National Tax Conference

Organised by

ALL INDIA FEDERATION OF TAX PRACTITIONERS (WESTERN ZONE) 
Jointly with 
GOODS AND SERVICES TAX PRACTITIONERS ASSOCIATION OF MAHARASHTRA
AURANGABAD BRANCH OF WIRC OF ICAI • TAX PRACTITIONER’S ASSOCIATION, AURANGABAD

on

Saturday, 16th February, 2019 and Sunday, 17th February, 2019
at
ICAI Bhavan, Gut No. 72, Beed Byepass Road, Near MIT College, Aurangabad – 431 005

The Western Zone of All India Federation of Tax Practitioners is pleased to announce the 2 day National Tax Conference at ICAI Bhavan, Gut No 72, Beed Byepass Road, Near MIT College, Aurangabad – 431 005 on Saturday, 16th February, 2019 and Sunday, 17th February, 2019.

The venue of “Aurangabad” was chosen after much thought and request from our members. Aurangabad is a city in Maharashtra State. The city is a tourism hub, surrounded by many historical monuments, including the Ajanta and Ellora Caves comprising ancient rock-cut Buddhist shrines which are UNESCO World Heritage Sites, as well as 17th-century marble Bibi ka Maqbara shrine, (replica of the Taj Mahal), Battlements surround the medieval Daulatabad Fort and Shivaji Maharaj Museum, dedicated to the Maratha King Shivaji, displays war weapons and a coin collection, Panchakki, Ghrishneshwar temple (Jyotirling) and many more… The current day Aurangabad offers a wonderful opportunity to step back to past history.

The NTC is packed with a lot of learning. To enrich the participants with the knowledge, papers covering recent developments in Direct & Indirect tax laws have been selected to be discussed at the Conference. The historical monuments will make learning a pleasure, and NTC will enable good networking and create long-term intangible assets of fond memories.

DETAILED PROGRAMME

Day 1

Time Event Coverage Chairman Speaker
9.00 a.m. to 9.55 a.m. Registration & Breakfast
10.00 a.m. to 11.15 a.m. Inaugural session Chief Guest / 
Guest of Honour
Hon’ble Mr. Justice S. V. Gangapurwala, Judge, Bombay High Court 
11.15 a.m. to 11.35 a.m. Tea Break
11.35 a.m. to 01.05 p.m. First Technical session:
Income Tax
Private Trust – Succession Planning, Wills and Taxation Aspects thereof Shri N. M. Ranka, 
Sr. Advocate, Jaipur
CA. Anup Shah Mumbai
01.05 p.m. to 02.00 p.m. Lunch Break
02.00 p.m. to 03.30 p.m. Second Technical session:
GST
Taxation of Intermediary Services in GST Ms. Nikita Badheka Advocate, Mumbai CA. Sagar Shah, Pune
03.30 p.m. to 03.50 p.m. Tea Break
03.50 p.m. to 05.20 p.m. Third Technical session:
Income Tax
Prosecution – Recent Developments, consequ-ences on Independent Directors / Legal Heirs Ms. Premlata Bansal, Sr. Advocate, Delhi Rahul Hakani, Advocate, Mumbai

Day 2

09.00 a.m. to 09.50 a.m. Breakfast
10.00 a.m. to 11.30 p.m. Fourth Technical session:
GST
Recent Developments in ITC Shri C. B. Thakar, Advocate, Mumbai Shri Dinesh Tambde Advocate, Mumbai 
11.30 a.m. to 11.45 a.m. Tea Break
11.45 a.m. to 01.45 p.m. Brains’ Trust Session Direct Tax & Indirect Tax For Indirect Tax:
CA. Umesh Sharma, Aurangabad & 
Mr. M. L. Patodi, Advocate, Kota
For Direct Tax:
CA. Harish Motiwalla Mumbai, &
CA. M. R. Hundivala, Aurangabad
01.45 pm to 1.55 pm Vote of Thanks
01.55 p.m. to 03.00 p.m. Lunch Break

Fees for Members of above Associations/Non-Members

Super Early Bird Fees  Registration on or before  31-12-2018 Early Bird Fees Registration between  1-1-2019 to 31-1-2019 Regular Fees Registration from 1-2-2019
Members ₹ 4,200/- + 756 ( 18% GST) = ₹ 4,956/- ₹ 4,600/- + 828 ( 18% GST) = ₹ 5,428/- ₹ 5,000/- + 900 ( 18% GST) = ₹ 5,900/-
Non-members ₹ 5,000/- + 900 ( 18% GST) = ₹ 5,900/- ₹ 5,500/- + 990 ( 18% GST) = ₹ 6,490/- ₹ 6,000/- + 1,080 ( 18% GST) = ₹ 7,080/-
Accompanying Spouse Fees – ₹ 2,500/-+ ₹ 450 (18% GST)= ₹ 2,950/-
The fees include , course material, delegate kit, Meals : Breakfast / Lunch / High Tea & Dinner on 16-2-2019 & breakfast & lunch on 17-2-2019

Bank details for sending registration

NAME OF BANK ACCOUNT: ALL INDIA FEDERATION OF TAX PRACTITIONERS (Western Zone)
CORPORATE ADDRESS: 215, Rewa Chambers, 31 New Marine Lines, Mumbai – 400 020
BANK NAME: CANARA BANK
BANK ADDRESS: New Marine Lines, Mumbai – 400 020
BANK BRANCH: New Marine Lines
BANK A/C NO. 1389101053451
ACCOUNT TYPE: Saving
NEFT / IFSC CODE. CNRB0001389

NOTES :

a) In case of online Payment please intimate on email [email protected]

b) We have arranged the Tour to Ellora / Daulatabad Fort & Grishneshwar Temple for those interested (on advance intimation & payment before 15-1-2019)

Date : 15-2-2019 from 11 am to 6 pm – Cost per person : ₹ 1,200./-

c) NEC Meeting will be held on 16-2-2019 from 5.45 pm at ICAI Bhavan

STAY : Suggested Hotels with whom rates have been negotiated are listed hereunder:

(Payment details of Hotels would be put up shortly on website. In the meantime members can e-mail the preferred Hotel)

Name of Hotel Star Category Location Charges (Per Day per Room – Including Breakfast ) Distance from venue of Conference
Welcomhotel Rama International 5 R-3 Chikalthana,Jalna Road, 
Town Center, MGM, Aurangabad,
Single : ₹ 5000/- plus GST 18% Double : ₹ 5750/- plus GST 18% 5 Km.
The One 3 F – 21, Town Centre, CIDCO, Jalna Road, Aurangabad, Maharashtra 431003 Single : ₹ 3,000/- plus GST 18% 
Double : ₹ 3,500/- plus GST 18%
4 Km.
Hotel VITS 4 Vedant Nagar, Railway Station Road, Aurangabad 431005 Single : ₹ 2,800/- plus GST @ 18%
Double : ₹ 3,200/- plus GST @ 18%
2.5 Km.
Amar Preet 4 Jalna Road, 
Amarpreet Chowk, Aurangabad, 
Maharashtra 431 001
Single : ₹ 3,000/- plus GST 18%
Double : ₹ 3,500/- plus GST 18%
3 Km.
Hotel Keys 3 Padampura Circle, Station Road, P.O. Krant Chowk, Aurangabad 431 005 Single : ₹ 3000/- plus GST 18% Double : ₹ 3,500/- plus GST 2.5 Km.
Hotel Manor 3 Kranti Chowk, Opp Rani Lakshmi Bai Park, 
Aurangabad, 
Maharashtra 431 001
Single : ₹ 3,000/- plus GST 18% 
Double : ₹ 3,500/- plus GST 18%
3 Km.

Connectivity

Aurangabad airport is directly air-linked to major cities like Mumbai, Delhi, Kolkata,, Hyderabad, Chennai & Bengaluru. The airport is conveniently located at a distance of around 10 km. east of the town.

Two trains leave daily from Mumbai for Aurangabad. Tapovan Express departs Mumbai early morning and arrives Aurangabad by late afternoon, while the Devgiri Express is an overnight train. Several luxury and State buses too run between Mumbai and Aurangabad that extends up to Ajanta/Ellora Caves.

For any query or assistance relating to room booking please contact :
Mr. Deepak R. Shah Conference Chairman, 9820148536

For any further enquiries relating to NTC, please contact

Mr. Deepak R. Shah Conference Chairman, 9820148536
Ms. Nikita Badheka, Vice President AIFTP (WZ) 9821037885

Mr. Pravin R. Shah, Vice Chairman, AIFTP (WZ) 9821476817
Mr. Salil Lodha, Hon Secretary, AIFTP (WZ) 9820149302

Mr. Kishor Vanjara (NEC Member) 9820186480
Mr. Chirag Parekh (NEC Member) 9821634128

Email: [email protected]

An employee expects and deserves, as a matter of right, some reward when he retires after a long meritorious service. The enactment of the Payment of Gratuity Act, 1972 has fulfilled this expectation of an employee. This Act has come into existence since 16th September, 1972.

What is Gratuity?

Gratuity is a sort of an award which an employer pays out of his gratitude, to an employee for his long and meritorious services, at the time of his retirement, or termination of his services. Payment of Gratuity is however, compulsory for employers subject to Eligibility (stated as below).

Under the Act an employee become, entitled to earn gratuity after putting in service of minimum five years. When an employee dies while in service his nominee or heirs are entitled to get gratuity even if the employee had put in less than 5 yrs. service. The rate of gratuity is 15 days salary for every year of service; recently from 29th March 2018, Central Govt. by Gazette Notification enhanced the limit up to 
20,00,000/- (Rupees Twenty Lakh)
.

Object

The Payment of Gratuity Act, 1972 has been passed with the object of providing a uniform scheme for payment of gratuity to industrial workers throughout the country.

Applicability

1. Every factory (as defined in Factories Act), mine, oilfield, plantation, port and Railway Company.

2. Every shop or establishment to which Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year, and

3. Any establishment employing 10 or more persons as may be notified by the Central Government.

4. Once Act applies, it continues to apply even if employment strength falls below 10.

5. The Act also has been made applicable to

a) Motor Transport undertaking,

b) Clubs,

c) Inland Water Transport Establishments

d) Local Bodies and

e) Solicitors Offices.

Eligibility

1. Any employee has to render minimum five years’ of service.

2. At the time of retirement or resignation or on superannuation, an employee should have rendered continuous service of not less than five years.

3. In case of death or disablement, the gratuity is payable, even if he has not completed 5 yrs of service.

Notice of Opening, Change or closure of an Establishment

An employer has to send a notice in Form A to the Controlling Authority of the area within 30 days of the Rules as becoming applicable. In addition to that, Form B is to be submitted within 30 days of any change in the name, address, employer or nature of business whereas an employer has to send Form C intending to close down the business at least 60 days before intended closure.

It is permissible to opt for better Gratuity Scheme

An employee can, no doubt opt for scheme other than the payment of Gratuity Act, if it appears to be better, but on adoption of that, he has to abide by the Scheme in toto. The Supreme Court has held that sub-section (5) of section 4 of the Payment of Gratuity Act does not contemplate that the employee would be at liberty to opt for better terms of the contract by keeping option open in respect of a part of the statute. While reserving his right to opt for beneficial provisions of the statute, he has to opt for either of them and not the best of the terms of the statute as well as those of the contacts. He cannot have both, such a construction would defeat the purpose for which sub-section (5) of section 4 has been enacted. Impugned judgment cannot sustain and is set aside.

What is Continuous Service ???

The term ‘complete year of service’ means continuous service for one year.

An employee is said to have rendered continuous service, if:

a) He has been in uninterrupted service, including service interrupted by sickness, accident, absents from duty with or without leave, lay-off, strike, or lock-out or cessation of work not due to the employee’s fault.

Note: if an employee having been superannuated is a reemployed by the employer without any break in service, he will be eligible for payment of service.

b) In case of mine or non-seasonal establishment working for less than 6 days in week, he has actually worked for at least 190 days (in mine) during the period of 12 months or 95 days, during the preceding 6 months, he shall be deemed to have rendered continuous service for a period of one year or 6 months, respectively.

c) In case of any other non-seasonal establishment he has actually worked for at least 240 days during the preceding 12 months or 120 days during the preceding 6 months, he shall be deemed to have rendered continuous service for a period of 1 year or 6 months, respectively.

d) In case of seasonal establishment, he has actually worked for at least 75% of the days on which the establishment was is operation.

Notes: for this purpose an employee shall be deemed to have actually worked on a day on which :-

a) He has been laid off under an agreement or in accordance with standing orders;

b) He has been on leave with full wages, earned in the previous year;

c) He has been absent due to temporary, disablement cause by accident arising out of, and in the course of his employment, and

d) In the case of female, she has been on maternity leave not exceeding 12 weeks

Retrenched Employee entitled to get Gratuity

Retrenchment means termination of service and termination of service is covered by the definition of retirement under the Act. Retrenchment of an employee falls within the scope of section 4(1)(b) of the act under which gratuity is payable to an employee on his retirement. Therefore the employee is entitled to get gratuity.

Benefits

1. Gratuity is payable on the basis of all emoluments earned by the employee, i.e., basic wages plus dearness allowances / special allowances.

2. The quantum of gratuity is to be computed at the rate of 15 days a wages (7 days wages in case of seasonal establishments) based on rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months.

3. The total amount of gratuity payable shall not exceed the prescribed limit i.e., ₹ 20,00,000/- w.e.f. 29th March, 2018.

4. In case where higher benefit of gratuity is available under any gratuity scheme of the Co. the employee will be entitled to higher benefit.

Calculation of Gratuity

1. GratuityMonthly Salary / x 15 days x no. of 26 Wages Last Drawn yrs.of Service

2. Piece rated employee –
Daily wage is average (total wages drawn in last 3 months x 15 Days x No. of
preceding termination)
 Years of Service
No. of days worked

3. Seasonal employee – based on 7 days wages for each season.

4. Max. Gratuity Payable under the Act is ₹ 20,00,000/- 
(w.e.f. 29th March 2018)

Q. Since the payment of gratuity is not a regular feature, as such, we face difficulty in calculation of gratuity. Kindly appraise the method of calculation of gratuity?

A. Section 4 of the Payment of Gratuity Act, 1972 deals with calculation of gratuity, The Explanation to the Act inserted by Act No. 22 of 1987 (w.e.f. 1-2-1987) provides that the completion of continuous services of five years shall not be necessary where the termination of the employment of the employee is due to death or disablement.

Example: Mr. Jatin joined an establishment in January 1985 at ₹ 5,000/- per month. His wages were raised to ₹ 15,000 per month in December, 2005. He retired on 31st December, 2005. The amount of gratuity payable to him shall be calculated as under:

Mr. Jatin retired on: = 31-12-2005

= ————————————X 15 X 20

Joined on : 01-01-1985

Total Service : 20 years

His last drawn monthly salary was ₹ 15,000.

The gratuity for the period of 20 years

= 15 days wages X 20 Monthly wages last drawn comprises of 26 days.

Hence the calculation will result as follows

15000

= ————- X 15 (days per completed year of 
26 service) X 20 yrs.

₹ 1,73,077.00 will be payable toward gratuity to Mr. Jatin

Forfeiture of Gratuity

1. The employee may wholly or partially forfeit the gratuity payable to him if his services are terminated on account:

a) For his riotous or disorderly conduct or any other act of violence on his part, or.

b) For any act which constitutes an offence involving moral turpitude.

Note:- If a workman who was dismissed for assaulting another workman, in a factory, is not entitled to payment of any amount of gratuity.

2. The employee partly forfeits the gratuity payable to him if his services are terminated for any act, wilful omission or negligence, causing any damage or loss to, or destruction of, property belonging to the employer, to the extent of damage or loss caused.

Recovery of Gratuity

1. On account of his death: If the employee has a family, he must nominate one or more members of the family and none other. If the employee has no family, he can nominate any person or persons of his choice. However, if the employee acquires a family after nominating any person or persons of his choice, such nomination becomes invalid and the employee has to make a fresh nomination of one or more members of his family.

2. The employee who is eligible for payment of gratuity and dies then his nominee or legal heir has to send a written application to the employer in Form J (for nominee) & Form K (for legal heir) within 30 days from the date gratuity becomes payable.

3. If the employer does not take any action on the application, the employee has to apply to the Controlling Authority in Form N within 90 days of the occurrence of the cause for the application for issuing necessary direction to the employer for making payment of gratuity.

4. If gratuity is not paid by the employer Controlling Authority issues certificate to collector who recovers the amount as arrears of land revenue together with compound interest.

Deduction of Gratuity – Not Permissible

The Gratuity of an employee can be forfeited or withheld only when he/she is dismissed for the prescribed misconduct like wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer shall be forfeited to the extent of the damage or loss so caused or if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude. In one case, the Calcutta High Court has also held that even if a workman gives an undertaking for making deductions, the gratuity of an employee cannot be withheld.

Time Limit of Payment

The employer should pay the gratuity within 30 days from the date it becomes payable or after such date along with simple interest @ 10% p.a. (or as notified from Govt. from time-to-time) on the amount of Gratuity, unless the delay is on the part of payee.

Protection

Gratuity payable under the Act cannot be attached in execution of any decree or order of any civil, revenue or criminal court.

Note: If the employee is dead then the gratuity becomes payable to the heirs of the employee and the same becomes attachable in the hands of the employer as the employer is legally bound to pay the said gratuity to the legal heirs of the employee.

Penal Provision

1. If any person, for the purpose of avoiding any payment to be made under the Act, knowingly makes or causes to be made any false statement or false representation he would be punished with imprisonment up to 6 months, or with fine up to 
₹ 10,000/- or, with both.

2. If any employer contravenes, or makes default in complying with any provisions of the act or any rule or order made there under, he would be punished with imprisonment up to 1 year, or with fine up to ₹ 20,000/- or with both.

Handy tips for Employer

1) It is advisable for the employer to obtain nomination from the employee in Form ‘F’

2) Form G when employee acquired family later

3) And any change of nomination to be submitted in Form H, in duplicate.

As it renders easy for the employer to disburse the gratuity amount. If he neglects to obtain nomination and employee dies without nomination, it is likely that the family members of the deceased employee may approach the employer with conflicting claims to the gratuity compelling the employer to be dilemma and to resort to the legal processes.

Display of Abstract of the Act

Every employer must display an Abstract of the Act and the Rules made thereunder in English and in the language understood by the majority of the employees at a conspicuous place at or near the main entrance of the establishment.

Obligations of Employer

1) Pay gratuity to the employees as required by the provisions of the Act and the rules framed there under

2) Determine the gratuity as soon as it becomes payable, and give notice of the same to the employee concerned and the controlling authority. In case of dispute regarding the amount determined, the admitted amount of gratuity must be deposited with the Controlling Authority. If the latter decides that any more gratuity is due to the employees, the same must be deposited with him.

3) Obtain an insurance in the prescribed manner for his liability for payment of gratuity under the Act, or establish an approved gratuity fund in the prescribed manner.

Obligations of Employee

1) An employee eligible for payment of gratuity under the Act, or any person authorised in writing to act on his/her behalf, has to apply to the employer within such time and in such form as may be prescribed under the rules for payment of gratuity as soon as it becomes due.

2) Every employee, after completing one year of service, has to nominate members of his / her family who may receive gratuity in case of his / her death.

Summary

The Payment of Gratuity Act applies to every factory, mine, oilfield, plantation, port, railway company, and shop or establishment in which ten or more persons are employed. An employee is a person (other than an apprentice) employed for wages in any capacity including administrative and managerial. There is no wage ceiling for its applicability. Gratuity at the rate of 15 days wages for every completed year of service, is payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years. The act authorises the appropriate Government to appoint any officer as a controlling authority for the administration of the Act.

Query No. 1: [Notice to non-existing company is invalid]

A company got converted and succeeded into an LLP in 2014. The Assessing Officer issued a notice u/s. 148 of the Act in the name of the company for reopening its case for the A.Y. 2011-12 within the time permissible under the law. The LLP has raised the objection against the reopening that since the company is not in existence, no proceedings lie in absence of any such provision of the Act. Will the objection succeed? Can the situation be different if the notice u/s. 148 had been issued in the name of successor i.e., LLP?

Answer

Yes, the objection is sustainable.

Section 58(4) of The Limited Liability Partnership Act, 2008 reads as under:

“Notwithstanding anything contained in any other law for the time being in force, on and from the date of registration specified in the certificate of registration issued under the Second Schedule, the Third Schedule or the Fourth Schedule, as the case may be, –

(a) there shall be a limited liability partnership by the name specified in the certificate of registration registered under this Act;

(b) all tangible (movable or immovable) and intangible property vested in the firm or the company, as the case may be, all assets, interest rights, privileges, liabilities, obligations, relating to the firm or the company, as the case may be, and the whole of the undertaking of the firm or the company, as the case may be, shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and

(c) the firm or the company, as the case may be, shall be deemed to be dissolved and removed from the records of the Registrar of Firms or Registrar of Companies, as the case may be:.

Similarly, para 6 of the Third Schedule i.e. conversion from Private Company into Limited Liability Partnership provides as under:

“Effect of registration – on and from the date of registration specified in the certificate of registration issued under paragraph 4 –

(a) there shall be limited liability partnership by the name specified in certificate of registration registered under this Act;

(b) all tangible (movable or immovable) and intangible property vested in the company, all assets, interests, rights, privileges, liabilities, obligations relating to the company and the whole of the undertaking of the company shall be transferred to and shall vest in the limited liability partnership without further assurance, act or deed; and

(c) the company shall be deemed to be dissolved and removed from the records of the Registrar of Companies.

In BDR Builders and Developers Pvt. Ltd. v. ACIT [397 ITR 529], Delhi High Court has held that notice issued after order of the court approving amalgamation in name of non-existent transferred company is invalid. On the same logic notice issued in the name of erstwhile company is also invalid. Therefore contention of the LLP is sustainable.

Yes, if the notice u/s. 148 had been issued in the name of successor i.e., LLP the situation would have been different.

Query No. 2: [Gift of shares by one company to another company]

What are tax implication u/s. 56(2)(viia) in respect of gift of shares by one company to another company? Would it make difference if both companies have common shareholders? If all the shareholders are relatives with each other as defined u/s. 56 would the answer be different?

Answer

Section 2(31) of the Income-tax Act, 1961 defines “person”, which includes a company. A company is a separate juristic entity distinct from its shareholders. Thus company is taxable entity distinct from its shareholders. Section 56(2)(viia) applies to unlisted company, so if one unlisted company receives a gift of shares of unlisted company from another unlised company this section would be applicable.

So, receipts of shares of unlisted company by way of gift from another unlisted company without consideration would be taxable at full aggregate fair market value, if it exceeds fifty thousand rupees, irrespective of common shareholders in both the company. The fair market value has to be determined as per Rule 11UA of the Income tax Rules, 1962.

Query No. 3: [Share application money u/s. 68]

AO made addition u/s. 68 in respect of share application money received by the assessee in the very first year of its incorporation. Whether AO could have made such addition in spite of the fact that assessee had practically done no business so as to generate any such income? What proof is required for proving the genuineness of the transaction? What shall be the scenario where share application money is received from tainted entities? What is the effect of finding that promoters / directors of assessee-company later on acquired the very shares at discounted rates from such share holders?

Answer

Yes, AO has right to make addition of share application money received by the assessee in very first year of incorporation, irrespective of the fact, whether the assessee has done business or not, on the basis of proviso inserted by the Finance Act, 2012 w.e.f. April 1, 2013 i.e., assessment year 2013-14.

The said proviso reads as under:

“Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee- company shall be deemed to be not satisfactory, unless –

(a) The person, being a resident in whose name such credit is recorded in the books of such company also offer an explanation about the nature and source of such sum so credited; and

(b) Such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory.

In the case of a company the following are the propositions of law under section 68. The assessee has to prima facie prove:

i) The identity of the creditors / subscriber;

ii) The genuiness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels;

iii) The credit worthiness of financial strength of the creditor / subscriber;

iv) If relevant details of the assessee or PAN identity of the creditor / subscriber are furnished to the Department along with the copies of shareholders’ register, share application forms, share transfer register etc.; it would constitute acceptable proof or acceptable explanation by the assessee.

v) Therefore Department would not be justified in drawing an adverse inference only because the creditor / subscriber is tainted.

vi) Later on, when promoters / directors acquired the share at discounted rate from such shareholder / subscriber, then, the acquirers have to prove the value and genuiness of the transaction.

Query No. 4: [Gift by a member to HUF]

Gift to HUF by members:

a) What will be the tax implications of a gift by cheque (sum of money), given by a member to the HUF?

b) Whether the member will be considered as a relative as defined in explanation to clause (vii) of section 56(2) and consequently the gift not considered as income from other sources for the HUF as per section 56(2)(x)(a)?

Answer

A gift by a member to HUF is not taxable as per section 56(2)(vii) read with Explanation to section 56(2)(x). Section 56(2)(vii)(e) provides “relative means” –

(i) In case of an individual –

a) Spouse of the individual;

b) Brother and sister of the individual

c) Brother or sister of the spouse of the individual

d) Brother or sister of either of the partners of the individual

e) Any lineal ascendant or descendant of the individual

f) Any lineal ascendant of descendant of the spouse of the individual

g) Spouse of the person referred to in items (b) to (f) and

(ii) In case of Hindu Undivided Family, any member thereof

Query No. 5: [Sum of money attracts section 64(2)]

Whether clubbing provisions of section 64(2) can be said to be applicable to the HUF in respect of sum of money received without consideration as the wordings in the section relate to only property? Can it be said that the sum of money received is separate from the property envisaged in section 64(2)?

Answer

Yes, Normally property has been understood in widest possible terms. The Explanation 1 to section 64(2) clarifies that the word “property” has been defined very widely. Property includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale thereof and where the property is converted into any other property by any method such other property. Therefore “any sum of money” is property.

As per section 64(2) when an individual being a member of the HUF, then clubbing provisions will apply as follows:

(a) Before partition of the HUF, entire income from such property will be clubbed with the income of the transferor.

(b) After partition of the HUF, such property is distributed among the members of the family, in such case income derived by spouse from such property will be clubbed with the income of individual and will be charged to tax in his hands.

(From the lifestyle of our professional brother Mr. M. T. Tijoriwala, Solicitor, the members of AIFTP and readers of its monthly Journal can get inspiration and gain confidence to live similar healthy life of more than 100 years by practising the seven golden rules mentioned below)

1) Born on 23rd September, 1918 Mr. Madhusudan Thakordas Tijoriwala recently completed age of 100 years (century) on 23rd September, 2018. To celebrate the occasion a small function was arranged by his relatives and friends at Sheth Radhakumar Tejpal Memorial Hall on 23rd September, 2018.

2) He was a student of St. Xaviers College. He loved the subject of law from the beginning. For the sake of job security, to earn a regular income, he joined as Assistant Solicitor in 1944 M/s. Amarchand Mangaldas & Co., and after eight months he began work with M/s. Peiera and Fazalbhoy & Co., both well-known firms and thereafter he never looked back.

3) He has been practicing as an Advocate and Solicitor for the last 73 years in the firm name of M/s. Nanavati Tijoriwala & Co. He has also been appointed as a Notary of Maharashtra since last several years. During his long career, he was a part time Professor at Government Law College and was attached to the University of Mumbai for seventeen years lecturing LL.M. students. He has also delivered lectures to Articled Clerks on the subject of Conveyancing and also lectured on the Law and Practice of Conveyancing to the Junior Advocates, arranged by the Bar Council of Maharashtra and Goa as refresher courses.

4) He and Mr. Sandip N. Vimadalal wrote a book on ‘Deeds and Documents’ on Conveyancing which contains their experience and knowledge on the subject of Conveyancing.

5) On 1st June, 1946 Mr. Nanavati and himself started their firm in the name of M/s. Nanavati Tijoriwala & Co.

6) He has been having healthy habits and he is a strict disciplinarian. When at 50, Mr. Tijoriwala was about to give up playing badminton, he decided to take up yoga. In the year 1966, he met ‘Guruji’ who used to come from Pune to Mumbai to conduct classes over the weekend and he became his guru, guide, friend, and philosopher. When he first started yoga he could not even touch his toes, in spite of the fact that he had been playing badminton very actively and after joining yoga class he could do all the difficult poses well. At the age of 86 he used to walk to temples viz., Dwarkadhishji, Laxmi Narayan, Ambaji and Babulnath and climbed stone steps. He is one of the Founder Donors and was a Trustee of the Swami Shri Prempuriji Ashram Trust at Babulnath, Mumbai- 400 007. Even today, after completing the age of 100 years, he has been practising yoga and he is healthy in all respects.

7) To live healthy life of more than 100 years practise yoga and follow the following 7 golden rules forever:

i. Keep cordial relations with others, good friends around you, remain mentally peaceful and practice yoga regularly;

ii. Eat moderately; eat fresh and healthy food;

iii. Forget the past, except its sweet memories, enjoy every moment of present and always be close to nature;

iv. Be kind and helpful to others by engaging in good social activities;

v. At any age of life, be a student to learn new useful things;

vi. Always feel young at heart and be enthusiastic;

vii. Things change often with times in life! Accept the same with a smile.

1. Deficiency in service – Builder : Consumer Protection Act

Builder failing to allot property to complainant despite having contractual obligation and transferring project to another company without any valid reason. Majority amount of consideration already paid to builders. Even after lapse of many years, builder failing to make redevelopment of property. Act of builder amounting to deficiency in service. Builder liable to pay compensation to complainants.

M/s. Fortune Infrastructure (now known as M/s. Hicon Infrastructure) and another v. Trevor D’Lima and others. AIR 2018 Supreme Court 2975.

2. Customary Laws – Oral gift – Deceased father during his lifetime orally gifting land in favour of son to exclusion of daughters – Oral gift permissible under customs governing parties

In support of the finding that the oral gift is permissible, learned single has placed reliance on the Full Bench judgment of this Court rendered in the case of “Ghulam Ahmad Sofi v. Mohd. Sidiq Dareel and others” AIR 1974 J&K 59 and also on the judgment rendered by the Hon’ble Apex Court in the case of “Hafeeza Bibi and others v. Shaikh Farid (dead) by LRs and others” reported in (2011) 5 SCC 654. Legal position vis-à-vis oral gift has been correctly appreciated i.e. oral gift under Muslim Personal Law is permissible, therefore, view regarding oral gift taken by the revisional authority (Financial Commissioner) that it is not permissible has been rightly negated.

Mst. Rafiqa and others v. Mohammad Maqbool Bhat and Others. AIR 2018 Jammu and Kashmir 98

3. Suit for injunction – By unregistered public trust – Is maintainable – Suit cannot be thrown out for want of registration of trust. M. P. Public Trust Act

Any trust in order to protect its properties from being alienated, transferred or demolished, can approach the Civil Court for obtaining the temporary injunction because u/s. 26 of the Act, the Registrar, Public Trust is not having any jurisdiction to grant the interim protection. Under section 26 of the Act, Registrar of Public Trust can only direct the working trustees to approach the Civil Court to obtain the relief, that too after notice to the non-applicants. In order to get the interim protection in urgency, the civil suit seeking permanent injunction as well temporary injunction is a suit is certainly maintainable. If there is any dispute about the registration of the trust, Civil Court can direct trust to get it registered or preliminary issue can be framed on this controversy as to whether the trust is a registered trust or not, but the entire suit cannot be thrown out for want of registration.

Shri Vaishnav Sahayak Trust v. Kailash Chandra and others. AIR 2018 Madhya Pradesh 160.

4. Gift deed – Adjudication as to validity of gift deed – Powers of Consolidation Officer – Consolidation Officer has no authority to declare gift deed as void : Transfer of Property Act, Sec. 122

The facts, in brief, is that one Daroga Rai is said to have executed a deed of gift in favour of Anuplal Rai, the father of the petitioners on 7-5-1975. On the basis of the aforesaid gift deed, Anuplal Rai filed petition before Consolidation Officer, patepur to get his name entered in the record of rights during the consolidation proceeding, but the Consolidation Officer rejected the petition of Anuplal Rai and his legal heirs holding that the gift deed is void.

Held that the aforesaid deed of gift cannot be said to be a void document unless the same is declared by the competent civil court having jurisdiction to declare a deed of gift as void and ignore it.

Shivjee Rai and others v. Joint Director Of Consolidatio, Muzaffarpur and others. AIR 2018 PATNA 137.

5. Maxims – ‘Generalia Specialibus Non-Derogan’ – Where statute contains both general as well as specific provision – Later must prevail

Rule 8 of the Preconception and Pre Natal Diagnostic Techniques Rules of 1996 prescribes procedure for renewal of registration in normal course or it can be said that it is a general provision regarding renewal of registration, however, with the insertion of Rule 18-A (4)(ii), the legislature has made a specific provision or carved out an exception to the general rule, directing the appropriate authorities including State, Districts and Sub-districts not to accept the applications for fresh registration or renewal of registration of those applicants against whom, case is pending in any court for violation of the provision of the Act of 1994 and Rules of 1996. With the insertion of Rule 18-A (4)(ii) in the statute book, a classification is created among existing ultrasound clinics firstly, where a criminal case is pending and secondly, where the other irregularities in compliance of the Act of 1994 and the Rules of 1996 exist. As statute contains both a general as well as specific provision the later must prevail and therefore Genetic clinics, Laboratories against whom case is pending for violation of Act or Rules are not entitled to renewal in view of specific bar under R.18-A. They cannot claim disposal of application for renewal of registration as per 
R. 8 of Rules.

Dr. Pramod Inderjeet Singh Bedi v. State of Rajasthan and others. AIR 2018 Rajasthan 100.

6. Expression ‘Ordinarily resides’ do not connote past residence

Expression ‘Ordinarily resides’ do not connote past residence. Ordinarily, an adverb qualifying verb ‘resides’ takes its natural and common meaning that an intention to live there for certain number of years, though not permanently, in connection with one’s occupation or employment. In case of school going child, ordinary place of residence is that place where it goes to school and lives with its parents, but this meaning cannot be fastened if child is studying in boarding school, its ordinary place of residence in such a situation is place where its parents reside. Residence connotes living in one’s house, whether own or rented. If one lives at a place, it obviously implies a meaning that there must be an intention to live at that particular place treating that place as his place of residence, and it may also be in connection with one’s business, employment, etc.

Dr. Vishal Khakhandaki v. Smt. Dr. Ashwini khakhandaki. AIR 2016 (NOC) 687(Kar.)

  1. S.4 : Charge of income-tax – Compensation received by the assessee in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging assessee’s signature on a document relating to sale of shares of a company is not taxable as income [S.2(24)]

    Dismissing the appeal of the revenue the Tribunal held that compensation received by the assessee in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging Assessee’s signature on a document relating to sale of shares of a company is not taxable as income as the compensation received by the Assessee was not for his professional activities but for settlement of dispute between him and third party. Accordingly, the same cannot fit into the definition of income as per section 2(24) r.w.s 4 of the Act. (AY. 2011-12)

    ACIT v. Jackie Shroff(2018) 167 DTR 133 / 172 ITD 425 / 194 TTJ 760 (Mum. Trib.)

  2. S.4 : Charge of Income tax – Capital or revenue – Subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt

    Dismissing the appeal of the revenue the Tribunal held that subsidy received from West Bengal Incentive Scheme from State Government for setting up of an industry in the backward area is to be treated as a capital receipt. (AY. 2005-06)

    ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243 / 192 TTJ 645 (Delhi)(Trib.)

  3. S.4 : Charge of income-tax –Development agreement – The “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt [S. 2(14) 28(va)]

    Allowing the appeal of the assessee the Tribunal held that the “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt. (ITA. No. 2449/Ahd/2016, dt. 17-9-2018)(AY. 2008-09)

    Bhojisaon Infrastructure Pvt. Ltd. v. ITO (Ahd.)(Trib.),
    www.itatonline.org

  4. S.4 : Charge of income-tax –Capital or revenue – compensation received on closure/termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilisation of profit making apparatus is capital receipts. [S.28(i)]

    Dismissing the appeal of the revenue the Tribunal held that compensation received on closure/ termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilisation of profit making apparatus is capital receipts. (ITA No.157/RPR/2014, dt. 23-10-2018)(AY. 2011-12)

    DCIT v. Rishabh Infrastructure Pvt. Ltd. (Raipur)(Trib),
    www.itatonline.org

  5. S.6(1) : Residence in India – Individual – Non-resident –Assessee was outside India for a period of more than 182 day, Salary income of assessee received outside India is not liable to tax merely because his foreign employer had deducted the tax at source on such income [S. 5(2), 192]

    Allowing the appeal of the assessee the Tribunal held that since assessee was outside India for a period of more than 182 days, he had became a non-resident. Accordingly the salary income of assessee received outside India is not taxable in India merely because it was deducted on such income. (AY. 2013-14)

    Avdesh Kumar v. DCIT (2018) 172 ITD 73 (Delhi) (Trib.)

  6. S.6(1) : Resident in India – Scope of total income – Non-Resident – Stationed in Switzerland for 331 days – Rendered his services outside India – Foreign assignment allowance received by him abroad, was not liable to tax in India [S. 5 (2)]

    Dismissing the appeal of the revenue , the Tribunal held that since services of assessee were utilised outside India and, moreover, both accrual and receipt of income happened outside India, same was outside ambit of tax as per provisions of section 5(2) of the Act. (AY. 2013-14)

    DCIT v. Sudipta Maity. (2018) 172 ITD 94 (Kol.) (Trib.)

  7. S.10(37) : Capital gains – Agricultural land – Within specified urban limits – Interest on compensation – Interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. [S.56, Land Acquisition Act, 1894, S.28]

    Tribunal held that interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. (AY. 2013-14)

    ITO v. Sangappa S. Kudarikannur. (2018) 172 ITD 332 (Bang.) (Trib.)

  8. S.11 : Property held for charitable purposes – Sports association – Merely because some sponsorship was accepted from a private company for Asian Games and Youth Olympic Games, exemption cannot be denied [S.2(15)]

    Dismissing the appeal of the revenue, the Tribunal held that there was no material which suggests that the assessee was conducting its affairs solely on commercial lines with the motive to earn profit. There is also no evidence that the assessee has deviated from its objects which it has been pursuing since past many decades. Thus, proviso to S.2(15) of the Act is not applicable to the assessee. The assessee cannot lose its character of charitable purpose merely because some sponsorship was accepted from a private company in respect of Asian Games and Youth Olympic Games (AY. 2011-12)

    Dy. CIT v. India Olympic Association (2018) 171 ITD 674 / 66 ITR 82 (Delhi)(Trib.)

  9. S.11 : Property held for charitable purposes – Application of income – Giving funds to various organisations which are carrying out activities of relief to poor or medical relief will constitute application of income [S.2(15) 12AA, 13]

    During relevant year, assessee made donations in kind and by issuing cheques to various schools, colleges and other charitable institutions registered under section 12A of the Act. AO held that the amount and items given to institutions which were registered under section 12A, could not be allowed in view of section 13(3)(d). Allowing the appeal of the assessee the Tribunal held that instead of carrying out any charitable activity by itself, gives funds to various organizations and institutions who are carrying out activities of relief to poor or medical relief, in cheque or in kind, then it will still tantamount to incurring of expenditure for charitable purposes and, hence, will constitute application of income in hands of assessee. Accordingly the disallowance was deleted. (AY. 2013-14)

    KPMG Foundation v. ITO (2018) 172 ITD 185 (Delhi) (Trib.)

  10. S.12A : Registration – Trust or institution – Corpus donations received by trust with specific directions by donors to be applied towards specific purpose be treated as capital receipts – Corpus donation cannot be taxed though the trust is not registered [S. 2(24) iia), 11, 12AA]

    Allowing the appeal of the assessee the Tribunal held that corpus donations received by assessee-trust with specific directions by donors to be applied towards specific purpose for which respective fund was created would be treated as capital receipts. Accordingly the corpus donation is not taxable though the trust is not registered under S.12A of the Act. (AY. 2012-13)

    Bank of India Retired Employees Medical Assistance Trust v. ITO (2018) 172 ITD 78 (Mum.) (Trib.)

  11. S.14A : Disallowance of expenditure – Exempt income –Net of interest – Benefits of netting of interest under Rule 8D(2)(ii) be allowed without even emphasising on need of having any inextricable link between interest earned and interest paid prior to 2-6-2016. [R.8D(2)(ii)]

    Dismissing the appeal of the revenue the Tribunal held that for the purpose of applying Rule 8D(2)(ii) prior to its amendment with effect from 2-6-2016, what would be considered as amount of expenditure by way of interest would be the interest paid by the assessee on the borrowings minus the interest income earned during the financial year. The interest income earned during the year being more than the interest expenditure incurred, the disallowance made by the AO on account of interest u/s. 14A by applying Rule 8D(2)(ii) was deleted by the CIT(A) on the ground that there was no net interest expenditure incurred by the assessee. Before the ITAT revenue challenged the same stating that there nothing brought on record to show an inextricable link between the interest earned and interest paid. Tribunal affirmed the order of CIT(A). (AY. 2009-10)

    Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713 (Kol.)(Trib.)

  12. S.14A : Disallowance of expenditure – Exempt income – Income from other sources –Dividend income on investment made in Oman – No disallowances can be made – DTAA-India – Oman [S.90(2), Art. 25, R.8D]

    Dismissing the appeal of the revenue the Tribunal held that dividend income earned from investment made in Oman is chargeable to tax in India under head ‘Income from other sources’ and would form part of total income; rebate of taxes had to be allowed from total taxes in terms of section 90(2), read with article 25 of Indo-Oman DTAA, and, consequently, provisions of S. 14A were not applicable to dividend received. (AY. 2006 07)

    ACIT v. Indian Farmers Fertiliser Cooperative Ltd. (2018) 171 ITD 504 (Delhi) (Trib.)

  13. S.17 : Perquisite – Employee Stock Option Plans – Tax arises in hands of employees, on date of allotment of shares and not on date of exercise of option. [S.15, 17(2), 192, 201(1A)]

    Assessee deducted perquisite tax on ESOP on date of allotment of shares. AO held that perquisite tax on ESOP should have been deducted on date of exercise of option. Allowing the appeal of the assessee the Tribunal held that as per S.17(2)(vi) obligation for withholding tax accrues only when shares are allotted after completion of commitments on part of person who exercised option and not on date of exercise of option. (AY. 2012-13)

    Bharat Financial Inclusion Ltd. v. DCIT (2018) 172 ITD 198 (Hyd.) (Trib.)

  14. S.23 : Income from house property – Annual value – vacancy allowance – The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23 (1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assessee’s attempts to let out and infallible proof should not be demanded [S.22, 23(1) (c)]

    Allowing the appeal of the assessee the Tribunal held that The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23(1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assessee’s attempts to let out and infallible proof should not be demanded. (ITA. No. 3755/Mum/2016, dt. 10-8-2018) (2012-13)

    Sachin R. Tendulkar v. DCIT (Mum)(Trib.),
    www.itatonline.org

  15. S.28(i) : Business income – Capital gains – Conversion into stock in trade – Development agreement – Project completion method –Advance received equivalent to share cannot be taxed in the year of receipt – As per the agreement, right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year – Taxable in subsequent year – Capital gains arising on conversion of land into stock-in-trade prior to development agreement would also be taxed in subsequent year in which the right to collect the amount is crystallized – Conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property. [S. 4, 5, 45, 145]

    Tribunal held that advance received equivalent to share cannot be taxed in the year of receipt. As per the development agreement right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year. Developer had recognised completion and sale of developed portion in subsequent assessment year 2011-12, business profits arising would be taxable in assessment year 2011-12. Capital gains arising on conversion of capital asset into stock-in-trade would also be taxed in in subsequent assessment year 2011-12 in which business profits were to be taxed. On conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property. (AY. 2009-10)

    Vilas Babanrao Rukari (HUF) (2018) 171 ITD 532 (Pune) (Trib.)

  16. S.28(i) : Business loss – Speculation – Tax planning – The fact that the assessee bought and sold shares of groups concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S.73 because the shares were held as investments

    Dismissing the appeal of the revenue, the Tribunal held that the fact that the assessee bought and sold shares of group’s concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S.73 because the shares were held as investments. The assessee-company has given scientific reasons for investment in these companies which are supported by documentary evidences. The Revenue has only contended that Ld. CIT(A) has not seen whose shares are sold by the assessee-company. However, complete details of purchase and sales are mentioned in the orders of the authorities below supported by documentary evidences. (ITA. No. 3661/Del./2014, dt. 1-10-2018)(AY. 2009-10)

    ACIT v. RJ Corp. Ltd. (Delhi) (Trib.),
    www.itatonline.org

  17. S.35 : Scientific research expenditure – Retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S.35(1)(ii). [S. 35(1)(ii)]

    Allowing the appeal of the asssessee the Tribunal held that retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S.35(1)(ii). (AY. 2014-15 )

    P. R. Rolling Mills (P.) Ltd. v. DCIT (2018) 171 ITD 683 (Jaipur)(Trib.)

  18. S.36(1)(ii) : Bonus or commission – Restriction of allowance would apply only to an employee who has also share in company – Payment made to agent who was an MD of company in earlier years and in the relevant year he was not an employee – Disallowance cannot be made

    Allowing the appeal of the assessee the Tribunal held that restriction of allowance would apply only to an employee who has also share in company. Payment made to agent who is not an employee during the relevant year. Disallowance cannot be made. (AY. 2009-10)

    Nat Steel Equipment (P.) Ltd. v. DCIT (2018) 171 ITD 482 (Mum.) (Trib.)

  19. S.37(1) : Business expenditure –Actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT [S.36(1)(v)]

    Dismissing the appeal of the revenue, the Tribunal held that actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT. Followed District Co-operative Central Bank, Eluru (ITA No. 49 & 50/Viz/2012) (AYs. 2013-14 & 2014-15)

    ACIT v. Guntur District Co-operative Bank Ltd. (2018) 66 ITR 61 (SN)(Vishakha) (Trib.)

  20. S.37(1) : Business expenditure –Where assessee was selling goods to retailers at a price less than their cost price, in view of fact that transaction was a bona fide one, taxing authority could not take into account market price of those goods, ignoring real price fetched to ascertain profit from said transaction. [S.145(3)]

    On appeal to the Tribunal, it held that revenue authorities cannot disregard the books of accounts and resort to the process of estimating income of the Assessee, unless provisions of section 145(3) are invoked, which was not the case. It also held that there should be a real income which needs to be taxed and not ‘income which could have been earned but not earned’ and held that the tax return filed by the assessee needs to be accepted. The Tribunal also observed that one cannot go on the assumption that the profit forgone is expenditure incurred and further, that expenditure so incurred was for acquiring intangible assets like goodwill, brand, etc. Thus, the Tribunal held that assuming that the expenditure was incurred, the expenditure for building brand or goodwill was also revenue expenditure and allowable as deduction. Thus, the Tribunal held that the loss declared by the Assessee should be accepted and the Ld. AO’s action in disallowing the loss was not in accordance with the law. (AY. 2015-16)

    Flipkart India Private Limited vs. ACIT (2018) 166 DTR 305 / 170 ITD 751 / 64 ITR 358 / 193 TTJ 685 (Bang)(Trib.)

  21. S.37(1) : Business expenditure – Capital or revenue – Expenses on renovation and refurbishing of a leased property – Held, expenses incurred to facilitate carrying out of catering / canteen services at the leased premises and formed integral part of profit earning process of assessee’s business – Held, revenue expenditure

    Expenditure incurred on a leased property in the nature of construction of working slabs / counters for various purposes, teakwood partitions, stainless steel shutters, pipelines, purchase of tables, chairs, centrifugal blowers and fresh air inlets, duct fabrication, Stainless steel Hoods, POP ceilings, electrical works, water connections, paintings etc., & various other items of similar nature were mainly to facilitate carrying out of catering / canteen services at the leased premises and formed part and parcel of assessee’s trading operations and constitute an integral part of profit earning process of assessee’s business. Same was held by the Tribunal to be revenue in nature. (AY. 2002-03, 2003-04, 2009-10)

    Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN)(Mum.)(Trib.)

  22. S.37(1) : Business expenditure – Compounding fees paid to RBI for post-facto approval from FIPB – Held, amount compensatory in nature and therefore, allowable as deduction. [Expln.]

    Assessee paid aforesaid sum of ₹ 18 Lakh to Reserve Bank of India [RBI] as compounding fees under the provisions of Foreign Exchange Management Act, 1999. Assessee was categorised as operating company for the purposes of FIPB and FEMA. Subsequently, the assessee made investment in shares of its wholly owned subsidiary companies and accordingly its category changed from operating company to operating-cum-holding company, which required prior approval of FIPB. However, the said approval was not obtained and the assessee applied for post-facto approval of the same from FIPB which was granted subject to compounding of the same by RBI. Held, such compounding fees was compensatory in nature and therefore, allowable. (AYs. 2002-03, 2003-04, 2009-10)

    Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN)(Mum.)(Trib.).

  23. S.37(1) : Business expenditure – Commercial expediency – Businessman’s point of view – Service charges were paid to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc. – There being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to refix amount that should have been paid. S.37(1) does not have any restriction to amount paid so long expenditure is incurred for business

    Assessee has paid service charges of ₹ 3 lakh per month to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc. Assessing officer estimated at ₹ 25,000 per month. On appeal the Tribunal held that , there being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to refix amount that should have been paid. S. 37(1) does not have any restriction to amount paid so long expenditure is incurred for business. (Referred, CIT v. Bharat Carbon & Ribbon Mfg. Co. (P.) Ltd. [1999]239 ITR 505 (SC), Sasson J. David & Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 (SC)). Birla Cotton Spinning & Weaving Mills Ltd. v. CIT [1967] 64 ITR 568 (Cal.) (HC). CIT v. Dhanrajgiri Raja Narasingiri [1973] 91 ITR 544 (SC) Jamshedpur Motor Accessories Stores v. CIT [1974] 95 ITR 664 (Pat.) (HC) J.K. Woollen Mfgr. v. CIT [1969] 72 ITR 612 (SC). CIT v. Chandulal Keshavlal & Co. [1960] 38 ITR 601 (SC), (AY. 2005 -06)

    Elem Investments (P.) Ltd. v. ACIT (2018) 172 ITD 58 (Hyd.) (Trib.)

  24. S.37(1) : Business expenditure – Corporate entity – even if no business was carried out during the year, expenditure incurred by it has to be allowed

    During assessment proceedings, AO found that assessee had claimed expenditure towards business expenses but assessee had not carried out any business during year under consideration. Therefore, AO disallowed the said amount and added back the same to income of assessee. CIT(A) set aside the order of the AO. The Tribunal held that in case of Preimus Investment And Finance Ltd (ITA 4879/M/12) dt. 13th May 2015, it was held that expenditure incurred for retaining status of company, namely miscellaneous expenses, salary, legal expenses, travel expenses, would be expenditure wholly and exclusively for purpose of making and earning income. There was no doubt that assessee was a corporate entity and even if it did not carry any business activity it had to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred had to be allowed and thereby Revenue’s appeal was dismissed.

    Ozoneland Agro Pvt. Ltd. (2018) 53 CCH 427 (Mum.)(Trib.)

  25. S.40(a)(ia) : Amounts not deductible – Deduction at source – Short deduction – Precedent – Deducted the tax applying the provision of S.194C @2% instead of 194J @ 10% – No disallowances can be made – Followed, CIT v. S.K. Tekriwal 206 CTR 73 (Cal.)(HC) instead CIT v. PVS Memorial Hospital Ltd. (60 taxmann.com 69)(Ker.) (HC). Tribunal held that in the absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which favour’s assessee had to be accepted. [S.194C, 194J]

    Dismissing the appeal of the revenue the Tribunal held for short deduction of tax no disallowance can be made. Followed, CIT v. S.K. Tekriwal ( )(206 CTR 73 (Cal )(HC) instead CIT v. PVS Memorial Hospital Ltd.( ) (60 taxmann.com 69)( Ker) (HC). Tribunal held that in the absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which is favours assessee had to be accepted. (AY. 2010-11)

    ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897 (Mum)(Trib.)

  26. S.40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – In absence of express or implicit contract between the assessee and the mastries, payments made to the labourers through mastries / group leaders did not attract deduction at source hence no disallowances can be made [S.194C]

    Dismissing the appeal of the revenue the Tribunal held that in absence of express or implicit contract between the assessee and the mastries, payments made to the labourers through mastries / group leaders did not attract deduction at source hence no disallowances can be made. (AY. 2012-13)

    ACIT v. Kasiviswanadham (A)(2018) 66 ITR 525 (Vizag) (Trib)

  27. S.45 : Capital gains – Allotment letter – Period of holdings –The law laid down in CIT v. Suraj Lamps & Industries Pvt. Ltd. (2012) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536 (Bom)(HC) is explained [S.2(42A), 2(47) 54]

    Allowing the appeal of the assessee the Tribunal held that the law laid down in Suraj Lamps & Industries (2012) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017 )393 ITR 536 (Bom)(HC) is explained. (ITA No.4853/Mum/2016, dt. 14-8-2018)(AY. 2012-13)

    Sanjay Kumar Footermal Jain, v. ITO (Mum)(Trib),
    www.itatonline.org

  28. S.45 : Capital gains – Long term capital gains from penny stocks-Tribunal held that it cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply – The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares – The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc. to prove the genuineness of the transactions are false or fictitious or bogus. [S.10(38), 68]

    Allowing the appeal of the assessee the Tribunal held that long term capital gains on penny stocks cannot be assessed as cash credits or undisclosed income. it cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply – The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares. The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc. to prove the genuineness of the transactions are false or fictitious or bogus. (ITA No. 457/Del/2018, dt. 5-11-2018)(AY. 2014-15)

    Arun Kumar v. ACIT (Delhi)(Trib),
    www.itatonline.org

  29. S.45 : Capial gains – Penny Stocks – Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker. [S.10(38)]

    Dismissing the appeal of the revenue the Tribunal held that, assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt. depository and traded on stock exchange. Nothing on record to suggest assessee gave cash and purchased cheque from broker. (Sanjay Bimalchand Jain (Bom HC) distinguished). ( ITA. Nos. 93 to 99/RPR/2014, dt. 16-4-2018)(AY. 2004-05)

    DCIT v. Rakesh Saraogi & Sons (HUF)(Rai)(Trib),
    www.itatonline.org

  30. S.45 : Capital gains – Business income – Merely because the Owner of an immovable property holds the land as stock-in-trade does not prove that assessee, being a co-owner, also held the property as stock in trade – Profits is assessable as capital gains [S.28(i) 54F]

    Assessee worked out long term capital gains and claimed exemption under section 54F on sale proceeds received on sale of land co-owned by him. Since one of the co-owners, a company, who owned major portion of the land held the same as stock-in-trade in its books of account, AO treated the land held by assessee as stock in trade as well. The Tribunal observed that transaction entered by assessee was to make investment in capital asset as an investor and the land was sold under a common agreement for the sake of convenience which does not tantamount to joint venture. Hence it was held that assessee cannot be compared with the co-owners who were holding the property as stock in trade and since the motive of the assessee right from the beginning was never to indulge in trading activity, therefore CIT(A) was right in treating the profits as capital gains.

    DCIT v. Mohinder Puri (2018) 172 ITD 29 / 53 CCH 573 (Delhi)(Trib.)

  31. S.50C : Capital gains – Full value of consideration – Stamp Duty Valuation – Where the assessee explained the reasons for fetching a lesser rate on sale of immovable property as compared to the Stamp Duty Valuation, the AO should have remitted the matter to the DVO for determination of the FMV of the immovable property.[S.45]

    On Revenue’s appeal, the Tribunal held that the assessee brought on record the complexities involved in the sale of property and the reasons for getting a lesser rate and therefore, the Ld. AO should have referred the valuation of the property to the DVO as per section 50C(2) of the Act. Since proper procedure has not been followed, the Tribunal remitted the matter back to the Ld. AO to make a reference to the DVO for determination of FMV of the property. (AY. 2012-13)

    ACIT v. Kishore Kumar (2018) 66 ITR 158 (Vizag) (Trib.)

  32. S.54 : Capital gains – Profit on sale of property used for residence

    Eligible for Capital gains exemption even if the construction of property in which the capital gains (claimed exempt) is invested could not completed within the prescribed time limit. [S.45]

    On Revenue’s appeal, the Tribunal held that the assessee had utilised the entire capital gain by way of making payment to the developer of the flat. The requirement of u/s. 54 of the Act is that capital gain shall be utilised or appropriated as specified in u/s. 54(2) of the Act, therefore Ld. CIT(A) has rightly allowed the appeal of the assessee. (AY. 2013-14)

    ACIT v. M. Raghuraman (2018) 169 ITD 315 / 65 ITR 17 (Chennai)(Trib.)

  33. S. 54 : Capital gains – Profit on sale of property used for residence – Purchased new residential house before sale of another residential house owned – Investment is made within the stipulated period and the investment was more than the capital gains earned- Entitle to exemption. [S.45,54F]

    Allowing the appeal of the assessee the Tribunal held that the assessee has made investment within the stipulated period and the investment was more than the capital gains earned. Accordingly the assessee is entitle to exemption though the assessee has purchased a new residential house before sale of another residential house owned by him. (AY. 2012-13)

    Yatin Prakash Telang v. ITO (2018) 171 ITD 705 (Mum.)(Trib.)

  34. S.54 : Capital gains – Profit on sale of property used for residence –Unregistered document-Though an unregistered agreement to sell does not entitle the parties to seek part performance u/s. 53A of the Transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s. 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property [S. 2(47), 45, Transfer of Property Act, 1882, S.53A, Registration Act, 1908, 17(1)(a), 49]

    Allowing the appeal of the assessee the Tribunal held that though an unregistered agreement to sell does not entitle the parties to seek part performance u/s. 53A of the transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s. 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property. (Followed K.B. Saha and Sons Pvt. Ltd. v. Development Consultant Ltd. (2008) 8 SCC 564) (ITA. No. 1356/Kol/2017, dt. 7-9-2018)(AY. 2012-13)

    Gautam Jhunjhunwala v. ITO (Kol)(Trib),
    www.itatonline.org

  35. S.54F : Capital gains – Investment in a residential house – Exemption cannot be denied on the ground that residential building was used for business purpose [S.54]

    AO and CIT(A) restricted the claim of deduction u/s. 54F of the Act by excluding the portion of the residential building which was used for business purpose. It was held by Hon’ble Tribunal that there was no bar on the assessee on the usage of the new residential property for business purpose. Section 54F of the Act only stipulates that the assessee should have constructed / purchased a residential house within the stipulated time in order to claim the benefit of deduction. It is not necessary that a person should reside in the house to call it a residential house. (AY. 2013-14)

    Dy. CIT v. Subramanian (A. M.) (2018) 63 ITR 24 (SN.) (Chennai)(Trib.)

  36. S.68 : Cash credits – Share premium – The AO cannot assess the share premium as income on the ground that it is “excessive”. The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations – There is no bar on collecting higher amount as share premium – There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds – The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities – The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business

    Dismissing the appeal of the revenue, Tribunal held that the AO cannot assess the share premium as income on the ground that it is “excessive”. The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations. There is no bar on collecting higher amount as share premium. There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business. ITA. No. 6991/Mum/2016, dt. 24-10-2018)(AY. 2012-13)

    DCIT v. Varsity Education Management Pvt. Ltd. (Mum.)(Trib)
    www.itatonline.org

  37. S.68 : Cash credits – Bogus share capital – If (a) the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants and (b) the bank statement show that money was received through banking channels and there were no immediate withdrawals to suggest that the share application amounts have been returned back to these parties in cash, it means the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions- Additions cannot be made as cash credits

    Allowing the appeal of the assessee the Tribunal held that; If (a) the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants and (b) the bank statement show that money was received through banking channels and there were no immediate withdrawals to suggest that the share application amounts have been returned back to these parties in cash, it means the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions. Additions can not be made as cash credits. (ITA No. 3212/Mum/2014, dt. 12-10-2018)(AY. 2008-09)

    Sunshine Metal & Alloys v. ITO (Mum)(Trib),
    www.itatonline.org

  38. S.68 : Cash credits – Bogus share capital – Failure by the AO to offer cross-examination of the persons whose statements are relied upon means that no adverse inference can be drawn against the assessee. Dept’s plea for a remand is not acceptable if the assessee has discharged primary onus

    Allowing the appeal of the assessee the Tribunal held that; failure by the AO to offer cross-examination of the persons whose statements are relied upon means that no adverse inference can be drawn against the assessee. Dept’s plea for a remand is not acceptable if the assessee has discharged primary onus. (ITA No. 5637/Del/2013, dt. 1-10-2018)( AY. 2004-05)

    Rajat Export Import (India) Pvt. Ltd. v. ITO (Delhi)(Trib),
    www.itatonline.org

  39. S. 68 : Cash credits – Capital gains – Penny stocks – Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE v. Andaman Timber Industries (2015) 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Addition cannot be made as cash credits. [S.10 (38), 45, 115BBE]

    Dismissing the appeal of the revenue, reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE v. Andaman Timber Industries (2015) 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Addition cannot be made as cash credits. (ITA No. 16/JP/2018, dt. 29-8-2018)(AY. 2014-15)

    DCIT v. Saurabh Mittal (Jaipur)(Trib)
    www.itatonline.org

  40. S.68: Cash credits – Produced sufficient documentary evidence before AO, at the assessment as well as appellate stage to prove the genuineness of the transaction – Share capital, share premium received by a Company from investors cannot be assessed as unexplained cash credit – The valuation report filed by the assessee supports explanation of assessee that shares were issued at premium which were below the fair market value – Addition cannot be made as income from other sources. [S.56(2)(viib), R.11UA(2)(a)]

    Allowing the appeal of the assessee the Tribunal held that failure to produce the assessment record by the revenue adverse inference against the Revenue and held that all the documents were filed before AO even at assessment stage. Considering the facts of the case, in the light of material on record and the decisions referred, it is clear that assessee produced sufficient documentary evidence before AO, at the assessment as well as appellate stage to prove ingredients of S. 68 of the Act. The AO however, did not make any further enquiry on the documents filed by the assessee. Thus, the AO failed to conduct scrutiny of the documents at assessment stage and merely suspected the transactions in question on the irrelevant reasons. The A.O. did not make any enquiry from the Banker of the Investor and Income Tax record of the Investor Company. The assessee, thus, proved the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter. Accordingly the addition was deleted. The valuation report filed by the assessee supports explanation of assessee that shares were issued at premium which were below the fair market value per share of ₹ 1221/. Accordingly the addition cannot be made as income from other sources. (ITA.No.2534/Del./2018, dt. 10-8-2018) (AY. 2014-15)

    Priyatam Plaschem Pvt. Ltd. v. ITO (Delhi)(Trib.),
    www.itatonline.org

  41. S.68 : Cash credits – Bogus share capital – A private limited co cannot say that it has no clue about the subscribers to its share capital. The genuineness of the transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. Even shell cos. have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials, the transaction cannot be regarded as genuine – Reassessment is held to be valid and addition is confirmed on merit [S. 147, 148, 151]

    Dismissing the appeal of the assessee the Tribunal held that a private limited co. cannot say that it has no clue about the subscribers to its share capital. The genuineness of the transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. Even shell cos. have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials, the transaction cannot be regarded as genuine. Reassessment is held to be valid and addition is confirmed on merit. (ITA No. 4978/Del/2014, dt. 23-8-2018)(AY. 2005-06)

    Pee Aar Securities Ltd. v. DCIT ( Delhi)(Trib.),
    www.itatonline.org

  42. S.68 : Cash credits – share capital – Premium – Alleged excessive premium charged for allotment of shares – Addition cannot be made as cash credits [S.56(2) (viib)]

    Dismissing the appeal of the revenue the Tribunal held that for alleged excessive premium charged for allotment of shares addition cannot be made as cash credits.(ITA No. 622/Mum/2016, dt. 20-6-2018)(AY. 2009-10)

    ACIT v. Goldmohar Design and Apparel Park Ltd. (Mum)(Trib.).
    www.itatonline.org

  43. S.72 : Carry forward and set-off of business losses – losses from non-speculation business can be set off against profit from speculation business [S. 73]

    The Tribunal held that there is no bar in adjustment of unabsorbed business losses from speculation profit of current year, provided speculation losses for earlier years has been first adjusted from speculation profit. If speculation losses for earlier years are carried forward and if in the year of account a speculation profit is earned by the assessee, then such speculation profits for the current accounting year should be adjusted against carried forward speculation losses of the earlier year, before allowing any other losses to be adjusted against those profits. Hence, it is clear that there is no bar in adjustment of unabsorbed business losses from speculation profit of the current year, provided the speculation losses for earlier years has been first adjusted from speculation profit. 
    (AY. 2011-12)

    Edel Commodities Ltd. v. Dy. CIT (2018) 194 TTJ 86 (Mum.)(Trib.)

  44. S.74 : Losses – Capital loss – shares sold at meagre value – sale price disbelieved by AO and accordingly, capital loss disallowed – Held, AO did not point out any discrepancy in the sale consideration – Held, AO did not conduct any enquiry in the hands of the purchaser – Held, loss cannot be disallowed

    Capital loss was disallowed by disbelieving the sale consideration. The Tribunal held that if the revenue alleges that the assessee has grossly understated the sale consideration, then the onus is on the revenue to prove with cogent materials that the assessee had indeed received higher sale price. Further, it was held that if no enquiries whatsoever were conducted in the hands of the purchaser of shares, the entire disallowance of long term capital loss was made only out of surmises, suspicion and conjectures. It was incumbent on the part of the AO to make further investigations by cross verifying the same from the purchaser of shares. Without doing so, he cannot simply disbelieve the consideration reported by the assessee and disallow the long-term capital loss claimed thereon. (AY. 2011-12)

    Electrocast Sales India Ltd. v. Dy. CIT (2018) 64 ITR 14 (Kol.)(Trib.)

  45. S.79 : Carry forward and set-off losses – Change in share holdings – Companies which public are not substantial interested – Amalgamation – Scheme of amalgamation approved by the High Court – Held, such scheme approved in public interest and cannot be disturbed by the Department merely because assessee was not eligible for the same u/s. 72A – Held, doctrine of acquiescence and estoppel applicable – Held, capital loss and business loss of amalgamating companies available to the amalgamated company [S. 72A]

    Set off of capital loss and business loss of amalgamating companies denied to the amalgamated company by AO by invoking section 79. Same upheld by the CIT(A) u/s. 72A. The Tribunal held that merger scheme was duly approved by High Court having in mind larger public interest. It cannot be disturbed by revenue merely because assessee was not entitled for benefits under section 72A. Further, Department was also bound by the doctrine of acquiescence and estoppel as no objection was raised by the Department before the High Court and no further appeal was filed u/s. 391(7) of the Companies Act, 1956 against order of amalgamation sanctioned by High Court. Held, therefore, even if the conditions of section 72A are not fulfilled, losses of amalgamating companies allowable for set off to the amalgamated company. (AY. 2011-12)

    Electrocast Sales India Ltd. v. Dy. CIT (2018) 64 ITR 14 (Kol.)(Trib.)

  46. S.90: Double taxation relief – If a non-resident assessee derives income from multiple sources in India, it is entitled to adopt the provisions of the Act for one source and the DTAA for the other source, whichever is more beneficial to it, even though the payer is common for both sources – Fees received by the assessee would be taxable under the Act as FTS (fees for technical services) under section 9(1)(vii) r.w.s. 115A(1)(b) @ 10% and not as business income and thus held that the maximum possible taxability in the hands of the assessee could not exceed 10%. – DTAA – India – Singapore [S.90(2),115A(1)(b), Art. 5(6)]

    Tribunal held that if a non-resident assessee derives income from multiple sources in India, it is entitled to adopt the provisions of the Act for one source and the DTAA for the other source, whichever is more beneficial to it, even though the payer is common for both sources – Fees received by the assessee would be taxable under the Act as FTS (fees for technical services) under section 9(1)(vii) r.w.s. 115A(1)(b) @ 10% and not as business income and thus held that the maximum possible taxability in the hands of the assessee could not exceed 10%. (ITA Nos. 1635 & 1636/Mum/2017, dt. 12-10-2018)(AY. 2013-14)

    Dimension Data Asia Pacific Pte. Ltd. v. DCIT (Mum.)(Trib.),
    www.itatonline.org

  47. S.93 : Transactions resulting in transfer – Non-residents – transfer of shares by wholly owned non-resident subsidiary of the Indian company to unrelated resident company – Held, S. 93 can apply only if transfer by the resident assessee to non-resident subsidiary – Provision is not applicable

    The Tribunal held that S.93 is a deeming fiction and therefore, has to be construed strictly and that the same can be invoked only if the conditions enshrined therein are fulfilled. In the present case, there was transfer of shares by wholly owned non-resident subsidiary of the assessee company to unrelated resident company. One of the condition of S. 93 is that there should be transfer of property by the resident assessee to non-resident subsidiary. Since the same was not present, it was held that S. 93 is not applicable. (AY. 2007-08)

    Dy. CIT v. Tata Industries Ltd. (2018) 192 TTJ 541 (Mum.)(Trib.)

  48. S.115BBE : Tax on income referred in section 69 – Survey – Surrender of excess stock – Prevailing price of gold had fallen as on 31-3-2013 – Unexplained investments – Loss is allowed to be set off against income disclosed in the course of survey – Provision is applicable with effect from 1-4-2017 which is prospective and not prior to that – Remanded for verification whether entire excess stock found in the course of survey remained unsold as on 31-3-2103 [S.69, 133A]

    During course of survey on 1st March, 2013, the assessee surrendered income on account of excess stock, however, in return of income, assessee showed lower income on account of excess stock by taking a plea that prevailing price of gold had fallen as on 31-3-2013. AO rejected assessee’s explanation and made addition under S. 69, read with S .115BBE of the Act. CIT(A) deleted the addition. On appeal by revenue dismissing the appeal, the Tribunal held that, S. 115BBE is applicable with effect from 1-4-2017 and not prior to that. However, in view of fact that question as to whether entire stock which was found in excess at time of survey remained as unsold till 31-3-2013 so that assessee could take benefit of reduction in prevailing price of gold against surrendered income on account of unexplained investment in stock, had not been examined by lower authorities, matter was to be remanded back for said limited purpose of verification. Followed, ACIT v. Sanjay Bairathi Gems Ltd. [2017] 166 ITD 445 (Jaipur) (Trib.) (AY.2013-14)

    ACIT v. Satish Kumar Agarwal (2018) 172 ITD 143 (Jaipur) (Trib.)

  49. S.115JAA : Book profit – Deemed income – Tax credit – Amount of MAT tax credit available from earlier year, inclusive of surcharge and education cess etc., should be reduced from amount of tax determined on total income of current year after adding surcharge and education cess, etc. [S. 234B, 234C]

    Allowing the appeal of the assessee the Tribunal held that the amount of the MAT tax credit, inclusive of surcharge and education cess etc., of any, should be reduced from the amount of tax determined on the total income after adding surcharge and education cess, etc. Only the resultant amount payable will suffer interest under the relevant provisions of the Act. Since the amount of MAT tax credit is uncertain, the impugned order is to be set aside and remit the matter to the file of the Assessing Officer for ascertaining the correct amount of MAT tax credit available with the assessee inclusive of surcharge and education cess etc., if any, and then allow tax credit as indicated above. (AY. 2011-12)

    Consolidated Securities Ltd. v. ACIT (2018) 172 ITD 163 (Delhi) (Trib.)

  50. S.115JB : Book profit – Provision for bad and doubtful debts – Assessee made a provision for bad and doubtful debts – It was maintaining a separate provision account – Certain bad debts were written off in such account – Provision amount lesser than the bad debts written off – Held, assessee eligible for higher deduction – Held, therefore, provision amount cannot be termed as unascertained liability and has to be allowed – Held, Tribunal cannot direct AO to allow greater deduction – Prior period expose cannot be added while computing book profits-Provision for leave encashment ascertained liability and therefore, cannot be added to book profit – Provision for non-moving and obsolete stock not a provision and also not debited to P&L account and therefore, cannot be added to book profit – Provision for fringe benefit tax not similar to provision for income tax and that fringe benefit was a liability of the employer therefore, cannot be added to book profit

    The assessee-company was engaged in the business of purchase and distribution of electric power. It had made a provision for bad and doubtful debts. The Assessing Officer had disallowed the said provision made by the assessee as unascertained liability while computing book profit. The Tribunal held that, in the P&L account ₹ 22.89 crore was provided for with the narration ‘bad and doubtful debts/ written off’. It was not specified whether it was a provision or a write off. Assessee was maintaining a separate provision account wherein it was shown the bad debts written off was of ₹ 25.43 crore. Such write off was an ascertained liability. It was held that assessee was eligible for deduction of entire ₹ 25.43 crore whereas it had claimed a lower deduction of ₹ 22.89 crore. Held, no addition can be made qua ₹ 22.89 crore and also, no direction can be made to AO to grant higher benefit to the extent of ₹ 25.43 crore.

    The Tribunal also held that prior period expose cannot be added while computing book profits as the AO cannot go beyond the accounts maintained in accordance with the Companies Act.

    The Tribunal held that provision for leave encashment was an ascertained liability and therefore, cannot be added to the book profit.

    The Tribunal held that provision for non-moving and obsolete stock was not a provision and was also not debited to P&L account and therefore, cannot be added to book profit.

    The Tribunal also held that provision for fringe benefit tax was not similar to provision for income tax and that fringe benefit was a liability of the employer therefore, cannot be added to book profit. (AY. 2009-10)

    Dy. CIT v. Southern Power Distribution Company of Andhra Pradesh Ltd. (2018) 170 ITD 1/ 166 DTR 1 / 64 ITR 257 / 193 TTJ 657 (TM)(Hyd.)(Trib.)

  51. S.143(2) : Assessment – Notice – Additional ground – Jurisdictional issue – Admitted – A notice u/s. 143(2) issued by the AO before the assessee files a return of income has no meaning – If no fresh notice is issued after the assessee files a return, the AO has no jurisdiction to pass the reassessment order and the same has to be quashed [S.147, 148, 254(1)]

    Tribunal admitted the additional ground on question of law and the facts were already on record. Facts relating to the additional ground are that the assessee filed his return of income on 31-7-2010 declaring total income at ₹ 46,76,95,780/- and this return was processed under section 143(1) of the Act on 21-3-2012. Thereafter, the case was reopened by issuing notice under section 148 of the Act dated 1-4-2013, which was served on assessee at 8-4-2013. The ACIT, Central Circle-45, Mumbai issued notice under section 143(2) of the Act dated 3-5-2013 requiring the assessee to attend his office on 13-5-2013. The assessee in a response to notice under section 148 of the Act dated 1-4-2013, which was served on assessee on 8-4-2013, filed a letter dated 23-5-2013 stating that return originally filed be treated as return filed in response to notice under section 148 of the Act. According to the learned Counsel no notice under section 143(2) of the Act was issued after the filing of return by assessee i.e. vide letter dated 22-5-2013 which was received in the office of the ACIT, Central Circle-45, Mumbai on 23-5-2013. It means that the return of income was filed on 23-5-2013 in response to notice under section 148 of the Act. The learned Counsel for the assessee now before us stated that when no notice under section 143(2) of the Act, which is a jurisdictional notice, is issued to the assessee in response to return filed under section 148 of the Act, the assessment framed is invalid and bad in law. The learned Counsel for the assessee relied on the decision of Hon’ble Bombay High Court in of ACIT vs. Geno Pharmaceuticals Ltd. (2013) 32 taxmann.com 162 (Bombay) & in CIT vs. Ms. Malvika Arun Somaiya (2010) 2 taxmann.com 144 (Bombay) and Hon’ble Delhi High Court in the case of DIT vs. Society for Worldwide Inter Bank Financial, Telecommunications (2010)323 ITR 249 (Delhi) and also Tribunal’s decision of Delhi Bench in ITAs No. 5163 & 5164/Del/2010, 5554/Del/2012 for AY 2004-5 & 2005-06 vide order dated 2-7-2018. When these facts were pointed to the learned CIT Departmental Representative, he only relied on the orders of the lower authorities and on this jurisdictional issue he could not controvert the arguments of the learned Counsel of the assessee. Allowing the appeal the Tribunal held that; a notice u/s 143(2) issued by the AO before the assessee files a return of income has no meaning,if no fresh notice is issued after the assessee files a return, the AO has no jurisdiction to pass the reassessment order and the same has to be quashed. (ITA No. 1744/Mum/2016, dt. 3-10-2018)(AY. 2010-11)

    Sudhir Menon v. ACIT (Mum)(Trib),
    www.itatonline.org

  52. S.143(3) : Assessment – Assessment has to be framed as per provisions – Instruction No. 13 of 2006 would not override the provisions – Revised return claiming refund of tax deduction at source – Assessment order as framed by the Assessing Officer is contrary to the provisions of law and beyond the jurisdiction of the Assessing Officer as the notice u/s. 143(2) of the Act is beyond the time prescribed under the law and is illegal. Accordingly, the assessment is quashed. The Assessing Officer is directed to allow the refund with interest as per law [S.119,143(2)]

    Allowing the appeal of the assessee the Tribunal held that notice issued under section 143(2) is beyond the time prescribed under the law barred by limitation and was thus illegal. There is no ambiguity under the law that the scrutiny assessment is to be framed as per the provisions of section 143. The instruction No. 13 of 2006 would not override these provisions. From a bare reading of the instructions, it is evident that the instruction is related to condonation of delay in respect of refund due. This instruction is issued with an objective to mitigate the hardship to the assessee. Para 7 of the Instruction, is limited to the extent of ascertaining the claim of the assessee. This does not empower the Assessing Officer to make scrutiny of the entire case, which goes against the spirit of the law. In the instance, the Assessing Officer was required to ascertain that the tax has been deducted at source and on the returned income, such refund is available to the assessee or not. It is viewed that the Assessing Officer has misconstrued direction of the Commissioner and assessed the income by making scrutiny assessment. It is also noticed that there is an inordinate delay in disposing the application by the Commissioner. Under these facts, it is held that the impugned assessment order as framed by the Assessing Officer is contrary to the provisions of law and beyond the jurisdiction of the Assessing Officer. Accordingly, the assessment is quashed. The Assessing Officer is directed to allow the refund with interest as per law. (AY. 2000-01)

    M. Lodha Impex v. ITO (2018) 171 ITD 659 (Indore) (Trib.)

  53. S.143(3) : Assessment – Survey – Bogus expenditure – Statement – Retraction – A statement recorded u/s. 133A under fear/ coercion cannot be relied upon by the AO if it is not corroborated by documentary evidence – The assessee is entitled to retract such statement. The AO is bound to give the assessee an opportunity to controvert evidence and cross examine the evidence on which the department places its reliance- A failure in providing the same can result in the order being a nullity – Income is estimated on the basis of gross profit. [S.133A]

    Allowing the appeal of the assessee the Tribunal held that ; addition cannot be made merely on the basis of statement in the course of survey. A statement recorded u/s. 133A under fear/ coercion cannot be relied upon by the AO if it is not corroborated by documentary evidence- The assessee is entitled to retract such statement. The AO is bound to give the assessee an opportunity to controvert evidence and cross examine the evidence on which the department places its reliance-.A failure in providing the same can result in the order being a nullity. Income is estimated on the basis of gross profit. (ITA No.3026/Mum/2016 and other appeals, 
    dt. 14-11-2018)(AY. 2007-08 to 2011-12)

    Concept Communication Ltd. v. DCIT (Mum)(Trib),
    www.itatonline.org

  54. S.147 : Reassessment – If information is received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information cannot be said to be tangible material per se and, thus, reassessment on said basis is not justified [S.148, 151]

    Allowing the appeal of the assessee the Tribunal held that if information is received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information cannot be said to be tangible material per se and, thus, reassessment on said basis is not justified (ITA No.132/Del/2018, dt. 6-8-2018) (AYs. 2009-10)

    Pioneer Town Plannners Pvt. Ltd. v. DCIT (Delhi)(Trib),
    www.itatonline.org

  55. S.147 : Reassessment – Within four years – Change of opinion – Bogus share capital – Premium- Reassessment was held to be not valid [S.143(3) 148]

    Dismissing the appeal of the revenue the Tribunal held that there was no failure on the part of the assessee to disclose material facts hence reassessment is bad in law. (ITA No. 622/Mum/2016, dt. 20-6-2018)(AY. 2009-10)

    ACIT v. Goldmohar Design and Appearel Park Ltd. (Mum)(Trib.).
    www.itatonline.org

  56. S.147 : Reassessment – The information given by DIT (Inv.) can only be a basis to ignite/ trigger “reason to suspect”. The AO has to carry out further examination to convert the “reason to suspect” into “reason to believe”. If the AO acts on borrowed satisfaction and without application of mind, the reopening is void. [S. 92, 148]

    Allowing the appeal of the assessee the Tribunal held that ; The information given by DIT (Inv) can only be a basis to ignite/ trigger “reason to suspect”. The AO has to carry out further examination to convert the “reason to suspect” into “reason to believe”. If the AO acts on borrowed satisfaction and without application of mind, the reopening is void. ( ITA. No. 2178/Kol/2017, dt. 15-10-2018)(AY. 2010-11)

    Devansh Export v. ACIT (Kol)(Trib),
    www.itatonline.org

  57. S.151 : Reassessment – Sanction for issue of notice – If the AO issues the notice for reopening the assessment before obtaining the sanction of the CIT, the reopening is void ab initio – The fact that the sanction was given just one day after the issue of notice makes no difference. [S.147, 148]

    Dismissing the appeal of the revenue the Tribunal held that, If the AO issues the notice for reopening the assessment before obtaining the sanction of the CIT, the reopening is void ab initio-The fact that the sanction was given just one day after the issue of notice makes no difference. (ITA.No.1505/Ahd/2017, dt. 14.11.2018)(AY. 2007-08)

    ITO v. Ashok Jain (Surat)(Trib),
    www.itatonline.org

  58. S.151 : Reassessment – Sanction –Sanction granted by writing “Yes, I am satisfied” is not sufficient to comply with the requirement of s. 151 because it means that the approving authority has recorded satisfaction in a mechanical manner and without application of mind – Reassessment is bad in law. [S.147, 148, 292B]

    Allowing the appeal of the assessee , the Tribunal held that sanction granted by writing “Yes, I am satisfied” is not sufficient to comply with the requirement of s. 151 because it means that the approving authority has recorded satisfaction in a mechanical manner and without application of mind. Reassessment is bad in law. (ITA No.132/Del/2018, dt. 6-8-2018) (AY. 2009-10)

    Pioneer Town Plannners Pvt. Ltd. v. DCIT ( Delhi)(Trib), www.itatonline.org

  59. S.151 : Reassessment – Sanction for issue of notice – Even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority, the requirement of sanction u/s. 151 is mandatory for issuing notice u/s. 147- The failure to obtain sanction renders the reopening invalid – S. 150(1) overrides S. 149 but not S. 151 of the Act. [S.147, 148, 150]

    Allowing the appeal of the assessee the Tribunal held that even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority, the requirement of sanction u/s. 151 is mandatory for issuing notice u/s. 147- The failure to obtain sanction renders the reopening invalid – S. 150(1) overrides S. 149 but not S. 151 of the Act. (ITA Nos. 735 & 736/JP/2015, dt. 21-8-2018)(AY. : 2006-07, 2009-10)

    Sonu Khandelwal ( Smt )v. ITO (Jai)(Trib),
    www.itatonline.org

  60. S.197 : Deduction at source –Certificate for lower rate – When tax was deducted on the basis of certificate issued by the AO i.e. on handling and transport charges under S.194C and on, ware housing charges under S.194I, the ITO (TDS) was unjustified in holding assessee in default for short deduction of tax on grounds that assessee was liable to deduct TDS on entire amount under S.194I. [s.194C, 194I, 201]

    Allowing the appeal of the assessee the Tribunal held that when tax was deducted on the basis of certificate issued by the AO i.e. on handling and transport charges under S.194C and on, ware housing charges under S.194I, the ITO (TDS) was unjustified in holding assessee in default for short deduction of tax on grounds that assessee was liable to deduct TDS on entire amount under S.194I. (AY.2009 -10)

    Kribhco Shyam Fertilizers Ltd. v. ITO (TDS) (2018) 172 ITD 319 (Luck) (Trib.)

  61. S.206C : Collection at source – Trading – Limitation – Order passed beyond limit of four years is bad in law – Though Section does not impose any limitation period for the AO to hold the assessee to be in default for collection of tax at source, a reasonable time limit of four years has to be read into the statute – Orders passed after this period are beyond the limitation and are void – The fact that the Dept. became aware of the default later is irrelevant. The fact that the assessee admitted his liability is also irrelevant – Assessment is held to be bad in law. [S.191, 201]

    Allowing the appeal of the assessee the Tribunal held that though Section 206C does not impose any limitation period for the AO to hold the assessee to be in default for collection of tax at source, a reasonable time limit of four years has to be read into the statute. Orders passed after this period are beyond the limitation and are void. The fact that the Dept. became aware of the default later is irrelevant. The fact that the assessee admitted his liability is also irrelevant. Assessment is held to be bad in law. Followed CIT (TDS) v. Anagram Wellington Assets Management Co Ltd. (2016) 389 ITR 654 (Guj.) (HC), Vodafone Essar Mobile Services Ltd. v. UOI (2016) 385 ITR 436 (Delhi) (HC) (ITA 316 & 248/JP/2018, dt. 29-8-2018)(AY. 2009-10)

    ITO v.EID Mohammad Nizamuddin (Jaipur) ( Trib)
    www.itatonline.org.

  62. S.250 : Appeal – Commissioner (Appeals) – If a decision is challenged by the assessee both on the issue of jurisdiction as well as on merits, the appellate authority has to decide both issues. He cannot decline to decide one of the issues on the basis that the decision on the other issue renders it academic. This approach leads to multiplication of proceedings and leads to delay – CIT(A) is directed to decide both the issues [S.254(1), R.27]

    Tribunal held that if a decision is challenged by the assessee both on the issue of jurisdiction as well as on merit, the appellate authority has to decide both issues. He cannot decline to decide one of the issues on the basis that the decision on the other issue renders it academic. This approach leads to multiplication of proceedings and leads to delay. CIT(A) is directed to decide both the issues Followed the ratio of judgment in CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad.) (HC) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in view of the finding on the issue decided by it. (ITA. No.6098/Mum/2016, dt. 2-7-2018) (AY. 2007-08)

    ITO v. Mohanraj Trading & Exchange (Mum) (Trib),
    www.itatonline.org

  63. S.253 : Appellate Tribunal – Delay of 2819 days in filing the appeal caused by the fault of CA/ Counsel has to be condoned –the expression “sufficient cause” should be interpreted to advance substantial justice – If there is “sufficient cause”, the period of delay cannot be regarded as excessive or inordinate – Delay was condoned [S.254(1)]

    Tribunal held that delay of 2819 days in filing the appeal caused by the fault of CA/ Counsel has to be condoned. The expression “sufficient cause” should be interpreted to advance substantial justice – If there is “sufficient cause”, the period of delay cannot be regarded as excessive or inordinate . Accordingly the delay was condoned. (I.T.A. No.288/Coch/2017, dt. 25-6-2018)(AY. 2006-07)

    Midas Polymer Compounds v. ACIT (Cochin)(Trib.),
    www.itatonline.org

  64. S.254(1) : Appellate Tribunal – Duties – If the AO has failed to discharge his obligation to conduct a proper inquiry, it is the obligation of the ITAT to ensure that effective inquiry is carried out – The AO has not examined the crucial aspect whether the bad debts claimed by the assessee due to the NSEL scam constitutes a “speculative transaction” u/s. 43(5) and whether Explanation to S. 73(1) applies. [S.36(1(iii), 43(5), 73(1)]

    Tribunal held that if the AO has failed to discharge his obligation to conduct a proper inquiry, it is the obligation of the ITAT to ensure that effective inquiry is carried out. The AO has not examined the crucial aspect whether the bad debts claimed by the assessee due to the NSEL scam constitutes a “speculative transaction” u/s. 43(5) and whether Explanation to S. 73(1) applies. (ITA No. 2818 / Ahd / 17, dt. 16-10-2018)(AY. 2014-15)

    Omni Lens Pvt. Ltd. v. DCIT (Ahd)(Trib);
    www.itatonline.org

  65. S.254(2) : Appellate Tribunal – Rectification of mistake – Pronouncement of order – An order passed by the Tribunal even one day after the prescribed period of 90 days from the date of hearing causes prejudice to the assessee and is liable to be recalled and the appeal posted for fresh hearing [S.254(1), R. 34(5) (c)]

    Allowing the petition the Tribunal held that an order passed by the Tribunal even one day after the prescribed period of 90 days from the date of hearing causes prejudice to the assessee and is liable to be recalled and the appeal posted for fresh hearing followed Otters Club v. DIT (E) (Bom.) (HC). Since, in the present case, the order has been pronounced one day beyond 90 days prescribed under the Rules, we respectfully, following the order of the Hon’ble High Court discussed above, recall the order dated 9-11-2017 without going into the merits of the other grounds raised in the application, for fresh hearing. Accordingly, we direct the registry to fix the case for fresh hearing by the regular Bench in the ordinary course. (M.A. No. 98/Mum/2018, dt. 1-11-2018)(AY. 2010-11)

    Kaushik N. Tanna v. ACIT (Mum.)(Trib.),
    www.itatonline.org

  66. S.254(2A) : Appellate Tribunal – Stay – Arrest for recovery of arrears – It is a question of confinement of a person in jail due to non-payment of tax dues. Since the recovery of outstanding dues has been stayed except deposit of specified amount, the TRO is ordered to arrange for release of the assessee immediately on deposit of said amount. Income Tax Authorities are directed to promptly do the necessary formalities including issue of release warrant to the Jail officials on compliance of the directions of the Tribunal

    Tribunal held that it is a question of confinement of a person in jail due to non-payment of tax dues. Since the recovery of outstanding dues has been stayed except deposit of specified amount, the TRO is ordered to arrange for release of the assessee immediately on deposit of said amount. Income Tax Authorities are directed to promptly do the necessary formalities including issue of release warrant to the Jail officials on compliance of the directions of the Tribunal. Considering the facts and circumstances of the case, the appeals of the assessee are directed to be heard out of turn on priority basis and is fixed for hearing on 30-8-2018.

    Copy of the order be promptly supplied to the parties. Order pronounced in the Open Court. (SA. Nos. 43, 44-Chd-2018 in ITA Nos. 498, 499-Chd/2015, 
    dt. 24-8-2018)(AY. 2007-08, 2008-09)

    Devinder Singh Gill v. DCIT (Chd)(Trib),
    www.itatonline.org

  67. S.254(2A) : Appellate Tribunal –Stay – Penalty – The assessee has made out a prima facie case that the outcome of the appeal before the ITAT will directly impact the penalty proceedings which are hurriedly being finalized by the authorities which may entail huge liability by way of penalty on the assessee. The Revenue authorities are accordingly restrained from passing any order imposing penalty on the assessee so long as the appeal is pending before the Tribunal. [S. 206AA, 271C]

    Tribunal held that the assessee has made out a prima facie case that the outcome of the appeal before the ITAT will directly impact the penalty proceedings which are hurriedly being finalised by the authorities which may entail huge liability by way of penalty on the assessee. Accordingly the Revenue authorities are restrained from passing any order imposing penalty on the assessee so long as the appeal is pending before the Tribunal. (Followed, Wander 44 Taxmann.com 103 (Bom.) & GE India Technology 46 Taxmann.com 374 (Guj) (HC). (SA NOS. 436 & 437/MUM/2018, dt. 28.09.2018)(AY. 2016-17 & 2017-18)

    Uber India Systems Pvt. Ltd. v. JCIT ( Mum)(Trib),
    www.itatoline.org

  68. S.263 : Commissioner – Revision of orders prejudicial to revenue – It obligates the CIT to give the assessee an opportunity of being heard before passing of order-While the CIT is entitled to consider a point which is not stated in the show-cause notice, he cannot pass the revision order unless the assessee is given the opportunity of being heard – Such an order is untenable in the eyes of law

    Tribunal held that it is obligates the CIT to give the assessee an opportunity of being heard before passing of his order. While the CIT is entitled to consider a point which is not stated in the show-cause notice, he cannot pass the revision order unless the assessee is given the opportunity of being heard. Such an order is untenable in the eyes of law. Accordingly the order of CIT was set aside. Ratio in CIT v. Amitabh Bachhan (2016) 384 ITR 200 (SC) is considered. (ITA No.3563/Mum/2016, dt. 10-11-2017)(AY. 2010-11)

    Ambuja Cements Limited v. CIT (Mum.)(Trib.),
    www.itatonline.org

  69. S.263 : Commissioner – Revision of orders prejudicial to revenue Deduction at source – Commission or brokerage – The incentive paid by the dealers to sub-dealers cannot be equated with commission – Not liable to deduct tax at source – Revision is held to be bad in law [S.194H]

    Allowing the appeal of the assessee the Tribunal held that the incentive paid by the dealers to sub-dealers cannot be equated with commission. The assessee is not liable to deduct tax at source. Revision is held to be bad in law. (I.T.A. No.3386/Del/2014, dt. 13-8-2018)(AY. 2009-10)

    Rakesh Kumar v. CIT (Delhi)(Trib)
    www.itatonline.org

  70. S.271(1)(c) Penalty – Concealment – No penalty can be imposed where (i) income is added or disallowance is made on estimate basis, (ii) books of account cannot be produced for reasons beyond control, (iii) disallowance is made as per retrospective insertion of s. 37(1) Explanation & (iv) allegation regarding concealment vs. furnishing inaccurate particulars is vague & uncertain

Tribunal held that no penalty can be imposed where (i) income is added or disallowance is made on estimated basis, (ii) books of account cannot be produced for reasons beyond control, (iii) disallowance is made as per retrospective insertion of S. 37(1) Explanation & (iv) allegation regarding concealment vs. furnishing inaccurate particulars is vague & uncertain. (ITA No. 141/Agra/2009, dt. 11-9-2018)

Farrukhabad Investment (India) P. Ltd. v. DCIT (TM (Agra) (Trib.).
www.itatonline.org.

  1. S.2(14)(iii) : Capital asset –Agricultural land – Adventure in the nature of trade – Land was sold after a period of 16 months – Land shown as agricultural land in revenue records – Fact that said land had been sold to an industrial unit and had potential to be used for industrial purpose, could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income – The intention of the purchaser cannot be the determinative factor to treat the profit earned by the assessee on sale of agriculture land as business income. [S.28(i), 45]

    Dismissing the appeal of the revenue the Court held that assessee was an agriculturist and, land owned by him had been shown as agricultural land in revenue records, land in question was sold by assessee after a period of 16 months from purchase and, thus, it could not be regarded as a case of ‘adventure in nature of trade’. Intention of purchaser could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income. (AY. 2009-10)

    PCIT v. Heenaben Bhadresh Mehta. (2018) 257 Taxman 219 (Guj.)(HC)

  2. S.2(14)(iii) : Capital Asset –Agricultural Land – Beyond 8 Kms. from nearest Municipality – Nursery – Land record showing the land as agricultural land – Sale consideration is exempt from tax [S.45]

    Dismissing the appeal of the revenue the Court held that land revenue records showed that land specified was agricultural land and distance from nearest municipality is beyond 8 kms., even though assessee ran a nursery on agricultural land, the fact that there was loss and income could not have made any difference to the nature and character of the land. (AY.2007 -08)

    PCIT v. P. S. Raghupathy (2018) 257 Taxman 225 (Mad.)(HC)

  3. S.4 : Charge of income-tax – Accrual of income – Method of accounting – Gains arising on account of securitisation of lease receivables and credited to the Profit & Loss Account is a taxable receipt in the year of securitisation. [S.145]

    Dismissing the appeal of the assessee the Court held that gain arising on account of securitisation of lease receivables and credited to the Profit & Loss Account is a taxable receipt in the year of securitisation. Followed CIT v. T. V. Sunderam Iyengar (1996) 222 ITR 344 (SC). Argument that the entry represents hypothetical income and not real income and that the amount is assessable in subsequent years on receivable basis is not correct. Question of whether income can also be deferred to subsequent years under the “Matching concept” as per Taparia Tools Ltd. v. JCIT (2003) 260 ITR 102 (Bom.)/Taparia Tools Ltd. v. JCIT (2015) 372 ITR 605 (SC) left open. (AYs. 2002-03, 2003-04) (ITA No. 256 of 2016, dt. 17-9-2018)

    L & T Finanace Limited v. DCIT (2018) 304 CTR 954 (Bom.)(HC),
    www.itatonline.org

  4. S.4 : Income chargeable to tax –Capital or revenue – Income from other sources – Interest on funds deposited with banks – Prior to commencement of commercial operations will be in nature of capital receipt and will be required to be set off against pre-operative expenditure capitalized under head capital work-in-progress – Cannot be taxed as income from other sources. [S.5, 56, 145]

    Dismissing the appeal of the revenue the Court held that as per loan agreement executed between consortium of banks and assessee all disbursements were to be deposited in trust and retention account was to be subject to strict control and verification by senior lenders and all disbursements were to be utilised solely for purpose of implementation of project and no other purpose. Funds were thus inextricably linked to setting up of mega road projects and interest earned on such borrowed funds could not be classified as income from other sources. Accordingly the interest received prior to commencement of commercial operations of specified mega projects will be in nature of capital receipt and will be required to be set off against pre-operative expenditure capitalised under head capital work-in-progress and cannot be taxed under head income from other sources.

    PCIT v. Road Infrastructure Development Corporation of Rajasthan Ltd. (2018) 257 Taxman 208 (Raj.) (HC)

    Editorial: SLP is granted to the revenue, PCIT v. Road Infrastructure Development Corporation of Rajasthan Ltd. (2018) 257 Taxman 186 (SC)

  5. S.4 : Charge of income-tax –Capital or revenue – Interest from mobilisation advances made by it to contractor for purpose of facilitating smooth commencement and completion of work of construction – Receipts being intrinsically connected with construction business of assessee would be capital receipt and not income of assessee from any independent source [S.56]

    Assessee is engaged in construction and development business, received certain amount by way of interest from mobilisation advances made by it to contractor for purpose of facilitating smooth commencement and completion of work of construction. Allowing the appeal of the assessee the Court held that said receipt was adjusted against charges payable to contractor and, thus, resulted in reduction of cost of construction .Accordingly in view of decision in case of CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC), receipts being intrinsically connected with construction business of assessee would be capital receipt and not income of assessee from any independent source.

    Roads & Bridges Development Corporation of Kerala Ltd. v. ACIT (2018) 257 Taxman 392 (Ker.)(HC)

  6. S.4 : Charge of income-tax –Capital or revenue – Subsidy –Technology upgradation of existing units as well as to set up new units with latest technology to enhance their viability and competitiveness in domestic and international markets – Capital receipts [S.28(i)]

    Dismissing the appeal of the revenue the Court held that the subsidy was clearly for purpose of upgrading machinery and plant and for acquiring capital assets and not for purpose of day-to-day business operations of assessee, held that quantum of subsidy received by assessee was a capital receipt.

    CIT v. Gloster Jute Mills Ltd. (2018) 257 Taxman 512 (Cal.)(HC)

  7. S.4 : Charge of income-tax – Interest on bank deposits out of share capital – Prior to commencement of business operations – Interest is not liable to be assessed as income from other sources – Interest income would go to reduce capital cost of project and was on capital account and same could not be taxed as income from other sources [S.56, 145]

    Dismissing the appeal of the revenue the Court held that interest earned before commencement of business operations was not liable to be taxed as same was eligible for deduction against public issue expenses incurred by company, interest income would go to reduce capital cost of project and was on capital account and cannot be assessed as income from other sources. (AY. 2011-12)

    PCIT v. Bank Note Paper Mill India (P.) Ltd. (2018) 256 Taxman 429 (Karn.) (HC)

  8. S.4 : Charge of income-tax – Capital or revenue – Power subsidy received by assessee company from State Government under Power Intensive Industries Scheme, 2005, for setting up a new industrial unit in backward area was capital receipt and, thus, not liable to tax

    Dismissing the appeal of the revenue the Court held that power subsidy received by assessee-company from State Government under Power Intensive Industries Scheme, 2005, for setting up a new industrial unit in backward area was capital receipt and, not liable to tax. (AY. 2001-01, 2003-04)

    CIT v. Keventer Agro Ltd. (2018) 256 Taxman 437 (Cal) (HC)

  9. S.10A : Free trade zone – For computing deduction if export turnover is arrived at after excluding certain expenses, said expenses should also be excluded from total turnover

    Dismissing the appeal of the revenue Court held that, while computing deduction if export turnover in numerator is to be arrived at after excluding certain expenses, said expenses should also be excluded in computing export turnover as a component of total turnover in denominator.(AY. 2010-11)

    PCIT v. Tesco Hindusthan Service Centre (P.) Ltd. (2018) 96 taxmann.com 74 (Karn.) (HC)

    Editorial: SLP of revenue is dismissed, PCIT v. Tesco Hindusthan Service Centre (P.) Ltd. (2018) 257 Taxman 92 (SC)

  10. S.10AA : Special Economic Zones – Derived from – Surplus amount in freight export account and in insurance export account was derived from export activities eligible for deduction

    Dismissing the appeal of the revenue, the Court held that surplus amount in freight export account and in insurance export account was derived from export activities eligible for deduction. (AY. 2010-11)

    PCIT v. Vedansh Jewels (P.) Ltd. (2018) 97 taxmann.com 521/ 258 Taxman 155 (Raj.) (HC)

    Editorial: SLP of revenue is dismissed; PCIT v. Vedansh Jewels (P.) Ltd. (2018) 258 Taxman 154 (SC)

  11. S.11 : Property held for charitable purposes – Institution imparting education in banking is entitled to exemption – Grant or refusal to grant exemption under S. 10(22) or 10(23C) is not relevant. [S. 2(15), 10(22), 10(23C), 12A]

    Dismissing the appeal of the revenue the Court held that institution imparting education in banking is entitled to exemption. Grant or refusal to grant exemption under S. 10(22) or 10 (23C) is not relevant. (AY. 2008-09)

    CIT v. Indian Institute of Banking and Finance. (2018) 408 ITR 558 (Bom.) (HC)

    Editorial: Order in Indian Institute of Banking and Finance v. DDIT (E) (2015) 39 ITR 323 (Mum.) (Trib.) is affirmed.

  12. S.11 : Property held for charitable purposes – Amount paid to employing foreign personnel for imparting education in India, amount set apart for payment in previous year and paid in subsequent year, expenditure of earlier years adjusted against income of current year, amounts to application of income – When purposes of accumulation is mentioned in Form 10 charitable merely failure to give details – Exemption cannot be denied [Form 10]

    Dismissing the appeals of the revenue the Court held that amount paid to employing foreign personnel for imparting education in India, amount set apart for payment in previous year and paid in subsequent year, expenditure of earlier years adjusted against income of current year ,amounts to application of income. Court also held that when purposes of accumulation is mentioned in Form 10 charitable merely failure to give details, exemption cannot be denied (AY. 2008-09, 2009-10)

    CIT v. Ohio University Christ College (2018) 408 ITR 352 (Karn.) (HC)

    Editorial: Order in Dy. DIT v. Ohio University Christ College ( 2015) 44 ITR 291 (Bang.) (Trib.) is affirmed.

  13. S.12A : Registration – Trust or institution – when there is no change in objects of Trust, registration cannot be cancelled on the ground that there was amendment in respect of appointment of chief trustees and manner of managing the trust[S.11, 12AA(3), 13]

    Dismissing the appeal, of the revenue the Court held that when there is no change in objects of Trust, registration cannot be cancelled on the ground that there was amendment in respect of appointment of chief trustees and manner of managing the trust.

    CIT(E) v. Sadguru Narendra Maharaj Sansthan (2018) 407 ITR 12 (Bom.) (HC)

  14. S.13 : Denial of exemption –Trust or institution – Investment restrictions – Holding shares in a company – Denial of exemption to be restricted to income from shares to be taxed at marginal rate under S. 164(2) [S. 11, 13(1))(d)(iii), 164(2)]

    Dismissing the appeal of the revenue the Court held that denial of exemption to be restricted to income from shares to be taxed at marginal rate under S.164(2) of the Act.

    CIT v. Santokba Durlabhji Trust Fund. (2018) 406 ITR 457 (Raj.) (HC)

    Editorial: SLP is granted to the revenue; CIT v. Santokba Durlabhji Trust Fund (2018) 404 ITR 2 (St)

  15. S.14A : Disallowance of expenditure – Exempt income – The expression “does not form part of the total income” in S. 14A envisages that there should be an actual receipt of the income, which is not includible in the total income – If no exempt income is received or receivable during the relevant previous year, no disallowance can be made [R.8D]

    Dismissing the appeal of the revenue the Court held that the expression “does not form part of the total income” in S.14A envisages that there should be an actual receipt of the income, which is not includible in the total income. If no exempt income is received or receivable during the relevant previous year, no disallowance can be made. Followed Chem Invest Ltd v. CIT (2015) 378 ITR 33 (Delhi) (HC) (749/2014 dt. 22-9-2015) ( ITA No. 51 of 2016, dt. 13-10-2016)

    PCIT v. Ballapur Industries Ltd. (Bom)(HC);
    www.itatonline.org

  16. S.14A : Disallowance of expenditure – Exempt income –Disallowance cannot be made in excess of actual exempted income-Matter remanded [R.8D]

    Allowing the appeal of the assessee the Court held that the, AO as well as Appellate Authority disallowed expenses incurred by assessee bank in earning exempt income in excess to actual exempt income, same was per se absurd and hypothetical and therefore, matter was to be remanded back to AO. (AY. 2011-12 )

    Pragathi Krishna Gramin Bank. v. JCIT (2018) 256 Taxman 349 (Karn.)(HC)

  17. S.23 : Income from house property – Annual value – Interest free security deposit – Interest offered as income from other sources –Notional interest on interest free deposit cannot be considered to determine annual letting value of property – Notional addition would amount to double taxation [S.22, 23(1)(b)]

    Dismissing the appeal of the revenue the Court held that once interest on interest free security deposits received by assessee from tenant was offered to tax as income from other sources, adding of notional interest on interest free security deposit to determine ‘Annual letting value’ of property would amount to double taxation. (AYs. 2004-05 to 2007-08)

    PCIT v. Karia Can Co. Ltd. (2018) 257 Taxman 189 (Bom.) (HC)

  18. S.32 : Depreciation – Rate of depreciation – All equipment formed part of Life Saving Equipment – Denial of depreciation on computer is held to be not proper [IT Rules 1962, Appex. I, Part A III 3(Xia)(D)]

    Dismissing the appeal of the revenue the Court held that all equipment formed part of Life Saving Equipment. Denial of depreciation on computer is held to be not proper. Accordingly depreciation @ 40% is allowed on computer. (AY. 2012-13)

    CIT v. Vasantha Subramanian Hospitals Pvt. Ltd (2018) 408 ITR 176 (Mad.) (HC)

  19. S.32 : Depreciation – Dumper and Volvo machines used by assessee for his own mining purposes as well as giving them on hire, were eligible for higher rate of depreciation

    Dismissing the appeal of the revenue the Court held that dumper and volvo machines, used by assessee for his own mining purposes as well as giving them on hire, were eligible for higher rate of depreciation. Expression used in sub-clause (ii) of clause 3 of Entry No. III of Appendix-1, namely motor buses, motor lorries and motor taxies is having wide amplitude and term motor lorries used therein, would include dumper and Volvo machines. (AY. 2011-12)

    PCIT v. Amar Singh Bhandari (2018) 258 Taxman 227 (Raj.)(HC)

  20. S.32: Depreciation — Additional depreciation — Manufacturer –Ready mix concrete is an article which has been manufactured — Entitled to additional depreciation on plant and machinery used in manufacture of ready mix concrete. Transit Mixer and Trucks used to transport ready mix concrete whether plant and machinery involved in manufacture of ready mix concrete is question to be decided by Tribunal — Matter remanded [S.32(1)(iia) ]

    Court held that considering the high degree of precision and stringent quality control observed in the selection and processing of ingredients as also the specific entry in the Central Excise Tariff First Schedule, Heading 3824 50 10 which deals with “Concretes ready to use known as “Ready mix concrete”, though the ready mix concrete did not have a shelf-life, the final mixture of stone, sand, cement and water in a semi-fluid state, transported to the construction site to be poured into the structure and allowed to set and harden into concrete was a thing or article manufactured. Court also held that the assessee, though engaged principally in the business of construction, was entitled to additional depreciation under section 32(1)(iia) for the plant and machinery used in the manufacturing activity being the production of ready mix concrete. Court further observed that the question whether additional depreciation was permissible on the actual cost of transit vehicles acquired by the assessee in the previous year, had to be considered by the Tribunal. Whether the subject vehicles, in the nature of the process involved, qualified to be treated as plant and machinery was to be decided by the Tribunal. Matter remanded. (AY. 2006-07)

    Cherian Varkey Construction Co. (P.) Ltd. v. UOI (2018) 406 ITR 262 (Ker.) (HC)

  21. S.32 : Depreciation – Carry forward and set-off of unabsorbed depreciation of A.Y 1999-2000 and A.Y 2000-01 against the profits of AY. 2009-10 – Eligible for carry forward and set-off. There is no conflict between CIT v. Hindustan Unilever Ltd. (2017) 394 ITR 73 (Bom.) & CIT v. Milton Pvt Ltd, CIT v. Confidence Petroleum India Ltd., because while the former is at the stage of final hearing, the latter is at the stage of admission. Accordingly, the request for reference to a larger Bench is not acceptable. Merely filing of an SLP would not make the order of this Court bad in law or give a licence to the Revenue to proceed on the basis that the order is stayed and/or in abeyance. Unabsorbed depreciation is allowed to be set off [S.32(2)]

    Question before the High Court was “Whether on the facts and circumstances of the case and in law, the Tribunal was justified in directing the Assessing Officer to allow carry forward and set-off of unabsorbed depreciation of A.Y 1999-2000 and A.Y 2000-01 against the profits of AY. 2009-10 without appreciating that as per the provisions of Section 32(2) as they stood prior to the amendment by Finance Act, 2001 w.e.f. 1-4-2002, such unabsorbed depreciation was eligible for carry forward and set-off against business profits only for a further period of eight years?”

    Department relied upon the orders in the case of CIT v. Milton Pvt Ltd. (ITA No. 2301 of 2013) and CIT v. Confidence Petroleum India Ltd. (ITA No. 582 of 2014), both of which were admitted on similar questions of law on 24th February, 2017 and 3rd April, 2017 respectively accordingly the matter may be referred to larger Bench.

    Honourable Court held that the issue referred above is concluded by the decision of Bombay High Court in CIT v. Hindustan Unilever Ltd (2017) 394 ITR 73 (Bom.) (HC), placing reliance upon the decisions of the Gujarat High Court in Dy. CIT v. General Motors India P. Ltd. (2013) 354 ITR 244 (Guj.) (HC) and the CBDT Circular No.14 of 2001 dt. 22-11-2001. Court also observed that the revenue was not able to point out any reason as to why the decision of the Gujarat High Court in General Motors (I) Ltd. (Supra) should not be followed. In the above facts, the appeal of the Revenue was dismissed. Court also observed appeals filed by the Revenue on identical question of law were not entertained by following the decisions, Hindustan Unilever Ltd. (Supra) CIT v. Arch Fine Chemicals Pvt. Ltd. (ITA No. 1037 of 2016 dt. 6-12-2016) CIT v. Bajaj Hindustan Ltd. (ITA No. 134 of 2016, 135 of 2016, 136 of 2016, 140 of 2016, 141 of 2016 and 148 of 2016) on 13th June, 2018 PCIT v. Hindustan Antibiotics Ltd., ITA No 1042 of 2015 dt. 20-2-2018. Court also held that merely filing of an SLP from the order of Hindustan Unilever Ltd. (supra) would not make the order of this Court bad in law or give a licence to the Revenue to proceed on the basis that the order is stayed and/or in abeyance. The Revenue is entitled to challenge the view taken by us following our decision in Hindustan Unilever (supra) by challenging this decision in the Apex Court. However, in the present facts, at this stage, there can be no question of our not following the order in Hindustan Unilever (supra). It may be pointed out that the Delhi High Court in Motor and General Fine Ltd. v. ITO (2017) 393 ITR 60 (Delhi)(HC) has also adopted the view of the Gujarat High Court in General Motors (supra). Unabsorbed depreciation is allowed to be set off. Accordingly the appeal of revenue was dismissed. (ITA – No 293 of 2016 dt. 3-8-2018)

    PCIT v. Associated Cable Pvt. Ltd. (Bom.)(HC) www.itatonline.org

  22. Expenditure – Foreign education and training expenses of a partner – Held to be allowable as business expenditure as the post graduate course underwent was directly related to profession carried on by firm – Professional fee received by firm had substantially increased after completion of post graduate degree by said partner, several important contracts were secured by firm, which firm attributed to educational qualification and expertise acquired by said partner abroad

    Allowing the appeal of the assessee the Court held that the expenditure incurred on foreign education and training expenses of a partner is held to be allowable as business expenditure as the post graduate course underwent was directly related to profession carried on by firm and professional fee received by firm had substantially increased after completion of post graduate degree by said partner, several important contracts were secured by firm, which firm attributed to educational qualification and expertise acquired by said partner abroad. (AY. 2001-02)

    Aswathanarayana & Eswara v. Dy. CIT (2018) 258 Taxman 210 (Mad.)(HC)

  23. S.37(1) : Business expenditure – Ad hoc disallowance of 5% – Tribunal is justified in holding that where the assessee had furnished names and PAN numbers of all vendors to whom it had paid repair and maintenance charges for their services addition by way of ad hoc disallowance of 5% of expenses is held to be not justified

    Dismissing the appeal of the revenue the Court held that Tribunal is justified in holding that where the assessee had furnished names and PAN numbers of all vendors to whom it had paid repair and maintenance charges for their services disallowance of ad hoc disallowance of 5% of expenses is held to be not justified. (AY. 2005-06)

    PCIT v. Rambagh Palace Hotels (P.) Ltd. (2018) 259 Taxman 31 (Delhi) (HC)

  24. S.37(1) : Business expenditure – Capital or revenue – In view of fact that advanced technology software become obsolete within short intervals – Expenditure incurred on software expenses is held to be revenue expenditure.

    Dismissing the appeal of the revenue the Court held that in view of fact that advanced technology software becomes obsolete within short intervals. Expenditure incurred on software expenses is held to be revenue expenditure. (AY. 2000-01, 2001-02)

    CIT v. Lakshmi Vilas Bank Ltd. (2018) 258 Taxman 193 (Mad.)(HC)

  25. S.37(1) : Business expenditure –Publicity expenses – Donations to support educational and social activities is held to be allowable as business expenditure

    Dismissing the appeal of the revenue the Court held that donations to support educational and social activities is held to be allowable as business expenditure

    PCIT v. Lord Chloro Alkali Ltd. (2018) 97 taxmann.com 513/ 258 Taxman 131 (Raj.) (HC)

    Editorial: SLP of revenue is dismissed. PCIT v. Lord Chloro Alkali Ltd. (2018) 258 Taxman 130 (SC)

  26. S.37(1) : Business expenditure –Capital or revenue – Non-compete fee for five years – Allowable as revenue expenditure

    Allowing the appeal of the assessee the Court held that since payment made as non-compete fee did not entail any enduring benefits to assessee in its business, same was to be allowed as revenue expenditure. Followed, Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1 (SC). (AY. 2000-01)

    Asianet Communications Ltd. v. CIT (2018) 257 Taxman 473 (Mad.)(HC)

  27. S.37(1) : Business expenditure – Capital or revenue – Abandoned projects – State Government ordered closure of implementation of said project – Same line of existing business – Allowable as business expenditure

    Allowing the appeal of the assessee the Court held that expenditure incurred for implementation of new project in same line of business which was abandoned as per the order of State Govt., since said project was in same line of existing business of assessee and there was no creation of any new asset of enduring nature, entire expenditure incurred on said project was to be allowed as revenue expenditure. (AY. 1998 -99, 1999-2000 )

    Tamil Nadu Magnesite Ltd. v. ACIT (2018) 257 Taxman 79 (Mad.) (HC)

  28. S.40(a)(ia) : Amounts not deductible – Deduction at source – Interest – Payment for delayed allotment of land by Housing Corp. is not interest since there was neither any borrowing of money nor was there incurring of debt on part of assessee hence not liable to deduct tax at source – No disallowance can be made [S.2(28A), 194A]

    Dismissing the appeal of the revenue the Court held that payment for delayed allotment of land by Housing Corp. is not interest since there was neither any borrowing of money nor was there incurring of debt on part of assessee hence not liable to deduct tax at source. Accordingly no disallowance can be made. (AY. 2005-06)

    PCIT v. West Bengal Housing Infrastructure Development Corporation Ltd. (2018) 257 Taxman 570 (Cal.) (HC)

  29. S.40(a)(ii) : Amounts not deductible – Rates or tax –Education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance cannot be made CBDT Circular referred

    Court held that; education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance cannot be made. CBDT Circular referred. (ITA No. 52/2018, dt. 31-7-2018) (AY. 2004-05)

    Chambal Fertilisers and Chemicals Ltd. v. JCIT (Raj)(HC),
    www.itatonline.org

  30. S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits of  20,000 – Inflated purchase expenditure by raising bogus claims – Only profit element embedded there in should be brought to tax and not the entire expenditure [S.37(1), 145]

    Dismissing the appeal of the revenue the Court held that when Assessing Officer had doubted genuineness of expenditure, he would require bringing to tax profit element so avoided by assessee and not the entire expenditure. (AY. 2009-10)

    PCIT v. Juned B. Memon (2018) 256 Taxman 380 (Guj.) (HC)

  31. S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Agricultural produce – Paddy from farmers – No disallowance can be made [R.6DD]

    Dismissing the appeal of the revenue the Court held that Agricultural produce i.e., Paddy purchased from the farmers by making cash payments exceeding prescribed limits, no disallowance can be made. S.40A(3) is a deeming provision and Rule 6DD exempts agricultural produce. (AY. 2001-02)

    CIT v. Keerthi Agro Mills (P.) Ltd. (2017) 405 ITR 192/ 87 taxmann.com 31 (Ker.) (HC)

    Editorial: SLP of revenue is dismissed; PCIT v. Keerthi Agro Mills (P.) Ltd. (2018) 257 Taxman 1 (SC)

  32. S.41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Liability is not written off in books of account – Addition cannot be made as cessation of liability

    Court held that as the assessee had not written off liability in books of account with respect to debtors and had carried forward and continued same liability addition cannot be made as cessation of liability (AY. 2009-10)

    PCIT v. Babul Products (P.) Ltd. (2018) 257 Taxman 100 (Guj.)(HC)

    Editorial: Order in Babul Products (P.) Ltd v. ACIT (2017) 167 ITD 402 (Ahd.) (Trib.) is affirmed.

  33. S. 43(5) : Speculative transaction – Hedging – High Sea Sales – Not speculative – Allowable as business loss [S.28(i)]

    The assessee entered into contracts for purchase of raw materials, mainly crude oil, which was the raw material for refined oil on “High Seas Sale” basis and many times, looking to the market trend, the assessee had to cancel such contracts for sale of raw materials (crude oil). In the present assessment year it had resulted in a loss which the assessee claimed as a business loss. The Assessing Officer and the Commissioner (Appeals) rejected the claim of the assessee in its entirety, but the Tribunal recorded findings with respect of 32 transactions in favour of the assessee. On appeal dismissing the appeal of the revenue the Court held that the Tribunal was correct in allowing the claim of the assessee in respect of 32 transactions. (AY. 2009-10)

    ACIT v. Surya International (P.) Ltd. (2018) 406 ITR 274 (All) (HC)

  34. S.43A : Rate of exchange – Actual cost – Depreciation – Notional fluctuation – Imported assets acquired in foreign currency – Fluctuation in rate of exchange – Adjustment can be made at each date of balance-sheet pending actual payment [S.32]

    Dismissing the appeal of the revenue the Court held that the Tribunal was justified in allowing the claim of depreciation on foreign exchange fluctuation which showed notional fluctuation. Adjustment can be made at each date of balance-sheet pending actual payment. (AY. 1993-94)

    CIT v. Phonex Lamps India Ltd. (2018) 406 ITR 550 (All.) (HC)

  35. S.43B : Certain deductions only on actual payment – Service tax payable – Since services were rendered, liability to pay service tax in respect of consideration would arise only upon assessee receiving funds and not otherwise – liability claimed by assessee could not be disallowed

    Dismissing the appeal of the revenue the Court held that since services were rendered, liability to pay service tax in respect of consideration would arise only upon assessee receiving funds and not otherwise, thus, liability claimed by assessee could not be disallowed. (AY. 2006-07)

    PCIT v. Tops Security Ltd. (2018) 258 Taxman 161 (Bom.)(HC)

  36. S.45 : Capital gains – Transfer – Development agreement not registered – General Power of attorney – Possession of property was given to the developer for specific purposes to develop the property – The development agreement clearly provides that nothing contained in the agreement shall be construed as grant of possession in part performance of the agreement under s. 2(47)(v), and 2(47)(vi) of the Act. Accordingly addition of  55 crore as full value of consideration for computing the capital gains is rightly deleted by the Tribunal – Taxability will be examined in the year in which the transfer of land as stock in trade has taken place and also value at that point of time will be examined independently [S.2(47)(v), 2(47)(vi) 45(2)]

    Dismissing the appeal of the revenue the Court held that possession of property was given to the developer for specific purposes to develop the property. The amount received by the Godrej Properties Ltd., shown as deposit. As per the agreement makes it clear that Godrej Properties Ltd. has been granted licence to enter the upon and develop the property and the possession of the land continued with the assessee. Further the development agreement clearly provides that nothing contained in the agreement shall be construed as grant of possession in part performance of the agreement under s. 2(47)(v), and 2(47)(vi) of the Act. Accordingly addition of ₹ 55 crore as full value of consideration for computing the capital gains is rightly deleted by the Tribunal. However taxability will be examined in the year in which the transfer of land as stock in trade has taken place and also value at that point of time will be examined independently. (AY. 2008-09)

    PCIT v. Fardeen Khan L/H Late Firoz Khan (2018) 169 DTR 209/ 304 CTR 299 (Bom.)(HC)

    Editorial: Fardeen Khan L/H Late Firoz Khan v. ACIT( 2015) 169 TTJ 398 (Mum.) (Trib.) is 
    affirmed.

  37. S.47(xiii) : Capital Gains –Transaction not regarded as transfer – Conversion of firm in to company – Allotment of shares to erstwhile partners of the firm after three and half years – Exemption is not entitled [S.45, 47A]

    Allowing the appeal of the revenue the Court held that the reason assigned by the assessee was that the authorised share capital of the company was not increased suitably to make the allotment of these shares to the partners and the consideration for their intended allotment of shares in proportion to their share capital was credited in the “shareholders’ fund account” in the books of account maintained by the company. This was not a sufficient reason or excuse to delay the process of allotment of shares in the company in favour of the erstwhile partners to an unreasonably long period of about three and half years. The conditions laid down in section 47A were not complied with during the previous year 1999-2000 relevant to assessment year 2000-01. Accordingly the imposition of tax on capital gains on the assessee was valid. (AY. 2000-01)

    CIT v. Prakash Electric Company. (2018) 407 ITR 340 (Karn.) (HC)

  38. S.48 : Capital gains – Property inherited under Will – Amount paid for discharge of encumbrances – Allowable as deduction [S. 45, 55]

    Dismissing the appeal of the revenue the Court held that when the property is inherited under Will, amount paid for discharge of encumbrances is allowable as deduction while computing capital gains .

    CIT v. Aditya Kumar Jajodia (2018) 407 ITR 107 (Cal.) (HC)

  39. S.54 : Capital gains – Profit on sale of property used for residence – Consideration that arose in hands of HUF on sale of capital asset had been invested for purchase of new residential house in name of some of its members instead of assessee (HUF) – Deduction is allowable.[S.45]

    Dismissing the appeal of the revenue the Court held that consideration that arose in hands of HUF on sale of capital asset had been invested for purchase of new residential house in name of some of its members instead of assessee (HUF), deduction is allowable. (AY. 2009-10)

    PCIT v. Vaidya Panalalmanilal (HUF) (2018) 259 Taxman 19 (Guj) (HC)

  40. S.54 : Capital gains – Profit on sale of property used for residence – Construction of residential house – Cost of land is also part of cost of residential house – Not necessary that same money from sale of residential asset must be used [S. 45]

    Allowing the appeal of the assessee the Court held that, cost of land is also form cost of residential house and it is not necessary that same money from sale of residential asset must be used for claiming exemption. (AY. 2010-11 )

    C. Aryama Sundaram. v. CIT (2018) 407 ITR 1 (Mad.) (HC)

  41. S.56 : Income from other sources – Gifts from relatives – Maternal aunt – Gift need not be on a particular occasion – Addition cannot be made as income from other sources [S.56 (2)(v)68]

    Allowing the appeal of the assessee Court held that S.56(2)(v) of the Income-tax Act, 1961 was inserted by the Finance (No. 2) Act, 2004 with effect from April 1, 2005. As could be seen from the language of sub-clauses (a) and (b) of clause (v) of sub-section (2) of section 56, while under clause (a) which deals with a gift from any relative no occasion is envisaged, clause (b) dealing with money received from any other person, specifies the occasion of marriage. Accordingly the gift received form maternal aunt cannot be assessed as income from other sources or as cash credits for the reason that the assessee had offered an explanation supported by uncontroverted material showing transfer of the amount. (AYs. 2005-06 to 2008-09).

    Pendurthi Chandrasekhar v. DCIT (2018) 407 ITR 179 (T&AP) (HC)

  42. S.68 : Cash credits – Share capital – Identity of the share applicant was established – Additions cannot be made on surmises without conducting any further inquiry

    Dismissing the appeal of the revenue the Court held that when identity of the share applicant was established, additions cannot be made on surmises without conducting any further inquiry. (AY. 2007-08)

    PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 4 (Delhi) (HC)

    Editorial: SLP of revenue is dismissed; PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 3 (SC)

  43. S.68 : Cash credits – Capital gains – Penny stocks – Share transaction is supported by contract notes, bills, were carried out through recognised stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments – A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises- Statement given earlier was retracted in cross examination-Brokers statement was recoded –Deletion of addition by the Tribunal is held to be justified [S.45,132(4) ]

    Dismissing the appeal of the revenue the Court held that, Share transaction is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments. A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises. Statement given by the partner earlier was retracted in cross examination. The stockbrokers asserted that these transactions were genuine. Deletion of addition by the Tribunal is held to be justified. (ITA No. 620 of 2008 GA No. 2589 of 2008, 
    dt. 26-8-2008)

    CIT v. Alpine Investment (Cal)(HC), www.itatonline.org

  44. S.68: Cash credits – Capital gains – Penny Stocks – If the transaction is supported by documents like contract notes, demat statements etc. and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee’s account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit, simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine [S.45]

    Dismissing the appeal of the revenue the Court held that if the transaction is supported by documents like contract notes, demat statements etc and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee’s account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit,simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non-genuine. Considering all these facts the share transactions made through Shri P. K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain made by the appellant before the AO is not approved. (ITA No. 385/2011 & 603 of 2011 dt. 11-9-2017)

    CIT v. Pooja Agarwal (Smt) (Raj)(HC), www.itatonline.org

    CIT v. Jitendra Kumar Agarwal (Raj)(HC), www.itatonline.org

  45. S.68 : Cash credits – Share application – Inability to produce share application – Addition cannot be made as cash credits

    Dismissing the appeal of the revenue the Court held that inability to produce share application, addition cannot be made as cash credits.

    CIT v. Jalan Hard Coke Ltd. (2018) 95 taxmann.com 330 (Raj.) (HC)

    Editorial: SLP of revenue is dismissed; CIT v. Jalan Hard Coke Ltd. (2018) 257 Taxman 91 (SC)

  46. S.68: Cash credits – Share capital – If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of s. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regarded as undisclosed income of the company

    Allowing the appeal of the assessee the Court held that If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of S. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regarded as undisclosed income of the company. (ITA No. 246 of 2017, dt. 6-8-2018) (AY. 2012-13)

    V. R. Global Energy Pvt. Ltd. v. ITO (2018) 407 ITR 145 (Mad)(HC), www.itatonline.org

  47. S.69A : Unexplained money – Search and seizure – Block assessment – Statement on oath – Merely on the basis that assessee in course of statement made under S. 132(4) had admitted that said jewellery belonged to him, could not be sustained, when in the course of assessment proceedings established that jewellery seized from him actually belonged to his employer – There is no requirement in law that evidence in support of its case must be produced by assessee only at time when seizure has been made and not during assessment proceedings [S.132(4), 158BC]

    Dismissing the appeal of the revenue the Court held that merely on the basis that assessee in course of statement made under S.132, had admitted that said jewellery belonged to him, could not be sustained, when in the course of assessment proceedings established that jewellery seized from him actually belonged to his employer. There is no requirement in law that evidence in support of its case must be produced by assessee only at time when seizure has been made and not during assessment proceedings. Accordingly the order of Tribunal deleting the addition is affirmed. (BP 1-4-1989 to 16-7-1999)

    CIT v. Rakesh Ramani. (2018) 256 Taxman 299 (Bom.) (HC)

  48. S.69B : Amounts of investments not fully disclosed in books of account – Survey – Merely on the basis of statement in the course of survey offering additional income – Addition is held to be not justified [S.133A]

    Dismissing the appeal of the revenue the Court held that; except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document in any other form to justify said statement, accordingly the deletion of addition is held to be valid.

    CIT v. Mantri Share Brokers (P.) Ltd. (2018) 96 taxmann.com 279 (Raj) (HC)

    Editorial: SLP of revenue is dismissed; CIT v. 
    Mantri Share Brokers (P.) Ltd. (2018) 257 Taxman 337 (SC)

  49. S.69C : Unexplained expenditure – Survey – Undisclosed stock – When undisclosed purchases are discovered – Only profit embedded in transaction 
    can be added as income. [S.4, 133A, 145]

    Dismissing the appeal of the revenue, the Court held that when undisclosed purchases are discovered in the course of survey, only profit embedded in transaction can be added as income. Followed Vijay Trading v. ITO ( 2016) 388 ITR 377 (Guj.) (HC).

    PCIT v. Subarna Rice Mill (2018) 257 Taxman 509 (Cal.)(HC)

  50. S.69C : Unexplained expenditure – Search – Work in progress –Valuation report of site engineer higher than work-in-progress recorded in the books of account – Addition is held to be not valid [S.69A,132]

    Dismissing the appeal of the revenue, the Court held that addition cannot be made on the basis of valuation report of site engineer higher than work-in- progress recorded in the books of account. Moreover, even if assume that the closing stock i.e., work-in-progress is in excess of that recorded/disclosed by the respondent, the same has to be added to the income only under section 69A. No question of law arises. (AY. 2009-10)

    CIT v. B.G. Shirke Construction Technology (P.) Ltd. (2018) 257 Taxman 561 (Bom.)(HC)

  51. S.72 : Carry forward and set off of business losses – Dividend – where investments were business investments, carried forward business loss could be set off against dividend income earned from such business investment as even though dividend was classified under separate head, but same was very much part of income from business [S.56]

    Dismissing the appeal of the revenue, the Court held that where investments were business investments, carried forward business loss could be set off against dividend income earned from such business investment as even though dividend was classified under separate head, but same was very much part of income from business. Followed United Commercial Bank Ltd. v. CIT (1957) 32 ITR 688 (SC), CIT v. Cocanada Radhaswami Bank Ltd. (1965) 57 ITR 306 (SC). (AY. 1997-98)

    CIT v. Shriram Chits & Investments (P.) Ltd. (2018) 257 Taxman 395 (Mad.)(HC)

  52. S.72 : Carry forward and set off of business losses – Search – Return is filed by assessee within reasonable time permitted by issue of notice under S.153A(1)(a), such return will be deemed to have been filed within time permitted under S.139(1) for benefit under S.139(3) to be availed of by assessee [S.80, 139, 153A]

    Allowing the appeal of the assessee the Court held that for purpose of carrying forward loss in terms of section 72, read with section 80, in a case where search operations have been conducted under section 132, time to file return within meaning of section 139(3) has to be regarded as reasonable time afforded by consequent notice issued under section 153A(1)(a), therefore, when return is filed by assessee within reasonable time permitted by such notice under section 153A(1)(a), such return would then be deemed to have been filed within time permitted under section 139(1) for benefit under section 139(3) to be availed of by assessee. (AY.2004-05)

    Shrikant Mohta. v. CIT (2018) 257 Taxman 43 (Cal.)(HC)

  53. S.80P : Co-operative Societies – Agricultural enterprise – Tapping of toddy and vending it through licenced shops, eligible to claim deduction, however deduction cannot be claimed without filing a return by co-operative society [S. 80A (5), 80P(2)(iii)]

    Court held that regulatory under Abkari Act would not be a relevant factor in deciding as to whether assessee-society would be entitled to exemption as available under S. 80P. Court held that tapping of toddy was a traditional agricultural enterprise within State and, State also encouraged it, as distinguished from foreign liquor trade, accordingly the deduction is available to co-operative society. Court also held that deduction cannot be claimed without filing a return by co-operative society.

    Kuthuparamba Range Kalluchethu Vyavasaya Thozhilali Sahakarana Sangham Ltd. v. CIT (2018) 257 Taxman 151 (Ker.) (HC)

  54. S.92C : Transfer pricing – Arm’s length price – Selection of comparables – Finding of fact by Tribunal that (i) the activities of the assessee and comparables are functionally different (ii) the extraordinary events such as merger/amalgamation would have an impact/effect on the profitability of comparable (iii) merely because both assessee and the comparable provide ITES services they do not become comparable, cannot be interfered, more particularly in the absence of the same being shown to be perverse – No question of law [S.260A]

    On appeal, the High Court held that the following finding of fact by Tribunal cannot be interfered with:

    (i) That the activities of the assessee and comparable (AT Ltd.) are functionally different and extra-ordinary events like merger / amalgamation would have an impact / effect on the profitability of comparable (AT Ltd.);

    (ii) Merely because both assessee and comparable provide ITES services, they do not become comparable as the nature of services provided, by use of information technology, is different.

    (iii) Not considering / excluding a comparable due to the reasons like comparables render different service (hence not a comparable) or adopts a different business model (hence to be excluded as comparable). (AY. 2008-09).

    PCIT v. Aptara Technology (P) Ltd. (2018) 303 CTR 805 / 168 DTR 14 (Bom.) (HC).

  55. S.127 : Power to transfer cases – Kolhapur to Mumbai – On facts, mere ‘Absence of dissenting notice’ from officers of equal rank who had to agree to proposed transfer, would not constitute agreement – Order of transfer of case was set aside [S.127(2)(a)]

    Allowing the petition the Court held that it was undisputed that Centralisation Committee was not authority, envisaged under section 127(2) and moreover, revenue had not placed anything on record to show that Commissioner, Pune, had given a consent to request to Commissioner, Mumbai so as to constitute agreement as a pre-condition for invoking powers under section 127. On facts, mere ‘Absence of dissenting notice’ from officers of equal rank who had to agree to proposed transfer, would not constitute agreement, as envisaged under section 127(2)(a). Accordingly order was seta side

    Herambh Anandrao Shelke v. M. L. Karmakar, PCIT (2018) 257 Taxman 487 (Bom.)(HC)

  56. S.132(4) : Search and seizure – Statement on oath – Block assessment – Declaration after search has no evidentiary value – Additions cannot be made on basis of such declaration [S. 158BC]

    Dismissing the appeal of the revenue the Court held that the Tribunal was justified in law in deciding that the letter dated January 15, 1998 of the assessee addressed to the Assistant Director about the disclosure of ₹ 80 lakh as income had no evidentiary value as stated under section 132(4). Court also observed that a bare reading of section 132(4) of the Income-tax Act, 1961, indicates that an authorised officer is entitled to examine a person on oath during the course of search and any statement made during such examination by such person (the person being examined on oath) would have evidentiary value under section 132(4). [BP. 1988-89 to 1998-99]

    CIT v. Shankarlal Bhagwatiprasad Jalan (2018) 407 ITR 152 (Bom.) (HC)

    Editorial: SLP of revenue is dismissed, CIT v. Shankarlal Bhagwatiprasad Jalan. (2018) 405 ITR 14 (St)

  57. S.144C : Reference to dispute resolution panel – Foreign company – Order in remand proceedings – Even in partial remand proceedings from the Tribunal, the Assessing Officer is obliged to pass a draft assessment order under section 144C(1) of the Act – Order passed without passing a draft assessment order being violative of provisions of section 144C(1) is set aside [S.92C, 144C(1), 254(1)]

    Allowing the petition the Court held that order in remand proceedings and even in partial remand proceedings from the Tribunal, the Assessing Officer is obliged to pass a draft assessment order under section 144C(1) of the Act. Order passed without passing a draft assessment order being violative of provisions of section 144C(1) is set aside. ‘Fresh adjudication’ itself would imply that it would be an order which would decide the lis between the parties, may not be entire lis, but the dispute which has been restored to the Assessing Officer. The impugned order is not an order merely giving an effect to the order of the Tribunal, but it is an assessment order which has invoked section 143(3) of the Act and also section 144C of the Act. This invocation of section 144C of the Act has taken place as the Assessing Officer is of the view that it applies, then the requirement of section 144C(1) of the Act has to be complied with before he can pass the impugned order invoking section 144C(13) of the Act. Moreover, so far as a foreign company is concerned, the Parliament has provided a special procedure for its assessment and appeal in cases where the Assessing Officer does not accept the returned income. In this case, in the working out of the order of the Tribunal results in the returned income being varied, then the procedure of passing a draft assessment order under section 144C(1) of the Act is mandatory and has to be complied with, which has not been done. In the above view, the impugned order has been passed without complying with the mandatory requirements of section 144C of the Act which is applicable to a foreign company such as the assessee. Therefore, the impugned order is quashed and set aside. (AY. 2011-12)

    Dimension Data Asia Pacific PTE Ltd. v. Dy. CIT (2018) 257 Taxman 442 (Bom.)(HC)

  58. S.147 : Reassessment – After the expiry of four years –Export oriented undertaking –Mentioning of wrong year of commencement of manufacture in Form 56G, when other materials furnished indicated correct year of commencement of manufacture is not a case of failure to disclose material facts – The proviso to S.147 cannot be invoked on the Assessing Officer’s omission or mistake – Reassessment notice is held to be not valid – Notice is not barred by limitation [S.10B, 148]

    Allowing the petition the Court held that , mentioning of wrong year of commencement of manufacture in Form 56G, when other materials furnished indicated correct year of commencement of manufacture is not a case of failure to disclose material facts. The proviso to S. 147 cannot be invoked on the Assessing Officer’s omission or mistake. Reassessment notice is held to be bad in law. (AY. 2010-11)

    MBI Kits International v. ITO (2018) 408 ITR 1 (Mad) (HC)

  59. S.147 : Reassessment – Intimation – The AO cannot reopen on the basis of info received from DIT (Investigation) that a particular entity has entered into suspicious transactions without linking it to the assessee having indulged in activity which could give rise to reason to believe that income has escaped assessment – Such reopening amounts to a fishing inquiry. The AO has to apply his mind to the information received by him from the DDIT (Inv.) and cannot act on borrowed satisfaction [S.143(1), 148]

    Dismissing the appeal of the revenue the Court held that the submission of the Dept. that in view of Rajesh Jhaveri 291 ITR 500 (SC), the AO can reopen the assessment for “whatever reason” is preposterous. The AO cannot reopen on the basis of info received from DIT (Investigation) that a particular entity has entered into suspicious transactions without linking it to the assessee having indulged in activity which could give rise to reason to believe that income has escaped assessment. Such reopening amounts to a fishing inquiry. The AO has to apply his mind to the information received by him from the DDIT (Inv.) and cannot act on borrowed satisfaction. ITA No. 1297 of 2015, dt. 16-4-2018)

    PCIT v. Shodiman Investment Pvt. Ltd. (Bom)(HC), www.itatonline.org

  60. S.147 : Reassessment – Unexplained money – Income Declaration Scheme, 2016 – Share premium and share capital –Disclosed by Gard Logistics Pvt. Ltd. as undisclosed income – Attempt to assess the same income as undisclosed income of the assessee would amount to double taxation – Reassessment is bad in law [S.69A, 143(1), 148]

    Allowing the petition the Court held that the amount which the Assessing Officer is proposing to add as undisclosed income has ben disclosed by Gard Logistics Pvt. Ltd. as undisclosed income under Income declaration scheme. Attempt of the Assessing Officer to assess the same income as undisclosed income of the assessee would amount to double taxation. Accordingly the reassessment is bad in law. Circulars and Notifications: Circular dt. 1-9-2016 (AY. 2010-11)

    M. R. Shah Logistrics (P.) Ltd. v. Dy. CIT (2018) 258 Taxman 103 (Guj.)(HC)

  61. S.147 : Reassessment –Unexplained expenditure – Information received from Investigation Wing – Reassessment proceedings initiated on same ground in earlier assessment years had been set aside – There was no tangible material to justify impugned reassessment proceedings – Reassessment proceedings is quashed [S.69C, 148]

    Allowing the appeal of the assessee the Court held that merely on the basis of information received from Investigation Wing, the re-assessment proceedings cannot be initiated when the reassessment proceedings initiated on same ground in earlier assessment years had been set aside. There was no tangible material to justify impugned reassessment proceedings. (AY. 2010-11)

    Sky View Consultants (P.) Ltd. v. ITO (2018) 258 Taxman 331 (Delhi)(HC)

  62. S.147 : Reassessment – Within four years – The assessment cannot be reopened on the ground that the AO lost sight of a statutory provision like section 50C. This amounts to a review. A.L.A. Firm v. CIT (1991) 189 ITR 285 (SC) distinguished on the basis that the reopening in that case was because the AO was unaware of a binding High Court judgment. Here it is not the case of the Revenue that the AO was not aware of S.50C at the time of passing the S.143(3) assessment order [S.50C, 143(3), 148]

    Dismissing the appeal of the revenue the Court held that the assessment cannot be reopened on the ground that the AO lost sight of a statutory provision like 50C. This amounts to a review. A.L.A. Firm v. CIT (1991) 189 ITR 285 (SC) distinguished on the basis that the reopening in that case was because the AO was unaware of a binding High Court judgment. Here it is not the case of Revenue that the AO was not aware of S. 50C at the time of passing the S. 143(3) assessment order. Court also observed that one must not lose sight that the reassessment proceedings are not proceedings to review of the order already been passed but only a power to reassess. As observed by the Supreme Court in CIT v. Kelvinator India Ltd. (2010) 320 ITR 561, ‘We must also keep in mind the conceptual difference between power to review and power to reassess’. (ITA No. 102 of 2016, dt. 23-7-2018) (AY. 2005-06)

    PCIT v. Inarco Ltd ( Bom)(HC),
    www.itatonline.org

  63. S.147 : Reassessment – The revenue played a subterfuge in trying to cover up its omission and in ante dating the record – The court hereby directs the Chief Commissioner to cause an inquiry to be conducted as to the involvement of the officials or employee in the manipulation of the record, and take strict disciplinary action, according to the concerned rules and regulations. This inquiry should be in regard to the conduct of the concerned AO posted at the time, who issued the notice under S.147/148 as well as the officers who filed the affidavits in these proceedings [S.148]

    It goes without saying that whilst the “reasons” shown to the court and the petitioner may ipso facto not be faulted, yet the file tells a different story; they were not recorded before the impugned notice was issued. In fact, the revenue played a subterfuge, in trying to cover up its omission, and in ante dating the record, in the attempt to establish that such reasons existed, and this Court’s interference was not called for. In these circumstances, this Court hereby directs the Chief Commissioner concerned to cause an inquiry to be conducted as to the involvement of the officials or employee in the manipulation of the record in this case, and take strict disciplinary action, according to the concerned rules and regulations. This inquiry should be in regard to the conduct of the concerned AO posted at the time, who issued the notice under section 147/148 as well as the officers who filed the affidavits in these proceedings. The investigation and consequential action shall be completed within four months. The writ petition is allowed in the above terms; the impugned reassessment notice and all subsequent orders, made pursuant thereto are hereby quashed. The matter shall be listed for the revenue to report its action, to the court, in the form of an Action taken Report, on or before second Tuesday of January, 2019. The matter shall be listed before the Court on 15th January, 2019 for considering the said report. The writ petition is allowed, in the above terms and in terms of the above directions. No costs. (W.P.(C) 8907/2008, 
    dt. 16-8-2018)

    Prabhat Agarwal v. DCIT (2018) 172 DTR 282 (Delhi)(HC);
    www.itatonline.org

  64. S.147 : Reassessment – Notice is issued on the basis of assessment order of earlier year – Earlier year order was set aside by CIT(A) before issue of reassessment notice – Reassessment notice is held to be bad in law [S.143(1), 148]

    Dismissing the appeal of the revenue the Court held that notice under S. 148 was issued to assessee on 9-3-2009 seeking to open assessment for assessment year 2006-07, based upon order of assessment for assessment year 2005-06. Assessment order passed for year 2005-06, had been set aside in appeal by order dated 13-1-2009 of CIT(A) and also given effect to by AO on 5-3-2009 and held that since 9-3-2009 when notice under S.148 was issued, Assessing Officer was aware of said order of CIT (A), accordingly AO could not have any reason to believe that income chargeable to tax had escaped assessment. (AY. 2006-07)

    DIT (IT) v. Atomstroyexport (2018) 95 taxmann.com 257 (Bom.)(HC)

    Editorial : SLP of revenue is dismissed; DIT (IT) v. Atomstroyexport (2018) 257 Taxman 30 (SC)

  65. S.147 : Reassessment –Subsequently Assessing Officer desired to withdraw of notice without issuing any formal withdrawal of notice – The law does not recognise two parallel assessments – In the absence of withdrawal of the first notice of reassessment, the proceedings would survive – Second notice of Reassessment is held to be not valid [S.148]

    Allowing the petition the Court held that; a notice of reopening which is once issued would remain in operation unless it is specifically withdrawn, quashed or gets time barred. The first instance would be at the volition of the Assessing Officer as the person who had issued the notice. He can recall the notice for valid reasons and may even issue a fresh notice which is not impermissible in law. Nevertheless, there has to be an action of withdrawal. Mere intention, a stated intention or even an intention which is otherwise put in practice cannot be equated with withdrawal of the notice. By mere intention to abandon the proceedings arising out of the notice, the Assessing Officer cannot bring about the desired result of withdrawing the notice. Even the files did not show any such formal withdrawal of the notice with or without communication thereof to the assessee. The law does not recognise two parallel assessments. In the absence of withdrawal of the first notice of reassessment, the proceedings would survive making the subsequent notice of reopening invalid. (AY. 2010-11)

    Marwadi Shares and Finance Ltd. v. DCIT (2018) 407 ITR 49 (Guj.) (HC)

  66. S.147 : Reassessment – Within four years – Disclosure in computation – The fact that the AO did not raise specific queries and is silent in the assessment order does not mean there is no application of mind – Reassessment is held to be bad in law [S.143(3), 148]

    Allowing the petition the Court held that computation is the basic document for making the S. 143(3) assessment. If there is a disclosure in the computation, it leads to the prima facie necessary inference that there is application of mind by the AO. The fact that the AO did not raise specific queries & is silent in the assessment order does not mean there is no application of mind ITO v. Techspan (2018) 404 ITR 10(SC) followed. (WP271-2018/) WP-278-2018 dt. 15-6-2018), (AY. 2013-14, 2014-15)

    State Bank of India v. ACIT (Bom)(HC);
    www.itatonline.org

  67. S.148 : Reassessment – Notice – when department had correct address of assessee furnished in return of income, sending notice at incorrect address available with bank and then drawing presumption of service of notice on ground that notice was not received back unserved, could not be sustained [S.147]

    Allowing the appeal of the assesee the Court held that when department had correct address of assessee furnished in return of income, sending notice at incorrect address available with bank and then drawing presumption of service of notice on ground that notice was not received back unserved, could not be sustained. (AY. 1999-2000)

    Suresh kumar Sheetlani v. ITO (2018) 257 Taxman 338 (All.)(HC)

  68. S.153 : Assessment – Limitation – When seven issues were before Tribunal, Tribunal remanding of only five issues – Time Limit specified in S.153(2A) is applicable not S.153 (3)(ii)of the Act – Order is held to be not valid [S. 153(2A), 153(3)(ii)]

    Allowing the petition the Court held that of the seven issues, the assessment in respect of five was set aside and the issues remanded for a fresh determination. Whether the remand was to the Transfer Pricing Officer or the Dispute Resolution Panel would not make a difference as long as what resulted from the remand was a fresh assessment of the issue. Clearly, therefore, the time-limit for completing that exercise was governed by section 153(2A). The assessment proceedings had to necessarily be completed by the Assessing Officer within the time-limit specified in section 153(2A) of the Act. In-as-much as the Assessing Officer failed to do so, the notice dated September 14, 2015 issued by the Assessing Officer and all proceedings consequential thereto including the order dated December 2, 2015 passed by the Assessing Officer were not valid. (AY. 2007-08)

    Nokia India P. Ltd. v. DCIT (2018) 407 ITR 20 (Delhi) (HC)

  69. S.153A : Assessment – Search –Limitation – The time limit of 2 years u/s. 153B for framing search assessment orders applies only to the original order and not orders passed after remand. Period of limitation prescribed for completion of remand (nine months) constituted a special provision, which applies to every class of remand regardless whether they originate from assessments/re-assessments/revisions or search and seizure assessments. – The time limit for passing remand orders is governed by S.153(3)/erstwhile 153(2A) & not by S. 153B – Limitation begins (for any purpose under the Act) from the point of time when the departmental representative receives the copy of a decision or an order of the ITAT – The last date by which the remand order could have been worked out validly was 31-12-2016. Accordingly the impugned order pursuant to the remand dated 22-12-2017 and all consequential orders and actions are hereby quashed [S.153(2A), 153B, 254(1)]

    In all these writ petitions, the narrow question agitated by the assessees is that assessment order made on 22-12-2017 under Section 153A read with Section 254 of Income-tax Act, 1961 (hereinafter ‘the Act’) for Assessment Year 2005-06 and subsequent years (up to 2012-13) covered by search assessment, were barred and therefore, needs to be quashed. Allowing the petition the Court held that it is quite evident from the decision in CIT v. Odeon Builders Pvt. Ltd. (2017) 393 ITR 27 (FB) (Delhi)(HC) that limitation begins (for any purpose under the Act) from the point of time when the departmental representative receives the copy of a decision or an order of the ITAT. The evidence on record in this case clearly establishes that the concerned DR (a Commissioner ranking officer) nominated by the revenue received a copy of the ITAT order dated 30-3-2016. The starting point of limitation therefore was 31-3-2016. The next question is whether the non-obstante clause under Section 153 of the Act, which prescribes a specific period of limitation to complete a search assessment for the block period concerned, could override the general period of limitation. During the relevant period when the assessment was completed, the period prescribed was nine months (on account of substitution carried out by the amendment). The special provision under Section 153B of the Act in the opinion of the Court carves out a special period of limitation without which search/block assessments would not be completed. The entire provisions under Chapter XIV relating to block assessment, have been termed by the Supreme Court to be a complete code. At the same time, a specific period of limitation prescribed is for completion of original block assessments for the search and seizure proceedings. The period for issuing notice and completion of block assessment for all the concerned years (7 years) is within two years. Now, in the opinion of the Court, to apply that general two years limitation, the block reassessment proceeding after remand is not a feasible proposition. In the judgments in Nokia India (P) Ltd. v. Dy. CIT (2017) 85 Taxmann.com 291 (Del.) as well as CIT v. Bhan Textile P. Ltd., (2008) 300 ITR 176 (Del.) are relevant authorities. In PCIT v. PPC Business and Products P. Ltd., (2017) 398 ITR 71 (Del.), this Court emphasised the need to initiate the proceedings wherever the revenue wished to proceed further in case of search and seizure within the time and underlined that in case the assessments are not initiated and completed within the time prescribed, the valuable right accrues to the assessee. The general provision of two years, in the opinion of the Court, has been provided with one important objective i.e., to cater to a specific situation where upon search and seizure operation, if new material is found, already completed assessments are revisited. Had Parliament not prescribed such a specific period of limitation, possibly, the assessee’s concern would have successfully urged that search and seizure proceedings would be confined only to the concerned year in which the search operation took place. It was proposed to tide over such situation. The only provision that prescribed a period of limitation in respect of remands at the relevant time at least in this case is Section 153(2A). In that sense, that period of limitation prescribed for completion of remand (nine months) constituted a special provision, which applies to every class of remand regardless whether they originate from assessments/reassessments/revisions or search and seizure assessments. In these circumstances, completion of the assessment proceedings for the block period by the impugned order dated 22-12-2017 was clearly beyond the period of limitation. As noticed earlier, the last date by which the remand order could have been worked out validly was 31-12-2016. Accordingly the impugned order pursuant to the remand dated 22-12-2017 and all consequential orders and actions are hereby quashed. (W.P.(C) 4304/2018 & CM APPL.16759/2018, dt. 1-10-2018)

    Surendra Kumar Jain v. PCIT (2018) 408 ITR 328 (Delhi)(HC),
    www.itatonline.org

    Virendra Jain v . PCIT (2018) 408 ITR 328 (Delhi)(HC),
    www.itatonline.org

  70. S.158BC : Block assessment – Unexplained expenditure –Cost of construction valuation report – Since no undisclosed income was detected as a result of search, and amounts in question had been found to have been entered in regular books of account of assessee, inquiry, if any, in respect of valuation of building was permissible only in course of regular assessment proceedings and, thus, addition made by Assessing Officer was to be deleted [S.69C]

    Dismissing the appeal of the revenue the Court held that Chapter XIV-B of Act is a complete code in itself and if assessment has to be made for undisclosed income, such undisclosed income should be out of result of search; since no undisclosed income was detected as a result of search, and amounts in question had been found to have been entered in regular books of account of assessee, inquiry, if any, in respect of valuation of building was permissible only in course of regular assessment proceedings and, thus, addition made by Assessing Officer was to be deleted.

    PCIT v. Rajni Developers (P.) Ltd. (2018) 89 taxmann.com 408 (Guj.) (HC)

    Editorial: SLP of revenue is dismissed PCIT v. Rajni Developers (P.) Ltd. (2018) 257 Taxman 258 (SC)

  71. S.159 : Legal representatives – Reassessment – Notice issued in name of dead person is not enforceable in law – There is no statutory obligation on part of legal representative of deceased to immediately intimate death of assessee or take steps to cancel PAN registration – The proceedings under S. 159 can be invoked only if the proceedings have already been initiated when the assessee was alive and was permitted for the proceedings to be continued as against the legal heirs – The notice has to be, in substance and effect, in conformity with or according to the intent and purpose of the Act. Undoubtedly, the issue relating to limitation is not a curable defect for the revenue to invoke S. 292B. Accordingly the Court held the impugned notice is wholly without jurisdiction and cannot be enforced against the assessee [S. 147, 148, 292BB]

    Allowing the petition the Court held that , notice issued in name of dead person is not enforceable in law. Court also held that there is no statutory obligation on part of legal representative of deceased to immediately intimate death of assessee or take steps to cancel PAN registration. Court observed that, the proceedings under S. 159 can be invoked only if the proceedings have already been initiated when the assessee was alive and was permitted for the proceedings to be continued as against the legal heirs. The factual position in the instant case being otherwise, the provisions of S. 159 have no application. Court observed that the language employed in S. 292B is categorical and clear. The notice has to be, in substance and effect, in conformity with or according to the intent and purpose of the Act. Undoubtedly, the issue relating to limitation is not a curable defect for the revenue to invoke S. 292B. Accordingly the Court held the impugned notice is wholly without jurisdiction and cannot be enforced against the assessee. (AY. 2010-11)

    Alamelu Veerappan v. ITO (2018) 257 Taxman 72 /wwwitatonline.org. (Mad) (HC)

  72. S.192 : Deduction at source – Salary – Bar against direct demand – If the deductor has deducted TDS and issued Form 16A, the deductee has to be given credit even if the deductor has defaulted in his obligation to deposit the TDS with the Government [S.205, 221]

    Allowing the petition the Court held that if the deductor has deducted TDS and issued Form 16A, the deductee has to be given credit even if the deductor has defaulted in his obligation to deposit the TDS with the Government revenue. (SCA No. 12965 of 2018, dt. 24-9-2018)

    Devarsh Pravinbhai Patel v. ACOT (Guj)(HC),
    www.itatonline.org

  73. S.194C : Deduction at source – Contractors – Payment towards annual maintenance contracts for lifts and air conditioners is not technical services – Deduction of tax as contractor is justified payment cannot be treated as fees for technical services [S.194J, 260A]

    Dismissing the appeal of the revenue the Court held that the Tribunal had correctly held that the assessee had made payments only in respect of maintenance contracts which related to minor repairs, replacement of some spare parts, greasing of machinery, etc., which services did not require any technical expertise, and therefore, could not be categorised as “technical services” as contemplated under section 194J and that the assessee had correctly deducted the tax at source under section 194C which applied to payments made to contractors. No question of law arose. (AYs. 2000-01 to 2009-10)

    CIT v. Mumbai Metropolitan Regional Development Authority (2018) 408 ITR 111 (Bom) (HC)

  74. S.194C : Deduction at source – Contractors – Licence fee paid to contractor by contractee and not vice versa – Not liable to deduct tax at source [S.201 (1)]

    Dismissing the appeal of the revenue the Court held that since payment of licence fee was made by contractee to contractor, provision of S.194C is not applicable.

    PCIT v. Hakmichand D & Sons (2018) 258 Taxman 208/97 taxmann.com 583(Guj.) (HC))

    Editorial: SLP of revenue is dismissed, PCIT v. Hakmichand D & Sons (2018) 258 Taxman 207 (SC)

  75. S.194C : Deduction at source – Contractors – Persons responsible for paying – As per the agreement between the company and assessee that freight payment would be made by said company directly to truck owners and TDS deduction as applicable would be made by said company; since payment was not made by assessee, default in TDS was that of other company and not assessee – No disallowance can be made in the assessment of the assessee for failure to deduct tax at source. [S. 40(a)(ia), 204(iii)]

    Dismissing the appeal of the revenue the Court held that S. 194C, read with S. 204(iii), will come into operation only on payment made by assessee contractor and there was an agreement between said company and the assessee that freight payment would be made by said company directly to truck owners and tax deduction at source as applicable would be made by said company; since payment was not made by assessee, default in tax deduction at source was that of other company and not assessee. Accordingly no disallowance can be made in the assessment of the assessee.

    CIT v. Daulat Enterprises. (2018) 94 taxmann.com 261 (Raj.) (HC)

    Editorial: SLP of revenue is dismissed, CIT v. Daulat Enterprises (2018) 256 Taxman 422 (SC)

  76. S.226 : Collection and recovery – Modes of recovery – Appeal – The AO is not justified in insisting on payment of 20% of the demand based on CBDT’s instruction dated 29-2-2016 during pendency of appeal before the CIT(A) – This approach may defeat & frustrate the right of the assessee to seek protection against collection and recovery pending appeal – Such can never be the mandate of law – CIT(A) is directed to hear the appeal expeditiously – During pendency of appeal the stay is granted [S. 220(6), 246]

    Allowing the petition the Court held that the AO is not justified in insisting on payment of 20% of the demand based on CBDT’s instruction dated 29-2-2016 during pendency of appeal before the CIT(A). This approach may defeat & frustrate the right of the assessee to seek protection against collection and recovery pending appeal. Such can never be the mandate of law. CIT(A) is directed to hear the appeal expeditiously – Pendency of appeal the stay is granted. (WP Nos. 2157 and 2160 of 2018, dt. 11-10-2018)

    Bhupendra Murji Shah v. DCIT (2018) 259 Taxman 45 (Bom)(HC)
    www.itatonline.org

  77. S.244 : Refund – Interest on refund – The Dept. should bring some order and discipline to the aspect of granting refunds. All pending refund applications should be processed in the order in which they are received. It is the bounden duty of the Revenue to grant refunds generated on account of orders of higher forums and disburse the amount expeditiously. In the absence of a clear policy, the Courts may impose interest on the quantum of refund at such rates determined by the Court – Registrar of High Court is directed to forward copy of the order to the PCIT and the Chairperson – Central Board of Direct Taxes

    Allowing the petitions the Court observed that we hope and trust that all pending refund applications are processed in the order in which they are received by the Respondents. If refunds are generated on account of orders of Higher Forums, Authorities and Courts, then, it is the bounden duty of the Revenue to grant such refund and disburse the amount expeditiously. Court also observed that needless to clarify that in the absence of a clear policy, the Courts may then impose interest on the quantum of refund generated either by virtue of Court orders or by virtue of substantive proceedings arising out of refund applications. Eitherway, it is the Revenue who would have to pay interest on the delayed refund and as such rates determined by the Court. It is in these circumstances that we hope and trust that some order and discipline should be brought as far as this aspect is concerned. Let the copy of this order be forwarded to the Principal Commissioner-3 and the Chairperson – Central Board of Direct Taxes. The needful be done by the Registry officials within two weeks from today. (WP No. 2460 of 2018, dt. 1-10-2018)

    Sicom Ltd. v. DCIT (Bom)(HC),
    www.itatonline.org

  78. S.244A : Refunds – Interest on refunds – Search and seizure – Tax dues appropriated from seized cash – Balance to be returned with interest [S. 132]

    Allowing the petition the Court held that when there was no tax liability, and after the order of assessment for assessment year 2011-12, i. e., December 31, 2012, there was no justification at all to retain the balance amount of ₹ 13,51,714. The assessee was entitled to a refund of the amount. He was also entitled to interest as per the Income-tax Act from April 1, 2013, i. e., after three months from the date of order of assessment for the assessment year 2011-12. (AY. 2011-12)

    Rajesh Vachhani v. CIT (2018) 408 ITR 94 (Guj.) (HC)

  79. S.245BC : Settlement Commission – Chairman – Power – These Petitions have been filed challenging a somewhat curious and unforeseen development. We do not know in what circumstances the Chairman flew down to Mumbai and invited the members for discussion in relation to some cases or related issues. It would be highly risky if such discussions in relation to judicial orders and judicial matters are held in a closed-door meeting or in the privacy of the chambers of the members of the Settlement Commission. There is an uncalled for interference in judicial proceedings and none including the Chairman can direct a particular course of action to be taken or a particular order being passed in pending judicial proceedings. Court also observed that to avoid an allegation of the nature made in these Writ Petitions, the Chairman would be well advised not to chart this course hereafter. We leave the matter entirely to his wisdom and say nothing more. [Art, 226, 227]

    The apprehension of the petitioner in writ petition (L) No. 2769 of 2018 and Writ Petition (L) No. 2770 of 2018 is that they would not be treated fairly by the Settlement Commission in the pending proceedings, more-so in the light of the events that have transpired pursuant to a visit by the Chairman of the Settlement Commission in Mumbai on 2nd August, 2018. Court held that these petitions have been filed challenging a somewhat curious and unforeseen development. We do not know in what circumstances the Chairman flew down to Mumbai and invited the members for discussion in relation to some cases or related issues. It would be highly risky if such discussions in relation to judicial orders and judicial matters are held in a closed-door meeting or in the privacy of the chambers of the members of the Settlement Commission. There is a uncalled for interference in judicial proceedings and none including the Chairman can direct a particular course of action to be taken or a particular order being passed in pending judicial proceedings. Referring various case laws the Court observed that the guarantee of justice is ensured when there are public hearings and open sittings. In judicial matters and proceedings of that nature, the discussion in open Court, after questioning the respective parties/their advocates or their representatives ensures not only fairness but purity and sanctity of Judicial process. It is not that everybody gets an opportunity to preside over as a Judge or Member of quasi judicial/judicial Commission. The more the power, the greater the responsibility. Here the power comes with a trust. Litigants and parties trust the Judges and Members of judicial bodies and Commissions only because they are sure that they will not decide cases going by somebody’s interference or influence. Members of Judicial bodies have to act without fear or favour, affection or illwill. They have to uphold the Constitution and the Laws. The guarantee or assurance of justice is above everything and that is ensured by the Constitution of India. If independence and impartiality of a Judge is questioned, then, that sets the above guarantee and assurance at naught. We would remind all concerned of these salutary principles emerging from the Judgments of the Hon’ble Supreme Court. They have been summarised and referred in a recent order of this Court passed on 8th March, 2018 in three Writ Petitions being writ petition No. 13488 of 2017 (Suresh Hareshwar Naik & Ors. v. The State of Maharashtra & Ors.); WP. No.13353 of 2016 (Robert Marsalin Dias & Ors. v. The State of Maharashtra & Ors.) and WP No. 2759 of 2011 (Jagannath Kusaji Sawant v. State of Maharashtra & Ors.). Court also observed that, to avoid an allegation of the nature made in these writ petitions, the Chairman would be well advised not to chart this course hereafter. We leave the matter entirely to his wisdom and say nothing more. The writ petitions are disposed of. (WP Nos. 2769 and 2770 of 2018, 
    dt. 21-8-2018)

    Raghuleela Builders Pvt. Ltd. v. ITSC (2018) 407 ITR
    721(Bom.)(HC), (2018) 407 ITR 721;
    www.itatonline.org

  80. S.246A : Appeal – Commissioner (Appeals) – Filed before wrong authority – Appeal for AY 2015-16 was filed before wrong authority ie Aayakar Seva Kendra [ASK] instead of CIT(A)] – CIT(A) to entertain the appeal filed (on merits) along with stay applications and pass orders on stay – Demand to be kept in abeyance till CIT(A) passed the relevant orders – Matter remanded

    On writ filed, the High Court instructed the assessee to file appeal for AY 2015-16 before the CIT(A) (which was earlier filed with Aayakar Seva Kendra (ASK) within ten days from receipt of High Courts order and CIT(A) to entertain it on merits, without law of limitation, and dispose off such appeal along with the other pending appeal for AY 2012-13 and stay applications; in the mean while the demand to be kept in abeyance. (W.P. No 5587 of 2018 & W. Misc P. No 6917 of 2018 dt. 4-4-2018, AYs 2012-13, 2015 -16)

    G.R.D. Trust v. DCIT (E) (2018) 255 Taxman 121 (Mad.) (HC)

  81. S.246A : Appeal – Commissioner (Appeals) – Appealable orders – Deduction at source – Order determining amount of tax deduction at source is appealable order – Tribunal has failed to consider S.248 of the Act therefore its order is per incuriam – Matter set aside to decide in accordance with law. [S.195(2), 248, 254(1)]

    Allowing the appeal of the assessee the Court held that order determining amount of tax deduction at source is appealable order. Tribunal has failed to consider S.248 of the Act therefore suffers from infirmity and is per incuriam. Accordingly the matter set aside to decide in accordance with law. (AY. 2006 -07)

    Bangalore International Airport Ltd. v. ITO (IT) (2018) 257 Taxman 148 (Karn.)(HC)

  82. S.251 : Appeal – Commissioner (Appeals) – Power of enhancement – In penalty appeal the CIT(A) cannot issue direction to the Assessing Officer for exploring the addition in assessment. [S.271(1) (c)]

    Dismissing the appeal of the revenue , the Court held that; in appeal arising out of order imposing penalty, matter pertaining to some other income escaping assessment does not fall within purview of expression ‘any matter arising out of proceedings in which order appealed against was passed’ in Explanation to S. 251 of the Act. Accordingly the direction issued by the CIT(A) to the Assessing Officer for exploring the addition in assessment which was quashed by the Tribunal is up held. (AY. 2007-08 to 2009-10)

    PCIT v. KPC Medical College & Hospital. (2018) 257 Taxman 159 (Cal)(HC)

    Editorial: Order in KPC Medical College & Hospital v. Dy. CIT (2015) 172 TTJ 204 (Kol) (Trib) is affirmed.

  83. S.254(1) : Appellate Tribunal – Duties – The Appellate Tribunal should give independent reasons showing consideration of the submissions made on behalf of the assessee – An appellate order which affirms the order of the lower authority need not be a very detailed order – Nevertheless, there should be some indication in the order passed by the appellate authority of due application of mind to the contentions raised by the assessee in the context of findings of the lower authority which were the subject matter of the challenge before it.

    Question before the High Court “Whether in the facts and circumstances of the case and in law, the Tribunal was justified in dismissing the assessee’s appeal by merely recording that it accepts the view of the (CIT) Appeals?”

    Court held that we find that while discussing various issues, the Tribunal has not given any independent reasons showing consideration of the submissions made on behalf of the assessee. We are conscious of the fact that an appellate order which affirms the order of the lower authority need not be a very detailed order, nevertheless, there should be some indication in the order passed by the appellate authority, of due application of mind to the contentions raised by the assessee in the context of findings of the lower authority which were the subject matter of the challenge before it. In view of above, the interest of justice would be served if the impugned order is quashed and set aside and the appeals are restored to the Tribunal for fresh consideration. Therefore, both the appeals are allowed by way of remand. All contentions 
    are kept open. (ITA No. 643 of 2016, dt 26-11-2018)

    Cheryl J. Patel v. ACIT (Bom.)(HC);
    www.itatonline.org

  84. S.254(1) : Appellate Tribunal – Duties – Passing the ex-parte order without ascertaining whether notice was duly served and assessee had avoided intentionally and deliberately to attend case of hearing would result in miscarriage of justice – Ex-parte order is set aside. [R. 24]

    Allowing the appeal of the assessee, the Court held that passing ex-parte order without ascertaining whether notice was duly served and assessee had avoided intentionally and deliberately to attend case of hearing would result in miscarriage of justice – Ex-parte order is set aside.

    Lalitnirman Business Development (P.) Ltd. v. ITO 259 Taxman 23 (Bom)( HC)

  85. S.254(1) : Appellate Tribunal –Powers – While setting aside the order of Commissioner, the Appellate Tribunal cannot rewrite the Assessing Officer’s order and improve upon it. [S. 14A, 252, 263]

    Allowing the appeal of the assessee the Court held that the Tribunal’s findings amounted to supplying reasons in respect of the Assessing Officer’s order, on aspects, which were not expressly reflected in the assessment order. The Tribunal not only went into the merits of the Commissioner’s order, which could be considered as only indicative of what was missed out by the Assessing Officer, but also recorded its findings. It proceeded to hold that amounts due to drawbacks/incentives and foreign exchange fluctuations were to be considered and had been considered by the Assessing Officer but not the Commissioner. As a matter of fact, the Assessing Officer had recorded no observation or findings on those issues, nor the issue of the loans, which the assessee had received, or the amounts claimed by him as interest. Given those matters of record, it was difficult to validate the Tribunal’s approach reading into the Assessing Officer’s order, reasons which were not there. The Tribunal’s order itself disclosed that the Assessing Officer did not investigate into the question of advances given to others, having regard to the assessee’s claim for having taken loans, for which interest expenditure was claimed. The duty of the Commissioner was to record why revision was warranted. The Tribunal’s jurisdiction was not to rewrite the Assessing Officer’s order and improve upon it. The orders of the Tribunal were unsustainable and thus were to be set aside. (AY. 2011-12, 2012-13

    CIT v. Braham Dev Gupta (2018) 408 ITR 291 (Delhi) (HC)

  86. S.254(1) : Appellate Tribunal – Powers – Tribunal cannot go beyond question in dispute – When the amounts could not have been added under section 68 , the Tribunal was not competent to make the addition under section 69A – The order of the Tribunal was vitiated in law – Matter remanded to the Tribunal [S.68, 69A]

    Allowing the appeal of the assessee the Court held that the use of the word “thereon” in section 254(1) of the Income-tax Act, 1961 is important and it reflects that the Tribunal has to confine itself to the questions which arise or are subject matter in the appeal and it cannot travel beyond that. The power to pass such order as the Tribunal thinks fit can be exercised only in relation to the matter that arises in the appeal and it is not open to the Tribunal to adjudicate any other question or issue, which is not in dispute and which is not the subject matter of the dispute in appeal. Accordingly, when the amounts could not have been added under section 68, the Tribunal was not competent to make the addition under section 69A. The order of the Tribunal was vitiated in law-Matter remanded to the Tribunal. (2001-02)

    Sarika Jain (Smt.) v. CIT (2018) 407 ITR 254 (All.) (HC)

  87. S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Mere pendency of appeal in the High Court does not preclude the Tribunal’s power of rectification, (ii) Fact that there is difference of opinion between the two members of the Tribunal would, by itself, notmean that the error sought to be rectified is not apparent on the record & (iii) The Tribunal has no jurisdiction to recall an order based on submissions made and upon consideration of materials on record. The power of rectification are circumscribed with the condition that the same can be exercised for correcting error be of law or facts apparent on record. The jurisdiction to correct errors vested in the Tribunal is not akin to review powers

    Court held that, whatever be the correctness of these findings it cannot be stated that the Tribunal arrived at such findings without proper consideration of materials on record. Several issues were presented before the Tribunal and were examined before coming to such specific finding. The Tribunal could not have recalled the entire order under purported exercise of rectification powers. It is well settled through series of judgments of this Court and the Supreme Court that power of rectification are circumscribed with the condition that the same can be exercised for correcting error be of law or facts apparent on record. The jurisdiction to correct errors vested in the Tribunal is not akin to review powers. As noted, the Accountant Member, while showing inclination to exercise rectification powers, had not cited any reason in support of his opinion. Accordingly the petition is allowed. Court also observed that we are, prima facie, not inclined to accept both these legal contentions. Merely because the appeal is pending before the High Court, would not preclude, in our prima facie opinion, the Tribunal from exercising rectification powers. Nor can we lay down a general proposition of inviolable application that the moment there is a difference of opinion between two Members of the Bench of the Tribunal, it would automatically imply that the order does not suffer from any error apparent on the face of the record. However, with respect to the fundamental question whether there was an error which could have been rectified, we would like to examine the issue further. (SP No. 6337 of 2018, dt. 20-8-2018)

    Shambhubhai Mahadev Ahir v. ITAT (Guj) HC),
    www.itatonline.org

  88. S. 254(2): Appellate Tribunal-Rectification of mistake apparent from the record – The ITAT should give priority to the hearing of Miscellaneous application – It should assign specific dates of hearing and inform parties well in advance – The ITAT should set right the lapses and put its house in order – None should be compelled to move the High Court and seek an out of turn hearing [S.254(1)]

    Allowing the petition the Court observed that the Miscellaneous Application is pending from 26th July, 2018. We are in the month of October, 2018 and the petitioner has no information as to when this application will be heard. In such state of affairs, we direct the Tribunal to give priority to this application and dispose it of as expeditiously as possible and, in any event, by 31st December, 2018. Court also observed that we have already indicated in our earlier orders and directions that the Tribunal should inform parties well in advance by assigning specific dates of hearing on these Miscellaneous Applications. They should be taken in the order in which they have been instituted/filed. None should be compelled to move this Court and seek an out of turn hearing. That would mean if somebody approaches this Court, gets a priority and expeditious hearing, others will have to wait for outcome of their Miscellaneous Applications for years together. This is not a happy scenario and it is for the Tribunal to set right the lapses and put its house in order. (WP No. 3104 of 2018. dt. 15-10-2018)

    Lupin Investment Pvt. Ltd. v. ITAT (Bom.)(Trib.),
    www.itatonline.org

  89. S.254(2) : Appellate Tribunal-Rectification of mistake apparent from the record – Limitation – Delay of 4 months and 10 days – Though the Tribunal has no power u/s. 254(2) to condone delay in filing the MA, the High Court has power under Articles 226 and 227 of the Constitution of India to do substantial justice by condoning the delay. Injustice was done to the assessee because the Tribunal did not follow the binding judgment in CIT v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Karn.) (HC) on the issue of levy of penalty u/s. 271(1)(c). Accordingly, the delay in fling the MA deserves to be condoned [S.271(1)(c)]

    Allowing the petition the Court held that ; Though the Tribunal has no power u/s 254(2) to condone delay in filing the MA, the High Court has power under Articles 226 and 227 of the Constitution of India to do substantial justice by condoning the delay. Injustice was done to the assessee because the Tribunal did not follow the binding judgment in CIT v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 on the issue of levy of penalty u/s. 271(1)(c). Accordingly, the delay in fling the MA deserves to be condoned. (WP No. 25553/2018, dt. 12-7-2018) (AY. 2007-08)

    Muninaga Reddy v. ACIT (Karn.)(HC),
    www.itatonline.org

  90. S.260A : Appeal – High Court – Notice of motion for disposal of appeal vis-a-vis pendency of appeal in the first round –Directions sought – To decide the second round of appeal basis decisions rendered by various Courts cannot be granted as the second round of proceedings have not yet culminated in a final order of the Tribunal [S.254 (1)]

    Held by the High Court that under the Act, it can exercise their Appellate jurisdiction in respect of appeals filed under Section 260A of the Act by the parties from the orders of the Tribunal passed under section 254 of the Act and since the second round of proceedings have not yet culminated in a final order under Section 254 of the Act, no directions can be given in respect of such matter not before the Court. (AY. 2008-09)

    Johnson & Johnson (P) Ltd. v. CIT (2018) 168 DTR 292 (Bom.)(HC)

  91. S.260A : Appeal – High Court –Transfer pricing disputes with regard to exclusion and inclusion of comparables to determine Arm’s Length Price (ALP) would not necessarily give rise to substantial questions of law except if there is perversity of finding or failure to adhere to the settled principles of law while determining comparables. [S.92C]

    Dismissing the appeal of the revenue the Court held that Transfer Pricing disputes with regard to exclusion and inclusion of comparables to determine Arm’s Length Price (ALP) would not necessarily give rise to substantial questions of law except if there is perversity of finding or failure to adhere to the settled principles of law while determining comparables. (ITA No. 522 of 2016, dt. 24-9-2018)

    PCIT v. TIBCO Software (India) Pvt. Ltd. (2018) 305 CTR 482 (Bom.)(HC),
    www.itatonline.org

  92. S.260A : Appeal – High Court – Subsequent event was not brought to the notice of High Court by revenue – Court held that there is no discipline in the manner the Dept. conducts matters. The Dept. should not take legal matters casually and lightly. There should be a dedicated legal team in the department. Lack of preparation is affecting the performance of the advocates. They do not have full records & do not have the assistance of officials who can give instructions. The Commissioner of income tax should devote more time to their work rather than attending some administrative meetings and thereafter boasting about revenue collection in Mumbai

    Honourable Court observed that when the matters were placed for ‘admission’ the revenue counsel was not briefed on the subsequent event of miscellaneous application. It was brought the notice by the Counsel appearing for the assessee to the subsequent development .We have no information as to whether prior to the decision of the Tribunal on this Miscellaneous Application, the Assessing Officer has already given effect to Tribunal’s initial or earlier order or otherwise. If the mistakes are corrected in the later order dated 13th January 2017, then, whether the Assessing Officer has given effect to that order also will be crucial and relevant for us. Court held that there is no discipline in the manner the Dept. conducts matters. The Dept. should not take legal matters casually and lightly. There should be a dedicated legal team in the department. Lack of preparation is affecting the performance of the advocates. They do not have full records & do not have the assistance of officials who can give instructions. The Commissioner of Income-tax should devote more time to their work rather than attending some administrative meetings and thereafter boasting about revenue collection in Mumbai. WP No. 1936 of 2018. & ITA No. 1320 of 2018, dt. 26-9-2018)

    PCIT v. Radan Multimedia Ltd. (Bom)(HC),
    www.itatonline.org

  93. S.260A : Appeal – High Court – strictures – The Revenue has been selective in its approach. It picks either the assessee or the AYs pertaining to that assessee for challenging the orders in relation to them, before the higher forums. This results in revenue leakage or perpetuation of wrongs affecting adversely the collection of revenue. The public at large is at a loss to understand as to why the Department/Revenue consistently loses the battle in the higher Courts. This could be then termed as a deliberate or intentional act. If the Department of Revenue, Ministry of Finance, Government of India is going to conveniently overlook this and not bring the guilty persons to book by initiating disciplinary measures against them, then, no purpose will be served at all. This is not a short term exercise, but a major surgery which will have to be performed. If the Revenue Officials are prepared to take some bold decisions, then, only these state of affairs will improve and not otherwise

    Court observed that, on numerous occasions, this Court has brought to the notice of the Department of Revenue, Ministry of Finance, Government of India through the Commissionerates that the Revenue has been selective in its approach. It picks either the assessee or the assessment years pertaining to that assessee for challenging the orders in relation to them, before the higher forums.This results in revenue leakage or perpetuation of wrongs affecting adversely the collection of revenue. The public at large is at a loss to understand as to why the Department/Revenue consistently loses the battle in the higher Courts. This could be then termed as a deliberate or intentional act. If the Department of Revenue, Ministry of Finance, Government of India is going to conveniently overlook this and not bring the guilty persons to book by initiating disciplinary measures against them, then, no purpose will be served at all. We know that the Appeal for the prior Assessment Year may not be properly drafted or does not contain the relevant details, much less the precise question of law and if that is dismissed, there will be definitely an impact on the Appeal relating to the Assessment Year under consideration. Hence, this is not a short term exercise, but a major surgery which will have to be performed. If the Revenue Officials are prepared to take some bold decisions, then, only these state of affairs will improve and not otherwise. (ITA No. 370 of 2016, dt. 23-8-2018)(AY. 2009-10)

    PCIT v. International Biotech Park Ltd. (2018) 259 Taxman 14 (Bom.)(HC),
    www.itatonline.org

  94. S.260A : Appeal – High Court – Transfer pricing – Determination of arm’s length price is question of fact – High Court will not interfere unless finding is perverse [S.92C]

    Dismissing the appeal of the asssessee the Court held that the contention of the assessee that while admitting under utilisation of the capacity of the assessee in this particular year, the Tribunal could not have computed the operating margins without proportionately reducing the quantum of depreciation, only finding its justification in the case of two comparables, was not tenable and the findings of the Tribunal could not be held to be perverse. The Tribunal was justified in its conclusion arrived at on the premise that the depreciation on the fixed assets need not be directly proportional to the utilisation of plant and machinery or production capacity. The premise of the Tribunal’s findings is not necessarily contrary to the finding in the case of the assessee that in this particular year, there was under utilisation of capacity in the case of the assessee. The claim of depreciation did not depend merely upon the extent of wear and tear of the plant and machinery. The findings or the premise taken by the Dispute Resolution Panel in the subsequent year did not render the findings in the previous years per se illegal or unsustainable. In the determination of the arm’s length price of an international transactions, the entire exercise is in the realm of a fact finding exercise and unless on the face of it, the findings of the Tribunal or the authorities below are found to be perverse and it can be said that the view taken by them is wholly unsustainable according to the legal provisions, no substantial question of law would arise in the matter. (AY. 2010-11)

    Indigra Exports Pvt. Ltd. v. DCIT (2018) 407 ITR 396 (Karn.) (HC) (HC)

  95. S.263 : Commissioner – Revision of orders prejudicial to revenue – Third party statement not provided to the assessee, during revisional proceedings, basis which fresh enquiry directed – Order is invalid and remanded to the CIT for providing material and hearing objections

    Held by the High Court that the revisional order passed by CIT directing AO to conduct fresh enquire relying on third party statement, without providing such statement/material to assessee is not valid. Matter remanded to CIT to provide the assessee all the material to be relied by him and hear objections of assessee on such material. (ITA No 242 of 2018, dt 28-2-2018)

    Humboldt Wedag India (P) Ltd. v. CIT (2018) 305 CTR 452 / 167 DTR 241 (Delhi)(HC)

  96. S.263 : Commissioner – Revision of orders prejudicial to revenue – Merger – Company non-existent on date of issue of order – Order void ab-initio [S.147]

    Assessee contended before the Tribunal that the order under S. 263 had been passed against an entity which did not exist in the eye of law and therefore the proceedings were vitiated. The Department’s contention was that during the proceedings under S. 147, the assessee did not raise any objection on that ground and therefore, it should not be permitted to raise the objection before the Tribunal. The Tribunal held that the notice and order were both in the name of a non-existent entity and therefore, void ab initio. On appeal, dismissing the appeal, that the assessee had ceased to exist as a result of the order of the court approving its merger with another company and the issuance of the notice under section 263 and the consequential order were in respect of a non-existent entity and void ab initio. (AY. 2009-10)

    CIT v. Kaizen Products (P.) Ltd. (2018) 406 ITR 311 (Delhi) (HC)

    Editorial: SLP of revenue is dismissed. CIT v. Kaizen Products (P.) Ltd ( 2018) 403 ITR 311 (St)

  97. S.263 : Commissioner – Revision of orders prejudicial to revenue – Merger – When partial disallowance made by the AO is up held by the CIT(A), revision by the CIT to once again examine very same issue to disallow entire expenditure is not valid, as the issue is merged with the order of CIT(A) [S.37(1)]

    Dismissing the appeal of the revenue the Court held that when partial disallowance made by the AO is upheld by the CIT(A), revision by the CIT to once again examine very same issue to disallow entire expenditure is not valid as the issue is merged with the order of CIT(A). (AYs. 2008-09, 2009-10)

    PCIT v. H. Nagaraja (2018) 256 Taxman 335 (Karn.)(HC)

  98. S.271(1)(c) : Penalty – Concealment – Disallowance of expenditure –merely because said claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty

    Dismissing the appeal of the revenue the Court held that merely because expenditure is disallowed or claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty. (AY. 1984-85)

    CIT v. U.P. State Bridge Corporation Ltd. (2018) 258 Taxman 64 (All) (HC)

    Editorial: SLP of revenue is dismissed CIT v. U.P. State Bridge Corporation Ltd. (2018) 258 Taxman 63 (SC)

  99. S.271(1)(c) : Penalty – Concealment – Inadvertently claimed higher rate of 40% depreciation instead of 25%- Bona fide mistake – Deletion of penalty is held to be justified [S.32]

    Dismissing the appeal of the revenue the Court held that inadvertently claimed higher rate of 40% depreciation instead of 25% is a bona fide mistake. Deletion of penalty is held to be justified. (AY. 2004 -05)

    PCIT v. Bunge India Pvt. Ltd. (2018) 407 ITR 225 (Bom) (HC)

  100. S. 271(1)(c) Penalty – Concealment – Appeal – If appeals with reference to the quantum proceedings have been admitted by the Court on substantial questions of law, it means that there were debatable and arguable questions raised and levy of penalty is not justified. Penalty also cannot be levied if the claim was as per judicial precedents prevalent at the time of filing the ROI. Also, there must be a finding that the details supplied by the assessee in its return were incorrect or erroneous or false

    Dismissing the appeal of the revenue the Court held that If appeals with reference to the quantum proceedings have been admitted by the Court on substantial questions of law, it means that there were debatable and arguable questions raised and levy of penalty is not justified. (PCIT v. Shree Gopal Housing and Plantation Corporation (2018) 167 DTR 236 (Bom.) (HC) is distinguished, CIT v. Nayan Builders and Developers (2014) 368 ITR 722 (Bom.) (HC) is followed). Penalty also cannot be levied if the claim was as per judicial precedents prevalent at the time of filing the ROI. Also, there must be a finding that the details supplied by the assessee in its return were incorrect or erroneous or false. (Refer CIT v. Advaita Estate Development Pvt. Ltd., ITA No. 1498 of 2014 dt. 17-2-2017 (Bom) (HC) www.itatonline.org (ITA No. 1133 of 2016, dt. 4-9-2018)(AY. 2003-04, 2004-05, 2005-06)

    PCIT v. Dhariwal Industries Ltd. (2018) 170 DTR 1 (Bom)(HC),
    www.itatonline.org

  101. S.276C : Offences and prosecutions – Wilful attempt to evade tax – The burden of proving the absence of mens rea is upon the accused and such absence needs to be proved not only to the basic threshold of “preponderance of probability” but “beyond reasonable doubt”. In every prosecution case, the Court shall always presume culpable mental state and it is for the accused to prove the contrary beyond reasonable doubt. This presumption is a rebuttable one – Petition to quash the proceedings was dismissed. [S.133A, 271(1) (c), 277, 278E, Cr.P.C. S.561A]

    The assessment was done under S.144 and appeal was dismissed. Concealment penalty was paid by the assessee. On the basis of complaint by the Assessing Officer under S. 276C/277 of the Act, Special Magistrate issued process against the accused. Accused has filed the petition to u/s. 561A of the Cr. P.C before the High Court to quash the proceedings. Dismissing the petition, the Court observed that the burden of proving the absence of mens rea is upon the accused. The absence needs to be proved not only to the basic threshold of “preponderance of probability” but “beyond reasonable doubt”. In every prosecution case, the Court shall always presume culpable mental state and it is for the accused to prove the contrary beyond reasonable doubt. This presumption is a rebuttable one. The criminal court has to judge the case independently on the evidence placed before it. So complaint lodged by respondent and process issued thereon against petitioner does not suffer from any infirmity of law. (CRMC No. 205/2015, IA No. 01/2015, dt. 28-9-2018)

    Arun Arya v. ITO ( J & K ) (HC);
    www.itatonline.org

  102. S.276C : Offences and prosecutions – Wilful attempt to evade tax – Pendency of appeal before CIT(A) – Stay – Alleged bogus purchases – During pendency of stay the criminal prosecution should not be launched and, if it has been already launched, the same shall not be proceeded. [S.246]

    Prosecution is launched on the footing that the return was filed, it was selected for scrutiny, assessment was completed and an order was passed assessing income of ₹ 2,49,10,960/-. When the appeal is pending for hearing, the Department proceeds on the footing that the assessee did not disclose his true and correct income while filing his return. The record was perused by the Sanctioning Authority and it came to the conclusion that certain transactions are not genuine but bogus. There were investigations also launched by the Directorate of Kolkata. This is a case where the tax was attempted to be evaded. On facts though on this show cause notice it is claimed that a hearing was granted, but the eventual order of sanction was not served. On writ, Court held that interest of justice would be served if we dispose of this writ petition by keeping larger and wider question open. In the event, the petitioner seeks a stay of the order passed by the Assessment Officer by making a stay application, then, during the pendency of such application, the criminal prosecution should not be launched and, if it has been already launched, the same shall not proceed. Thus, the ad interim stay granted by this Court would continue till the disposal of the application for stay by the First Appellate Authority. Petitioner will file this stay application within one week from the date of receipt of copy of this order. If that is filed and the Commissioner is seized of it, then, until the stay application is disposed of and the order on same is communicated to the petitioner, the prosecution launched pursuant to the order of sanction shall not proceed. (WP No. 761 of 2018, dt. 4-9-2018) (AY. 2014-15)

    Ramchandran Ananthan Pothi v. UOI (Bom.)(HC),
    www.itatonline.org

  103. S.279 : Offences and prosecutions – Sanction – Chief Commissioner – Commissioner – The expression “amount sought to be evaded” in CBDT’s compounding guidelines dated 23-12-2014 means the amount of “tax sought to be evaded” and not the amount of “income sought to be evaded” –Directed the department to refund the excess amount paid by the assessee latest by 31-10-2018. [S. 271(1)(c), 276C]

    The Question for consideration is what would be the basic compounding charges that the petitioner must pay in order to avail the offer for compounding the offence. The primary facts are not in dispute. In the assessment of the petitioner’s return, an addition of ₹ 8.70 lakh came to be made. This gave rise to additional tax of ₹ 2.61 lakh. A penalty of ₹ 2.61 lakh at the rate of 100% of the tax sought to be evaded was also imposed in terms of section 271(1)(c) of the Act. The revenue calculated the compounding fees at ₹ 10,4900. On the basis of income ought to have been evaded which was paid under protest. The Assessee moved rectification application which was not disposed off. The assessee moved the petition before High Court. Allowing the petition the Court held that , the expression “amount sought to be evaded” in CBDT’s compounding guidelines dated 23-12-2014 means the amount of “tax sought to be evaded” and not the amount of “income sought to be evaded”. Accordingly the court directed the department to refund the excess amount paid by the assessee latest by 31-10-2018.) (SCA No. 8715 of 2018, dt. 17-9-2018)

    Supernova System Private Limited v. CCIT (2018) 305 CTR 326 (Guj.)(HC),
    www.itatonline.org

  104. Strictures: Court is pained by the manner in which the authority has passed the order just ignoring the applicable Notification and throwing it to winds. The said order is nothing less than suffering from malice-in- facts as well as malice-in-law. The responsible officer deserves to pay the exemplary costs of  50,000 for passing such whimsical order from her personal resources or by deduction from salary

    After hearing the learned counsels, this Court is surprised and is pained by the manner in which the authority has passed the impugned reassessment order in the second round of assessment for the period 1-4-2011 to March 2012 just ignoring the applicable Notification and throwing it to winds. The said order is therefore nothing less than suffering from malice-in-facts as well as malice-in-law. Therefore, the said responsible officer deserves to pay the exemplary costs for passing such whimsical order and the writ petition deserves to be allowed. The 1st Respondent – Assessing Authority Ms. K. C. Sujatha, Deputy Commissioner of Commercial Taxes (Audit) – 2.4, Bengaluru, is directed to deposit the costs quantified at ₹ 50,000/- from her personal resources with the Registrar General of this Court within a period of one month from today, failing which, the same may be deducted from her salary by the Commissioner, Commercial Tax Department and the same to be paid to the Registrar General of this Court. The amount upon deposit shall be remitted to the ‘Prime Minister’s Relief Fund’, Delhi, for meeting the costs of relief to sufferers of natural disasters (W.P.Nos.60480/2016 & 62125-135/2016, dt. 24-9-2018)

    Kalyani Motors Pvt. Ltd. v. DCIT (Kar)(HC),
    www.itatonline.org

  105. Interpretation – Precedent – Merely filing of an SLP would not make the order of this Court bad in law or give a licence to the Revenue to proceed on the basis that the order is stayed and/or in abeyance

Merely filing of an SLP would not make the order of this Court bad in law or give a licence to the Revenue to proceed on the basis that the order is stayed and/or in abeyance. ( ITA. No. 293 of 2016 dt. 3-8-2018)

PCIT v. Associated Cable Pvt. Ltd. (Bom.)(HC),
www.itatonline.org.

  1. S.10(20) : Local authority – Urban improvement Trust constituted under Rajasthan Urban Improvement Act, 1959 is not local authority, hence not entitled to exemption – The “functional test” as laid down in UOI v. R. C. Jain, (1981) 2 SCC 308 is not applicable after amendment of Section 10(20) of the Act by Finance Act, 2002 . [S.10(20A]

Allowing the appeal of the Revenue the Court held that Urban improvement Trust constituted under Rajasthan Urban Improvement Act, 1959 is not local authority, hence not entitled to exemption. The High Court based its decision on the fact that functions carried out by the assessee are statutory functions and it is carrying on the functions for the benefit of the State Government for urban development. The said reasoning cannot lead to the conclusion that it is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii). The High Court has not adverted to the relevant facts and circumstances and without considering the relevant aspects has arrived at erroneous conclusions. Judgments of the High Court are unsustainable. The functional test” as laid down in UOI v. R. C. Jain, (1981) 2 SCC 308 is not applicable after amendment of section 10(20) of the Act by Finance Act, 2002. (CA. No. 10577 of 2018, dt. 12-10-2018)

ITO v. Urban Improvement Trust (2018) 409 ITR 1 98 taxmann.com 237 (SC),
www.itatonline.org

  1. S.11 : Property held for charitable purposes – Application of income – Any excess expenditure incurred by the trust/charitable institution in earlier assessment year allowed to be set off against income of subsequent years

    Affirming Delhi High Court’s view, (Subros Educational Society – in IT Appeal No. 382 of 2015 dt. 23rd Sept., 2015), that any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years, the Supreme Court dismissed the Miscellaneous Application of the Revenue. (Misc. Appl. No. 941 of 2018 dt. 16-4-2018)

    CIT (E) v. Subros Educational Society (2018) 303 CTR 1 / 166 DTR 257 (SC)

  2. S.80IC : Special category States – An assessee who avails of deduction for a period of 5 years @ 100% of profits and gains is entitled to deduction on ‘substantial expansion’ for remaining 5 Assessment Years @ 25% (or 30% where the assessee is a company) and not @ 100%

    Allowing the appeal of the Revenue the Court held that an assessee who avails of deduction for a period of 5 years @ 100% of profits and gains is entitled to deduction on ‘substantial expansion’ for remaining 5 Assessment Years @ 25% (or 30% where the assessee is a company) and not @ 100% (Mahabir Industries v. PCIT (2018) 406 ITR 315 (SC) distinguished). CA. No. 7208 of 2018, dt. 20-8-2018) (AY. 2011-12- 20015-16)

    CIT v. Classic Binding Industries (2018) 407 ITR 429 (SC);
    www.itatonline.org

  3. S.142(2A) : Inquiry before assessment – Special Audit –Limitation – Manipulation in dates by Department proved – Notices of SLP against order of High Court dismissing writ petition against Special Audit under S.142(2A) issued and directions of High Court order stayed

    The Supreme Court stayed the instructions of High Court order and issued notices to parties for hearing, in response to the writ filed by assessee seeking abatement of assessment as it becomes barred by limitation. As the assessee proved that the proposal for approval of audit under Section 142(2A) of the Act was moved on March 31, 2013, hence the order under Section 142(2A) could not be served on such date as claimed by Department. (SPL (C) No. 8384 of 2018 dt. 9-4-2018)(AY. 2009-10)

    Nokia India (P) Ltd. v. Add. CIT (2018) 255 Taxman 448 (SC)

    Editorial: Nokia India (P) Ltd. v. Add. CIT (2018) 92 taxmann.76) Delhi)(HC) is stayed

  4. S.222 : Collection and recovery – Certificate to Tax Recovery Officer Income-tax dues, being in the nature of crown debts, do not take precedence even over secured creditors, who are private persons. Given S. 238 of the Insolvency and Bankruptcy Code, 2016 the Code will override anything inconsistent contained in any other enactment, including the Income-tax Act [Insolvency and Bankruptcy Code, 2016 S. 238]

    Dismissing the SLP of the Revenue the Court held that; Income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons. Given S. 238 of the Insolvency and Bankruptcy Code, 2016 the Code will override anything inconsistent contained in any other enactment, including the Income-tax Act. Referred, Dena Bank v. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of crown debts, do not take precedence even over secured creditors, who are private persons. (SLP No. 6483/2018, dt. 10-8-2018).

    PCIT v. Monnet Ispat and Energy Ltd. (2018) 304 CTR 233 (SC),
    www.itatonline.org

  5. S.260A : Appeal – High Court – Condonation of abnormal delay of 1,371 days in removing office objections: High Court refused to condone delay and held that Dept must “set its own house in order by sacking and removing the delinquent and negligent officials or penalising them otherwise so as to subserve larger public interest”. The Supreme Court reversed this, order holding that the High Court ought to have condoned the delay and not dismissed the appeal – Dept to pay costs of  1 lakh to be deposited with the Supreme Court Bar Association Lawyers’ Welfare Fund

    The appeal was filed by the Department (appellant herein)
    before the High Court againsrder which was been rejected by the High Court vide the impugned Judgment. The Supreme Court set aside the Order of the High Court observing “No doubt, there is a long delay in removing the objections, we are of the opinion that in a case like this the High Court should have condoned the delay in removing the office objectt
    the judgment of the Income Tax Appellate Tribunal (ITAT).However, the said appeal was defective and the appellant took abnormal time of 1,371 days in removing those defects. An application for condonation of delay was also filed. Since there was abnormal delay, the Registrar/Prothonotary
    & Senior Master of the Bombay High Court passed an Order dismissing the appeal
    for non-removal of office objections. The appellant herein took out a Notice of
    Motion against the aforesaid Oions and heard the matter on merits. However, for the said delay caused by the appellant, the appellant shall pay cost of Rupees one lakh within four weeks, which shall be deposited with the Supreme Court Bar Association Lawyers’ Welfare Fund. In view of the above, we condone the delay in removing office objections and remit the matter to the High Court for consideration of the case on merits. The appeal is allowed as indicated above.” (CA. No 10774 of 2018, dt. 26-10-2018).

    CIT v. Reliance Industries Ltd. (SC);
    www.itatonline.org

  6. S.261 : Appeal – Supreme Court – Strictures – Delay of 596 days- Misleading statement about pendency of similar appeal – Petition was dismissed – Awarded cost of  10 lakh to be paid to the Supreme Court Legal Services Committee

    Dismissing the petition of the Revenue the Court held that there is an inadequate and unconvincing explanation given for the delay of 596 days in filing the petition. Secondly it is mentioned in the proforma for listing that a similar matter is pending in this Court. However, the office has given the report stating that the said case was decided by this court as far back as on 27th September, 2012. Court observed that as the petitioner has given a totally misleading statement and Union of India through the CIT has taken the matter so casually. Accordingly dismissing the petition, the Honourable Court directed the petitioner to pay cost of ₹ 10 lakh to the Supreme Court Legal Services Committee.

    CIT v. Hapur Pilkhuwa Development Authority (2018) 304 CTR 337/ 169 DTR 281 (SC)

  7. Gold Control Act – Repeal of statute – Interpreattaion – Pending proceedings – Effect of repeal of a statute – Show cause notice will not survive – Given liberty to both parties to add to or amend or delete the questions in the Wealth Tax Reference within a period of eight weeks from today – Once this is done, the writ petitions will be taken up and decided on their merits. Considering these writ petitions are of 2005, we request the High Court to hear the same expeditiously – Appeals allowed and set aside the common impugned judgment of the High Court. Wealth tax references are set aside [General Clauses Act S.6A]

    Show cause notice was issued under Gold Control Act, which was challenged when the stay was continued and the Gold Control Act and itself was repealed. It was contended that as the Gold Control Act itself has been repealed without a saving clause, Section 6 of the General Clauses Act would not apply for the reason that the objects and reasons show that the Act was sought to be repealed without any saving clause. It was argued that upon the objects and reasons using the expression “regressive” and the fact that it has given rise to considerable dissatisfaction in the minds of the public as it has caused hardship and harassment to artisans and small self-employed goldsmiths. Accordingly the statement of objects and reasons clearly evinces a contrary intention as a result of which, nothing will survive the repeal of this Act. This being so, a show cause notice which has been upheld by the Delhi High Court would not survive. On behalf of the revenue it was contended that once there is a repeal simpliciter, without any savings clause, the whole object of such a repeal was so that the general rule under Section 6 would apply, as a result of which the law laid down in State of Punjab v. Mohar Singh, [1955] 1 SCR 893, would apply. Court held that having heard learned counsel for both sides, “we are of the view that the statement of objects and reasons makes it clear that over 22 years, the results achieved under the Act have not been encouraging and the desired objectives for which the Act has been introduced have failed. Following the advice of experts, who have examined issues related to the Act, the objects and reasons goes on further to state that this Act has proved to be a regressive measure which has caused considerable dissatisfaction in the minds of the public and hardship and harassment to artisans and small self-employed goldsmiths. Court also observed that, we are of the opinion that the repeal simpliciter, in the present case, does not attract the provisions of Section 6 of the General Clauses Act as a contrary intention is very clearly expressed in the statement of objects and reasons to the 1990 repeal Act. In this behalf, it would be apposite to refer to New India Assurance Co. Ltd. v. C. Padma and Another, (2003) 7 SCC 713 (para 10).

    This Court noticed that in a parallel instance of simpliciter repeal, Parliament realised the grave injustice and injury that had been caused to heirs of LRs of victims of accidents if their petitions were rejected only on the ground of limitation. This being the case, this Court found that a different intention had been expressed and, therefore, Section 6-A of the General Clauses Act would not in that situation apply. Court also observed that in a similar situation in the present case. In point of fact, on going through the impugned judgment, it is clear that every time an amendment was made to the Defence of India Rules and/or repeal of the said rules had taken place, there was always an in built savings clause. In fact, Section 116 of the Gold (Control) Ordinance No. 6 of 1968 also made it clear that it went to the extent, in sub-section 2 thereof, by serving show cause notices which, ordinarily, are not served even if Section 6 were to apply – See M.S. Shivananda v. Karnataka State Road Transport Corporation and Others, [1980] 1 SCR 684 following Director of Public Works & Anr. v. Ho Po Sang & Ors., [1961] 2 All. ER 721. This being the case, we are of the view that the show cause notice dated 1-6-1971, which is the subject matter of this appeal, no longer survives. In this view of the matter, the appeal is disposed of. Given the fact that the show cause notice and proceedings thereafter have now disappeared as a result of the repeal of the Gold Control Act, we give liberty to both parties to add to or amend or delete the questions in the Wealth Tax Reference within a period of eight weeks from today. Once this is done, the writ petitions will be taken up and decided on their merits. Considering these writ petitions are of 2005, we request the High Court to hear the same expeditiously. Appeals allowed and set aside the common impugned judgment of the High Court.” (CA. No. 10824 of 2018, 
    dt. 30-10-2018)

    Sushila N. Rungta v. TRO (SC);
    www.itatonline.org.

    Chartered Accountants Act, 1949

  8. S.22 : Professional misconduct – A Chartered Accountant can be held guilty of professional misconduct even when he is acting as an individual in commercial dealings and is not acting as a Chartered Accountant nor discharging any function in relation to his practice as a Chartered Accountant. Under the chartered Accountants Act, any action which brings disrepute to the profession or the Institute is misconduct whether or not related to professional work

Apex court held that, a Chartered Accountant can be held guilty of professional misconduct even when he is acting as an individual in commercial dealings and is not acting as a Chartered Accountant nor discharging any function in relation to his practice as a Chartered Accountant. Under the chartered Accountants Act, any action which brings disrepute to the profession or the Institute is misconduct whether or not related to professional work. (CA No. 11034 of 2018, dt. 16-11-2018)

Council of ICAI v. Gurvinder Singh (SC),
www.itatonline.org

Happy New Year 2019

I wish a very Happy, Healthy and Happening New Year 2019 to all my brothers and sisters of AIFTP.

I would like to convey my thanks to the members of collegium for reposing confidence in me and allowing me an opportunity to serve the fraternity.

It is my last communication to you as President of the organisation, the work done by team 2018 is before you. We have striven hard to achieve the object of reforming the systems and administrative methods of our office at Mumbai.

The digitalisation of the AIFTP is achieved by the hard work put in by our Secretary General Shri Pankaj Ghiya. We have also successfully made several representations to Government through our Direct and Indirect Tax Representation Committee that yielded dividends.

We have also filed two Writ Petitions one before Hon’ble Delhi High Court against the direction of CBDT to appellate authorities and second before Hon’ble Bombay High Court for appointment of Registrar and Assistant Registrars of ITAT. I trust we have worked to obtain good results and communication facility for our members at large.

I express my thanks to the entire executive body i.e., Vice Presidents, Chairmen of all the zones and members of NEC, Chairmen and Members of various committees who have discharged their assignments sincerely and for extending their full co-operation in functioning the organisation.

I am happy that Dr. Ashok Saraf Saheb the new incoming incumbent of the office will certainly achieve new heights and bring glory to our organisation.

The organisations are built brick-by-brick by the effort of several persons, the focus should be on the object to be achieved. Individuals will come and go but the organisation will remain. It is the bounden duty of the leaders of the organisation to bring glory by strengthening it through involvement of larger membership and active participation of the fraternity.

I request all my brothers and sisters to inculcate the comradeship among all the members and should be willing to work collaboratively for betterment and development of the fraternity.

We have a strong team of experts to resolve the issues faced by the members, but it is possible only when the members are active and vigilant to contribute by their participation and suggestions for the betterment of our association.

A big thank you to one and all for helping for the term 2018.

Ganesh N. Purohit
National President

The honourary services provided by me as the Editor of this publication is one of the most satisfying responsibilities that I have taken up which enabled me to share my thoughts and communicate with readers and the members of the AIFTP – It is my conviction that writing articles on various subjects helps young professionals to get recognition amongst the other professionals, tax administration and also from the judiciary –The skill of writing on technical subjects is an invaluable tool in the hands of a professional when he gets elevated to the Bench of a Court or is appointed as member of a Tribunal. It also empowers a spirit of research and patience that can assist him in preparing for academia and in getting published in due course of time–I therefore appeal to young professionals to develop the skill of writing articles as an essential professional skill.

I am associated with the All India Federation of Tax Practitioners (AIFTP) and have been the editor of the journal since 1994. The members of the AIFTP have given me an opportunity to serve this association in various different capacities such as being the chairman of the Representation Committee, the Vice-President, the Dy. President, the National President, the editor-in-chief, the Chairman of ITAT Bar Association co-ordination committee, etc. When I first joined the AIFTP, I was informed that the AIFTP used to publish a Bulletin every quarter, which was thereafter discontinued. My responsibility was to revive the Bulletin so that the professionals across the country can get the benefit of sharing knowledge. My prior experience as the editor of Income Tax Review published by the Chamber of Tax consultants for a decade have helped me revive the Bulletin. Interestingly, I was the editor of both the journal of the Chamber of Income Tax Consultants and also AIFTP for a number of years. I voluntary opted out from the Chamber’s Journal as it has developed in due time many young professionals who are very competent and devoted to the Association. I had full faith that new leaders of the Chamber would do very well. I am very happy to note that the Journal of The Chamber is considered one of the best journals and credit must go to the entire young team under the leadership of Mr. K. Gopal, Advocate. For the AIFTP, with the help of members of the journal committee we have revived the Bulletin and from January 2002, we had started a monthly journal. The journal was being sent only to subscribers. In the year September 2005, it was decided to publish the AIFTP Times every month so that the Office bearers of the AIFTP could communicate the various activities and latest developments in law to all the members of the AIFTP. We must recognize the contribution of Mr. Pradip Kapasi, a senior Chartered Accountant from Mumbai who was instrumental in designing the AIFTP times and Mr. Dinesh Mohan Sinha, an Advocate from Delhi, both of who have 
helped us to get the registration from Delhi, which in turn helped us to get postal concession.

There were a number of factors which motivated me to write the editorial or make representations from time to time, however three factors which always motivated me to write can be attributable to the following; firstly when my father in law gave me a nice gift of pen, secondly when I became the President of the ITAT Bar Association, one of the eminent and most respected Sr. Advocate from Mumbai gifted me a pen and wrote in the letter stating that the pen was for my writing through which I could take up various causes of professional interest and thirdly, the then President of the ITAT, Mr. T. V. Rajagopala Rao called me one day and told me, “don’t stop writing irrespective of whether the authorities listen to you or not, do your duty” . I always remember the encouraging words, which have always motivated me to write the editorial with passion and make representations for the greater good of the Institution of the Appellate Tribunal and others.

In my association with various professional organisations, I have found the honourary role of the chief editor of the AIFTP journal as one of the most satisfying services offered by me to the public at large. I have tried to use this privilege to take up issues of general importance. When the AIFTP filed the PIL on voluntary disclosure scheme, the Revenue authorities had annexed the editorial of the AIFTP to oppose the petition. The editorial of AIFTP has been annexed to the PIL filed before the Supreme Court for filling up the vacancies of Vice-Presidents of the ITAT. The Late Justice Mr. S. H. Kapadia, former Chief Justice of India was a regular reader of the AIFTP journal. When he was elevated as the Chief Justice of Uttarakhand High Court, he called us and issued a cheque for the subscription to AIFTP Journal with the request that the journal may be sent to his new address. When he was elevated to Supreme Court, if for any reason the journal did not reach hm, his office used to place a telephonic call to the Office of the AIFTP and obtain the issue of the journal. Even after his retirement he had his subscription changed to his new address so that he could read the journal regularly. The Hon’ble Justice Mr. Anil R. Dave, former judge of the Supreme Court, while addressing the national conference at Hyderabad had praised the quarterly digest of case laws published by the AIFTP. The quarterly digest of the case laws as published by the AIFTP involves a research team of more than 15 young professionals and digests all important case laws. Due to constraint on the number of pages, all the cases are not published in the journal, however even the cases that are not included in the said digest are published on the website of www.itatonline.org along with the yearly digest of case laws. The online digest can downloaded in PDF format. All case laws digested since 2003 up to October 2018 are available on the website for the benefit of tax professionals as well as the public at large. According to me, the quarterly digest of case laws in a section-wise format done by the AIFTP team on honourary basis, is one of the greatest service rendered to the tax professionals by the AIFTP.

As I have been the editor-in-chief of this publication since 1994, I have made a request to Dy. President, Mr. Ashok Saraf, Senior Advocate, who will be taking over as the National President with effect from 1-1-2019 to relieve me from this responsibility. The AIFTP has many competent and experienced tax professionals all over the nation, who can now shoulder the responsibility and also bring in innovation. Mr. Harish N. Motiwala, a senior Chartered Accountant of rich experience and a man of impeccable integrity, has consented to take the responsibility as an Editor of the journal from 2019. My best wishes for him. From January 2019 onwards, we will have a new look to the journal and many new features will be added.

I am making an appeal to all the young professionals that they must develop the skill of writing articles. In addition to the benefits already enumerated, the publications by an Advocate has now been laid down as one of the considerations for conferring of the designation as a ‘Senior Advocate’ by the Hon’ble High Court of Bombay. The AIFTP and www.itatonline.org encourages the young professionals to write articles and also compile publications. The AIFTP in association with the ITAT Bar Association Mumbai, is proposing to publish three publications, i.e., Digest of Case Laws 2003-2018, Digest of Supreme Court Cases and a section-wise Digest of the Hon’ble Bombay High Court Case Laws. Tax professionals who desire to be associated with these noble efforts may send their names and e-mail to the office of the AIFTP which can be reached at [email protected]. Any professional who desires to remain updated on law and practice, must read the journal of AIFTP, The Chamber’s Journal as well as Journal of the BCAS. One will find all three journals are complementary to each other and duplication of content does not occur.

At the present, the journal of the AIFTP is sent to the Judges of Apex Court, the Judges of Bombay High Court, the members of the AIFTP who have been elevated as the Judges of various High Courts and the Members of the Income Tax Appellate Tribunal. I hope the new committee will also follow the same practice.

In the era of technology and digitalisation, the journal shall also need to be digitalised and shall have to evolve to meet the current challenges. The new leadership shall have to give due thought to the challenges that shall evolve.

I must acknowledge that I have immensely enjoyed the responsibility of being the editor of this publication. It was made possible only with the support of the Chairman of journal Committee Mr. Mitesh Kotecha, Mr. Kishor D. Vanjara, associated Editors, assistant Editors, Convenors, members of the Journal Committee, Advisory Board, respective Presidents and also the members of the national executives who have bestowed their confidence in me. Finally, it is the readers who have been a constant source of encouragement for me to write editorials. It is overwhelming when the readers from remote places of the country call and give suggestions and also when sometimes, the Commissioners of Income Tax after taking notice of the editorial, have taken positive steps to implement the suggestions provided in the same.

Let me also acknowledge that for a journal to be finalised, it requires team work and I must acknowledge the contribution of staff of AIFTP, especially Mr. Ravi Patade, who is a bridge between various authors, printing staff and the editorial board. I must also acknowledge that my juniors, associates and staff have continuously rendered me assistance from the very beginning.

My salute to readers and members of the AIFTP.

Happy New Year to all the readers.

Dr. K. Shivaram
(Senior Advocate)
Editor-in-Chief