1. Insurance – Theft of vehicle –Lodging of complaint – Delay of 8 days – Limitation – Insurance company liable : Consumer Protection Act

It is common knowledge that a person who lost his vehicle may not straightaway go to the Insurance Company to claim compensation. At first, he will make efforts to trace the vehicle. It is true that the owner has to intimate the insurer immediately after the theft of the vehicle. However, this condition should not bar settlement of genuine claims particularly when the delay in intimation or submission of documents is due to unavoidable circumstances. The decision of the insurer to reject the claim has to be based on valid grounds. Rejection of the claims on purely technical grounds in a mechanical manner will result in loss of confidence of policy-holders in the insurance industry. If the reason for delay in making a claim is satisfactorily explained, such a claim cannot be rejected on the ground of delay. It is also necessary to state here that it would not be fair and reasonable to reject genuine claims which had already been verified and found to be correct by the Investigator. The condition regarding the delay shall not be a shelter to repudiate the insurance claims which have been otherwise proved to be genuine. It needs no emphasis that the Consumer Protection Act aims at providing better protection of the interest of consumers. It is a beneficial legislation that deserves liberal construction. This laudable object should not be forgotten while considering the claims made under the Act.

Om Prakash v. Reliance General Insurance and Anr.: AIR 2017 Supreme Court 4836

2. Parole and Furlough – Distinction between – Enumerated : Prisons Act 1894, S. 59

Parole can be defined as conditional release of prisoners i.e. an early release of a prisoner, conditional on good behaviour and regular reporting to the authorities for a set period of time. Furlough, on the other hand, is a brief release from the prison. It is conditional and is given in case of long-term imprisonment. The period of sentence spent on furlough by the prisoners need not be undergone by him as is done in the case of parole. Furlough is granted as a good conduct remission. This Court, through various pronouncements, has laid down the differences between parole and furlough, few of which are as under:

(i) Both parole and furlough are conditional release.

(ii) Parole can be granted in case of short term imprisonment whereas in furlough it is granted in case of long-term imprisonment.

(iii) Duration of parole extends to one month whereas in the case of furlough it extends to fourteen days maximum.

(iv) Parole is granted by Divisional Commissioner and furlough is granted by the Deputy Inspector General of Prisons.

(v) For parole, specific reason is required, whereas furlough is meant for breaking the monotony of imprisonment.

(vi) The term of imprisonment is not included in the computation of the term of parole, whereas it is vice versa in furlough.

(vii) Parole can be granted number of times whereas there is limitation in the case of furlough.

(viii) Since furlough is not granted for any particular reason, it can be denied in the interest of the society.

Asfaq v. State of Rajasthan and Others: AIR 2017 Supreme Court 4986

3. Special leave to appeal – Filed by private party – Is maintainable as he is an aggrieved person: Constitution of India Art. 136 Criminal Jurisprudence – Locus standi concept – Is foreign to criminal jurisprudence

Article 136 does not confer a right to appeal on any party but it confers a discretionary power on the Supreme Court to interfere in suitable cases. The exercise of the power of the court is not circumscribed by any limitation as to who may invoke it. It does not confer a right to appeal, it confers only a right to apply for special leave to appeal. Therefore, there was no bar for the appellant to apply for special leave to appeal as he is an aggrieved person.

Ratanlal v. Prahlad Jat and Others: AIR 2017 Supreme Court 5006

4. Muslim Law – Gift by father to minor son – Delivery of possession

Delivery of possession by a Mahomedan father to his minor child is, for all practical purposes, delivery by right hand to the left hand. This is evidently the reason why the strict requirement of delivery of possession is not strictly insisted upon in the case of a bona fide gift by the father to his minor child. In a sense the requirement continues, but it is fulfilled in a somewhat different manner. Upto the date of the gift, the father is in possession of the relevant property on his own behalf and on and from the date of the gift he is in possession of the same, but only on behalf of the minor.

Shamshed Begum v. Sadiq Basha & Ors : AIR 2017(NOC) 1042(Mad.)

5. Contract – Memorandum of Undertaking (MOU) – Binding nature

Whether an MOU would constitute a binding contract depends only on the presence or absence of well-defined legal elements in the text proper of the document (the so-called “four corners”). The required elements are: offer and acceptance, consideration, and the intention to be legally bound. The legal ramification of the MOU is, an MOU signals a legal contract is imminent. However, an MOU itself is not legally defensible but should still clearly outline specific points of an understanding. An MOU should describe who the parties are, what the project is that they are agreeing on, the scope of the document, each party’s roles and responsibilities and more. An MOU forces the participating parties to reach a semblance of a mutual understanding, and in the process, the two sides naturally mediate and figure out what is most important in moving towards an eventual future agreement that benefits both sides.

M/s. Enkon Pvt. Ltd. v. Bhubaneswar Smart City Ltd.: AIR 2017(NOC) 1057(Ori.)

6. Borrower – Definition of – Includes person, who has given any guarantee or created any mortgage or pledge as security for financial assistance granted by any bank or financial institution: SARFAESI Act

The definition of ‘borrower’ takes in its sweep even a person who has given guarantee or created any mortgage or pledge as a security for the financial assistance granted by any bank or financial institution. The security interest means right, title or interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those specified in Section 31. The creation of security interest to secure the debt of the bank or financial institution does not fall within Section 31 of the Act. Security interest could be created under the security agreement as defined in Section 2(zb) of the Act and on creation of such security interest, the debt of the bank or financial institution is secured. Therefore, a person who has given any guarantee or created any mortgage or pledge as security for financial assistance granted by any bank or financial institution, is a borrower within the meaning of ‘borrower’ under the Act.

Sagar Innovative Private Limited v. Punjab National Bank and Another. : AIR 2017(NOC) 1109(GUJ)

7. Execution of power of attorney authenticated by foreign notary – Recognition of notarial act : Notaries Act Sec. 14

Acceptance of notarial attestation and notarial certificates of Notary public of India by reciprocal country. Mutual reciprocity being established, notification in Official Gazette to declare notarial acts as legal, not required. Notarial attestation on power of attorney, proper.

Jaldhi Overseas Pte. Ltd. v. Bhushan Power & Steel Ltd. : AIR 2017(NOC) 1111 (Cal.)

8. Wills – Doctrine of ‘dependent relative revocation’ applicable –Execution of Will – Evidence Act 1872, S.68; Succession Act, sec 63.

Date of valid attestation. Necessarily be date of execution, presence of attesting witness on subsequent date of registration instead of date of execution, does not make attestation valid.

Revocation of earlier Will by Subsequent Will. Subsequent Will, however, surrounded by suspicious circumstances on ground of lack of proof of execution and attestation. Failure of propounder to dispel said suspiciousness. Doctrine of ‘dependent relative revocation’ applicable. Original Will shall remain in force.

Doctrines of ‘Dependent relative revocation means if Will intended to be substituted, is inoperative from defect of attestation or any other cause, revocation fails and original Will remains in force.

K. C. Binu and Another v. Leela Kollandi and Others: AIR 2017(NOC) 1119 (Ker.)

9. Pleadings – Can be treated as proof only if averments stated in plaint are admitted in written statement

The plaint and the written statement are the “pleadings” of the parties and they stand on a different footing. The pleadings cannot take the place of proof according to the Evidence Act. If the pleadings are to be considered as evidence, then the efficacy of the Evidence Act and the burden of proving the facts pleaded would be lost. The aforesaid stands with the exception that after the plaint, if there is an admission in the written statement, then the Court may not insist for proof, but thereby, it cannot be said that the power of the Court for insistence of the proof does not exist on a mere admission, but such power leaves discretion upon the Court to act on admissions. Pleadings cannot be treated as proof unless there is an admission of the averments stated in the plaint in the written statement of the defendant.

Legal Heirs of Decd. Umedmiya R. Rathod & Others v. State of Gujarat : AIR 2017 (NOC) 1146 (Guj)

10. Interpretation of statutes – Non- obstante – Purpose

Non-obstante Clause is sometimes added to a Section in the beginning, with the view to give enacting part of the Section, in case of conflict, an overriding effect over the provisions of Act mentioned in that Clause. In other words, in spite of the provisions of the Act mentioned in the Non-obstante Clause, the enactment following it, will have its full operation or that the provisions enacted in the Non-obstante Clause will not be an impediment in the operation of the enactment. It is well known rule of interpretation that on construction, the entire Act must be looked into as a whole. The Court cannot add words to a statute or read words into it which are not there. When the purpose and object or the reason and spirit pervading through the statute is clear, the Court must adopt a purposive approach in interpreting such a statute.

Jahan Singh v. State of U.P. and Others : AIR 2017 (NOC) 247 (All.)

Advocate Act, 1961

Foreign law firms and foreign lawyers cannot practice profession of law in India either in the litigation or in non-litigation side though they can “fly in and fly out” for the purpose of giving legal advice to their clients in India regarding foreign law.

Foreign law firms and foreign lawyers cannot practice profession of law in India either in the litigation or in non-litigation side though they can “fly in and fly out” for the purpose of giving legal advice to their clients in India regarding foreign law. The expression “fly in and fly out” will only cover a casual visit not amounting to “practice”. If the Rules of Institutional Arbitration apply or the matter is covered by the provisions of the Arbitration Act, foreign lawyers are not debarred from conducting arbitration proceedings arising out of international commercial arbitration but will be governed by code of conduct applicable to the legal profession in India. B.P.O. Companies providing wide range of customised and integrated services and functions to its customers like word processing, secretarial support, transcription services, proof reading services, travel desk support services, etc. may come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules if in pith and substance the services amount to practice of law. We also modify the direction of the Madras High Court in Para 63(iv) that the B.P.O. Companies providing wide range of customised and integrated services and functions to its customers like word processing, secretarial support, transcription services, proof reading services, travel desk support services, etc. do not come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules. We hold that mere label of such services cannot be treated as conclusive. If in pith and substance the services amount to practice of law, the provisions of the Advocates Act will apply and foreign law firms or foreign lawyers will not be allowed to do so. The Civil Appeals are disposed of accordingly. (CA Nos. 7875-7879 of 2015, dt. 13-3-2018)

Bar Council of India v. A. K. Balaji & Co. (SC), www.itatonline.org

Hindu Succession Act, 1956

S.6: Hindu Undivided Family (HUF) – Married daughters can be said to be the coparceners in the HUF and are entitled to the ancestral property even if they were born prior to the amendment to the Hindu Succession Act.

The very factum of birth in a coparcenary creates the coparcenary. Therefore the sons and daughters of a coparcener become coparceners by virtue of birth. The amendment to s. 6 of the Hindu Succession Act, 1956 in 2005 statutorily recognises the rights of coparceners of daughters as well since birth. Consequently, married daughters can be said to be the coparceners in the HUF and are entitled to the ancestral property even if they were born prior to the amendment to the Hindu Succession Act. (CA Nos. 188-189 of 2018, dt. 1-2-2018)

Danamma @ Suman Surpur v. Amar (SC), www.itatonline.org

A. Appeal / Limitation

1. If an assessee could not take up any point involving fact and law before the first forum, it does not necessarily create a bar to take up before the First Appellate forum, it such point clinches the issue. The Tribunal itself could have remanded the matter to adjudicating authority on the basis of very vital point raised by the assessee before it. The learned Tribunal has failed to exercise its jurisdiction while passing the order.

Held: Order of the Tribunal was set aside and directed the Commissioner (Appeals) to verify the contention of the appellant and pass the appropriate order.

[Sri Balaji Service Station v. CESTAT – 2017(51) STR 484 (AP)]

2. The appellant has not received the Order-in-Appeal dated 15-12-2009 passed by the Commissioner (Appeals). The appellant sought for certified copy of the order on 13-12-2011 and was provided on 12-1-2012. On filing the appeal against the order the Tribunal with an application to condone the delay, the Tribunal has rejected the application. Held : Taking date of order of Commissioner (Appeals) as relevant date is not proper, as said order was not served on the appellant in time. Appellant having belated received certified copy of the order, appeal filed before Tribunal is not delayed. Hence, Tribunal should condone delays where contentious issues with regard to merit and reasons for delayed filing of appeals are raised. Order dismissing the appeal set aside.

[OSA Shipping P Ltd., v. CCE, Chennai – 2017(51) STR 127(Madras)]

B. Export of Service

The assessee, 100% EOU rendering “Scientific or Technical Consultancy Service” have entered into agreement with a company registered in Japan for generation of candidate compounds for pharmaceutical products on certain drug targets and using information supplied by the client. The assessee availed CENVAT credit on inputs/input services as per Cenvat Credit Rules, 2004 and claimed refund of unutilised CENVAT credit. The original authority has partly sanctioned the refund and rejected some refund claims. The assessee has disputed the rejection before the First Appellate Authority and the Commissioner of CE has directed the original authority to challenge the sanction of the other refunds. The First Appellate Authority has allowed the appeal of the assessee and rejected appeal of the Revenue. The Revenue is before the CESTAT, Held : Since ingredients which crystallise activity as export of service for the purposes of Rule 6A of Service Tax Rules, 1994, viz., that provider of service is in taxable territory, that recipient is outside India, that service is not in ‘negative list’, that payment received in convertible foreign exchange and that provider and recipient not covered by fiction in Explanation 2(b) of Section 65B(44) of the Finance Act, 1994 are present in the facts of this case Revenue’s appeal is dismissed.

[Principal CCE v. Advinus Therapeutics Ltd. – 2017(51) STR 298 (Tri – Mumbai)]

C. Interest on delayed refund

The petitioner-company became entitled for refund of Central Excise Duty as a result of its appeal being allowed by the Collector(Appeals), Ghaziabad by the order dated 3-5-1991. The company filed the application for refund on 5-8-1991. It remained pending with the authorities in spite of repeated reminders by the petitioner-company. On filing of WP before the HC, the Hon’ble Allahabad HC has directed the Revenue to decide the claim of the petitioner for refund. The authority has passed an order dated 20-8-2009 rejecting the application for refund filed on 5-8-1991. The Commissioner (Appeals) has allowed the appeal of the petitioner with a direction to refund the amount to the petitioner. The lower authorities have sanctioned the refund on 5-8-2010. Since no interest was paid for the delayed period of refund the petitioner has filed WP before the Hon’ble HC. Held: Interest liability on delayed refund starts after expiry of 3 month from the date of receipt of application under Section 11B(1) of CE Act, 1944. Legislature never intended that refund application be kept pending for years together. Hence, postponement of passing of refund order under section 11B(2) ibid has nothing to do with interest liability of Revenue which starts running upon expiry of period of three months from date of application. Any contrary interpretation will violate language of Section 11BB of Central Excise Act, 1944 as made applicable to service tax vide Section 83 of Finance Act, 1994, defeat its object and extend premium for inefficiency and delay in processing claim for refund.

[Swadeshi Polytex Ltd. v. UOI – 2017 (51) str 354 (Allahabad)]

D. Interest liability

The appellants are undertaking the services of storage and warehousing of bulk liquid cargo and they engaged the services of their Associated Enterprises. Instead of making the payment of value of input services to their Associated Enterprises, the appellants make book adjustment in their books of account. A Show Cause Notice was issued to the appellant alleging that they have wrongly taken CENVAT credit for the reason that they have availed credit much before making payment of value of the input services to their Associated Enterprises and demand was raised. After due process of law, the original authority has dropped the demand but levied interest and penalty on the appellants alleging that there was a delay in making service tax payments to the Government by their Associated Enterprises. As such there was no delay in making the payment of service tax by the Associated Enterprises. The appellants have filed an appeal before the Tribunal. Held: The Associated Enterprises have paid the service tax within time without waiting for the payment to be made by the appellant and on such book adjustments the appellant has taken credit and the demand of interest is made on the pretext that there is delay in paying service tax and that appellant has taken credit of the service tax even before the payment of the said amount to the Associated Enterprises. When the service tax has been paid by the Associated Enterprises within time the demand of interest cannot sustain, in terms of provisions laid in Section 67(4)(c) of the Finance Act, 1994, the impugned order is set aside.

[IMC Ltd. v. CCE, Visakhapatnam-1 2017(51) STR 14(Tri.-Hyderabad)]

 

  1. S.2(14) : Capital asset – Gains arising on sale of land held for long time as investment and offered to Wealth-tax [S. 45]

    AO disputed chargeability of gains arising on sale of land under head ‘capital gains’.

    On appeal, the Tribunal observed that the assessee had sold only few plots during the year as against the large land portfolio and there was considerable time lag between the purchase and sale of land. It was also noticed that land/properties have been declared as capital investment by the assessee all along and that some agricultural produce were recorded in 7/12 extract and therefore the assessee earned some money by way of yield on such investments. The land held prior to selling was shown as investment and subjected to wealth-tax which further underscores the intention of the assessee to hold the properties as capital asset. It was also observed that the assessee has declared the acquisition of land in its books as investment over a period of time. The Tribunal held that an element of borrowed funds in the acquisition of assets in the present case did not alter the position. Therefore, the Tribunal held that the assessee was entitled to hold certain class of assets as capital asset even while he is dealing with the asset of similar nature in business with commercial objectives. (AY 2011-12)

    Hiteshkumar Ashok Kumar Vaswani v. JCIT (2017) 157 DTR 167 /165 ITD 505 / (2018) 191 TTJ 495 (Ahd.)

  2. S.2(15) : Charitable purpose – Amended proviso of S.2(15) has no application vis-a-vis the clause other than object of general public utility i.e., in relation to the educational activities of the Society for Participatory Research in Asia [Ss. 2(15) & 11]

    The Tax Department has been consistently accepting the stand of the assessee in the preceding years that the participatory research activities of the assessee fall within the scope of education as envisaged u/s. 2(15) as well as u/s. 10(22) and simply because assessee’s income from education is confined to distance learning course fee of ₹ 20.65 lakhs out of total receipts of ₹ 21.45 crores. Proviso to 2(15) cannot be invoked to deny claim of exemption under Se.11 & 12 (ITA No. 1553/Del/2015 dt. 17-2-2017) (AY. 2010-11).

    Society for Participatory Research in Asia v. ITO (2017) 157 DTR 85 (Delhi) (Trib.)

  3. S.2(22)(e) : Deemed dividend – Transfer by book entries cannot be considered as cash payment hence addition cannot be as deemed dividend

    Dismissing the appeal of the Revenue the Tribunal held that transfer by book entries cannot be considered as cash payment hence addition cannot be as deemed dividend. (AY. 2010-11)

    ACIT v. Siddharth Gupta (2017) 165 ITD 369 (Delhi) (Trib.)

  4. S.2(29A) : Long-term capital asset – The period of holding shall be computed from the date when the specific flat is earmarked and allotted by the builder in favour of the assessee and not from the date of registration of flat [S.2(42A), 45]

    During the year in October / December 2009, the assessee sold two flats and offered long term capital gain. For the purpose of computing the period of holding, the assessee treated the date of booking of flats i.e., September 2005 as the relevant date and not the date of registration of flat i.e., March 2008. The AO held that period of holding shall be computed from the date of registration of flat and thus, treated the gain on sale of flat as short term capital gains. On appeal, the CIT(A) disproved the action of the AO. On further appeal, the Tribunal held title, interest and rights in the flats was created when specific flat was earmarked and allotted by the builder in favour of the assessee i.e. in September 2005 and hence, the period of holding shall be computed from the said date. (AY. 2010-11)

    ACIT v. Yogesh Agencies & Investments Pvt. Ltd. (2017) 58 ITR 83 (Mum.) (Trib.)

  5. S.4 : Income chargeable to tax – Mutuality – A club whose membership is also open to the persons from the public and whose management is looked after by officials of HUDA is eligible to claim the benefits of mutuality

    Dismissing the appeal of the revenue, the Tribunal held that; there cannot be said to be straight jacket formula to say that in every mutual concern the members must be entitled to a share in the surplus. Since the affairs of the assessee trust are controlled by the serving officers of HUDA, hence it has to pass through greater scrutiny as the chances of it crossing the thin line between the mutuality and commerciality are very high. However, at this stage, so far the Assessment Years under consideration are concerned, the Revenue could not point out the taint of commerciality in the contribution, management and application of the surplus collected through contributions and subscriptions from the members and for price of the facilities availed by its members, hence, the same cannot be said to be taxable income of the society. (ITA No. 1084/Chd/2009, dt. 26-9-2017)(AY. 2006-07)

    ITO v. Gyamkhana Club (Chd.)(Trib.), www.itatonline.org

  6. S.5 : Scope of total income – Accrual – Seafarer – Services were rendered outside India on a foreign ship salary receipts shall not include income as same was credited in NRE account maintained in Indian Bank

    Allowing the appeal of the assessee, the Tribunal held that salary accrued to a non-resident for services rendered outside India on a foreign ship shall not be included in total income, as the salary has been credited in NRE account maintained with an Indian Bank by seafarer. (AY. 2012-13)

    Asim Kumar Bera v. DIT (2017) 166 ITD 592 (Kol.)(Trib.)

  7. S.5 : Scope of total income – Salary earned by the foreign employer for services rendered outside India directly credited to NRE bank account of the non-resident seafarer in India cannot be brought to tax in India in terms of section 5 [S.5]

    Assessee, a Marine Engineer was engaged with ‘W’ Ltd., Hongkong in the capacity as a Master and earned salary therefrom in US dollars. The said salary was earned outside India and since he was a non-resident the said income was not chargeable to tax in India. Circular No. 13/2017 dt. 11th April 2017 shows that the salary accrued to a non-resident seafarer for services rendered outside India on a foreign going ship shall not be included in the total income merely because the said salary has been credited in the NRE account maintained with an Indian Bank by seafarer. (ITA No. 67/Kol/2016 dt. 2-6-2017) (AY. 2011-12).

    Shyamal Gopal Chattopadhyay v. DDIT (2017) 189 TTJ 327 (Kolkata Trib.) / (2017) 165 ITD 437 (Kolka) (Trib.)

  8. S.10A – Export – Newly Established Undertaking in Free Trade Zone – Net interest can be disallowed

    The assessee received interest on bank deposits amounting to ₹ 1,05,04,361/- and the AO during the course of assessment proceedings disallowed the deduction claimed by the assessee u/s. 10A of the IT Act,1961 in respect of this interest income treating it as income from other sources. The CIT(A) held that such interest income did not have a first degree nexus to the export. However, he held that only net interest i.e,. interest income after reducing interest paid, could be excluded while determining the business income derived from export. The CIT(A) worked out the disallowance in respect of interest at ₹ 30,17,944/-. The appeal has been filed by the department and assessee before the Tribunal. The Tribunal held that only net interest should be disallowed in the claim of deduction u/s. 10A. (ITA Nos. 7547&6691/Mum./2014} (A.Y 2010-11) (6-9-2017)

    Balaji Export Co. v. ACIT (2017) 59 ITR 36 (Mum.)(Trib.)

  9. S. 12A : Registration –Trust or institution – Exemption cannot be denied to a trust if it had obtained registration during the pendency of appeal before CIT(A) [S.11 ]

    The AO held that the assessee was only affiliated to SNDP Yogam and was not independently registered either under the relevant Kerala State Act or the Income-tax Act and hence the provisions of Section 167B of the I.T. Act were applicable and thus the whole income of the assessee from all the institutions were to be taxed at the maximum marginal rate. The assessee contended that once the registration u/s. 12A was granted to the assessee even at a later date, the same was applicable for pending assessment proceedings for the earlier assessment years. The assessee also contended that CITs power to grant registration is not with retrospective effect and the assessee has filed petition before the CBDT for the condonation of delay in filing application for registration under Section 12A, and it is mentioned therein that there is a chance that registration would be granted to the assessee with retrospective effect by the CBDT. The assessee has also contended in the additional grounds that since it is running individual education institution the assessee is also eligible for exemption u/s. 10(23C). On appeal the Tribunal held that the AO was not justified in taking a stand that registration u/s. 12A was not applicable to the assessee for the AYs under dispute and the condonation petition for delay in filing the application for registration u/s. 12A for the AYs under dispute has not yet been decided by the CBDT and the total incomes of the assessee were to be assessed as per commercial principles. (ITA Nos. 503 to 506 & 569/ Coch/ 2016 dt. 1-3-2016) (AYs. 2006-07 to 2009-10 & 2011-12).

    SDNP Yogam v. ADIT(E) (2017) 186 TTJ 277/161 ITD 1 (Cochin) (Trib.)

  10. S.14A : Disallowance of expenditure – Exempt income – Satisfaction to be recorded by the Assessing Officer, it cannot be substituted by recorded satisfaction of Commissioner of Income-tax (Appeals) [S. 251, R.8D]

    Allowing the appeal of the assessee, the Tribunal held that though the power of CIT(A) is co-terminus with that of Assessing Officer, it is Assessing Officer who has to record his satisfaction with regard to correctness of assessee’s claim before proceeding to disallow expenditure under section 14A and satisfaction to be recorded by Assessing Officer under section 14A(2) cannot be substituted by satisfaction recorded by First Appellate Authority. (AY. -11)

    Arnav Gruh Ltd. v. DCIT (2018) 168 ITD 518 (Mum) (Trib.)

  11. S.14A : Disallowance of expenditure – Exempt income – Suo motu disallowance, wrongly offered to tax – AOs should assess taxable income and compute the tax liability of taxpayers in accordance with law and should not take undue advantage of the ignorance of the assessee – Matter remanded back to AO for verification [R.8D]

    Allowing the appeal of the assessee, the Tribunal held that suo motu disallowance, wrongly offered to tax. AO should assess taxable income and compute the tax liability of taxpayers in accordance with law and should not take undue advantage of the ignorance of the assessee. Matter remanded back to AO for verification AO would be well within his powers to assess the income below the amount offered by the assessee in the return of income, if the facts of this case and law applicable thereon so demands. (AYs. 2009-10, 2010-11)

    Rupee Finance and Management Pvt. Ltd. v. DCIT (2017) 57 ITR 205 (Mum.) (Trib.)

  12. S.14A : Disallowance of expenditure – Exempt Income – Fixed terms debt Scheme – Interest on overdraft cannot be disallowed [R.8D ]

    Assessee having invested in the fixed maturity plans of various mutual funds which are basically fixed terms debt scheme, the same are not tax free investments and therefore the interest on the overdraft account could not be disallowed under the provisions of S. 14A of the Act. (AY. 2009-10)

    Allen Career Institute v. JCIT (2017) 190 TTJ 823 (Jaipur) (Trib.)

  13. S.23 : Income from house property – Common Areas Maintenance Charges and non-occupancy charges paid by the assessee to the Society are deductible from the rent while computing the annual letting value [S. 22]

    Dismissing the appeal of the revenue the Tribunal held that; Common Areas Maintenance Charges and non-occupancy charges paid by the assessee to the Society are deductible from the rent while computing the annual letting value. (ITA No. 4776/Mum/2014, dt. 1-11-2017) (AY. 2010-11)

    DCIT v. Yogen D. Sanghavi(Mum)(Trib) ; www.itatonline.org

  14. S.28(iv) : Business income –Amalgamation – There was no business transaction in amalgamation, surplus of assets over liability of subsidiary company resulting from said amalgamation was not taxable [S.28(i)]

    Allowing the appeal of the assessee the Tribunal held that where 100 per cent owned subsidiary company of assessee was amalgamated with assessee-company and there was no business transaction in amalgamation, surplus of assets over liability of subsidiary-company resulting from said amalgamation was not taxable. (AY. 2003-04)

    Sundaram Finance Ltd. v. ACIT (2017) 165 ITD 563 (Chennai) (Trib.)

  15. S.28(iv) : Business income – Value of any benefit or perquisites – Converted into money or not – Concession of duty on import of capital goods conditional on certain quantum of export, still be a concession on capital account hence cannot be assessed as business income [S.4]

    Dismissing the appeal of the Revenue the Tribunal held that ; since the concession was linked to the import of capital goods, though conditional on fulfilling export obligation, was a concession on the capital account. The assessee was also not allowed to use the import entitlement in any manner other than for import of capital goods. There was no benefit or perquisite that accrued to the assessee on account of this transaction and it did not have any component of revenue nature and hence, the provisions of Section 28(iv) would not apply. (AYs. 2001-02, 2004-05, 2006-07 )

    ACIT v. India Cements Ltd. (2017) 165 ITD 496 (Chennai) (Trib.)

  16. S.28(iv) : Business income – Value of any benefit or perquisites –Converted in to money or not – Only fact that the assessee attended annual day celebrations and addressed to employees of the Company which gifted a villa to the assessee in Dubai does not amount to rendering of professional services or carrying out brand endorsement activities and hence the value of villa cannot be brought to tax u/s. 28(iv) [S. 28(iv)]

    Assessee, an actor by profession received a villa as simple unilateral gratuitous act of gift from ‘N’ a friend of the assessee and Executive Director/ Chairman of ‘PJSC’, a Dubai based Company on account of love and affection towards the assessee. The AO held that PJSC was using the assessee’s brand image which was corroborated by the fact that he attended the annual day celebrations of PJSC and hence brought the value of the villa to tax u/s. 28(iv). The CIT(A) upheld the stand of the AO. On appeal, the Tribunal held that the assessee had merely addressed the employees of PJSC at the annual day celebrations and he did not give any stage performance. Also, the gift was offered to assessee in 2004 whereas the annual day took place in 2007 and that the assessee was under no obligation to attend the same and undertake any sort of brand endorsements for PJSC and hence the gift received was not taxable in the hands of the assessee u/s. 28(iv) (ITA No. 8555/M/2011 & 80/M/2012 dt. 18-8-2017) (AY. 2008-09).

    Shah Rukh Khan v. ACIT (2017) 189 TTJ 547 / 84 taxmann.com 209 (Mum.) (Trib.)

  17. S.32 : Depreciation – Advertising Company – Hoarding is entitled to 100 per cent depreciation

    Dismissing the appeal of the Revenue, the Tribunal held that hoardings is entitled to 100 per cent depreciation. (AY. 2010-11)

    DCIT v. Vantage Advertising P. Ltd. (2018) 61 ITR 564 (Kol.) (Trib.)

  18. S. 32(1)(ii) – Depreciation – Intangible asset – Right to collect toll

    Assessee has expended on development, construction and maintenance of infrastructure facility i.e., road out of its own funds and after the end of specified period, it has to transfer the said infrastructure facility to the State Government free of charge. In consideration thereof assessee was granted the right to collect toll from motorists who use the said infrastructure facility in nature and the same cannot be amortised over the period for which the assessee can collect the toll.

    The Tribunal held that the right to collect toll granted to the assessee in consideration of developing, constructing and maintaining the infrastructure facility i.e., road and transferring the same to the State Government free of charge after the specified period is an intangible asset eligible for depreciation under section 32(1)(ii). {ITA Nos. 1452 to 1457/Pun. 2014} (30-6-2017)

    Ashoka Infrastructure Ltd. v. ACIT (2017) 189 TTJ 749 (Pun.)(Trib.)

  19. S.32 : Depreciation – Right to operate the toll road/bridge – Commercial rights which is entitled to deprecation [S.32(1)(ii)]

    Tribunal held that right to operate the toll road /bridge and collect toll charges in lieu of investment made by it in implementing the project is an intangible asset in the nature of licence or akin to licence as well as a business or commercial rights, which is entitled to depreciation. (AY. 2011-12)

    ACIT v. Progressive Constructions Ltd. ( 2018) 161 DTR 289 (SB) (Hyd.) (Trib.)

  20. S.35 : Scientific research expenditure – Due to retrospective cancellation of approval, donor’s claim of deduction could not be denied [S. 35(1)(ii)]

    Tribunal held that when institution was enjoying approval on date of receipt of donation, on retrospective cancellation of approval of concerned institution, weighted deduction claimed by assessee in respect of donation could not be denied. (AY. 2012-13)

    Deviyani Dilip Patel (Smt.) v. ITO (2017) 165 ITD 598 (Chennai) (Trib.)

  21. S.37(1) : Business expenditure – Capital or revenue – Annual lease premium paid for acquiring mining rights on land was capital expenditure.

    Allowing the appeal of the Revenue, the Tribunal held that Annual lease premium paid for acquiring mining rights on a land was capital expenditure. Tribunal also held that if the payment is capital in nature, expenditure cannot be allowed on staggered basis. Even for the purpose of spreading over period of lease, it is essential that the expenditure should be in the nature of revenue expenditure. (AY. 2008-09 to 2012-13)

    ACIT v. K.R. Kaviraj. (2018) 168 ITD 491 (Beng.) (Trib.)

  22. S.37(1) : Business expenditure – Entire expenses incurred on abandoned project development is allowable even if the assessee had amortised the same over a period of five years in its books

    Entire expenses incurred on abandoned project development is allowable even if the assessee had amortised the same over a period of five years in its books. (AY. 2008-09)

    Royal Calcutta Turf Club v. DCIT (2017) 158 DTR 92 / 189 TTJ 433 / 59 ITR 656 (Kol.) (Trib.)

  23. S.37(1) : Business expenditure –Capital or Revenue – Expenditure incurred on purchase of plastic cans and crates, for the purposes of transportation of milk, is allowable as revenue expenditure

    Dismissing the appeal of the Revenue, the Tribunal held that expenditure incurred on purchase of plastic cans and crates, for the purposes of transportation of milk, is allowable as revenue expenditure. (AY. 2012-13)

    ACIT v. Tirumala Milk Products Pvt. Ltd. (2017) 59 ITR 137 (SN)(Visakha)(Trib.)

  24. S.37 : Business Expenditure – Bogus Purchases – Books of account of assessee not rejected – Disallowance of purchases not proper [S.133(6)]

    Dismissing the appeal of the Revenue, the Tribunal held that merely because the suppliers had not appeared before the AO or CIT(A), it could not be concluded that the purchases were not made by the assessee. This is the case where books of account of the assessee had not been rejected and the AO had not brought on record anything which may prove that the evidences submitted by the assessee was bogus. Relying on the Bombay High Court decision in the case of Nikunj Exim Enterprises Pvt. Ltd. 372 ITR 619, the Hon’ble Tribunal deleted the addition of disallowing the purchases made by the Assessee. (A.Y. 2011-12)

    ACIT v. Skylark Builders SSJC (Ghatkopar) (2017) 58 ITR 77( SN) (Mum.) (Trib.)

  25. S.45 : Capital gains – Real income – An amount which is payable only on fulfilment of conditions does not create an enforceable right and has to be excluded while computing capital gains [S. 48]

    Allowing the appeal of the Revenue the Court held that the scheme of the Act is to assess real income and not hypothetical income. The word “accrue” in “full value of consideration received or accruing” in S. 45 means that the assessee has a legally enforceable right to receive the sum. An amount which is payable only on fulfilment of conditions does not create an enforceable right and has to be excluded while computing capital gains. (ITA No. 5097/Mum/2015, dt. 1-11-2017)(AY. 2010-11)

    Gordhandas S. Garodia, (late). v. DCIT (Mum.)(Trib.) www.itatonline.org

  26. S.45 : Capital gains – Purchase and sale of shares – Average holding period was 72 days hence income earned was held to be assessable as capital gains and not as business income [S.28(i)]

    Dismissing the appeal of the Revenue, the Tribunal held that the assessee has invested his own funds in purchase of shares, in view of fact that he entered into delivery based transactions and, moreover, average holding period of shares was around 72 days, income earned on sale of those shares was liable to tax as short term capital gain. (AY. 2010-11)

    ACIT v. Jignesh Madhukant Mehta. (2017) 165 ITD 646 (Mum.) (Trib.)

  27. S.45(4) : Capital gains –Distribution of capital asset – Revaluation of assets on retirement – On retirement the accounts are settled of retiring partners without distribution of capital assets, provisions of S. 45(4) cannot be invoked [S. 45]

    Allowing the appeal of the assessee the Tribunal held that on retirement accounts of retiring partners are settled by revaluing the assets without distribution of capital assets and firm continued to the business, provision of S. 45(4) cannot be invoked. (AY. 2009-10)

    Mahul Construction Corporation. v. ITO (2018) 168 ITD 120 (Mum.) (Trib.)

  28. S.47(iv) : Capital gains –Transaction not regarded as transfer – Subsidiary – A subsidiary of a subsidiary (step-down subsidiary) is also a subsidiary of the parent. Consequently, transfers between the holding company and the step-down subsidiary are not “transfers” which can give rise to capital gains or loss. [Ss.45, 48, Companies Act, S. 4(1)(c), 108]

    The Tribunal held that; the term ‘subsidiary company’ is not defined under the Income-tax Act and so will have to be given the meaning in s. 4(1)(c) of the Companies Act. A subsidiary of a subsidiary (step-down subsidiary) is also a subsidiary of the parent. Consequently, transfers between the holding company and the step-down subsidiary are not “transfers” which can give rise to capital gains or loss. Accordingly the Tribunal held that the transaction of sale of shares of M/s. Zandu Realty by the assessee to M/s. Emami Rainbow Niketan Ltd. is not regarded as a transfer in view of Sec.47(iv) of the Act. Hence, the question of computing either capital loss or capital gain does not arise. Thus, the assessee is not entitled to carry forward the capital loss of ₹ 25 crores as claimed. (AY. 2010-11)

    Emami Infrastructure Ltd. v. ITO (Kol.)(Trib.), www.itatonline.org

  29. S.48 : Capital gains – Computation –Indexation – Government securities indexation benefit is available [S. 45]

    Assessee sold Government Securities and claimed indexation benefit on such sale which resulted into loss. Assessing Officer denied the indexation benefit holding that the Government securities were in the form of bonds and debentures as per third proviso to S. 48 of the Act. On appeal the Tribunal held that, since bonds and debentures are distinguishable from Government Securities as per third proviso, indexation benefit was held to be allowable. (AY. 2003-04)

    Sundaram Finance Ltd. v. ACIT (2017) 165 ITD 563 (Chennai) (Trib.)

  30. S.50 : Capital gains – Depreciable assets – Block of assets – Once the asset forms a part of the block of asset and such block of assets ceased to exist at the end of the previous year the provisions of Section 50 of the ITA becomes applicable and capital gains on depreciable assets should be computed accordingly [S. 43]

    The AO reopened the assessment since according to him, short term capital loss on demolition of asset does not constitute a transfer of capital asset and hence the set off of such short term capital loss against long term capital gains has resulted into income escaping assessment. The CIT(A) upheld the action of the AO. On appeal the Tribunal held that the depreciation have been claimed in the earlier years on the same building and it forms a part of the block of asset. Since the asset was demolished during the year the difference between the written down value and the salvage received has to be treated as short term capital loss/ gain, as the case may be. (ITA No. 1421/Hyd/2016 dt. 12-5-2017) (AY. 2003-04).

    Sidamshetty Ramesh (HUF) v. ITO (2017) 154 DTR 82/187 TTJ 498 (Hyd.)(Trib.).

  31. S.50B : Capital gains – Slump sale – Transfer of individual assets to sister concern without transfer of undertaking or business activity as a whole cannot be considered as slump sale [Ss. 2(19AA), 2(42C)]

    Allowing the appeal of the assessee, the Tribunal held that since assessee had neither transferred an undertaking or any part of an undertaking, or a unit or division of undertaking or a business activity taken as a whole, but what had been transferred was an individual asset, viz., business leads, which did not constitute a business activity on its own, view taken by Assessing Officer that amount received by assessee was liable to be characterised as a consideration received pursuant to a slump sale as per provisions of section 50B, could not be upheld. (AY. 2003-04)

    L&T Finance Ltd. v. DCIT (2018) 168 ITD 52 (Mum) (Trib.)

  32. S.50C : Capital gains – Full value of consideration – Stamp valuation – Agreement to sell entered much before the date of transfer of property – first and second proviso inserted by Finance Act, 2016 w.e.f. 1-4-2017, should be treated as curative in nature and with retrospective effect from 1st April 2003 [S. 45]

    Allowing the appeal of the assessee, the Tribunal held that first and second proviso inserted by Finance Act, 2016 w.e.f. 1-4-2017, should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which section 50C was introduced. Thus the matter was restored back to the AO with a direction that in case he finds that a registered agreement to sell, as claimed by the assessee, was actually executed on June 29, 2005 and the partial sale consideration was received through banking channels, the Assessing Officer, so far as computation of capital gains is concerned, will adopt the stamp duty valuation, as on June 29, 2005, of the property sold as it existed at that point of time. (AY. 2008-09)

    Dharamshibhai Sonani v. ACIT (2017) 57 ITR 669 (Ahd.) (Trib)

  33. S.54 : Capital gains – Profit on sale of property used for residence – If entire consideration was paid within three years the assessee is entitle to exemption [Ss.45, 54F]

    Allowing the appeal of the assessee the Tribunal held that, if agreement for purchase of new residential house is made and entire purchase price is paid within three years from the date of transfer of the old asset, exemption u/s. 54 is available. It is not required that the house must be completed within 3 years. The requirement in s. 54(2) that the capital gains should be deposited in the CGAS scheme is merely an enabling provision. If the assessee shows during assessment proceedings that the capital gains have been reinvested in the new residential house, exemption cannot be denied merely the amount was not deposited in the CGAS. (ITA No. 272/Chd/2017, dt. 5-2-2018)(AY. 2013-14)

    Seema Sabharwal v. ITO (Chd.)(Trib.), www.itatonline.org

  34. S. 54 : Capital gains – Profit on sale of property used for residence – Acquisition of new flat in an apartment under construction should be considered as a case of “Construction” and not “Purchase”. The date of commencement of construction is not relevant for purpose of claiming exemption [S. 45]

    Allowing the appeal of the assessee, the Court held that, acquisition of new flat in an apartment under construction should be considered as a case of “Construction” and not “Purchase”. The date of commencement of construction is not relevant for purpose of S. 54. The fact that the construction may have commenced prior to the date of transfer of the old asset is irrelevant. If the construction is completed within 3 years from the date of transfer, the exemption is available. (I.T.A. No. 6108/Mum/2017, dt. 18-12-2017)(AY. 2013-14)

    Mustansir I Tesildar v. ITO (2018) 61 ITR 465 (Mum)(Trib)

  35. S.54 : Capital gains – Investment in new residential property – Demolition of new asset in subsequent year for construction of commercial property – Exemption cannot be denied [S. 45]

    Allowing the appeal of the assessee the Tribunal held that subsequent demolition of new asset, for construction of commercial property exemption cannot be denied. (AY. 2012-13)

    Vikas Kumar v. DCIT (2017) 166 ITD 481/ 189 TTJ 587 (Hyd.) (Trib.)

  36. S.54F : Capital gains – Investment in a residential house – As per development agreement landowner received three residential units on same location, assessee would be entitled to exemption in respect of all units (position prior to 1-4-2015) [S. 2(47)(v), 45, Transfer of Property Act, 1882 , S. 53A]

    As per development agreement, assessee got 3 constructed flats to her share, at same location in pursuance of development agreement, assessee was eligible for exemption, however since, legal heirs had sold two flats in subsequent year within 3 years from date of acquisition, amount of capital gains exempted in respect of two flats would be brought to tax in such subsequent year. ( AY. 2007-08)

    ITO v. Sureddy Venkata Ramanamamma. (Smt.) (2017) 165 ITD 574 /190 TTJ 665 (Visakha) (Trib.)

  37. S. 56 : Income from other sources – Advance receipt cannot be taxed as gifts or income merely because the person who has paid the amount has not initiated any legal proceedings to recover the amount [Ss. 28(i), 56(2)(vi)]

    Allowing the appeal of the assessee the Tribunal held that the Advance receipt cannot be taxed as gifts or income merely because the person who has paid the amount has not initiated any legal proceedings to recover the amount. (ITA No . 3738/Mum/2013/3739/Mum/2013 Bench “B” dt. 12-11-2017 (AY. 2008-09, 2009-10)

    Nilesh Janardan Thakur v. ITO (2018) 168 ITD 143 (Mum) (Trib.)

  38. S.56 : Income from other sources – Amount received at the time of retirement from partnership firm after surrendering her right, title and interest, same was said to be received for consideration and, thus, same could not be taxable in hands of assessee [S. 2(47)(i), 2(47)(ii), 45, 56(2)(vi)]

    Allowing the appeal of the assessee, the Tribunal held that amount received at the time of retirement from partnership firm after surrendering her right, title and interest, same was said to be received for consideration and, thus, same could not be taxable in hands of assessee. (AY. 2008-09)

    Vasumati Prafullachand Sanghavi (Smt.) v. DCIT (2018) 168 ITD 585 (Pune) (Trib.)

  39. S. 68 : Cash credits – Share capital – Merely because its directors are not produced personally before the AO, addition cannot be made unless the AO demonstrates with specific evidence that the assessee has really obtained accommodation entries by showing cash deposited linked to the investors

    Dismissing the appeal of the Revenue the Tribunal held that merely because its directors are not produced personally before the AO, addition cannot be made unless the AO demonstrate with specific evidence that the assessee has really obtained accommodation entries by showing cash deposited linked to the investors. Revenue alleged that the Companies are of the Mr. Parvin Kumar Jain. The Tribunal held that when the assessees representative attended for cross-examination the Directors were not present hence no cognizance can be taken as regard the statement of Mr. Pravin Kumar Jain before investigation wing. (ITA Nos 3754/ 3755/3756 / 2017 dt 14 -11-2017 Bench ‘ E.’ (AYs. 2008-09 to 2012-13) (AY. 2008-09)

    ITO v. Shreedham Construction Pvt. LTD. (Mum.) (Trib.) www.itatonline.org.

  40. S. 68 : Cash Credits – Share capital – Shareholders did not respond to summons cannot be the basis to treat the share capital as bogus [S.133(6)]

    Allowing the appeal of the assessee, the Court held that, if the assessee has discharged the initial onus regarding the identity, credit worthiness and genuineness, the onus shifts to the AO to bring material or evidence to discredit the same. The fact that the shareholders did not respond to s. 133(6) summons is not sufficient to draw an adverse inference. There must be material to implicate the assessee in a collusive arrangement with person who are accommodation entry providers. (ITA No. 5955/Del/2014, dt. 23-2-2018)(AY. 2010-11)

    Umbrella Project Pvt. Ltd. v. ITO (Delhi)(Trib.), www.itatonline.org

  41. S.68 : Cash credits – Share premium can be assessed as undisclosed income if directors are allotted the shares at par and other at premium without any justification [S.69]

    Dismissing the appeal of the assessee, the Tribunal held that, share premium received can be assessed as undisclosed income if (a) directors are allotted shares at par while others are allotted at premium, (b) the high premium is not justified by a valuation report, (c) the high premium is not supported by the financials, (d) based on financials the value of shares is less and no genuine investor would invest at the premium, (e) there are discrepancies & abnormal features which show transaction as “made up” to camouflage real purpose. (ITA No. 665/Bang/2017, dt. 9-2-2018)(AY. 2008-09)

    Cornerstone Property Investments Pvt. Ltd. v. ITO (Bang)(Trib.), www.itatonline.org

  42. S.68 : Cash credits – Sale of shares – Long term capital gains cannot be assessed as cash credits [S. 45]

    Allowing the appeal of the assessee the Tribunal held that; where the assessee has carried out all the purchases and sales transaction through registered SEBI broker and the AO himself has accepted purchases of shares in preceding previous year and all the transactions were evidenced and supported with bills and vouchers, the AO could not make an addition u/s. 68 by rejecting the long term capital gains shown by the assessee on sale of shares. (ITA No. 3028 to 3023/Mum/2011 dt. 17-11-2016) (A.Ys. 2002-03 to 2006-07)

    Anjali Pandit (Smt.) v. ACIT (2016) 188 TTJ 645 (Mum.) (Trib.)

  43. S.69 : Undisclosed income – search – Disclosure made in the course of search and seizure proceedings – Retraction of statement was held to be not valid – Addition was held to be justified [Ss. 132(4), 133A, 153C]

    Allowing the appeal of the Revenue, the Tribunal held that admission was made in the course of search proceedings on the basis of loose sheet which was subsequently retracted cannot be accepted as valid retraction as the retraction was not based on any corroborative evidence. (ITA Nos. 2525 & 2526 /Mum/ 2015 Bench “H” dt. 15-1-2017 ( AY. 2010-11, 2011-12)

    DCIT v. Studio Aethetic Health & Hospitality Pvt. Ltd. (Mum.) (Trib.) www.itatonline.org

  44. S.69 : Unexplained investments – Purchase of shares – The assessee did not discharge its primary onus to prove as to why he deviated from the normal course of conduct while dealing in securities and hence the addition made by the AO was upheld (S. 45)

    Information received from the investigation wing that the assessee was engaged in earning commission income in lieu of providing these bogus accommodation entries. The shares were claimed to have been purchased on the stock exchange and the value increased owing to bonus shares and stock split. The intermediary was never registered on the stock exchange at the time of the purchase of shares and there was no record of the transaction of purchase of shares on the stock exchange. Further, the assessee could not explain the reason for delay of more than six months in making the payment for purchase of shares during which the price of the shares increased substantially. This was against the normal course of conduct of activities of share transactions business on the stock market. The onus was on the assessee to prove as to why he deviated from the normal course of conduct while dealing in shares which he failed to discharge and hence the addition made by the AO was upheld (ITA No. 866/Mum/2016 dt. 15-9-2017) (AY. 2008-01)

    Rohit Jayantilal Shah v. ITO (2017) 59 ITR (T) 299 (Mumbai) (Trib.)

  45. S.69A : Unexplained moneys – Gross weight of jewellery disclosed in regular returns was in excess of gross weight of jewellery found in search, no seizure/addition was permissible. [S. 132]

    Allowing the appeal of the assessee the Tribunal held that, if gross weight of jewellery disclosed in regular returns was in excess of gross weight of jewellery found in search, no seizure/addition was permissible. CBDT Instruction No. 1961, dated 11-5-1994 (AY. 2012-13)

    Nawaz Singhania (Mrs.) v. DCIT (2018) 168 ITD 478 (Mum.) (Trib.)

  46. S.69B: Undisclosed investments – On money – Mere admission of amounts recorded in pen drive as additional unexplained income would not lead to drawing of adverse inference that unexplained investment was made by assessee for purchase of property, particularly when no evidence was produced to justify said payment by assessee [Ss. 132(4),147]

    Tribunal held that, mere admission of amounts recorded in pen drive as additional unexplained income would not lead to drawing of adverse inference that unexplained investment was made by assessee for purchase of property, particularly when no evidence was produced to justify said payment by assessee. Ex-employee of Hiranandani in course of his cross-examination had clearly stated that neither he was aware of person who had made entry in pen drive, nor had with him any evidence that assessee had paid any cash towards purchase of flat. (AY. 2007-08)

    Anil Jaggi. v. CIT (2018) 168 ITD 599 (Mum) (Trib.)

  47. S.69C : Undisclosed income –Bogus purchases – Non service of notice cannot be the basis to confirm the addition as bogus purchases considering other evidences purchases cannot be assessed as alleged bogus purchases [Ss. 37(1), 145]

    Allowing the appeal of the assessee, the Tribunal held that the fact that s. 133(6) notices could not be served upon the alleged vendors and they were not physically available at the given addresses does not falsify the claim of the assessee that the purchases are genuine if the assessee has produced other evidence and made payments through banking channels, addition confirmed by the CIT(A) was deleted. (AYs. 2009-10, 2010-11)

    Prabhat Gupta v. ITO (Mum.)(Trib.), www.itatonline.org

  48. S.69C : Unexplained expenditure – Purchase of shares out of speculative income which was accepted by revenue, addition cannot be made as unexplained expenditure

    Allowing the appeal of the assessee, the Tribunal held that assessee purchased shares in preceding year mainly out of speculation income which was shown as short-term capital gains by the assessee in her return and assessed and accepted by AO in the assessment for that year, hence, the impugned addition u/s. 69 cannot be sustained. (ITA Nos. 3028 to 3023/Mum/2011 dt. 17-11-2016) (A.Y. 2002-03 to 2006-07)

    Anjali Pandit (Smt.) v. ACIT (2016) 188 TTJ 645 (Mum.) (Trib.)

  49. S.80IA : Industrial undertaking – Income from advertisements on foot over bridges and bus shelters is entitled to deduction

    Dismissing the appeal of the Revenue, the Tribunal held that income from advertisements on foot over bridges and bus shelters is entitled to deduction. (AY. 2010-11)

    DCIT v. Vantage Advertising P. Ltd. (2018) 61 ITR 564 (Kol.) (Trib.)

  50. S. 80-IA : Industrial undertakings – Infrastructure development – develop, operate and maintain the rail systems for smooth movement of goods from factory till nearest railway station – Deduction was allowed in first year, and cannot be disallowed in subsequent year

    Assessee entered into agreements with the railway authorities to develop, operate and maintain the rail systems for smooth movement of goods from factory till nearest railway station – Overall profits of the assessee have increased due to such commercial benefits and the same should have been treated as revenue of the rail systems, thus eligible for benefit u/s. 80-IA – Deduction u/s. 80-IA was allowed in first year and in subsequent years, it cannot be disallowed on same ground. (AYs. 2009-10, 2010-11)

    Ultratech Cement Ltd. v. ACIT (2017) 153 DTR 153 (Mum.) (Trib.)

  51. S.92C : Transfer pricing – Arm’s length price – Method of accounting – TPO has no jurisdiction to comment on the method of accounting followed by the assessee [S.145]

    Dismissing the appeal of the Revenue, the Tribunal held that only role assigned to TPO is to find out as to whether international transaction is at arm’s length or not and he is not supposed to take decision about accounting policy to be followed by assessee, nor he should comment upon as to how to compute income if an assessee follows a particular method of accounting. (AY. 2002-03)

    DCIT v. Hazaria Cryogenic Engineering & Construction Management (P.) Ltd. (2018) 168 ITD 344 (Mum.) (Trib.)

  52. S.92C : Transfer Pricing – Arm’s length price – Transfer pricing provision will be applicable. Assessee carrying on insurance business [S.44]

    Tribunal held that there being no specific reference to Section 92 in section 44, provisions relating to transfer pricing u/s. 92 would apply to assessees carrying on insurance business. (AY. 2002-03)

    ACIT v. Max New York Life Insurance Company Ltd. (2017) 167 ITD 540 /190 TTJ 137 (Delhi) (Trib.)

  53. S.92C : Transfer Pricing – Arms’ Length Price – Comparison- company using its own software and having copyrights is not comparable to a company engaged in business of software solutions and consultancy services

    A company providing any consulting IT services, end-to-end solutions, having revenue from software production addition to software development and a company using its own software and having copyrights is not comparable to a company engaged in business of software solutions and consultancy services.(AY. 2008-09)

    Aircom International (India) Pvt. Ltd. vs. DCIT (2017) 84 taxmann.com 218 / 189 TTJ 682 (Delhi) (Trib.)

  54. S.92C : Transfer Pricing – Arm’s Length Price – Reselling of finished goods – RPM was the most appropriate method

    Where assessee was directly engaged in reselling finished goods purchased from its Associated Enterprise (‘AE’), without making any value additions, RPM was the most appropriate method.

    ACIT v. Akzo Nobel Car Refinishes India (P.) Ltd. (2017) 84 taxmann.com 199 / 189 TTJ 535 (Delhi) (Trib.)

  55. S.92C : Transfer Pricing – Arm’s Length Price – Specific services cannot be specified as stewardship services

    Where services rendered by the Associated Enterprise (‘AE’) were to meet specific need of the assessee, it was erroneous to classify such services as stewardship services and the assessee evidenced with a number of documentary evidences, the receipt of services, charges paid for the same were to be treated at arm’s length. (AY. 2009-10)

    DCIT v. Akzo Nobel India Ltd. (2017) 189 TTJ 715 (Kol.) (Trib.) ?

  56. S.93 : Transactions resulting in transfer – Non-residents – Capital gains – For invoking S.93 to tax a resident, there should be transfer of assets by a resident to non-resident, and not where a non-resident had transferred assets to a resident – DTAA-India – Mauritius [Ss. 90, 201(1), 201(IA), Article 13(4)]

    AT&T group formed a joint venture with Birla group and made investment through its Mauritius company Apex. Apex was holding shares of an Indian company Idea. Later on, assessee-TIL acquired entire shareholding of Apex and, thus, Apex became wholly owned subsidiary of assessee . During relevant year, Apex sold shares of Idea to a Birla group company. The AO invoked the provision of S. 93 and held that capital gains out of sale of shares by “Äpex” had to be taxed in the hands of the assessee. CIT(A) also confirmed the order of the AO. On appeal the Tribunal held that since in instant case, a non-resident company had transferred property i.e., shares to a unrelated resident company, deeming provision of Section 93 could not be invoked. As far as applicability of tax treaty provision vis-a-vis section 93 was concerned, DTAA would prevail over local Act, as provided in Section 90(2). (AY. 2007-08)

    Tata Industries Ltd. v. ACIT (2018) 168 ITD 340 (Mum.) (Trib.)

  57. S.145 : Method of accounting – Low gross profit – Books of account could not have been rejected merely on increase or decrease in GP/NP [S. 145(3)]

    Tribunal held that; mere low profit by itself is no ground for rejection of books of account of the assessee. There was no reason to reject the
    books of account u/s. 145(3) of the Act. (AY. 2011-12)

    DCIT v. British Health Products (I) Ltd. (2017) 165 ITD 1 / 188 TTJ 377 (TM) (Jaipur)(Trib.)

  58. S.145 : Method of accounting – Developer – Percentage completion method – Accounting Standards AS-1, AS-7 & AS-9, the Guidance Note on Accounting for Real Estate Transactions issued by the ICAI – Percentage of revenue recognised by the CIT(A) was held to be justified [S. 145(2)]

    Tribunal held that the AO has not disputed the fact that the assessee is required to carry out the specified development activities and also the application of percentage of completion method of recognition of revenues but has missed this finer nuance of interconnection between the economic substance of the transaction and application of percentage completion method of recognition of revenues while analyzing the guidance note issued by the ICAI and which has been rightly appreciated by the learned CIT(A). The stage of development of the township project has been determined by the assessee at 45.73% with reference to entire land and development cost for the whole project and is not in dispute before us. The total revenues in respect of executed sale deeds till 31-3-2012 comes to ₹ 5,44,46,105 and 45.73% thereof comes to ₹ 2,48,98,204 and after allowing credit for revenues already recognised in the previous year amounting to ₹ 37,59,918, the revenues for the year have been rightly determined by the learned CIT(A) at ₹ 2,11,38,286 and we hereby affirm his findings in this regard. (ITA Nos. 105, 119, 172, 106 & 120 /JP/2017, dt. 22-12-2017)(AY. 2012-13)

    Vastukar Township Pvt. Ltd. v. DCIT (Jaipur)(Trib.), www.itatonline.org

  59. S.145 : Method of accounting – Sales Tax refund had to be taken into consideration while determining the total business receipts/turnover and the estimation of net profit rate had to be determined accordingly. [S. 41(1)]

    Where books of account are rejected and net profit rate had been estimated by the AO, the receipt on account of sales tax refund had to be taken into consideration while determining the total business receipts/turnover and the estimation of net profit rate had to be determined accordingly. The Tribunal, further upheld the net profit rate of 8% estimated made by the CIT(A) as being reasonable. (AY. 2008-09)

    ACIT v. Mohd. Construction Co. (2017) 187 TTJ 200 (Jaipur) (Trib.)

  60. S.147 : Reassessment – Non-speaking order disposing of Assessee’s objection against reassessment – Reassessment was held to be invalid [Ss. 68, 148]

    Allowing the appeal of the assessee the Tribunal held that the Assessing Officer had not passed a speaking order in disposing of the assessee’s objections against the notice under section 148 before proceeding with the assessment. Hence the subsequent assessment order was bad in law and was quashed. (AY. 2006 07)

    Veer Vardhman Finance Investment Pvt. Ltd. v. DCIT (2018) 61 ITR 669 (Delhi) (Trib.)

  61. S.151 : Reassessment – Sanction for issue of notice – Mechanical approval was held to be bad in law [Ss. 147, 148]

    Allowing the cross objection of the assessee the Tribunal held that the grant of approval by the CIT with the words “Yes. I am satisfied” proves that the sanction is merely mechanical and he has not applied independent mind while according sanction as there is not an iota of material on record as to what documents he had perused and what were the reasons for his being satisfied to accord the sanction to initiate the reopening of assessment u/s. 148 of the Act. (AY. 2005-06)

    ITO v. Virat Credit & Holdings Pvt. Ltd. (Delhi)(Trib.), www.itatonline.org

  62. S.153A : Assessment – Search– Assessment framed for assessment year relevant to previous year covering the search period is not valid and void ab initio, assessment can be framed only for six assessment years relevant to the previous year in which the search was conducted or requisition was made

    Assessment u/s. 153A can be framed for six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. In the instant case, the search took place on 10-8-2006 i.e. relevant to AY. 2007-08 and hence assessment u/s. 153A could have been framed for the 6 assessment years which precedes AY. 2007-08 i.e. AYs. 2001-02 to 2006-07. Since the assessment for the year under consideration i.e. AY. 2007-08 was also framed u/s. 153A, the same was not valid in law and was void ab initio. (AY. 2007-08).

    Sohan Lal Arora v. ACIT (2017) 186 TTJ 522 /152 DTR 233 (Chd.)(Trib)

  63. S.153A : Assessment – Search – Assessing Officer has no jurisdiction to assess the long term capital gains as income from other sources as no incriminating material qua long term capital gains was found during search. [S. 132]

    Allowing the appeal of the assessee the Tribunal held that; assessment year was not pending on the date of search and no incriminating material qua long term capital gains was found during the search, AO had no jurisdiction to assess the long term capital gains as income from other sources in the assessment u/s. 153A of the Act. (AYs. 2002-03 to 2006-07)

    Anjali Pandit (SMT.) v . ACIT (2016) 188 TTJ 645 (Mum.) (Trib.)

  64. S.201 : Deduction at source –Failure to deduct or pay – When the ITO (TDS) had not ascertained as to whether taxes had been paid or not by recipient of income, he could not initiate proceedings to declare deductor as assessee-in-default [Ss. 10(10AA), 191, 192, 201(IA)]

    The Assessing Officer treated the assessee as an assessee in default under sections 201/201(1A) for short deduction of tax due to allowing the exemption under section 10(10AA)(i) beyond the maximum limit of ₹ 3 lakhs. Tribunal held that, ITO (TDS) had not ascertained as to whether taxes had been paid or not by recipient of income, he could not initiate proceedings to declare deductor as assessee-in-default , therefore the invocation of the jurisdiction is null and void ab initio. Such invocation of jurisdiction is, accordingly, cancelled. (AY. 2015-16)

    Aligarh Muslim University v. ITO (2017) 165 ITD 652/189 TTJ 794 (Agra) (Trib.)

  65. S.253 : Appellate Tribunal – Withdrawal –Tribunal cannot refuse to give permission to withdrawal of appeal to the appellant

    Allowing the appeal the Tribunal held that ; Petitioner/ Plaintiff is the ‘dominus litis’ and it is open to him to pursue or abandon his case. Withdrawal cannot be denied except when the person making the prayer has obtained some advantage/benefit which he seeks to retain (ITA No. 189/Mum./2011, dt. 18-11-207)(Ay. 2007-08)

    Sainath Enterprises v. ACIT (TM) (Mum.)(Trib.) www.itatonline.org

  66. S.263 : Commissioner – Revision of orders prejudicial to revenue – CIT cannot treat the AO’s order as being erroneous and prejudicial to the interest of revenue without conducting an enquiry and recording a finding – Explanation 2 to s. 263 inserted w.e.f. 1-6-2015 does not override the law as interpreted by the various High Courts

    Allowing the appeal of the assessee, the Tribunal held that Explanation 2 to S. 263 inserted w.e.f. 1-6-2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat the AO’s order as being erroneous and prejudicial to the interest of revenue without conducting an enquiry and recording a finding. If the Explanation is interpreted otherwise, the CIT will be empowered to find fault with each and every assessment order and also to force the AO to conduct enquiries in the manner preferred by the CIT, thus prejudicing the mind of the AO, This will lead to unending litigation and no finality in the legal proceedings which cannot be the intention of the legislature in inserting the Explanation. (ITA No. 3205/Del/2017. Dt. 29-11-2017)(AY. 2014-15)

    Amira Pure Foods Pvt. Ltd. v. PCIT (Delhi)(Trib.); www.itatonline.org

  67. S.271(1)(c) : Penalty – Concealment – Satisfaction was not recorded in absolute term – Levy of penalty was held to be not justified. [S. 274]

    Allowing the appeal of the assessee the Tribunal held that; if the AO has not recorded any satisfaction in absolute terms whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income, the levy of penalty is invalid. The judgment of the Bombay High Court in Maharaj Garage cannot be read out of context or in a manner to mean that there is no need for mentioning the specific limb of section 271(1)(c) of the Act for which the penalty was intended to be imposed, as such issue never came up for consideration before the High Court. (ITA No. 1339/mum/2016, dt. 19-1-2018)(AY. 2010-11)

    Indrani Sunil Pillai v. ACIT ( Mum.)(Trib.) www.itatonline.org

  68. S.271(1)(c) : Penalty – Concealment – When show cause notice does not strike out the inappropriate words, levy of penalty was held to be not justified. [S. 274]

    Tribunal held that when the show cause notice issued in the present case u/s. 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s. 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the learned Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. (I.T.A No. 956/Kol/2016, dt. 1-12-2017)(AY. 2010-11)

    Jeetmal Choraria v. ACIT (Kol.)(Trib.) www.itatonline.org

  69. S. 271(1)(c): Penalty – Concealment – Additional ground was raised before the Tribunal – Failure to specify the charge the levy of penalty was held to be invalid. The argument that the assessee was made aware of the specific charge during the proceedings is of no avail. S. 292BB does not save the penalty proceedings from being declared void. [Ss. 254(1), 274, 292BB]

    Allowing the appeal the Tribunal held that ; Additional ground on jurisdiction issue was admitted. Tribunal held that concealment of particulars of income” and “furnishing of inaccurate particulars of income” referred to in s. 271(1)(c) denote two different connotations. It is imperative for the AO to make the assessee aware in the notice issued u/s. 274 r.w.s. 271(1)(c) as to which of the two limbs are being put-up against him. The failure to do so is fatal to the penalty proceedings. The argument that the assessee was made aware of the specific charge during the proceedings is of no avail. S. 292BB does not save the penalty proceedings from being declared void. (ITA Nos. 1596 &1597/Mum/2014, dt. 1-9-2017)(AYs. 2005-06, 2006-07)

    Orbit Enterprises v. ITO ( Mum.)(Trib.), www.itatonline.org

  70. S.271(1)(c) : Penalty – Concealment – Notice not specifying the specific charge – Levy of penalty was held to be not justified

    Allowing the appeal of the assessee, the Tribunal held that, levy of penalty without specifying a specific charge was held to be valid. The law in Maharaj Garage & Co. (Bom.) that it is not necessary for the penalty notice to frame a specific charge cannot be followed in the context of whether the notice should specify ‘concealment’ v. ‘inaccurate particulars’ because the judgment does not consider SSA’s Emerald Meadows (SC) and is contrary to Samson Perinchery (Bom)(HC). (ITA No. 5006/Del/2013, dt. 21-11-2017.)(AY. 1997-98)

    Aditya Chemicals Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org

  71. S.271(1)(c) : Penalty – Concealment – Notice not specifying specific charge – Concealment of income and furnishing of inaccurate particulars are distinct and separate charges. A nebulous notice which contains both charges is null and void ab initio [S. 274]

    Allowing the appeal of the assessee , the Tribunal held that notice should specify the specific charge. Concealment of income and furnishing of inaccurate particulars are distinct and separate charges. A nebulous notice which contains both charges is null and void ab initio. (ITA No. 118/Agra/2015, dt. 19-9-2017)(AY. 2008-09)

    Sachin Arora v. ITO (Agra)(Trib.) ; www.itatonline.org

  72. S.271(1)(c) : Penalty – Concealment – Change of method of computation of ALP by TPO cannot be the ground to levy of concealment penalty. [S. 92C 271(1)(c), Expl. 7]

    Allowing the appeal of the assessee, the Tribunal held that; under Explanation 7 to S.. 271(1)(c), the onus on the assessee is only to show that the ALP is computed in accordance with the scheme of s. 92 C in good faith and due diligence. The fact that the TPO changes the method of computation of ALP does not mean it is a fit case for imposition of penalty if there is no dishonesty is found in the conduct of the assessee. ( ITA No. 2647/Del/2016, dt. 31-10-2017) (AY. 2010-11)

    Halcrow Consulting India Pvt. Ltd. (Delhi)(Trib); www.itatonline.org

  1. S.2(47)(v) : Transfer-Development agreement – If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer [S. 45, 54EC]

    Dismissing the appeal of the revenue, the Court held that; immovable property can be regarded to have been transferred on the date of execution of the Development Agreement and irrevocable General Power of Attorney only if the terms indicate that complete control is given to the developer. If the entire consideration is not received by the assessee and physical possession of the property is not parted with, there is no transfer u/s. 2(47)(v). ( ITA No. 139 of 2015, dt. 20-11-2017)(AY. 2008-09)

    CIT v. Dr. Arvind S. Phake (Bom)(HC); www.itatonline.org

  2. S.4 : Charge of income-tax –Diversion of income by overriding title – Company formed for purpose of procuring tender and not for execution work, receipt cannot be treated as income of assessee [S. 2(24)]

    Allowing the appeal the Court held that; Company was formed for purpose of procuring tender and not for execution work, receipt cannot be treated as income of assessee as there was diversion of income at the source itself and therefore, there was diversion of income by overriding title. The receipt of amount of  ₹ 12,09,55,137 could not be treated as income of the assessee and it was diversion of income by overriding title.

    Soma TRG Joint Venture v. CIT (2017) 398 ITR 425 (J&K)(HC)

  3. S.4 : Charge of income-tax – Capital or revenue – Non-compete fee paid to an acknowledged personality to prevent her from competing with the business was a capital receipt

    Assessee, president of M/s. Tara Sinha McCann Erickson (P) Ltd. (‘TSME’), an advertising agency also held 51 per cent shares of the company. During the assessment year, the assessee resigned from TSME. Upon her retirement, she received ₹ 3,15,31,750 towards entering into a non-compete agreement which was treated by her as a capital receipt. HC observed that the assessee was an acknowledged personality in the advertising field in India. HC further observed that the assessee had the potential and stature to take away a substantial number, if not all, of the clients and the employees of TSME. The non-compete fee paid to her could not, therefore, be termed as a camouflage or a well-orchestrated plan to avoid payment of tax.

    CIT v. Tara Sinha (Mrs.) (2017) 158 DTR 193 (Delhi)(HC)

  4. S. 10A : Free trade zone –Deduction to be allowed on profit increased by amount of disallowance [S. 40(a)(v)]

    Dismissing the appeal of the revenue the Court held that deduction to be allowed on profit increased by amount of disallowance. Followed CIT v. Gem Plus Jewellery India Ltd. (2011) 330 ITR 175 (HC) (AY. 2008-09)

    PCIT v. Lionbridge Technologies (P) Ltd. (2017) 158 DTR 397 / 68 taxmann.com 101 (Bom.)(HC)

  5. S.10BA : Export of wooden articles or things – Modification and beautification of semi-finished furniture for export is entitled to deduction

    Dismissing the appeal of the revenue, the Court held that modification and beautification of semi-finished furniture for export is entitled to deduction.

    CIT v. Manglam Arts (2017) 398 ITR 594 (Raj.)(HC)

  6. S.11 : Property held for charitable purposes – Filing of Form 10 during re-assessment benefit of accumulation was available. [S. 139(4), 148]

    Dismissing the appeal of the revenue, the Court held that form 10 was filed during re-assessment by assessee-trust, benefit of accumulation was available because such filing would be considered within time allowed for furnishing return of income under section 139(4) . Followed, CIT v. Nagpur Hotel Owners’ Association (2001) 247 ITR 201 (SC). (AY. 2000-01, 2001-02)

    CIT v. Sakal Relief Fund (2017) 248 Taxman 31/295 CTR 561 / 152 DTR 89 (Bom.)(HC)

  7. S.12AA : Procedure for registration – Trust or institution – Charitable purposes – Preservation of environment including watersheds, forests and wildlife has a direct causal connection to the activity of preservation of environment hence the assessee is entitle to registration [S.2(15)]

    Dismissing the appeal of the revenue the Court held that the charitable purposes includes preservation of environment including watersheds, forests and wildlife. The activity carried out by the assessee had a direct causal connection to the activity of preservation of environment. The assessee is entitled to registration. (AY. 2012-13)

    CIT (E) v. Water and Land Management Training and Research Institute (2017) 398 ITR 283 (T &AP) (HC)

  8. S.12AA : Procedure for registration – Trust or institution – Income derived by assessee by way of fees from students for running educational institution is income derived which was applied for aims and objects of assessee hence is entitled to registration

    The Commissioner failed to mention the exact enquiry report sent by the Departmental authorities to ascertain the basis on which they did not recommend registration to the assessee. Thus, the Tribunal rightly directed the Commissioner to grant registration to the assessee. No illegality or perversity could be demonstrated by the Department in the findings recorded by the Tribunal. (AY. 2012-13)

    CIT(E) v. Lord Krishna Charitable Trust (2017) 398 ITR 370 (P&H)(HC)

  9. S.14A : Disallowance of expenditure – Exempt income – When there is no exempt income, no disallowance can be made [R.8D]

    Dismissing the appeal of revenue the Court held that, when there is no exempt income, no disallowance can be made. Merely because tax auditor had suggested in tax audit report that there ought to be such disallowance, it could not be a ground to make disallowance. (AY. 2011-12)

    PCIT v. IL & FS Energy Development Company Ltd. (2017) 250 Taxman 174 / 297 CTR 452 (Delhi)(HC)

  10. S.14A : Disallowance of expenditure – Exempt income – Recording of satisfaction is mandatory – Remanding the matter to CIT(A) is not justified [R.8D]

    Allowing the appeal of the assessee the Court held that recording of satisfaction is mandatory, once this mandatory was itself not fulfilled, the question of remanding the matter to the Commissioner (Appeals) and to call for a remand report from the Assessing Officer for the purposes of rectifying this jurisdictional defect would not arise. (AY. 2009-10)

    Eicher Motors Ltd. v. CIT (2017) 398 ITR 51 (Delhi)(HC)

  11. S.22 : Income from house property – letting of building including charges for air conditioning is assessable as income from house property and not as income from other sources. [S.32, 56]

    Dismissing the appeal of the revenue, the court held that the property was part of stock-in-trade of the assessee and also that the assessee did not claim any depreciation on the air-conditioning plant to the extent it was used for letting out the air-conditioned building. The assessee had not claimed depreciation to that extent. Therefore, the rent receipt which also includes air conditioning charges was income from house property. (AY. 1997-98)

    CIT v. DLF Universal Ltd. (No.1) (2017) 398 ITR 708 (Delhi) (HC)

  12. S. 36(1)(vii) : Bad debt – Advance to suppliers for business which was lying outstanding for number of years was written off was held to be allowable as deduction, though the suit was not filed for recovery of the said amounts. [S. 28(i)]

    Dismissing the appeal of the revenue the Court held that advance to suppliers for business which was lying outstanding for number of years was written off was held to be allowable as deduction, though the suit was not filed for recovery of the said amounts.

    PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj.)(HC)

    Editorial : SLP of revenue is dismissed, PCIT v. Rajasthan State Beverages Corporation Ltd. (2017) 250 Taxman 16 (SC)

  13. S.37(1) : Business Expenditure – Foreign exchange losses due to fluctuation in the rate of foreign exchange as on balance sheet date are deductible. [S. 145]

    Dismissing the appeal of the revenue the Court held that the AO had failed to consider the judgment of Supreme Court in case of Woodward Governor India (P.) Ltd. (2009) 312 ITR 254 (SC), wherein it was held that loss suffered by the assessee, maintain accounts regularly on mercantile system and following accounting standards prescribed by the ICAI, on account of fluctuation in the rate of foreign exchange as on the date of balance sheet was an item of expenditure under S.37(1) not withstanding that the liability has not been discharged in the year in which the fluctuation in the rate of foreign exchange occurred. (AY. 2008-09)

    PCIT v. Lionbridge Technologies (P) Ltd. (2017) 158 DTR 397 / 68 taxmann.com 101 (Bom.)(HC)

  14. S.37(1) : Business expenditure – Expenses incurred over and above 6 per cent by an assessee being an asset management company was allowable as a deduction [S.260A]

    Regulation 52(5) of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 states that any expense other than those specified in sub-regulations (2) and (4) shall be borne by the asset management company. Further, any excess over the 6 per cent initial issue expense shall also be borne by the asset management company. HC held that where it is accepted that the assessee is an asset management company, the assessee is statutorily liable to bear the expenses over and above 6 per cent. High Court held that the order of the Tribunal allowing deduction of such expenses incurred by the assessee did not give rise to any substantial question of law.

    CIT v. ING Investment Management (India) (P) Ltd. (2017) 157 DTR 153 / 298 CTR 582 (Bom.)(HC)

  15. S.37(1) : Business expenditure – Liquidated damages in the nature of penalty for delaying delivery or late completion of terms and conditions of order was held to be allowable as business expenditure

    Dismissing the petition the Court held that liquidated damages in the nature of penalty for delaying delivery or late completion of terms and conditions of order was held to be allowable as business expenditure. (AY. 2010-11)

    PCIT v. Mazda Ltd. (2017) 250 Taxman 510 (Guj.)(HC)

  16. S.37(1) : Business expenditure –Payment made as per agreement for joint production of film was held to be allowable as business expenditure

    Dismissing the appeal of the revenue, the Court held that payment made as per agreement for joint production of film was held to be allowable as business expenditure. (AY. 2006-07)

    CIT v. Dharma Productions (P.) Ltd. (2017) 248 Taxman 465 / 297 CTR 24 / 153 DTR 105 (Bom.)(HC)

    Editorial: Order in Dharma Productions (P.) Ltd v. Dy. CIT (2014) 42 taxmann.com 8 (Mum) (Trib) is affirmed.

  17. S.37(1) : Business expenditure – Commission – Disallowance of commission only on the ground that supply was made to Govt. department would not be sustainable – Matter remanded

    Allowing the appeal the Court held that disallowance of commission only on the ground that supply was made to Gov. department would not be sustainable. Matter remanded . (AY. 2005-06)

    Brijbasi Hi-Tech Udyog Ltd. v. CIT (2017) 248 Taxman 92/ 154 DTR 69 (All.)(HC)

  18. S.37(1) : Business expenditure — Employees’ stock option plan — Once option given and exercised by employee liability is ascertained it is not contingent liability hence allowable as business expenditure

    Dismissing the appeal of the revenue the Court held that as regards employees stock option plan, once option given and exercised by employee liability is ascertained it is not contingent liability hence allowable as business expenditure (AY. 2007-08)

    CIT v. New Delhi Television Ltd. (2017) 398 ITR 57 (Delhi)(HC)

    Editorial: SLP is granted to revenue CIT v. New Delhi Television Ltd. (2017) 396 ITR 71 (St.)

  19. S.40(a)(ia) : Amounts not deductible – Deduction at source – A party cannot be called upon to perform an impossible act i.e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. S. 40(a)(ia) disallo-wance can be made only if the royalty falls under Explanation 2 to s. 9(1)(vi) but not if it falls under Explanation 6 to s. 9(1)(vi) [S. 9(1)(vi), 194C, 194J, 195]

    Dismissing the appeal of the revenue the Court held that a party cannot be called upon to perform an impossible act i.e., to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. S. 40(a)(ia) disallowance can be made only if the royalty falls under Explanation 2 to s. 9(1)(vi) but not if it falls under Explanation 6 to s. 9(1)(vi) (ITA No. 397 of 2015. dated 29-1-2018)

    CIT v. NGC Networks (India)(Pvt. Ltd. (Bom)(HC), www.itatonline.org

  20. S.40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – sub-contractor – No disallowance can be made due to human mistake Form 15J was filed before the Assessing Officer instead of Commissioner [S.194C, 292B]

    Dismissing the appeal of the revenue, the Court held that no disallowance can be made due to human mistake Form 15J was filed before the Assessing Officer instead of Commissioner (AY. 2008-09)

    CIT v. Shridhar Shantinath Patravali (2017) 248 Taxman 550 (Karn.)(HC)

  21. S.40(a)(ia) : Amounts not deductible – Deduction at source – Transport charges – Deposited tax deducted at source before due date of filing of return – No disallowance can be made –Amendment to Section 40(a)(ia) by Finance Act, 2010 with effect from 1-4-2010 would also apply for the AY. 2009-10 [Ss. 139(1), 194C]

    Allowing the appeal of the assessee the Court held that assessee has deposited tax deducted at source before due date of filing of return therefore no disallowance can be made as the amendment to section 40(a)(ia) by Finance Act, 2010 with effect from 1-4-2010 would also apply for the AY. 2009-10. (AY. 2009-10)

    Allahabad Wholesale Central Coop. Store Ltd. v. P CIT (2017) 248 Taxman 302/ 157 DTR 357 (All.)(HC)

  22. S.40(b)(i) : Amounts not deductible – Partner – Book profit – Once cash advances was assessed as business income the same has to be taken in to consideration for the purpose of book profit [Ss.28(i), 133A]

    Allowing the appeal of the assessee the Court held that once cash advances was assessed as business income the same has to be taken in to consideration for the purpose of book profit. It was not open to the Department to contend that the amount of ₹ 1,55,289 was part of business income while computing the tax payable but not so for the purposes of Section 40(b) of the Act. The character of the income would not change depending upon the section to be applied.

    National Sales Corporation v. ITO (2018) 400 ITR 463 (Bom.) (HC)

  23. S.41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Principal amounts of loan was written off was being capital nature hence not taxable [S.28(iv)]

    Dismissing the appeal of revenue the Court held that principal amounts of loan was written off as per BIFR order, was being capital nature hence not taxable. Ratio in Solid Containers Ltd. v. Dy.CIT( 2009) 308 ITR 417 (Bom.)(HC) is considered. (AY. 2006-07)

    CIT v. Graham Firth Steel Products (I) Ltd. (2017) 250 Taxman 235 (Bom.)(HC)

  24. S.45 : Capital gains – Penny stocks – Merely because appreciation in value the capital gains cannot be assessed as income from undisclosed sources [S. 69]

    Dismissing the appeal of the revenue the Court held that the fact that the appreciation in the value of the shares is high does not justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income if (a) the shares are traded on the Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate it is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner. (ITA No. 95 of 2017, dt. 18-1-2018)(AY. 2008-09)

    PCIT v. Prem Pal Gandhi ( 2018) 401 ITR 253 (P & H) (HC)

  25. S. 45 : Capital gains – Business income – Investment in shares – As explained in Circular No. 6, dated 29-2-2016, in respect of listed shares and securities held for a period of more than 12 months immediately preceding date of its transfer has to be assessed as capital gains [S. 28(i)]

    Dismissing the appeal of the revenue, the Court held that as explained in circular No. 6, dated 29-2-2016, in respect of listed shares and securities held for a period of more than 12 months immediately preceding date of its transfer, if assessee desires to treat income arising from transfer thereof as capital gain, same shall not be put to dispute by Assessing Officer subject to condition that consistent view of the assessee in subsequent years also. (AY. 2006-07)

    PCIT v. Ramniwas Ramjivan Kasat (2017) 248 Taxman 484 (Guj.)(HC)

  26. S.45 : Capital Gains – Cost of flats received on entering into a development agreement would be the cost of construction of the built-up area

    Co-owners of a property including the assessee entered into an agreement with Ansal Properties & Industries Ltd. on 2nd May, 1984 whereby the building on the land was to be demolished and an apartment complex was to be constructed thereon. It was agreed that the co-owners would get built-up area of 89,136 sq. ft. which constituted 56% of total built-up area and 44% of the built up area would belong to Ansals. The entire cost of construction was to be met by Ansals. Assessee sold his share of the flats and offered capital gains on such sale. HC held that there was no transfer of the title to the land by the assessees in favour of Ansals but what was transferred under the collaboration agreement was only 44 per cent of the land owned by them in exchange for 56 per cent of the built-up area. Further, the assessee not only transferred the flats to buyers but the proportionate right in the appurtenant land as well. HC held that the consideration for the transfer of 44 per cent land was the cost of construction of the 56 per cent built up area. HC held that the cost of flat would be equal to costs of construction of 56 per cent of the built up area and the cost of acquisition of land would be the market value of land as on 1st April 1981.

    CIT v. Siddharth Pratap Chand (2017) 398 ITR 316/159 DTR 199 (Delhi)(HC)

  27. S.45(2) : Capital gains – Conversion of a capital asset in to stock-in-trade – Land is converted into stock-in-trade – Capital gains is to be computed up to the date of conversion in to stock in trade and for a period thereafter as business income [Ss. 28(i), 45]

    On appeal by revenue, dismissing the appeal the High Court held that when the land is converted in to stock-in-trade, capital gains is to be computed up to the date of conversion in to stock in trade and for a period thereafter as business income. Assessing Officer should apply provisions of section 45(2) and compute capital gains up to date of conversion into stock-in-trade, and thereafter on actual sale of land, i.e., difference between value of sale and stock-in-trade, was to be considered as business income. (AY. 2011-12)

    CIT v. Essorpe Holdings (P.) Ltd. (2017) 249 Taxman 222 (Mad.)(HC)

  28. S.50 : Capital gains – Depreciable assets – Block of assets – Once depreciation is allowed on an asset it would remain a business asset and any profit earned on sale of such asset would be taxed [Ss.2(11), 45]

    Dismissing the appeal of the assessee the Court held that once depreciation is allowed on an asset it would remain a business asset and any profit earned on sale of such asset would be taxed. High Court held that; the tribunal was right in holding that an asset cannot move out of the block of assets once depreciation is allowed on that particular asset and that since initially depreciation was allowed on both the galas, even though subsequently one gala was not used for the business of the assessee, the same continued to be a part of block of assets on which depreciation was allowed and the gain on sale of such asset should be taxed under section 50. (AY. 1991-92)

    Meena V. Pamnani (Smt.) v. CIT (2017) 159 DTR 1/ 251 Taxman 100 (Bom.) (HC)

  29. S.54B : Capital gains – Land used for agricultural purposes – Though the document is registered in the name of spouse wife exemption cannot be disallowed – Revision was held to be not valid [S. 45, 50C, 54F, 263 ]

    Allowing the appeal of the assessee the Court held that the fact that the investment and document is registered is made in the name of the spouse (wife) is not a ground for disallowing exemption from capital gains u/s. 54B if the funds utilised for the investment belong to the assessee. Revision was held to be not valid. (ITA No. 20/2016, dt. 8-12-2017)

    Mahadev Balai v. ITO (Raj)(HC); www.itatonline.org

  30. S.54F : Capital Gains – Investment in a residential house – Receipt of multiple flats on conveying land under a joint development agreement would not disentitle assessee from the benefits [S. 45]

    Assessee owned a plot of land. A joint development agreement was entered into and the plot of land was conveyed to a builder and the assessee received certain flats. The issue before the High Court was as to whether receipt of more than one flat by the assessee disentitled him from making a claim u/s. 54F. High Court held that all the flats received were a product of one development agreement of the same piece of land being transferred. Therefore, even if flats/apartments received were in different blocks and different towers as long as they were in the same address/location, the assessee was entitled to benefit of S. 54F. HC also held that the amendment in S. 54F w.e.f. 1st April, 2015 would be prospective in nature.

    CIT v. Gumanlal Jain (2017) 160 DTR 221 (Mad.)(HC)

  31. S.68 : Cash credits – Long term capital gains – Evidence of contract and payment through Banks – Addition cannot be made solely on the basis that late recording in Demat Pass book – Order of Tribunal set aside [Ss. 45, 254(1), 260A]

    Allowing the appeal of the assessee the Court held that evidence of contract and payment through banks hence addition cannot be made solely on the basis that late recording in Demat Pass book. – Order of Tribunal set aside as it has considered only part of evidence and not entire evidence. (AY. 2005-06)

    Amita Bansal (Ms.) v. CIT (2018) 400 ITR 324 (All) (HC)

  32. S. 68 : Cash credits – Penny stocks – Capital gains – Assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit [S. 45]

    Dismissing the appeal of the assessee the Court held that the assessee has not tendered cogent evidence to explain how the shares in an unknown company worth ₹ 5 had jumped to ₹ 485 in no time. The fantastic sale price was not at all possible as there was no economic or financial basis to justify the price rise. The assessee had indulged in a dubious share transaction meant to account for the undisclosed income in the garb of long term capital gain. The gain has accordingly to be assessed as undisclosed credit. (ITA No. 18/2017, dt. 10-4-2017)( AY. 2006-07)

    Sanjay Bimalchand Jain v. P. CIT (Bom.)(HC); www.itatonline.org

  33. S. 68 : Cash credits – Sale of shares – When purchase of shares were accepted as genuine in the year of sale consideration cannot be assessed as cash credits

    Dismissing the appeal of the revenue , the Court held that when purchase of shares were accepted as genuine in the year of sale consideration cannot be assessed as cash credits. (AY. 2006-07)

    PCIT v. Ramniwas Ramjivan Kasat (2017) 248 Taxman 484 (Guj.)(HC)

  34. S.68 : Cash credits – Share capital – Reliance on statements of third parties who have not been subjected to cross-examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents

    Dismissing the appeal of the revenue the Court held that the companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Reliance on statements of third parties who have not been subjected to cross-examination is not permissible. Voluminous documents produced by the assessee cannot be discarded merely on the basis of statements of individuals contrary to such public documents. (ITA No. 66 of 2016, dt. 10-4-2017)

    PCIT v. Paradise Inland Shipping Pvt. Ltd.( 2018) 400 ITR 439 (Bom)(HC)

  35. S.69 : Unexplained investments – Sale and purchase of shares carried out on stock exchange and appearing in the demat account where the settlement was made through account payee cheque cannot be treated as non-genuine [S.45]

    Assessee had sold shares on which he earned a short term capital gain. AO carried out investigations which revealed that the entire share transactions were bogus and mere accommodation entries obtained from an entry provider Shri P. K. Agarwal from Kolkata. High Court upheld the genuineness of the transaction as the shares were purchased and sold through the demat account, payments were made by way of an account payee cheque. Further, AO had also not made any inquiries as to whether the transactions were not genuine.

    CIT v. Jitendra Kumar Agarwal (2017) 160 DTR 198 / 299 CTR 524 (Raj.)(HC)

    CIT v. Pooja Agarwal (Smt.) (2017) 299 CTR 524 / 160 DTR 198 (Raj.)(HC)

  36. S. 80IA : Industrial undertakings –Only losses of the years beginning from the initial assessment year are to be brought forward for set-off against profits of the eligible unit. Losses of earlier years which are already set off against income cannot be brought forward notionally for set-off. The fiction in s. 80-IA(5) is created only for a limited purpose and cannot be extended [S.80-IA(5)]

    Dismissing the appeal of the revenue , the Court held that only losses of the years beginning from the initial assessment year are to be brought forward for set-off against profits of the eligible unit. Losses of earlier years which are already set off against income cannot be brought forward notionally for set-off. The fiction in
    S. 80-IA(5) is created only for a limited purpose and cannot be extended. (ITA No. 707 of 2014, dt. 14-6-2017)(AY. 2009-10)

    CIT v. Herculers Hoists Ltd. (Bom)(HC); www.itatonline.org

  37. S.80IC : Special category States – “initial assessment year” and “substantial expansion” – There can be more than one initial assessment year – Substantial expansion is also eligible to deduction – Circular explaining the provision is also relevant to interpretation of the section

    After analysing the provisions, the Court held that appeals are allowed and orders passed by the Assessment Officer as well as the Appellate Authority and the tribunal, in the case of each one of the assessees, are quashed and set aside, holding as under:

    (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7-1-2003 and have undertaken substantial expansion between 7-1-2003 up to 1-4-2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB.

    (b) Such of those units which have commenced production after 7-1-2003 and carried out substantial expansion prior to 1-4-2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC.

    (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions.

    (d) Correspondingly, there can be more than one initial Assessment Year.

    (e) Within the window period of 7-1-20013 up to 1-4-2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years.

    (f) All this, of course, is subject to a cap of ten years [Section 80-IC(6)].

    (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [S. 80 IB(5)] ( ITA No. 20/2015, dt. 28-11-2017)

    Stovekraft India v. CIT(2017) 160 DTR 378/ ( 2018) 300 CTR 5 / 400 ITR 225 (HP)(HC)

  38. S. 80P : Co-operative societies –Primary agricultural credit society are entitled to the exemption [S.80P(4)]

    The assessee was a “primary agricultural credit society”, engaged primarily in the principal business of providing financial assistance to its members who were agriculturists. A primary agricultural credit society need not be treated as a primary co-operative bank. S. 80-P(4) denies benefit of the provision to any co-operative bank other than a primary agricultural credit society. HC held that primary agricultural credit societies, registered as such were entitled to exemption under Section 80-P.

    CIT v. Veerakeralam Primary Agricultural Co-operative Credit Society (2017) 156 DTR 178 (Mad.)(HC)

  39. S.92C : Transfer Pricing – Arm’s Length Price – Unless it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged

    Dismissing the appeal of the revenue, the Court held that the Comparable Uncontrolled Price (CUP) method is not the Most Appropriate Method for determining the Arm’s Length Price (ALP) in respect of the transactions of (sales of goods and sales commission) with Associated Enterprises (AEs) if there are geographical differences, volume differences, timing differences, risk differences and functional differences. If it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged. (ITA No. 1131, 1102, 1100 of 2015, dt. 7-3-2018) (AY. 2006-07, 2007-08, 2009-10)

    PCIT v. Amphenol Interconnect India P. Ltd. (Bom)(HC), www.itatonline.org

  40. S.92C : Transfer pricing – Arm’s Length Price – Corporate guarantee – When no expenditure was incurred for providing guarantee to bank for the loan given to subsidiaries applying the rate of 2.5% by the TPO was held to be not justified

    Dismissing the appeal of the Revenue, the Court held that when no expenditure was incurred for providing guarantee to bank for the loan given to subsidiaries applying the rate of 2.5% by the TPO was held to be not justified. (AYs. 2003-04 to 2006-07)

    CIT v. Reliance Industries Ltd. ( 2018) 161 DTR 420 (Bom) (HC)

  41. S.92C : Transfer Pricing – Arm’s length price – Corporate guarantee is not to be determined on basis of comparison with bank guarantee hence addition was held to be not justified

    Dismissing the appeal of the Revenue, the Court held that the arm’s length price of corporate guarantee could not be determined on the basis of comparison with the bank guarantee hence deletion of addition was held to be justified. (AY. 2008-09)

    CIT v. Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439 (Bom.)(HC)

  42. S.92C : Transfer pricing – Arm’s Length Price – Outstanding receivable from debtors – Deletion was held to be justified [S.92B]

    Dismissing the appeal of the Revenue, the Court held that any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction which was impermissible. The focus of the Assessing Officer was on just one assessment year and the figure of receivables in respect of that assessment year could hardly reflect a pattern that would justify the Transfer Pricing Officer to conclude that the figure of receivables beyond 180 days constituted an international transaction by itself. (AY. 2010-11)

    PCIT v. Kusum Healthcare P. Ltd. (2017) 398 ITR 66 (Delhi)( HC)

  43. S.115JB : Book profit– Disallowance of expenditure on exempt income – Amount disallowed u/s. 14A of the Act cannot be added to arrive at book profit for purposes. [S. 14A, R.8D]

    Dismissing the appeal of the revenue the Court held that, the amount disallowed u/s. 14A of the Act cannot be added to arrive at book profit for purposes of S. 115JB. (ITA No. 337 of 2013, dt. 10-2-2015) (AY. 2007-08)

    CIT v. Bengal Finance & Investment Pvt. Ltd. (Bom.)(HC); www.itatonline.org

  44. S.133A : Power of Survey – Statement is not conclusive – In absence of any contrary evidence or explanation the same can be acted upon [S. 32]

    On appeal, the High Court held that a statement made under Section 133A of the Act is not bereft of any evidentiary value. It may not be conclusive but in the absence of any contrary evidence or explanation as to why the statement made under Section 133A of the Act is not credible, it can be acted upon. As a result the High Court upheld the order of the AO denying depreciation allowance to the Assessee. (AY. 1996-97)

    Pebble Investment & Finance Ltd. (2017) 156 DTR 247 (Bom.)(HC)

  45. S.139 : Return of income – Return of income filed within time showing the taxable income, can be revised showing the loss Tribunal was justified in allowing the carry forward of speculation loss [Ss. 139(1), 139(5)]

    Dismissing the appeal of the Revenue, the Court held that once a return was revised under section 139(5) within time prescribed, original return filed under section 139(1) would not survive – Accordingly, Tribunal was justified in allowing assessee’s claim for carry forward of speculation loss. (AY. 2005-06)

    PCIT v. Babubhai Ramanbhai Patel (2017) 249 Taxman 470 (Guj.)(HC)

  46. S.139 : Return – Revised return – Return filed u/s. 139(1) or u/s. 139(4) within extend period of one year from the end of the relevant assessment year or before completion of assessment, which ever is earlier can be revised –Amendment with effect from April 1, 2017 is retrospective in nature – Matter set aside to Assessing Officer. [Ss. 139(1), 139(4), 139(5)]

    Allowing the appeal of the assessee, the Court held that; Return filed u/s. 139(1) or u/s. 139(4) within extended period of one year from the end of the relevant assessment year or before completion of assessment, whichever is earlier can be revised. Section 139(5) was amended by Finance Act, 2016, with effect from April 1 2017. The amendment was intended to confer a benefit on the assesssee and has retrospective application.

    DIT(E) v. Medical Trust of the Seventh Day Adventists (2017) 398 ITR 721 (Mad.) (HC)

  47. S.144C : Reference to dispute resolution panel – Issuance of draft assessment orders by assessing officer mandatory, without following the procedure the passing of the order was held to be invalid and consequently demand notices and penalty proceedings also invalid [Ss. 156, 271(1)(c)]

    Allowing the petition, the Court held that ; failure by the Assessing Officer to adhere to the mandatory requirement of Section 144C(1) and pass draft assessment orders had invalidated the final assessment orders, the consequent demand notices and penalty proceedings. The legal position was unambiguous and the final assessment order stood vitiated for failure to adhere to the mandatory requirements of first passing the draft order. (AYs. 2007-08, 2008-09)

    Turner International India P. Ltd. v. Dy. CIT (2017) 398 ITR 177 (Delhi)(HC)

  48. S.145 : Method of accounting – Where revenue had modified or substituted method of valuation of closing stock in particular year, same methodology would also have to be applied for valuation of opening stock for that year [S.154, 254(2)]

    Allowing the petition of the Court held that; where Revenue had modified or substituted method of valuation of closing stock in particular year, same methodology would also have to be applied for valuation of opening stock for that year. Court also held that rejection of the application for rectification by the Tribunal on the ground that the said arguments was not raised was held to be not justified, the Tribunal ought to have allowed the rectification application of the petitioner. (AY. 2003-04)

    Veera Exports v. ACIT (2017) 248 Taxman 478 (Guj.)(HC)

  49. S.145 : Method of Accounting – Merely because the gross profit is low cannot be the ground to reject the books of account

    Dismissing the appeal of the Revenue, the Court held that merely because the gross profit is low cannot be the ground to reject the books of account. (AY. 2007-08)

    PCIT v. Purshottam B. Pitroda (2017) 248 Taxman 118 (Guj.)(HC)

  50. S.145 : Method of Accounting – Loss on derivatives arising as a result of change in method and adoption of AS-31 allowable [S.28(i)]

    Assessee changed his method of accounting and started following Accounting Standard 31 and consequently claimed deduction in respect of loss on derivative contracts. High Court held that once it is accepted that the AS applies to the assessee and it was legally entitled to follow the same, the loss on derivatives had to be allowed.

    CIT v. Olam Agro India Ltd. (2017) 251 Taxman 120 (Ker.)(HC)

  51. S.147 : Reassesment – With in four years – Audit objection – Reply of Assessing Officer to audit objection opposing the reassessment, Apex Court Judgment was not available – Reassessment was held to be bad in law [S. 80IB, 148]

    Dismissing the appeal of the Revenue, the Court held that the Assessing Officer has objected to the audit objection, Apex Court judgment was not available when the notice for reopening was issued. Change of opinion, therefore reassessment was held to be bad in law (ITA No. 606 of 2015, dt. 24-2-2018)(AY. 2004-05)

    CIT v. Rajan N. Aswani (Bom.)(HC), www.itatonline.org

  52. S.147 : Reassessment – Non furnishing the copy of recorded reasons is not mere procedural lapse, reassessment was held to be bad in law – There was no estoppel against an assessee, on account of participating in the proceedings, as long as it had raised an objection in writing regarding the failure by the Assessing Officer to follow the prescribed procedure [Ss.148, 292BB(1)]

    Dismissing the appeals of the Revenue, the Court held that Non-furnishing the copy of recorded reasons is not mere procedural lapse, reassessment was held to be bad in law. According to the proviso to Section 292BB(1)there was no estoppel against an assessee, on account of participating in the proceedings, as long as it had raised an objection in writing regarding the failure by the Assessing Officer to follow the prescribed procedure. No question of law arose. (AY.1999-2000 to 2004-05 )

    PCIT v. Jagat Talkies Distributors (2017) 398 ITR 13 (Delhi)(HC)

  53. S.153 : Assessment – Time limit- When the assessment was set aside the same has to be completed within limitation period, it is not necessary that entire assessment order is set aside – Order passed was held to be beyond period of limitation hence quashed. [S. 153(2A)]

    Allowing the appeal of the assessee the Court held that when the assessment was setaside the same has to be completed within limitation period, it is not necessary that entire assessment order is set aside. Accordingly order passed was held to be beyond period of limitation hence quashed. (AY. 2007-08)

    Nokia India (P) Ltd. (2017) 251 Taxman 85 / 298 CTR 334 (Delhi)(HC)

  54. S.153 : Assessment – Reassessment – Limitation period between vacation of stay and receipt of order by Income-tax Department is not excluded hence the order of reassessment passed is barred by limitation. [Ss. 147, 148]

    Allowing the petition, the Court held that ; the Revenue could not take advantage of the fact that it received a copy of the order dated November 9, 2016 of the Court only on December 2, 2016 to contend that the assessment order having been passed on January 30, 2017 within 60 days of the date of the receipt of the order of the High Court, was not issued beyond the period stipulated under Section 153(2) of the Act read with the proviso to Explanation 1 thereof. The order dated November 9, 2016 was passed in the presence of counsel for the Revenue and, therefore, the Revenue clearly was aware of the order on that date itself. The order dated January 30, 2017 was time-barred. (AY. 2006-07)

    Saheb Ram Om Prakash Marketings P. Ltd v. CIT (2017) 398 ITR 292 (Delhi)(HC)

  55. S.153A : Assessment – Search –Assessment can be made only on the basis of incriminating evidence found during search, whether assessment u/s. 143(1) or 143(3) does not make any difference [Ss. 132, 143(1), 143(3)]

    Dismissing the appeal of the Revenue the Court held that; the scope of assessment under section 153A was limited to the incriminating evidence found during the search and no further. Section 153A of the Income-tax Act, 1961 did not make any distinction between the assessment conducted under section 143(1) and Section 143(3). (AY. 2002-03, 2003-04)

    CIT v. SKS Ispat and Power Ltd. (2017) 398 ITR 584 (Bom.)(HC)

  56. S.158BE : Block Assessment – Time limit – Search of factory completed in May 1997 and last panchanama drawn on 14-8-1997. Subsequent restraint orders for purpose of seizure, hence the assessment order passed on 16-8-1999 was held to be barred by limitation [Ss. 132, 158BC]

    Allowing the appeal, the Court held that the search proceeding continued up to August 16, 1997, but the subsequent restraint orders were only for the purpose of seizure, no further search material was found and specifically the panchanama drawn on that date, and therefore, the assessment order passed under Section 158BC on August 16, 1999 was barred by limitation. The order passed by the Tribunal and the Assessing Officer were set aside.

    Mohd. Yasin v. CIT (2017) 398 ITR 33 (Raj.)( HC)

  57. S.158BE : Block assessment –Time limit – Panchanama – when nothing new is found in second panchanama limitation cannot be extended [Ss. 153A, 153B]

    Dismissing the appeal of the Revenue, the Court held that when nothing new is found merely visiting the premises on the pretext of concluding the search but not actually finding anything new for being seized could not give rise to a second panchanama. In such event, there would be no occasion to draw up a panchanama at all. The second visit by the search party to the premises on May 15, 2007 did not result in anything new being found that belonged to any of the searched parties. The second visit and the panchanama drawn up on that date could not lead to postponement of the period for completion of assessment with reference to section 153B(2)(a). The assessments were barred by limitation (AYs. 2001-02 – 2006-07)

    PCIT) v. J. H. Business India P. Ltd. (2017) 398 ITR 71 (Delhi)( HC)

  58. S.179 : Private Company – Liability of directors – without giving an opportunity to prove that non-recovery of tax due against company could not be attributed to any gross negligence, misfeasance or breach of duty on her part in relation to affairs of company, provision could not be invoked against directors

    Allowing the petition the Court held that without giving an opportunity to prove that non-recovery of tax due against company could not be attributed to any gross negligence, misfeasance or breach of duty on her part in relation to affairs of company, provision could not be invoked against directors. (AY. 2004-05)

    Susan Chacko Perumal v. ACIT (2017) 249 Taxman 501 (Guj.)(HC)

  59. S.194H : Deduction at source – Commission or brokerage –Principal-to-principal – Discount did not amount to a payment hence not liable to deduct tax at source. [S. 201, 201-IA, 271, Contract Act, S. 182]

    An obligation to deduct tax at source arises only if the relationship is that of “principal and agent” and if a “payment” is made. As the relationship between the assessee and the distributor was that of “principal-to-principal” and as the “discount” did not amount to a “payment”, there was no liability to deduct TDS. Contention regarding provisions of Section 271 of the Act, in view of our answer in favour of assessee, this issue is also required to be answered in favour of assessee. Even otherwise as rightly held by the Supreme Court in
    CIT v. Eli Lilly & Co. (India) P. Ltd. the penalty could not have been levied in all the appeals filed by assessee Coca Cola. (ITA No. 205/2005, dt. 11-7-2017)

    Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (Raj)(HC); www.itatonline.org

  60. S.206AA : Requirement to furnish Permanent Account Number –where the non-resident payee is resident in a territory with which India has a Double Taxation Avoidance Agreement, the rate of taxation would be as dictated by the provisions of the treaty-DTAA–India-Singapore [Ss. 4, 5, 90, Art. 12]

    Allowing the petition, the Court held that the requirement (pre-amendment) that TDS should be deducted at 20% on payments to non-residents even though the income is chargeable to tax at a lower rate under the DTAA is not acceptable because the DTAA has primacy over the Act. Section 206AA (as it existed) has to be read down to mean that where the non-resident payee is resident in a territory with which India has a Double Taxation Avoidance Agreement, the rate of taxation would be as dictated by the provisions of the treaty. (WP No. 5908/2015, dt. 5-2-2018)

    Danisco India Private Ltd. v. UOI (Delhi)(HC), www.itatonline.org

  61. S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – TRO was not permitted to bring property for sale because of limitation period, it would be assessee’s duty to pay tax [Schedule II, Rule 68B]

    Allowing the petition the Court held that ; since there was an order of attachment in year 2003, but property was not sold within 3 years from date of attachment, same could no more be sold by Revenue. Therefore the order of attachment passed by TRO and consequential proceeding of Sub-Registrar were to be quashed and Sub-Registrar was to be directed to remove encumbrance made in respect of said property. Court also held that since the TRO was not permitted to bring property for sale because of limitation period, it would be assessee’s duty to pay tax.

    T. Subramanian v. TRO (2107) 249 Taxman 170 (Mad.)(HC)

  62. S. 226 : Collection and recovery – Stay of proceedings – Deduction at source – Appeal pending before CIT(A) – Refusal to extend stay merely because the assessee had funds was held to be not proper, when the Board has given instructions that stay must be granted on paying 15% of tax in dispute when appeal is pending before CIT(A) [S. 225, Art. 226]

    Allowing the petition the Court held that earlier stay granted and extended from time-to-time on the basis of a binding Central Board of Direct Taxes circular which directs officers of the Revenue to grant stay till the disposal of the first appeal on payment of 15 per cent disputed amount. This circular was completely ignored. Merely having funds, i.e., no financial hardship, would not by itself justify the deposit where a prima facie case was made out. Nowhere had the delay in disposal of the pending appeals before the appellate authority been attributed to the assessee. The petition was adjourned and ad interim stay was granted restraining the authorities from taking any coercive steps to recover the amount of ₹ 43.79 crores or any part thereof being the outstanding demand in respect of the pending appeals before the Commissioner (Appeals) till the next date. (AY. 2000-01 to 2012-2013)

    Vodafone India Ltd. v. CIT (2018) 400 ITR 516 (Bom.) (HC)

  63. S.226 : Collection and recovery – Stay – PCIT & ACIT directed to pay personal costs for filing frivolous writ petition to challenge ITAT stay order [S. 254(2A)]

    Dismissing the petition of the revenue , the Court held that raising unsustainable, illegal and high pitched demands and enforcing coercive recovery and challenging stay orders shows utterly irresponsible and unfair behaviour. Thereafter, seeking adjournments by the Dept. of the hearing in the ITAT adds insult to injury. Irresponsible and unco-ordinated manner of the Dept. strongly deprecated. PCIT & ACIT directed to pay personal costs for filing frivolous writ petition to challenge ITAT stay order. (WP No 12913 / 2017 dt. 9-1-2018)

    ACIT v. Epson India Pvt. Ltd. (Karn. (HC), www.itatonline.org

  64. S.226 : Collection and recovery – Recovery of the amount in dispute as soon as the order passed by the Appellate Authority, though the limitation period for filing an appeal was not over cannot be said to be illegal, though it may not be proper. [S. 226(3), 237, 240]

    Dismissing the petition, the Court held that ; recovery of the amount in dispute as soon as the order passed by the Appellate Authority, though the limitation period for filing an appeal was not over, cannot be said to be illegal, though it may not be proper. Appeal was disposed of and was communicated on 30-3-2017. Demand was recovered from bank account of assessee on very next day i.e., 31-3-2017. Court also held that although assessee’s appeal was pending before Tribunal, it was not entitled for refund of amount recovered at this stage, as a matter of right, since neither section 237 nor section 240 would come to their rescue as on date. (AYs. 2009-10, 2010-11, 2013-14)

    Chennai Central Co-operative Bank Ltd. v. ACIT (2017) 248 Taxman 366 (Mad.)(HC)

  65. S. 234B : Interest – Advance tax –Assessee was under no obligation to pay advance tax and the liability arose only on account of retrospective amendment to the law after the conclusion of the previous year relevant to the subject assessment year

    Dismissing the appeal of the Revenue, the Court held that the Tribunal was right in deleting the interest charged under Section 234B of the Income-tax Act, 1961 on the basis that at the time of making the payment of advance tax the assessee was under no obligation to pay advance tax and the liability arose only on account of retrospective amendment to the law after the conclusion of the previous year relevant to the subject assessment year. (AY. 2008-09)

    CIT v . Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439 (Bom)(HC)

    Editorial: SLP is granted to the Revenue CIT v. Glenmark Pharmaceuticals Ltd. (2017) 397 ITR 30 (St.)

  66. S.253 : Appellate Tribunal –Delay of 1,631 days – Chartered Accountant engaged in the matter, was unaware of the fact that an appeal could be filed against the order of the Commissioner to the Tribunal – Delay was condoned [Ss.12AA, 254(1)]

    Allowing the petition the Court held that Chartered Accountant engaged in the matter, was unaware of the fact that an appeal could be filed against the order of the Commissioner to the Tribunal. Hence the delay of 1631 days, was condoned. Tribunal was directed to decide the issue on merits.

    United Christmas Celebration Committee Charitable Trust v. ITO (2017) 249 Taxman 372 (Mad.)(HC)

  67. S.254(1) : Appellate Tribunal –Duties – Adopting a short-cut in rendering order, large portions were lifted verbatim from order of Assessing Officer as well as from remand order of High Court setting out facts, reasoning and conclusion was held to be not proper, matter was once again set aside to the Tribunal

    Allowing the petition, the Court held that ; adopting a short-cut in rendering order, large portions were lifted verbatim from order of Assessing Officer as well as from remand order of High Court setting out facts, reasoning and conclusion was held to be not proper, matter was once again set aside to the Tribunal.

    Arun Malhotra v. P CIT (2017) 248 Taxman 317 (Delhi)(HC)

  68. S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Where an application for rectification was rejected, second application cannot be made on same grounds

    Dismissing the appeal of the Revenue, the Court held that, where an application for rectification was rejected, second application cannot be made on same grounds. (AYs. 2006-07, 2007-08)

    PCIT v. Navjivan Roller Flour and Pulse (2017) 398 ITR 62 (Guj.)(HC)

  69. S.255 : Appellate Tribunal – Third member – Third member has to decode specific points referred for his opinion and he cannot sit in appeal over entire matter and take decision independently [S. 255(4)]

    Allowing the appeal of the Revenue, the Court held that third member has to decode specific points referred for his opinion and he cannot sit in appeal over entire matter and take decision independently. Accordingly the order and approach of the third member was patently erroneous, illegal, impermissible and constitutionally unsustainable in law rendering the order passed by the Regular Bench, unsustainable. The President of the Tribunal was to nominate another Bench to take a decision on the matter.

    CIT v. Sahara India Ltd. (2017) 398 ITR 301 (All)(HC)

  70. S.260A : Appeal – High Court –Administrative reasons cannot be the ground for filing defective appeal – Repetitive notice of motions cannot be filed for recall of speaking orders – Dismissal of appeal was held to be justified. [Bombay High Court (Original side) Rules, 1980, R. 986]

    The Department’s appeal to the High Court for setting aside an order of the Appellate Tribunal dated November 19, 2015, was rejected by the Prothonotary and Senior Master under Rule 986 of the Bombay High Court (Original Side) Rules, 1980. The first notice of motion taken out by the Department was dismissed on April 22, 2016, after hearing the parties and passing a speaking order. Thereafter, the Department took another notice of motion to recall the order dated April 22, 2016, which was rejected by a speaking order dated August 19, 2016. On the third notice of motion: Dismissing the notice of motion, the Court held that the Department failed to remove the office objections which had resulted in the appeal itself being rejected by the Prothonotary and Senior Master. Administrative difficulties could not be a reason for filing an appeal which was defective. It was not the case of the Department that any new evidence was discovered after the passing of the order or that there was any mistake apparent on record which justified the review of the order. Repeated applications for recall of speaking orders passed after hearing the parties could not be filed.

    CIT (E) v. Maharashtra Industrial Development Corpn. (2017) 398 ITR 29 (Bom.)(HC)

    Editorial: SLP of revenue is dismissed; CIT(E) v. Maharashtra Industrial Development Corpn. (2017) 397 ITR 1 (St)

  71. S.260A : Appeal – High Court –Review petition is not to be barred even when SLP preferred against order of which review is sought, has been dismissed as withdrawn

    The assessee preferred SLP against the judgment of the High Court. After some arguments, the assessee sought permission to withdraw the Special Leave Petition with liberty to move the High Court in a review petition. The respondent raised a preliminary objection to the very maintainability of the review petition on the ground that the Special Leave Petition (SLP) preferred against the order of which review was sought having been dismissed, the Court could not review its judgment. Dismissing the objection the Court held that, review petition is not to be barred even when SLP preferred against order of which review is sought has been dismissed as withdrawn.

    Kanoria Industries Ltd. v. UOI (2017) 249 Taxman 267 (Delhi)(HC)

  72. S. 271(1)(c) : Penalty – Concealment – Admission of appeal by High Court – There can be no universal rule to the effect that no penalty can be levied if quantum appeal is admitted on a substantial question of law [S.260A]

    Admitting the appeal of the Revenue, the Court held that the law in CIT v. Nayan Builders & Developers (2014) 368 ITR 722 (Bom.)
    does not mean as a matter of rule that in case where the High Court admits an appeal relating to quantum proceedings ipso facto i.e., without anything more, the penalty order gets vitiated. The question of entertaining an appeal from an order imposing / deleting penalty would have to be decided on a case-to-case basis. There can be no universal rule to the effect that no penalty can be levied if quantum appeal is admitted on a substantial question of law. In fact, the admission of an appeal in quantum proceedings, if arising on a pure interpretation of law or on a claim for deduction in respect of which full disclosure has been made, may, give rise to a possible view, that admission of appeal in the quantum proceedings would suggest no penalty can be imposed as it is a debatable issue. However, it cannot be a universal rule that once an appeal from the order of the Tribunal has been admitted in the quantum proceedings, then, ipso facto the issue is a debatable issue warranting deletion of penalty by the Tribunal. There could be cases where the finding of the Tribunal in quantum proceedings deleting addition could be perverse, then, in such cases, the admission of appeal in quantum proceedings would indicate that an appeal against deletion of penalty on the above account will also warrant admission (ITA No. 701 of 2015, dated 6-2-2018)(AY. 2006-07)

    PCIT v. Shree Gopal Housing & Plantation Corporation (Bom.)(HC), www.itatonline.org

  73. S.271(1)(c) : Penalty – Concealment – The requirement to obtain previous approval of the IAC is mandatory as it is to safeguard the interests of the assessee against arbitrary exercise of power by the AO, however before approval opportunity must be given to explain the specific charge is not mandatory [S. 274]

    On reference by assessee the Court held that the requirement to obtain previous approval of the IAC is mandatory as it is to safeguard the interests of the assessee against arbitrary exercise of power by the AO. Non-compliance may vitiate the penalty order. However, the requirement in s. 274 that the assessee must be given a reasonable opportunity of being heard cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed. There was no arbitrary exercise of discretion and the reasons are recorded after taking into consideration the explanation submitted by the assessee. The exercise of jurisdiction in respect of quantum of penalty is neither unjust nor beyond jurisdiction. (ITR No. 21 of 2008, dated 22-7-2017)

    Maharaj Garage & Company v. CIT ( 2018) 400 ITR 292 (Bom)(HC)

  74. S.271(1)(c) : Penalty – Concealment – In the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 to s. 271(1)(c) in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. Deletion of penalty was held to be justified. [S. 92C, 271(1)(c ), Expl. 7]

    Dismissing the appeal of the revenue, the Court held that in the absence of any overt act, which disclosed conscious and material suppression, invocation of Explanation 7 to s. 271(1)(c) in a blanket manner could not only be injurious to the assessee but ultimately would be contrary to the purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where the assessees who might otherwise accept such determination may be forced to litigate further to escape the clutches of Explanation 7. (ITA 460/2016, C.M. APPL.26591/2016, dt. 22-8-2016)(AY.2007-08)

    PCIT v. Verizon India Pvt. Ltd. (Delhi)(HC); www.itatonline.org

  75. S.271(1)(c) : Penalty – Concealment – The AO must specify whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars thereof and which one of the two is sought to be pressed into service. He is not permitted to club both by interjecting an ‘or’ between the two

    Dismissing the appeal of the revenue, the Court held that penalty can be levied only where the charge is unequivocal and unambiguous. The AO must specify whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars thereof and which one of the two is sought to be pressed into service. He is not permitted to club both by interjecting an ‘or’ between the two. The ambiguity in the show-cause notice compounded by the confused finding of the AO that he was satisfied that the assessee was guilty of both renders the proceedings void (K. P. Madhusudhanan 251 ITR 99 (SC) & MAK Data 358 ITR 593 (SC) distinguished. (ITA No. 684 of 2016, dt. 13-7-2017)

    PCIT v. Baisetty Revathi(AP)(HC); www.itatonline.org

  76. S.271AAA : Penalty – Search initiated on or after 1st June, 2007 – Additional condition of having to substantiate manner in which undisclosed income was earned, only if revenue raises question regarding manner in which undisclosed income was earned while recording assessee’s statement. The cancellation of penalty was justified [S.132(4)]

    Dismissing the appeal of the Revenue the Court held that the additional condition of having to substantiate manner in which undisclosed income was earned, only if Revenue raises question regarding manner in which undisclosed income was earned while recording assessee’s statement. the Commissioner (Appeals) was specific that no question was put to the assessee while recording his statement under section 132, regarding the manner of deriving the undisclosed income hence the cancellation of penalty was justified.
    (AY. 2010-11)

    PCIT v. Mukeshbhai Ramanlal Prajapati (2017) 398 ITR 170(Guj) (HC)

  77. S.276C : Offences and prosecutions – Wilful attempt to evade tax – Depreciation on land – A claim in the return which is scrutinised by the auditors and the directors cannot be considered as a mere accounting mistake, hence order of the learned Magistrate is upheld. [S. 277, CRPC, 1973, S. 397]

    Dismissing the revision application of the petitioner the Court held that claim of depreciation was made in the return which is scrutinised by the auditors and the directors cannot be considered as a mere accounting mistake, hence order of the learned Magistrate is upheld. (CRL. REVP 16 /2015 dt. 23-11-2017)

    Ambience Hospitality Pvt Ltd v.Dy .CIT ( 2018) 161 DTR 36 ( Delhi) (HC)

  78. S.276CC : Offences and prosecutions – When High Court has given direction to consider the application for compounding, pendency of appeal against conviction could no longer be a reason for refusing consideration for compounding of offence

    Allowing the petition, the Court held that; When High Court has given direction to consider the application for compounding,pendency of appeal against conviction could no longer be a reason for refusing consideration for compounding of offence, within meaning of clause 4.4(f) of Guidelines dated 16-5-2008.

    Government of India, Ministry of Finance, Department of Revenue (CBDT) v. R. Inbavalli (2017) 249 Taxman 476 (Mad.)(HC)

  79. S.279 : Offences and prosecutions – Compounding of offences – Guidelines on compounding of offences dated 23-12-2014 prescribing eligibility conditions and the formula for calculating the compounding fee are valid or unreasonable [Ss.119, 276, 277, 278]

    The Guidelines of 2014, under which the last application for compounding was made, and was accepted to be in the prescribed format, has enured to the benefit of the petitioner and the application has rightly been processed under these Guidelines. The petitioner has not raised a challenge either to the 2008 Guidelines or 2003 Guidelines. It is only after the charges were framed in the criminal proceedings and after filing the applications for compounding and after compounding charges have been determined as per the formula prescribed in the 2014 Guidelines, that the challenge has been raised by the petitioner. The petitioner having voluntarily agreed and undertaken to the department to pay the compounding charges and to withdraw his appeal, ought to be directed to be bound down by the same. It is a settlement process voluntarily invoked by the petitioner in order to escape criminal prosecution under the Act. Since an accused may have to suffer severe consequences for non-payment of tax, if he is held to be guilty, it is not open to him to challenge the reasonableness of the same. The petitioner had consciously undertaken to abide by the decision of the Committee constituted for compounding the offences. (W.P.(C) 6268/2017, dt. 23-1-2018)

    Vikram Singh v. UOI ( 2017) 394 ITR 746/ 247 Taxman 212 (Delhi)(HC)

  80. Interpretation – Binding precedent – Interpretations given by High Courts and Tribunals cannot be ignored by the Assessing Officers

    Allowing the reference of the assessee, the Court states that in fact, the written submission of Revenue, states “Litera leges, certainty concept and the concept that there is no equity on fiscal law irrespective of any judgment of any Honourable Court or Tribunal to go by cannot be given to the aforesaid interpretations given in this written submission”

    The above submission that decision of Court and/or Tribunal interpreting a provision is to be ignored by the Assessing Officer, if accepted, will ring the death knell of Rule of law in the country. The Assessing Officer is bound by the views of the Court. The above submission ignores the hierarchical system of jurisprudence in our country. (ITA No. 25 of 2000, dt. 23-2-2018)(AY. 1993-94)

    Bajaj Auto Fianance Ltd. v. CIT (Bom.)(HC), www.itatonline.org

  1. S.2(22)(e) : Deemed dividend-Beneficial owner – Prima facie, CIT v. Ankitech Pvt. Ltd. (2012) 340 ITR 14 (Delhi)(HC) and
    CIT v. Madhur Housing and Development Company is wrongly decided and should be reconsidered by larger bench

    The term “shareholder”, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. The moment there is a shareholder, who need not necessarily be a member of the Company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state that two conditions have to be satisfied, namely, that the shareholder must first be a registered shareholder and thereafter, also be a beneficial owner is not only mutually contradictory but is plainly incorrect. Prima facie, Ankitech/Madhur Housing is wrongly decided and should be reconsidered by larger bench. This being the case, the High Court was prima facie of the view that the Ankitech judgment (supra) itself requires to be reconsidered, and this being so, without going into other questions that may arise, including whether the facts of the present case would fit the second limb of the amended definition clause, the Bench placed these appeals before the Hon’ble Chief Justice of India in order to constitute an appropriate Bench of three learned Judges in order to have a relook at the entire question. (CA Nos. 2068-2071 of 2012, dt. 18-1-2018)

    National Travel Service v. CIT ( 2018) 401 ITR 154/ 162 DTR 201 (SC)

  2. S.4 : Charge of income-tax –Mutuality – Co-operative societies – Non-occupancy charges, transfer fees are exempt from tax [S. 2(24)]

    Receipts by housing co-operative societies such as non-occupancy charges, transfer charges, common amenity fund charges and certain other charges from their members are exempt from income-tax based on the doctrine of mutuality. The fact that the receipts are in excess of the limits prescribed by the State Government does not mean that the Societies have rendered services for profit attracting an element of commerciality and thus taxable. (CA No. 2706 of 2018, dt. 12-3-2018)

    ITO v. Venkatesh Premises Co-op. Society Ltd. (SC), www.itatonline.org

  3. S.4 : Charge of income-tax –Entertainment subsidy – Capital or revenue – A subsidy granted by the Govt. to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. [S. 28(i)]

    Dismissing the appeal of the revenue the Court held that; A subsidy granted by the Govt. to achieve the objects of acceleration of industrial development and generation of employment is capital in nature and not revenue. The fact that the incentives are not available unless and until commercial production has started, and that the incentives are not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery is irrelevant. The object has to be seen and not the form in which it is granted. (CA Nos. 6513-6514 of 2012, dt. 7-12-2017)

    CIT v. Chaphalkar Brothers Pune ( 2018) 400 ITR 279/ 300 CTR 113/ 161 DTR 41 (SC)

  4. S.4 : Charge of income-tax –Subsidy – Capital or revenue –Judgment of Delhi High Court in
    CIT v. Bhushan Steels And Strips was stayed [S. 28(1), 56]

    Supreme Court stays judgment of the Delhi High Court in CIT v. Bhushan Steels And Strips which held that if the recipient has the flexibility of using the subsidy amount for any purpose and is not confined to using it for capital purposes, the subsidy is revenue in nature and is taxable as profits. Court directed, issue of notice. In the meantime, the operation of the impugned judgment shall remain stayed. (SLP Nos. 30728-30732/2017, dt. 20-11-2017)

    Bhushan Steeel v. CIT (SC); www.itatonline.org

  5. S.4 : Charge of income-tax – Hindu law – Burden is on the member to establish the property is his individual and not ancestral presumption continues to operate in favour of family

    Court held that; as per settled principle of Hindu law there lies a legal presumption that every Hindu family is joint in food, worship and estate and in absence of any proof of division, such legal presumption continues to operate in family. Burden lies upon the member who after admitting existence of jointness in family properties asserts his claim that some properties out of entire lot of ancestral properties are his self-acquired property. On facts the appellants failed to adduce any kind of documentary evidence to prove the self-acquisition of properties nor were they able to prove source of its acquisition, Order of High Court declaring property as joint property of family was upheld.

    Adiveppa v. Bhimappa (2017) 250 Taxman 476 (SC)

  6. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Formula One Grand Prix of India’ event constitute business income, liable to deduct tax at source – DTAA-India-UK. [S. 195, Articles 5, 13]

    Dismissing the appeal of the assessee the Court held that; receipt from the Formula One Grand Prix of India’ event constitute business income, liable to tax deduction at source. High Court rightly concluded that based on exclusive nature of access and period for which it was accessed it could be concluded that circuit constituted a fixed place PE of assessee in India.

    Formula One World Championship Ltd. v. CIT (IT) (2017) 248 Taxman 192 (SC)

  7. S.10(37) : Capital gains – Agricultural land – Exemption can be claimed even where compensation for acquisition of land is determined based on the agreement between the parties

    The issue before the Supreme Court was whether the payment of compensation on agreed terms in respect of the land acquired would be entitled for exemption u/s. 10(37). The Supreme Court dismissed the department’s appeals. Supreme Court observed that the issue was covered by the decision in
    Balakrishnan v. UOI (2017 )391 ITR 178 (SC) where it was held that compensation paid on agreed terms would not change the character of the acquisition from that of compulsory acquisition to voluntary sale and the exemption provided under the Act would be available.

    CIT v. Special Land Acquisition Officer (2017) 297 CTR 219 (SC)

  8. S.10A : Free Trade Zone – Deduction to be granted before computing gross total income of eligible undertaking and without setting off losses of other units against exempt unit

    Dismissing the appeal of the revenue the Court held that; deduction is to be granted before computing gross total income of eligible undertaking and without setting off losses of other units against exempt unit. Followed
    CIT v. Yokogawa India Ltd (2017) 391 ITR 274 (SC) (AY. 2009-10)

    PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619 (SC)

    Editorial : Decision in PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619 (Karn.) is affirmed.

  9. S.12A : Registration – Trust or institution – The CIT has no power to cancel/withdraw/recall the registration certificate granted u/s. 12A until express power to do so was granted by s. 12AA(3). S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate [General clauses Act S. 21]

    Allowing the appeal the Court held that the CIT has no power to cancel/withdraw/recall the registration certificate granted u/s. 12A until express power to do so was granted by s. 12AA(3). S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate. (CA No. 6262 of 2010, dt. 16-2-2018)

    Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. v. CIT(SC), www.itatonline.org

  10. S.14A : Disallowance of expenditure – Exempt income – Rule 8D cannot be held to be applicable retrospectively and cannot be applied to pending assessments [R.8D]

    Dismissing the appeal of the revenue the Court held that Rule 8D is prospective in operation and could not have been applied to any assessment year prior to Assessment Year 2008-09. (CA No. 2165 of 2012, dt. 31-1-2018)(AY. 2003-04)

    CIT v. Essar Teleholdings Ltd ( 2018) 162 DTR 225(SC)

  11. S.32 : Depreciation – Charitable Trust – Even if the entire expenditure incurred for acquisition of a capital asset is treated as application of income for charitable purposes, assessee is entitled to depreciation and entitled to carry forward [S. 11(1)(a)]

    Dismissing the appeal of the revenue the Court held that; even if the entire expenditure incurred for acquisition of a capital asset is treated as application of income for charitable purposes u/s. 11(1)(a) of the Act, the assessee is also entitled to depreciation u/s. 32. The argument that the grant of depreciation amounts to giving double benefit to the assessee is not acceptable. It may also be mentioned that the legislature, realising that there was no specific provision in this behalf in the Income-tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-16. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. For the aforesaid reasons, the Hon’ble Supreme Court affirmed the view taken by the High Courts in these cases and dismissed these matters. (CA No. 7186 of 2014, dt. 13-12-2017)

    CIT v. Rajasthan and Gujarati Charitable Foundation Poona ( 2018) 300 DTR 1/ 161 DTR 33 (SC)

  12. S.43B : Deduction on actual payment – Advance deposit of Central Excise duty in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of S. 43B and the assessee is entitled to deduction of the said amount

    Dismissing the appeal of the revenue the Court held that advance deposit of Central Excise Duty in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of S. 43B and the assessee is entitled to the benefit of deduction of the said amount. (CA No. 19763 of 2017, dt. 24-11-2017.)

    CIT v. Modipon Limited ( 2017) 160 DTR 73/ (2018) 400 ITR 1/ 252 Taxman 123 (SC)

  13. S.80HHC : Export business –Amount received as commission had to be taken into consideration while computing amount of deduction – Matter was set aside to High Court to decide a fresh [S. 260A]

    The High Court held that the amount of commission should not be taken into consideration while calculating deduction u/s. 800HHC. While giving the said finding the Court relied upon the judgment in the case of
    CIT v. P. R. Prabhakar [2005] 276 ITR 176/148 Taxman 231 (Mad.). The said judgment was reversed by the Supreme Court in
    P. R. Prabhakar v. CIT [2006] 284 ITR 548/154 Taxman 503(SC). Accordingly, the Supreme Court set aside the matter to the High Court to be decided afresh in accordance with law.

    Veejay Marketing v. Dy. CIT (2017) 297 CTR 17/ 247 Taxman 151 (SC)

  14. S.80-IB : Industrial undertakings – Initial assessment year – Small scale industrial undertaking – Assessee is not entitled to benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular assessment year even if in initial year eligibility was satisfied

    Allowing the appeal of the revenue, the Court held that the incentive meant for small scale industrial undertakings cannot be availed by undertakings which do not continue as small scale industrial undertakings during the relevant period. Each assessment year is a different assessment year. The fact that the object of legislature is to encourage industrial expansion does not mean that the incentive should remain applicable even where on account of industrial expansion, the small scale industrial undertakings ceases to be small scale industrial undertakings. The fact that in the initial year eligibility was satisfied is irrelevant. Accordingly the assessee is not entitled to benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular assessment year even if in initial year eligibility was satisfied. (CA No. 20854 of 2017, dt. 5-12-2017)

    DCIT v. Ace Multi Axes Systems Ltd (2017) 160 DTR 353 /299 CTR 441 /(2018) 400 ITR 141/ 252 Taxman 274(SC)

  15. S.119 : Central Board of Direct Taxes – Instructions – Appeal – Low tax effect circular – The CBDT cannot issue any circular having retrospective operation –The fact that the CBDT itself vide Circular dated 10-12-2015 directed that the instruction to withdraw low tax effect appeals will apply retrospectively to pending appeals has no bearing. [S. 260A, 268A]

    The question raised in this batch of Appeals is as to whether the instructions/circular issued by the Central Board of Direct Taxes on 9-2-2011 will have retrospective operation or not.

    This Court in CIT v. Suman Dhamija (CA.Nos.4919-4920/2015) has held that instructions/circular dated 9-2-2011 is not retrospective in nature and they shall not govern cases which have been filed before 2011, and that, the same will govern only such cases which are filed after the issuance of the aforesaid instructions dated 9-2-2011.

    Learned counsel for the respondents relied upon circular dated 10th December, 2015 and specifically relied upon paragraph 10. We are of the considered opinion that the Central Board of Direct Taxes cannot issue any circular having retrospective operation. Respectfully following the above decision, we allow the instant Appeals. The impugned order passed by the High Court dated 2-11-2011 in ITA No. 887/2006 is set aside. The matter(s) is/are remitted back to the High Court for re-adjudication on merits and in accordance with law. (CA No. 6815/2017, dt. 12-10-2017).

    CIT v. Gemini Distilleries (2017) 398 ITR 343/ 299 CTR 27/ 159 DTR 63/251 Taxman 324 (SC)

  16. S.244A : Refunds – Interest on refunds – Partial waiver of interest by Settlement Commission the assessee was entitled to interest – When the amount is due to the assessee, there is statutory obligation of the department to refund the amount with interest [Ss. 234A, 234B, 234C, 245D(4)]

    Allowing the petition the Court held that, when the amount is due to the assessee, there is statutory obligation of the department to refund the amount with interest. Contention of the revenue that the refund became due to partial waiver of interest by the Settlement hence the assessee is not entitled to interest was rejected (AYs. 1993-94 to 1994-95)

    K. Lakshmansa and Co. v. CIT (2017) 399 ITR 657 (SC)

    Editorial: Decision in CIT v. K. Lakshmansa and Co. (2010) 323 ITR 617 (Karn.) (HC) was reversed.

  17. S.252 : Appellate Tribunal –Appointment of Tribunal Members under new rules – Interim directions issued regarding the method for selection of Tribunal Members and their terms and period of appointment

    The validity of the ‘Tribunals, Appellate Tribunals and Other Authorities (Qualifications, Experience and Other Conditions of Service of Members) Rules, 2017‘ has been challenged in the Supreme Court. The Supreme Court is required to examine whether the Rules, which seek to appoint the Members of the Tribunal for a limited period, and which make the appointment and removal of the Members the sole prerogative of the Government, are valid in law.

    The following interim order has been passed by the Supreme Court:

    We have heard learned counsel for the petitioners and Mr. K. K. Venugopal, learned Attorney General for India.

    In the course of hearing, suggestions for an interim order in respect of Central Administrative Tribunal have been filed. The suggestions read as follows:

    “1. Staying the composition of Search-cum-Selection Committee as prescribed in Column 4 of the Schedule to the Tribunal, Appellate Tribunal and Other Authorities (Qualification, experience and Other Conditions of Service of Members) Rules, 2017 both in respect of Chairman/Judicial Members and Administrative Members. A further direction to constitute an interim Search-cum-selection Committee during the pendency of this W.P. in respect of both Judicial/Administrative members as under:

    1. Chief Justice of India or his nominee – Chairman b. Chairman of the Central Administrative Tribunal – Member c. Two Secretaries nominated by the Government of India – Members

    2. Appointment to the post of Chairman shall be made by nomination by the Chief Justice of India.

    3. Stay the terms of office of 3 years as prescribed in Column 5 of the Schedule to the Tribunal, Appellate Tribunal and other Authorities (Qualification, Experience and other Conditions of Service of Members) Rules, 2017. A further direction fixing the term of office of all selectees by the aforementioned interim Search-cum- Selection Committee and consequent appointees as 5 years.

    4. All appointments to be made in pursuance to the selection made by the interim Search-cum-Selection Committee shall be with conditions of service as applicable to the Judges of High Court.

    5. A further direction to the effect that all the selections made by the aforementioned interim selection committee and the consequential appointment of all the selectees as Chairman/Judicial/Administrative members for a term of 5 years with conditions of service as applicable to Judges of High Court shall not be affected by the final outcome of the Writ Petition.”

    Mr. Venugopal, learned Attorney General has submitted that he has no objection if the suggestions, barring suggestion Nos. 4 and 5, are presently followed as an interim measure. On a query being made whether the said suggestions shall be made applicable to all tribunals, learned Attorney General answered in the affirmative.

    He would, however, suggest that suggestions Nos. 4 and 5 should be recast as follows:

    “4. All appointments to be made in pursuance to the selection made by the interim Search-cum-Selection Committee shall abide by the conditions of service as per the old Acts and the Rules.

    5. A further direction to the effect that all the selections made by the aforementioned interim selection committee and the consequential appointment of all the selectees as Chairman/Judicial/Administrative members shall be for a period as has been provided in the old Acts and the Rules.

    In view of the aforesaid, we accept the suggestions and direct that the same shall be made applicable for selection of the Chairpersons and the Judicial/Administrative/Technical/Expert Members for all Tribunals.

    List after twelve weeks along with W.P.(C) Nos. 120 of 2012; 267 of 2012. (Wp No. 279/2017, dt. 9-2-2018)

    Kudrat Sandhu v. UOI (SC), www.itatonline.org

  18. S.260A : Appeal – High Court –Mesne profit – Capital or revenue – Dismissal of the appeal on the ground that the department has not filed an appeal against the Judgment of Special Bench was held to be not justified – High Court was directed to hear the appeal on merits [S.4]

    High Court dismissed the appeal of the revenue on the ground that the department has not filed an appeal against the judgment of Special Bench in
    Narang Overseas Pvt. Ltd. v. ACIT (2008) 111 ITD 1 (Mum.) (SB) (Trib.). On appeal by the revenue allowing the appeal, the Court held that this was not the correct approach of the High Court : though one authority had followed its own decision in another case and that matter in appeal had been dismissed on technical grounds still the High Court had to decide the question on the merits.

    CIT v. Goodwill Theatres P. Ltd. (2018) 400 ITR 566 (SC)

    Editorial : Order in CIT v. Goodwill Theatres Pvt. Ltd. (2016) 386 ITR 294 / 241 Taxman 352 (Bom.)(HC) was set aside

  19. S.261 : Appeal – Supreme Court – Observation of the High Court against department was expunged [Ss. 260A, 262]

    On appeal by the revenue, adverse observation of the High Court against the department and imposing costs for making assessee contest case in three forums and wasting taxpayers money was held to be uncalled for and expunged .

    CIT v. Deutsche Software Ltd. (2017) 399 ITR 570 (SC)

    Editor: Decision in CIT v. DSL Software Ltd. (2013) 351 ITR 385 (Karn.) (HC) is affirmed

  20. S.263 : Commissioner – Revision of orders prejudicial to revenue – Share capital – CIT is entitled to revise the assessment order on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned such order cannot be interfered with. [S. 68]

    Dismissing the appeal of the assessee the Court held that CIT is entitled to revise the assessment order on the ground that the AO did not make any proper inquiry while accepting the explanation of the assessee insofar as receipt of share application money is concerned such order cannot be interfered with. Law laid down in
    Subhlakshmi Vanijya Pvt. Ltd v. CIT 155 ITD 171 (Kol), Rajmandir Estates 386 ITR 162 (Cal) (HC) is affirmed. ( SLP No. 23976/2017, dt. 10-4-2017)

    Daniel Merchants Private Limited v. ITO (SC); www.itatonline.org

  21. S.268A : Appeal – Low tax effect circular – A beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively

    Dismissing the appeal of the revenue the Court held that; the view of the two-judge Bench in Suman Dhamija & Gemini Distilleries that CBDT’s low tax Circular dated 9-2-2011 cannot be given retrospective effect cannot be followed as it is contrary to the three-judge Bench verdict in Surya Herbal. A beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Circular dated 9-2-2011 has retrospective operation except for two caveats: (i) The Circular should not be applied ipso facto when the matter has cascading effect and/or (ii) where common principles are involved in subsequent group of matters or a large number of matters. ( SLP No. 23-11-2017.

    DIT v. S. R. M.B. Dairy Farming (P) Ltd (2017) 160 DTR 129 / 299 CTR 321 / ( 2018) 400 ITR 9 / 252 Taxman 1 (SC)

  22. S.271(1)(c) : Penalty – Concealment – Where income disclosed by assessee in return and income assessed was nil, no penalty was leviable

    The Supreme Court dismissed the Department’s appeal against the High Court order wherein the High Court held that no penalty is leviable under section 271(1)(c) of the Act, if the income disclosed in the return and the income assessed is nil.

    JCIT v. Classic Industries Ltd. (2017) 247 Taxman 152 (SC)

  23. S.271(1)(c) : Penalty – Concealment – Penalty is chargeable even where no tax is payable but the returned loss is reduced on assessment

    Supreme Court following its earlier decision in the case of CIT v. Gold Coin Health Food (P) Ltd. 218 CTR 359 held that penalty can be levied even if no tax is payable on the total income assessed and the loss as returned by the assessee is reduced.

    CIT v. Shree Chowatia Tubes (India) (P) Ltd. (2017) 297 CTR 15 / 154 DTR 97/ 247 Taxman 147 (SC)

  24. S.276C : Offences and prosecution – Wilful attempt to evade tax – Return was tampered – Amount involved was less than ₹ 25,000, prosecution ought not to have been initiated [S. 277]

    Allowing the appeals the Court held that as the amount involved was below ₹ 25,000, and had been paid with interest long ago, the Circular dated February 7, 1992 squarely applied and no proceedings should have been filed. Proceedings against the appellants were to be quashed.

    Magdum Dundappa Lokappa v. Income Tax Dept. (rep by its Income Tax Officer, Angad Kumar) (2017) 397 ITR 145 (SC)

    Suresh Sholapurmath v. Income Tax Dept. (rep by its Income Tax Officer, Angad (Kumar) (2017) 397 ITR 145 (SC)

    Circulars are binding on the department – When two views are possible, one which favours the assessee has to be adopted.

    It is trite that when two views are possible, one which favours the assessee has to be adopted. Circulars are binding on the Department. The Government itself has taken the position that where whole of excise duty or service tax is exempted, even the Education Cess as well as Secondary and Higher Education Cess would not be payable. This is the rational view. (CA. Nos. 2781-2790 of 2010, dt. 10-11-2017.)

    SRD Nutrients Private Limited v. CCE (SC), www.itatonline.org

  25. Precedent — High Court — When Bench is disagreeing with decision of Co-ordinate Bench, the matter to be referred to larger Bench

Allowing the appeal the Court held that; when Bench disagreeing with decision of Co-ordinate Bench, the appropriate course of action for the High Court would have been to refer the matter to a larger Bench. Since subsequently, in another case pending before the High Court on the same question, the High Court had referred the matter to a larger Bench, the judgment of the High Court was to be set aside and the appeal remanded to the High Court for decision afresh along with the decision in the other case by the larger Bench. (AY, 2006-07)

Engineers India Ltd. v. CIT (2017) 397 ITR 16 (SC)

 

My dear brothers and sisters of All India Federation of Tax Practitioners:

My good wishes for Holi, Ram Navami and Navratri. The months of March and April are the months of festivities, however, GST has made us a bonded labour.

The representations made by us and various other organisations are still under consideration with the Government. I am hopeful that the GST Council shall modify the system of filing returns and make it quarterly in place of monthly. That will go a long way in helping our members to enjoy the festivals and holidays.

At present, the system of returns is such that a GST practitioner cannot think of leaving his office more than a week that too he is bound to make compliance of stipulated dates. Let us hope for the best and the decision comes in ensuing Council meeting making a change in the system of filing returns and I hope by the time this communiqué comes to your hand, the change is already made giving desired relief to our Members and GST practitioners at large.

The Budget has been announced by the Finance Minister Shri Arun Jaitley on
1-2-2018. It was expected to be an election budget being the last full budget by the present Government before 2019 national elections. We have seen that the scope available with the Finance Minister was not much and that has resulted into minimal relief to the taxpayers except for the change in the rate of companies tax from 30 to 25% up to turnover of ₹ 250 crores and provision for standard deduction of ₹ 40,000/- to salaried employees there is no other considerable benefit that could be doled out to the public for attracting votes in 2019 elections.

On the contrary, the Hon’ble Finance Minister has introduced long term capital gains on sale of shares that adversely affected the stock market. It is first time such a plunge has been seen in the stock market immediately after the budget with the market dropped by about 1,000 points though it is partly attributed to international slow down.

Changes have also been made in the merger of companies where certain prohibitions have been introduced for taking advantage of the loss and the loss making company when it is merged with the profit making company. It seems that the basic idea of the Government is to plug the loopholes of tax evasion. The long term capital gains on stock market has also been brought to plug the method of converting unaccounted money into white money by way of fictitious long term capital gain earned through shell companies. The emphasis of the Government is on tracking the conversion of black money into disclosed money and put reins on the rampant corruption. The introduction of Section 143A in the Finance Budget is a glaring example of the same.

I may caution my friends that now only those persons will flourish into practice who had a strong support of knowledge in their tax practice. Our endeavour is to educate our fraternity and to help them achieving excellence in the profession and to develop their knowledge base to make them successful in providing good service to the client and to put themselves in the profession on strong foundation. The tax profession is one of the professions that is always likely to flourish. Whatever changes in the system of tax may be made but the importance of tax practitioners is not going to lessen or diminish but we cannot take things easy and have to strive hard to prove ourselves.

In the recent judgment of the Supreme Court has directed the Government to appoint the Tribunal Members of all the Tribunals based on the rules and provisions of the old Act as an interim order which is a welcome move. The shortage of Members is being felt in all the Tribunals such as Green Tribunal, CAT and also the Income Tax Appellate Tribunal. Those changes made by the Government in provisions for appointment of Tribunal Members had greatly hampered the appointment of Income Tax Appellate Tribunal Members and the shortage of Members is being felt in every Tribunal including Income Tax Appellate Tribunal.

We hope that Supreme Court’s verdict shall be in favour of the petitioners and old Rules for appointment of Members in the Tribunals may be finally approved by the Court that will help appointment of new, young and knowledgeable Members.

We are organising a Seminar with NEC meeting on 17th and 18th March, 2018 at Vadodara (Gujarat). I request all the Members to participate in the Seminar in large number so as to make it a grand success that will help in enriching our knowledge and provide strength to our ability and capability of dealing with the intricate issues.

Once again, with good wishes and best of enjoyment in the festivities of March and April.

Yours sincerely,

Ganesh N. Purohit
National President

 

New direct tax legislation – Duties and responsibilities of tax
professionals to send their suggestions objectively to have
better tax law for our country

On 22nd November, 2017, the CBDT issued a press release for constitution of a task force comprising of a seven member committee for drafting a new direct tax legislation. The task force has to submit its report to the Government within six months. The terms of reference of the task force is to draft an appropriate direct tax legislation keeping in view the following:

(i) The direct tax system prevalent in various countries;

(ii) The international best practices;

(iii) The economic needs of the country; and

(iv) Any other matter connected thereto,

(Source.www.itatonline.org.)

The intention of the Government to simplify the present Income–tax Act, 1961 is laudable; however is it possible for the Committee to submit a comprehensive report on or before May 2018? A classic example of rushed legislation is the Goods and Services Tax Act, 2017, (GST),which is well conceived and with good intention. However the Government is not able to get the desired results because of poor implementation (Abicor and Binzel Technoweld Pvt. Ltd. v. UOI (Bom.)(HC) www.itatonline.org). It is desired that the Government does not needlessly hurry to bring the new Income-tax Law without discussing the implications of the same with the concerned stakeholders. It is desired that the members of the taskforce committee may reach out to small towns as well as large metropolitan cities and interact with tax professionals and small assessees to understand the difficulties faced by the taxpayers. It may be an impossible task to reach and understand the concerns of the tax payers and professionals across the country and compile a comprehensive report within six months. Tax professionals as citizens, bearing duties to the nation may have to consider sending objective suggestions for the consideration of the Committee and the Honourable Finance Minister. The Representation Committee of the Federation will be sending specific suggestions on various sections. In this article, I am sharing my personal views on various conceptual issues for consideration and discussion by the readers.

1. Terms of reference

Terms of reference put before the committee should have been very broad. For e.g. “to examine the existing Income–tax Act, 1961, and to suggest changes that have become necessary for doing easy business and compliances“.

Members of the Federation had an opportunity of discussing the issues with two learned Members of the Task Force i.e. Mr. Mukesh M. Patel, Advocate, and Dr. Girish Ahuja, CA. According to them, the mandate is very clear to rewrite the new Income –tax Act, considering the need of our Country, it is not direct taxes code, it will be a new Income–tax Act. They are very positive that the new Income–tax Act will be tax payer friendly which will bring accountability on the part of the tax administrators as well as the tax payers. They are working with clean slate and out of box thinking.

2. Time frame for submitting the report

The present Income–tax Act, 1961, refers to 98 Central Acts, various State Legislations and more than 800 Sections, Rules, Notifications and various case laws of the Apex Court, High Courts, Appellate Tribunals and Authorities for Advance Rulings. It may not be possible to consider all the aspects within a period of six months. Ideally, there has to be an on-going process for at least two years.

3. Accountability provision

One of the suggestions made by Dr. Raja J. Chelliah in his committee report (1992) 197 ITR 177 (St) (257) para. 5.9) suggested that ways must be found to hold the Assessing Officers accountable for kinds of assessments they make. He suggested as follows:

“The Assessing Officers should be made accountable for their actions by being blamed for raising demands which are not upheld by a reasonable figure, say 50 per cent, the officer should be given a black mark and also reprimanded. On the other hand, an Assessing Officer should be protected and defended if he has observed instructions of the Board and followed the Court rulings even though audit might raise objections about his actions”. Federation has sent representations from time-to-time to introduce the accountability provision in the Act. It is desired that the accountability provision as suggested by Dr. Raja J. Chelliah Committee may have to be incorporated in the proposed new Act. Bringing in accountability in tax administration is the first step in reducing avoidable litigation, and would benefit honest taxpayers of the country. If accountability provision is not introduced, whatever may be the law, the desired object of simple tax law may not be achieved.

4. Culture of tax services

The Hon’ble Prime Minster always says that he is the servant of the people of our country, however it does not seem to be the case when it comes to tax administration. The honest taxpayers are finding it difficult to get the refund due to them. Rectification applications are not disposed off in time. In a recent judgment, the Bombay High Court in Bajaj Auto Finance Ltd., it held that the (www.itatonline.org), Officers are not following the judgments of Jurisdictional High Court and Tribunal. The Hon’ble Court has held that if the decision of the Court/Tribunal interpreting a provision is to be ignored by the Assessing Officer, it shall ring the death knell of Rule of law in the country. It is only the big assessees, who can afford to go to the High Court in appeal but for a small assessee, he will be at the mercy of the tax administration to get the refund or rectification as per the assessment. The CBDT in the year 1955 has issued the Circular (XL-35 dated 11-4-1955) dealing with refunds and reliefs. The circular stated that the Officers should guide the assessees and if any claim which is rightfully due to the assessee is not claimed in the return, it must be allowed to the assessee. How many officers have given the relief to the assessee which he is entitled to and not claimed in the return? The need of the hour is a change in the mind-set of the tax administration from that of tax collection to that of providers of tax services.

5. Pendency of tax litigation

Before the introduction of new tax legislation, the Government must chalk out an action plan on how to reduce the pendency of tax litigation before Apex Court, various High Courts, the Appellate Tribunal, Commissioner of Income-tax (Appeals) and Prosecution matters before various designated Magistrate Courts. The pendency of tax matters before Bombay High Court is alarming. Appeals filed take nearly five years to come up for admission. Once admitted, it takes another 10 years for them to come up for final hearing and disposal. Now the Bombay High Court is taking up the matters which were filed in the year 2015 for admission and final hearing matters which were admitted in 2002. It takes more than three years to get an order from the CIT(A) and another two years from the Appellate Tribunal. If the matters are taken to the Apex Court, another five years may be consumed before the matter comes for hearing. That means tax litigation takes nearly 20 years to attain finality. Unless the Government makes serious efforts to reduce the litigation, whatever may be the law, the desired objects of simplifying and streamlining the tax administration and adjudication may not be achieved. The Federation has made various suggestions from time-to-time to the Government with respect to the ways and means to reduce tax litigation. One of the suggestions was to set up an e-Bench of Supreme Court, linking of the Supreme Court to various High Courts and that SLP in tax matters can be heard by arguing the matters from respective High Courts. (refer www.itatonline.org). Similarly hosting of various issues pending before various High Courts by CBDT on their website as directed by the Bombay High Court in CIT v. TCL Ltd. (2016) 241 Taxman 138(Bom.) (HC) and Independent National tax litigation cell separate legal cell. As regards prosecution, setting up of special Courts to deal with prosecution in relation to direct and indirect taxes was proposed. In Mumbai, more than 300 cases of prosecution have been launched in the year 2018. One will be surprised to know that the prosecution notice is issued for few days delay on filing of return though the taxes along with interest were paid.

6. Tax deduction at source

In the Income–tax Act, 1961, there were only two sections under which the assessee was liable to deduct tax at source, whereas presently, there are more than 25 sections under which the assessee is required to deduct tax at source and file the tax return. If there is a failure to deduct the tax at source such a payment is not allowable as deduction. By deducting the tax at source and depositing such amount to the Government Treasury, the assessee is doing the honourary duty of the Government. As of today, upon a few days delay in depositing the tax or return of tax deducted at source, he is made liable to pay interest, penalties and the omnipresent threat of prosecution. Many-a-times there is no clarity on various issues that can be faced while deducting such tax. It is desired that one may think of having the concept of a passbook and only one return for all TDS deducted at source. The assessee may deposit the amount as advance or may adjust against various taxes to be deducted. This will help to reduce the compliance provisions.

7. Advance Ruling for taxation – Scope may be extended to residents by giving power to Income Tax Appellate Tribunal

It has been observed that on many occasions the assessee is not able to find out what the tax liability would be i.e. whether the expenditure will be capital or revenue, whether the said amount will be allowed as deduction or not, what is the rate of tax, etc. For the resident assessee, there should be a provision for approaching the Authority for Advance Ruling. Such a power can be given to the existing Income Tax Appellate Tribunal and the modality can be worked out to integrate this within the existing system of tax administration. This will greatly reduce tax litigation. Relevant provisions in the Maharashtra VAT legislation can be considered as a guiding force.

8. Settlement Commission: Transparency in appointment of Members of Settlement Commission

An ideal Settlement Commission should comprise of one representative from the revenue and one each from the legal and the accountancy professions. The Members may be selected by inviting applications and following the due process of interviews in a transparent manner. There has to be a minimum term of five years for serving as a member of the Settlement Commission. The scope of the Settlement Commission may be broadened wherein a once in a life time opportunity may be given to an assessee who comes before the Settlement and voluntarily pays the taxes.

9. Independent Committee to suggest amendment in tax law

An independent committee consisting of representatives from the tax profession, tax administration, taxpayers, judiciary etc. may be constituted. It may scrutinise suggestions received from various bodies on a concurrent basis. After examining suggestions in detail, the committee may suggest amendments which should be made public and debated. If this process is followed, I am sure that 90% of litigation will be reduced.

10. An ideal tax reform committee

An ideal tax reform committee, should preferably be headed by a retired Judge of the Supreme Court or the High Court having experience of dealing with taxation matters as chairman. Representatives from professional organisations, trade associations, constitutional experts, economists, representatives from tax administration, etc. should constitute the remainder for the committee.

11. Conclusion

The drafting of a new direct tax law for the country requires members from different backgrounds who can think about the progress and vision of the country at least for another 50 years. The law should be drafted in a manner that they spell out the objects behind the law and duties expected of the taxpayers. There should be a reasonable time before a draft law or amendment is suggested and the enactment of such law. The draft law should be widely circulated for suggestions and such suggestions have to be carefully considered before the draft gets finalised. It is desired that the committee may invite suggestions from Bar Associations, eminent tax professionals and senior advocates who practice on direct taxes on certain specific issues. There has to be on-going research to understand the implementation of tax law. We hope that we may have new Income-tax Act law which will be taxpayer friendly possibly by the time we celebrate 75 years of Independence.

 

Dr. K. Shivaram
Editor-in-Chief