had furnished wrong PAN
Assessee payer having failed to discharge its obligation to verify the PAN submitted by the payee which has been eventually found to be incorrect by the department at the time of processing of the TDS return, A.O. was justified in raising demand for the differential tax that the assessee should have deducted in terms of S. 206AA on account of submission of incorrect PAN by the payee. (AY. 2011-12)
Office of Xen, PHED v. ITO (2017) 146 DTR 19 (Jaipur)(Trib.)
- S. 206AA : Requirement to furnish Permanent Account Number –Deduction at source – In case where payments have been made to deductees on the strength of the beneficial provisions of S. 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of s. 206AA cannot be invoked by the AO insisting to deduct tax @ 20% for non-availability of PAN [Ss. 90(2), 115A(1)(b), 195, 200A]
Allowing the appeal of assesse the Tribunal held that in case where payments have been made to the deductees on the strength of the beneficial provisions of section 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of section 206AA cannot be invoked by the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN. [(ITA No. 1204/Ahd/2014, dt. 4-1-2017)(AY. 2011-12)]
Quick Flight Limited. ITO (Ahd)(Trib) ; www.itatonline.org
- S.206AA : Requirement to furnish Permanent Account Number – Section does not have an overriding effect over the other provisions of the Act. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN [S.90(2)]
Special Bench was constituted to decide the following questions involved.
“Whether on the facts and circumstances of the case, provisions of section 206AA, of the Act will have a overriding effect for all other provisions of the Act, and that being the case, assessee is required to deduct tax at the rate prescribed therein in case of persons having taxable income in India, including non-residents,
who do not furnish their Permanent Account Number “
Special Bench held that section does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN. (ITA Nos. 1187 & 1188/H/2014, dt. 13-2-2017)(AY. 2011-12 & 2012-13)
Nagarijuna Fertilsers and Chemicals limited v. ACIT (Hyd)(Trib)(SB) ; www.itatonline.org
- S. 220 : Collection and recovery – Stay – Assessee’s income assessed was ten times more than the returned income, demand is to be stayed till the disposal of appeal
Where assessee, a non-resident, received management fee from its Indian subsidiary but Assessing Officer made assessment at sum 10 times higher to returned income and raised demand, stay on said demand should be granted to assessee in view of CBDT Instruction No. 96 dated 21-8-1969. (AY. 2011-12)
Dimension Data Asia Pacific Pte. Ltd. v. Dy. CIT (IT) (2017) 146 DTR 89 (Mum.)(Trib.)
- S.234C : Interest – Deferment of advance tax – Interest is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift
Allowing the appeal of assessee the Tribunal held that though levy of interest for deferment of advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift was on 17-12-2011. (ITA No. 7661/Mum/2013, dt. 13-7-2016)(AY. 2012-13)
Kumari Kumar Advani v. ACIT (Mum)(Trib); www.itatonline.org
- S.251 : Appeal – Commissioner (Appeals) – Powers – The CIT(A) has no power to enhance by discovering a new source of income which is neither discussed in the assessment order nor mentioned in the return of income filed by the assessee [Ss. 2(22)(e), 250]
Allowing the appeal of the assessee the Tribunal held that; It is well settled law laid down by the Hon’ble Apex Court in CIT v. Shapoorji Pallonji Mistry, (1962) 44 ITR 891 (SC) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967), 66 ITR 443 (SC) and subsequently followed by the Hon’ble Delhi High Court in CIT v. Sardari Lal & Co. (2001) 251 ITR 864 (Delhi)(FB) that the CIT(A) is not competent to enhance assessment in appeal by discovering new source of income not mentioned in return or consider by the Assessing Officer in assessment. We hold that the Commissioner of Income Tax (Appeals) has exceeded his jurisdiction in making addition u/s. 2(22)(e) of the Act as there is no reference of such income either in the return of income or in the assessment proceedings. (ITA No. 746/PN/2013, dt. 30-12-2016) (AY. 2009-10)
Ram Infrastructure Ltd. v. JCIT (Pune) (Trib) www.itatonline.org
- S.254(1) : Appellate Tribunal –Admission of additional evidence by the CIT(A) was held to be justified. [R. 46A]
The Tribunal held that the CIT(A) has rightly admitted additional evidences which were necessary for arriving at justice. The learned CIT(A) has passed a reasoned and speaking order and has passed the order after obtaining remand report from the AO. The appeal of the revenue is dismissed. (A.Y. 2009-10)
ACIT v. Saraswati Builders (2017) 183 TTJ 13 (Asr.)(UO)(Trib.)
- S. 263 : Commissioner – Revision of orders prejudicial to revenue – The fact that the AO is silent in the assessment order does not mean that he has not applied his mind so as to justify exercise of revisional powers by the CIT
Allowing the appeal the Tribunal held that ; there is a distinction between “lack of enquiry” and “inadequate enquiry”. If the AO has called for the necessary details and the assessee has furnished the same, the fact that the AO is silent in the assessment order does not mean that he has not applied his mind so as to justify exercise of revisional powers by the CIT. (ITA No. 2464/Mum/2013, dt. 24-2-2017)(AY. 2009-10)
Small Wonder industries v. CIT (Mum)(Trib.) : www.itatonline.org
- S.263 : Commissioner – Revision of orders prejudicial to revenue – Revision based on special audit report and incorrect presumption hence revision was held to be not valid. [S. 2(22) (e)]
Commissioner initiated revisionary proceedings based on special audit report obtained in the case of a company as the company converted into public company, deemed dividend provision not applicable hence revision was held to be not valid. (AYs. 2005-06 to 2007-08)
Gurucharan Dass Arora v. CIT (2017) 53 ITR 364 (Delhi) (Trib.)
- S.263 : Commissioner – Revision of orders prejudicial to revenue – Assessing Officer arriving at decision after examination and enquiry, revision on the basis of audit objection was held to be bad in law. [S.154]
Allowing the appeal the Tribunal held that; the Assessing Officer had made necessary enquiries with respect to matters covered by order of Commissioner and arrived a decision after examination and enquiry. As regards audit objection, the assessing Officer categorically replying to objections raised by internal audit party objections and dismissed audit objections by replying on each and every issue on merits. Rectification proposed by Assessing Officer on matter of interest was also forms part of record before Commissioner. Order by the Assessing Officer was neither erroneous nor prejudicial to interests of Revenue hence revision was not valid. (AY. 2006-07)
Lotus Energy (India) Ltd. v. CIT (2017) 53 ITR 227(Mum)(Trib.)
- S.263 : Commissioner – Revision of orders prejudicial to revenue – Mutuality – CIT(A) allowed the exemption in earlier years , order cannot be regarded as erroneous [[S. 11]
The Tribunal held that the CIT(A) in the appellate orders for AY. 2008-09 & 2009-10 held that the assessee cannot be denied the benefit of exemption under section 11 as well as on the principle of mutuality. Therefore, the order of AO was based on the order of CIT(A), accepting nil income, it was not erroneous & prejudicial to the interests of revenue and consequently the revision under section 263 is not sustainable. (AY. 2011-12)
Calcutta Cricket & Football Club v. ITO (2017) 183 TTJ 112 (Kol.)(Trib.)
- S.271(1)(c) : Penalty – concealment – Penalty cannot be levied if the omission to offer income, and the wrong claim of deduction, was by oversight and the auditors did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s. 271(1)(c) is imposed is a fatal error
Allowing the appeal of the assessee the Tribunal held that penalty cannot be levied if the omission to offer income, and the wrong claim of deduction, was by oversight and the auditors did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s. 271(1)(c) is imposed is a fatal error. (ITA No. 2158/Mum/2016, dt. 24-2-2017)(AY. 2011-12)
Wadhwa Estate & Developers India Pvt. Ltd. v. ACIT (Mum)(Trib) ; www.itatonline.org
- S.271(1)(c) : Penalty – Concealment – Bogus purchases – Surrendered in the course of assessment – Levy of penalty was held to be not justified, however merely on the basis of defects in the notice penalty cannot be deleted. [Ss. 69C, 274, 292BB]
In the course of assessment proceedings the assessee surrendered the alleged bogus purchases to buy peace and not contested the addition in quantum proceedings. The AO levied the penalty which was confirmed in appeal by CIT(A). In appeal deleting the penalty the Tribunal held that, the claim of the assessee was bona fide and same was coupled with documentary evidence hence imposition of penalty was not justified. As regards the legal ground on alleged defects in the notice, the Tribunal held that penalty could not be deleted merely on the basis of defect pointed out in the notice. (AY. 2010-11)(ITA No.6617/Mum/2014 dt. 2-5-2017)
Earth moving Equipment Service Corporation v . DCIT ( Mum)(Trib) www.itatonline.org.
- S.271(1)(c) : Penalty – Concealment – Excess claim of interest under bona fide belief, levy of penalty was held to be not justified