1. Doctrine of escheat – Explained : Section 29 of Hindu Succession Act, 1956

    Doctrine of escheat postulates that where an individual dies intestate and does not leave behind an heir who is qualified to succeed to the property, property devolves on Government. Though the property devolves on Government in such an eventuality, yet the Government takes it subject to all its obligations and liabilities. State in other words does not take the property “as a rival or preferential heir of the deceased but as the lord paramount of the whole soil of the country”. S. 29 comes into operation only on there being a failure of heirs. Failure means a total absence of any heir to the person dying intestate. When a question of escheat arises, onus rests heavily on the person who asserts absence of an heir qualified to succeed to the estate of the individual who has died intestate to establish the case. Law does not readily accept such a consequence. In other words, even in a situation where a founder or his line of heirs is extinct and the properties escheat to the State, the state which receives a dedicated property is subject to the trust and cannot treat it in the manner of a secular property.

    Escheat is doctrine which recognizes State as paramount sovereign in whom property would vest only upon clear and established case of failure of heirs.

    Kutchi Lal Rameshwar Ashram Trust Anna Kshetra Trust thr. Velji Devshi Patel vs. Collector, Haridwar and Others: AIR 2018 Supreme Court 614

  2. Electronic records – Admissibility – requirement of furnishing certificate: Evidence Act of 1872, S. 65B(4)

    Applicability of procedural requirement under S. 65B (4) of Act furnishing certificate is to be applied only when such electronic evidence is produced by a person who is in a position to produce such certificate being in control of the said device and not of the opposite party. In a case where electronic evidence is produced by a party who is not in possession of a device, applicability of Ss. 63 and 65 of Act cannot be held to be excluded. In such case, procedure under the said sections can certainly be invoked. If this is not so permitted, it will be denial of justice to person who is in possession of authentic evidence/witness but on account of manner of proving, such document is kept out of consideration by the court in absence of certificate u/s. 65B(4) of the Evidence Act, which party producing cannot possibly secure. Thus, requirement of certificate under S. 65B(h) is not always mandatory. Party who is not in possession of device from which the document is produced, Such party cannot be required to produce certificate under S. 65B(4) of Act. Applicability of requirement of certificate being procedural can be relaxed by Court wherever interest of justice so justifies.

    Shafhi Mohammad vs The State of Himachal Pradesh: AIR 2018 Supreme Court 714.

  3. Devolution of interest in coparcenary property –Right of coparceners – Explained : Hindu Succession Act , 1956

    Law relating to a joint Hindu family governed by the Mitakshara law has undergone unprecedented changes. Said changes have been brought forward to address growing need to merit equal treatment to the nearest female relatives, namely daughters of a coparcener. Section stipulates that daughter would be coparcener from her birth, and would have the same rights and liabilities as that of a son. Daughter would hold property to which she is entitled as a coparcenary property, which would be construed as property being capable of being disposed of by her either by a will or any other testamentary disposition. These changes have been sought to be made on the touchstone of equality, thus seeking to remove the perceived disability and prejudice to which daughter was subjected. S. 6, as amended, stipulates that on and from the commencement of the amended Act, 2005, daughter of a coparcener shall by birth become coparcener in her own right in the same manner as the son. It is apparent that the status conferred upon sons under the old section and the old Hindu Law was to treat them as coparceners since birth. Amended provision now statutorily recognizes the rights of coparceners of daughters as well since birth. Section uses words in same manner as the son. It should therefore be apparent that both the sons and the daughters of coparcener have been conferred the right of becoming coparceners by birth. It is the very factum of birth in a coparcenary that creates the coparcenary, therefore the sons and daughters of coparcener become coparceners by virtue of birth. Devolution of coparcenary property is the later stage of and a consequence of death of a coparcener. First stage of a coparcenary is obviously its creation as explained above, and as is well recognized. One of the incidents of coparcenary is right of a coparcener to seek a severance of status. Hence, the rights of coparceners emanate and flow from birth now including daughters.

    Danamma alias Suman Surpur and another vs. Amar and others: AIR 2018 Supreme Court 721.

  4. Ex parte decree – Remedies available – Is filing an appeal or an application for setting aside decree–Recourse to both proceedings can be taken simultaneously: CPC Order 9, Rule 13

    Defendant against whom an ex parte decree is passed has two options: First is to file appeal. Second is to file application under O.9, R. 13. Defendant can take recourse to both the proceedings simultaneously. Right of appeal is not taken away by filing an application under O.9, R. 13. But if appeal is dismissed as result of which the ex parte decree merges with order of the Appellate Court, petition under O.9, R. 13 not be maintainable. When application under O.9, R. 13 is dismissed, remedy of the defendant is under O.43, Rule 1. However, once such appeal is dismissed, same contention cannot be raised in first appeal under Section 96 of Code.

    M/S. Neerja Realtors Pvt. Ltd. vs. Janglu (Dead) Thr. LR: AIR 2018 Supreme Court 753.

  5. Doctrines – Law of the Case – Meaning – It states that decision rendered in former appeal of case is binding in later appeal of same case

    Doctrine of the Law of the Case, according to the Black’s Law Dictionary, holds that a decision rendered in former appeal of case is binding in later appeal of the same case. It is different from law of the trial, res judicata, or stare decisis. Garner’s Dictionary of Legal Usage elaborates on doctrine of law of the case: If case is appealed a second time [say, on remand] to a panel of Court of Appeals, panel with a different makeup from the first panel hears case the second time, second panel will generally hold itself bound by writings of first panel whether or not its members agree with those earlier writings. Law-of-the-case doctrine is said to come in at least two forms. One form, also called the mandate rule, forestalls “relitigation in Trial Court of matters that were explicitly or implicitly decided by an early appellate decision in same case. Once an Appellate Court decides an issue, then it is settled in further proceedings. Other form generally binds a Court to its own earlier ruling in same case— in the absence of an intervening ruling by higher Court on same issue. This doctrine wants the Courts to “display disciplined self-consistency” throughout the case. It distinguishes itself from res judicata (for instance, Section 11 of CPC) ‘issue estoppel’ (as seen in Order 2, Rule 2 of CPC), both of which are much more rigid and offer no much leverage.

    However this doctrine has three exceptions: to address new evidence, to deal with a change in controlling legal authority, to prevent a miscarriage of justice. If applying doctrine would lead to, they postulate, clearly erroneous results and if uncorrected, would work a serious injustice, policy justifications of doctrine yield to interests of justice, Courts decline to apply the former decision. Finally comes cautionary caveat: despite this roster of three exceptions to the law-of-the-case doctrine, it bears repeating that the doctrine is a prudential one. These rules and exceptions are meant to be “guide to discretion,” not “a set of categorical rules, mechanically applied.

    State of Kerala and Another v. K. K. Mathai : AIR 2018 Kerala 63.

  6. Power and function of information commission – Information commission discharges administrative functions, not judicial functions: Right to Information Act

    Decision taken by State Public Information Officer u/S.11 of the RTI Act, to disclose any information or record or part thereof, on request made under the Act, which relates to or has been supplied by third party and has been treated as confidential by that third party, is appealable u/s 19 of the RTI Act before the Information Commission. When Information Commission decides such an appeal, it decides only whether or not information should be furnished to the citizen in view of the objection of the third party. Information Commission does not decide the rights of a third party but only whether information which is held by or under the control of a public authority, in relation to, or supplied by that third party, could be furnished to a citizen under the provisions of the RTI Act. Hence, Information Commission discharges administrative functions, not judicial functions. While performing these administrative functions, however, the Information Commissions are required to act in a fair and just manner following the procedure laid down in Ss. 18, 19 and 20 of the RTI Act. But this does not mean that the Information Commissioners are like Judges or Justices who must have judicial experience, training and acumen.

    Chandra Shekhar Kargeti v. State of Uttarakhand and Others: AIR 2018 UTTARAKHAND 38.

  7. Impounding of document – Insufficiently stamped document presented for registration : Registration Act , 1908 sec. 69

    When person presents document for registration, it is for registering officer to determine at first instance as to what is fee to be paid. Once such determination is made and the presenting party is dissatisfied, he has an option to apply to Inspector General of Registration who shall have power to refund excess. Section 33 of the Act relates to instruments that are produced as evidence or for such purposes before public authorities and which are not sufficiently stamped. Presentation of a document for registration stand on a completely different footing. It is possible that a person presenting a document has not been properly advised of actual stamp duty to be paid. It is, therefore, that Rule 207 provides that Registering Authority will have to first determine the fee. It would then be upon the person presenting the document either to pay that fee or to seek return of document without getting it registered. Obviously when a document remains unregistered for more than 120 days, it ceases to have any legal sanctity.

    Assanaru Khan v. Sub-Registrar Chalai Thiruvananthapuram and Another: AIR 2018 (NOC) 267 (Ker.)

  8. Lease – ‘Tenant by holding over’ and ‘tenant by sufferance – Distinction

    ‘Tenant by sufferance’ is one that continues after determination of lease without consent of the landlord. Such occupation of premise is not ‘Tenancy’ in sensu stricto and requires no notice to determine it, as status of tenant is akin to a trespasser though not exactly a trespasser being rightful in its inception “holding over” means that the relationship of landlord and tenant is allowed to continue after determination of lessee, with consent of both parties. A lessee holding over with consent of Lessor is in a better position than a tenant at sufferance. In case of a tenant at sufferance liability arises ex delicto, i.e., from a transgression and he will lible for damages in form of mesne profit and not payment of rent.

    General Manager, Bharat Sanchar Nigam Limited (BSNL) v. Smt. Radhika Chettri. AIR 2018 (NOC) 285 (SIK.)

Posted in May.
  1. S.5 : Scope of total income – Non-resident – Employees of Indian company sent on assignments – Employees resident of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India – Indian Company is not liable to deduct tax on salaries paid in India – Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India – DTAA – India-Germany-USA [Ss. 2(45) 4, 5(2) 9(1)(ii) 15, 90, 192, Art. 4(1), 23, 25]

    Authority held that Employees of Indian company sent on assignments, employees resident of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India. Indian Company is not liable to deduct tax on salaries paid in India. Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India.

    H. P. India Software Operation P. Ltd., In Re (2018) 401 ITR 339 (AAR)

  2. S.5 : Scope of total income – Non-resident – Employees of Indian company sent on assignments – Employees resident of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India – Indian Company is not liable to deduct tax on salaries paid in India – Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India – Indian company is not liable to deduct tax on split pay and perquisites received in India but accrued outside India. DTAA – India – USA [Ss. 2(45) 4, 5(2) 9(1)(ii), 15, 90, 192, Art. 4(1), 25]

    Authority held that Employees of Indian company sent on assignments, employees resident of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India Indian Company is not liable to deduct tax on salaries paid in India. Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India. When payments were received from more than one source during a particular year, the present employer could give credit for the taxes deducted during his deputation outside India. In the absence of any other provision, recourse to the specific provision in S.192(2) alone was possible. This provision cast an obligation on the employee to furnish to the employer, the applicant, such details of the salary, etc., received by him from the other employer, the tax paid or deducted therefrom, and other particulars, and the employer would examine and take into account such details before computing the tax deductible.

    Texas Instruments (India) Pvt. Ltd., In Re (2018) 401 ITR 289 (AAR)

  3. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Title in equipment imported transferred outside India – Delivery of equipment outside India and consideration for supply of plant and equipment paid in Euros to Bank outside India – Not liable to deduct tax at source

    AAR held that title in equipment imported transferred outside India delivery of equipment outside India and consideration for supply of plant and equipment paid in Euros to Bank outside India therefore the applicant is not liable to deduct tax at source.

    Michelin Tamil Nadu Tyres P. Ltd., In Re (2018) 401 ITR 164 (AAR) (HC)

  4. S.9(1)(i) : Income deemed to accrue or arise in India – Business connection – Technical and equipment and services for events – DTAA – India – Belgium – Portugal [Ss.9(1)(vii), 90, Art. 7, 12]

    Applicant provided with exclusive office space as well as on-site space and lockable space for storing tools and equipment, identifiable place of business at its disposal, constitutes permanent establishment therefore income from activity is chargeable to tax in India as business profits.

    Organising committee of commonwealth games not acquiring know-how or ability to use it. “Make Available” clause is not satisfied. Income does not constitute royalty hence income is not taxable as fees for technical services

    Production Resource Group, In Re v. (2018) 401 ITR 256 (AAR)

  5. S.48 : Capital gains – Computation – Expenses incurred towards fees for computerisation of share certificates in order to transfer them to escrow account is allowable as deduction. [S.45, 112]

    AAR held that expenses incurred towards fees for computerisation of share certificates in order to transfer them to escrow account is allowable as deduction.

    Honda Motors Co. Ltd., In Re (2018) 401 ITR 382 /253 Taxman 402/301 CTR 159/163 DTR 113 (AAR)

  6. S.54 : Capital gains – Profit on sale of property used for residence – Investment in residential house outside India was held eligible for exemption (Prior to amendment with effect from 1-4-2015 by Finance (No. 2) Act, 2014) [S. 45, 54F]

    Allowing the application AAR held that, Investment in residential house outside India was held eligible for exemption (Prior to amendment with effect from 1-4-2015 by Finance (No. 2) Act, 2014). Amendment is not retrospective. As regards the period of holding would be determined from the period from which property was held by the applicant’s father, indexation was to be allowed on 1-4-1981.

    Dipankar Mohan Ghosh, In Re 2018] 401 ITR 129 (AAR) (HC)

  7. S.90 : Double taxation avoidance – Income deemed to accrue or arise in India – Capital gains – Transfer of shares by German individuals to German Company – Not liable to deduct tax at source – DTAA – India – Germany. [Ss. 45, 90, 195, Art. 13]

    Allowing the application the AAR held that transfer of shares by German individuals to German Company is not chargeable to tax in India hence not liable to deduct tax at source. That the liability to deduct tax at source arises only if the sum paid was chargeable to tax. In cases where income is not chargeable to tax under the Act, as per expressions used in section 195 itself, there will be no obligation to withhold tax. There was no obligation on an applicant to withhold tax in a case, as the one in hand, where the gains arising from the alienation of shares were not chargeable to tax in India.

    Gea Refrigeration Technologies Gmbh (2018) 401 ITR 115 / 163 DTR 145 (AAR) (HC)

  8. S.90 : Double taxation relief – Non-resident – Assessee is not operating as independent entity – Assessee is not entitled to benefit of double taxation avoidance agreement between India and Mauritius – Transaction was held to be liable to tax in India and tax to be withheld – DTAA – India –Mauritius-USA [S. 195, Art. 13]

    Assessee incorporated in Mauritius as Investment Company for investment in particular sector in India. Acquiring shares in Indian Company from two U.S. sellers under share purchase agreement. Assessee shown as party to agreement but consideration paid and all decisions taken by U.S. holding Company . Assessee is not operating as independent entity. Shares in Indian company to be treated as held benami. Actual owner of shares U.S. holding company. Sale of shares to another non-resident group company. Assessee is not entitled to benefit of double taxation avoidance agreement between India and Mauritius. Transaction was held to be liable to tax in India and tax to be withheld.

    By the authority : (i) “The existence of a separate and independent status of a subsidiary in another territory is the core basis and foundation of the application of treaty law across the globe. Tax treaties throughout the world function on the premise that the subsidiary is an independent legal entity, different from its parent, even though controlled by it. However, in a case where the parent acts on behalf of its subsidiary and takes all its decisions, the corporate veil between the company’s subsidiary and its parent stands torn, not at the instance of the Revenue, but by the conduct of the group itself.”

    Authority also held that a mere accounting entry without the actual flow of money or other consideration must be made subservient to the actual transaction.

    “AB” Mauritius, In Re (2018) 402 ITR 311 (AAR)

  9. S.90 : Double taxation avoidance agreement – Non-resident – Capital gains, arising from sale of shares in Indian Company to group company in Singapore is not liable to tax in India – DTAA – India-Mauritius [S. 195, Art. 13]

    Assessee is not a benami of holding Company or set up for tax avoidance. Transfer of shares in Indian company to Singapore Company as part of business reorganisation. Assessee is entitled to benefits of the Double Taxation Avoidance Agreement between India and Mauritius. Capital gains arising from sale of shares in Indian company to group company in Singapore is not liable to tax In India. S. 195 is applicable only if income chargeable to tax in payment.

    Ab Holdings, Mauritius-Ii, In Re. (2018) 402 ITR 37 (AAR)

  10. S.92 : Transfer Pricing – International transactions – Arm’s length price – Transaction of sale of shares in Indian company to be benchmarked under transfer pricing provisions [Ss. 92A to 92F]

    No requirement that transaction should result in income chargeable to tax for transfer pricing provisions to get attracted. Transaction of sale of shares in Indian company to be benchmarked under transfer pricing provisions.

    “AB” Mauritius, In Re (2018) 402 ITR 311 (AAR)

  11. S.92 : Transfer Pricing –International transactions – Arm’s length price – Transaction of sale of shares in Indian company to be benchmarked under transfer pricing provisions [Ss. 92A to 92F]

    No requirement that transaction should result in income chargeable to tax for transfer pricing provisions to get attracted. Transaction of sale of shares in Indian company to be benchmarked under transfer pricing provisions.

    Ab Holdings, Mauritius-Ii, In Re (2018) 402 ITR 37 (AAR)

  12. S.112 : Tax on long term capital gains – Foreign company on long-term capital gains arising on sale of equity shares of an Indian company being listed in securities, will be 10 per cent (plus surcharge and cess) of amount of capital gains as per proviso to S.112(1)-DTAA – India-Japan [S.45, Arts. 4, 13]

    Question before AAR was whether the tax payable by the applicant on the long term capital gains arising on the sale of equity shares being listed securities, will be 10% (plus surcharge and cess) of the amount of capital gains as per the proviso to S. 112(1) of the Act.

    AAR granted benefit of proviso to S. 112(1) to the applicant and upheld 10% tax rate for long-term capital gains arising on sale of listed shares pursuant to share transfer agreement with Indian partners in order to sell its stake in HHML by placing reliance upon Delhi High Court ruling in Cairn UK Holding Ltd. (2013) 359 ITR 268 (Delhi ) (HC) and AAR ruling in Pan-Asia iGate Solutions (2014) 364 ITR 331 (AAR).

    Honda Motors Co. Ltd., In Re (2018) 401 ITR 382/ 253 Taxman 402/ 301 CTR 159 /163 DTR 113 (AAR)

  13. S.112 : Tax on long term capital gains – Non-residents – Concessional rate of tax – Long-term capital gains arising on sale of equity shares in Indian listed company to be taxed at 10.506 per cent, inclusive of surcharge and cess [S. 45]

    Allowing the application AAR held that the benefit under the proviso to section 112(1) of the Act could not be denied to the applicant. The tax payable by the applicant on the long-term capital gains arising on the sale of equity shares in A, an Indian listed company, were to be computed at 10.506 per cent inclusive of surcharge and cess of the amount of capital gains, in terms of the proviso to section 112(1) of the Act.

    Finnish Fund for Industrial Co-operation Ltd., In Re (2018) 402 ITR 373 (AAR)

  14. S.115JB : Book profit – Not applicable to foreign companies

    The provisions of S.115JB shall not be applicable to foreign companies , in terms of the retrospective amendment to S.115JB by the Finance Act, 2016 and the clarification issued by the Board dated September 24, 2015.

    “AB” Mauritius, In Re (2018) 402 ITR 311 (AAR)

  15. S.115JB : Book Profit – Not applicable to foreign companies

    The provisions of S.115JB shall not be applicable to foreign companies, in terms of the retrospective amendment to S. 115JB by the Finance Act, 2016 and the clarification issued by the board dated September 24, 2015

    Ab Holdings, Mauritius-Ii, In Re. (2018) 402 ITR 37 (AAR)

  16. S.192 : Salary – Deduction at source – Non-Resident – Employees rendering services on deputation at USA and Germany on assignment basis – Not liable to tax in India as services were rendered there hence not liable to deduct tax at source – DTAA – India-USA-Germany [Ss. 2(45)4, 5(2), 9(i)(ii), 90, 192, 195, Arts. 25, 23]

AAR held that, employees of Indian company sent on assignments to render services in U. S. A. and Germany to companies, income earned from services rendered in those countries chargeable to tax there, and not in India, during period of assignment hence the Indian company is not liable to deduct tax on salaries paid in India. Employees resident of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India.

Hewlett Packed India Software Operation P. Ltd. In, re/ 162 DTR 337 (2018) 401 ITR 339 (AAR) (HC)

Posted in May.
  1. S.2(22)(e) : Deemed dividend – Transactions between group concerns being current and inter banking accounts, addition cannot be made as deemed dividend

    Allowing the appeal of the assessee the Tribunal held that transactions between group concerns being current and inter banking accounts, addition cannot be as loans and advances hence cannot be assessed as deemed dividend. (AY. 2008-09)

    Saamag Developers (P.) Ltd. v. ACIT (2018) 168 ITD 649 (Delhi) (Trib.)

  2. S.2(47)(v) : Transfer – Development rights – Transfer of development rights as per shareholder agreement with financial partner for development of integrated township by unregistered agreements, no liability of tax could be fastened on assessee on basis that possession of land had been handed over. [Ss.28(i), 45, Registration Act, 1908, S. 17(IA), Transfer Property Act 1882, S.53A]

    Allowing the appeal of the assessee, the Tribunal held that ; Transfer of development rights as per shareholder agreement with financial partner for development of integrated township by unregistered agreements, no liability of tax could be fastened on assessee on basis that possession of land had been handed over. (A.Y. 2008-09, 2012-13)

    Saamag Developers (P.) Ltd. v. ACIT (2018) 168 ITD 649 (Delhi) (Trib.)

  3. S.4 : Charge of income-tax –Capital or revenue – Book profit – Sales tax subsidy granted by the Government for purpose of setting up or expansion of mills would be capital receipt – Amended provisions treating subsidy or grant as income u/s. 2(24)(xvii) are prospective in nature and not applicable to assessment year prior to AY. 2016-17) [Ss.2(24)(xvii), 28(i), 115JB]

    Allowing the appeal of the assessee the Tribunal held that sales tax subsidy granted by the Government for purpose of setting up or expansion of mills would be capital receipt and the said receipts cannot be added to book profit. Amended provisions treating subsidy or grant as income u/s. 2(24)(xvii) are prospective in nature and not applicable to assessment year prior to AY.2016-17) (ITA Nos. 979/1001/17 /Hyd/ 17 dt. 20-4- 2018 (AY. 2006-07, 2013-14)

    Sanghai Industries Ltd v. ACIT (Hyd.) (Trib.) www.itat.nec.

  4. S.4 : Income chargeable to tax – Father died intestate – Property inherited as per S.8 of the Hindu Succession Act is assessable in his individual capacity and not as Karta of HUF [Hindu Succession Act, 1956, S.8]

    Assessee’s father died intestate leaving behind certain ancestral properties which was inherited under S.8 of Hindu Succession Act, said properties devolved on in his individual capacity and not as karta of HUF and accordingly income from these properties would be assessable in his individual capacity and not as Karata of HUF. (AY.2011-12)

    Mahaveer Yadav v. ITO (2018) 169 ITD 717 (Jaipur) (Trib.)

  5. S.4 : Charge of income-tax –Interest awarded under Land Acquisition Act is in nature of solatium and an integral part of compensation and receipt of same is a capital receipt whereas, interest awarded under the said Act is on account of delayed payment of compensation and is revenue receipt. [S. 10(37), Land Acquisition Act, 1894, S. 28, 34]

    Tribunal held that interest awarded under S.28 of Land Acquisition Act is in nature of solatium and an integral part of compensation and receipt of said compensation is a capital receipt whereas, interest awarded under S. 34 of Land Acquisition Act is on account of delayed payment of compensation and is revenue receipt. (AY. 2011-12)

    Dnyanoba Shajirao Jadhav v. (2018) 169 ITD 291 (Pune) (Trib.)

  6. S.6(5) : Residence in India –Deemed residence – Where status of assessee was taken as resident for computing his business income, his status would remain the same for salary income earned outside India. [S. 5]

    On appeal, the Tribunal held that the residential status of the assessee for the business income earned by him was taken as resident. Thus, the assessee ought to be treated as a resident for other sources of income as well in light of section 6(5) and hence the matter was remanded back to the CIT(A). (ITA No. 458/Asr./2016 dt. 24-2-2017) (AY. 2011-12)

    ITO v. Rajesh Joshi (2018) 163 DTR 137 (Asr.)(Trib.)

  7. S.9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Domain name is an intangible asset which is similar to trademark. Consequently, income from services rendered in connection with such domain name registration is assessable as “royalty” – DTAA – India-USA [S. 115A, Article 12]

    Dismissing the appeal of the assessee the Tribunal held that domain name is an intangible asset which is similar to trademark. Consequently, income from services rendered in connection with such domain name registration is assessable as “royalty”, Therefore, the charges received by the assessee for services rendered in respect of domain name is royalty within the meaning of Clause (vi) read with Clause (iii) of Explanation 2 to Section 9(1) of Income-tax Act. (ITA No. 1878/Del./2017, dt. 3-4-2018)(AY. 2013-14)

    Godaddy.com LLC v. ACIT (Delhi)(Trib.), www.itatonline.org

  8. S.9(1) : Income deemed to accrue or arise in India – Company situated in UAE but having effective control and management situated in Germany could not claim benefit of the India-UAE tax treaty but it can claim benefits of the India-Germany tax treaty –DTAA – India-UAE-Germany [Articles 4, 8, 29]

    The assessee was a shipping company. It was denied the benefit of India-UAE DTAA shipping company by invoking Article 29 on grounds that the said company had got registration for doing its business in UAE whereas its place of effective control and management was situated outside UAE. In order to invoke Article 29 of India-UAE DTAA, what is to be established is that if assessee-company was not formed in UAE, it would not have been entitled for such benefits. It was noted that the entire share capital of the assessee company was held by German entities but then in Indo-German DTAA also same treaty protection with regards to taxability of shipping profits only in State of residents were available and hence the assessee company was to be formed in UAE or in Germany, would not have any material difference so far as non-taxability of said income in India is concerned. (ITA Nos. 7 to 9 (Rjt.) of 2011 dt. 28-11-2017) (AY. 2008-09)

    ITO (IT) v. Martrade Gulf Logistics FZCO-UAE (2018) 162 DTR 22 / 191 TTJ 575 (Rajkot)(Trib.)

  9. S.10A : Free Trade Zone – If the assessee suo motu makes the adjustment and offers higher income, Ss. 10A/10B deduction cannot be denied. Also, as such notional income is not “export turnover”, the condition in Ss. 10A/10B that foreign exchange must be brought to India does not apply [Ss. 10B, 92CA]

    Tribunal held that the assessee is not entitled to Ss. 10A/10B deductions in respect of transfer pricing adjustments applies only where the adjustment is made by the AO/TPO. If the assessee suo motu makes the adjustment and offers higher income, Ss. 10A/10B deduction cannot be denied. Also, as such notional income is not “export turnover”, the condition in Ss. 10A/10B that foreign exchange must be brought to India does not apply (Deloitte Consulting v. ITO in ITA No.157/Mum/2012 dt. 15-7-2015) (Mum) (Trib) is not followed as it is contrary to CIT v. iGate Global Solutions Ltd. (ITA No.453/2008, dt. 17-6-2014, (Karn.) (HC)). (ITA No. 1051/Pun/2015, dt. 12-3-2018)(AY.2011-12)

    Approva Systems Pvt. Ltd. v. DCIT (Pune)(Trib.), www.itatonline.org

  10. S.12AA : Procedure for registration – Trust or institution – Registration granted under section 12AA cannot be denied in the subsequent years when there is no change in the objects of the assessee only on the presumption that proviso to S.2(15) is applicable [2(15)]

    On appeal the Tribunal held the registration u/s. 12A of the Act is not annual but is for all the subsequent years until it is withdrawn u/s 12AA of the IT Act. Having granted registration for the A.Y 2007-08, holding that the assessee is not eligible for the registration for the A.Ys. 2009-10 onwards will amount to rejection or cancellation of the registration granted earlier and hence following the CBDT Circular No. 21 of 2016 it held that the CIT(E) ought not to have rejected the registration u/s. 12A of the Act for the subsequent assessment years even if it is presumed and accepted that the proviso to S. 2(15) of the Act is applicable to the assessee.With respect to the earlier years the Tribunal held that there is no change in the objects of the assessee from the earlier and in the subsequent assessment years and there is no finding that the assessee has carried on any activity not in accordance with its objectives and held that it is eligible to registration u/s. 12A w.e.f. A.Y. 2003-04 onwards (ITA Nos. 980.1008 dt. 31-10-2017) (AYs. 2003-04 to 2013-14)

    HMDA v. CIT(E) (2018) 161 DTR 82/191 TTJ 122 (Hyd.)(Trib.)

  11. S.14A : Disallowance of expenditure – Exempt income – Disallowance has to be made even if the assessee has not earned any tax free income on the investment – Revision was held to be valid
    [S. 263, R. 8D]

    Dismissing the appeal of the assessee against the revision order of the Commissioner of Income-tax , the Tribunal held that , Disallowance has to be made even if the assessee has not earned any tax free income on the investment. Tribunal held that Cheminvest Ltd. v. CIT (2015) 378 ITR 33 (Delhi) (HC) is not binding on the assessee as it is a non -jurisdictional High Court. CBDT ‘s Circular 5/2/2014 is accordance with Godrej & Boycee Manufacturing Co. Ltd v. Dy.CIT (2017) 394 ITR 449 (SC) & Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) (ITA No 218 (Asr) 2017 dt.12-4 02018 )(AY. 2012-13)

    Lally Motors India (P) Ltd v. PCIT (2018) 93 taxmann.com 39 (Amritsar) ( Trib) www.itatonline.org

  12. S.14A : Disallowance of expenditure – Exempt income – The AO has to first record satisfaction having regard to accounts of the assessee that the claim made by the assessee with regard to non-incurrence of any expenditure for the purpose of earning income is incorrect before proceeding to make any disallowance. [R.8D]

    The Tribunal held that the AO had not raised any query with the regard to disallowance under S.14A in the entire assessment proceedings. It is the duty of the AO to record satisfaction in terms of S.14A(2) read with Rule 8D(1) of the Rules, before proceeding to make disallowance as per Rule 8D(2) of the Rules. It is the duty of the AO first to disturb the stand of the assessee of not making any disallowance under S.14A by recording proper satisfaction having regard to the accounts of the assessee in terms of S.14A (2) of the Act read with Rule 8D(1) of the Rules which was not present in the present case and hence deleted the disallowance made under S. 14A (ITA No. 2212/Kol/2014 dt. 10-1-2018) (AY. 2010-11)

    IMC Ltd. v. Dy. CIT (2018) 191 TTJ 73 (Kol.)(Trib.)

  13. S.17(2) : Perquisite – Purchase of property from a company wherein the assessee is also director can not be assessed as perquisite in lieu of salary as there was no employer and employee relation ship [Ss.17(2)(iii), 50C]

    Assessee purchased the property from the Company. The value paid was less than the fair value of property as per the stamp valuation. AO treated the difference as perquisite in the hands of the assessee. On appeal allowing the appeal of the assessee, the Tribunal held that to treat any sum as a perquisite in lieu of salary as per S.17(2)(iii) it is incumbent on part of Assessing Officer to establish on record that a benefit in nature of salary is given by an employer to an employee; establishment of employer-employee relationship between assessee and company is essential. Tribunal also held that, the legal fiction created under S.50C in so far as it enables the Assessing Officer to adopt the value for stamp duty purpose as the deemed sale consideration cannot be extended to assess the buyer of the immovable properties to tax on the differential amount. Though, the Assessing Officer has consciously not referred to the provisions of S.50C, however, there is no room for doubt that applying the deeming fiction of S 50C, the Assessing Officer has adopted the stamp duty value as the deemed sale consideration while making the addition. Therefore the addition made of ₹ 1.95 crore is unsustainable in law. (AYs. 2010-11, 2012-13)

    Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23 (Mum.) (Trib.)

  14. S.28(i) : Business income – Penny stock – Assessable as business income and not as short-term capital gains, deduction of donation was held to be allowable. [Ss. 35, 45]

    Allowing the appeal of the assessee the Tribunal that if the purchase of shares has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding them, the transaction is an “adventure in the nature of trade” and the gains are assessable as “business profits” and not as “short-term capital gains” accordingly the deduction u/s. 35 was held to be allowable. Tribunal held that the AO was not justified in assessing the sale consideration as short term capital gains ( ITA No. 2572/Del./2016, dt. 22-3-2018.)(AY. 2011-12)

    Prem Jain (Smt.) v. ITO (Delhi)(Trib.), www.itatonline.org

  15. S.28(i) : Business income – Income from house property – Manufacturing activities were closed and premises given on lease, rental income is held to be assessable as business income and remuneration paid to directors is held to be allowable deduction. [S. 22, 37(1)]

    Allowing the appeal of the assessee, the Tribunal held that, though manufacturing activities were closed and premises given on lease, rental income is held to be assessable as business income since main activity of assessee is letting out the properties. As the rental income is assessed under the head Business income remuneration paid to directors is also held to be allowable deduction. Followed Rayala Corpn. P. Ltd v. ACIT (2016) 386 ITR 500/ 243 Taxman 360 (SC) (AY.2011-12)

    Bharat Tiles & Marble (P) Ltd. v. Dy. CIT (2018) 170 ITD 26 (Mum.)(Trib.)

  16. S.28(i) : Business loss – Advance to purchase of land – Loss incurred on account of irrevocable advance paid for purchase of land for construction of office is held to be allowable as business loss

    Tribunal held that the assessee did not acquired any capital asset, it simply paid advance amount to acquisition of capital asset such amount of loss was incidental to the business, hence allowable as business loss. (AY. 2006-2007 to 2008-2009)

    Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

  17. S.28(i) : Business loss – Retention money – Advances to the companies which are in nature of irrevocable which are written off in the books is allowable as business loss

    Advance money given as retention to the companies for contract. Neither the interest nor principle amount settled against the same by these companies. Said advances were in nature of irrevocable and having nexus with the business hence allowable as business loss. (AYs. 2006-2007 to 2008-2009)

    Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

  18. S.28(i) : Business loss – Government deposits written off is held to be allowable as business loss. [S.37 (i)]

    Government old deposits write of owing smallness of amount in books of accounts are allowed as business loss and the efforts involved in recovering the said amounts is allowable as business expenditure. (AYs. 2006-2007 to 2008-2009)

    Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

  19. S.28(i) : Business loss – Advance made to parties for purchase of goods, consumables which are written off in the books is held to be allowable as business loss.

    Advances given to various parties for purchase of goods, electrical installation, consumable stores which have nexus with business hence allowable as business loss. (AYs. 2006-2007 to 2008-2009)

    Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

  20. S.28(iv) : Business income – Value of any benefit or perquisites – Converted into money or not – Purchase of property from a company wherein the assessee is also director cannot be assessed as profit and gain of business or profession

    Allowing the appeal of the assessee the Tribunal held that, purchase of property from a company wherein the assessee is also director cannot be assessed as profit and gain of business or profession as the transaction relating to purchase had been shown as an investment activity by assessee in its books which was accepted by the revenue, therefore, if at all there was any benefit or perquisite, it could not be said to be arising from a business or exercise of a profession by assessee and hence could not have been treated as profit and gain of business or profession. (AYs. 2010-11, 2012-13)

    Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23 (Mum.) (Trib.)

  21. S.32 : Depreciation – Toll bridge – BOT basis – Intangible asset, depreciation is allowable

    As per Circular No. 9 of 2014 issued by the Board, the assessee can claim amortisation of the expenditure also shows that the expenditure incurred by the assessee has to be treated as a capital expenditure by treating it as intangible asset. The expenditure has to be allowed as deduction in each year, so as to arrive at real profit. The provisions of depreciation or amortisation are only aimed at arriving at the true profit, though the methodology is different. The claim of depreciation was consistently being allowed, in which event, it may not be proper, for the interregnum period to disallow the claim of depreciation. (AYs. 2007-08 to 2009-10)

    Godavari Toll Bridge (P) Ltd. v. ACIT (2018) 163 DTR 17 / 191 TTJ 568 (Visakha)(Trib.)

  22. S.37(1) : Business expenditure – Expenses to keep its status of the company active was held to be allowable as business expenditure as business loss. [S. 28(i)]

    Allowing the appeal of the assessee the Tribunal held that expenses to keep its status of the company active was held to be allowable as business expenditure and as business loss. (AY. 2012-13)

    Kesha Appliances Pvt. Ltd v. ITO (2018) 63 ITR (Trib) 294 (Delhi) (Trib.)

  23. S.37(1) : Business expenditure – Bogus purchases – Payment through account payee cheques and consumption of goods broadly explained, purchases not bogus, however estimation of net profit at 5.76% was affirmed

    Tribunal held that mere appearance of purchase parties on sales tax department website, does not falsify that the purchases. The purchases by payment through account payee cheques and consumption of goods broadly explained said purchases cannot be held to be bogus purchases however net profit at 5.76% was confirmed. (AY. 2009-10)

    ACIT v. Pinaki D. Panani (Smt.) (2018) 61 ITR 7 (Mum.)(Trib.)

  24. S.37(1) : Business expenditure – Advertisement expenditure on project is held to be allowable though no income was offered during the year. [S. 145]

    Advertisement expenditure on project is held to be allowable though no income was offered during the year. (AY. 2013-2014)

    Dy. CIT v. Ramkay Wavoo Developers P. Ltd. (2018) 62 ITR 376 (Chen.)(Trib.)

  25. S.37(1) : Business expenditure – Freebies to doctors –Advertisement and sales promotion expenses incurred by the pharmaceutical company cannot be disallowed, on the basis circulars by Medical Council of India

    The Circular issued by the CBDT enlarging the scope of disallowance to the pharmaceutical companies was without any enabling notification or Circular of the Medical Council of India. Therefore a pharmaceutical company is outside the scope of the circular by the Medical Council of India or the CBDT, therefore expenditure on advertisement and sales promotion is allowable as business expenditure. (AY. 2010-11).

    Emcure Pharmaceuticals Ltd. v. Dy. CIT (2018) 62 ITR 744 (Pune)(Trib.)

  26. S.37(1) : Business expenditure – Capital or revenue – Debenture whether convertible or non convertible are in nature of loan at the time of issuance therefore expenditure incurred are allowable as business expenditure.

    Expenditure incurred on issue of foreign currency convertible bonds debentures at the time of issuance, expenditure are allowable as revenue expenditure. (AY. 2006-2007 to 2008-2009)

    Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

  27. S.37(1) : Business expenditure – Corporate entity – Administrative expenditure to maintain status of the company, is held to be allowable though the manufacturing activity of fragrance and flavours was discontinued. [S.57(iii)]

    Allowing the appeal of the assessee, the Tribunal held that Administrative expenditure to maintain the status of the company and for said purposes it was necessary to maintain clerical staff and secretary or accountant and incur incidental expensed is held to be allowable though the manufacturing activity of fragrance and flavours was discontinued. Tribunal also held that so long as the company is in operation and its name is not struck off from Registrar of Companies the administrative expenses will be allowable as deduction [Referred, CIT v. Ganga Properties Ltd. (1993) 199 ITR 94 (Cal.) (HC)] [AY. 2008-09, 2009-10]

    Sai Fragrance & Flavours (P.) Ltd. v. ACIT (2018) 169 ITD 235 (Mum.) (Trib.)

  28. S.37(1) : Business expenditure –Development rights – Payment made to shareholders to protect business interest was held to be allowable as business expenditure

    Dismissing the appeal of the revenue the Tribunal held that the payment was made to shareholders of SIPL for withdrawal of litigations and suits filed before High Court, so that the development of the said property could be smoothly undertaken without any hindrance, consequently, the expenditure was incurred to protect the business interest of the assessee and further to safeguard the assessee itself for further losses hence allowable as business expenditure . ( AY. 2008-09)

    DCIT v. Cowtown Land Development (P.) Ltd. (2018) 168 ITD 705 (Mum.) (Trib.)

  29. S.37(1) : Business expenditure – The assessee was doing major works for Govt. Departments and the said Departments also confirmed the authenticity of work and merely because the assessee could not produce the parties, purchases could not be held as non-genuine

    The assessee was a civil contractor carrying on contract of construction of roads and buildings. The AO issued notice to various parties in order to verify the genuineness of the purchases claimed to have been made by the assessee of construction material like bitumen, sand, and bricks. Since the assessee failed to produce the parties he disallowed the amount of  ₹ 1,97,55,357/- out of the total amount debited of ₹ 5,27,81,496/- claimed by the assessee on account of purchase. The CIT(A)) restricted the addition to ₹ 15,00,000/-.

    On appeal, the Tribunal held that the assessee had done major works for the Government departments and they confirmed the authenticity of the work. The assessee continuously declared a net profit in the range of 1.71% to 4.65% and the disallowance made by the AO if accepted would increase the net profit to the tune of 25.15% which was abnormal. The suppliers of these goods had no permanent place for carrying on the business. There were no defects in the books of account of the assessee. The disallowance confirmed by the CIT(A) of ₹ 15 lakh was to be reduced to ₹ 5 lakh (ITA No. 60 & Co. No. 10/Chd/2017 dt. 2-11-2017) (AY. 2011-12)

    IHR Associates v. Dy. CIT (2018) 61 ITR 70 (Chd)(Trib.)

  30. S.40(a)(ia) : Amounts not deductible – Deduction at source – Payment of commission to foreign agent – Not liable to deduct tax at source, hence, no disallowances can be made. [S.5(2)(b), 9(1)(i), 195]

    Dismissing the appeal of the revenue the Tribunal held that; payment of commission to foreign agent, the tax was not liable to be deducted hence no disallowances can be made .CBDT Circulars Nos. 7 dated 22-10-2009, 23 dated 23rd July 1969, 163 dated 29th May, 1975 and 786 dated 7th February, 2000 considered. (ITA Nos. 434 & 446/Agra/2015, dt. 11-4-2018)(AYs. 2010-11, 2011-12)

    ACIT v. Manufax (India) S. B. (Agra)(Trib), www.itatonline.org

  31. S.43(5) : Speculative transaction – Currency derivatives – Transactions through a recognised stock broker on recognised stock exchange, could not be termed as speculative transaction. [S.73]

    Allowing the appeal of the assessee the Tribunal held that; transactions of currency derivatives were conducted through a recognised stock broker, on a recognised stock exchange and which were duly supported by time stamped contract notes, same could not be termed as speculative transaction (AYs. 2013-14, 2014-15)

    Nand Nandan Agrawal v. DCIT (2018) 169 ITD 161 (Agra) (Trib.)

  32. S.45 : Capital gains – Business income – Land – Sale consideration received in respect of property received on dissolution of partnership of firm of his father was held to be assessable as capital gains and not as business income [Ss. 2(14), 28(i)]

    Allowing the appeal of the assessee the Tribunal held that sale consideration received in respect of property received on dissolution of partnership of firm of his father was held to be assessable as capital gains and not as business income. As regards expenditure incurred on levelling and construction of boundary wall, the matter was remanded to the AO for verification. (AY. 2010-11)

    Balkrishna P. Wadhwan. v. DCIT (2018) 169 ITD 693 (Mum.) (Trib.)

  33. S.45 : Capital gains – Index cost – Family arrangement – Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authorities – Consideration received as part of family arrangement cannot be assessed as income from other sources [Ss. 48, 49, 54 56]

    Allowing the appeal of the assessee the Tribunal held that it is not necessary for the validity of a family arrangement that there must be existing legal claims & disputes between the family members. The possibility of future disputes is sufficient. Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authorities. Consideration received as part of family arrangement cannot be assessed as income from other sources. Indexation was held to be allowable and exemption u/s. 54 of the income-tax Act. (ITA No. 5768/Mum/2017. Dt.
    28-2-2018)(AY. 2012-13)

    Kunal R. Gupta v. ITO (SMC) (Mum)(Trib), www.itatonline.org

  34. S.45 : Capital gains – Set off of capital loss – “Sham transaction”/ “Colourable device” – Sale of shares to son cannot be held to be colourable device if the transaction is within the four corners of law and valid

    Allowing the appeal of the assessee the Tribunal held that; the sale of shares in a Pvt. Ltd. Co. by the assessee to a relative (son) in order to book losses so as to set-off the capital gains from on sale of property cannot be rejected as a sham transaction / colourable device if the transaction is within the four corners of law and valid. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue. Further, if the period co-existed or permitted the assessee to set off her capital loss against the capital gains earned, would itself not give rise to the presumption that the transaction was in the nature of colourable device. We notice that the assessee has taken indexed cost of acquisition of share at ₹ 30,40,400/-. We notice that the Assessing Officer has not examined the same and accordingly direct him to verify the computation given by the assessee and allow set off of correct amount of Long Term Capital Loss against Long term capital gains. (ITA No. 7410/Mum/2012, dt. 9-3-2018)(AY. 2006-07)

    Madhu Sarda v. ITO (Mum.)(Trib.), www.itatonline.org

  35. S.45 : Capital gains – Cash credits – Share capital – Shares were issued at premium – Identity and PAN No was furnished addition cannot be made as undisclosed income. [Ss. 68, 133(6)]

    Dismissing the appeal of the revenue the Tribunal held that the fact that a Pvt. Ltd. co issued shares at an exorbitant premium is irrelevant if the assessee has proved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee. (ITA No. 1946/Mum./2016, dt. 28-2-2018)(AY. 2010-11)

    DCIT v. Alcon Biosciences P. Ltd. (Mum.)(Trib.), www.itatonline.org

  36. S.45 : Capital gains – Cash credits – Penny stocks – When the identity and genuineness of transaction is established merely because, the investigation department has alleged that there is a modus operandi of bogus Long Term Capital Gains scheme is not relevant if the same is not substantiated [Ss.10(38), 68]

    Allowing the appeal of the assessee the Tribunal held that capital gains from penny stocks cannot be assessed as unexplained cash credit u/s. 68 if the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept. has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated. (ITA No. 6235/Del/2017, dt. 19-3-2018)(AY. 2014-15)

    Meenu Goel v. ITO(SMC) (Delhi)(Trib.), www.itatonline.org

  37. S.45 : Capital gains – Sale of flats which was received from the developer for transfer of development rights was held to be assessable as capital gains, it was not a case where land was sold after converting in to stock-in-trade [S. 45(2)]

    Allowing the appeal of the assessee the Tribunal held that sale of flats which was received from the developer for transfer of development rights, which was let out and the rental income was offered as income from house property, the sale consideration was held to be assessable as capital gains, provision of S. 45(2) cannot be held to be applicable. (AYs. 2006-07 to 2010-11)

    Vikas Solvextracts (P.) Ltd. v. DCIT (2018) 168 ITD 692 (Kol.) (Trib.)

  38. S.48 : Capital gains – Computation – Tenancy rights – Value of tenancy rights to be considered for determination of cost of acquisition [Ss. 45, 49, 50C]

    Dismissing the appeal of the revenue the Tribunal held that value of tenancy rights to be considered for determination of cost of acquisition. The builder has given alternative flat to the assessee only by way of surrender of tenancy rights. Had there been no tenancy rights the builder would not have offered any flat to the assessee on ownership basis. Thus it is valuable right on which cost of acquisition has to be determined. Followed CIT v. Abrar Alvi (2001) 247 ITR 312 (Bom.) (HC). (ITA No. 3947/Mum/2016 dt 19-4-2018 Bemch “H”)(AY. 2007-08)

    ACIT v. Shree Krishna Pharmacy (Mum.) (Trib.)

  39. S.50B : Capital gains – Slump sale – Transfer of business division to its subsidiary against shares and debentures, was held to be not a ‘slump sale’ but an ‘exchange’; thus, provisions of section 50B would not be applied. [Ss.2( 42C), 45]

    Allowing the appeal of the assessee the Tribunal held that since transfer of undertaking was not for money but for equity shares and debentures, transaction was not a ‘sale’ but an ‘Exchange’ and, consequently, provisions of section 50B would not be applicable. The business Division transferred by the assessee as on a going concern basis where no cost of acquisition was possible to be attributed individual assets in that undertaking and therefore the charging of provisions of section 45 were not attracted. The provisions of section 50B are not applicable to this case as it is a case of slump exchange and not a slump sale. Accordingly, the order of Commissioner (Appeals) is set aside and the Assessing Officer is directed not to tax the amount of capital gains. (AY. 2008-09)

    Bennett Coleman & Co. Ltd. v. ACIT (2018) 168 ITD 631 (Mum.) (Trib.)

  40. S.54 : Capital gains – Profit on sale of property used for residence –Purchase of four flats merged in to one residential house – Entitle to exemption. [S.45]

    Dismissing the appeal of the revenue, the Tribunal held that, though the assessee has purchased four flats, merged into one unit the exemption is held to be available. The Inspector carried out spot verification and reported that though there are four flats but the same has been merged into one composite flat having a common entrance door, and was used as a residence. Followed CIT v. Devdas Naik (2014) 366 ITR 12 (Bom) (HC), ITO v. Sushila M. Jhaveri (2007) 107 ITD 327 (SB)(Mum)(Trib) (ITA No. 6884/Mum./2014 dt. 11-4 2018 (AY. 2009-10)

    ITO v. Kavita Gupta (Mum.) (Trib.)

  41. S.54 : Capital gains – Profit on sale of property used for residence – When entire capital gains is invested in a flat under construction, exemption cannot be denied on the ground that possession was not given [S.45]

    Dismissing the appeal of the revenue, the Tribunal held that when entire capital gains is invested in a flat under construction exemption cannot be denied on the ground that possession was not given. S.54(2) does not specify any condition that. (AY. 2013-14)

    ACIT v. M. Raghuraman (2018) 169 ITD 315 (Chennai) ( Trib)

  42. S.56 : Income from other sources – Fair market value of shares sold – Choice of method of valuation is with the assessee – AO has no jurisdiction to insist that the assessee should only a particular method for determining the value of shares. Rule of constancy must be followed by the AO. [S.56(2)(viiib) R.11UA]

    Dismissing the appeal of the revenue the Tribunal held that, for determining the fair market value of shares sold, Choice of method of valuation is with the assessee. AO has no jurisdiction to insist that the assessee should follow only a particular method for determining the value of shares. Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares, the assessees are free to adopt any one method. Rule of constancy must be followed by the AO. (ITA No. 4854/Mum/2016 dt. 2-5-2018 Bench “C”) (AY. 2013-14)

    DCIT v. Ozoneland Agro Pvt. Ltd. (Mum) (Trb) www.itatonline.org

  43. S.56 : Income from other sources – Unquoted equity shares – Discounted cash flow method – Net asset value method – Option to adopt the method of valuation is with assessee – When no defect is found in valuation of shares arrived on basis of discounted cash flow method addition made by the AO on basis of net asset value method was to be set aside. [Ss.56(2)(vii)(b), R. 11UA]

    The assessee submitted valuation per equity share computed on the discounted cash flow method as per the certificate of Chartered Accountants wherein the value per shares was arrived at ₹ 54.98 per share. The AO did not accept said valuation and applied Net Asset Value method as per which value of share came to ₹ 26.69 per share. Applying the said value, the Assessing Officer made addition under S. 56(2)(vii)(b) of the Act. Tribunal held that the provisions of S. 56(2)(vii)(b) gives an options to assessee to adopt any of methods which can be compared with Net Asset Value Method and Assessing Officer shall adopt value whichever is higher. Accordingly the since discounted cash flow method is one of prescribed methods and, moreover, Assessing Officer had not found any serious defect in facts and details used in determining fair market value under said method, impugned addition made by him was deleted. (AY. 2014-15)

    ACIT v. Safe Decore (P.) Ltd. (2018) 169 ITD 328 (Jaipur) (Trib.)

  44. S.56 : Income from other sources – Redeemable non-cumulative preference shares could not be excluded from the ambit of S.56(2)(viib)

    The issue of shares more than fair market value, tax to be factored while determining net rate of return on investments, rate of return on preference shares issued by other companies for relevant period relevant material. The redeemable non-cumulative preference shares could not be excluded from the ambit of section 56(2)(viib).

    Microfirm Capital P. Ltd. v. Dy. CIT (2018) 62 ITR 109 (Kol.)(Trib.)

  45. S.56 : Income from other sources – Purchase of property from a company wherein the assessee is also director cannot be assessed as income from other sources, as the amendment to assess difference arising out of stamp duty value and actual sale consideration as income in case of sale of property for a consideration less than stamp duty value of property was incorporated into statute by Finance Act, 2013 with effect from 1-4-2014 [S. 56(2)(vii) ]

    Allowing the appeal of the assessee the Tribunal held that, Purchase of property from a company wherein the assessee is also director can not be assessed as income from other sources, as the amendment to assess difference arising out of stamp duty value and actual sale consideration as income in case of sale of property for a consideration less than stamp duty value of property was incorporated into statute by Finance Act, 2013 with effect from 1-4-2014. (AY. 2010-11, 2012-13)

    Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23 (Mum) (Trib.)

  46. S.56 : Income from other sources – Under valuation of shares – The “fair market value” of shares acquired has to be determined by the taking the book values of the underlying assets and not their market values [S. 56(2)(viia), (R. 11UA)]

    Allowing the appeal of the assessee the Tribunal held that on the plain reading of above Rule, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration. Therefore, we are of the view that the share price calculated by the assessee of TEPL for ₹ 5 per share has been determined in accordance with the provision of Rule 11UA. (ITA Nos. 6964 and 722/Del/2017, dt. 7-3-2018)(AY. 2014-15)

    Minda SM Tecnocast Pvt. Ltd. v. ACIT (Delhi)(Trib.), www.itatonline.org

  47. S.68 : Cash credits – Share capital – Shell companies – Accommodation entries were routed through shell companies hence addition was held to be justified. [Ss. 131, 133(6)]

    Dismissing the appeal of the assessee the Tribunal held that the assessee set up a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerised print out to give it a semblance of originality to defraud the revenue shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade taxes. (ITA No. 4520/Del/2009 and 613/Del/2013, dt. 28-4-2018)(AY. 2006-07)

    Shaan Construction P. Ltd. v. ITO (Delhi)(Trib.), www.itatonline.org

  48. S.68 : Cash credits – Share application money – No adverse material was found in the course of search proceedings, hence addition was held to be not justified [S. 153A]

    Tribunal held that, during the course of search, no adverse material found to prove that the share application money received was bogus or non-genuine. As the assessee filed details in the form of bank statements books of account, PAN, confirmation etc. addition made by the AO was without any basis, deleted the addition. (AYs. 2007-08, 2009-10, 2010-11)

    Garuda Imaging & Diagnostics (P) Ltd. v. ACIT (2018) 191 TTJ 765 (Delhi)(Trib.)

  49. S.68 : Cash Credits – Share application money – AO failed to to make inquiry on documentary evidence produced by assesse, addition deleted

    The AO had not verified the documentary evidence filed by the assessee in order to prove the identity, creditworthiness and genuineness of the transaction. Filed evidence that the net worth of both the investor companies was substantial so as to make investment with the assessee. No material was produced on record that during the course of search, any material was found to prove that the assessee received any accommodation entries from the investor companies. The AO instead of issuing fresh notice u/s. 133(6) on the correct address of the investors, merely relied upon the fact that the earlier letter had been returned unserved. No coercive action had been taken for the production of investors; no adverse inference could be drawn against the assessee. (AY 2011-2012)

    Prabhatam Investment Pvt. Ltd. v. ACIT (2018) 61 ITR 352 (Delhi)(Trib.)

    ACIT v. Sindhu Holding Ltd. (2018) 191 TTJ 765 (Delhi)(Trib.)

  50. S.68 : Cash credits – Sale of shares – Offline transactions – Merely on the ground that six companies failed to reply to notices issued to them, addition was held to be not justified. [S. 133(6)]

    Allowing the appeal of the assessee, the Tribunal held that merely on the ground that six companies failed to reply to notices issued to them, addition was held to be not justified, when the assessee had furnished all the necessary details of six companies along with the permanent account numbers. (AY. 2012-13)

    Kesha Appliances Pvt. Ltd v. ITO (2018) 63 ITR (Trib.) 294 (Delhi) (Trib.)

  51. S.68 : Cash credits – Share application money – Existing share holders – Confirmation and other details were filed – Addition as undisclosed was held to be not justified

    Dismissing the appeal of the revenue, the Tribunal held that the assessee has furnished complete particulars such as, names address, permanent account numbers, confirmation letters, income tax returns and balance sheet, and all are existing shareholders therefore share application money cannot be assessed as undisclosed income of the assessee. (AY. 2010-11)

    ITO v. Dhanalaxmi Equipment P. Ltd. (2018) 63 ITR (Trib.) (S.N.)33 (Jaipur) (Trib.)

  52. S.69 : Unexplained investments – Remand report – Once the AO was satisfied in the remand proceedings and did not oppose not controverted the documents filed by the assessee, he cannot be said to be aggrieved by the Order passed by the CIT(A) considering his own remand report. [S.251]

    The assessee in the course of the assessment proceedings was required to explain the deposit of ₹ 33,09,240/- in its bank account with Union Bank of India, Fatehgarh Sahib. In the course of the assessment proceedings, it was noticed that the amounts have been deposited in HDFC Bank, Bassi Road, Sirhind, Fatehgarh Sahib which were explained to be on account of sale of HUF ancestral agricultural land at village Badhoshi Kalan to Shri Kamaljit Singh S/o Shri Sukhdev Singh of Mauli Vedwan sold by assessee’s brother Shri Darshan Singh wherein the assessee also had half a share. The claim was supported by way of affidavit. However, since the assessee despite a direction failed to produce the purchaser Shri Kamaljit Singh who did not respond even to the summons issued u/s. 131, the addition of ₹ 25,40,000/- cash deposit in the Union Bank of India and ₹ 10 lakh in HDFC Bank account was held to be not explained. On further appeal by the assessee, the CIT(A) deleted the impugned addition after relying upon the remand report and on consideration of the facts.

    On appeal by the Revenue, the Tribunal held that the occasion for the AO to file an appeal did not arise. Since the facts and evidences considered in the remand proceedings have not been rebutted by the AO in the present proceedings, the present appeal ought not to have been filed. The AO once satisfied in the remand proceeding cannot be said to be aggrieved by the order passed by the CIT(A) considering his own remand report and thus the appeal filed by the Revenue was dismissed (ITA No. 599/Chd/2017 dt. 10-1-2018) (AY. 2009-10)

    ITO v. Randhir Singh (2018) 163 DTR 10 (Chd.)(Trib.)

  53. S.69C : Unexplained expenditure – Bogus purchases – Supplier admitted the supply of goods and genuineness of transaction, therefore purchases cannot be treated as bogus purchases addition of 12.5% of the purchases was deleted

    Allowing the appeal of the assessee the Tribunal held that the fact that the supplier admitted to issuing bogus bills does not necessarily mean that he had issued accommodation bills to the assessee. There is subtle but very important difference in issuing bogus bills and issuing accommodation bills to a particular party. The difference becomes very important when a supplier in his affidavit admits supply of goods. As far as sales are concerned there is no doubt about the genuineness of such sales. It is also a fact that suppliers were paying VAT and were filing their returns of income. In response to the notices issued by the AO u/s. 133(6) of the Act, the supplier admitted the genuineness of the transaction. Accordingly, the purchases cannot be treated as bogus. Accordingly addition of 12.5% of purchases was deleted. ITA No. 1045/Mum/2016, dt. 13-4-2018)(AY. 2011-12)

    Shantivijay Jewels Ltd. v. DCIT ( Mum)(Trib), www.itatonline.org

  54. S.69C : Unexplained expenditure – Estimation of profits embedded in purchases at 12.5% is reasonable when the assessee failed to prove the purchases to be genuine and also failed to produce the selling parties during the course of the assessment proceedings. [S.145]

    Pursuant to search and seizure operations which revealed that the assessee was the beneficiary of accommodation entries, notices under section 133(6) of the Income-tax Act, 1961 were issued to two parties from whom the assessee claimed to have made purchases. Since the assessee failed to produce the parties before the AO and the purchases remained unverifiable, the AO rejected the books of account of the assessee under section 145 of the Income-tax Act, 1961 and held that the purchases shown by the assessee were not genuine and added them to the income of the assessee as unexplained expenditure in the hand of the assessee. The CIT(A) brought to tax profits at the rate of 12.5% amounting to ₹ 13,35,058/- embedded in such alleged bogus purchases to the tune of ₹ 1,06,80,467/-

    On appeal the Tribunal held that the purchases existed in the books of account of the assessee and the onus was on the assessee to prove that the purchases were genuine. Under these circumstances, the possibility of the assessee buying the material actually from the grey market at lower rates and obtaining corresponding bills from the parties to reconcile the quantitative records and books of account could not be ruled out. Hence the profits estimated by the CIT(A) at 12.5% was reasonable (ITA No. 1441 & 3133/Mum./2016 dt. 1-2-2018) (AY. 2007-08)

    ITO v. Prankit Exports (2018) 62 ITR 243 (Mum.)(Trib.)

  55. S.80-IA : Industrial Undertaking – Manufacturer of yeast setting up plant for generation of steam power and cooling power for maintaining temperature of yeast is entitled for deduction

    The scheme of section the deduction u/s. 80-IA provides for working out the profit on power generation undertaking as a separate industrial undertaking de hors any other business. For calculating the deduction u/s. 80-IA the profits of the eligible business must be worked out as if it were the only source of an assessee’s income. Therefore, Net profit percentage of the assessee’s yeast manufacturing business for arriving at the profits u/s. 80-IA in respect of the cooling power and steam power generation undertakings was contrary to s. 80-IA(5).

    Saf Yeast Co. P. Ltd. v. Dy. CIT (2018) 62 ITR 381 (Mum)(Trib.)

  56. S.80-IC : Special category States – Support services provided to IT companies by the assessee through its own staff is eligible for deduction

    Assessee was engaged in providing support services to the IT companies through online, onsite and offsite modes and all the work performed at the site of client was through the staff of the assessee. The assessee had its operational unit in Dehradun and was creating jobs in Dehradun, Uttaranchal bringing new IT call centres and BPO companies to Dehradun to deliver IT services. All the facilities to its clients were controlled and provided from Dehradun and activities undertaken by the assessee fell in the category of Information and Communication Technology Industry in clause No. 13 of Part C of Schedule Fourteenth. Hence the assessee fulfilled the conditions to claim deduction under section 80-IC (ITA Nos. 5856 of 2011, 4277, 5744 of 2012 & 2506 (Del.) of 2013 dt. 27-10-2017)(AY. 2007-08 to 2010-11)

    IMSI India (P.) Ltd. v. DCIT (2018) 191 TTJ 662 (Delhi )Trib.)

  57. S.80P : Co-operative societies – Interest earned by a co-operative Society from deposits kept with co-operative bank is deductible. [S.80P(4) ]

    Tribunal held that interest earned by a co-operative society from deposits kept with co-operative bank is deductible.

    Land End Co-operative Housing Society Ltd. (ITA No. 3566/Mum/2014 “A” dt. 15-1-2016 (AY. 2009-10)

    Nutan Laxmi Co-operative Housing Society Ltd. v. ITO (ITA No 7203/7204/Mum/2013 “B” dt. 24-8-2016 (AY. 2009-10, 2010-2010-11) Sea Grean Co-operative Housing Society Ltd. (ITA No. 1343 /Mum/ 2017 “ E” dt. 31-03 -2017 (AY. 2013-14)

    Merwanjee Cama Park Co-op. Housing Society Ltd. v. ITO (ITA No. 6139/Mum/2014
    dt 27-9-2017 “B”

    ITO v. Citiscape Co-operative Housing Society Ltd. (ITA No. 5435 & 5436/Mum/2017
    dt 8-12-2017 (SMC)

    Kaliandas Udyog Bhavan Premises Co-op. Society Ltd. v. ITO (ITA No. 6547/Mum/2017 dt 25-4-2018( AY.2014-2015) (SMC)

    Maratha Era Co-operative Housing Society Ltd. v. ITO (ITA No. 6996/Mum/2017 dt. 6-3 2018 “I”) (AY. 2014-15)

  58. S.92C : Transfer pricing – The “international transaction” as defined in S. 92F(v) has to be a genuine transaction. Transfer pricing provisions do not apply to non-genuine or sham transactions [S.92F(v)]

    Tribunal held that it is elementary that the ALP is determined of an ₹international transaction’, which has been defined in section 92B of the Act. The term ₹transaction’, for the purposes of the Chapter–X containing transfer pricing provisions, has been defined in clause (v) of section 92F to include an arrangement, understanding or action in concert. It shows that the ALP is always determined of an international transaction, which is genuine, but may be formal or in writing and whether or not intended to be enforceable by legal proceeding. If a transaction itself is not genuine, there can be no question of applying the transfer pricing provisions to it. In such an eventuality of a supposed genuine transaction turning out to be non-genuine, all the consequences which would have flowed for a real transaction, are reversed. In other words, certain deductions which would have been otherwise allowed in case of a genuine international transaction, are denied. Nitty-gritty of the matter is that only a declared and accepted genuine international transaction can be subjected to the transfer pricing regulations. If an international transaction is proved to be not genuine, the transfer pricing provisions are not triggered. (ITA No. 5921/Del/2010, dt. 11-4-2018)(AY. 2006-07)

    Mitchell Drilling India Private Limited v. DCIT (Delhi)(Trib.), www.itatonline.org

  59. S.92C : Transfer pricing – Arm’s length price – The TPO can not sit in judgment over the business model of the assessee and determine the ALP of the transactions with AEs at Nil

    Allowing the appeal of the assessee the Tribunal held that international transactions of information technology services availed has to be aggregated with other transactions being intrinsically linked to other international transactions undertaken by the assessee during the year and the same has to be benchmarked applying internal TNMM method as in the case of other international transactions. Further, we also reverse the order of TPO in holding that the assessee has not availed any services in view of various documents filed by the assessee and also certificate of Eaton China, which was filed during the course of TP proceedings evidencing not only the availment of services but also the basis of cost for such services. Similar services were availed by other Eaton group entities from Eaton China and its certificate that the same has also charged at the same rates as charged to the assessee. In the entirety of the above said facts and circumstances, we reverse the order of TPO/Assessing Officer in taking the value of international transactions of Information Technology Services availed at Nil and delete the adjustment made. (ITA No. 45/Pun/2013, dt. 12-3-2018)(AY. 2008-09)

    Eaton Fluid Power Limited v. ACIT (Pune) (Trib.), www.itatonline.org

  60. S.92C : Transfer pricing – Arm’s length price – A company having a calendar year ending, cannot be compared with the assessee having a financial year ending notwithstanding functional similarity between two companies

    The assessee was engaged in provision of information technology (IT) enabled back office support services in the nature of customized business/financial research support to Copal group. The assessee selected certain companies including Jindal Intellicom Ltd. in connection with the provision of ITES. The Tribunal held that Jindal Intellicom Ltd., having a calendar year ending, cannot be compared with the assessee having a financial year ending notwithstanding the functional similarity between the two (ITA No. 1865/Del/2014 dt. 9-1-2018) (AY. 2009-10)

    ITO v. Copal Research (I)(P.) Ltd. (2018) 162 DTR 129 / 191 TTJ 1000 / 90 taxmann.com 70 (Delhi) (Trib.)

  61. S.92CA : Reference to transfer pricing officer – CBDT’s Instruction No. 3/2003 is binding on the AO. Consequently, the ALP of international transactions where the quantum is less than ₹ 5 crore has to be determined by the AO and cannot be referred to the TPO. If such reference is made, it is invalid and the extended time for completing the assessment is not available to the AO. The assessment is void as it is time-barred [S.119, 144C]

    The Tribunal had to consider the following ground of appeal:

    “The reference to the Transfer Pricing Officer u/s. 92CA of the Income-tax Act, 1961 by the Assessing Officer was illegal being contrary to (i) the binding Instruction No. 3/2003, (ii) the provisions of Section 92CA and the binding decision of the Special Bench in the case of Aztec Software and Technology Services Ltd. 107 ITD 141 (Bang.) (SB). Consequently, the impugned assessment is time barred and, therefore, bad in law.”

    Tribunal held that CBDT’s Instruction No. 3/2003 is binding on the AO. Consequently, the ALP of international transactions where the quantum is less than ₹ 5 crore has to be determined by the AO and cannot be referred to the TPO. If such reference is made, it is invalid and the extended time for completing the assessment is not available to the AO. The assessment is void as it is time-barred.
    (ITA No. 4363/del./2010, dt. 23-3-2018)
    (AY. 2006-07)

    Calance Software Pvt. Ltd. v. DCIT (Delhi)(Trib.), www.itatonline.org

  62. S.92D : International Transactions – Amalgamation – On the date of the draft assessment order the assessee was not in existence, assessment order was a nullity and was not sustainable in the eyes of law

    The assessee merging in another company and not in existence on date of passing of draft assessment order and order of assessment. Thus the assessment order was not sustainable in the eyes of law. (AY. 2008-2009 & 2009-2010)

    JCB India Limited (formerly known as M/s. JCB Manufacturing Pvt. Ltd.) vs. Dy. CIT (2018) 61 ITR 148 (Del)(Trib.)

  63. S.140A : Self-assessment – Failure to pay self-assessment tax, penalty cannot be levied [S. 221]

    Allowing the appeal of the assessee, the Tribunal held that assessee’s failure to pay self-assessment tax within stipulated period, in view of fact that amended section 140A(3) with effect from 1-4-1989 levy of penalty was held to be not justified. (AY. 2009-10)

    Heddle Knowledge (P.) Ltd. v. ITO (2018) 169 ITD 304 (Mum.) (Trib.)

  64. S.143(2) : Assessment – Notice by an AO not having jurisdiction over the assessee is irrelevant –Assessment was held to be bad in law

    Notice by an AO not having jurisdiction over the assessee is irrelevant. If the proper AO does not issue the notice within the time limit, the assessment is null and void. The argument that the non-jurisdictional AO issued the s. 143(2) notice as per PAN or computerised system or internal procedure is not relevant as it violates the law (AY. 2006-07)

    ITO v. NVS Builders Pvt. Ltd. (Delhi)(Trib.), www.itatonline.org

  65. S.143(3) : Assessment – Survey – An admission of estimated income made during survey has no evidentiary value and is not binding on the assessee. The income has to be assessed as per the return of income and books of account. [S. 133A]

    Allowing the appeal of the assessee the Tribunal held that merely on the basis of admission made in the course of survey addition cannot be made. Order in Hiralal Maganlal 97 TTJ Mum 377 distinguished. CBDT Circular No. 286/2/2003 (Inv.) II dated 10-3-2003 referred. (ITA No. 795/Mum/2015, dt. 23-2-2018)(AY. 2006-07)

    Amod Shilal Shah v. ACIT (Mum)(Trib), www.itatonline.org

  66. S.144C : Reference to dispute resolution panel – AO has to adhere to mandatory requirement of the section – Even in remand proceedings the Assessing Officer has to first pass a draft assessment order before passing a final assessment order – Appeal before the Tribunal is held to be not maintainable. [Ss. 92C, 246A, 253]

    Assessing Officer has to adhere to mandatory requirement of section 144C(1) and first pass a draft assessment order before passing final assessment order even in remand proceedings.Tribunal held that, the AO has to adhere to mandatory requirement of S. 144C(1) and first pass a draft assessment order before passing final assessment order even in remand proceedings. Even if final assessment order is passed in contravention of any statutory provision appeal has to be filed before CIT(A) or appropriate Constitutional remedy. Appeal before Tribunal is not maintainable. (AY. 2012-13)

    STevapharm India (P.) Ltd. v. ACIT (2018) 169 ITD 619 (Delhi) (Trib.)

  67. S.145 : Method of accounting –Where then books of account is rejected and income is estimated, separate addition u/s. 40A(3), 68 or peak credit cannot be made. [Ss. 68. 145(3)]

    Allowing the appeal of the assessee the Tribunal held that when the books of account is rejected there is no justification for the authorities below to make addition of ₹ 6,92,25,000/- under section 40A(3) of the I.T. Act and addition of ₹ 7,12,15,150/- under section 68 of the I.T. Act. In view of the above discussion, we set aside the orders of the authorities below and delete both these additions. (ITA No. 4709/Del/2017, dt. 23-3-2018)(AY. 2013-14)

    Deepak Mittal v. ACIT (Delhi)(Trib.), www.itatonline.org

  68. S.147 : Reassessment – Income of any other person – Issue of notice u/s. 153C and did not continue with proceedings, again issuing a notice u/s. 148 is held to be bad in law [Ss.148, 153C]

    Allowing the appeal of the assessee, the Tribunal held that when the AO had issued a notice u/s. 153C to which the assessee had complied with. Thereafter the AO did not continue with the proceedings u/s. 153C. Subsequently the AO issued a notice u/s. 148, which was held to be bad in law. (ITA No. 3275/Mum/2015 & 3276/Mum/2015) (A.Y. 2003-04, 2005-06)

    Rayoman Carriers Pvt. Ltd. v. ACIT (Mum) (Trib.)

  69. S.147 : Reassessment – Bogus accommodation entries – Order was passed before expiry of four weeks of passing the orders of objection – Non-application of mind while recording reasons – Order was held to be bad in law [S. 148]

    Allowing the petition the Tribunal held that, passing the reassessment order before the expiry of 4 weeks of passing the order of objections renders the reassessment order void. Also, if the reasons state “bogus accommodation entries were provided/taken” and it is not clear whether the assessee has received or provided accommodation entries, it means there is no application of mind by the AO while recording reasons. (ITA No. 5780/Del./2014, dt. 6-4-2018)(AY. 2004-05)

    Meta Plast Engineering P. Ltd. v. ITO ( Delhi)(Trib), www.itatonline.org

  70. S.153A : Assessment – Search – On the date of search the company does not existed as it was merged with another company, hence the notice and assessment is held to be bad in law

    On the date of search the company does not existed as it was merged with another company, hence the notice and assessment is held to be bad in law. (AY. 2007-2008 – 2010-2011)

    Garuda Imaging & Diagnostics (P) Ltd. v. ACIT (2018) 191 TTJ 765 (Delhi)(Trib.)

    ACIT v. Sindhu Holding Ltd. v. ACIT (2018) 191 TTJ 765 (Delhi)(Trib.)

  71. S.201 : Deduction at source – Failure to deduct or pay – Limitation of two years prior to amendment, by Finance (No. 2) Act, 2014, with effect from 1-10-2014 and seven years thereafter [S. 201(3)]

    S. 201(3) as amended by Finance (No. 2) Act, 2014, with effect from 1-10-2014 provides for limit for passing order to be within seven years from end of financial year in which payment was made or credit was given and for earlier years said limitation period would be two years from end of year in which payment was made. (AY. 2009-10)

    Vodafone Cellular Ltd. v. DCIT (2018) 169 ITD 675 (Pune) (Trib.)

  72. S.234B : Interest – Advance tax – Book profit – In view of Explanation 1(v) of sub-section (1) of S. 234B, MAT credit has to be allowed from ‘assessed tax’ and, thereafter, interest to be computed

    Allowing the appeal of the assessee the Tribunal held that in view of Explanation 1(v) of sub-section (1) of S. 234B, MAT credit has to be allowed from ‘assessed tax’ and, thereafter, interest to be (AY. 2007-08)

    Ellenbarrie Industrial Gases Ltd. v. ITO (2018) 169 ITD 194 (Kol.) (Trib.)

  73. S.251 : Appeal – Commissioner (Appeals) – Powers – Fresh claim can be made before the appellate authorities if the assessee demonstrates that he was unable to make such a claim through a revised return. [S. 35D, 139(5)]

    Fresh claim can be made before the appellate authorities if the assessee demonstrates that he was unable to make such a claim through a revised return. Hence the matter was restored back to the AO. (ITA Nos. 30 to 32/Coch/2016 dt. 23-11-2017) (AYs. 2009-10 to 2011-12)

    HLL Lifecare Limited v. ACIT (2018) 191 TTJ 1(UO) (Kochi) (Trib.)

  74. S.253 : Appellate Tribunal –Registrar’s Court – The Registrar of the Tribunal has no jurisdiction to consider and decide on applications for condonation of delay. Only the Court/ Tribunal have the power. The order passed by the Registrar is ultra vires his power and non est in law. He should desist from passing such orders [S. 152(1).253(5)]

    Order passed by the Bench in ITA No. 6339/Mum/2017 in the case of Shri Hiten Ramanlal Mahimtura on lst May 2018 through order sheet.

    ORDER

    This appeal is barred by limitation by 21 days. While hearing the appeal. we observed that the Registrar has heard this preliminary issue of condoning the delay and passed order on
    8-3-3018 condoning the delay.

    The power of condoning the delay is with the Court/Tribunal under the Limitation Act as well as u/s. 253(5) r.w.s. 252(1) of the Income-tax Act.

    The petition of assessee has to be examined by the Court/Tribunal after hearing both the parties and after considering the reasons, facts etc.

    Hence, the order passed by the Registrar is ultra vires beyond his power. hence his order is non-est in the eyes of the law.

    Henceforth the Registrar should desist from passing such orders and he should put up all petitions before the Bench.

    The Registry is also directed to place this order before Hon’ble President for issuing necessary instructions. Copy of this order is sent to Registrar for compliance. The appeal as well as condonation Petition is adjourned to 19-6-2018. (ITA No. 6339/Mum/2017, dt. 1-5-2018)

    Hiten Ramanlal Mahimtura (Mum.)(Trib.), www.itatonline.org

  75. S.253 : Appellate Tribunal – Order passed in remand proceedings as per direction of Tribunal, appeal lies before CIT(A) and not before Tribunal [Ss. 144C, 246A]

    Tribunal held that, order passed in remand proceedings as per direction of Tribunal , appeal lies before CIT(A) and not before Tribunal. Even if final assessment order is passed in contravention of any statutory provision appeal has to be filed before CIT(A) or appropriate Constitutional remedy. Appeal before Tribunal is not maintainable. (AY. 2012-13)

    Tevapharm India (P.) Ltd. v. ACIT (2018) 169 ITD 619 (Delhi) (Trib.)

  76. S. 254(2A) : Appellate Tribunal – Interim stay – Contempt – Strictures passed against the Department for confronting, showing resentment and displeasure to the Tribunal for granting interim stay against recovery of demand. Petition of revenue was dismissed with costs of ₹ 20,000/- to be deposited in Prime Minister’s Relief Fund within 15 days of receipt of the copy of this order. [S. 11]

    The Tribunal held that department officials fully knowing that no useful purpose will be served either by moving the present application and even knowing that the present application was infructuous and non-maintainable even on the date of its filing, not only filed this application, but also insisted for arguments despite that the hearing on the main appeal had already been concluded on a previous date. The only motive behind this application is to confront and show resentment and displeasure to this Tribunal for granting interim stay against recovery in this matter. This application is therefore dismissed with costs of ₹ 20,000/- to be deposited in Prime Minister’s Relief fund within 15 days of receipt of the copy of this order. While ordering so, we are cautious that it will not result into any loss to the Govt. Exchequer but the movement of some funds from one branch of the Govt. to the other perhaps will convey the message of caution to the concerned officials. However, keeping judicial restraint, no contempt of court proceedings recommended at this stage. Strictures passed against the Department for confronting, showing resentment and displeasure to the Tribunal for granting interim stay against recovery of demand. The Dept. is showing open defiance of, disrespect of, or of open resentment to, orders of the Tribunal, which may prove be very dangerous for the sanctity of the courts of law/Justice dispensation system of the country. (MA No. 37/Chd/2018, dt. 6-4-2018)(AY. 2013-14)

    ITO (E) v. Chandigarh Lawn Tennie Association (Chan)(Trib), www.itatonline.org

  77. S.263 : Commissioner – Revision of orders prejudicial to revenue – Non est revised return cannot be revised as the assessment order itself is null and void

    Allowing the appeal the Tribunal held that, non est return cannot be revised as the assessment order itself is null and void. (AY. 2011-12)

    Hari Mohan Das Tandon (HUF) v. PCIT (2018) 169 ITD 639 (All) (Trib.)

  78. S.271(1)(c) : Penalty – Concealment – Wrong claim of depreciation by crediting capital subsidy to reserves instead of reducing from actual cost/WDV does not attract the penalty

    Allowing the appeal of the assessee the Tribunal held that the primary burden of proof is on the Revenue to show that the assessee is guilty of concealment/furnishing inaccurate particulars. Making an incorrect claim does not tantamount to furnishing inaccurate particulars by any stretch of imagination. Wrong claim of depreciation by crediting capital subsidy to reserves instead of reducing from actual cost/ WDV does not attract s. 271(1)(c) penalty. (ITA No. 4023/Del/2016, dt. 15-3-2018)(2009-10)

    Prafful industries (P) Ltd. v. DCIT (Delhi)(Trib.), www.itatonline.org

  79. S.271(1)(c) : Penalty – Concealment – Non-specification of limb in notice levy of penalty is held to be bad in law

In the penalty notice the AO has not mentioned under which limb penalty was initiated therefore the notice has its inception is bad in law the penalty levied was directed to be deleted. (AY. 2010-2011, 2011-2012)

Dy. CIT v. Sujata Bharadwaj (Smt.) (2018) 191 TTJ 17 (Jodh.)(UO)(Trib.)

Posted in May.
  1. S.2(22)(e) : Deemed dividend –loans from two companies addition cannot be made as deemed dividend

    Dismissing the appeal of the revenue the Court held that the assessee had not made any payment by way of advance or loan to a shareholder, but on the contrary, had received loans from the two companies. Therefore, if at all, the provisions of section 2(22)(e) were applicable to the companies which had made such payments, provided the assessee had the requisite shareholding. The assessee being the recipient of such amounts, the Tribunal was justified in holding that the provisions of section 2(22)(e) could not be invoked. No question of law arose. (AY. 2010-11)

    CIT v. Gladder Ceramics Ltd. (2018) 401 ITR 205 (Guj.) (HC)

  2. S.4 : Charge of income-tax – Capital or revenue – Sales tax subsidy is a capital receipt [S. 264]

    Allowing the petition against order u/s. 264 the Court held that the sales tax subsidy received by the assessee was to be treated as a capital receipt and was not to be added to its income. The orders of the Commissioner and the Assessing Officer, treating the sales-tax subsidy as revenue receipt, were to be set aside. (AYs. 2007-08 to 2010-11)

    Sunbeam Auto Pvt. Ltd. v. CIT (2018) 402 ITR 309 (Delhi) (HC)

  3. S. 4 : Charge of income-tax – VAT subsidy – Refund of value added tax was held to be capital receipt and not chargeable to tax [Ss. 2(24)(xviii), 43(1)]

    Dismissing the appeal of the revenue the Court held that refund of value added tax subsidy from Government of Bihar was held to be capital receipt and not chargeable to tax.

    CIT v. Deepak Vegpro Pvt. Ltd. (2018) 401 ITR 89 (Raj.) (HC)

  4. S.10 (23C) : Educational institution – Application for exemption was made before wrong authority – Authority concerned should have forwarded to the correct authority instead of rejecting the said application after enquiries [S. 10(23C)iv)]

    Allowing the petition the Court held that when the assessee filed the application before the wrong authority, it should have been returned. Instead of returning the assessee’s application, an enquiry was held and additional material was sought, thereby making the assessee believe that its application was pending consideration. Therefore, on the facts of the case, the blame was equally apportionable to both parties. If the assessee were entitled to exemption on merits, it would be iniquitous to deny consideration of its application, merely because it was not addressed to the correct authority. Therefore, it would be in the fitness of things, if the application dated September 30, 2015, filed by the assessee were treated as the one filed before the competent authority, i.e., the Commissioner (E). The Assistant Commissioner (E) was to forward the application filed by the assessee for exemption in Form 56 along with the enclosures to the Commissioner (E) and the Commissioner (E) shall hold an enquiry, pass an appropriate order and communicate it to the assessee. (AY. 2015-16)

    Telangana State Pollution Control Board v. CIT (2018) 402 ITR 267 (T&AP) (HC)

  5. S.10B : Export oriented undertakings – Manufacture or processing – Garbling pepper to make it edible – No new product emerges – Not entitled to deduction

    Dismissing the appeals, that the process of garbling to make pepper edible did not give rise to a different commodity distinct from the raw pepper purchased. The assessee was not entitled to deduction under section 10B (AY. 2003-04, 2005-06)

    Nishant Export v. ACIT (2018) 401 ITR 401 (Ker.) (HC)

  6. S.11 : Property held for charitable purposes – Propagation of yoga falls under category of ‘Imparting of education’ – Corpus donation to be excluded from total income – Higher membership fee is also donation hence cannot be assessed as income [Ss. 2(15, 2(24(iia), 4]

    Dismissing the appeal of the revenue the Court held that propagation of yoga by way of conducting yoga classes on a regular basis and in a systemised manner falls under category of ‘Imparting of education’ . Corpus donation was to be excluded from total income. Higher amount from certain subscribers/donors in yoga camps who were provided corresponding benefits as opposed to others, that by itself could not be basis for holding that membership fee was not a donation and had to be treated as income liable to tax. (AY. 2009-10).

    CIT(E) v. Patanjali Yogpeeth (NYAS) (2018) 252 Taxman 317 / 300 CTR 266 (Delhi)(HC)

  7. S.12AA : Procedure for registration – Trust or institution – Genuineness of activities of the assessee was not doubted hence refusal of registration was held to be not justified [S. 12A]

    Dismissing the appeal of the revenue the Court held that it was rightly concluded by the Tribunal that the Commissioner was not justified in rejecting the application for registration, under section 12AA, of the assessee-society by insisting on conditions not contemplated by the statute. The Department had not been able to produce any material on record to show that the approach adopted by the Tribunal was legally unsustainable or to show that the view taken by it was erroneous. No question of law arose.

    CIT v. Shri Mahavir Jain Society (Regd.) (2018) 402 ITR 301 (P&H)(HC)

  8. S.12AA : Procedure for registration – Trust or institution – Rejection of application for failure to produce Trust deed was held to be not justified, when the assessee was registered under State Wakf Board [R. 17A]

    Dismissing the appeal of the revenue the Court held that the factum of existence of a trust could also be established by producing documents evidencing its creation. The order passed by the Wakf Board recognised various Daudi Vora Trusts and the assessee had also listed its objects, who would be the managers of the trust and how such managers would be appointed or removed. The Tribunal had gone through the registration details of the assessee as contained in the order of the Wakf Board and was satisfied that the full details of the functions of the trust were available which established the existence of the trust, its registration by the State Wakf Board and also contained the details of its objects, the manner of appointment of mutawalli, etc. The Tribunal was right in holding that looking to the nature of the assessee-trust no separate trust deed was required for registration under section 12AA as it was registered with the State Wakf Board.

    CIT v. Dawoodi Bohra Masjid (2018) 402 ITR 29 (Guj.) (HC)

  9. S.12AA : Procedure for registration – Trust or institution – Alleged misuse of funds is not a ground for refusing registration [Ss.11, 12A]

    Dismissing the appeal of the revenue the Court held that alleged misuse of funds is not a ground for refusing registration.

    CIT v. Chaudhary Son Pal Singh (2018) 401 ITR 509 (All.) (HC)

  10. S.28(i) : Business loss – Fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure [S.37(1)]

    Dismissing the appeal of the revenue the Court held that fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure. Relied CIT v. Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC) (ITA No. 806 of 2015 dt.26-2-2018)(AY. 2009-10)

    PCIT v. Aloka Exports (Bom)(HC) (2018) BCAJ -May. 62

  11. S.35AB : Know-how – Acquiring know-how means acquiring on ownership basis or on lease deduction cannot be allowed as revenue expenditure [S.37(1)]

    Question for consideration was “Whether on the facts and the circumstances of the case and in law, the Tribunal was right in law to hold that the assessee had acquired the ownership rights in the technical knowhow included in the agreement in contradistinction to lease of rights in such knowhow and accordingly the assessee was entitled to deduction under section 35AB as against under Section 37(1) of the Act?

    Court held that on the application of law to the facts in the present facts, the expenditure on account of technical know-how incurred under the agreement dated 19th June, 1984 is classifiable under S.35AB of the Act and not under S.37(1) of the Act. Therefore, question is answered in the affirmative in favour of the respondent Revenue and against the applicant assessee.
    (Dy. CIT v. Anil Starch Products Ltd. (2015) 232 Taxman 129 (Guj.)(HC) and Diffusion Engineers Ltd. v. Dy. CIT (2015) 376 ITR 487 (Karn.)(HC) (based on CIT v. Swaraj Engines Ltd. (2008) 301 ITR 284 (P&H)(HC) dissented from) (ITR No. 13 of 2001, dt. 27-4-2018) (AY. 1986-87).

    Standard Batteries Ltd. v. CIT (Bom.)(HC), www.itatonline.org

  12. S.37(1) : Business expenditure — Expenditure in excess of 6 per cent of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology Infrastructure was also held to be allowable. [Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, R. 52]

    Reading the proviso to Regulation 52 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, it is manifest that any excess over the 6 per cent initial issue expense shall be borne by the asset management company, therefore expenditure in excess of 6% of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology infrastructure was held to be allowable (AY. 2006-07).

    CIT v. Ing Investment Management (India) P. Ltd. (2018) 401 ITR 405 (Bom.) (HC)

  13. S.40(a)(ia) : Amounts not deductible – Deduction at source – Proviso excepting assessee from disallowance where payee has declared payment in his return and paid tax thereon is retrospectively applicable, hence no disallowance can be made [S. 201(1)].

    Dismissing the appeal of the revenue the Court held that the second proviso to section 40(a)(ia) of the Income-tax Act, 1961 introduced by the Finance Act, 2012 (which provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B but is not deemed to be an assessee-in-default under the first proviso to section 201(1), i.e., the payee has filed a return taking into account such sum for computing his income, has paid the tax due on such income declared and furnishes a certificate to this effect from an accountant, the assessee shall not be subject to disallowance in respect of such sum) has retrospective application (AY. 2009-10).

    CIT v. Manoj Kumar Singh. (2018) 402 ITR 238 (All.) (HC)

  14. S.40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – Payment made to producer of meat in cash in excess of ₹ 20,000/ disallowance cannot be made [R.6DD]

    Dismissing the appeal of the revenue the Court held that, payment made to producer of meat in cash in excess of ₹ 20000/ disallowance cannot be made. Circular No. 8 of 2016 issued by CBDT cannot impose additional condition in the Act or Rules adverse to an assessee. Relied UCO Bank v. CIT (1999) 237 ITR 889 (SC) (ITA No. 1224 of 2015 dt. 13-3-2018) (AY. 2009-10)

    PCIT v.Gee Square Exports (Bom)(HC) (2018) BCAJ -May. 61

  15. S.45 : Capital gains – Transfer –Power of Attorney was executed in the year 1993-94 but actual possession was given in the year AY. 2003-04, capital gains was held to be taxable in the year of handing over of possession [S. 27(v), Transfer of Property Act, 1882, S.53A]

    Dismissing the appeal of the assessee the Court held that the agreement dated April 30, 2001 referred to some oral agreement and powers of attorney executed between the assessees and the developer, but the fact remained that the agreement dated April 30, 2001 recorded that the assessees were the owners and in possession of the property. The power of attorney of the year 1993-94 did not disclose that possession was given to the developer in pursuance of the power of attorney. Moreover, the assessees in their reply to the notice stated that the assessees had not given possession to the developer but had given only access to enable him to do certain jobs on their behalf. It had also been stated in the reply that the assessees continued to be full owner of the property and there was no transfer. Therefore, the transfer within the meaning of section 2(47)(v) had taken place only in the assessment year 2002-03, since, by agreement dated April 30, 2001, actual possession was given to the developer and it was not given on the basis of the powers of attorney and oral agreements entered into between the assessees and the developer in the year 1993-94 (AY. 2002-03).

    Dr. Joao Souza Proenca. v. ITO (2018) 401 ITR 105/ 253 Taxman 275 (Bom.) (HC)

    Sara Proenca (Mrs.) v. ITO (2018) 401 ITR 105/ 253 Taxman 275 (Bom) (HC)

  16. S.45: Capital gains – Search – Additions cannot be made on the basis of statement of third parties, when no incriminating documents were found in the course of search action on the assesse [Ss.132(4) 158BA].

    Dismissing the appeal of the revenue the Court held that the Tribunal held that the search action had not resulted in recovery of incriminating evidence or undisclosed investment in any form including deposits in bank accounts and that an unsigned agreement which was disowned by both parties, not supported by any evidence could not be relied upon to make addition. It further held that an addition could not be made solely on the basis of surrender made during the course of search or survey in the absence of corroborative evidence in support and deleted the addition.

    CIT v. Prabhati Lal Saini. (2018) 401 ITR 228 (Raj.) (HC)

  17. S.45 : Capital gains – Transfer – Development agreement was not registered hence there was no transfer, therefore not liable to capital gains tax [S. 2 (47)(v), Transfer of Property Act, 1882, S.53A]

    Dismissing the appeal of the revenue the Court held that on facts as the development agreement was not registered, there was no transfer, therefore not liable to capital gains tax (AY. 2008-09).

    PCIT v. Ranjit Kaur (2017) 81 taxmann.com 319 (P&H) (HC)

    Editorial: SLP of revenue was dismissed, PCIT v. Ranjit Kaur (2018) 252 Taxman 382 (SC)

  18. S.54B : Capital gains – Land used for agricultural purposes – Investment in the name of wife was held to be entitled to exemption. The words used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken into consideration while considering the exemption [S. 263]

    Allowing the appeal of the assessee the Court held that investment in the name of wife was held to be entitled to exemption. The words used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken in to consideration while considering the exemption.

    Laxmi Narayan v. CIT (2018) 402 ITR 117 (Raj.) (HC)

    Shravan lal Meena L/H of Late Bhagwanta Meena v. ITO (2018) 402 ITR 117 (Raj.) (HC)

    Mahadev Balaji v. ITO (2018) 402 ITR 117 (Raj.) (HC)

  19. S.68 : Cash credits – Not required to explain source of source – Confirmation letters, affidavits PAN No. was filed, deletion of addition was held to be justified

    Dismissing the appeal of the revenue the Court held that the assessee is not required to explain the “source of source” prior to insertion of the proviso to s. 68. If the assessee has discharged the primary onus placed upon it u/s. 68 by filing confirmation letters, the affidavits, the full address and pan numbers of the creditors, the Revenue has to proceed against the persons whose source of funds are alleged to be not genuine (ITA No. 819 of 2015, dt. 17-4-2018)(AY. 2010-11).

    PCIT v. Veedhata Tower Pvt. Ltd. (Bom.)(HC), www.itatonline.org

  20. S.68 : Cash credits – Share application money – Merely on the basis of statement given by directors of investing companies additions cannot be made when the assessee has provided all necessary evidences – Burden is on revenue to prove otherwise

    Dismissing the appeal of the revenue the Court held that; the lone circumstance of a director disowning the document itself could not have constituted fresh material to reject the documentary evidence. The existence of the company as an Income-tax assessee and that it had furnished audited accounts was not in dispute. Furthermore, its bank details too were furnished to the Assessing Officer. If the Assessing Officer were to conduct his task diligently, he ought to have at least sought the material by way of bank statements, etc., to discern whether in fact the amounts were infused into the shareholder’s account in cash at any point of time or that the amount were such as to be beyond their means. The Assessing Officer failed to do so. The Tribunal rightly set
    aside the addition made under section 68 of the Act.

    CIT v. Oriental International Co. P. Ltd. (2018) 401 ITR 83 (Delhi) (HC)

  21. S.68 : Cash credits – Firm or AOP – First year of business no addition can be made

    Dismissing the appeal of the revenue the Court held that since it was first year of business of AOP and no business activity having been shown to have been conducted by it that could lead to generation of unaccounted income on first day of relevant accounting period itself, Tribunal had not committed any error in deleting impugned addition (AY. 2001-02)

    CIT v. Lal Mohar (2017) 252 Taxman 401 (All.)(HC)

  22. S.69B : Amounts of investments not fully disclosed in books of account – Valuation of closing stock for availing of facilities from bank – Quantity of stock remaining same additions cannot be made. [S. 143(3)]

    Dismissing the appeal of the revenue the Court held that there was no difference between the quantity of stock as shown in the books of account and in the statement submitted to the bank. The conclusions arrived at by them did not suffer from any legal infirmity. The deletion of addition made under section 69B was proper.(AY. 2010-11)

    CIT v. Gladder Ceramics Ltd. (2018) 401 ITR 205 (Guj.) (HC)

  23. S.69C : Unexplained expenditure – Disallowances cannot be made merely on the ground that parties to whom payments were made not appeared before the AO in response to summons, when the assessee has furnished PAN numbers, TDS was deducted and details of the bank was furnished [S. 131]

    Dismissing the appeal of the revenue the Court held that disallowances cannot be made merely on the ground that parties to whom payments were made not appeared before the AO in response to summons, when the assessee has furnished PAN numbers, TDS was deducted and details of the bank was furnished. Court also held that Tribunal correctly held that it is not possible for the assessee to compel the appearance of the parties before the AO. (ITA No. 1103 of 2015 dt. 28-2-2018) (AY. 2009-10).

    PCIT v. Chawla Interbild Construction Co. Pvt. Ltd. (Bom.) (HC) (2018) BCAJ -May. 63

  24. S.80IA : Industrial undertaking – Infrastructure facility – Container Freight Station (CFS) is eligible deduction as an infrastructure facility – Strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents [S. 260A]

    The issue involved was whether the Container Freight Station (CFS) is eligible deduction as infrastructure facility. Though the issue is covered by Jurisdictional High Court in CIT v. Continental Warehousing Corporation (Nava Sheva) (2015) 374 ITR 646 (Bom) (HC) and also All Cargo Logistics Ltd. v CIT (ITA Nos. 5018 to 5022 and 5059 dt. 6th July 2012, the revenue wanted to argue the matter once again. Dismissing the appeal of the revenue the Court has passed, strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents. (ITXA-613-2015 ITXA-618-2015 (SR.3), dt. 11-4-2018)(AY. 2008-09, 2009-10)

    PCIT v. JWC Logistics Park Pvt. Ltd. (Bom.)(HC), www.itatonline.org

  25. S.80IB : Industrial undertakings – Activity of supplying the audio of the background sound to the film already shot by customers is manufacture and entitle to deduction

    On appeal the High Court held, following the principle laid down in CIT v Oracle Software India Ltd (2010)320 ITR 546 (SC) and considering the facts that (i) the activity of video software generation has been recognised as small scale industries by Government of India and (ii) providing the audio software to the video already shot makes an article fit for use, it tantamount to manufacture within the meaning of provisions of S. 80IB of the Act (ITA No. 108 of 2012, dt. 8-8-2017) (AY. 2001-02).

    Vijay Kumar v CIT (2018) 161 DTR 278 /300 CTR 254 (J&K)(HC)

  26. S.80IB : Industrial undertakings – Manufacture – Process of galvanisation amounted to ‘manufacture’ since the resultant product is a different commercial commodity having distinct use and is sold at a higher price

    Allowing the appeal of the assessee the Court held that process of galvanisation amounted to ‘manufacture’ since the resultant product is a different commercial commodity having distinct use and is sold at a higher price (AY. 2001-02).

    Kashmir Tubes v. ITO (2017) 85 taxmann.com 299 (2018) 300 CTR 541 (J&K) (HC)

  27. S.80P : Co-operative societies –Entitle deduction – Co-operative Society is not a Credit Co-Operative Bank [S.80P(2)(a)(i)(4)]

    Dismissing the appeal of the revenue the Court held that; the exclusion clause of sub-section (4) of section 80P did not apply to the assessee the assessee being co-operative society is entitled to deduction (AY. 2010-11)

    CIT v. Ekta Co-op. Credit Society Ltd. (2018) 402 ITR 85 (Guj.) (HC)

  28. S.92C : Transfer pricing – Arm’s length price – Interest on loan to associated enterprise – Rate of interest being charged in the country where the loan is received or consumed

    Dismissing the appeal of the revenue, the Court held that, in case of loans advanced to associated enterprise would determined on the basis of rate of interest being charged in the Country where the loan is received/consumed. On facts the assessee has got the loan at 4.79 per cent and has advanced the loan to its AE at 7.3 per cent and the very basis of the order of TPO was on wrong premise. i.e. It has considered the rate as prevailing in India, the Tribunal has considered the facts of the present case in a plausible manner.

    CIT v. The Great Eastern Shipping Co. Ltd. (2018) 301 CTR 662 (Bom)(HC)

  29. S.92CB : Transfer Pricing – Safe Harbour Rules – AO has no authority to make any reference to the TPO to ascertain the arm’s length price of the assessee’s specified domestic transactions. CBDT’s circular dated 10-3-2006 could not have and does not lay down anything to the contrary [Ss. 92C, 92CA]

    Allowing the petition the Court held that if the assessee has exercised the safe harbour option under Rule 10THD(1) & the AO has not passed any order under Rule 10THD(4) declaring the exercising of option to be invalid, the option is treated as valid. Thereafter, the Transfer Pricing regime does not apply & the AO has no authority to make any reference to the TPO to ascertain the arm’s length price of the assessee’s specified domestic transactions. CBDT’s circular dated 10-3-2006 could not have and does not lay down anything to the contrary. Accordingly, reference made by the Assessing Officer to the TPO in the present case is quashed. Resultantly, the order dated 15-9-2017 passed by the TPO on such invalid reference is set aside (Special Civil Application No. 19073 of 2017, dt. 6-3-2018) (AY. 2014-15)

    Mehsana District Co-operative v. DCIT (Guj.)(HC), www.itatonline.org

  30. S.119 : Central Board of Direct Taxes – Powers – Condonation of delay in making investment – Power must be exercised in a judicious manner – Order of CBDT was set aside [S. 54EC, Art. 226]

    Allowing the petition the Court held that delay of six months deserved to be condoned in view of the fact that the assessee, a doctor by profession was travelling from India to the
    U. S. A. where she normally resided and came to India not only to meet her family members, but to sell the immovable property belonging to her and sought to avail of the genuine exemption from such tax liability upon making the investment in the prescribed investment in the form of bonds of infrastructure which she did make in the National Highways Authority. Accordingly the CBDT was directed to grant exemption (AY. 2013-14).

    Dr. Sujatha Ramesh (Smt.) v. CBDT (2018) 401 ITR 242 (Karn.) (HC)

  31. S.119 : Central Board of Direct Taxes – Refund – Application for condonation of delay in filing return of income and claiming refund of TDS – PCIT rejected the application on merits of claim / extent of exemption and not considering the criteria required to be satisfied by assessee-trust – Impugned order is set-aside to the file of PCIT for fresh disposal [Ss.237, 264]

    HELD, by the High Court that the impugned rejection order does not deal with the various criteria which the assessee were asked to satisfy for consideration of its application ie specific evidence/test laid down by CBDT as indicated in PCIT’s notice has not been dealt with in respect to each of the heads. Order set aside to the file of PCIT for fresh disposal and considering the parameters indicated in PCIT’s notice (W.P. No. 2301 of 2017 dt. 18-1-2018) (AY. 2014-15)

    Yash Society v. CIT (E) (2018) 163 DTR 337/301 CTR 729 (Bom)(HC)

  32. S.139 : Return of income – When assessee took advantage of provisions of section 139(5), could not say that it was non est [S.10B, 139(5)]

    Dismissing the appeal the Court held that when assessee took advantage of provisions of section 139(5), could not say that it was nonest. When Commissioner (Appeals) rejected assessee’s claim under section 10BA, assessee filed revised return under section 139(5) pending his appeal before Tribunal which was decided in favour of assessee. Immediately assessee sought to withdraw revised return to avail benefit of section 10BA which was held to be not justified (AYs. 2005-06 to 2007-08).

    Amit Basu v. Dy. CIT (2018) 252 Taxman 314 (Raj.)(HC)

  33. S.142(2A) : Inquiry before assessment – Special audit – Order passed without application of mind and objections of the assessee was held to be bad in law [S.142]

    Allowing the petition the Court held that the orders neither disclosed the discussion on the objections of the assessee to the special audit and at least in one case for the assessment year 2013-14, the assessing authority did not even wait for the objections to be placed on record and before they were furnished on March 29, 2016, he had already passed the order on March 28, 2016 while the limitation for passing the assessment order was expiring on March 31, 2016. The orders under section 142(2A) could not be sustained (AY. 2013-14, 2014-15).

    Karnataka Industrial Area Development Board v. CIT (2018) 401 ITR 74 / 162 DTR 73/ 300 CTR 449/ 253 Taxman 178 (Karn.) (HC)

  34. S. 143(2) : Assessment – Notice issued within period of limitation, however the notice was served beyond limitation period hence the assessment was held to be in valid and quashed [S. 143(2)]

    Dismissing the appeal of the revenue the Court held that even though revenue authorities issued notice under section 143(2) within period of limitation as prescribed in proviso to section 143(2), yet same was served on assessee after limitation period, it was to be regarded as invalid notice and, thus, assessment proceedings initiated in pursuance of said notice deserved to be quashed.

    CIT v. V. V. Devassy (2018) 252 Taxman 390 (Ker.)(HC)

  35. S.143(3) : Assessment – Capital gains — Capital gains wrong shown in the return as taxable – Duty of Assessing Officer to refrain from assessing such income – No tax shall be levied or collected except by authority of law. [S.45, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, S.96, Art. 265]

    Allowing the petition the Court held that, merely because the assessee has shown capital gains as taxable in the return, the same cannot be taxed if it is not taxable. It is the duty of the Assessing Officer to refrain from assessing such income. Under Article 265 of the Constitution the powers of the Assessing Officers under the Act are quasi-judicial in nature and they are duty-bound, therefore, to act fairly in the discharge of their functions. They are also invested with the authority to do justice to the assessees. In a case where it is apparent on the face of the record that the assessee has included in his return, an income which is exempted from payment of Income-tax, on account of ignorance or by mistake, the Assessing Officer is bound to take into account that fact in a proceeding under section 143 of the Income-tax Act, 1961. In other words, if the capital gains on a transaction are exempted from payment of tax, the Assessing Officer has a duty to refrain from levying tax on the capital gains and the Assessing Officer cannot, in such cases, refuse to grant relief under section 143 of the Act to the assessee on the technical plea that the assessee has not filed a revised return. It is so since the paramount duty of the Assessing Officer is to complete the assessments in accordance with law (AY. 2014-15).

    Raghavan Nair v. ACIT (2018) 402 ITR 400 (Ker.) (HC)

  36. S.145 : Method of accounting – Mere non-maintainence of stock register could not form the basis of rejection of books of account

    Allowing the appeal of the assessee the Court held that there was no findingby the AO that the books of account were not correctly maintained. The mere non-maintenance of the stock register cannot form the basis of rejection of the assessee’s books of account. As rightly pointed out by the assessee, although a separate stock register may not have been maintained, a physical verification of the stock on yearly basis was undertaken and was reflected in the balance sheet of the assessee. In a large number of decisions, including Pandit Bros v. CIT [1954] 26 ITR 159 (Punj. & Har.)(HC) Bombay Cycle Stores Co. Ltd. v. CIT [1958] 33 ITR 13 (Bom.)(HC) and S. Veeriah Reddiar v. CIT [1960] 38 ITR 152 (Ker.)(HC), it has been held that the mere non- maintenance of stock register would not lead to the conclusion that profit of the assessee could not be determined on the basis of the books of account maintained by it (AY. 1999-2000).

    Maruti udyog Ltd v. CIT (2018) 253 Taxmann 60 (Delhi) (HC )

  37. S.145 : Method of accounting –Rejection of accounts was held to be not justified on the basis that the goods are sold at the price lower than the market price or purchase price – Law cannot oblige or compel a trader to make or maximise its profits [S.145(3)]

    Dismissing the appeal of the revenue, the Court held that rejection of accounts was held to be not justified on the basis that the goods are sold at the price lower than the market price or purchase price – Law cannot oblige or compel a trader to make or maximise its profits. Relied CIT v. A. Raman & Co. (1968) 67 ITR 11 (SC) S.A. Builders Ltd. v. CIT (2006) 288 ITR 1 (SC). (ITA No. 813 of 2015 dt. 20-2-2018) (AY. 2005-06).

    PCIT v. Yes Power and Infrastructure Pvt. Ltd. (Bom) (HC) (2018) BCAJ -May. 63

  38. S.147 : Reassessment – After the expiry of four years – Agricultural income – Change of opinion – Objection was disposed without speaking order – Notice for reassessment only for the relevant year and there were hundreds of coffee growers whose income were also exempted, reopening notice issued only against assessee during relevant assessment year was unjustified [Ss.10(1), 148]

    Allowing the petition the Court held that , since reassessment order was passed without disposing of assessee’s objections to reopening of assessment and without passing a speaking order, same was unjustified. Court also held that where claim of assessee of exemption of income under section 10(1) on proceeds from sale of coffee subjected to only pulping and drying was accepted for several years and there were hundreds of coffee growers whose income were also exempted, reopening notice issued only against assessee during relevant assessment year was unjustified (AY. 2009-10).

    Karti P. Chidambaram v. ACIT (2018) 252 Taxman 416 / 300 CTR 233 (Mad.)(HC)

  39. S.147 : Reassessment – Within four years – Reopening of assessment by succeeding Assessing Officer to disallow excess deduction was held to be change of opinion which was held to be impermissible [Ss.80IA, 143(3) 148]

    Allowing the petition the Court held that ; the assessee’s claim to deduction under section 80-IA was examined by the previous Assessing Officer minutely during the scrutiny assessment proceedings. He had given detailed reasons for reducing the claim by ₹ 3.8 lakhs and had accepted the rest of the claim. Any attempt on the part of the succeeding Assessing Officer to modify that position would be based on change of opinion. If an angle or an element of the claim had not been directly addressed by the previous Assessing Officer during the original assessment to the satisfaction of the succeeding Assessing Officer, it could not be a ground for reopening of the assessment which was previously made after scrutiny (AY. 2011-12).

    Ajanta Pvt. Ltd. v. DCIT (2018) 402 ITR 72 (Guj.) (HC)

  40. S.147 : Reassessment – Two notices – Reassessment was initiated vide two notices and the second notice was beyond prescribed period. Nowhere it was stated that second notice was in continuation of first one hence reassessment was invalid [S.143(1),148]

    Allowing the petition the Court held that, no satisfactory explanation was provided as to why the first notice on March 2015 issued by the AO under S. 148 of the Act was not carried to its logical end. The mere fact that the AO who issued that notice was replaced by another AO can hardly be the justification for not proceeding in the matter. On the other hand, the AO did not seek to proceed under S. 129 of the Act but to proceed de novo under S. 148 of the Act and this was a serious error which could not be accepted to be a mere irregularity. Thus the High Court noticed that there were numerous legal infirmities which led to inevitable invalidation of all the proceedings that took place pursuant to the notice issued to the assessee first in March 2015 and then again in January, 2016 under S.148 of the Act. Thus the High Court set-aside the proceedings initiated by the AO under S. 148 of the Act (AY. 2008-09).

    Mastech Technologies Pvt. Ltd. (2018)161 DTR 189 (Delhi) HC)

  41. S.147 : Reassessment– Natural justice – Order passed without disposing of objections raised by assessee for reopening was improper and null and void [Ss. 143(2), 148]

    Allowing the petition the Court held that Order passed without disposing of objections raised by assessee for reopening was improper and null and void. The law laid down by the Supreme Court is of binding nature and is a source of law unto itself, which would bind on all the authorities. Gkn Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC) lays down a law and failure to comply would render the assessment order without jurisdiction (AY. 2009-10).

    Jayanthi Natarajan (Ms.) v. ACIT (2018) 401 ITR 215 / 300 CTR 225/ 161 DTR 281 (Mad.) (HC)

  42. S.153A : Assessment – Search –Merely on the basis of third party statement without any incriminating evidence addition was held to be not justified [S. 132 (4)]

    Dismissing the appeal of the revenue the Court held that the statement under section 132(4) could not bind the assessee. According to section 132(4) a presumption arose in the case of the searched party. In the case of statements by the party whose premises were searched or attributed to a third party, there had to be a connect or corroboration and there was none in the case of the assessee. No incriminating material was found in the premises of the assessee. The addition made by the Assessing Officer was unsustainable.

    CIT v. Manoj Hora (2018) 402 ITR 175 (Delhi) (HC)

  43. S.153A : Assessment – Search or requisition – When no incriminating material was found in the course of search, addition cannot be made on the basis of evidence collected after the search. No addition can be made on the basis of statement of director much later after the search [Ss. 131, 132]

    Dismissing the appeal of the revenue the Court held that where no incriminating evidence was found against assessee during course of search, additions cannot be made on basis of material collected after search. Court also held that, additions cannot be made on basis of statement of director of assessee company which was recorded under section 131 much later after search (AY. 2007-08).

    PCIT v. Sunrise Finlease (P.) Ltd. (2018) 252 Taxman 407 (Guj.)(HC)

  44. S.153D : Assessment – Search and seizure – Approval – Order passed by the Assessing Officer without approval of Joint Commissioner was held to be bad in law [S. 153C]

    Dismissing the appeal of the revenue the Court held that ; an assessment order under section 153C can be passed by Income Tax Officer only after obtaining prior approval under section 153D of Joint Commissioner inasmuch as compliance of section 153D requirement is absolute therefore order passed by the Assessing Officer without approval of Joint Commissioner was held to be bad in law (AY. 2007-08).

    PCIT v. Sunrise Finlease (P.) Ltd. (2018) 252 Taxman 407 (Guj.)(HC)

  45. S.179 : Private Company – Liability of Directors – Assessing Officer can exercise jurisdiction to recover the dues of the company against the director only when it fails to recover its dues from private limited company

    Allowing the petition, the Court held that it is condition precedent for the AO to exercise jurisdiction under S. 179(1) of the Act that to proceed against the directors of the delinquent Private Limited Company only after it has failed to recover its dues from such company. The jurisdictional requirement cannot be said to be satisfied by a mere statement in the impugned order that the recovery proceedings had been conducted against the defaulting Private Limited Company but it had failed to recover its dues. The above statement should be supported by mentioning briefly the types of efforts made and its results. Accordingly the order was set aside (AY. 2006-07 to 2011-12).

    Madhavi Kerkar v. ACIT (2018) 253 Taxman 288 (Bom.) (HC)

  46. S.197 : Deduction at source – Certificate for lower rate – Flaw in decision making process – No Change in facts during period between grant of certificate and order cancelling certificate –Violation of principles of natural justice – Order was quashed. [S. 263 R. 28aa, Art. 226]

    Allowing the petition the Court held that; if the Department sought to cancel the certificate on the ground that a particular aspect had not been considered, before taking a decision to cancel the certificate already granted, it must have satisfied the requirement of natural justice by giving a copy of the same to the assessee and heard the assessee on it before taking a decision to cancel the certificate. The notices which sought to review the certificate did not indicate that the review was being done as the certificate dated May 4, 2017 was granted without considering the applicability of Rule 28AA in the context of the assessee’s facts. Therefore, there was no occasion for the assessee to seek a copy of the reasons recorded while issuing the certificate. Moreover, it was found on facts that there was no change in the facts that existed on May 4, 2017 and those that existed when the order dated October 23, 2017 was passed. Thus, there was a flaw in the decision-making process which vitiated the order dated October 23, 2017. The grant or refusal to grant the certificate under section 197 had to be determined by the parameters laid down therein and Rule 28AA and it could not be gone beyond the provisions to decide an application. The order dated October 23, 2017 did not indicate, what the profits were likely to be in the near future, which the Department might not be able to recover as it would be more than the carried forward losses. However, such a departure from the earlier view had to be made on valid and cogent reasons. Therefore, on the facts, the basis of the order, that the financial condition of the assessee was that any further tax payable might not be recoverable, was not sustainable and rendered the order bad (AY. 2018-19).

    Tata Teleservices (Maharashtra) Ltd. v. DCIT (2018) 402 ITR 384/253 Taxman 343 /163 DTR 317 /301 CTR 377 (Bom.) (HC)

  47. S.206C : Collection at source – Scrap – Items used by the buyers in manufacturing of other items cannot be considered as scrap, hence not liable to collect tax at source

    Dismissing the appeal of the revenue the Court held that assessee having imported garments, cut them into smaller pieces and sold to different parties in form of rags, wipers or chindi which were used by buyers in manufacturing other items like blankets, pillows etc., waste so manufactured would not fall within ambit of expression ‘scrap’ as envisaged in clause (b) of Explanation to S. 206C. Accordingly not liable to collect tax at source (AY 2009-10 to AY. 2013-14)

    PCIT (TDS) v. Safari Fine Clothing (P) Ltd. (2018) 253 Taxman 198 (Guj.)(HC)

  48. S.225 : Collection and recovery –Stay – Once the CIT(A) concludes hearing the appeal, the stay application becomes infructuous. CBDT should investigate arm twisting measures, de hors application of the law, adopted by the Revenue for recovery of tax and take corrective measures to ensure AOs are not over zealous in recovering maximum revenue before 31st March – CBDT was directed to take appropriate measure [Ss. 220(6), 226, 246A]

    Allowing the petition the Court held that once the CIT(A) concludes hearing the appeal, the stay application becomes infructuous. The exercise by CIT(A) of taking up the stay application, after the appeal was heard, was only done so as to collect some revenue before 31st March, 2018. This is certainly not expected of an Appellate Authority who adjudicates disputes between the Revenue and the assessee on a regular basis. The CIT(A) must not only be fair but appear to be so, in a country governed by rule of law. CBDT should investigate arm twisting measures, de hors application of the law, adopted by the Revenue for recovery of tax and take corrective measures to ensure AOs are not over zealous in recovering maximum revenue before 31st March (WP. No. 939 of 2018,
    dt. 27-3-2018)( AY. 2015-16).

    The Shri Saibaba Sansthan Trust (Shirdi) v. UOI (Bom.) (HC), www.itatonline.org

  49. S.226 : Collection and recovery – Modes of recovery – Revenue cannot issue notice for recovery directly to assessee’s bank without giving an opportunity to be heard – Appropriate direction for re-crediting the amount to assessee’s bank account issued to the Revenue

    HELD by the High Court that the principle laid down in the case of Shri Lakshmi Brick Industries v. TRO [2013] 351 ITC 345 and the judgment of Hon’ble Supreme Court of India in case of Mohan Wahi v. CIT [2001] 248 ITR 799(SC) would apply with full force in the present case and it will be fully justified in issuing appropriate direction to recredit the amount to the assessee’s bank account. (W. P. No 33765 of 2017 / W.M.P Nos. 37408 and 37410 of 2017 dt. 22-12-2017) (AY. 2009-2010)

    Rapid Care Transcription (P) Ltd. v. ITO (2018) 253 Taxman 392 (Mad.)(HC)

  50. S.234A : Interest – Default in furnishing return of income – Bona fide family dispute – Entitled to waiver of interest. [S. 119, 133A, 148, 234B, 234C]

    The assessee approached the Chief Commissioner under S.119(2)(a) for waiver of interest. The assessee in his application for waiver stated that he was under the bona fide belief that he had no taxable income and therefore not required to file a return. The Chief Commissioner had rejected the petition for waiver on the grounds that the assessee failed to voluntarily file its return but the return was filed consequent upon a survey conducted under S. 133A and issuance of notice under section 148 and tax on the assessed income was not paid which was a pre-condition for waiver of interest. On writ the Court held that the property continued to be in the name of the HUF i.e., it remained undivided and there were serious civil disputes between the family members. Thus, when the property continues to remain undivided, the assessee cannot anticipate the accrual/receipt of such income hence the assessee was right in the befief that he had no taxable income. The High Court also held that the return was filed well before the issuance of notice under section 148 and merely because there was a survey counducted in premises canot be stated that the ROI was not voluntatily filed by the assessee. Hence the assessee would be entitled to waiver of interest levied under section 234A. The High Court also observed that the circular (Circular No. 400/234/95 dated 30-1-1997) issued by the Board empowering the Chief Commissioner to consider the waiver petition for waiver of interest under S 234A as well as S. 234B would show that even in cases covered by section 234B and even though these provisions are compensatory in nature, special orders for grant of relaxation could be passed. It was further held that the dispute with regard to the division of property was a bona fide dispute which directly relates to the assessbility of the petitioner to tax. Therefore, if the petitioner is entitled for waiver of interest under S. 234A for the reasons set out above, the question of payment of advance tax nor a portion thereof will not arise and therefore, the petitioner is entitled for waiver of interest under S. 234B and 234C as well (AY. 1997-98, 1998-99).

    R. Mani v. CCIT (2018) 253 Taxman 3 (Mad.) (HC)

  51. S.245D : Settlement Commission – Settlement Commission does not have power to rectify, review or re-examine order passed in the rectification application [S. 234B, 245C]

    Dismissing the petition of revenue the Court held that Settlement Commission does not have power to rectify, review or re-examine order passed in the rectification application.

    PCIT v. Frontline Business Solutions (P.) Ltd. (2018) 252 Taxman 217 (Delhi)(HC)

  52. S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Reliance on a decision not subject-matter of consideration during the hearing of appeal (and having influence on final view) constitutes mistake apparent from record

    HELD by the High Court that:

    (i) It cannot be stated with certainty that the decision of Delhi High Court had not evenly remotely influenced the decision taken given the manner in which the order has been structured and the final view given after considering such decision. Hence the Tribunal while dealing with the rectification application, must deal with the assessee’s grievance that the Delhi High Court’s decision does not apply to the present case / facts.

    This restoration is only to reconsider the assessee’s grievance in respect of reference / reliance upon the Delhi High Court decision in the original order and pass appropriate order on the rectification application (W.P. Nos 2065, 2075, 2068 of 2017 dt. 19-1-2018) (AY. 2009-10).

    Rama Industries Ltd .v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC).

    Rama Petrochemicals Ltd. v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC)

    Rama Phosphates Ltd. v. DCIT (2018) 163 DTR 156/92 taxmann.com 289 (Bom) (HC)

  53. S.254(2) : Appellate Tribunal –Rectification of mistake apparent from the record – Order in the case of sister concern is binding on the Tribunal unless set-aside or stayed. A rectification application on the ground that the orders in the sister concern’s case are not correct is not permissible as it amounts to a review [S. 254(1)]

    Allowing the petition the Court held that Order in the case of sister concern is binding on the Tribunal unless set-aside or stayed. A rectification application on the ground that the orders in the sister concern’s case are not correct is not permissible as it amounts to a review (WP No. 2738 of 2017, dt. 9-3-2018) (AY. 2004-05).

    Procter & Gamble Home Products Pvt. Ltd. v. ITAT (Bom.)(HC), www.itatonline.org

  54. S.260A : Appeal – High Court – Departmental Counsel – CBDT should reconsider the practice of appointing retired revenue officers as panel counsel. CBDT should lay down a standard procedure in respect of manner in which the Departmental Officer/Assessing Officer assist the Counsel for the Revenue while promoting/ protecting Revenue’s cause so that the Revenue’s Counsel are not left to fend for themselves. Copy of the judgment was forwarded to Chairman CBDT [S.119]

    Considering the assistance given to the Court by the departmental counsel before the Bombay High Court, the Hon’ble Court observed that; the CBDT should reconsider the practice of appointing retired revenue officers as panel counsel. While the retired officials have domain expertise and do render assistance, they lack the skill and conduct required to appear as an advocate. They also lack the objectivity expected from officers of the court. The CBDT could consider holding of a training programme, where leading advocates could address the domain expert on the ethics, obligation and standard expected of advocates before they start representing the State. The CBDT should lay down a standard procedure in respect of manner in which the Departmental Officer/Assessing Officer assist the Counsel for the Revenue while promoting/protecting Revenue’s cause so that the Revenue’s Counsel are not left to fend for themselves. Court directed the learned ASG and the Registry to forward a copy of this order to the Chairman, CBDT. We would expect the learned ASG to interact and advice the CBDT in respect of the issues referred to herein above to enable proper representation by the advocates on behalf of the Revenue (ITA No. 778 of 2015, dt. 18-4-2018) (AY. 2001-02).

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

  55. S.260A : Appeal – High Court –Strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues and not following the judicial discipline and law of precedents – Infrastructure facility – Container Freight Station (CFS) is eligible deduction as an infrastructure facility [S.80IA]

    Dismissing the appeal of the revenue the Court has passed strictures passed against Dept’s Advocate for “most unreasonable attitude” of seeking to reargue settled concluded issues. This results in unnecessary wastage of the scarce judicial time available in the context of the large number of the appeals awaiting consideration. Dept’s Advocate is expected to act with responsibility as an Officer of the Court and not merely argue for the sake of arguing when an issue is clearly covered by the decision of Co- ordinate Bench of the Court and take up scarce judicial time. Advocates must bear in mind that this is a Court of law and not an University/College debating Society, where debates are held for academic stimulation. We deal with real life disputes and decide them in accordance with the Rule of Law, of which an important limb is uniformity of application of law. This on the basis of judicial discipline and law of precedents (ITXA-613-2015 ITXA-618-2015 (SR.3), dt. 11-4-2018)(AY. 2008-09, 2009-10).

    PCIT v. JWC Logistics Park Pvt. Ltd. (Bom.)(HC), www.itatonline.org

  56. S.260A : Appeal – High Court – Formulation of additional substantial question of law – Court has the power to frame an additional substantial question of law even at the time of hearing of appeal [S.32, 80HH, 260A(4)]

    Court held that S.260A(4) confers power on the Court to hear, for the reasons to be recorded, the appeal on any other question of law not formulated by it, if the Court is satisfied that such a question arises. Additional question was framed whether the assessee can disclaim depreciation when it claimed deduction u/s 80HH (AY. 1989-90).

    CIT v. Auto Mobile Corporation of Goa Ltd. (2018) 164 DTR 168 (Bom.) (HC)

  57. S.263 : Commissioner – Revision of orders prejudicial to revenue – Order passed after expiry of two years from the end of the financial year was held to be bad in law. [S.260A]

    The assessee has challenged the validity of the notice issued under S. 263 of the Act and the order passed thereon by the CIT. The High Court held that the CIT who passes order under S. 263 of the Act ought to satisfy himself that an adequate opportunity has been given to the Assessee to controvert the facts stated in the notice issued under S. 263 of the Act and to explain the circumstances surrounding such facts. However on facts no useful purpose would be served in providing an opportunity of being heard at this stage to the assessee as S. 263(2) provides an outer limit in the statute hence petition in favour of Assessee. (ITA. No 853 of 2015 dt. 14-9-2017) (AY. 2009-09).

    Tulsi Tracom Private Ltd v. CIT (2017) 100 CCH 0013/(2018) 161 DTR 148 (Delhi)(HC)

  58. S.271(1)(c) : Penalty – Concealment – Donation – Withdrawal of claim on alleged bogus donation and filing the revised return disclosing the alleged bogus donation –Deletion of penalty was held to be valid [Ss. 35(1)143(3), 148].

    Dismissing the appeal of the revenue, the Court held that when the donation was made the assessee believed that the Indian Medical Scientific Research Foundation was genuine, however after conclusion of enquiry by CBI it was found that the institution was bogus. The assessee withdrew the claim in the revised return filed in pursuance of notice u/s. 148, as there was complete disclosure on the part of the assessee, deletion of penalty was held to be justified (AY. 2004-05).

    CIT v. Man Industries Ltd. (2018) 164 DTR 165 (Bom.) (HC)

  59. S.271AAA : Penalty – Search initiated on or after 1st June, 2007– Payment of tax with interest before assessment was made-Deletion of penalty was held to be justified [S. 132, 132(4)]

    Dismissing the appeal of the revenue the Court held that Payment of tax with interest before assessment was made. Deletion of penalty was held to be justified. Both Commissioner (Appeals) as well as the Tribunal had recorded concurrent findings of fact that the partner of the firm, AGK, during the course of recording of his statement at the time of the search, had stated that the income was earned by accepting on-money in its building project. Therefore, the manner in which the income had been derived has been clearly specified in his statement. It was not the case of the Department that during the course of recording of the statement of AGK any specific questions had been asked to substantiate the manner in which the income was derived (AY. 2011-12).

    CIT v. Swapna Enterprise (2018) 401 ITR 488 (Guj.) (HC)

  60. S. 275 : Penalty – Bar of limitation – Concealment – Time to be reckoned from date of service of order of Commissioner (Appeals) on assessee – Penalty proceedings was barred by limitation [S. 271(1) (c)]

    Allowing the appeal of the assessee the Court held that it was incumbent upon the Department to have completed the penalty proceedings and passed an order within the prescribed period of limitation of six months. The Department’s appeal before the Tribunal was never heard, no effective proceedings were held nor was any order passed. The assessee was not notified about the filing of the appeal, its pendency or its withdrawal. According to section 275(1A), the expiry of six months prescribed was to be reckoned “from the date of completion of the proceedings or from the end of the month in which the order of the Commissioner (Appeals) or the Tribunal was received”. It was an adjudicatory “order” which culminated in “the proceedings”, an order that determined, inter alia, the rights of the parties finally, that was to be deemed a terminus a quo for the completion of penalty proceedings. The dependence of the period of the limitation upon whether an order became final at the instance of one party would leave the legal position inchoate and unsatisfactory. An interpretation that permitted certainty had to be adopted. The order of the Commissioner (Appeals) provided a fixed date from which to reckon the end of the period of limitation. The absence of an appeal by the assessee against the order of the Commissioner (Appeals) meant that at least with respect to the amount that it had accepted in the adjudicatory order as an addition, the penalty proceedings survived. There was no occasion for further penalty proceedings given that the issue might have been rendered debatable, even in the eventuality of an order favouring the Department. The order of the Tribunal holding that the penalty order was within the period of limitation was unsustainable. (AY. 1989-90).

    Salora International Ltd. v. CIT (2018) 402 ITR 211 (Delhi) (HC)

  61. S.276C : Offences and prosecutions – Wilful attempt to evade tax – Order of penalty was set aside on ground there was no concealment of income — Prosecution was liable to be quashed [S. 271(1)(c)].

    Allowing the appeal the Court held that the basis for initiating proceedings under the Income-tax laws by imposing penalty and on the criminal side by lodging a criminal complaint is the same. The levy of penalties and prosecution under Section 276C are simultaneous. Hence, once the penalties are cancelled on the ground that there is no concealment, the quashing of prosecution under Section 276C is automatic.

    Malti Mishra (Smt.) v. State of Uttar Pradesh. (2018) 401 ITR 327 (All.) (HC)

  62. S.279 : Offences and prosecutions – Sanction – Chief Commissioner – Late deposit of tax deducted at source – If sanctioning was held to be not as per requirement of law summons issued by the Court can be challenged. [Ss.276A, 276B 278AA, 278AB,278B, Code of Criminal Procedure Code, Ss. 397, 401, 482]

    If the assessee is able to make out that cognisance was not justified and as per law they can challenge and question the summoning order by way of petition u/s. 397 read with Section 401 of the Code of Criminal Procedure, 1973 or if permissible, by way of a petition under Section 482 of the Code. Referring various case laws the Court observed that following principles can be culled out:

    (a) It is incumbent on the prosecution to prove that the valid sanction has been granted by the sanctioning authority after being satisfied that a case for sanction has been made out.

    (b) The sanction order may expressly show that the sanctioning authority has perused the material placed before it and, after consideration of the circumstances, has granted sanction for prosecution.

    (c) The prosecution may prove by adducing the evidence that the material was placed before the sanctioning authority and its satisfaction was arrived at upon perusal of the material placed before it.

    (d) Grant of sanction is only an administrative function and the sanctioning authority is required to prima facie reach the satisfaction that relevant facts would constitute the offence.

    (e) The adequacy of material placed before the sanctioning authority cannot be gone into by the court as it does not sit in appeal over the sanction order.

    (f) If the sanctioning authority has perused all the materials placed before it and some of them have not been proved that would not vitiate the order of sanction.

    (g) The order of sanction is a prerequisite as it is intended to provide a safeguard to a public servant against frivolous and vexatious litigants, but simultaneously an order of sanction should not be construed in a pedantic manner and there should not be a hyper-technical approach to test its validity.” (WP No. 3964/2017, dt. 12-3-2018)

    Indo Arya Central Transport Limited v. CIT (TDS) (Delhi)(HC), www.itatonline.org

  63. S.281 – Certain transfers to be void – Tax Recovery officer (TRO) has no jurisdiction to declare transaction of transfer of property as null and void in proceedings under rule 16 of Second Schedule to Act [S. 220, R.48]

    Allowing the petition the Court held that ; Tax Recovery officer (TRO) has no jurisdiction to declare transaction of transfer of property as null and void in proceedings under Rule 16 of Second Schedule to Act. Followed, TRO v. Gangadhar Vishwanath Ranade (1998) 234 ITR 188 (SC) and Co-ordinate Bench in case of Karsanbhai Gandabhai Patel v. TRO (2014) 43 taxmann.com 415 (Guj) (HC) and held that TRO had no power to declare transfer as void and the status of the department being a creditor, will have to file a suit for a declaration that the transaction of transfer is void under S. 281 of the Act.

    Nitaben Harishbhai Shah v. TRO (2018) 253 Taxman 222 (Guj) (HC)

    Wealth-tax Act, 1957 – Finance Act 1983

  64. S.40(3) : Levy of wealth tax on land and building which is not used for the purpose of business was held to be valid – Parliament has legislative competence to tax land and buildings which are in List-II of the 7th Schedule and whether the classification of “companies in which the public are not substantially interested” is neither arbitrary nor violative of Article 14 of the Constitution of India [Art. 14]

Dismissing the petition the Court held that S. 40(3) of the Act bringing to tax land and building which is not used for business purposes by companies in which public are not substantially interested to tax under the Wealth-tax Act and leaving out those land and buildings which are used for business purposes by companies in which public are not substantially interested from the charge of wealth-tax under the Act is a reasonable classification. Therefore, the legislation bringing to tax land and buildings owned by the companies in which public are not substantially interested without any reference to the manner in which such companies came into ownership of the land and buildings is a decision taken by the legislature and cannot be faulted on the touchstone of Article 14 of the Constitution of India. The speech of the Finance Minister while introducing the bill points out the mischief which was existing namely persons transferring land and buildings owned by them to closely held companies i.e., companies in which the public are not substantially interested so as to evade payment of wealth-tax. Therefore, the legislation to cure the mischief was to bring to tax all companies in which public are not substantially interested to the extent it held land and buildings which are not used for business purposes, without determining the source and manner of acquisition.

In fact, the Finance Minister’s speech itself indicates that it is proposed to levy wealth-tax in case of closely held companies inter alia in respect of land and buildings owned by such companies and not used for the business purposes. The object of introducing the bill was in terms of the Finance Minister’s speech not restricted only to bring to tax those companies in which public are not substantially interested to which the land and building has been transferred by its members. The Parliament has decided to bring to tax the land and buildings not used for the purposes of business and owned by the companies in which the public are not substantially interested.

The Parliament has thus made a reasonable classification between the companies in which public are substantially interested from the companies in which public are not substantially interested. This classification cannot be found fault with because the petitioners want further classification to have been done by the Parliament.

The remedy of the petitioners, if any, in matters such as this, is to have the Parliament to amend the law so as to meet what according to the petitioners would be the most just and appropriate classification, by adding further classification and restricting its applicability only where the assets have not been acquired by the company in which the public are not substantially interested out of its own profits.

The legislature has in its wisdom decided that the executive should not be burdened with finding out the manner in which the land and buildings has been acquired by the company, to bring it to tax. The mere fact that there is land and building owned by the company and it is not used for the purposes of business is sufficient to hold that these assets to be taken into account under Section 40(3) of the Act for the purposes of wealth-tax under the Wealth-tax Act. Therefore, the challenge to Section 40(3) of the Act is not sustainable. (WP No. 2983 of 1987, dt. 2-4-2018).

Indian Express Newspapers (Bom.)Private Ltd. v. IAC (Bom.)(HC), www.itatonline.org

Posted in May.
  1. S.4 : Income chargeable to tax – Share application money – The interest accrued from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenses [S. 56, 145]

    Dismissing the appeal of the revenue the Court held that interest accrued on account of deposit of share application money is not taxable income. Such interest is inextricably linked with the requirement to raise share capital and is thus adjustable towards the expenditures involved for the share issue. The fact that part of the share application money would normally have to be returned to unsuccessful applicants, and therefore, the entire share application money would not ultimately be appropriated by the Company, make no significant difference. The Interest earned from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenses
    (Referred CT v. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC)(CA No. 6391 of 2013/ 8336 of 2013 dt. 24-4-2018)

    CIT v. Shree Rama Multi Tech Ltd. (SC); www.itatonline.org

  2. S.4 : Income chargeable to tax – Diversion of income by overriding title – Acted only broker – For determination of taxable income, written agreement is not relevant, conduct of parties can be considered accordingly. Only income that has actually accrued to the assessee is taxable. [S. 145]

    Dismissing the appeal of the revenue the Court held that. The income that has actually accrued to the respondent is taxable. What income has really occurred to be decided, not by reference to physical receipt of income, but by the receipt of income in reality. Given the fact that the respondent had acted only as a broker and could not claim any ownership on the sum of ₹ 14,73,91,000/- and that the receipt of money was only for the purpose of taking demand drafts for the payment of the differential interest payable by Indian Bank and that the Respondent had actually handed over the said money to the Bank itself, we have no hesitation in holding that the respondent held the said amount in trust to be paid to the public sector units on behalf of the Indian Bank based on prior understanding reached with the bank at the time of sale of securities and, hence, the said sum of ₹ 14,73,91,000/- cannot be termed as the income of the Respondent. In view of the above discussion, the decision rendered by the High Court requires no interference (CA. No.4341 of 2018, dt. 24-4-2018)(AY. 1991-92 to 1993-94)

    DCIT v. T. Jayachandran (SC); www.itatonline.org

  3. S.5 : Scope of total income –Income chargeable to tax – Double taxation – Where the assessee has paid the income- tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961 – In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted [S.4, 80TT, 256(1), Sikkim State Income Tax Rules, 1948, Art. 371F]

    Allowing the appeal of the assessee the Court held that where the assessee has paid the income tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961. It is a fundamental rule of law of taxation that unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the Court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. While S. 5 of the IT Act would not be applicable, the existing Sikkim State Income Tax Rules, 1948 would be applicable. Thus, on the income, it would appear that Income-tax would be payable, under Sikkim State Income Tax Rules, 1948 and not under the IT Act. Since Sikkim is a part of India for the accounting year, there would appear to be, on the same income, two types of income taxes cannot be applied. On the issue of double taxation reference was made to
    Laxmipat Singhania v. CIT (1969) 72 ITR 291 ( SC) (294) and Jain Brothers and Others v UOI (1970) 77 ITR 107 (SC). As regards other issues whether the income that is to be allowed deduction under section 80TT of the IT Act is on ‘Net Income’ or ‘Gross Income’, becomes academic. (CA No. 4166 of 2006, dt. 19-4-2018)

    Mahaveer Kumar Jain v. CIT (SC), www.itatonline.org

  4. S.10A : Free trade zone – Profits of business – Export turnover –Total turn over – Export turnover is the numerator whereas the total turnover is the denominator in the formula for computing profit from exports. Software development charges are to be excluded while working out the deduction admissible on the ground that such charges are relatable towards expenses incurred on providing technical services outside India [S.80HHC, 80HHE]

    Dismissing the appeals of the revenue the Court held that if the deductions on freight, telecommunication and insurance attributable to the delivery of computer software u/s. 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the assessee which could have never been the intention of the legislature As the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well. (CA Nos. 8489-8490 of 2013, dt. 24-4-2018)

    CIT v. HCL Technologies Ltd. (SC), www.itatonline.org

  5. S.11 : Property held for charitable purposes – Application of income – Write back of depreciation was allowed to be carried forward for application of income of subsequent years [S.32]

    Dismissing the appeal the Court held that, the High Court has allowed the assessee to write back the depreciation for this year and even for previous years and if that is done, the AO is directed to modify the assessment determining the higher income and allow the recompted income with written back of by the assessee to be carried forward for subsequent years as applicable for charitable purposes Though the question was answered in favour of the revenue, relief was granted to the assessee as application of income. (AY. 2005-06)

    Lissie Medical Institutions v. CIT (2018) 161 DTR 73/300 CTR 130 (SC)

  6. S.14A : Disallowance of expenditure – Exempt income – Stock in trade – Controlling interest – Only that expenditure which is “in relation to” earning dividends can be disallowed- AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo motu disallowance is not correct. [R.8D]

    Court held that the argument that S. 14A & Rule 8D will not apply if the “dominant intention” of the assessee was not to earn dividends but to gain control of the company or to hold as stock-in-trade is not acceptable. S. 14A applies irrespective of whether the shares are held to gain control or as stock-in-trade. However, where the shares are held as stock-in-trade, the expenditure incurred for earning business profits will have to be apportioned and allowed as a deduction. Only that expenditure which is “in relation to” earning dividends can be disallowed u/s. 14A & Rule 8D. The AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo motu disallowance is not correct. (CA. No. 104-109 of 2015, dt. 12-2-2018)

    Maxopp Investment Ltd. v. CIT (SC), www.itatonline.org

  7. S.17(2) : Perquisite – Amount received by an employee from redemption of Stock Appreciation Rights (SARs) cannot be assessed as “perquisite” or as “profits of business” [S.17(2)(iii), 28(iv), 45]

    Dismissing the appeal of the revenue, the Court held that amount received by an employee from redemption of Stock Appreciation Rights (SARs) cannot be assessed as “perquisite” u/s. 17(2) (iii) or as “profits of business” u/s. 28 (iv) or as “capital gains” ,despite no “cost of acquisition. Circular No 710 dt 24-7-1995, was considered. The Court also held that; the Respondent got the Stock Appreciation Rights (SARs) and, eventually received an amount on account of its redemption prior to 1-4-2000 on which the amendment of Finance Act, 1999 (27 of 1999) came into force. In the absence of any express statutory provision regarding the applicability of such amendment from retrospective effect, we do not find any force in the argument of the Revenue that such amendment came into force retrospectively. It is well-established rule of interpretation that taxing provisions shall be construed strictly so that no person who is otherwise not liable to pay tax, be made liable to pay tax.
    (CIT v. Infosys Technologies Ltd. (2008) 297 ITR 167 (SC), Sumit Bhattacharya v. ACIT (2008) 112 ITD 1 (SB) (Mum)(Trib.) (CA. No. 4380/ 4381 of 2018, dt. 24-4-2018)(AY. 1998 -99)

    ACIT v. Bharat V. Patel (SC); www.itatonline.org

  8. S.28(iv) : Business income – Waiver of loan – Remission or cessation of trading liability –Loan waiver cannot be assessed as cessation of liability, if the assessee has not claimed any deduction u/s. 36(1)(iii) of the Act qua the payment of interests in any previous year and S.28(iv) does not apply if the receipts are in the nature of cash or money [S. 4, 41(1)]

    Dismissing the appeal of the revenue the Court held that S. 28(iv) of the IT Act does not apply on the present case since the receipts are in the nature of cash or money and S.41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under S. 36(1)(iii) of the IT Act qua the payment of interest in any previous year. (CA Nos. 6949-6950 of 2004, dt. 24-4-2018).

    CIT v. Mahindra and Mahindra Ltd. (SC), www.itatonline.org

  9. S.40(a)(ia) : Amounts not deductible – Deduction at source – The amendment made by the Finance Act, 2010 in Section 40(a)(ia) of the IT Act is retrospective in nature

    Dismissing the appeal of the revenue the Court held that the amendment to S. 40(a)(ia) by the Finance Act, 2010 w.e.f. 1-4-2010 to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income should be interpreted liberally and equitably and applied retrospectively from the date when S. 40(a)(ia) was inserted i.e., with effect from the AY 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. The amendment is curative in nature and should be given retrospective operation as if the amended provision existed even at the time of its insertion. (CA Nos. 4339-4340 of 2018, dt. 24-4-2018)( AY. 2005-06)

    CIT v. Calcutta Export Company (SC), www.itatonline.org

  10. S.41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Deferral sales tax Scheme – Premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability [S.43B]

    Dismissing the appeal of the revenue the Court held that premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability. What assessee was required to pay after 12 years in 6 equal instalments was paid by assessee prematurely in terms of net present value (NPV) of same. (AY. 2003-04)

    CIT v. Balkrishna Industries Ltd. (2018) 252 Taxman 375 / 300 CTR 209 (SC)

    Editorial: CIT v. Sulzer India Ltd. (2014) 369 ITR 717/ (2015) 229 Taxman 264 (Bom) (HC) is affirmed.

  11. S.80IA : Industrial undertakings – Infrastructure development –Inland Container Depots (ICDs) are Inland Ports and income earned out of these Depots are eligible for deduction. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places [S.80IA(4)]

    Dismissing the appeal of the revenue the Court held that Inland Container Depots (ICDs) are Inland Ports and income earned out of these Depots are eligible for deduction. However, the actual computation is to be made in accordance with the different Notifications issued by the Customs department with regard to different ICDs located at different places.
    (CA No. 8900 of 2012, dt. 24-4-2018) (AYs. 2003-04 to 2005-06)

    CIT v. Container Corporation of India Ltd. (SC), www.itatonline.org

  12. S.80-O : Royalties – Foreign enterprises – Technical assistance – Principal agent relationship – Information concerning industrial, commercial or scientific knowledge, experience or skill – Major information sent by the appellant to the Sumitomo Corporation was in the form of blue prints for the manufacture of dies for stamping of doors therefore not entitle to deduction

    Dismissing the appeal of the assessee the Court held that; major information sent by the Appellant to the Sumitomo Corporation was in the form of blue prints for the manufacture of dies for stamping of doors. There was principal and agent relationship, accordingly the assessee was not entitle to deduction. Court also observed that, the Appellant failed to prove that he rendered technical services to the Sumitomo Corporation and also the relevant documents to prove the basis for alleged payment by the Corporation to him. The letters exchanged between the parties cannot be claimed for getting deduction under Section 80-O of the IT Act. Court also observed that it is settled law that the expressions used in a taxing statute would ordinarily be understood in the sense in which it is harmonious with the object of the Statute to effectuate the legislative animation. (CA No. 3892 of 2007, dt. 24-4-2018)(AY. 1997-98)

    B. L. Passi v. CIT (SC), www.itatonline.org

  13. S.143(3) : Assessment – Real income – Lease rental – Interest and loan recovery – Guidance Note issued by the ICAI carries great weight – An assessee can only be taxed on “real income” [S. 145(3)]

    Dismissing the appeal of the revenue, the Court held that an assessee can only be taxed on “real income”. The bifurcation of lease rental is not an artificial calculation. Lease equalisation is an essential step in the accounting process to ensure that real income from the transaction in the form of revenue receipts only is captured for the purposes of income tax. The Guidance Note issued by the ICAI carries great weight. The method of accounting prescribed in such a Guidance Note, in order to compute real income and offering the same for taxation, cannot be disregarded by the AO unless such action falls within the scope and ambit of S. 145(3) of the IT Act (CA No. 4358 of 2018, dt. 24-4-2018) (AY. 1999-00)

    CIT v. Virtual Soft Systems Ltd. (SC) , www.itatonline.org

  14. S.147 : Reassessment – Change of opinion – Excess deduction was allowed was based on change of opinion on same facts hence reassessment was held to be bad in law. [S. 10A, 148]

    Dismissing the appeal of the revenue the Court held that; initiation of the reassessment proceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings. Court also observed that, in order to constitute “change in opinion”, the assessment earlier made must either expressly or by necessary implication have expressed an opinion on the subject matter of reopening. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the AO any opinion on the questions that are raised in the proposed reassessment proceedings. The reassessment cannot be struck down as being based on “change of opinion” if the assessment order does not address itself to the aspect sought to be examined in the re-assessment proceedings. (CIT v. Kelvinator of India Ltd (2010) 320 ITR 561 (SC) (CA No. 2732 of 2007, dt. 24-4-2018) (AY. 2001-02)

    ITO v. TechSpan India Private Ltd.(SC), www.itatonline.org

  15. S.147 : Reassessment – Transfer pricing – Permanent establishment – Income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm’s length. Reassessment was held to be bad in law. [Ss. 92C, 148]

    Allowing the appeal of the assessee the Court held that the AO is not entitled to issue a reopening notice only on the basis that the foreign company has a permanent establishment (PE) in India if the transactions in respect of which it is alleged that there has been an escapement of income had already been disclosed by the Indian subsidiary and found by the Transfer Pricing Officer (TPO) to be at arm’s length. (CA. No. 2833 of 2018, dt. 14-3-2018)

    Honda Motor Co. Ltd. v. ADCIT(SC), www.itatonline.org

  16. S.148 : Reassessment – Clerical mistake – The object and purpose behind S. 292B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities [Ss. 147, 292B]

    Dismissing the petition the Court held that notice issued in the name of a company which does not exist upon its conversion into an LLP is valid if there is material to show that the issue in the name of the company was a clerical mistake. The object and purpose behind S. 292B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The Court also observed that, in the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under S. 292B of the Income-tax Act. (SLP No. 7409/2018, dt. 2-2-2018) (AY. 2010-11)

    Skylight Hospitality LLP v. ACIT (SC), www.itatonline.org

    Editorial. Order of Delhi High Court in Skylight Hospitality LLP v. ACIT (WP No. 10870/ 2017 dt. 2- 2-2018 is affirmed

  17. S.158BB : Block assessment – Material found in the course of search and survey which has been made simultaneously made at the premises of connected person can be utilised while making block assessment [Ss. 132, 133A, 158BC]

    Allowing the appeal of the revenue the Court held that while it is a cardinal principle of law that in order to add any income in the block assessment, evidence of such income must be found in the course of the search u/s. 132, any material or evidence found/collected in a survey u/s .133A which has been simultaneously made at the premises of a connected person can also be utilised while making the Block Assessment. The same would fall under the words “and such other materials or information as are available with the Assessing Officer and relatable to such evidence” occurring in S. 158 BB. (CA No. 10164 of 2010, dt. 2-5-2018)

    CIT v. S. Ajit Kumar (SC), www.itatonline.org

  18. S.158BD : Block assessment –Undisclosed income of any other person – Recording of reasons – Issue of Second (Fresh) Notice under S. 158BD of the Act is valid [Ss. 132,148, 158BC]

    Dismissing the appeal of the assessee the Court held that; although S. 158BD does not speak of ‘recording of reasons’ as postulated in S. 148, but since proceedings u/s. 158BD may have monetary implications, such satisfaction must reveal mental and dispassionate thought process of the AO in arriving at a conclusion and must contain reasons which should be the basis of initiating the proceedings u/s. 158BD. Notice u/s. 158BC issued on the same date to the searched person and the other person is not valid as no reasonable or prudent man can come to the satisfaction that any undisclosed income belongs to the other person unless the seized books of account etc. are verified. The AO is empowered to issue a second notice u/s. 158BD to the other person. Accordingly the order of High Court was affirmed. (CA No. 2014 of 2007, dt. 24-4-2018)(AY. 1989-90 to 1999-2000)

    Tapan Kumar Dutta v. CIT (SC), www.itatonline.org

  19. S.194H : Deduction at source – Commission or brokerage –Principal and agent – Payment of commission made to advertisement agencies was held to be deducted tax at source. Non-compliance was held to be attracted the provision of S. 201 [S. 201(IA]

    Dismissing the appeal of the assessee the Court held that, payment of commission made to advertisement agencies was held to be deducted tax at source. Non-compliance was held to be attracted the provision of S. 201(IA) of the Act. (CA Nos. 3496-3497 of 2018, dt. 3-4-2018)

    The Director, Prasar Bharti v. CIT (SC), www.itatonline.org

    Advocates Act (25 of 1961)

  20. S.29 : Practice of law – Foreign law firms and foreign lawyers cannot set up offices and practice in India, however they can give advice to Indian clients on ‘fly in and fly out’ mode on temporary basis. [S. 24(1)(a), 47(2)]

    Dealing with the PIL petition the Court held that, Foreign law firms and foreign lawyers cannot set up offices and practice in India, however they can give advice to Indian clients on ‘fly in and fly out’ mode on temporary basis. As regards Arbitration proceedings if provisions of Act of 1996 are applicable, foreign lawyers may not be debarred from conducting arbitration proceedings in view of S. 32, 33 of Act of 1961, however, the Bar Council of India and Central Govt. are liberty to make rules in this regard. BPO companies, providing range of customized and integrated services and functions may not violate provision of Act of 1961, only if activities in pith and substance do not amount to practice of law. If their services do not directly or indirectly amount to practice of law, Act of 1961 may not apply. Mere label of such services cannot be treated as conclusive. If in pith and substance services amount to practice of law, provisions of Act 1961 will apply and foreign law firms or foreign lawyers will not be allowed to do so. This matter which may have to be dealt with on case to case basis having regard to.

    Bar Council of India v. A. K. Balaji and Others, AIR 2018 SC 1382

    Chartered Accountants Act, 1949

  21. S.21 : Misconduct – Disciplinary Directorate – Multinational Accounting Firms (MAFs) – Union of India was to be directed to constitute a Committee of Experts in order to look into function of Multinational Accounting Firms (MAFs) [S. 25, 29]

Direction was given to Union of India to constitute a Committee of experts in order to look into functioning of MAFs in India, to look into question whether and what extent statutory frame work to enforce letter and spirit of sections 25 and 29 of CA Act and statutory code of conduct for CAs require revisit so as to appropriately and regulate MAFs.

S. Sukumar v. Secretary, Institute of Chartered Accountants of India ( 2018) 254 Taxmann 37 ( SC)

National Litigation Policy -Burdening the Court with frivolous litigation- Strictures passed –Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can easily imagined on the basis of existing orders in similar cases .Yet the Union of India is increasing its liability and asking the tax payers to bear an avoidable financial burden for the misadventures. Appeal was dismissed with cost of ₹ 1,00,000/.

Dismissing the appeal of Union of India the Court held that, Union of India has created a huge financial liability by engaging so many lawyers for an appeal whose fate can easily imagined on the basis of existing orders in similar cases. Yet the Union of India is increasing its liability and asking the taxpayers to bear an avoidable financial burden for the misadventures. Appeal was dismissed with cost of ₹ 1,00,000/. (Diary No. 8754 of 2018 dt. 24-4-2018)

UOI v. Pirthwi Singh (SC) www.itatonline.org

Posted in May.

The heat is building up political heat in Karnataka and hot weather all over. The month of May is known for its extreme hot weather schools and courts are closed for summer vacations. We are advised to stay indoors to avoid the sun stroke and watch for your health.

This is the time to spend time with family particularly your kids and siblings in the hot season to maintain warmth in the relationship and closeness in the family. Many of our friends will be heading to hills to avoid the scorching heat of the planes. Do we realise that number of vehicles on the road are enormously increasing. The number of air conditioners are phenomenally multiplying, giving boost to fossil fuel consumption and increasing power consumption and electricity bills.

We need to take care of our environment and reduce carbon emission. The only way to do that is by planting a sapling that should eventually take shape of large tree to absorb the carbon dioxide from the air. The season for planting tree is coming now that is rainy season. I request all the members to make sure that we plant at least one plant and nurture it to become tree as our part of social responsibility.

Friends human nature is a puzzle when climate is hot we want cool, when it is cool we want hot; when it is dry season we are longing for rain and if it is raining we want it to stop. We always want what is not.

Similar is our professional thinking if the cases are selected for scrutiny we question the action. If there is no scrutiny we feel we are being rendered jobless and there is no work. We start worrying that if no scrutiny assessments are done then there shall be no work at higher levels, no appeals to CIT, Tribunal or even before High Court.

Now the era of E-assessment has come, an apprehension is expressed by many of our members that it may result into heavy additions for the reason that it may not be possible for the Assessing Officers to appreciate all evidences and written submissions particularly in respect of accounting entries, it is easy to understand when explained in person with reference to documentary evidences. The board is however trying to put in place a system that may avoid frivolous additions. We on our part are also making representation to say that before any addition is made a specific opportunity be allowed by way of notice and reason for proposed addition so as to enable us to make an effective counter to the same.

The board has also announced a fortnight observation for settlement of appeal effects and refunds.

In GST also there is a welcome notification for waiver of late fees in uploading GSTR in December 2017. The issues are gradually getting settled.

In a recent development the Hon’ble Apex Court has ordered the Government to appoint the heads of the Tribunals and Commissions even if the suitable retired Supreme Court judge or Chief Justice of the High Court is not available, out of other appropriate judges within a time bound manner so that the litigants should not suffer for want of heads of various Tribunals and Commissions. This will results into appointment of President of ITAT and backlog of promotions shall be cleared and Vice-Presidents of zones shall be appointed that shall go a long way in the administration of ITAT.

We are also planning to follow up the Tax Practitioners Bill, 2010, that is lingering in the Parliament from past several years, it will benefit our ITP and STP members. The argument of the administration in not allowing power of audit as there is no regulatory body will be met and we shall be able to pursue the cause aggresively. Let us keep the fingers crossed and hope for the best.

Ganesh N. Purohit

National President

Posted in May.

The Independence of the Income Tax Appellate Tribunal is the need of the hour for effective administration of justice – The Tax Bar has a greater responsibility to strengthen the independence of the mother Tribunal and to promote an unpolluted justice delivery system.

The Honouarble Mr. Justice Chelameswar, the Second Senior most Judge of Supreme Court of India, while delivering the address on “Rule of Law and Role of the Bar“ on 13th April, 2018 at Nagpur to the High Court Bar Association of Nagpur stated that “If the judiciary is not strong, independent, efficient and non-responsive to social problems of the day, nobody in this country is safe”.

We are of the opinion that the Tax Bars across the Country may have to debate upon how bureaucracy has indirectly curtailed the independence of judicial fora like the Income Tax Appellate Tribunal and how to strengthen the judicial independence of the Income Tax Appellate Tribunal and to promote an unpolluted justice delivery system. The following incidences are an eye-opener for the citizens and taxpayers who are concerned with Independence of judicial and various quasi judicial forums.

1. Attempt to shift headquarters of the Income Tax Appellate Tribunal from Mumbai to Delhi

Ever since the Income Tax Appellate Tribunal was established in the year 1941 the head quarter of the ITAT is at Mumbai. In the year 1994 there was a move to shift the Headquarters of the Income Tax Appellate Tribunal from Mumbai to Delhi for reasons best known to the Government. The ITAT Bar Association, Mumbai, took strong objections and sent detailed representations. On the basis of the representation made, Honourable Shri Atal Behari Vajpayee then as the Leader of Opposition (Lok Sabha) opposed the transfer of headquarters of ITAT from Mumbai to Delhi and wrote a letter to the then Minster of State for Law, Justice & Company Affairs, Govt. of India and accordingly the move to shift headquarter to Delhi was stalled.

2. Attempt to take away the powers of the President of the Income Tax Appellate Tribunal to transfer the Members of the Income Tax Appellate Tribunal

From 1941 to 1996, the Power to transfer the Members of the ITAT was with the President of the ITAT, however in the year 1996, the then Law Secretary issued a notification, stating that the Ministry of Law would have the power to transfer Members. It was again the ITAT Bar Association Mumbai, which filed a PIL before the Bombay High Court and the notification was stayed. When the matter was pending before the Supreme Court, the then law Secretary tried to interfere in the judicial functioning of the Tribunal and the Honourable Supreme Court in ITAT v. V. K. Agarwal (1999) 235 ITR 175 (SC), held that the then law Secretary was held liable for contempt, for interfering with the judicial functions of the Tribunal. The Supreme Court also framed guidelines for transfer of Members of the Tribunal (Ajay Gandhi v. B. Singh (2004) 265 ITR 451 (SC).

3. Residential Accommodation to Members of the Income Tax Appellate Tribunal

There were difficulties in getting residential accommodation to Members who had joined from the profession. The AIFTP filed a PIL and the residential accommodation was provided to Members of the Tribunal. (WP No. 2464 of 1996 Income Tax Review April. 1997) also refer (1998) 97 Taxman 48 (Raj) (HC). In UOI v All Gujarat Federation of Tax Practitioners, the Apex court directed the Govt. to provide Residential accommodation, telephone, news paper, library, car, secretarial assistance etc. to the Members of the ITAT. (AIFTP J –April 2004 –
P 34)

4. Office accommodation to Income Tax Appellate Tribunal for additional five Benches

When the Govt. sanctioned additional Five Benches to Mumbai, the Govt. desired that the five additional Benches which was sanctioned to Mumbai be made to function from Navi Mumbai. It is the ITAT Bar Association Mumbai which filed a PIL before Bombay High Court praying that all 12 Benches are desired to function from one place only. It is due to the Court order, that all the Benches of the Tribunal are functioning from same premises. [WP No. 624 of 1999 (2001) 116 Taxman 418 (Bom) (HC)].

5. Constitution of National Tax Tribunal by way of Ordinance to take away the powers of the High Courts to decide substantial question of law

In the year 2003, the Govt. introduced the National Tax Tribunal Ordinance dt. 16-10-2003 (2003) 264 ITR 17 (St) to take away the powers of the High Courts to decide the substantial question of law. In the proposed National Tax Tribunal, Members of the CBDT were also to be allowed to be appointed as Members of the National Tax Tribunal. The Tax Bar across the country including the AIFTP and ITAT Bar Association, challenged the said ordinance and a stay was granted subsequently. The Ordinance lapsed.

6. Constitution of National Tax Tribunal by legislation

In the year 2004, the Govt. once again introduced the National Tax Tribunal Bill, 2004 (2004) 271 ITR 50 (St) which was referred to the Parliamentary Committee on Personnel, Public Grievances, Law & Justice. The AIFTP also made a representation before the Committee. The Committee was fully convinced that the National Tax Tribunal is not the solution to reduce the tax litigation before various High Courts. In spite of the reports of the select committee, the Govt. passed the Bill. The said Act was once again challenged before various High Courts. The AIFTP was one of the petitioners which had filed the petition before the Bombay High Court and a stay was granted. Ultimately Apex Court also struck down many provisions of the National Tax Tribunal. [Madras Bar Association v. UOI (2014) 368 ITR 42 (SC)].

7. Appointing the retired High Court Judge as President of Income Tax Appellate Tribunal

In the Year 2013, the Govt. amended S. 253 of the Act wherein the Retired Judge of High Court who has completed not less than seven years of service as a Judge in a High Court could also be considered to be appointed as President of the ITAT. ITAT Bar Association Mumbai and the AIFTP has strongly opposed to such proposal.

Shri S. E. Dastur, Sr. Advocate and eminent jurist in his article which is published in www.itatonline.org has stated as under: “Pursuant to the newly acquired power vested in it in 2013 the Central Government appointed a retired judge of a High Court to be President of the Tribunal with effect from 14th March 2015. In my view, the conferment on the Central Government of the option to appoint a retired judge as the President is misconceived. The President has to perform various administrative tasks relating to the function of the Tribunal such as constitution of Benches, the posting of Members etc. which requires him to be a person who has worked as a Member for long period of time before he assumes office charge as President. The President is also a part of the committee to select persons as Members of the Tribunal. An existing Vice-President and more so senior Vice-President, would be fully experienced to discharge these functions. A retired High Court judge is not likely to be aware of the of the plethora of judgements, reports, magazines etc. dealing with tax matters. Speaking myself I do not think the experience of appointing a retired High Court Judge as the President of the Tribunal was at all successful.”

8. Legislation to appoint the Members of the Income Tax Appellate Tribunal on tenure basis for three years

Though the selection process of the Members of the ITAT is undoubtedly one of the best methods followed there could be further improvements in the process of the appointments. Instead of improving the process, the Govt. proposed to make an amendment in the Finance Act, 2017 by introducing S. 184 of the Finance Act, 2017, where appointment of the Members is on tenure basis. This amendment had been challenged and is pending before the Apex Court. If the appointment of the Members of the Income Tax Appellate Tribunal is made on a tenure basis, it will destroy the institution and Members will be at the mercy of the Govt. for the renewal of their tenure, which will affect the independency of the institution. In the interest of the institution, the Govt. should continue the appointment of the Members of the ITAT on permanent basis and not on tenure basis.

9. Non-appointment of the President on a regular basis

When then President of the ITAT retired on 3-6-2010, the then Sr. Vice-President continued as the officiating President till 14-10-2011 (on till his elevation as a High Court Judge). On 14-10-2011, Govt. appointed another senior most Vice-President as officiating President untill 1-9-2012. On 1-9-2012, one of the Vice-Presidents was appointed as officiating President till 12-3-2015. On 12-3-2015 Govt. appointed a Retd. High Court Judge as the President who retired on 17-2-2017. On 17-2-2017, the Govt. appointed one of the Vice–Presidents as an officiating President, whose term is renewed from time to time. Not appointing a regular President for the ITAT has affected the independence of the institution. Many decisions which can be taken by the regular President may not be taken by the officiating President considering past experience. Therefore the need of the hour is the appointment of a President of the ITAT on a regular basis in the interest of the institution.

10. Not appointing the Vice–Presidents and Members of the Income Tax Appellate Tribunal

The sanctioned Bench strength of the ITAT is 63 Benches (126 Members) which are functioning from 29 places. For the sake of administrative convenience, the Income Tax Appellate Tribunal is divided into 10 zones. Each zone is headed by a Vice-President. Accordingly the ITAT should have 10 Vice-Presidents and one President. The Vice-Presidents are required for better administration of justice before the Tribunal. At present the Tribunal has one officiating President and two Vice–Presidents. One of the Vice–President will be retiring on 9-7-2018. After 9-7-2018 the entire institution will have to function under the admiration of one officiating President and one Vice-President. How can the institution function having only one officiating President and one Vice-President?. Non appointment of the Vice-Presidents on time demoralise the Members who are due for promotions as Vice-Presidents. The sanctioned strength of the ITAT is 63 benches (126 Members) whereas today there are 95 Members active of which 5 will presently retire hence at the end of 2018 there will be vacancy for 36 Members. The process of filling of the vacancies takes at least one year after the interview. The Govt. has not made any announcement for filling of the vacancy which means that for another two years there may not be any new appointments which is affecting the functioning of the Tribunal. There is also inadequacy in the number of staff and Assistant Registrars appointed, which has affected the functioning of the Tribunal.

11. Impartial easy and speedy justice

Total pendency of appeal before the ITAT on 11-2018 is 91,657 appeals (2018) AIFTPJ January. P. 73. It is desired that the assessee is able to get the justice within six months of the filing of an appeal from the final fact finding authority. By not appointing a regular President, Vice–Presidents, Members and not providing the desired infrastructure the motto of the Tribunal is “Impartial easy and speedy justice” cannot be achieved. In Mumbai, more than 10,000 appeals are pending before the High Court for final disposal. The delay in disposal of the cases before High Courts is mainly because of the delay in appointment of Judges and not providing required infrastructure.

We hope the Govt. will give work on a war footing to fill the vacancies in the Judicial and quasi forums. The need of the hour is it is that the Bar which should play a proactive role by sending objective suggestions to the Govt. if the representations are not considered, we may have to ring the bell of the Courts.

A thought for debate.

Dr. K. Shivaram
Editor-in-Chief

Posted in May.