1. The wages should be more than 50% of the gross wages. Thereby, the employer may fix at least 50% as basic wages + DA + Retention Allowance (If Any) & rest 50% can be fixed other components as enumerated. However, no bifurcation of the minimum wages, either notify by the Central Government or the State Government, should be done for reducing the further statutory benefits of the employees.

  2. Increase in Provident Fund Contribution from Employer and Employee’s, due to increase in Basic+ DA+ Retention Allowance (Minimum 50% of Gross Salary)

  3. Increase in liability of Payment of Gratuity, since increase in Basic+ DA+ Retention Allowance (Minimum 50% of Gross Salary)

  4. Increase in liability of Payment of Bonus, since increase in Basic+ DA+ Retention Allowance (Minimum 50% of Gross Salary) and also code does not specify upper limit for applicability of Bonus Act.

  5. Now, Leave Encashment will be payable on Gross Salary, hence liability of employer for payment of leave encashment will be increase.

  6. Employee definition includes Supervisory, Administrative and Managerial employees too.

  7. 24K sealing for employee definition dissolved.

  8. Schedule Employment abolished. Thus now almost everyone will be covered under the definition of Employee.

  9. OT double of normal wages VS current practice of double of Basic + DA

  10. Consent of Employees for OT required.

  11. There will be a National Floor wage. No state to have MW less than this.

  12. F&F payment within 2 days after reliving

  13. Inspector Vs Inspector-cum-Facilitator. Advisory role to Employer and Workers

  14. Related Rules and Implementation date is pending. We need to wait.

  15. Digital compliance enhanced

  16. Basic + DA must be min 50% of gross wages

  17. Wages paid in Kind cannot be more than 15% of the Gross wages.

  18. Bonus shall be applicable to all even if the Basic + DA exceeds 21K. Need to wait for the rules for more clarity.

  19. There is no gender discrimination in this code.

  20. Conviction for Sexual Harassment stands as disqualification for Bonus applicability.

  21. Web based inspection process introduced

  22. Employee and Worker defined separately.

  23. Electronic payments encouraged

  24. Penalties will increase 10x

  25. Now even an Employee and Trade Union can file a complaint against an Organisation. Earlier only the Inspector had this right.

  26. Minimum Wages = Basic + DA + Retention Allow (Eg – Sugar Mills)

  27. Minimum Wages will be revised every 5 years by Govt. Periodical revisions of DA will continue as it is.

  28. Deductions from wages to be only as per prescription of law. No other deductions will be allowed.

  29. 4 Central acts merged in this code, namely Minimum Wages, Payment of Wages, Bonus Act and Equal Remuneration Act. It has 9 Chapters.

Please note that final rules are yet to be notified.

R. L. Soni has acted as faculty for Labour Laws at various Seminars as under:

  • Confederation of Indian Industries (CII) (in this seminar various corporates participate)
  • Institute of Chartered Accountants of India (ICAI) (Western Region)
  • Nasik Branch of WIRC of ICAI;
  • Bhilai Branch of CIRC of ICAI
  • The Institute of Company Secretaries of India.
  • The Bombay Chartered Accountants Society
  • The Chamber of Tax Consultants
  • Bombay Stock Exchange (BSE) Broker’s Forum
  • Maharashtra Institute of Labour Studies (MILS- Government of Maharashtra) [Given training to Asst. Labour Commissioners and Govt. Labour Officers, and Shops & Estb Inspectors of Maharashtra State]
  • AMAZON
  • Larsen & Toubro Limited
  • The Tata Power Company Ltd.
  • Hindustan Unilever Field Services Pvt. Ltd
  • Vodafone Essar Limited
  • Bajaj Electricals Ltd
  • Anchor Electricals Pvt Ltd (By Panasonic)
  • Polycab Wires Pvt Ltd
  • Gammon India Ltd.
  • 3i-Infotech Limited
  • Maharashtra State Electricity Distribution Company Ltd
  • Maharashtra State Power Generation Company Ltd
  • Maharashtra State Electricity Transmission Company Ltd
  • Dun & Bradstreet Information Services India Pvt. Ltd
  • ABN AMRO Central Enterprise Services Pvt Ltd
  • Bharatratna Dr. Ambedkar Institute of Management & Legal Research
  • IL&FS Transportation Networks Limited
  • Lodha Group of Companies
  • Ajmera Group of Companies.
  • Kanakia Spaces Pvt Ltd
  • JMC Projects (India) Ltd
  • Oberoi Realty Limited
  • OMKAR REALTORS & DEVELOPERS PVT. LTD.
  • National Academy of Indian Payroll (NAIP)
  • V. O. Chartered & Cost Accountants Association
  • Borivali (Central) CPE Study Circle of WIRC of ICAI,
  • Ghatkopar CPE Study Circle of WIRC of ICAI
  • J B Nagar C.A. Study Circle, Andheri,
  • Dahisar CA Study Circle of WIRC of ICAI
  • Pune Camp CPE Study Circle, of WIRC of ICAI
  • Shri Kutchi Advocate’s Welfare Association
  • Princeton Academy (in this seminar various corporates participate)
  • Satvam Consulting Pvt. Ltd (in this seminar various corporates participate)
  • Sharp Facility Management Pvt Ltd (in this seminar various corporates participate)
  • STEPS Management Services Pvt. Ltd, UTTARKHAND (in this seminar various corporates participate)
  • IEEMA (Indian Electronics & Electrical Manufactures Association)
  • Bombay Management Association (BMA)
  • Bombay Master Printers Associations
  • Raishabh Academy Pvt Ltd
  • Shree Vagad Kala Kendra
  • Kutch Corporate Forum
  • Association of System Integrators & Retailers in Technology (ASIRT)
  • Paper Traders Association
  • Smart Edge, Goa
  • Sampat & Mehta (Chartered Accountants)
  • Computer Media Dealers Association, Fort, Mumbai.
  • Ahmedabad Branch of WIRC of ICAI.
  • VAPI Industries Association.
  • VAPI Branch of WIRC of ICAI.
  • Carnival Group
  • Masjid CPE Study Circle of WIRC of ICAI
  • Highway Concessions One Pvt. Ltd.
  • Trade Association of Information Technology (TAIT)
  • Gowalis Industries Association (Vasai, District- Palghar)
  • Foundation for Education of Girls
  • The Borivali Diamonds Cutters & Polishers (Owners) Associations.
  • Snacks Food Association of Maharashtra
  • SMS Limited (Nagpur)
  • Pramod Ram Ujagar Tiwari Saket Institue of Management (Kalyan)
  • Lions Club of Bombay Mandvi (East)
  • Vile Parle CPE Study Circle of WIRC of ICAI
  • V Giri National Labour Institute (An Autonomous Body of Ministry of Labour & Employment, Government of India.)
  • Idemitsu Lube India Private Limited
  • Burns & McDonnell (India)
  • Chetana’s Institute of Management & Research (CMIR) in association with (SIIOD)
  • Mumbai Port Trust in association with (SIIOD)
  • Anglo Eastern Ship Management (India) Private Limited
  • Meher Distributors Pvt. Ltd.
  • Impresario Handmade Restaurants.
  • Bloomasia Incorporated
  • Lions Club of Bombay Mandvi East
  • Rotary Club of Mumbai Downtown Sealand
  • Chamber of Small Industry Associations (COSIA, Nagpur)
  • The Gem & Jewellery Export Promotion Council
  • E.S.I., P.F. & Other Industrial Law Practitioners’ Association (EPILPA) ……

    and many more

Query 1

Donation received by Trust

A Charitable Trust receives donations from public. The amount of donations is more than Rs.20 lakhs in a year. Trust uses the amount so received towards its charitable activities including medical and educational help to needy persons. Whether donation received will form part of aggregate turnover and whether trust liable to obtain registration under GST Act?

Reply:- Under GST, a person is liable for registration if it is carrying on business and turnover exceeds the limit of Rs.20 lakhs . The relevant statutory provisions can be noted as under:-

Section 22(1) provides for registration by every supplier in following words.

“22. (1) Every supplier shall be liable to be registered under this Act in the State or

Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.”

Thus, there should be supply of goods or services to make up the aggregate turnover. The meaning of ‘supply’ in section 7 can be noted as under:-

“Section 7(1): For the purposes of this Act, the expression “supply” includes––

  1. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

  2. import of services for a consideration whether or not in the course or furtherance of business and

  3. the activities specified in Schedule I, made or agreed to be made without a consideration;

  4. The activities to be treated as supply of goods or supply of services as referred to in Schedule II.”

It can be seen that the transactions made in the course of or furtherance of business against consideration are covered in the category of ‘supply’ for the purpose of GST Act.

The term ‘business’ is defined in section 2(17)

as under:-

“(17) “business” includes––

  1. any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

  2. any activity or transaction in connection with or incidental or ancillary to sub- clause (a);

  3. any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

  4. supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

  5. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;

  6. admission, for a consideration, of persons to any premises;

  7. services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;

  8. services provided by a race club by way of totalisator or a licence to book maker in such club ; and

  9. any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;”

Thus, the cumulative effect of above provisions is that the receipts should be for supply in course of business. There are number of judgments in which the meaning of ‘business’ is discussed. However, they are not referred here for sake of brevity. The primary thing will be to see whether Trust is engaged in any business activity as per GST Act.

Further, in relation to donations, it is required to be seen whether the donations are against supply of goods or services. Only if such receipts are against supply of goods or services, then only the receipts can be said to be supply and can be included in aggregate turnover. The ordinary meaning of ‘donation’ is very clear that it is voluntary payment by the donor without any expectation of receipt of any goods or services. If the donation is paid against any agreed goods or services like advertisement by

Trust, then it cannot be termed as a donation. It will be consideration for concerned goods or services obtained from the Trust. The meaning of ‘donation’ in dictionary can also be referred to as under:-

https://dictionary.cambridge.org/

money or goods that are given to help a person or organization, or the act of giving them:

donations of food and money

I’d like to make a small donation in my mother’s name.”

“https://www.dictionary.com/browse/donation

an act or instance of presenting something as a gift, grant, or contribution.

a gift, as to a fund; contribution.”

It can be seen that donation is an act of giving something. It is not in exchange of goods or services. Therefore, such receipts cannot be considered as for supply. The Trust is also not giving any goods or services to the donor.

Similar issue is also dealt with in Flyer issued by CBIC and circular issued by CBIC bearing no.116/35/2019-GST dt.11.10.2019. In this

circular, the issue about receipt of donation against putting name plate is dealt with. While dealing so, it is clarified that such donations which are against promise of putting name plate etc. are not under any obligation or agreement and hence not liable as supply. However, if putting such name etc. amounts to advertisement then the issue about supply will arise. The said principle will apply with more force when the donations are received even without such commitments, in the sense they are blank donations without any corresponding commitment by the Trust.

Therefore, the donations cannot be considered in the aggregate turnover and no liability for registration can arise based on receipt of donations.

HIGH COURTS GUJARAT HIGH COURT FORMATIVE TEX FAB

V/S

STATE OF GUJARAT & 3 OTHER [J.B.PARDIWALA & ILESH J. VORA, JJ]

R/SPECIAL CIVIL APPLICATION NO.

14059 of 2020

Date of Decision: January 18, 2021

Provisional attachment u/s 83 of GST — Cash credit account attached—on instructions for attachment of cash credit account, the bank attached all other accounts of the petitioner on its own—writ filed—Held, said order attaching cash credit account is not sustainable

Where the cash credit account was ordered to be attached u/s 83 of the Act, the concerned bank attached all other accounts on its own. It is pleaded that all the accounts could not be attached. Moreover, attaching cash credit account is not within the scope of S 83 of GST Act,2017. The Hon’ble court has held that the impugned order attaching cash credit account u/s 83 is quashed.

DELHI HIGH COURT

RCI INDUSTRIES AND TECHNOLOGIES LTD

V/S COMMISSIONER DGST DELHI & ORS.

[RAJIV SAHAI ENDLAW & SANJEEV NARULA, JJ]

W.P.(C) 121/2021

Date of Decision: January 7, 2021

Search under SGST Act—validity of—absence of signatures of independent witnesses will not render the search invalid.

Reason to believe—while exercising writ the court cannot go into the sufficiency of grounds leading to reason to believe on part of officer to conduct search.

Statement given by the petitioner was not retracted soon after which indicates that indicating that it’s a way to wriggle out of the liability admitted during search.

Facts:

Search conducted u/s 67 of DGST Act has been challenged on the grounds that no signatures of independent witnesses have been attained. That the premises are already searched by central GST Authorities and there can be no parallel enquiries by two independent authorities on the same issue. That the statement was taken coercively during search .That the officer has no reason to conduct search as required by law.

Held:

  • The statement if taken with coercion ought to have been retracted soon after but it was never done indicating that the petitioner has challenged the search action as an attempt to wriggle out of the commitment of paying tax and penalty made in the statement during the search action.

  • The authorities are dealing with different years hence there is no overlapping of enquiries by the two authorities.

  • There is no merit in the contention that absence of signatures would render the search illegal. No Panchnama was drawn. There is no such provision supporting this contention that the signatures of witnesses are required.

  • Regarding the ‘reason to believe’ to conduct search, the Hon’ble court cannot go into sufficiency of grounds while exercising writ. The reasons to believe shown to the Court demonstrate that the Appropriate authority had the reasons, as per mandate of Section 67(2) of the DGST Act along with relevant Rules, for formation of belief to carry out the search. Therefore, writ is disposed of.

GUJARAT HIGH COURT NIPUN A. BHAGAT, PROPRIETOR OF

STEEL KRAFT INDUSTRIES

V/S

STATE OF GUJARAT

[J.B. PARDIWALA & ILESH J. VORA, JJ]

R/SPECIAL CIVIL APPLICATION NO. 14931 OF 2020

Date of Decision: January 4, 2021

Recovery of dues—Scope of S. 86A of CGST Act—ITC available in credit ledger of the director of public company blocked to recover dues—S. 86A held wrongly invoked—director’s credit ledger cannot be blocked for recovery of dues in case of public company

The respondent had blocked the ITC available in the credit ledger of the director of the private company to recover dues. A writ is filed in this regard. It is contended that under section 18 of the Central sales tax Act, 1956, the recovery can be made from directors. It is held that S 86 A could not be invoked as S.18 deals with private company. In the present case, the company in question is a public company. Therefore, the respondent is directed to unblock it.

RAJASTHAN HIGH COURT MEGA JEWELS PVT LTD

V/S ADDITIONAL COMMISSIONER

[INDRAJIT MAHANTY & SATISH KUMAR SHARMA, JJ]

CWP No. 6575/2020

Date of Decision: January 27,2021

Refund—Input tax credit—Scope of circular No 14/14/2017 dt 6/11/2017—Refund of ITC u/s 54 (3) of CGST Act claimed—denied in view of circular dated 6/11/2017—writ filed—Held: the said circular is prospective and will not apply on transactions entered prior thereto— transaction in instant case pertains to period between July to October 2017, therefore there is no lawful impediment in justifying denial of refund of ITC—interest to be paid alongwith— writ allowed

The petitioner has filed a writ seeking refund of ITC u/s 54 (3) of the CGST Act 2017 which stood denied in view of circular dated 6/11/2017 . The Hon’ble court has allowed the writ directing the respondents to grant refund alongwith interest since the said circular is prospective and does not apply to transactions entered prior thereto

DELHI HIGH COURT PERNOD RICARD PVT. LTD.

V/S

AUTHORITY FOR ADVANCE RULING GST

[RAJIV SAHAI ENDLAW & SANJEEV NARUL, JJ]

W.P.(C) 2064/2021

Date of Decision: February 16, 2021

Advance Ruling Authority—Direction given by Hon’ble court to adjudicate the application filed within 4 weeks after quorum is complete—request to Lt. Governor to process the nomination received on priority basis

The petitioner had filed an application before the Advanced Ruling authority in order to start its new business. Even after 2 ½ years no orders are passed as the quorum of 2 members is not complete. The Hon’ble court has directed that the application be decided as soon as the quorum is complete and request to the Hon’ble Lieutenant Governor to take up the matter on priority basis and process the nomination received from the CBIC at the earliest.

GAUHATI HIGH COURT BARAK VALLEY CEMENTS LTD

V/S

THE UNION OF INDIA AND 5 ORS

[ACHINTYA MALLA BUJOR BARUA, J] WP(C) 4334/2020

Date of Decision: February 15, 2021

EWB portal—blocking of—failure to file returns for two financial years—respondent to block the EWB portal of petitioner under Rule 138E(b) of the CGST Rules, 2017 in consequence thereto—writ filed contending that the petitioner defaulted in filing returns as refund not granted to it in terms of new industrial policy—Hon’ble court directed the petitioner to make representation before the Principal commissioner justifying reasons for refund within 3 days failing which interim order barring respondents from blocking of EWB Portal shall not hold good.

The petitioner’s EWB portal was to be blocked on account of failure to file GSTR returns for two financial years. The petitioner has contended that since it was entitled to a huge amount of refund under the new industrial policy which was not refunded by the department it had not filed returns. The Hon’ble court has directed the petitioner to make a representation before the respondent justifying the reason for refund. Till the order is passed by the Principal Commissioner, the earlier interim order requiring the respondents not to block the EWB Portal of the petitioner shall continue. If the representation is not made within the time given, the interim order shall not hold good.

ALLAHABAD HIGH COURT ANANDESHWAR TRADERS

V/S STATE OF UP

[SAUMITRA DAYAL SINGH, J]

W.P NO. 503 OF 2020

Date of Decision: January 18, 2021

Appeal—Additional evidence—whether can be added by respondent at time of appeal— penalty imposed for failure to cancel E-Way bill when movement did not take place— appeal filed—respondent added further ground that the same E-Way bill was used twice for movement of goods—appeal rejected—High Court observed in favour of petitioner that Rule 112 of CGST Rules does not permit additional evidence by respondent at time of appeal—amount deposited by petitioner to be returned.

The goods were seized and penalty was imposed on the ground that the E way bill was not cancelled within 24 hours of generation when the movement had not started after its issuance. Rule 138 does not prescribe that the E-way bill ought to be cancelled when the movement does not take place. On appeal by petitioner it was rejected on further added grounds by respondent that the e way bill in question had been used twice. It is held Rule 112 of CGST Rules does not permit respondent to place an additional evidence at the time of appeal. Therefore, the petitioner is to be returned the amount deposited by it.

HIGH COURT OF GUJRAT SKF FINEST ADVISORY PVT. LTD

V/S UNION OF INDIA

[JB PARDIWALA and ILESH J VORA, JJ] SCA 457 of 2021

Date of Decision: February 19, 2021

Provisional Attachment—bank account attached creating difficulty in functioning of business—Hon’ble High court has enquired if any tangible property can be furnished for uplifting bank attachment—applicant ready to maintain balance of 22 Lakhs as existed on day of attachment provided it be permitted to operate the account—matter decided in favour of assessee

After the search u/s 67 was conducted, the bank account of the applicant was provisionally attached which caused impediment in conducting its business. Enquiry still being under process, the Hon’ble High court asked for any other tangible security equivalent to the demand raised. The applicant is ready to maintain a balance of ` 22 Lakhs which was the amount available in the account when attachment was done provided it may operate its account. The applicant is ready for the undertaking, therefore the matter is decided in favour of the assessee.

HIGH COURT OF RAJASTHAN JODHPUR VIDYUT VITRAM NIGAM LTD

V/S UNION OF INDIA

[INDRAJIT MAHANTY, CJ & DINESH MEHTA, J]

CWP No 9397/2018

Date of Decision: February 5, 2021

Exemption—can exemption granted by government be taken away by way of circular—Held no—services exempted by way of notification by central government cannot be taxed by the revenue by way of issuing circular under the cloak of clarification.

The services of distribution and supply of electricity in districts of Rajasthan had been declared in negative list by the Central Government vide notification dated 28/6/2017. However, the revenue carved out an exception vide circular dated 1/3/2018 and excluded some of the services provided by the DISCOMS although the said services were themselves exempted. The Hon’ble High court has held that the respondent s have levied tax on some of the services by carving them out that too by way of circular under the cloak of clarification. The impugned paragraph of the circular is thus quashed.

HIGH COURT OF DELHI LUPITA SALUJA

V/S

DGGI AND ANR [SURESH KUMAR KAIT, J] APPLICATION NO 319/2021

Date of Decision: February 11, 2021

Anticipatory bail—enquiry under CGST Act—bogus invoices—fake suppliers and wrongly availed ITC alleged—anticipatory bail is granted on the observation that the idea of fake suppliers is misconceived by department as per documents on record— GSTR returns duly filed—applicant never called upon for investigation for one year, only after she challenged the investigation she is called—therefore, no custodial interrogation is required—anticipatory bail is granted.

Anticipatory bail is sought by the directors of the company for the enquiry initiated under the CGST Act. Allegedly the applicant has availed bogus ITC by creating fake firms and that the applicant has siphoned the funds from company accounts. It is contended by the revenue that the applicant is not merely a housewife, but an active involved in financial affairs and had been absconding after her husband was arrested.

Records show that it is misconceived that suppliers are nonexistent. The PAN cards and bank accounts are valid and the registration has been granted by the respondent itself. GSTR returns are duly filed. The applicant has been called for the first time after she challenged the whole investigation. Therefore, No custodial interrogation is required. Anticipatory bail is granted.

HIGH COURT OF JHARKHAND TURRET INDUSTRIAL SECURITY PVT LTD

V/S

UNION OF INDIA & ORS [APARESH KUMAR SINGH & ANUBHA

RAWAT CHOUDHARY, JJ]

W.P. (T) No 2661 of 2020 Date of Decision: February 4, 2021

Registration—cancellation of—show cause notice issued—subsequent cancellation on account of failure to reply to show cause notice—High Court has observed that since show cause notice was short of date and time, petitioner couldn’t be expected to reply to it— cancellation resulting from such incomplete show cause notice cannot be sustained being violative of principles of law

The GST Registration was cancelled on account of non filing of returns for a period of six months. A notice was issued by the revenue in this regard to which no reply

was filed by the petitioner. It is held that the impugned notice lacks date and time for replying due to which it stands quashed. Cancellation of registration resulting from such an incomplete show cause notice also cannot be sustained being violative of principles of natural justice.

BOMBAY HIGH COURT GOODS AND SERVICES TAX

PRACTITIONERS ASSOCIATION

V/S UNION OF INDIA

[UJJAL BHUYAN & MILIND N. JADHAV, JJ] WRIT PETITION (L) NO.5172 OF 20021

Date of Decision: February 26, 2021

Returns—Extention for filing — time limit was already extended once—no extinguishment of right by not extending it further—Annual returns for the period in question had been made optional if turnover is upto 2 crores and 5 crores with respect to the financial years mentioned in the notification by Central Government—Petition dismissed

The writ is filed by GST Practitioners’ Association seeking a direction to the respondents to extent the periodicity of filing of annual returns in Maharashtra due to the prevailing COVID situation. They have also sought extension of limitation period for filing of annual returns for the year 2019-20 under Section 44 of CGST Act r/w Rule-80 of CGST Rules 2017 upto 30.6.2021. The court has held that the time limit had been extended from 31.12.2020 to 28.2.2021. Perusal of Section 42 of the CGST Act reflects that non extension of the time limit beyond the sought after date would not leave to any extinguishment of right. The Central Govt. notified that annual turnover upto Rs.2 Crores for financial Years 2017-18, 2018-19 and 2019-2020 may be filed as an option; and for business with annual turnover upto Rs.5 crores for the above mentioned latter to financial years has been waived off.

It is the professional body of GST practitioners and not an individual taxable person finding it difficult to adher to the time line of 28.2.2021. Petitioner is dismissed.

HIGH COURT OF BOMBAY JSK MARKETING LTD & ANR.

V/S

UNION OF INDIA & ORS

[UJJAL BHUYAN & MILIND N JHADAV,JJ] WP No 5000 of 2020

Date of Decision: February 16, 2021

Arrest—apprehension of—summons issued allegedly on account of circular trading—writ filed by petitioner apprehending arrest seeking protection against coercive action—Summons observed to be indicative of only demanding oral evidence or documents by the petitioner— No arrest signified—Petitioner to appear in response to summons and respondent to refrain from coercive action if the former cooperates in investigation.

Multiple summons were issued to the petitioner allegedly involved in circular trading to which the petitioner did not respond apprehending its arrest. A writ is filed for protection against coercive action. The Hon’ble Court has held that the summons have been issued to petitioner calling him upon to tender oral evidence and produce documents. No threat of arrest is indicated therein. There is no reason to apprehend arrest on presenting himself before the investigating officer in response to summons issued. The respondents are directed not to take any coercive action if the petitioner co-operates investigation.

GUJARAT HIGH COURT RAMESWAR UDYOG PVT. LTD.

V/S UNION OF INDIA

[J.B.PARDIWALA & ILESH J. VORA, JJ]

R/SPECIAL CIVIL APPLICATION NO. 17688

of 2019

Date of Decision: March 18, 2021

Refund on exports—amendment in GST portal—exports of goods—errors in outwards supplies in GSTR 1—amendment of 28 invoices permitted accordingly to assist exporters—albeit refund not granted on 14 invoices on account of mismatch in GST portal and ICEGATE customs portal due to technical error—Respondent is directed to sanction the refund.

The exporter applicant had exported goods under payment of IGST. However there was a mismatch between GST portal data and data on the ICEGATE customs portal and hence, the refund of the IGST was not granted.

Steps were taken for permitting amendment of invoices. 28 invoices were amended but 14 were still pending, the amendment of which was not allowed on account of technical error.

The respondent is directed by the Hon’ble court to sanction the refund, in accordance with law, as claimed by the writ applicants within a period of 12 weeks from the date of receipt of this order. In case of any further difficulty, it shall be open for the writ applicants to revive this writ application.

DELHI HIGH COURT MRIDUL TOBIE INC.

V/S

ADDITIONAL DIRECTOR GENERAL,

DIRECTORATE GENERAL OF GOODS

AND SERVICE TAX INTELLIGENCE & ORS.

[RAJIV SHAKDHER & TALWANT SINGH, JJ]

W.P.(C) 2420/2021

Date of Decision: March 17, 2021

Stay of investigation—search by Commissionerate and Intelligence simultaneously—The Hon’ble court has held that in view of the circular dated 5/10/18, if the search is commenced by the Commissionerate, the other intelligence units should have held their hand as it is both practical and sensible— while respondents file their reply to the captioned application, no coercive measures to be taken against the petitioner—search officers to ensure no privacy is invaded.

As per the earlier orders passed by this Hon’ble Court, the petitioner was relegated to Allahabad High court since few issues were overlapping with issues raised in writ petition in Allahabad High court. The respondent was given some time to file a response in this regard. Within two days of the passing of the order, authorization was given for a search being carried out by the DGGI, Delhi Zonal Unit 1. The record shows that search has been carried out not only by the Commissionerate but also by various Intelligence Units. Thus the applicant has approached for a stay in investigation.

The Hon’ble court has held that that since investigation was commenced, in the first instance, by the Commissionerate, the other Intelligence units should have held their hands in view of the circular dated 05.10.2018. Therefore, no coercive measures will be taken against the petitioner. If, in the interregnum, investigation is necessitated, in line with the circular dated 05.10.2018, it shall be carried out only by the Commissionerate. The search officers will ensure that there is no invasion of privacy.

JAMMU & KASHMIR HIGH COURT NAVNEET R. JHANWAR

V/S

STATE TAX OFFICER AND OTHERS

[SANJEEV KUMAR & SANJAY DHAR, JJ] WP(C) No. 443/2021

Date of Decision: March 17, 2021

Refund—improper show cause notice— principles of natural justice—show cause notice served to explain delay in claiming refund of ITC—refund rejected on merits without hearing the appellant in this regard—Held by Hon’ble Court that writ is maintainable since order passed is fundamentally flawed being violative of principles of natural justice—fresh show cause notice to be served—petition allowed.

In response to the show cause notice served, the petitioner had explained that the delay in claiming refund was on account of the pandemic. Subsequently, the respondent rejected the refund on grounds of merit without hearing the petitioner on that. The Hon’ble Court has held that writ jurisdiction can be exercised despite there being efficacious remedy of appeal since the impugned order is passed in violation of natural justice making it fundamentally flawed. Therefore, the matter is remanded back for fresh adjudication after service of proper show cause notice and opportunity of hearing to the petitioner.

PUNJAB AND HARYANA HIGH COURT SACHDEVA COLLEGES LTD.

Vs

UNION OF INDIA & ORS [RITU BAHRI & ARCHANA PURI, JJ]

CWP NO.5605 OF 2021

Date of Decision: March 10, 2021

Natural Justice—Rejection of Application u/s 97 of CGST Act—application rejected at stage of omission contending counsel of petitioner being absent—Entry Dispatch Register being proof of presence of counsel on the day of hearing – order passed in favour of petitioner by Hon’ble High court—matter remanded for fresh hearing.

ORDER

Application for AAR is filed contending that the application filed U/s 97 of the CGST Act was rejected at the stage of admission itself without giving an opportunity of hearing. On the other hand the department contends that the Counsel for the petitioner was absent. It is observed by the Hon’ble Court that the lawyer was present as per the Entry Dispatch Register. Hence, no application could be rejected without hearing the appellant in view of the provision of Sec.98(2) of the above act which is mandatory. Therefore, the impugned order is set aside and remanded back to the authorities for passing a speaking order after hearing.

KERALA HIGH COURT USMAN M.

V/S

THE COMMISSIONER OF STATE GST TAX TOWERS & ORS.

[A.M. BADAR, J] WP(C) NO. 8319 of 2021

Date of Decision: March 30, 2021

Bank Guarantee — Invoking of — goods released on furnishing bank guarantee— guarantee invoked before filing of appeal — Held: Respondent cannot invoke the bank guarantee if petitioner files appeal challenging the order within the limitation period.

The goods were released on foundation of bank guarantee. The final order was passed by the respondent directing payment of IGST tax. However, before an appeal could be filed against the said order the respondent invoked the bank guarantee which was furnished. The Hon’ble Court has held that the respondent should not invoke bank guarantee furnished if the petitioner files statutory appeal challenging the order passed by them within the prescribed period of limitation.

HIGH COURT OF GUJARAT JIGAR CARS PVT. LTD.

V/S UNION OF INDIA

[J.B. PARDIWALA & ILESH J. VORA, JJ]

CIVIL APPLICATION NO.15631 of 2019

Date of Decision: March 23, 2021

Transitional credit—denial of on account of typographical error in GSTR-2 returns— respondents directed to open online portal for rectification of error or accept manual returns for the period in question.

A writ is filed by the petitioner seeking direction to the respondents to allow them to file returns in form GST TRAN-2 and claim transitional credit for the period concerned. The Hon’ble Court has observed that the transitional tax credit was not allowed on account of an inadvertent and bona fide typographically error made in form GST TRAN-2. In view of the ratio given in the case of Jakap Metind Pvt. Ltd. it is held that the respondents shall open an online portal to file rectified firm of GST TRAN-2 electronically for the period concerned as well as for the subsequent months, or accept manual filed returns for the months with corrections.

HIGH COURT OF MADRAS VECTRA COMPUTER SOLUTIONS

V/S

THE COMMISSIONER OF COMMERCIAL TAXES

[G.R. SWAMINATHAN, J]

W.P. No. 9531 of 2020

Date of Decision: March 25, 2021

Natural Justice—Levy Of Tax And Penalty— SCN Served—Tax And Penalty Imposed— Writ Filed Alleging Violation Of Natural Justice-Contention By Respondent To Avail

Remedy Of Appeal Under Section 107— Held That Impugned Order Being Passed Without Hearing The Appellant Is Set Aside— Respondents To Pass Fresh Orders.

The petitioner received notice proposing to levy tax in response to which no reply was submitted. A writ is filed challenging the order passed in consequence to said notice. The respondents contend that the impugned order can be challenged by way of appeal.

The Hon’ble court observed that no opportunity of hearing was afforded to the petitioner, therefore, the matter is remitted to pass fresh orders.

RAJASTHAN HIGH COURT

H.R. ENTERPRISES, GURPREET SINGH S/O SUBA SINGH

V/S

STATE OF RAJASTHAN [DINESH MEHTA, J]

Civil Writ Petition No. 5266/2021 Date of Decision: April 1, 2021

Jurisdiction Of Officer—Power To Conduct Inquiry U/S 67—Check Post Officers Cannot Be Permitted To Carry Rowing Enquiry As It Would Retard Free Flow Of Trade—In Addition Thereto, The Documents Were Found In Accord—Scope Of Anti Evasion Officer Squad Ends There Itself

The requisite documents were produced in respect of goods in transit. Extension to complete inspection from the competent authority was sought to conduct inquiry relating to alleged wrongful availment of input tax credit.

The petitioners contends that such fishing and rowing inquiry in relation to availment of ITC and suspicion about the purchase transaction is not within the domain of check post officer while exercising powers under Section 68 of the CGST Act, 2017 i.e. while goods are in movement.

It is held that the circular dated 13.04.2018, issued by the Central Board of Indirect Taxes and Customs lays down guidelines for inspection and release of the goods in transit, but the same has not been adhered to by the respondent. If a Check Post Officer or Anti Evasion Officer is permitted to carry on such fishing and rowing inquiry it would retard free flow of trade resulting in unnecessary and unwarranted harassment to the carrier of goods, so also to the consignor/consignee. Even, genuineness of the goods in transit per se is not in dispute and the nature of goods on physical examination was found to be in accord. Therefore, the scope of inquiry under Section 68 of the Act of 2017 by Anti Evasion Officer/ Check Post Officer or flying squad ends. The respondent is directed to release the goods and vehicle in question forthwith, in case of furnishing two solvent sureties executed by dealers. Furnishing of bank guarantee or cash security will not be insisted upon.

ALLAHABAD HIGH COURT

JAI MAA JAWALAMUKHI IRON SCRAP SUPPLIER

V/S STATE OF U.P.

[SAUMITRA DAYAL SINGH, J.] WRIT TAX No. 614 OF 2020

Date of Decision: March 17, 2021

Concealment Of Turnover—Couple Of Purchases Allegedly Concealed To Escape Turnover—Respondent Does Not Deny Issuance Of E Way Bill And Invoice—Alleged Transaction Cannot Be Held To Be Falling Under Undisclosed Turnover Merely Because Of Certain Discrepancies.

ORDER

The appellate authority upheld tax and penalty in respect of two alleged loose purchases holding that the turnover was concealed. A writ has been filed contending that the said purchases were covered by Tax invoice, E-way bill. As a matter of fact the respondent has not denied the issuance of these documents. It is held that once revenue authority admits that the invoice and e-way bills relied upon were genuine, it is difficult to imagine how it reached a conclusion that these invoices were unaccounted for. The alleged discrepancy in GSTR-3B and GSTR- 2A referred by the Assessing Authority did not find favour by the appellate authority, therefore, the transaction cannot be held falling under category of undisclosed turnover merely because there were certain discrepancies. Petition is allowed.

KARNATAKA HIGH COURT INM TECHNOLOGIES PVT LTD.

V/S

THE UNION OF INDIA & ORS.

[SURAJ GOVINDARAJ, J.]

WP No.226277/2020 (T-Res)

Date of Decision: February 3, 2021

On Account Of Mere Technical Glitch In The Web Portal, Benefit Of Carrying Forward Of Central Credit To CGST Regime Cannot Be Denied

ORDER

Where the petitioner was permitted to carry forward Central Credit to CGST regime through TRAN-1 but the electronic credit ledger on the website of the respondent did not reflect the same, grievance was filed but no action was taken. It is held by the Hon’ble Court that merely on account of glitch in the website a registered dealer cannot be denied the benefit of credit available under the provisions of Act.

  1. Interpretation of Statutes – Intention of legislature – Is best evidenced by text of statutes itself :

First and best method of determining the intention of the legislature is the very words chosen by the legislature to have the force of law. In other words, the intention of thelegislature is best evidenced by the text of the statute itself. However, where a plain reading of the text of the statute leads to an absurd or unreasonable meaning, the text of the statute must beconstrued in light of the object and purpose with which the legislature enacted the statute as a whole. Where it is contended that a particular interpretation would lead to defeating the very object of a legislation, such an interpretative outcome would clearly be absurd or unreasonable.

Council of Architecture v. Mukesh Goyal And Others: AIR 2020 Supreme Court 1736.

  1. Trust property – Sanction to sale by Charity CommissionerApplication for revocation of sanction on ground that sanction was obtained by fraud, misrepresentation and by concealing material facts- Charity Commissioner is not denuded of his jurisdiction under S. 36(2) on ground that sanction granted has been acted upon or exhausted :

The power of revocation of sanction under Section 36(2) of the Maharashtra Public Trusts Act, 1950 on the ground that such sanction was obtained by fraud or misrepresentation or by concealing the facts, material for the purpose of giving sanction can be exercised even after the execution of a sale-deed or the multiple sale-deeds on the basis of the sanction granted under Section 36(1)(a) of the said Act. Charity Commissioner is not denuded of his jurisdiction under S. 36(2) on ground that sanction granted has been acted upon or exhausted Sale of trust property during pendency of application for revocation of sanction . The subsequent purchasers have no right to claim hearing or an opportunity to show cause in respect of the proceedings under Section 36(2) of the said Act. Obviously, their rights or defences available in law are not concluded by the order passed under Section 36(2) of the said Act by the Charity Commissioner.

Shri Avinash Kishorchand Jaiswal v. Shri Rammandi Deosthan, Pavnar AIR 2020 BOMBAY 153

  1. Foreign judgment – Conclusiveness – Judgment of High Court of Fiji as regards due execution of Will in probate proceeding – All defendants were not parties before High Court of Fiji – Judgment per se cannot to be held to be binding qua defendant who is not shown to be party before that Court – Civil P.C. of 1908, S.13

The lower appellate court dealt with section 13 of the Code of Civil Procedure which relates to the foreign judgment and has recorded that although this Section makes the foreign judgment as binding, however, there are certain exception to it. Since there is nothing in the judgment passed by the High court of Fiji to suggest that the will has been proved in accordance with law as applicable in India, therefore, the said judgment being not in conformity with the law, as applicable in India, cannot be held to be binding upon the courts in India.

A bare perusal of the Section itself shows that the foreign judgment is declared to be conclusive qua the matter involved therein. However, it is binding upon the same parties which were before the foreign court or which may be claiming under them. First of all; there is nothing on record to suggest that all the defendants were parties before the High Court of Fiji. Hence this judgment per se cannot be held to be binding qua defendant No. 7, who is not shown to be a party before that court.

Karnail Singh v. Lashmir Kaur alias Kashmir Kaur and others AIR 2020 PUNJAB AND HARIYANA 88

  1. Benefit of concessional stamp duty – Availability – Sister – in-law intending to convey her individual property in favour of brother-in-law by virtue of settlement deed – Concessional stamp duty would be applicable to legal heirs, who succeed to estate of persons referred to in ‘family’ – Benefit of concessional stamp duty cannot be granted.

A person may hold property either as a legal heir or as an individual. If the person is not holding the property as a legal heir, mere family relationship with the person to whom right is being conveyed will not qualify him to claim the concessional rate. The term ‘legal heir’ is an assigned norm under law with a qualification attributable in the context of the succession to an estate. A legal heir has a distinct character in his personality Independent of being a legal heir in relation to a property. That independent property with a legal heir will not be related to others based on the rule of cognation under law of inheritance. Concessional stamp duty would be applicable to legal heirs, who succeed to estate of persons referred to in ‘family’ . If person is not holding property as legal heir, mere family relationship with person to whom right is being conveyed would not qualify him to claim concessional rate Kunjithomman E.T. v. State of Kerala AIR 2020 KERALA 110

  1. Maintenance– Claim against daughter-in-law – Maintenance and Welfare of Parents and Senior Citizens Act of 2007 Ss.2(a), 2(f), 5 :

In order to give more attention to the care and protection for the older persons, who are neglected by their family, and lack physical and financial support, and to provide them simple, inexpensive and speedy justice, Parliament introduced the Act, and the Bill in this regard, further proposes to cast an obligation on the persons who inherit the property of their aged relatives to maintain such aged relatives.He object of the enactment is to cast an obligation not only on the family, but also on the ‘persons’ who inherit the property of their aged relatives to maintain such aged relatives. Family has larger connotations and the same is also defined under the Act. If the persons like son-in-law and daughter-in-law and such other persons, who would be entitled in law, to inherit the property of such where the daughter-in-law has squat over the property of the parents- in-law and made them to reside in a rented accommodation, she would also come within the sweep of the definition of ‘children’ and ‘parents’ in law are entitled to maintain application against ‘daughter in law’.

H. Deepika v. Maintenance Welfare of Parents and Others AIR 2020 TELENGANA 69

  1. Right of pre-emption – Availability:

The right of pre-emption is a preferential right to acquire the property by substituting the original vendee. The transfer or sale of an immovable property is a condition precedent to the enforceability of the right. The right of pre-emption is attached to the property and only on that footing can it be enforced against the vendee. Though the right is recognised by law, yet it can be rendered imperfect by the vendor when he transfers the property to another person who also has a superior right to the plaintiff pre-emptor.

Suresh Chand and another v. Suresh Chander (D) Thr LRs and Others: AIR 2020 Supreme Court 1144

  1. Compensation – Doctrine of notional extension – Employee’s Compensation Act (8 of 1923), S.3

Death of driver of truck due to slipping in canal while bathing, during trip. Causal connection between death of workman and his employment established. Doctrine of “notional extension” of employment applicable. Claimants entitled to compensation. The Workmen’s Compensation Act, 1923 (now christened as Employees Compensation Act, 1923) is a piece of socially beneficial legislation. The provisions will therefore have to be interpreted in a manner to advance the purpose of the legislation, rather than to stultify it. In case of a direct conflict, when no reconciliation is possible, the statutory provision will prevail only then.

Poonam Devi and another v. Oriental Insurance Co. Ltd. AIR 2020 Supreme Court 1305

  1. Freedom of trade and commerce and freedom of speech and expression – Through medium of internet is constitutionally protected under Art. 19(1)(g) and 19(1)(a), subject to restrictions under Art. 19(6) : Constitution of India, Art. 19(1)(g),(6)

Internet is also a very important tool for trade andcommerce. The globalization of the Indian economy and the rapid advances in information and technology have opened up vast business avenues and transformed India as a global IT hub. There is no doubt that there are certain trades which are completely dependent on the internet. Such a right of trade through internet also fosters consumerism and availability of choice. Therefore, the freedom of trade and commerce through the medium of the internet is also constitutionally protected underArticle 19(1) (g), subject to the restrictions provided under Article 19(6).

Poonam Devi and another v. Oriental Insurance Co. Ltd. AIR 2020 Supreme Court 1305

  1. Will – Rule of last intention – Applicability – Succession Act of 1925, Ss. 74, 95, 96

First clause of Will providing for sale of property during lifetime of wife of testator. Latter clause providing distribution of sale proceeds between children . First clause creating absolute right in favour of wife of testator shall prevail over later clause . Later clause cannot be treated as bequest in favour of children as it was mere desire expresses by testator . No intention of testator to compel wife to sale property during her life time . Rule of last intention, not applicable. The assertive language used in Will in favour of wife of testator shows clear intention of absolute bequest in her favour, while using of non mandatory words such as desire indicate that the testator did not wish to compel hiswife to sell the suit property testator intended to create an absolutely unfettered right in favour of his wife by virtue of the Will. Reading in other clauses that are merely expressive of his desire as compulsory dictates on such absolute ownership goes against the clear wording of the Will, and would amount to rewriting it.

M. S. Bhavani and another v. M. S. Raghu Nandan AIR 2020 Supreme Court 1441

  1. Complaint – Locus standiComplainant, voluntary recognised association – Can file composite complaint on behalf of more than one consumers.: Consumer Protection Act S.12(1) (b)

From a reading of Section 12(1)(b) of the Act read with Explanation to Section 12 it is clear that voluntary registered association can file a complaint on behalf of its members to espouse their grievances. There is nothing in the aforesaid provision of the Act which would restrict its application to the complaint pertaining to an individual complainant. If a recognised consumer association is made to file multiple complaints in respect of several consumers having a similar cause of action, that would defeat the very purpose of registration of a society or association and it would result only in multiplicity of proceedings without serving any useful purpose. Thus finding of the NCDRC that recognised consumer association can file complaint on behalf of a single consumer, but cannot file complaint on behalf of several consumers in one complaint, is erroneous.

Subhechha Welfare Society v. M/s. Earth Infrastructure Pvt. Ltd. AIR 2020 Supreme Court 1449

The Limitation Act , 1963

  1. S.18 : Effect of acknowledgement in writing. – The principle of S. 9 of the Limitation Act, namely, that when time begins to run, it cannot be halted, except by a process known to law, has to be strictly adhered to. S. 18 of the Limitation Act, which extends the period of limitation depending upon an acknowledgement of debt made in writing and signed by the corporate debtor, is also applicable to the Insolvency and Bankruptcy Code since S. 238A uses the expression “as far as may be” governing the applicability of the Limitation Act. An entry made in the books of accounts, including the balance sheet, can amount to an acknowledgement of liability within the meaning of Section 18 of the Limitation Act. The notes annexed to or forming part of the balance sheet, or the auditor’s report, must be read along with the balance sheet. [S.9, 14, Companies Act, 2013 , S. 2(40), 92, 128, 129, 134, 137, Insolvency and Bankruptcy Code , S,238A ]

Under S. 18 An Acknowledgement Of Liability Signed By The Party Against Whom The Right Is Claimed Gives Rise To A Fresh Period Of Limitation. Under Explanation (B) To The Section The Word ‘Signed’ Means Signed Either Personally Or By An Agent Duly Authorised. A Company Being A Corporate Body Acts Through Its Representatives, The Managing Director And The Board Of Directors. Under S. 210 Of The Companies Act It Is The Statutory Duty Of The Board Of Directors To Lay Before The Company At Every Annual General Body Meeting A Balance Sheet And A Profit And Loss Account For The Preceding Financial Year. S. 211 Directs That The Form And Contents Of The Balance Sheet Should Be As Set Out In Part I Of Schedule Vi. The Said Form Stipulates For The Details Of The Loans And Advances And Also Of Sundry Creditors. The Balance Sheet Should Be Approved By The Board Of Directors, And Thereafter Authenticated By The Manager Or The Secretary If Any And Not Less Than Two Directors One Of Whom Should Be The Managing Director. (See S. 215). The Act Also Provides For Supply Of Copies Of The Balance Sheet To The Members Before The Company In General Meeting. Going By The Above Provisions, A Balance Sheet Is The Statement Of Assets And Liabilities Of The Company As At The End Of The Financial Year, Approved By The Board Of Directors And Authenticated In The Manner Provided By Law. The Persons Who Authenticate The Document Do So In Their Capacity As Agents Of The Company. The Inclusion Of A Debt In A Balance Sheet Duly Prepared And Authenticated Would Amount To Admission Of A Liability And Therefore Satisfies The Requirements Of Law For A Valid Acknowledgement Under S. 18 Of The Limitation Act, Even Though The Directors By Authenticating The Balance Sheet Merely Discharge A Statutory Duty And May Not Have Intended To Make An Acknowledgement. (Ca. no 3228 Of 2020 Dt 15-4 – 2021

Asset reconstruction company (India) limited v. Bishal Jaiswal & Anr . www.itatonline.org (SC)

The Negotiable Instruments Act , 1881

  1. S.138 : Dishonour Of Cheque For Insufficiency , Etc , Of Funds In The Account – Courts are inundated with complaints filed under Section 138 of the Negotiable Instruments Act, 1881. The cases are not being decided within a reasonable period and remain pending for a number of years. This gargantuan pendency of complaints filed under s. 138 of the Act has had an adverse effect in disposal of other criminal cases. Concerned with the large number of cases pending at various levels, a Larger Bench of the Supreme Court has examined the reasons for the delay in disposal of the cases. The Bench has issued important directions which will expedite the hearing and disposal of the cases[ S. 140, 141, 142]

Chapter XVII inserted in the Negotiable Instruments Act, containing Sections 138 to 142, came into force on 01.04.1989. Dishonour of cheques for insufficiency of funds was made punishable with imprisonment for a term of one year or with fine which may extend to twice the amount of the cheque as per Section 138. Section 139 dealt with the presumption in favour of the holder that the cheque received was for the discharge, in whole or in part, of any debt or other liability. The defence which may not be allowed in a prosecution under Section 138 of the Act is governed by Section 140. Section 141 pertains to offences by companies. Section 142 lays down conditions under which cognizance of offences may be taken under Section 138. Over the years, courts were inundated with complaints filed under Section 138 of the Act which could not be decided within a reasonable period and remained pending for a number of years. ( In Re: expeditious trial of cases under section 138 of n.i. act 1881. (cr.l) no.2 of 2020 dt. 16 -4 -2021

Suo Motu Writ Petition www.itatonline.org (SC)

CONSTITUTION OF INDIA

  1. Art. 32 : Remedies for enforcement of rights conferred by this part – COVID -19 -Waiver of interest – Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters. In assessing the propriety of the decision of the Government the court cannot interfere even if a second view is possible from that of the government. Legality of the policy, and not the wisdom or soundness of the policy, is the subject of judicial review.

The present Petition had been preferred under Article 32 of the Constitution of India by the Small Scale Industrial Manufactures Association, Haryana for an appropriate writ, direction or order directing the Union of India and others to take effective and remedial measures to redress the financial strain faced by the industrial sector, particularly MSMEs due to the Corona Virus Pandemic.

The reliefs of the Petitioners has been summarised as under:

  1. a complete waiver of interest or interest on interest during the moratorium period;

  2. there shall be sector wise relief packages to be offered by the Union of India and/ or the RBI and/or the Lenders;

  3. moratorium to be permitted for all accounts instead of being at the discretion of the Lenders;

  4. extension of moratorium beyond 31.08.2020;

  5. whatever the relief packages are offered by the Central Government and/or the RBI and/or the Lenders are not sufficient looking to the impact due to Covid 19 Pandemic and during the lockdown period due to Covid 19 Pandemic;

  6. the last date for invocation of the resolution mechanism, namely, 31.12.2020 provided under the 6.8.2020 circular should be extended.

Held:

In catena of decisions and time and again this Court has considered the limited scope of judicial review in economic policy matters. It is further observed that in the case of a policy decision on economic matters, the courts should be very circumspect in conducting an enquiry or investigation and must be more reluctant to impugn the judgment of the experts who may have arrived at a conclusion unless the court is satisfied that there is illegality in the decision itself.It is further observed that it is not the function of the Court to amend and lay down some other directions. The function of the court is not to advise in matters relating to financial and economic policies for which bodies like RBI are fully competent. The court can only strike down some or entire directions issued by the RBI in case the court is satisfied that the directions were wholly unreasonable or in violative of any provisions of the Constitution or any statute. It would be hazardous and risky for the courts to tread an unknown path and should leave such task to the expert bodies. This Court has repeatedly said that matters of economic policy ought to be left to the government.

Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters. In assessing the propriety of the decision of the Government the court cannot interfere even if a second view is possible from that of the government. Legality of the policy, and not the wisdom or soundness of the policy, is the subject of judicial review.

Even the government also suffered due to lockdown, due to unprecedented covid 19 pandemic and also even lost the revenue in the form of GST. Still, the Government seems to have come out with various reliefs/packages. Government has its own financial constraints. Therefore, no writ of mandamus can be issued directing the Government/RBI to announce/ declare particular relief packages and/or to declare a particular policy.

That there shall not be any charge of interest on interest/compound interest/penal interest for the period during the moratorium from any of the borrowers and whatever the amount is recovered by way of interest on interest/ compound interest/ penal interest for the period during the moratorium, the same shall be refunded and to be adjusted/given credit in the next instalment of the loan account. (WP (C) 476 of 2020 dated March 23, 2021)

Small Scale Industrial Manufactures Association (Regd.) v. UOI and others (2021) 125 taxmann.com 336 (SC) / LL 2021 SC 175.www.itatonline.org

Research Team

  1. S. 45: Capital gains – Transfer – Development agreement -No real development took place till date – Matter restored to AO to decide the capital gains after verifying whether the possession is taken back by the assessee or not and the assessee cancelled the development agreement or not.[ S.2(47) (v)]

Assessee entered a Development agreement-cum-GPA with M/s 21st Century Investments & Properties Ltd., wherein he transferred the land admeasuring 0.15 guntas. The developer had to complete the development within 24 months and the Assessee had to receive 5000 square feet built-up area. Since, the assessee has handed over the property as per the agreement to the developer, the AO was of the view that it was hit by section 2(47)(v) of the IT Act and accordingly, determined the short-term capital gains. The Tribunal observed that after entering into agreement, the developer had vanished, and no real development took place till date as verified and confirmed by the AO through the Departmental Inspector. Neither development has taken place nor developed area was received by the assessee and this fact was confirmed by the AO himself. The Tribunal was of the view that there was no real income except notional income as per the development agreement, which was never been received by the assessee. The Tribunal observed that till date development agreement was not cancelled and no public notice was issued by the assessee for cancellation of development agreement. The Tribunal thus restored the matter back to AO to decide the capital gains after verifying whether the possession is taken back by the assessee or not and the assessee cancelled the development agreement or not. In case, the possession is taken back by the assessee and there was no development, there could be no capital gain. (IT A No. 1348 (Hyd.) of 2017, dt. 13-11-2020(AY. 2007-08)

Santosh Kumar Subbani v. ITO (2020) 122 taxmann.com 169 / (2021)186 ITD 217 (Hyd)(Trib.)

  1. S. 4: Charge of income-tax – Reimbursement of Software payments – Licence obtained from third parties – Not taxable

The assessee entered into a services agreement to provide SAP software and licence to its Indian subsidiary on a cost-to-cost basis without any markup. The assessee has purchased a licence on behalf of the Indian subsidiary and then charged the assessee for these amounts. The Assessing Officer held that once a right had been provided for a cost, the fact that there was no markup or any profit would not take the receipt out of income nature. In such a scenario, the amount cannot be treated as reimbursement and treated the payments as Royalty.

The Tribunal noted the agreement, and the financial director’s certificate and held there no challenge to the factual element of the receipt being a cost to cost reimbursement received by the assessee. The routing of the payments has no bearing on the taxability of the income in the hands of the assessee. The receipt of software licence fees by the assessee from its Indian subsidiary was reimbursement of software licence fees to paid to a third party, and it would not constitute income taxable in the hands of the assessee. (ITA No. 7315 of 2018, dt 08.01.2021) (AY 2015-16)

Hygiene Products AB v. Dy. CIT (IT) (2021) 209 TTJ 545 / 123 taxmann.com 152/ 85 ITR 607 (Mum) (Trib.)

  1. S. 4 :Charge of income-tax Assessee a federation of co- operative societies received contribution from its members towards co-operative education fund – Assessee had no discretion to spend amount received – the contribution could not be treated as income of assessee.

The Appellate Tribunal has held that the

contribution received by the assessee from co- operative societies towards specific purpose and the assessee has no discretion to spend the contribution received. The utilization of the contribution is to be decided by the Advisory Board consists of different persons as per the direction of the Government of Karnataka. The donations were for specific purposes which means that the assessee has agreed to act as a trustee for this contribution received from various co-operative societies. Thus, the donations received by the Assessee are for specific purposes and do not belong to the assessee. Hence, such donations do not form income of the assessee. ( AY. 2013-14 to 2015-16)

Karnataka State Co-operative federation Ltd. v. ACIT (2021) 186 ITD 750 (Bang) (Trib.)

  1. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty Singapore tax resident providing bandwidth services – Cannot be taxed as royalty as Indo- Singapore DTAA does not include “transmission by satellite, cable, optic fiber or similar technology” in the definition of ‘Royalty’- DTAA-India-Singapore

Assessee a tax resident of Singapore provided the bandwidth services, as standard services, wherein the customer enjoys an uninterrupted 24×7 service to transmit voice and data at standard rate of reliability. In case no service was provided or there is default of regular supply, then there is non- payment of consideration by the payee. The Revenue authorities were of the view that the consideration received by the assessee falls within the definition of Royalty both u/s 9(1) (vi) of the Act and also under provisions of Tax Treaty. The Tribunal held that the Tax Treaty between India Singapore specifically does not include “transmission by satellite, cable, optic fiber or similar technology” in the definition of ‘Royalty’ under the Tax Treaty and also further the Tax Treaty had not undergone any amendment, the provisions of DTAA being more beneficial to the assessee were attracted. The Tribunal held that assessee was not liable to be taxed on the amount received from Indian customers for the provision of bandwidth services outside India. (ITA 1548 & 6733/ Del/2015; 286/Del/2016; 3020/Del/2017; dt. 30-09-2020) (AY. 2011-12, 12-13 , 14-15)

Telstra Singapore Pte Ltd. v. Dy. CIT (IT)-(2021) 186 ITD 440/ 123 taxmann.com 124 (Delhi ) (Trib.)

  1. S. 10 (23C): Educational institutionexemption if income is applied for educational purpose – alternatively expenditure incurred for earning such income should be allowed under section 57(iii) – eligibility to claim exemption – wholly and substantially financed by the government.[S.57 (iii)]

Where there is an educational institution, established for educational purpose and not to earn profit, which is substantially financed by the government, it is eligible to claim exemption under section 10(23C)(iiiab) of the Act. Inability to furnish details of exemption under section 10(23C)(iiiab) on account of lack of proper columns in the income tax return form will not invalidate such claim, when the income was applied for the purpose of running the college. Alternatively, if the claim for exemption is denied under section 10(23C)(iiiab) and the income is assessed under the residual head of income, then as per section 57(iii) entire expenditure incurred for the purpose of making or earning income should be allowed to the Assessee.

On the question of eligibility of the Assessee to claim exemption under section 10(23C)(iiiab) with respect to the institution being “wholly and substantially financed by the Government”.

The Tribunal observed that the explanation to clause 10(23C)(iiiab) was inserted via Finance Act, 2014 which came into effect on 01.04.2015, and this explanation was prospective in nature. It held that the Assessee is an education institution running for educational purpose and not for profits and therefore it is eligible for exemption under section 10(23C)(iiiab). CIT v. Jat Education Society, Rohtak (2016) 383 ITR 355 (Punjab. &. Har.) relied. (ITA No. 469 (Ind) 2018 dt. 6 November, 2020) (AY 2014-15).

Dy. CIT v. Shri Vaishnav Polytechnic College Govn by VSK Market Tech Educational Society (20210186 ITD 378 (Indore) (Trib.)

  1. S.  10AA : Special economic zonesTransfer pricing voluntary adjustments – Entitle to deduction in enhanced income [S.92C]

The Assessee is engaged in providing back office support services, in the nature of ‘Information Technology Enabled Services’ (ITES). It adopted TNMM to benchmark its international transaction. It made a voluntary TP adjustment to its financial results and claimed deduction under Section 10AA of the Act against it. The TPO proposed an adjustment by making certain changes in the comparable companies. The DRP directed the AO/TPO to exclude certain comparable companies on the basis that it considered the Assessee company as low end service provider whereas the comparable companies viz. M/s E-Clerx Services Ltd. & M/s Acropetal Technologies Limited were providing high-end services. The Tribunal upheld this direction of the DRP. In respect of disallowance of section 10AA claim on voluntary adjustment, the AO had allowed the said deduction on the voluntary TP adjustment, however, the DRP directed to disallow the claim as- (i)The Assessee has not furnished any details as to how the above said amount was worked out;(ii) Section 10AA mandates the export consideration should be brought into India; (iii) The unit for which deduction has been claimed has actually incurred losses. The Tribunal noted that the first proviso to Section 92C(4) is applicable only to situations where adjustment to the ALP is made by the AO/TPO / DRP. It also appreciated that the Assessee computed the adjustment in a scientific manner by comparing its margins with that of comparable companies selected by the Assessee. The Tribunal observed that artificial income cannot be part of export turnover and hence there could not be any condition for getting such foreign exchange to India. It held that the Assessee was entitled to deduction under Section 10AA of the Act on voluntary transfer pricing adjustment. Apoorva Systems (P) Ltd (2018)(92 taxmann.com 82); I-Gate Global Solutions Ltd. (2007)(112 TTJ 1002) upheld by Hon’ble Karnataka High Court in ITA 453/ 2008 relied. (ITA No. 218 (Bang) 2015 & 199 (Bang) 2015 Dt. 20.05.2020) (AY 2010-11)

Dy. CIT v. EYBGS India (P.) Ltd (2021)186 ITD 765 (Bang) (Trib)

  1. S. 11: Property held for charitable purposes – Deployment of funds pursuant to government policy and recommendations – No intention to earn profits – Exemption allowable [S.12AA, 13(1)(d)]

Assessee is a not-for-profit company registered under section 12AA of the Income- tax Act, 1961 as a charitable institution. The Assessee was required to establish Broadcast Audience Research Council (BARC) under section 25 of the Companies Act, 1956 by the policy of Central Government and TRAI recommendations. The Tribunal observed that the BARC enables assessee to fulfil its ‘objects incidental or ancillary to the attainment of the main objects’. It further observed that, there was no intention to earn profits by the Assessee as being a not-for-profit company, the BARC is not permitted to distribute profits among its shareholders neither can it distribute its funds to its shareholders upon the liquidation of the company. Therefore the finding of the Assessing officer that the investment in BARC was in violation of section 13(1)(d) is not valid and the Assessee is eligible for exemption under section 11. Director of Income tax v. Alarippu (2000) 111 TAXMAN 511 (Delhi), Director of Income tax v. Acme Educational society (2010) 326 ITR 146 (Delhi) upheld. (ITA No.4193 and 4194/Del/2017 dt. 14 September, 2020) (AY. 2013-14, 2014-15)

ACIT (Exemption) v. Indian Broadcasting Foundation (2021) 186 ITD 241 (Delhi)(Trib.)

  1. S. 14A : Disallowance of expenditure – Exempt income – Rule 8D is not mandatory – AO must record satisfaction. [R.8D]

Assessee disallowed Rs. 41 lakhs as expenditure attributable to said exempt income. Assessing Officer applied provision of section 14A read with rule 8D and made addition of Rs. 31 lakhs in disallowing expenditure over and above disallowance made by assessee.It was held by ITAT that Assessing Officer did not examine books of account and nowhere recorded satisfaction to arrive at reasonable expenditure incurred by assessee to earn exempt income. Further, Assessing Officer had proceeded on erroneous presumption that application of rule 8D was mandatory in nature. (AY 2014-15)

JCIT v. Rare Enterprises (2020) 84 ITR 164 / (2021) 187 ITD 65 (Mum)(Trib.)

  1. S. 14A : Disallowance of expenditure – Exempt income – Ad-hoc disallowance – deleted. [R.8D]

The Tribunal noted that the Assessing Officer accepted that no expenditure has been incurred for earning the dividend income and therefore no disallowance under section 14A was called for. Without appreciating this aspect, the Assessing Officer disallowed Rs. 3 lacs under section 14A of the Act on an ad-hoc basis, and while doing so the Assessing Officer had not established any nexus between the expenditure and earning of dividend income. The Tribunal deleted the disallowance. (ITA Nos. 1955 TO 1959/Del/2016; dt. 06-08-2020) (AY. 2001-02 to 2005-06)

Triveni Engineering & Industries Ltd. v. ACI (2020) 118 taxmann.com 301/ (2021) 186 ITD 353 (Delhi (Delhi)(Trib.)

  1. S. 17(2): Perquisite – ESOP Benefits Granted To An Assessee When He Was Resident And In Consideration For Services Rendered In India Is Taxable Even Though The Assessee Is A Non-Resident In The Year Of Exercise- DTAA-India-UAE [S.15, Art .15]

Tribunal Held That Esop Benefits Granted To An Assessee When He Was Resident And In Consideration For Services Rendered In India Is Taxable Even Though The Assessee Is A Non-Resident In The Year Of Exercise. S. 17(2) (Vi) Decides The Timing Of The Income To Be The Year Of Exercise Of The Esops But Does Not Dilute Or Negate The Fact That The Benefit Had Arisen At The Point Of Time When The Esop Rights Were Granted. Article 15 Of The India-UAE DTAA Permits Taxation Of Esop Benefit, Which Is Included In The Scope Of The Expression “Other Similar Remuneration”

Appearing Immediately After The Words “Salaries And Wages”, In The Jurisdiction In Which The Related Employment Is Exercised. Thus, An Assessee Who Gets Esop Benefits In Respect Of His Service In U.A.E. And He Exercises These Options At A Later Point Of Time, Say After Returning To India And Ceasing To Be A Non-Resident, Will Still Have The Treaty Protection Of That Income Under Article 15(1). Conversely, When The Assessee Gets The Esop Benefit On Account Of Rendering Services In India, He Cannot Have The Benefit Of Article 15 In Respect Of The Said Income. (ITA No. 1200 And 1201/Mum/2018, Dt. 13.01.2021)(Ay.2013-14 And 2014-15)

Unnikrishan V. S. v. Ito(Mum)(Trib), www.itatonline.org

  1. S. 36(1)(iii): Interest on borrowed capital – Interest free advances made-availability of sufficient own funds- addition deleted by the Tribunal-delay in payment to the account of Provident Fund- disallowance upheld-delay in pronouncement of order by the Tribunal-90 days period should exclude at least the lockdown period.

Delay on the part of the Assessee to file an appeal before the CIT(A) pursuant to Notification no. 11/2016 dated 01.03.2016 on account of technical difficulty faced by the Assessee in filing the appeal electronically within the prescribed time limit was condoned by the Tribunal.

Further, the Assessing Officer made certain disallowance under section 36 (1)(iii) assuming that interest bearing funds were utilized for making interest-free advances by the Assessee. The Tribunal observed that upon perusal of records, the company had sufficient interest free and in fact it made such interest free advances to the tune of only 20.43% of the total interest free funds available with the Assessee company and therefore deleted the addition.

On the question of delayed payment by the Assessee to the account of Provident Fund after the expiry of the due date as prescribed by the relevant Act was not allowed by the Tribunal.

Lastly, the Tribunal touched upon the topic of delay in pronouncement of an order by the Tribunal taking into consideration the lockdown imposed by the government during the unprecedented COVID19 pandemic. Where the Tribunal acknowledged the time limit of 90 days prescribed under Rule 34(5) of the Appellate Tribunal Rules, 1963, and usage of the word “ordinarily” therein. It held that a pedantic view of the rule cannot be taken since these are extra-ordinary situations and that such period of 90 days must be computed by excluding at least the period during which the lockdown was in force. It also concluded that this does not create any bar on the discretion of benches to re-fix the matters for clarifications because of the considerable time gap between hearing a case and finalizing an order thereon. Eagel Steel Industries P. Ltd. vs. ITO [ITA No. 3151/Ahd/2016]; CIT-vs-Dalmia Cement (P.) Ltd. [(2002) 254 ITR 377]; DCIT v. JSW Ltd. (ITA Nos. 6264 & 6103/Mum/2018) relied upon. (I.T.A. No. 1538/Ahd/2018 & 1539/Ahd/2018 dt. 11.09.202) (AY 2013-14 & 2014-15)

Balaji Electrical Insulators (P) Ltd. v. Dy. CIT (2021) 186 ITD 1 (Ahd.) (Trib)

  1. S. 37(1) : Business expenditureexpenditure incurred on affixing adhesive stamps on conveyance deed-held, it is revenue expenditure-provision for warranty-provision for present obligation due to past event-not a contingent liability-expenditure allowed – Depreciation on goodwill and customer contracts- held in nature of intangible assets, therefore eligible for depreciation [S. 32]

Assessee’s claim for expenditure of Rs. 59,17,000/- for cost of adhesive stamp in connection with preparation of deed of transfer and assignment for acquisition of receivables was allowed by the Tribunal as the same was incurred for receivables which is a part of current asset and therefore revenue expenditure. CIT(A)’s observation that that the payment of stamp duty was in connection with acquisition of industrial steam turbine i.e. an industrial unit or a capital asset and therefore it is a capital expenditure set aside.

In respect of provision for warranty of Rs. 2,76,18,000/-. The Assessing Officer and CIT(A) denied this claim on the ground that it is an unascertained and a contingent liability and the CIT(A) restricted this disallowance only for provision made during the year. The Tribunal noted that the claim was allowed in subsequent years. It held that when an expenditure or obligation is anticipated on the basis of past experiences, provision for such expenditure cannot be held as contingent liability and allowed the claim of assesse.

In respect of claim of depreciation on customer contracts made by the Assessee by referring to the provisions of section 2(11) & 32(1)(ii). The lower authorities denied the claim and held that depreciation under section 32(1) (ii) cannot be allowed as customer contracts were not in the nature of ‘intangible assets’ as contemplated under section 2(11). Assessee raised an additional ground for depreciation on goodwill under section 32 before the Tribunal. On the basis of judicial precedents, the Tribunal observed that goodwill was an intangible asset entitled for depreciation under section 32. It noted the claim of the Assessee that goodwill arising out of slump sale agreement and customer contract which were similar to goodwill being an intangible asset were also eligible for depreciation. On the basis of judicial precedents, it concluded that goodwill and customer contracts were eligible for depreciation under section 32. Rotork Controls India P. Ltd. v. CIT [(314 ITR 62)(SC)]; Techno Shares and Stocks Limited [37 ITR 323]; Commissioner of Income Tax vs. Smifs Securities Ltd. [Civil Appeal No. 5961 of 2012]; Areva T&D India Ltd. v. CIT [ITA No. 315/2010]relied (I.T.A. No. 211(Mum)2008 & I.T.A. No. 2500(Mum) 2010 dt. 16 September, 2020) (AY 2004-05 & 2005-06)

Demag Delaval Industries Turbomachinery (P.) Ltd v. ACIT(2021) 186 ITD 228 (Mum) (Trib)

  1. S. 37(1) : Business expenditure – expenditure on implementation of a new software package – allowable as revenue expenditure

The assessee was a public limited company engaged in the business of manufacture and sale of Turbine, Gear and Gear Boxes, sugar plants, water treatment plants, mini hydel power projects, etc. The assessee had, during the relevant previous year, inter alia, incurred an expenditure aggregating to Rs. 1,16,60,400 on implementation of new ERP package which was treated as deferred revenue expenditure in the books of accounts. Though in the books of account, the expenses were treated as deferred revenue expenditure, the said expenses, being revenue in nature, were claimed as deduction in the return of income. The Assessing Officer disallowed the said expenses holding the same to be capital expenditure on the ground that it resulted an enduring benefit to the assessee and allowed depreciation @ 60% on the same. The Tribunal noted that no ownership of any software was acquired by the assessee as a consequence of the ERP expenditure. The assessee had only limited right to use the concerned software product which the assessee acquired without acquiring the right of transferring the said software. Thus, no benefit of an enduring nature had been derived by the assessee as result of said expenditure and the said expenditure was incurred only for smooth working and for improving the functioning of the organization. The Tribunal thus allowed the expenditure. (ITA Nos. 1955 TO 1959/Del/2016; dt. 06-08-2020) (AY .2001-02 TO 2005-06)

Triveni Engineering & Industries Ltd. v. ACIT (2020) 118 taxmann.com 301 / (2021)186 ITD 353

(Delhi) (Trib.)

  1. S. 40(a)(ii) : Amounts not deductible – Rates or tax – Business expenditure – deduction for foreign taxes paid allowed while computing its income, to the extent that such tax was not entitled to the benefit of section 91 of the Act.[S.37(1), 91]

The assessee-company claimed deduction of state taxes paid overseas of Rs. 13,22,52,218/- in the return of income. The Assessing Officer held that the payments were not liable to be allowed as deduction either u/s 37(1) or section 40(a)(ii) of the Act. The Tribunal held that Assessee was entitled to deduction for foreign taxes paid on income accrued or arisen in India in computing its income, to the extent that such tax was not entitled to the benefit of section 91 of the Act. The Tribunal directed the AO to verify whether the State taxes paid by the assessee overseas are eligible for any relief u/s 90 of the Act and if it is not found to be so, assessee’s claim of deduction should be allowed. However for interest / penalty for delay in payment of federal or state taxes overseas, the Tribunal observed that assessee had not filed the details with supporting documents on the penal interest and hence it was not possible to decipher whether the penal interest was compensatory in nature or not. Hence the Tribunal restored the issue to the AO for deciding it afresh and directed the assessee to file the documents/evidence before the AO .(IT(TP)ANos. 3262 & 3389/MUM/2017; Dt. 11-11-2020) (AY. 2007-08)

Tata Consultancy Services Ltd v. ACIT (2020) 121 taxmann.com 190 (2021) 186 ITD 721 (Mum)(Trib.)

  1. S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed limits – purchase of lands from farmers – Disallowance deleted.

Assessee company during the year purchased vide six separate registered sale deeds, certain portion of land. Assessee, out of above total six purchases of land made cash payments in part in five purchases of land. The A.O. held that assessee had contravened provisions of section 40A(3) and there was no escape through rule 6DD therefore he disallowed 20% part of total expenditure (Rs. 2,12,50,000) incurred in cash amounting to Rs. 42,50,000/- and added the same to total income in the hands of the assessee company. The Tribunal observed that the identity of the persons from whom the purchase of various land parcels have been made by the assessee has been established and the source of cash payments was clearly identifiable in form of the withdrawals from the assessee’s bank accounts and the said details were submitted before the lower authorities which has not been disputed by them. The Tribunal observed that it was not the case of the Revenue either that unaccounted or undisclosed income of the assessee has been utilized in making the cash payments. The Tribunal held that genuineness of the transaction was established as evidenced by registered sale deeds wherein the payments through cheque as well as cash has been duly mentioned and lastly, the test of business expediency was met as the initial payments as insisted by the sellers most of whom were farmers have been made in cash to secure the transaction. Considering entire facts Tribunal held that no disallowance is called for under section 40A(3) of the Act and the same was deleted.(IT No. 980/JP/ 2018; dt . 27-10-2020) (AY. 2007-08)

Vijayeta Buildcon Pvt. Ltd v. ACIT (2021) 86 ITD 493 / 123 taxmann.com 133 (Jaipur) (Trib.)

  1. S. 45(3): Capital gains – Transfer of capital asset to AOP – transfer of development right – Section 50C not applicable

The assessee entered into a Joint Venture agreement with M/s. Benchmark Properties, an AOP, vide agreement dated 01.07.2010, wherein it contributed the development rights as ‘capital contribution’ at an agreed consideration of Rs. 5 crores. According to the Assessee, development rights was a capital contribution, and though a transfer, it is not a sale because there neither any receipt nor any accrual of any consideration. The assessee claimed the said amount by way of ‘capital contribution’ and declared long term capital gain amounting to 1,28,953/- under the special provisions of section 45(3) of the Act.

The AO invoked section 50C of the Act by treating the consideration received as per circle rates and applied stamp duty value at Rs.10,10,47,000/-, thereby assessing the long term capital gains at Rs.5,10,47,000/-, and disregarded the application of section 45(3).

The Hon’ble Tribunal noted that Section 45(3) is a charging provision having two limbs joined by the conjunction “AND”. The first limb is a charging provision that levies capital gain tax arising from capital asset contribution in the AOP by a member, and the second limb is an essential deeming fiction for determining the value of consideration without which the charging provision would fail. Section 50C is also deeming fiction to apply to compute capital gains in the case of transfer of a capital asset from one person to another. The provisions of section 50C could not be applied to the sale development rights of land owned by the assessee when transfer from member to the AOP. In view of the above, the provisions of section 50C are not applicable, and provision of section 45(3) of the Act will be applied. (ITA No. 2279/Mum/2017 dated 11.08.2020, AY 2012-13)

Network Construction Company v. ACIT (2021) 209 TTJ 900 (Mum) (Trib)

  1. S. 50C: Capital gains – Full value of consideration – Stamp valuation – Sale Consideration – Third proviso – Retrospective.

The assessee sold her flat for Rs 75 lakhs, and the capital gain was computed and offered to tax. The valuation of the property for the purpose of stamp duty was Rs 79,91,000/-. The AO applied section 50C and adopted the stamp duty valuation to compute the capital gains.

The Tribunal noted that the third proviso to section 50C was inserted by the Finance Act 2018, providing a tolerance band of 5 percent for the variation between actual sale consideration vis-à-vis the stamp duty valuation with prospectively effect from 1 April 2019. The Finance Act 2020 increased the tolerance band from 5 percent to 10 percent. The Tribunal held that the amendment accepts that these variations could be based on various factors while affecting genuine variations, creating a difference in sale consideration and stamp duty value. Thus, the amendment was to provide a safeguard in a bonafide transaction, are curative amendment that applies retrospectively and not prospectively. (ITA No. 4850/Mum/2019 dated 15.01.2021, AY 2011-12)

Maria Fernandes Cherly v. ITO (IT )(2021) 209 TTJ 850 /123 Taxmann.com 252

  1. S. 50C : Capital gains – Full value of consideration – Stamp valuation – Third Proviso providing tolerance band of 10 per-cent is retrospective.

The ITAT held that Amendment made in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5 per cent to 10 per cent are effective from date on which section 50C, itself was introduced, i.e 1-4-2003. (AY. 2011-2012)

Maria Fernandes Cheryl v. ITO [2021] 85 ITR 674 (Mum)(Trib.)

  1. S. 50C : Capital gains – Full value of consideration – Stamp valuation – addition cannot be made under section 50C on the transfer of leasehold rights in land or building.[S.45]

The Appellate Tribunal held the expression ‘land or building’ in its coverage is quite distinct from the expression ‘any right in land or building’. The legislature, in its wisdom, has used the expression ‘land or building or both’ in section 50C(1) of the Act, and not the expression ‘any right in land or building’. Thus, section 50C covers only capital asset being land or building or both and it would not cover transfer of leasehold rights in land and building. (AY. 2015-16)

Noida Cyber park (P.) Ltd v. ITO (2021) 186 ITD 593 (Delhi) (Trib)

  1. S. 54: Capital gains – Profit on sale of property used for residencecapital gains arising from sale of two flats were invested in one residential house, such capital gains would be exempted. [S.45]

Assessee invested capital gains from sale of two flats in one residential house and claimed exemption under section 54. Assessing Officer opined that there must be set of sale and purchase of one residential house to claim exemption under section 54. The ITAT held requirement of section 54 is that investment should be in one residential house, there is no bar on investing capital gains arising from sale of more than one residential house. (AY. 2009- 10)

Vijay Kumar Wanchoo v. ITO (2020) 84 ITR 268 / (2021) 187 ITD 283 (Delhi) (Trib.)

  1. S. 54F : Capital gains – Exemptionunutilized sale consideration invested in capital gain accounts scheme before filing of return u/s.139(4), eligible for deduction [S.45, 139(4)]

Held that Long term capital gain earned from sale of plots was deposited in FDR with bank and later on, assessee came to know that as per provisions of s.54F, FDR was required to be made under capital gain account scheme (CGAS), therefore, to rectify procedural mistake, assessee en-cashed FDR with bank and deposited same on very same day into capital gains scheme FDR without utilizing same for any other purpose and had filed revised return within time limit prescribed u/s. 139(4). The claim of the Assessee u/s. 54F was eligible. (ITA No.96/JP/2020, dated. 06/03/2020)(AY 2011-12)

Renu Jain v. ITO (2021) 186 ITD 175 (Jaipur)(Trib.)

  1. S. 54F : Capital gains – Investment in a residential house – Residential property where Assessee name is merely included will not be considered as owned by Assessee.[S.45]

Assessing Officer disallowed exemption under section 54F to assessee on ground that assessee was owner of two other residential properties along with one purchased by him out of consideration from sale of shares. The ITAT held that in view of fact that one of those properties was a commercial property and other residential property was fully owned by wife of assessee and merely name of assessee was included in purchase deed, assessee was to be allowed exemption under section 54F.(AY 2013-14).

Anil Dev v. Dy. CIT (2020) 185 ITD 418 / 119 taxmann.com 328 / (2021) 209 TTJ 920 (Bang) (Trib.)

  1. S. 54F : Capital gains – Investment in a residential house – Joint Ownership cannot come in way of claiming exemption [S.45]

Assessee i.e. late husband of Smt Savita Bhasin sold land and earned long term capital gains. Assessing Officer denied exemption u/s 54F on ground that assessee on date of transfer of original asset had two residential house, although both assets were jointly owned with his wife. Assessee, however, claimed that second residential house was already sold to his son before sale of land. The ITAT held that the agreement to sell residential house between assessee and his son was duly registered and rental income from said property was mentioned in ITR of assessee’s son and hence said house cannot be said to be owned by Assessee. Further, assessee was having only 50 per cent share in the impugned residential property which was sold to the son of the assessee. Therefore, the Assessing Officer could not deny exemption under section 54F to the assessee.

Savita Bhasin Smt. v. ITO (2020) 84 ITR 602/ (2021( 186 ITD 195 (Delhi) (Trib.)

  1. S. 55A: Reference to valuation officer – if value of immovable property determined by assessee was lesser than FMV of property, as per the amendment brought in s.55A (a) with effect from 01- 07-2012 by Finance Act, 2012; AO can make reference to DVO for determination of value. [S.45]

Amendment brought in section 55A(a) with effect from 1-7-2012 by Finance Act, 2012, according to which reference could be made by Assessing Officer to DVO if value of immovable property determined by assessee was lesser than FMV of property, is applicable prospectively. Therefore value of an immovable property sold by assessee determined by DVO was lesser than value declared by assessee as on 1-4-1981, reference to DVO by Assessing Officer under section 55A was not warranted. (ITA No.821 – 822/AHD/2016 dated. 27/11/2020)(AY. 2011 – 2012)

Ranchodbhai C. Patel v. ITO (2021) 186 ITD 523 (Surat) (Trib.)

  1. S. 56 : Income from other sources Chargeable as (Business income v. Income from other sources) – Assessee as director of company purchased one unit in a Hotel, had given for being run by a managing company, said unit could not be construed to be a business of assessee, loss from hotel unit assessed under head ‘income from other sources’ and not as business loss.

The Assessee was whole time Director of company in India also owner of one unit in a Hotel in USA, on which he incurred loss and claimed said loss under head ‘income from other sources’ and sought to set off loss against salary income of same year. The Assessing Officer considered said loss as business loss, CIT (A) also confirmed.

Tribunal observed that, assessee had entered into hotel maintenance and operation agreement in respect of Hotel Unit owned by him and under this agreement, Hotel Unit was operated as a part of Hotel by an appointed Managing Company. The control of affairs of assessee’s unit like to whom unit was to be let out. Tribunal held that the unit under consideration could not be considered to be a business undertaking of assessee. Loss from Hotel Unit in USA was to be assessed under head ‘income from other sources’ and not as business loss. (ITA No.9016/Del/2019, dated 01/07/2020)(AY. 2016-2017)

Rohit Kapur v. Addl CIT (2021) 186 ITD 466 (Delhi)(Trib.)

  1. S. 56 : Income from other sourcesBusiness income – Income from other sources – Assessee working as a director and made investment in two limited liability companies (LLCs) in USA, Investment being only for purpose of an investment and not business. Loss occurred from investment in LLCs assessed as ‘Income from other sources’ and not as business loss.[S.28 (i)]

The assessee was doing business as partner in LLCs and, therefore, resultant income or loss was he booked under head ‘business income’ and not income from other sources. Tribunal held that, assessee, by virtue of being whole time employee Director in an oil exploration company, could not have made capital outlay in two limited liabilities company for purpose of business and, apparently, this was only for purpose of an investment. In preceding years, investment of this nature had consistently not been treated as business and therefore, there was no foundation for to have treated impugned loss as business loss. Hence, loss from investment in LLCs was to be assessed under head ‘Income from other sources’ and not as business loss. (ITA No.9016/ Del/2019, dated 01/07/2020)(AY.2016-2017)

Rohit Kapur v. Addl CIT (2021) 186 ITD 466 (Delhi)(Trib.)

  1. S. 68 : Cash credit – Manipulated accounts by way of bogus/ fictitious entries, transactions did not involve actual cash inflow, it was unrealizable for assessee to discharge onus of establishing identity and creditworthiness of parties and genuineness of transaction, addition cannot be made as cash credits.

During relevant years, assessee-company had shown certain additions to share capital in its books of account; It was revealed that assessee, through involvement of cashier of Bank manipulated accounts by way of bogus/ fictitious entries in compliance of provisions as prescribed by SEBI in order to facilitate public issue. No actual cash inflow carried out by assessee for enhancing share capital, the Assessing Officer held that such increase in share capital represented unexplained cash credit and made additions under section 68.

Held that, a legal fiction is created under section 68 on basis of which an entry in books of account is deemed to be income of assessee chargeable to tax in event assessee fails to discharge onus imposed upon it u/s. 68. However, such legal fiction could be applied only in case of actual transactions incorporated in books, therefore, transactions were fictitious/ bogus, did not involve real cash inflow, and it was impracticable for assessee to discharge onus of establishing identity and creditworthiness of parties and genuineness of transaction, hence s.68 was not invocable. (ITA No.186 to 188/ AHD/2015 dated.29/10/2020) (AY. 1995-96 to 1997-98)

Rich Paints Ltd. v. ITO (2021) 186 ITD 425 (Ahd) (Trib.)

  1. S.68: Unexplained cash creditsnot providing an opportunity to cross examine the witness – violation of principles of natural justice-when all the requisite documents and information is provided by the assesse onus shifts to the Revenue to cross verify the details furnish – otherwise no addition can be made [S. 132, 147, 148]

Reassessment proceeding under section 147 was initiated on the basis the basis of information received during search conducted under section 132 on the premises of a third person, Mr. P by the Assessing Officer. In response, Assessee furnished all the requisite documents and requested for cross-examination of Mr. P since the entire addition of Rs. 29,82,89,600/- as unexplained cash credit under section 68 was proposed to be made on the statement of Mr. P a.k.a. the witness. It was observed that the Assessing Officer did not provide a copy of such statement of the witness neither did it provide an opportunity to the Assessee to cross-examine such witness. It also did not bring anything on record to rebut the factual position and explanation provided by the Assessee.

The CIT(A) as well as the Tribunal held that the order passed by the Assessing Officer is illegal and the entire addition solely based on such statement is likely to be deleted as there was a violation of principle of natural justice. The Tribunal held that if the Assessing Officer intends to rely, for the purposes of making addition to the total income of the assessee, on the statement of the third party as a witness, then he has to summon such witness, record his statement, offer that witness to the assessee for cross examination in order to rebut the material on the basis of which the Assessing Officer intended to proceed.

On the merits of the case, the Tribunal observed that the Assessee by furnishing the necessary details has discharged its onus, if such details are not cross verified by the department then the Department cannot go on to hold addition under section 68 in the facts and circumstances of the case. CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103; Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498; CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi); PCIT v. Best Infrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287 (Delhi); Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC); CIT vs. Chanakya Developers reported in 43 taxmann.com 91; CIT v. Orissa Corp. (P.) Ltd. [1986] 159 ITR 78/25 Taxman 80 (SC); Deputy CIT v. Rohini Builders [2002] 256 ITR 360/[2003] 127 Taxman 523 (Guj.) followed. (ITA No(s) 1823/ Ahd/2017 Dt. 11.02.2020) (AY 2009-10)

ACIT v. El Dorado Biotech Pvt. Ltd (2021) 186 ITD 661 (Ahd )(Trib)

  1. S.80P: Co-operative societies – Deposit only from Members – Determination based on Charter documents – Not based on mere admission – deduction allowable. [S.80P(2)(a)(i)]

Where Assessee co-operative society collected deposits only from its members and had no transaction with non-members. It filed a return of income declaring Rs. Nil after calculating the deduction u/s. 80P(2)(a)(i) of the Act. The AO observed that the assessee is carrying on banking business as stated by the former Chartered Accountant.

The Tribunal noted that the assessee had collected deposits only from its members and had provided credit facilities only to its members and did not have any transaction with non-members. It was registered under Maharashtra State Co-operative Societies Act, 1960, providing financial assistance to its members. The former Chartered Accountant of the assessee had misinterpreted activity carried on by the assessee to be akin to banking business. On realising its mistake, the assessee had even preferred a rectification petition pointing out the mistake, which was still pending disposal. Mere admission of Chartered Accountant alone would not determine the status of assessee, and same was to be determined based on charter documents, i.e. objects and bye-laws of assessee society. The assessee was to be considered as a co-operative credit society and not co-operative bank and allowed deduction under section 80P(2)(a)(i). (ITA No 4296 & 4297 of 2016, 5983 of 2017 and 403 & 4211 (MUM.) OF 2018, dt 03.12.2020( AY. 2007-08, 2010-11, 2013-14, 2014-15)

Thane Zilla Madhyamik Shikshak Sangh Sahakari Patpedhi Maryadit v. ACIT (2021) 209 TTJ 571/ 124 Taxmann.com 75(Mum) (Trib)

  1. S.80P: Deductions – Income of co-operative societies (Credit Societies) – interest earned on short term deposits eligible for deduction[ S. 80P (2)(d)]

The assessee co-operative society, engaged in providing credit facility to its members, was maintaining short-term deposits of money which was not required for time being, as investment with co-operative banks, interest earned by assessee on such deposits was qualify for deduction u/s. 80P(2)(d).(ITA No. 826/ Pune/2019, dated 23/09/2020)(AY. 2014-2015)

Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. v. ITO (2021) 186 ITD 220 (Pune)(Trib.)

  1. S.80P : Deductions – Income of co-operative societies (Credit Societies) – Interest on income tax refund eligible for deduction [S. 80P (2)(a)(i), 244A]

Interest received by the co-operative societies (Credit Societies) on income tax refund u/s. 244A would be eligible for deduction u/s. 80P (2)(a)(i). (ITA No. 826/Pune/2019, dated 23/09/2020)(AY.2014-2015)

Sant Motiram Maharaj Sahakari Pat Sanstha Ltd. v. ITO (2021) 186 ITD 220 (Pune)(Trib.)

  1. S.90: Double taxation relief – Most Favourable Nation clauseApplied automatically – No separate notification – Not assessabke as fees for technical services – DTAA-India-Sweden [S.9(1)(vii)]

The assessee provided consulting services on actual cost based charges and information technology services to the Indian subsidiary. The assessee submitted that payments would not constitute ‘fees for technical services’ as the services would not “make available” the recipient to perform the services in the future, as provided under the “Most Favoured Nation” clause (MFN clause) in India-Sweden Tax treaty, read with India Portugal DTAA. The AO denied the benefits of the MFN Clause under India – Sweden tax treaty was not notification.

The Tribunal held that the MFN clause in the Indo-Swedish tax treaty is a situation in which limiting the source taxation, for fees for technical services, to any other OECD member jurisdiction, by itself, is enough to trigger that the same provisions. No further actions on India’s part are envisaged in the Indo-Swedish tax treaty to trigger the application of the same provisions in the Indo Portugal tax treaty (no requirement to issue separate notifications). Portugal is an OECD jurisdiction, and India has entered the tax treaty after Sweden. The Portuguese tax treaty provides a far more restricted scope of ‘fees for technical services’, since it adopts the ‘make available’ clause, which restricts the taxation of fees for technical services only in such cases which “make available” technical knowledge, experience, skill, know- how or processes. The services provided does not enable the recipient of these services to perform the same services, in the future, without recourse to the assessee, thus cannot be considered as FTS. (ITA No 7315 of 2018, dt 08.01.2021)(AY 2015-16)

Hygiene Products AB v. Dy. CIT (IT) (2021)-209 TTJ 545/ 123 taxmann.com 152/ 85 ITR-DTAA 607 (Mum)(Trib)

  1. S.90: Double taxation relief – Credit for foreign taxes on income eligible for deduction u/s 10A/10AA – Allowed as per the treaties – DTAA-India-USA [S.90(1)(a)(ii), 91]

Assessee had claimed foreign tax relief as per the provisions of section 90(1)(a)(ii) of the Act read with provisions of the applicable Double Tax Avoidance Agreements, for income taxes paid in overseas jurisdiction in relation to income eligible for deduction under section 10A/10AA of the Act in India. It is stated that herein the countries involved are USA, Denmark, Hungary, Norway, Oman, South Africa, Saudi Arabia and Taiwan. Tribunal relied on earlier years ITAT order. Referring to the treaty provisions with USA it was earlier held that it is not the requirement of law that the assessee before he claims credit under the Indo-US convention or under the provision of the Act must pay tax in India on such income. As per the embargo placed in the DTAA, the assessee is entitled to such tax credit only in respect of that income which is taxed in USA. It referred to the tax treaty with Canada where the provisions do not allow credit for tax paid in Canada if the income is not subjected to tax in India. Regarding countries with which India does not have any agreement for avoidance of double taxation, the Tribunal observed that as per section 91 of the Act, the assessee would be eligible to avail tax credit. Thus, Tribunal observed that where the respective tax treaty provides for benefit for foreign tax paid even in respect of income on which the assessee has not paid tax in India, still, it would be eligible for tax credit under section 90 of the Act. Basis above Tribunal held that foreign tax credit would be available to the assessee in view of treaties India is having with USA, Denmark, Hungary, Norway, Oman, Saudi Arabia and Taiwan. The assessee was further directed to file before the AO the relevant provisions of India- South Africa Treaty.

(IT(TP)Nos. 3262 & 3389/MUM/2017; Dt. 11-11-2020) (AY. 2007-08)

Tata Consultancy Services Ltd. ACIT / (2020) 121 taxmann.com 190 / (2021) 186 ITD 721 (2021) (Mum) (Mum)(Trib.)

  1. S.90: Foreign tax Credit – Not allowed as refund – Deduction of taxes paid – Allowed in computation – DTAA [S. 28(1), 37(1), 91, Art 24]

The assessee is a major Indian bank, with several branches abroad- a few in the treaty partner jurisdictions, i.e., the countries with which India has entered into Double Taxation Avoidance Agreements under section 90, and remaining in the non-treaty partner jurisdictions. The issue before the Tribunal was ;

  1. Whether or not, on the facts and in the circumstances of this case, learned CIT(A) was justified in upholding the action of the Assessing Officer, in declining refund to the assessee for Rs. 165,96,87,349 for income tax paid in treaty partner jurisdictions, for Rs. 15,79,80.943 for income tax paid in non- treaty partner jurisdictions and for Rs. 87,54,656 in respect of dividend taxes abroad?

  2. Whether or not the learned CIT(A) was justified in upholding the action of the Assessing Officer in declining deduction, in the computation of business income, of Rs. 182,64,22,948 in respect of taxes so paid abroad?

The Tribunal held that The assessee is declined the foreign tax credits for Rs. 182,64,22,948, and, accordingly, held that the assessee is not entitled to seek a refund of that money from the Indian tax exchequer. The claim of the assessee that these taxes paid abroad will be allowed as a deduction in the computation of the business income of the assessee is upheld. (ITA No. 869/ Mum/2018 dt. 4-3-2021 (AY. 2012-13)

Bank of India v. ACIT (Mum) (Trib) www.itatonline.org

  1. S.92C : Transfer pricing – Arm’s length price – Working capital adjustment is to be allowed on actual without making adjustment to average working capital component of comparables.

In the present case the Ld. TPO while making the working capital adjustment observed that that working capital adjustment cannot exceed the average working capital component of the comparables. Ld. TPO further observed that while computing working capital adjustment, advances received from the sister company included in the debtors should be excluded because such advances received towards services to be rendered usually does not have any cost.

The Appellate Tribunal however deleted the addition by holding that when the working capital adjustment is positive, the same is to be allowed on actual without putting a cap on the working capital adjustment i.e., without restricting the working capital adjustment to the average working capital component of the comparables. The Appellate Tribunal further held that when the working capital adjustment is negative then there should be no adjustment on account of working capital and advances received from AE should also be considered as part of payables in computing working capital of the Assessee. (AY. 2010-11)

ITO v. sabre Travel Technologies (P) Ltd (2021) 186 ITD 164 (Bang) (Trib)

  1. S.92C : Transfer pricing – Assessee apart from acting as a distributor of products manufactured by its AE, also engaged in manufacturing its own products in India under license from AE – AMP expenditure to promote its brand would not constitute international transaction requiring any TP adjustment. [S.92B]

In this case the Appellate Tribunal held that the assessee was not merely a distributor of the products manufactured by its AE but also manufacturing its own products in India under license from the AE. The assessee has incurred AMP expenditure by making payments to third parties in India in order to market and promote its own manufactured products. There was no express arrangement/agreement between the assessee and its AE for incurring such expenditure to promote the brand of the AE. Therefore, the said transactions would not constitute international transaction relating to AMP expenditure. The Appellate Tribunal further observed that BLT method as adopted by Ld. TPO is not a valid method to benchmark the transactions relating to AMP expenditure. (AY.2013-14)

Kellogg India (P.) Ltd v. ACIT (2021) 186 ITD 10 (Mum) (Trib)

  1. S.92C : Transfer pricing – Arm’s length price – Guarantee commission

The Tribunal directed the AO to charge guarantee commission @0.5% per annum both on performance/lease guarantee as well as financial guarantee. Tribunal further directed the AO to examine the contentions of the assessee that (i) part of the activity with respective performance guarantee, was performed by the assessee itself, while the remaining services are rendered by the AE and thus, if the performance guarantee is treated a chargeable services, the charges should be levied only on the component of services performed by the AE (ii) part of the premises i.e. 40% during the year under consideration was occupied by the assessee and thus, if lease guarantee is treated as chargeable services, the charge should be levied only for the balance i.e. 60% during the year under consideration.

(IT(TP)A Nos. 3262 & 3389/Mum/2017;dt. 11-11-2020) (AY. 2007-08)

Tata Consultancy Services Ltd v. ACIT (2020) 121 taxmann.com 190 /(2021) 186 ITD 721 (Mum) (Trib.)

  1. S.92C : Transfer pricing – AMP expenditures incurred for creating awareness about the product is purely business expenditures and thus, outside the purview of international transactions. Hence, no TP adjustment on account of AMP expenses are required to be made.[ S.92B]

It has been held by the Appellate Tribunal that the assessee is engaged in sale of Nivea products in India. The Assessee had incurred huge expenditure on advertisement, marketing and promotion of Nivea brand in India. The TPO made adjustment in respect of AMP expenditure incurred by assessee in the absence of any agreement or arrangement between assessee and AE for incurring the AMP expenses. As, the assessee wanted to create awareness about its product in Indian market, it has incurred AMP expenditure. Thus, the expenses incurred by the assessee were wholly and exclusively for its own business and it was not international transaction. Hence, no adjustment is required to be made with respect to AMP expenditure incurred by the Assessee. (AY. 2014-15)

NIVEA India (P) Ltd. v. Dy. CIT (2021) 186 ITD 366 (Mum) (Trib)

  1. S.92C : Transfer pricing – Arms’ length price – Availment of support services from AE had benefitted business of assesseeThus, ALP of management fee paid to AE could not be determined at nil.

In this case the Appellate Tribunal held that increase in profitability of assessee during relevant period proved that availment of support services from AE had benefitted its business. Thus, TPO is not justified in determining ALP of management fee paid by assessee to its AE at nil. (AY.2008-09)

Michelin India (P) Ltd v. JCIT (2021)186 ITD 62 (Delhi) (Trib)

  1. S.92C : Transfer pricing – Arms’ length price – A company engaged in KPO services is not comparable to software development service company.

It has been held by the Appellate Tribunal that the assessee was rendering software development services to its AE. Thus, a company engaged in KPO services was not acceptable as comparable with Assessee company. (A.Y.2011-12)

Microchip Technology (India) (P) Ltd v. ACIT (2021) 186 ITD 156 (Bang) (Trib)

  1. S.143(3) : Assessment – ValidityAssessment on a non-existent entity is bad in law

M/s Satyam Computers Services Ltd. was merged with the assessee company i.e. M/s Tech Mahindra Ltd. i.e. w.e.f 1-4-2011. Subsequent to the aforesaid merger, the existing proceedings against Satyam Computers Services Ltd. were taken over by the assessee company. The Tribunal found that the A.O in the assessment order had observed, that Satyam Computers Services Ltd. had w.e.f 1-4-2011 merged with M/s Tech Mahindra Ltd. Basis this, the Tribunal concluded that though the A.O while framing the assessment was well informed about the fact that M/s Satyam Computers Services Limited w.e.f 1-4-2011 having merged with M/s Tech Mahindra Ltd. was no more in existence, he had vide his assessment order dated 5-1-2015 chose to frame the assessment in the hands of the said non-existent entity. The Tribunal further found that even the PAN Number stated in the assessment order was of the amalgamating company i.e. M/s Satyam Computers Services Ltd. and thus in sum and substance, it was beyond any scope of doubt that the assessment order was passed in the name of a non-existent entity viz. M/s Satyam Computers Services Ltd. (Supreme Court decision in case of Pr. CIT v. Maruti Suzuki Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) relied on) (ITA No. 7319 & 7156/Mum/2016; ITA No. 4856 & 4909/Mum/2017; dt.30-06-2020)(AY. 2010-11 , 2011-12)

Satyam Computer Services Ltd. v. Dy. CIT(2021) 186 ITD 39 (Mum)(Trib)

  1. S.147: Reassessment – After the expiry of four years – Information obtained from CIB Report – Notice failed to provide reasons – No independent enquiry or application of mind- Reassessment invalid.[S.148]

The assessee held a power of attorney for a property that was sold for Rs.7 lakhs, and the value of stamp duty was Rs 7, 17, 286/-. The AO received CIB information that the assessee had sold a property, and the assessee failed to file a return of income. Therefore, he had reasons to believe that the income chargeable to tax has escaped assessment.

The Tribunal noted that the reasons failed to specify the nature and source of information. Further, the AO has merely relied upon the report of the CIB, which is more generic in nature and not containing exact information of the transaction. If the AO had verified the sales deed before recording the reasons, it would show that the assessee held a power of attorney. It is expected that the AO on receipt of such report should carry out further examination before arriving at the prima facie view that income has escaped assessment. The AO has not conducted any independent enquiry. Further, the reasons recorded must show a link/nexus and relevancy to the opinion formed by the AO. (ITA No. 170/JP/2019 dated 05.01.2021, [AY. 2008-09]

Ali Khan v. ITO (2021) 209 TTJ 409 (Jaipur) (Trib)

  1. S.153A : Assessment – Search or requisition – Cash Credits – Disclosed in Return of Income and no incriminating material during Search – Addition deleted. [S.68]

Assessee-company was engaged in real estate, land trading and trading and development. A search was conducted at premises of assessee and notice under section 153A was issued. Assessing Officer made addition u/s 68 of share capital on the ground that Assessee had failed to discharge its onus of proving identity, creditworthiness and genuineness of transaction. The ITAT held that since addition had been made by Assessing Officer of items which were already disclosed to Department in original return of income and assessment was already completed on date of search and no incriminating material was found during course of search so as to make addition, said addition was to be deleted. (AY. 2003-04 to 2006-07)

Alankar Saphire developers v. Dy.CIT (2020) 184 ITR 847/ 116 taxmann.com 389/ 81 ITR 549/ (2021) 209 TTJ 491 (Delhi)(Trib.)

  1. S.153A : Assessment – Search or requisition – The scope of making assessment of total is limited – Can be only of income that is not disclosed and which is detected or which emanates from material found in search.[S.132]

A search and seizure action was carried out in case of the assessee’s group on 25-4-2012. The original return of income was filed u/s 139 on 8-2-2008 and the last day of issuing notice section 143(2) had expired on 30-9-2008 before the date of search and the assessment proceedings therefore were not pending as on 25-4-2012 i.e. the date of search. The Tribunal held that in case of completed assessment and not abated due to initiation of search u/s 132 or making of requisition u/s 132A, the AO has to reassess the total income of the assessee and therefore, the assessment already completed can be tinkered with or distrusted where any incriminating material is found and seized during the course of search or requisition as case may be indicating undisclosed income of the assessee. Tribunal noted that the Assessing Officer had reassessed the income of the assessee by making the disallowance u/s 40(A)(3) without making any reference to any incriminating material found during the course of search. There was no finding of the Assessing officer or any other material brought on record that the registered sale deeds were found and seized during the course of search or the transactions so represented by such sale deeds were not recorded in the books of accounts as on the date of search. The Tribunal held that once these transactions were duly recorded in the books of accounts and basis the same, the return of income was furnished before the date of search, the said transactions were duly disclosed to the department and thus, doesn’t represent any undisclosed transactions so as to constitute incriminating material found during the course of search in case of the assessee. Therefore, the disallowance/addition made by the AO and reassessment completed u/s 153A was undisputedly not based on any incriminating material found or seized during the course of search and seizure action u/s 132 of the Act. The addition was thus deleted. (IT ANo. 980/JP/ 2018; dt . 27-10-2020) (AY. 2007-08)

Vijayeta Buildcon Pvt. Ltd v. ACIT (2021) 186 ITD 493 / 123 taxmann.com 133 (Jaipur) ( Trib.)

  1. S.153C : Assessment – Income of any other person – Search and seizure – Disallowance of expenses – the scope of making assessment of total income in an unabated assessment proceedings is limited – can be only of income that is not disclosed and which is detected or which emanates from material found in search of some other person and which relate to the Assessee. [S.132]

Assessee, Sri Lakshmi Venkateshwara Minerals, was is a partnership firm. The business of the firm was trading in iron ore. There was a search & seizure action conducted on 25-11-2010 in the case of K. Mahesh Kumar, who was one of the partners of assessee firm. Proceedings consequent to search was initiated u/s. 153C of the Act. The AO of the assessee partnership firm and the AO of K. Mahesh Kumar who was subjected to search, was one and the same. During assessment proceedings the assessee could not participate in the proceedings and therefore the AO proceeded to frame the assessment in the absence of proper details from the assessee. The AO made a disallowance of 20% of the expenses claimed in the P&L account for the reason that the details of expenses were not furnished by the assessee during assessment proceedings. AO also noticed that for AY 2008- 09 there was a difference in total credit in the books of account and gross receipts from business of Rs. 71,02,418 which was treated as unexplained business receipts and added to total income of assessee. This addition was, however, made on a protective basis. Similar additions were made in AYs 2009-10 and 2010-11 also. Aggrieved the assessee preferred appeals before the CIT(Appeals). The CIT(Appeals) upheld the disallowance of expenses. As far as protective addition CIT(A) deleted the addition as it was confirmed in the hands of K. Mahesh Kumar on substantive basis.

The Tribunal held that the assessment in all the three AYs 2008-09 to 2010-11 have already been completed prior to the date of search in the sense that the return filed by the Assessee was accepted and no assessment u/s.143(3) of the Act was framed within the time contemplated in law. Therefore, the scope of making assessment of total income u/s.153C of the Act in an unabated assessment proceedings is limited and can be only of assessing income that is not disclosed which is detected or which emanates from material found in the course of search of some other person and which relate to the Assessee. Since the impugned addition of disallowance of expenses were not based on any incriminating material found during search, the additions are liable to be deleted. As far as the addition made on protective basis for AY 2008-09 to 2010-11 were concerned, the Tribunal held that the said addition was made not on the basis of any incriminating material found in the search of K. Mahesh Kumar which relate to the Assessee and therefore the said addition can also not be sustained as it is contrary to the provisions of Sec.153C of the Act. There was no basis for protectively assessing the income in the hands of the Assessee and substantively in the hands of K. Mahesh Kumar. There was no material to show that the income declared by K. Mahesh Kumar was either his income or that of the Assessee. From the fact that K. Mahesh Kumar was a Partner in the Assessee firm it cannot be concluded that the income declared by K. Mahesh Kumar in his hands was either his income or the income of the partnership firm in which he was a partner. Tribunal observed that even going by the theory of the AO that there are differences in the credits in the bank account which have to be regarded as undisclosed business receipts, such differences in the credits in the bank account was not found as a result of search in the case of K. Mahesh Kumar. (IT Nos. 1789 to 1791 & 1813 to 1818/Bang/2017; dt.30-09-2020) (AY.2008-09 to 2010-11)

Shree Lakshmi Venkateshwara Minerals v. Dy. CIT (2021) 186 ITD 695 (Bang)(Trib)

  1. S.153D: Assessment – Search – Approval – Approval Has To Be Given Each Assessment Year By Proper Application Of Mind – Mechanical Approval Is Held To Be Bad In Law. [S.132]

Tribunal Held That The Approving Authority (Jcit) Has To Give Approval For “Each” Assessment Year After Applying Independent Mind To The Material On Record To See Whether The Cases Are Un-Abated Or Abated Assessments And Their Effect. However, The Jcit Has Granted Common Approval For All Ays. Further, He Did Not Have The Seized Material Nor The Appraisal Report Or Other Material At The Time Of Granting Approval. Therefore, The Approval Granted Is Merely Technical Approval Just To Complete The Formality And Without Application Of Mind. The Approval Has Been Granted Without Application Of Mind And Is Invalid, Bad In Law And Is Liable To Be Quashed.(1813/Del/2019, Dt. 19.01.2021)(AY. 20210-11)

Sanjay Duggal v. ACIT (Delhi)(Trib), www. itatonline.org

  1. S.194C: Deduction at source – Contractors – Payments for maintenance charges – No failure to deduct tax. [S.194I, 201(1), 201(1A)]

The assessee had rented premises and entered into a tripartite agreement, under which it was liable to pay the rental income to the owner of the premises and common area maintenance charges to the operation/maintenance service provider. It deducted tax at 10 percent for the rent paid u/s 194I and 2 percent for the maintenance charges u/s 194C. According to the AO, the maintenance charges were part of the agreement and essentially a part of rental activity, hence covered u/s 194I and not 194C. It treated the assessee in default u/s 201(1) & (1A) for short deduction and interest.

The Tribunal noted that the maintenance charges were not forming part of the rent paid to the owner of the premises, and payments were made to two separate parties for different services after deducting tax at the source. Thus the assessee cannot be treated in default u/s 201(1) & (1A). (ITA No. 889/JP/2020 dated 05.01.2021) (AY 2011-12)

Kapoor Watch Company (P) Ltd v. ACIT (2021) 209 TTJ 793 (Delhi) (Trib)

  1. S.253 : Appellate Tribunal – Power to condone delay – delay of 654 condoned. [S. 253 (5), 254 (1)]

The Tribunal observed that was a delay in filing the present appeal and the period of delay as computed by the Registry was 654 days. Tribunal observed that in the instant case, it had been stated in the affidavits submitted that there has been a change in the management of the company and the tax matter pertaining to the period prior to change of management, it was decided that the same would be handled by the erstwhile management, however, due to change of management and lack of diligence on part of erstwhile employees, the appeal could not be filed. It had been further stated that the matter came to light of the present management on 11-7-2018 when an enquiry was made by the Assessing officer for payment of outstanding demand and thereafter, the appeal papers were prepared and appeal was submitted before the Registry on 20-8-2018 though with a delay of 654 days. The Tribunal was of the view that there was no culpable negligence or malafide on the part of the assessee company in delayed filing of the appeal and as soon as it came to know of the old tax matter pertaining to the period prior to change of the management, it took steps and filed the present appeal. Therefore, the Tribunal believed that there was sufficient and reasonable cause for condoning the delay in filing the present appeal and where substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserved to be preferred. Therefore, in exercise of powers under section 253(5) of the Act, Tribunal condoned condone the delay in filing the present appeal as it was satisfied that there was sufficient cause for not presenting the appeal within the prescribed time. (IT A/ No. 980/JP/ 2018; dt. 27-10-2020) (AY. 2007-08)

Vijayeta Buildcon Pvt. Ltd. v. ACIT (2021) 186 ITD 493 / 123 taxmann.com 133 (Jaipur)(Trib.)

  1. S.263 : Commissioner – Revision of orders prejudicial to revenue – Scope of Explanation 2(a) – Mere lack of necessary enquiries cannot lead to revision – Reassessment is held to be bad in law.

The ITAT held that for invoking Explanation 2(a) to section 263 Commissioner cannot only rely about lack of necessary inquiries and verifications but must give an objective finding that Assessing Officer has not conducted, at stage of passing order which is subjected to revision proceedings, inquiries and verifications expected, in ordinary course of performance of duties of a prudent, judicious and responsible public servant that Assessing Officer is expected to be. When investment in shares by assessee-trust had been accepted as part of corpus of trust for over four it was not at all unreasonable on part of Assessing Officer not to question whether or not investments in shares were part of corpus. Provisions under section 263 could not be put into service to make some roving and fishing inquiries. (AY. 2014-2015)

JRD Tata Trust v. JCIT (2021) 85 ITR 431 (Mum) (Trib.)

  1. S.271AAB : Penalty – SearchUndisclosed income – Levy of penalty not mandatory – Opportunity of hearing must be given – No assessment required for initiation of penalty – Since, the assessee has neither made any surrender of any undisclosed income during the search action nor the penalty has been initiated on the basis of undisclosed income found during such search action, the appeal of the assessee stands allowed- Levy of penalty deleted [S. 132]

A search action under section 132 of the Act was carried out at the premises of the assessee on August 07, 2014. During the search action jewellery in the shape of gold bars, coins was found from the locker of the assessee. The assessee could explain about the source of investment in respect of the part of the said bullion and jewellery. The assessee could not explain the source of assets worth Rs. 21,97,221/- with bills and vouchers. The assessee, however, explained that the said jewellery was accumulated out of gifts received by the assessee on the eve of marriage and other ceremonies/ occasions from time to time. The assessee, thereafter, included the value of the above stated jewellery in the computation of income and offered the same for taxation. The Assessing Officer in the assessment proceedings noted that the assessee in the return of income has disclosed income of Rs.21,79,222/- on account of undisclosed jewellery. He, therefore, initiated penalty proceedings under section 271AAB of the Act and levied the minimum penalty at 10 per cent of the said declared income of the assessee. The CIT(A), however, observed that the levy of penalty under the provisions of section 271AAB of the Act was mandatory and accordingly confirmed the penalty so levied by the AO. The Tribunal relied on the decision of Co-ordinate Chandigarh Bench of the Tribunal in the case of SEL Textiles Ltd. v DCIT ITA No. 695/Chd/2018 order dated April 18, 2019 wherein it was held that levy of penalty u/s 271AAB of the Act is not mandatory. It has also been noted that the Legislature has consciously used the word ‘may’ in contradistinction to the word ‘shall’ in the opening words of Section 271AAB of the Act. That the choice of the expression ‘may’ and not ‘shall’ in the opening Section of 271AAB shows that the Legislature did not intend to make the levy of penalty statutory, automatic and binding on the Assessing Officer but the Assessing Officer has been given discretion in the matter of levy of penalty. It has also been held that the penalty u/s 271AAB will not be attracted if the surrendered income would not fall in the definition of ‘undisclosed income’ as defined under explanation to Section 271AAB of the Act. Therefore, from plain reading of section 271AAB of the Act, it is evident that the penalty cannot be imposed unless the assessee is given a reasonable opportunity and assessee is being heard. Further, the provisions of section 271AAB of the Act are self-contained and are not dependent upon commencement or finalization of the assessment proceedings. Since, the assessee has neither made any surrender of any undisclosed income during the search action nor the penalty has been initiated on the basis of undisclosed income found during such search action, the appeal of the assessee stands allowed. (ITA No.194/ Pat/2019 dated February 11, 2021)

Shiv Bhagwan Gupta v. ACIT (Pat) (Trib) www. itatonline.org

Research Team

  1. S. 2(14)(iii): Capital asset – Agricultural land – land was situated 40 k.m away from municipality – Agricultural activities were carried out in land, there were standing banana crops as well as coconut trees, etc. – Approval from Joint Director, Directorate of Town and Country Planning [‘DTCP’] for conversion of land for non-agricultural purpose prior to execution of sale deed – Not liable to capital gain tax [S. 45]

Assessee sold land to a company and claimed same as exempt under section 2(14) (iii) on ground that same was agricultural land. The AO held that assessees along with their co-owners (sons) had obtained approval from Joint Director, Directorate of Town and Country Planning [‘DTCP’] for conversion of land for non-agricultural purpose prior to execution of sale deed, held that on date of sale, land was no longer agricultural land and not eligible for claiming exemption u/s. 45 of the Act . Commissioner (Appeals) deleted the addition. On appeal Tribunal held that agricultural activities were carried out in land, there were standing banana crops as well as coconut trees, etc, and land was situated 40 k.m away from municipality. Accordingly affirmed the order of CIT(A). On appeal by the revenue, High Court affirmed the order of the Tribunal) (AY. 2009-10)

CIT v. P. Mahalakshmi (2021) 276 Taxman 224 (Mad.)(HC)

  1. S. 9(1)vi): Income deemed to accrue or arise in India – RoyaltyNon-resident – receiving consideration – sale of software product – not royalty – DTAA- India-UK [Art. 13]

Assessee is a company incorporated in UK. It sells software products in India. it was held by the AO that the receipt of income from the sale of software products in India is taxable under the head ‘Royalty’ as per the provisions of section 9(1)(vi) of the Act read with Article 13 of the India-UK DTAA. The High Court relying on the case of DIT v. New Skies Satellite B.V. [2016] 382 ITR 114 (Delhi) (HC) and PCIT v. M. Tech India (P.) Ltd. [2016] 381 ITR 31 (Delhi) (HC) held that payment made by the reseller for the purchase of software for sale in Indian market could not be considered as royalty within meaning of Article 13 of India UK DTAA.

Micro Focus Ltd. (2021) 197 DTR 299/ 318 CTR 670/, 431 ITR 136 (Delhi) (HC)

  1. S. 10 (23C): Educational institution – Approval not to be denied in the absence of information regarding charging of profits

Where the assessee’s application for approval under section 10(23C) was rejected by the CIT on the ground that it is not an educational institution, matter had to be remanded back to the CIT to consider the application again in light of the fact whether the assessee was generating any profits by charging fees for conducting the examination.

Bihar Combined Entrance Competitive Examination Board v. CIT (2021) 318 CTR 229 / 125 taxmann. com 228 (Pat) (HC)

  1. S. 10 (23C): Educational institutionExemption claimed by assessee u cannot be denied on ground that it does not have independent MoA, bye-laws, etc unless it is proved that assessee does not meet parameters of section 10(23C) of the Act. [S.10(23C)(vi)]

Held by the High Court that:

  1. Tribunal has rightly discussed the relevant provisions of the Act and finding that the Appellant Educational Institution is undoubtedly, an “Institution” covered by the provisions of section 10(23C)(vi) of the Act and therefore, as an AOP, it was entitled to exemption irrespective of the fact whether it had separate registration under other law as an Institution or Society or not.

  2. Since the Appellant/Assessee is admittedly filing its Returns of Income as AOP. So long as the Assessee adheres to the parameters required to be satisfied under section 10(23C) of the Act to avail the exemption granted under the provision, it is so entitled (TCA No 467 of 2017 dt. 25-09-2020) (AY. 2014-15)

CIT v. Sengunthar Matriculation Higher Secondary School (2020) 121 taxmann.com 338 / (2021) 277 Taxman 252 (Mad) (HC)

  1. S. 10(10C) : Public sector companies – Voluntary retirement scheme – exemption available under section 10(10C) and section 89(1) of the Act – Alternate remedy not a bar from entertaining the writ petition – Single judge order of the High Court set aside [S. 10(10C)(viii), 17(3), 89(1), 264, Art. 226]

Assessee received certain amount from his employer under VRS scheme which was claimed as exempt under section 10(10C)(viii) as well as section 89(1) r.w.s. 17(3) of the Act. AO rejected the claim of the assessee and an application under section 264 was filed which was rejected by the CIT. Assessee filed a writ petition which was disposed off by a single judge as alternative remedy was available with the assessee by filing an appeal to the CIT(A). However, the division bench set aside the order of the single judge and held that when proceedings are without jurisdiction, existence of alternate remedy is not a bar for granting relied under Article 226 of the Constitution of India. Reliance was placed on Calcutta Discount Company Ltd v .ITO (1961)41 ITR 191(SC). Further, relying on the decision of State Bank of India v. CBDT (2006 KLT 258), the HC held that assessee was entitled to claim deduction under section 10(10C)(viii) and section 89(1) of the Act. (WA No. 1713 of 2020 dt. 5-01-2021) (AY 2001-02)

V. Gopalan v. CCIT (2021) 318 CTR 706 / 197 DTR 433 (Ker.)(HC)

  1. S. 10(23C)(vi) : Exemption for an Educational Institute – Assessee filed an application for claiming exemption under section 10(23C)(vi) – such application was rejected being delayed – application for further AYs not delayed – order for the exemption for further AYs needs to be passed accordingly – petitioner to file condonation application with CBDT for current AY 2019-20 [S. 10(23C) (vi), 119(2)(b). Art. 226]

The CIT(E) rejected the application of the petitioner dated 31-10-2019 for exemption under section 10(23C) (vi) of the Act for the assessment year 2019-20 and AYs thereafter. The application was rejected referring to the 16th proviso to section 10(23C)(vi) which says that an application for exemption or continuance of exemption under section 10(23C)(vi) has to be fled on or before the 30th day of September of the relevant assessment year from which the exemption is sought which date in the instant case would be on or before 30-9- 2019, as the due date to file application was 30-9-2019 and CIT(E) had no power to condone such delay. The assessee filed Writ Petition seeking direction to quash the order of rejection. The Hon’ble High Court held that CIT(E) was not authorized to condone the delay with respect to AY .2019-20 and hence the assessee had to file an application before the CBDT under section 119(2)(b) to authorize CIT(E) to condone the delay in fling its application dated 31-10- 2019. With respect to the contention of dealing with grant of exemption with regards to future AYs, the High Court directed the CIT(E) to consider such application as being filed within time limit and take necessary action. (AY. 2009-10) [W.P. No. 94842 of 2020 dt. 28.01.2021]

Sanjay Ghodawat University, Kolhapur v. CIT(E) (2021) 124 taxmann.com 6 (Bom)(HC)

  1. S. 10A : Free trade zone – Grounds not adjudicated on merits – Matter remanded [S. 254(1), 260A]

Assessee is engaged in business of providing software development services, professional services and had claimed deduction u/s 10A of the Act. AO denied benefit of deduction to some units on ground as these were not set up in accordance with STPI scheme and also held that the income earned by the Assessee in the nature of recruitment fee should be excluded from the eligible profits of the business of the Assessee. On Assessee’s appeal to CIT(A), it allowed partial relief and denied the relief in respect of the recruitment fee on the ground that such activity has no nexus with the activity of export of computer software. On Assessee’s appeal to Tribunal, the Tribunal upheld the CIT(A) order and did not decide the grounds raised by the assessee and held that the same are academic.

Aggrieved by the same, the Assessee preferred an appeal before High Court. The High Court held that Tribunal ought to have adjudicated the grounds raised by the Assessee on merits instead of holding the grounds to be academic and not deciding the same. Thus, the High Court remanded the matter back to Tribunal for adjudication. (ITA No. 526 Of 2017 dt. 19-11-2020) (AY. 2005-06)

Ntt Data Global Delivery Services Ltd. v. ACIT (2021) 123 taxmann.com 226 277 Taxman 143 (Karn) (HC)

  1. S. 10B: Export oriented undertakings – Submission of declaration to be treated as directory – provision of the section did not provide for any consequence on non-filing of declaration within the time limit. [S. 10B(8), 72]

The Assessee was a software company who filed its original return on due date in which exemption under section 10B was claimed. Thereafter, assessee withdrew the said exemption before completion of assessment and filed revised return in which said exemption was not claimed and certain loss was declared. The AO denied assessee’s claim of carrying forward of losses under section 72, however same was allowed by Tribunal. Revenue filed an instant appeal against order of Tribunal with the High Court, contending that Tribunal erred in holding that assessee was entitled to said claim of carrying forward of losses even when assessee had filed declaration, after due date of filing original return of income was over.

Relying on the decision of State of Bihar v. Bihar Rajya Bhoomi Vikas Bank Samiti [2018] 9 SCC 472, the Hon’ble Karnataka High Court held that the requirement of submission of declaration in terms of section 10B(8) of the Act has to be treated as mandatory whereas, the requirement of submission of declaration by a time limit has to be treated as directory as the provision does not provide for any consequence by non-filing of the declaration by the time limit. Accordingly, since assessee had filed the declaration before completion of assessment, appeal filed by Revenue was dismissed. (ITA No.462 of 2017 dt. 30-11-2020) (AY.2001-02)

PCIT. v. Wipro Ltd (2021) 123 Taxmann.com 393 / 277 Taxman.com 309 (Karn)(HC)

  1. S. 10B : Export oriented undertakings – Manufacture – Conversion of crude ore into iron ore concentrate fines amounts to manufacture – Entitle to benefit. [S. 2(29BA)]

Dismissing the appeals of the revenue the Court held that the assessee purchased run-of-mines, which included a lot of impurities ; it was crude ore, practically of no use unless it was processed and made suitable for its intended end-use. Iron ore concentrates were manufactured by the process of magnetic separation. It essentially amounted to manufacture or processing. The assessee was entitled to the benefit under section 10B of the Act. (AY.2008-09, 2009-10)

CIT v. Ramacanta Velingkar Minerals (2021) 430 ITR 161/ 277 Taxman 299 (Bom)(HC)

  1. S. 11 : Property held for charitable purposes – School – Exemption – For delay in filing form Nom 10B denial of exemption is not justified – Petitioner is directed to file an application before the CBDT within a period of three weeks from today, and CBDT shall pass an appropriate order in terms of direction No.1 above within a period of four weeks from the date of receipt of such application with due intimation to the petitioner [S. 2(15), Form No 10B]

The petitioners are charitable trusts providing education to students belonging to middle class families through various schools situated in Mumbai. Both the petitioners are assessed to income tax under the Income Tax Act, 1961(Act).

Challenge made in both the writ petitions is to the orders dated 19.02.2020 passed by the Commissioner of Income Tax (Exemptions), Mumbai declining to condone the delay in filing Form No.10B of the Act for the assessment year 2018-2019.

It is stated that for the assessment year 2018-19, petitioner filed return of income on 25.07.2018 declaring nil income. Form No.10B was obtained on 15.08.2018 from the auditor. It is stated instead of uploading Form No.10B in the income tax portal, petitioner uploaded Form No.10BB because of mistake of the chartered accountant and accountant.

The CPC under section 143(1) of the Act raising a demand of Rs.1,46,01,489.00 as payable by the petitioner for the assessment year 2018-19 by denying exemptions under sections 11 and 12 of the Act.

Petitioner uploaded Form No.10B on the income tax portal on 06.11.2019 and also filed an application for condonation of delay. As a matter of fact, petitioner filed Form No.10B for assessment years 2017-18 and 2018-19.

Respondent No.2 i.e., Central Board of Direct Taxes issued Circular No.2 of 2020 dated 03.01.2020 empowering the Commissioner of Income Tax (Exemptions) to condone the delay in filing Form No.10B for a period upto 365 days from the assessment year 2018-19 onwards.

However, vide the impugned order dated 19.02.2020, Commissioner of Income Tax (Exemptions), Mumbai rejected the application of the petitioner for condonation of delay for the assessment year 2018-19. The said order was passed following Circular No.2 / 2020 of the Central Board of Direct Taxes.

Aggrieved, the related writ petition has been filed for quashing of order dated 19.02.2020 and for a direction to the Commissioner of Income Tax (Exemptions) to condone the delay in filing Form No.10B for the assessment year 2018-19.

Court held that being the position and having regard to the mandate of section 119(2)(b), we feel that even at this stage, petitioner may approach CBDT under the aforesaid provision seeking a special order to the Commissioner of Income Tax (Exemptions), Mumbai to condone the delay in filing Form No.10B for the assessment year 2018-19 which is beyond 365 days and thereafter to deal with the said claim on merit and in accordance with law.

Petitioner shall file an application before the CBDT under section 119(2)(b) of the Act to authorize the Commissioner of Income Tax (Exemptions), Mumbai to condone the delay in filing Form No.10B for the assessment year 2018-19 and to deal with the same on merit in accordance with law;

If such application is filed by the petitioner within a period of three weeks from today, CBDT shall pass an appropriate order in terms of direction No.1 above within a period of four weeks from the date of receipt of such application with due intimation to the petitioner (WP No. 1061 of 2020 March 25, 2021 (Bom)

(HC), dated 25th March 2021)

Little Angels Education Society & Anr v. UOI (Bom) (HC) www.itatonline.org

  1. S. 11 : Property held for charitable purposes – Since lower authorities had not rendered any finding that activity carried out by assessee –trust was a commercial activity, benefit of exemption could not have been denied to assessee Matter remanded to AO to take fresh decision [S.2(15)]

Held by the Court that where the claim for exemption of a assessee-trust which is established with a main object to consider all questions concerning relations between employers and employees in Southern India in order to protect their interests have been denied to assessee merely taking the view that substantial sums of money were received by assessee from conducting conferences and seminars which were not incidental to its main objects without the lower authorities having not rendered any finding as to whether activity carried out by assessee was a commercial activity, denial of the benefit of exemption u/s 11 is not justified. Matter remanded to AO to find out facts on the principles enunciated in few decisions referred by the Court (TCA No. 98 of 2018, CMP No. 1567 of 2018) dt.09-09-2020)

(AY. 2009-10)

Employers Federations of Southern India v. CIT (E) (2020) 122 taxmann.com 87 / (2021) 277 Taxman 266 (Mad) (HC)

  1. S. 11 : Property held for charitable purposes – Statutory body – Functions of assessee were fully controlled by instructions issued by Government – Assessee was engaged in charitable activity through advancement of an object of general public utility. [S. 2(15), Karnataka Industrial Area Development Act, 1987]

On appeal the High Court confirmed that the following observations of the Tribunal and allowed the appeal:

  1. main component of income of the assessee is derived in the form of interest and there is no profit element in earning income as interest;

  2. that the assessee has been established to promote rapid and orderly development of industries in the State and to assist in implementation of the policy of the Government;

  3. to facilitate in establishing infrastructure projects and to function on ‘No Profit-No Loss’ basis;

  4. profit making is not the driving force or objective of the assessee;

  5. AO has not disputed that the assessee fulfills all the conditions for allowing exemption except proviso to Section 2(15) of the Act.

Thus, the Tribunal has correctly held that the proviso to section 2(15) of the Act is not applicable to the case of the assessee. (ITA No. 205 of 2016, dt. 30/09/2020) (AY. 2009-10)

Karnataka Industrial Area Development Board v. Addl DIT (E), (2020) 121 taxmann.com 88 / (2021) 277 Taxman 36 (Karn)(HC)

  1. S. 11: Property held for charitable purposes – Purchase of gold bullion – Tribunal has not dealt with the contention of assessee – Matter remanded to Tribunal[ S.13 (1)(d) (iia) 254 (1)]

Assessee, an educational charitable trust, purchased a gold bullion and contended that as per proviso (iia) to section 13(1)(d) it could hold such gold for a period of one year from end of previous year in which same was acquired, thus, there was no violation of section 11(5). Since Tribunal did not dealt with such contention of assessee and passed an order holding such purchase to be in violation of section 11(5), said order was to be set aside and matter was to be remanded. (T C No 890 of 2019 dt. 24-09-2020)

(AY. 2010-11)

Sri Venkkaliamman Educational and Charitable Trust v. DCIT (2020) 122 taxmann.com 81 / (2021) 277 Taxman 257 (Mad) (HC)

  1. S. 12AA : Procedure for registration – Trust or institution Assessee deemed to have abandoned or waived off their claim made in first application on filing second fresh application – Commissioner justified in granting registration taking into consideration second application and not retrospective registration on the basis of first application

Held that, where assessee-trust filed application for granting registration in Form 10A under section 12AA on 11-3-2009 and without pursuing same for two years filed another application on 28-6-2011 second application could not be considered as a letter in continuation of earlier application; it was to be considered as a fresh application and registration was rightly granted from 1-4-2011 and not from 1-4-2009. (TCA No 770 of 2019, dt. 05-10-2020) (AY. 2012-13).

Carmel Educational and Charitable Trust v. ITO (2020) 121 taxmann.com 278 / (2021) 277 Taxman

165 (Mad) (HC)

  1. S. 12AA : Procedure for registration – Trust or institutionAmendment in section 12AA applicable with effect from AY 2011-12 – retrospective cancellation of registration of trust with effect from AY 2010-11 is without jurisdiction. [S. 2(15)]

The DIT(E) held that the assessee is not running an educational institution, it is only giving donation to another trust and the word ‘education’ has been defined in various decisions to mean conventional type of education given in class rooms and, since the assessee does not run any schools or colleges, they are not in the field of education and that their activity will fall under the category of ‘advancement of any other object of general public utility’ as used in section 2(15). It was held that Circular No. 1 of 2011 will clearly show that the amendment brought out in Section 12AA is applicable with effect from 1st June, 2010, i.e., from the assessment year 2011-12 and subsequent years. Therefore, the retrospective cancellation of the registration of the assessee is wholly without jurisdiction. The DIT(E) failed to adhere to the instructions issued by the CBDT which is binding on the DIT(E). The recent pandemic has taught very many lessons and one of which is that, mode and method of education cannot be in any manner restricted, but should be given the widest meaning that is possible. (AY. 2011-12)

Thanthi Trust (2020) 196 DTR 57/ (2021) 318 CTR 403 (Mad) (HC)

  1. S. 32: Depreciation – granted in earlier years and latter years Order set aside for fresh consideration

A scheme of arrangement had been sanctioned by this Court in respect of the Petitioner, viz., Ponni Sugars (Erode) Limited, with a specific provision entitling it to claim depreciation in its tax returns on the basis of fair market value of fixed assets as on 01.04.1999. The AO disallowed depreciation for AY 2003-04. It was held that there is no justification to deny the Petitioner of the same benefit for the assessment year 2003- 2004, which has been granted for the assessment years 2001-2002, 2002-2003, 2004-2005, 2005-2006 and 2006-2007. Matter remanded for fresh consideration, reasonable opportunity for hearing and a reasoned order on merit. (AY. 2003-04)

Ponni Sugars (Erode) Ltd. (2021) 197 DTR 133 / 318 CTR 676 (Mad) (HC)

  1. S. 32 : Depreciation – Asset put to use for less than 180 days – additional depreciation of 10% allowed in the year and balance 10% would be allowed in the subsequent year [S. 32(1)(iia)]

Assessee acquired plant and machinery in the second half of FY 2007-08 and the asset was put to use for less than 180 days in that year. Additional depreciation at 10% was allowed in AY 2008-09 under section 32(1)(iia) of the Act and the balance additional depreciation at 10% was allowed in the subsequent year i.e. AY 2009-10. The HC relied on the decision of DCIT v. Brakes India Ltd (IT Appeal No. 1069 (Mds) of 2010 dt. 6-1-2012) which has been approved by the Supreme Court. (TCNo. 267 of 2020 dt. 07- 09-2020) (AY.2009-10)

  1. S. 37(1) : Business expenditureDiscount on employees Stock Option Plan – Allowable as deduction. [Companies Act, 1956, S.2(15A)]

Dismissing the appeal of the revenue the Court held that the deduction of the discount on the employees stock option plan over the vesting period was in accordance with the accounting in the books of account, which had been prepared in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. For assessment year 2009-10 onwards the Assessing Officer had permitted the deduction of the employees stock option plan expenses. The Revenue could not be permitted to take a different stand with regard to the assessment year 2004-05. The expenses were deductible.(AY.2004-05)

CIT (LTU) v. Biocon Ltd. (2021) 430 ITR 151/ 276

Taxman 1 (Karn)(HC)

  1. S. 37(1) : Business expenditure – Take over business – Scheme for voluntary retirement of employeesAllowable as business expenditure. [S. 10(10C]

Dismissing the appeal of the revenue the Court held that the sum was paid as retirement benefit to employees who availed of the benefit of the scheme. Under the scheme, compensation was paid not only for past services but also for the remaining years of service with the company. The employees had also filed a complaint against the assessee under the labour laws and therefore, the assessee had to offer a scheme to avoid any kind of future problems. The scheme was sanctioned by the Chief Commissioner for the exemption under section 10(10C) of the Act and it was a contractual obligation and was an ascertained liability. The genuineness of the scheme was not doubted by any of the authorities, rather it had been approved by the Chief Commissioner. The expenditure incurred by the assessee under the scheme had been incurred solely and exclusively for the purposes of business and was eligible for deduction under section 37(1).(AY.2000-01)

CIT v. G. E. Medical Systems (I.) (P.) Ltd. (2021)430 ITR 494/ 197 DTR 449/ 277 Taxman 315 (Karn)(HC)

  1. S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Purchase of intellectual propertyDepreciation is not an expenditure – No disallowance can be made for failure to deduct tax at source. [S.32, 37(1), 40(a)(ia)]

Dismissing the appeal of the revenue the Court held that the payment had been made by the assessee for an outright purchase of intellectual property rights and not towards royalty. Depreciation is not an expenditure hence No disallowance can be made for failure to deduct tax at source. (AY.2009-10 to 2011-12)

PCIT v. Tally Solutions Pvt. Ltd. (2021) 430 ITR 527 (Karn)(HC)

  1. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Handling charges paid to persons for in turn paying multiple labourers – TDS provisions not applicable – matter remanded back to CIT(A) for re- examining evidence which he refused to accept.

Assessee was engaged in the business of clearing and forwarding agency for ACC Ltd. Assessee made payment towards handling charges to three people who in turn paid labour charges to multiple labourers. AO disallowed the amount paid due to non deduction of tax. The CIT(A) refused to accept the evidence produced by the assessee. Hight Court upheld Tribunal’s order of remanding the matter back to the CIT(A) for re-examination. (IT A No. 407 of 2010 dt. 31-08-2020) (AY.2006-07)

C.S. Raghoji (Bellary) v. DCIT (2020) 119 taxmann. com 143 /(2021) 277 Taxman 61 (Karn)(HC)

  1. S. 44AD : Presumptive taxationIndividual partner of firm engaged in eligible business – Not entitled to benefit. [S.28(v), 44AD(2)]

Dismissing the appeal the Court held that the assessee who was an individual was not carrying on any business. Therefore, the remuneration and interest received by the assessee from the firm could not be termed turnover of the assessee. The assessee had not done any sales nor rendered any services but had been receiving remuneration and interest from the firms which amount had already been debited in the profit and loss account of the firms. Therefore, the remuneration and interest could not be treated as gross receipts. The assessee was not entitled to the benefit of section 44AD. (AY.2012-13)

Anandkumar v. CIT (2021) 430 ITR 391 (Mad)(HC)

  1. S. 56: Income from other sources – Individual – Natural living individuals – Donation received by discretionary Trust – Assessable as income from other sources.[S. 2(24)(xv), 2(31)(v), 56(2) (vii)]

Court held that no amount had been received from any relative of the individual beneficiary or on account of marriage of the individual beneficiary and the income was received on behalf of the representative assessee. The assessee was a representative assessee as it represented the beneficiaries who were identified individuals and therefore to be assessed as an individual only. Consequently, the contribution of Rs. 25 crores was to be assessed as income under section 56(1) under the head Income from other sources.(AY.2014- 15)

CIT v. Shriram Ownership Trust (2021) 430 ITR 356/ 197 DTR 153/ 318 CTR 233 (Mad)(HC)

  1. S. 56 : Income from other sourcesIssue of bonus shares by capitalization of reserves does not result in inflow of any funds or property and is not assessable under section 56(2)(vii)(c).[S.56 (2) (vii)(c)]

Issue of bonus shares by capitalization of reserves is merely reallocation of company’s funds. It does not entail outflow of any funds or change the capital structure of the company. The value of the original share goes down and the intrinsic value of the original and the bonus share remains the same. Therefore, there is no transfer of any property. In any event, there was no allegation of intention to evade taxes, which is the object of the provision. For these reasons, section 56(2)(vii)(c) was not applicable.

PCIT v. Dr. Ranjan Pai (2021) 197 DTR 314/ 318 CTR 603 431 ITR 250 (Karn) (HC)

  1. S. 57 : Income from other sources – Deductions – AO is not justified in disallowing claim for deduction u/s 57(iii) for interest paid when Assessee given names of lenders, loans were availed through banking channels and interest paid was allowed as deduction from year to year – Matter remanded to AO.[S.57(iii)]

Allowing the appeal, the High Court observed that:

  1. Since loans were availed through proper banking channels and interest amounts were paid to lenders who had disclosed same in their respective tax returns and tax was remitted by them on such interest income; and

  2. It may be true that the earlier assessments stood concluded upon intimation being issued under section 143(1) of the Act and in none of the years, there was an assessment u/s 143(3), however, the assessments for the previous years had not been disturbed by the Revenue (either u/s 143(3) or reopening u/s 148). Therefore, the assessments could not have been brushed aside and an attempt ought to have been made to examine the genuineness of the stand. Hence, impugned disallowance was unjustified and matter was to be remanded. [TCA No.744 of 2019, dt. 05-10-2020] (AY. 2011-12)

Rajendra Kumar Jain v. ITO (2020) 120 taxmann.com 293 / (2021) 277 Taxman 236 (Mad) (HC)

  1. S. 68: Cash credits – Opening stock accepted in scrutiny – Sales made from opening stock cannot be treated as bogus. [S. 56, 133]

A survey was conducted in the premises of the assessee. The AO held that it was a case of money laundering and a false impression had been created that the entire cash deposits in the bank account of the Assessee were purported sale proceeds. The AO also held that the entire cash deposits found in the bank account of the Assessee were, in fact unexplained income and not sale proceeds. It was held that the quantum figure and the opening stock which stood accepted in the earlier years had to be taken as actual stock available with the Assessee. In view of these facts, the sales made by the Assessee out of its opening stock cannot not treated as unexplained income, to be taxed as income from other sources.

Akshit Kumar (2021) 197 DTR 121 /318 CTR 26 / 277 Taxman 423 (Delhi) (HC)

  1. S. 80IB : Industrial undertakingsFailure to provide details of number of workmen working in each units in form No. 10CCB – Denial of exemption is held to be not valid. [Form no. 10CCB]

Assessing Officer denied assessee deduction under section 80-IB, because, assessee in Form No. 10CCB failed to provide details of number of workmen working in each of Units of assessee. Tribunal held that omission on part of assessee whilst filling in Form 10CCB, was not such an omission which was not rectifiable and Assessing Officer should have granted assessee an opportunity for rectifying this omission. On appeal by the revenue the Court held that since assessee, prior to assessment, produced material before Assessing Officer which evidenced that each of Units of assessee employed more than 10 workers, there was material before Assessing Officer to conclude that assessee fulfilled conditions required for claiming deduction under section 80IB. (AY. 2006-07, 2007-08)

CIT v. Borkar Packaging (P.) Ltd. (2021) 276 Taxman 131 (Bom.)(HC)

  1. S. 80IC : Special category statesConsumption of electricity – Mismatch of production – Denial of exemption is held to be not justifies.

Assessing Officer, on basis of consumption of electricity in various Units of assessee, concluded that profits of newly established Unit N was unreasonably high and he denied assessee deduction under section 80IC by observing that consumption of electricity was increased only by 1497 per cent, but sales had increased by 7102 per cent. Commissioner (Appeals) as well as Tribunal held that alleged mismatch between production and profits at various Units as determined by consumption of electricity at such units could not be sole ground for denial of exemption. On appeal by the revenue High Court affirmed the order of the Tribunal. (AY. 2006-07, 2007-08)

CIT v. Borkar Packaging (P.) Ltd. (2021) 276 Taxman 131 (Bom.)(HC)

  1. S. 92C : Transfer pricing – Arm’s length price – Rejection of comparables is a finding of fact [S.92B]

Where certain companies were rejected as comparables by the Tribunal on the ground that segmental information was not available and that the comparables were majorly involved in related party transactions, such findings of the Tribunal were findings of fact and no question of law arises from the same. (AY. 2011-12, 2012-13)

Microsoft India (R&D) Pvt. Ltd. v. DCIT (2021) 197 DTR 409 / 318 CTR 654 / 431 ITR 483 (Delhi) (HC)

  1. S. 132B : Application of seized or requisitioned assets – High court could not direct release of gold in favour of the alleged owner when appeal before the CIT(A) was pending. [Art.226]

The Petitioner claimed that it was the owner of certain quantity of gold which was seized from the job worker to whom the gold was given to convert into jewellery and in whose hands the same was added as undisclosed income as he could not explain the source thereof. The order of assessment in the case of the job worker was pending before the CIT(A). The HC held that as the ownership over the gold had not been finalized and the appeal in the case of the job worker was pending before the CIT(A), it could not direct the release of the gold in favour of the Petitioner. (AY. 2017-18)

New Lakshmi Jewellers v. PCIT (2021) 318 CTR 713 / 431 ITR 570 (Bom) (HC)

  1. S. 143(3): Assessment – Cash credits – Unexplained money – Estimation of profit – Estimation of profit at 2 Per cent of total credits held to be justified [S. 68, 69]

Dismissing the appeal of the revenue the Court held that the Tribunal was justified in restricting the addition made by the Assessing Officer under section 68 to 2 per cent of the total credits. The Tribunal had found that the computation of profit at the rate of 8 per cent of the turnover was without any basis or materials on record. The order of the Tribunal is affirmed. (AY.2003-04)

PCIT v. Shitalben Saurabh Vora (2021)430 ITR 253 (Guj)(HC)

  1. S. 144C : Reference to dispute resolution panel – Where the matter was remanded by the ITAT for de novo assessment, the entire procedure under 144C had to be followed. [S.254 (1)]

Where the matter was remanded to the AO for passing an order of assessment de novo, the entire procedure prescribed under section 144C had to be followed by the AO starting from passing a draft assessment order. Since the AO had straightaway passed the final assessment order, the proceedings were null and void. Not following the prescribed procedure is not a technical or a procedural defect, which can be cured. (AY. 2007-08)

PCIT v. Headstrong Services India Pvt. Ltd. (2021) 197 DTR 329 /318 CTR 369 (Delhi) (HC)

  1. S. 147 : Reassessment – After the expiry of four years – No failure to disclose any tangible materialReassessment is held to be bad in law. [S. 40(b)(ia), 148]

A notice under section 148 was challenged by the assessee. The reasons recorded stated that the assessee was a partner in the firm named M/s Vijya Laxmi Exports where an audit objection was raised as the deed of the partnership firm provided a clause to provide for interest and remuneration as per section 40(b) but no provision was made by the firm. High Court quashed the reopening proceedings which were beyond a period of four years as there was no failure to disclose any tangible material and there was no escapement of income. There was no material on record to show that assessee actually received any interest on capital or remuneration from the firm and where no such income is earned, there was no question of taxing the same. (SCA No. 20607 of 2018 dt. 7-01-2021) (AY.2011-12)

Devebhai Mafatlal Patel v. ACIT (2021) 318 CTR 722 / 110 CCH 53 (Guj.)(HC)

  1. S. 147 : Reassessment – Within four years – HC directed AO to re-look at the matter in light of the declaratory and curative amendment in 40(a)(ia) being retrospective from 1-4-2005 [S. 40(a)(ia), 148, 194C, Art 226]

A notice under section 148 was challenged by the assessee. The reasons recorded stated that the assessee had not disclosed freight receipts from exporters and net freight paid to La Freightlift Pvt Ltd fell within section 194C as payment to sub-contractor and assessee failed to deduct tax in the year under consideration. Disallowance of the entire amount was made under section 40(a)(ia) of the Act. Assessee explained the AO that the freight rates from exporters were actual payment received on behalf of La Freightlift Pvt Ltd who has paid the tax amount but since the AO did not accept the explanation a writ was filed. HC directed the AO to re-look at the matter in light of the amendment to section 40(a)(ia) being declaratory and curative in nature would have retrospective effect from 1-4-2005. (WP Nos. 19565 of 2008 dt. 6-01-2021) (AY.2005-06)

Sima Agencies v. ITO (2021) 318 CTR 516 / 198 DTR 33 / 110 CCH 52 (Mad.)(HC)

  1. S. 147: Reassessment – Principal officer – Director for short periodAssessee cannot be held to be Principal Officer – Notice was set aside. [S. 2(35), Art 226]

Allowing the petition the Court held that here being acting directors of company, department could have proceeded against any one of such acting directors for reassessment proceedings and could have treated any one of them as Principal Officer. Accordingly since effective proceedings would not be possible with petitioner as Principal Officer impugned order treating petitioner as a Principal Officer was to be set aside. (AY. 2011-12)

Suvendra Kumar Panda v. ITO (2021) 276 Taxman 171 (Mad.)(HC)

  1. S. 153A : Assessment – SearchAssessment on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act) is not valid. The Assessee also had no opportunity to cross-examine the said witness [S. 132, 153C]

A statement recorded u/s 132(4) has evidentiary value but cannot justify the additions in the absence of corroborative material. (ii) The statement also cannot, on a standalone basis, constitute ‘incriminating material’ so as to empower the AO to frame a block assessment u/s 153A (iii) If the statement was recorded in the course of search conducted in the case of a third party, and assuming the statement is construed as ‘incriminating material belonging to or pertaining to a person other than person searched’, the only legal recourse available to the department is to proceed in terms of S. 153C of the Act by handing over the same to the AO who has jurisdiction over such person. An assessment framed u/s 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act) is not valid. The Assessee also had no opportunity to cross-examine the said witness (ITA NO. 23/2021 & CM APPL. 5385/2021 DT.. 12.02.2021)

Pcit(C)-3 v. Anand Kumar Jain (Huf) (Delhi)(HC), www.itatonline.org

  1. S. 153A : Assessment – Search or requisition – Objections raised by the Assessee – rejected with reasons – No violation of Principles of Natural Justice. [Art. 226]

The petitioner’s late father, Mr. K. Murugesan, was a partner in various firms. During the life time of K. Murugesan, the respondent- Department, on 10.08.2017, conducted search under section 132 of Income-tax Act, 1961, in all the concerns run by him. According to the petitioner, the statements obtained from the petitioner’s late father could not be retracted, as he had died, due to the harassment of the Department within three months from the date of the search. It is the case of the petitioner inter alia that the statements recorded by the respondent from him was retracted by him on 22.08.2019. According to the petitioner, the statements obtained from the petitioner’s late father under intimidating circumstances cannot be used against the petitioner for passing any orders against him. Further, the opportunity for cross examination was not afforded to the Petitioner and sufficient opportunity for hearing was also not given. It was held that, the respondent-Department has adhered to the principles of natural justice by providing a fair hearing and by giving the petitioner sufficient opportunity to raise all the contentions and the respondent has also given reasons for rejecting the objections raised by the petitioner under the impugned assessment orders.

M. Vivek (2021) 197 DTR 12 / 318 CTR 270 (Mad) (HC)

  1. S. 153C: Assessment – Income of any other person – Search The materials seized did not indicate any inflation of purchase expenses Assessment is held to be bad in law. [S.12AA, 132]

The Assessee was a medical charitable trust registered under section 12AA, running a multi-specialty hospital. A search action was conducted in case of third party who was a supplier of medical, surgical equipment and other accessories to hospital. On the basis of certain documents seized during search, AO concluded that assessee had siphoned off funds through said third party, allegedly resorting to huge inflation of expenses. Accordingly, a notice under section 153C was issued against assessee. Being aggrieved by the additions made by the AO, the Assessee made an appeal before the CIT(A), who allowed the appeals filed by the Assessee. The Tribunal found that materials seized did not establish any co-relation, document wise, with the four Assessment Years under consideration and therefore did not indicate any inflation of purchase expenses by assessee trust. The Tribunal further noted that the third party had approached the Settlement Commission and submitted an application wherein Commissioner stated that there was no supporting evidence of returning cash withdrawn by the third party to the hospital.

Relying on the decision of Hon’ble Supreme Court in the case of CIT v. Sinhagad Technical Education Society (84 Taxmann.com 240) , the Hon’ble Madras High Court held that ,in absence of any incriminating documents or evidence discovered against assessee, during its search upon the third Party, jurisdiction under provisions of section 153C could not be assumed against assessee. Accordingly, the appeals filed by the Revenue were dismissed. (TCAl No.161 to 167 of 2020, dt.24-11-2020) (AY. 2009-10 to 2015-16)

PCIT v. S.R.Trust (2021) 123 taxmann.com 311 / 277 Taxmann.com 133 (Mad)(HC)

  1. S. 160 : Representative assesseeAssociation of persons – Corpus donation – Trustees of discretionary trust not assessable as association of persons – Description in returns not relevant. [S. 2(24)(xv), 2(31)(v), 56(2)(vii) 161]

The assessee-trust received donations from six of its group companies amounting to Rs. 25 crores which were credited to the balance-sheet of the assessee under the head addition to corpus and not routed through the profit and loss account. It filed its return in the status of an association of persons. The Assessing Officer treated the sum of Rs. 25 crores credited directly to the balance sheet as income from other sources and taxed the said receipt which was up held by the CIT(A). On appeal the the Tribunal held that a discretionary trust could not be treated as an individual for all purposes of the Act especially when the term individual was not defined under the Act. It held that the amount Rs. 25 crores received by the assessee could not be considered as income from other sources under section 56(2)(vii) read with section 2(24)(xv) of the Act and accordingly, deleted the addition.

On appeal by the Department the Court held that the settlor had created a trust and appointed trustees, to administer the trust for the benefit of certain identified beneficiaries who were top level executives of the S group of companies and who were admittedly individuals. Those individuals had not come together with a common purpose and they did not have any role in the operation or administration of the trust. Therefore, the assessee could not be treated as an association of persons. The Court also held that the trustees were only the representatives of the beneficiaries and the income was required to be taxed in the like manner and to the same extent as it would be in respect of beneficiaries. All the beneficiaries were individuals and therefore, the assessee in the instant case, having received the perquisite on behalf of its beneficiaries, should be treated as a representative of those beneficiaries and therefore, had to be assessed as an individual. Court also held that Consequently, the contribution of Rs. 25 crores was to be assessed as income under section 56(1) under the head Income from other sources the donation was received by discretionary trust and not relative of individual. (AY.2014-15)

CIT v. Shriram Ownership Trust (2021) 430 ITR 356 /197 DTR 153/ 318 CTR 233 (Mad)(HC)

  1. S. 194A : Deduction at source – Interest other than interest on securities – No liability to deduct tax based on the specific exclusion provided to the assessee under section 194A(3)(v) – Provisions would not apply [S. 40(a)(ia), 194A(3)(i)(b), 194A(3)(v)]

AO disallowed interest paid to various members of the society where interest exceeded 10,000 under section 40(a)(ia) and relied on the provisions of section 194A(3)(i)(b). The CIT(A) relied on provisions of section 194A(3)(v) and held that provisions of section 194A(1) did not apply to income credited or paid by a co- operative society to its members. High Court upheld the Tribunal and CIT(A) order relying on the Finance Act 2015, where clause (v) of section 194A(3) was amended to exclude co- operative banks w.e.f 1-6-2015 which indicates that prior to the said date benefit of exemption was available to co-operative banks. (ITA No. 14 of 2017 dt. 7-01-2021) (AY.2013-14 & 2014-15)

PCIT v. The Goa State Co-operative Bank Ltd (2021) 318 CTR 497 / 197 DTR 305 / 110 CCH 54 (Bom.) (HC)

  1. S. 194H : Deduction at sourceCommission or brokerage Nationalized Bank – Service charges paid for routing transactions to National Financial Switch and Cash Tree – Not be liable to deduct tax at source. [S. 40(a)(ia)]

The Assessee, a Nationalized bank had filed original return of income which was revised subsequently. The Assessee’s case was selected for scrutiny and AO had made various disallowances including the disallowance under section 40a(ia) of the Act in respect of service charges paid to National Financial Switch and Cash Tree. Aggrieved by the said order, the Assessee preferred an appeal before the CIT(A) who partly allowed the appeal. Aggrieved by the same, the Revenue filed an appeal before the Tribunal. However, the Tribunal dismissed the appeal filed by the Revenue. On appeal to the High court, it held that section 194H would apply if the payment was received or is receivable directly or indirectly by a person acting on behalf of another person for services rendered, not being professional and for any services in the course of buying and selling of goods or in relation to any transaction relating to an asset, valuable article or thing. The relationship between the Assessee and the acquiring bank in case of credit card swiping transaction is not of an agency but that of two independent basis and on principal-principal basis. In the present case, even assuming that the transaction was being routed to National Financial Switch and Cash Tree, then also it is pertinent to mention here that the same is a consortium of banks and no commission or brokerage is paid to it. Thus, it does not act as an agent for collecting charges. Therefore, relying on Hon’ble Delhi High Court decision in case of JDS Apparels (P.) Ltd. (2015) 370 ITR 454 (Delhi)(HC) held that provisions of section 194H of the Act were not attracted in the present case and thus dismissed the Revenue’s appeal. (ITA No. 427 of 2015, dt. 23-11-2020) (AY 2011-12)

CIT.v. Corporation Bank (2021) 123 taxmann.com 204/ 277 Taxmann.com 207 (Kan) (HC)

  1. S. 249: Appeal – Commissioner (Appeals) – Form of appeal and limitation – Appeal could not be dismissed on a technical ground of not filing the same electronically

Right to appeal is a substantive right. An appeal should not be rejected on technical grounds. Where the law had been amended in 2016 requiring the assessees to e-file its appeals before the CIT(A) but the assessee filed a manual appeal, however, in the same year e-filing of the same appeal was done along with an application for condonation of delay, CIT(A) ought to have admitted and decided the appeal on merits and not dismissed the same on a technical ground. (AY. 2008-09, 2009-10 and 2013-14)

CIT v. A.A. Antony (2021) 197 DTR 425 / 318 CTR 691 / 431 ITR 207 / 125 taxmann.com 170 (Mad) (HC)

  1. S. 251 : Appeal – Commissioner (Appeals) – Powers – Doctrine of merger – CIT(A) dismissed appeal as being infructuous basis notice issued u/s 263 by CIT on grounds unrelated to that before CIT(A) – CIT(A) ought to have adjudicated appeal on merits hence matter remanded back to CIT(A).[S.263]

Held by the Court that taking into account the fact that appeal is maintainable in respect of the subject matter, which does not pertain to grounds covered in notice under section 263 of the Act, the CIT(A) ought to have adjudicated the appeal on merits and in respect of the grounds, which were not the subject matter of notice under section 263 of the Act. Matter remanded back to CIT(A). (ITA No. 102 of 2012 dt. 21-09-2020) (AY. 2004-05)

Karnataka State Beverages Corporation Ltd. v. ACIT (2020) 121 taxmann.com 89 / (2021) 277 Taxman 58 (Karn) (HC)

  1. S. 254(1) : Appellate Tribunal – Duties – Document not filed due to mistake of counsel – Dismissal of appeal – Not justified.

Allowing the appeal the Court held that, it is trite law that for the fault committed by counsel, a party should not be penalized. Accordingly, that due to inadvertence, the senior chartered accountant engaged by the assessee could not comply with the directions of the Tribunal to file documents. The Tribunal, in fact, should have adjudicated the matter on the merits instead of summarily dismissing it. The order of dismissal was not valid.(AY.2016-17)

Swetha Realmart LLP v. Dy CIT (2021) 430 ITR 159 (Karn)(HC)

  1. S. 254(1) : Appellate Tribunal – Duties – Adducing additional evidence – assessee filed additional evidence – Tribunal passed order without dealing with application to file additional evidence – order set aside – matter remanded – Tribunal directed to first dispose the application for additional evidence and then pass order on merits for the appeal. [ITAT R. 29]

The appellant had filed an application for admission of additional evidence in terms of rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963 (hereinafter referred to as the ‘ITAT Rules’) on 14th January 2019. On 17th January 2019, the Tribunal concluded its hearing in the said appeal. Thereafter, on 22nd January 2019, the appellant filed its synopsis/written submissions. On 28th February 2019, the Tribunal passed the impugned order without dealing with the application filed by the appellant for admission of additional evidence under Rule 29. After the impugned order had been passed by the Tribunal, the appellant preferred an application for rectification dated 8th May 2019 under section 254(2). However, till date no order has been pronounced by the Tribunal on the application filed. The High Court in the view of the case of Jyotsna Suri [2003] 128 Taxman 33 held that the Tribunal was bound to decide the application under Rule 29 and thereafter to dispose of the appeal on merits. (ITA No. 211 of 2020, CM APPL No.32045-32047 of 2020, dt. 22-12-2020)

HL Malhotra & Co. (P.) Ltd. v. DCIT (2021) 125 taxmann.com 70 / 431 ITR 148 (Delhi)(HC)

  1. S. 254(2): Appellate Tribunal – Rectification of mistake apparent from the record – Ex Parte order – Limitation – Notice was not served though change of address was intimated – Rejection of application for recall of order on ground of bar of limitation – Order quashed and set aside – Matter remanded to Tribunal.[S.253, 254(1), Art. 226]

The assessee filed an application under section 254(2) of the Act, for recall of the ex parte order remanding the matter to the Assessing Officer to decide the matter afresh after examining all the documents, including additional evidence as well as books of account, bills and vouchers, etc. The Tribunal held that it had no power to condone the delay in filing the application under section 254(2) as the assessee had filed the application after six months from the end of the month in which the ex parte order had been passed. On a writ petition contending that the assessee had changed its address and shifted to new premises and this fact was mentioned in the appeal filed by the assessee in form 35 against the order passed by the Dy Commissioner and the assessee was never served in the appeal filed by the Department before the Tribunal. On writ allowing the petition, that the course adopted by the Tribunal at the first instance, by dismissing the appeal for non- prosecution, and then refusing to entertain the application The assessee was never served in the appeal filed by the Department before the Tribunal. The Tribunal had erroneously concluded that the miscellaneous application filed by the assessee was barred by limitation under section 254(2) inasmuch as the assessee had filed the application within six months of actual receipt of the order. If the assessee had no notice and no knowledge of the order passed by the Tribunal, the limitation period would not start from the date the order was pronounced by the Tribunal. The order dismissing the application filed by the assessee under section 254(2) was quashed and on the facts the ex- parte order whereby the matter was remanded to the Assessing Officer was set aside. The Tribunal was directed to hear and dispose of the appeal on the merits.

Pacific Projects Ltd. v. ACIT (2021) 430 ITR 522 (Delhi)(HC)

  1. S. 260A : Appeal – High CourtSubstantial question of law – Additional questions cannot be raised by respondent.[S.144A, 260A (4)]

Court held that the power of the High Court to frame a substantial question of law at the time of hearing of the appeal other than the questions on which the appeal has been admitted remains under section 260A(4) and this power is subject however to two conditions, namely, (i) the court must be satisfied that the appeal involves such questions ; and (ii) the court has to record reasons therefor. There is a vast difference in cases where a reference is made to the High Court by the Tribunal on an application and an appeal under section 260A of the Act by an aggrieved person. Unless and until the aggrieved person is before the court by way of an appeal, the question of calling upon the court to frame an additional substantial question of law by invoking its power under sub-section (4) of section 260A of the Act does not arise. Accordingly the Court held that the assessee was precluded from raising any contention with regard to the jurisdiction of the Joint Commissioner to issue direction under section 144A of the Act nor anything about the procedure followed by the Assessing Officer pursuant to such direction. The underlying principle was that the Department could not be worse off in its appeal at the instance of the assessee who had not filed an appeal over such finding of the Tribunal. (AY.2014-15)

CIT v. Shriram Ownership Trust (2021) 430 ITR 356/197 DTR 153/ 318 CTR 233 (Mad)(HC)

  1. S. 263 : Commissioner – Revision of orders prejudicial to revenue Capital gains not chargeable – Investment in Bonds (2015 Amendment) – Amendment to S 54EC from 1-4-2015 restricting investment in assets from sale consideration on sale of original asset to Rs. 50 lakhs prospective nature – Revision is held to be bad in law. [S.45, 54EC]

Assessee, an individual, derived income from Capital Gains and other sources. Assessees case was selected for scrutiny and notice under S143(2) of the Act was issued. AO concluded the assessment and accepted the income declared. CIT invoking the powers under S 263 of the Act held that the Assessee is eligible for deduction under S 54EC of the Act to the extent of Rs. 50 lakhs whereas he has claimed deduction to the extent of Rs. 1 crore, which is in excess of the limit prescribed under the proviso to section 54EC of the Act and concluded that the Order passed by the AO is erroneous and prejudicial to the interest of the revenue, set aside the order of the AO and remitted back the matter to the AO.

On appeal, Tribunal held that the legislature itself has accepted the ambiguity in language of the proviso and has amended the law with prospective effect. It was further held that for prior Assessment Years on interpretation of the provisions, it was possible for the Assessee to claim deduction of Rs. 1 crore by investing Rs. 50 lakhs in each of the Financial Years but within six months from the date of transfer. Thus, it was held that the view taken by the AO was one of the possible views and therefore, the power under S 263 of the Act in the fact situation could not have been exercised by the CIT. The Tribunal quashed the order of the CIT.

On Departments appeal, High Court held that from close scrutiny of S 263 of the Act, it is evident that twin conditions are required to be satisfied for exercise of revisional jurisdiction under S 263 of the Act. Considering SC decision in Malabar Industrial Co. Ltd. v. CIT (243 ITR 83), it was held that the order of the AO cannot be treated as prejudicial to the interest of revenue. High Court further held that it is axiomatic that the view taken by the AO was one of the possible views and ruled in favour of the assessee. (ITA No. 343 of 2015 dt. 19-11-2020) (AY. 2009-10)

CIT v. Neena Krishna Menon (2021) 123 taxmann.com 205 / 277 Taxman 211 (Karn) (HC)

  1. S. 271(1)(c) : Penalty – ConcealmentNotice must specify whether there has been concealment of income or furnishing of inaccurate particulars of income – Levy of penalty is held to be not valid. [S.274]

Allowing the appeal the Court held that the notice did not specifically mention as to whether the assessee had concealed particulars of his income or furnished inaccurate particulars or both hence levy of penalty is held to be not valid . Followed CIT v. S. I. Paripushpam (2001) 249 ITR 550 (Mad) (HC) ( AY.2013-14)

Babuji Jacob v. ITO (2021) 430 ITR 259 (Mad)(HC)

  1. S. 277 : Offences and prosecutionsFalse statement – Verification – Only the concerned AO can file a complaint against the accused unless some strong incriminating material is found in the course of search/survey on a third party [S. 276C]

Ordinarily, it is only the concerned AO who completes the assessment/reassessment, who is competent to file a complaint and proceed under section 276C and 277 for willful evasion of tax or filing false verification. The Deputy Director, who had carried out search/survey in the case of a third party and wherein statements were recorded which loosely pertain to the accused, could not initiate the proceedings against the accused only on the basis of such statements, without any further incriminating material being seized which pertains to the accused.

DDIT v. Karti P. Chidambaram & Anr. (2021) 197 DTR 33 / 318 CTR 113 431 ITR 261/ 122 taxmann.com 146 (Mad) (HC)

Research Team

 

  1. S. 12AA : Procedure for registration – Trust or institution-: Application for registration u/s. 12AA denied as the society collected capitation fees at the time of admission to the college run by it

Appeals were filed before the Supreme Court by two assessees – Karnataka Chamber of Commerce and Industry and by Travancore Education Society.

Karnataka Chamber withdrew its appeal filed in the Supreme Court as it had opted to resolve its dispute under Vivad Se Vishwas Scheme, 2020. Travancore Education Society’s appeal before the Supreme Court challenged the High Court decision which had upheld the CIT’s order denying the assessee’s application for registration u/s. 12AA on the basis that the object of the society was not charitable as it collected capitation fee at the time of admission of students to its engineering college. Supreme Court dismissed Travancore Education Society’s appeal observing that there was no ground to interfere with the order passed by the High Court. [CA Nos 7664 of 2009 / 1955 of 2015 dt. 21st January 2021]

Karnataka Chamber of Commerce and Industry v. CIT (2021) 431 ITR 50/ 319 CTR 651 /199 DTR 305 (SC)

  1. S. 28(i) : Business Loss – Foreign exchange fluctuation loss – Mark to Market basis – SLP of revenue is dismissed. [S.37(1)]

SLP of revenue is dismissed, foreign exchange fluctuation loss. Mark to Market basis. From the Judgement of Gujarat High Court (ITA No. 1000 of 2017 dt. 27-6-2018 (AY. 2009-10)

PCIT v. Suzlon Energy Ltd. (2021) 276 Taxman 85 (SC)

Editorial: Followed, PCIT v. Suzlon Energy Ltd (SLPNo. 1422 of 2019 dt. 17-1-2020 ( SC)

  1. S. 40(a)(iib):Amounts not deductible -: Payment by a State Government undertaking to State Government – Matter remanded to the High Court to decide the constitutional validity of section 40(a)(iib)

Assessee had filed a writ petition before the High Court challenging the constitutional validity of section 40(a)(iib) of the Act urging that the said provision was discriminatory and violative of article 14 of the Constitution of India. High Court dismissed the writ petition without deciding the validity of section 40(a)(iib) holding that such a challenge need not be entertained at this stage as the AO in the pending assessment proceeding had issued a show cause notice as to why VAT expenditure need not be disallowed u/s. 40(a)(iib). High Court held that the challenge to the vires of the provision could be raised at an appropriate moment. Supreme Court held that the High Court ought to have decided the challenge to the vires of section 40(a)(iib) as the vires of a provision goes to the root of the matter. Supreme Court observed that as show cause notice was issued by the AO the assessee had approached the Court at the right moment and it need not have waited till the assessment was finalized. Supreme Court remanded the matter back to the High Court to decide the vires of section 40(a)(iib). [CA No. 3821 of 2020 dt. 25.11.2020]

Tamil Nadu State Marketing Corporation Ltd. v. UOI (2020) 429 ITR 327 317 CTR 961 / 196 DTR 289 (SC)

  1. S. 80P: Co-operative societies – Section 80P must be read liberally and reasonably and in case of ambiguity, in favour of the assessee – once a co-operative society provides credit facilities to its members, the fact that it also provides credit facilities to non-members does not disentitle it from availing of the deduction u/s. 80P(2)(a)(i) – s. 80P(2)(a)(i) does not require that the society has to give agricultural credit only – s. 80P(4) is to be read as a proviso which excludes co- operative banks which are co- operative societies engaged in banking business and not primary agricultural credit societies

Assessee provided credit facilities to its members for agricultural and allied purposes and was classified as primary agricultural credit society by the Registrar of Co-operative Societies under the Kerala Co-operative Societies Act, 1969. It claimed deduction under s. 80P(2)(a)(i) of the Income-tax Act. Post insertion of
S. 80P(4) which denied deduction to co-operative bank other than primary agricultural credit society, etc. AO denied the claim for deduction holding the agricultural credits given by the assessee to its members were negligible and that the credits given to such members were for purposes other than agricultural credit. Supreme Court held that section 80P being a benevolent provision must be read liberally and reasonably and in case of any ambiguity it must be interpreted in favour of the assessee. Supreme Court observed that section 80P(2) (a)(i) which covers a co-operative society engaged in the business of banking or providing credit facilities to its members does not require that the assessee has to be a primary agricultural credit society. Supreme Court noted that section 80P(2)(a)(i) does not require that the society has to give agricultural credit only. It further observed that once the co-operative society provides credit facility to its members, the fact that it also provides credit facility to non-members does not disentitle the society from availing of deduction. However, profits attributable to loans given to non-members cannot be deducted. Supreme Court observed that the object of section 80P(4) was to exclude co-operative banks that function at par with other commercial banks and noted that as primary agricultural credit societies are not entitled for obtaining a banking license would not be hit by this provision. [CA Nos. 7343-7350 and 8315 of 2019 dt. 12.01.2021) (AY. 2007 – 08 to 2010 – 11 and 2012 – 13]

Mavilayi Service Co-Operative Bank Ltd. v. CIT (2021) 431 ITR 1/ 318 CTR 609 / 197 DTR 361 (SC)

  1. S. 127: Power to transfer cases – Search and Seizure – Show cause notice had clearly spelt out reasons for proposed transfer of case of assesse – Dismissal of petition by High Court is affirmed. [S. 132 Art. 226]

A search under section 132 was conducted upon assessee company and its directors during which incriminating materials tending to show huge tax evasions were recovered . PCIT Madurai transferred case of assessee from Tiruneveli to Madurai for reason that detailed, coordinated and centralized investigation was necessary. Assessee contended that there was no clear reasons provided for transfer of its case. It further contended that its Chartered Accountant was stationed at Tirunelveli and that he was 85 years old and it would cause hardship for assessee if its case would be transferred to Madurai. Dismissing the petition High Court held that show cause notice had clearly spelt out reasons for proposed transfer of case of assesse. Further, grievance of assessee that its Chartered Accountant was an elderly person was also imaginary because Income-tax returns were now filed online. High Court by impugned order held that, on facts, order of transfer of case was to be upheld. SLP of the assessee is dismissed .

V.V. Minerals v. PCIT (2021) 276 Taxman 279 (SC)

Editorial: Affirmed the Judgment in V.V. Minerals v. PCIT (Mad) (HC) (WAMD No. 417/2020 dt 30 -6 -2020)

  1. S. 195 :DEDUCTION AT SOURCE – NON-RESIDENT – OTHER SUMS – AMOUNT RECEIVED FOR SUPPLY OF SOFTWARE – NOT LIABLE TO DEDUCT TAX AT SOURCE DTAA -INDIA [ ART, 12 , 9 (1)(VI), ART, 12 ]

Court Held That Given The Definition Of Royalties Contained In Article 12 Of The Dtaas Mentioned In Paragraph 41 Of This Judgment, It Is Clear That There Is No Obligation On The Persons Mentioned In Section 195 Of The Income Tax Act To Deduct Tax At Source, As The Distribution Agreements/Eulas In The Facts Of These Cases Do Not Create Any Interest Or Right In Such Distributors/End-Users, Which Would Amount To The Use Of Or Right To Use Any Copyright. The Provisions Contained In The Income -Tax Act (Section 9(1)(Vi), Along With Explanations 2 And 4 Thereof), Which Deal With Royalty, Not Being More Beneficial To The Assessees, Have No Application In The Facts Of These Cases. Our Answer To The Question Posed Before Us, Is That The Amounts Paid By Resident Indian End- Users/Distributors To Non-Resident Computer Software Manufacturers/Suppliers, As Consideration For The Resale/Use Of The Computer Software Through Eulas/Distribution Agreements, Is Not The Payment Of Royalty For The Use Of Copyright In The Computer Software, And That The Same Does Not Give Rise To Any Income Taxable In India, As A Result Of Which The Persons Referred To In Section 195 Of The Income -Tax Act Were Not Liable To Deduct Any Tds Under Section 195 Of The Income Tax Act. The Answer To This Question Will Apply To All Four Categories Of Cases Enumerated By Us In Paragraph 4 Of This Judgment. (Canos . 8733-8734 Of 2018 Dt. 2-3-2021)

Engineering Analysis Centre Of Excellence P. Ltd. v. Cit (2021) 125 Taxmann.com 42 ( Sc) Www.itatonline .Org

  1. S. 254(2A): Appellate Tribunal –Stay- Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee. [Art. 14]

Dismissing the appeal of the revenue the Court held that ,since the object of the 3rd proviso to S. 254(2A) is the automatic vacation of a stay that has been granted on the completion of 365 days, whether or not the assessee is responsible for the delay caused in hearing the appeal, such object being itself discriminatory, is liable to be struck down as violating Article 14 of the Constitution of India. Also, the said proviso would result in the automatic vacation of a stay upon the expiry of 365 days even if the Appellate Tribunal could not take up the appeal in time for no fault of the assessee. Further, vacation of stay in favour of the revenue would ensue even if the revenue is itself responsible for the delay in hearing the appeal. In this sense, the said proviso is also manifestly arbitrary being a provision which is capricious, irrational and disproportionate so far as the assessee is concerned. Consequently, the third proviso to s. 254(2A) will now be read without the word “even” and the words “is not” after the words “delay in disposing of the appeal”. Any order of stay shall stand vacated after the expiry of the period or periods mentioned in the Section only if the delay in disposing of the appeal is attributable to the assessee. (CA No. 1127 of 2021 dt. 6-4-2021)

Dy. CIT v. Pepsi Foods Ltd. (Now Pepsico India Holdings Pvt. Ltd.) (SC)
www.itatonline.org

  1. S. 261 : Appeal – Supreme Court – Decision of Jurisdictional High Court is binding though the SLP is pending before Supreme Court – Low tax effect – SLP filed by the revenue is dismissed as withdrawn due to low tax effect. [S.14A, R.8D]

In appellate proceedings, Tribunal restricted disallowance under section 14A, read with rule 8D by relying on decision of Jurisdictional High Court . Revenue filed appeal against said order by raising a plea that they had filed an SLP before Supreme Court against decision relied upon by Tribunal – High Court took a view that mere filing of an SLP by revenue to Apex Court, in absence of any stay, would not in any manner impact binding nature of orders of Jurisdictional High Court on all authorities functioning within State – High Court, thus, dismissed revenue’s appeal – Revenue sought to withdraw SLP filed against order of High Court due to low tax effect – Whether, on facts, SLP filed by revenue was to be dismissed as withdrawn. (AY. 2006-07)

CIT v. Enercon India Ltd. (2021) 276 Taxman 88 (SC)

A Warm Greetings to all the Members on the occasion of Telugu New Year, Gudi Padwa, Ugadi, Baisakhi, Cheti Chand, Chaitra Navrati and all other National Events.

In the month of February and March, 2021, I have attended following Physical Programmes which are as under:-

  1. ITAT Foundation Day Function – National Conference 2021 on 27th & 28th February, 2021 at Kevadia (Gujarat)

  2. Half Day Seminar at Raipur on 13th March, 2021

  3. Half Day Seminar at Bubaneshwar on 14th March, 2021

  4. Full Day Seminar at Varanasi on 27th March, 2021 alongwith a unique Kavi Sammelan was organized on conjoined Bajras (Big Boats). The evening culminated with the delegates witnessing the Ganga Aarti and sailing along the Varanasi Ghats listening to traditional poets Manjari Pandey and Kunwar Singh Kunwar. The Cultural Program having famous Banarasi Semi Classical Singer and Folk Artist Dr. Sucharita Gupta who enthralled the audience with her performance. Holi was played with rose petals which is the essence of Gulab Baari.

We had organised Webinar jointly with Ranka Public Charitable Trust on 7th March, 2021.

Due to the second wave of Covid 19 pandemic situations all over the country, we would like to work on electronic mode for atleast one month.

In this connection, we are trying to conduct Virtual Programmes in association with Local Bar Association which will also help in joining more members into AIFTP.

I would like to inform you that, Two Day National Tax Conference to be held on 10th & 11th April, 2021 has been postponed for the time being. The new dates will be announced by the Local organisors at the earliest. As soon as the same is announced, we will inform you all accordingly.

As you all know the concessional membership fee announced in the 3rd NEC Meeting, is available only upto 30th June, 2021, I request you to kindly utilize this opportunity to join new members into the Federation as I have set the target of 2000 new membership before 30th June, 2021. The Membership can be applied through our website.

All are requested to co-operate and involve everyone in Virtual AIFTP Programmes and may help us to get away from the mental agony of this pandemic situation, which will get Federation to the greater heights in this disaster time.

All are requested to wear a mask with proper distancing and sanitise regularly and take care of yourself, your family members and society at large.

 

Place: Eluru 

Dated: 18-4-2021

M. Srinivasa Rao
National President, AIFTP

With a heavy heart I pen this editorial as one of the Past Presidents AIFTP Mr. Bharatji Aggarwal, Senior Advocate left for his heavenly abode on 4th April, 2021. I offer my heartfelt condolences to the bereaved family. Shri Bharatji Aggarwal, Senior Advocate was National President of AIFTP during calender years 2008 and 2009. He led the organization from the front and provided guidance to the young generation of professionals. Sir, you will always be remembered your warmth and unassuming nature.

Wishing you all a Very Happy Ugadi, Gudi Padwa, Sajibu Chircoba, Chetichand and Vishu. At the same time I wish all professional colleagues a very happening Financial Year (FY) 2021-22. The COVID-19 pandemic ruined the FY 2020-21. The visible green shoots in the fourth quarter of the last FY are in the red zone due to the rising numbers of active COVID-19 patients in last few days. At national level, we are consistently adding more than 2 lakhs cases per day in last several days. With another round of the fresh ‘çurbs’ or lockdown ( by whatever name one might call), the brighter side of life is, we are able to devote some time every day to passions which we could not indulge in life pre-covid; as I chose to pick up books, I cannot help but wonder which is more profound- the greatness of those authors who could foresee things which might happen centuries after their lifetime or the rigidity of human mind and human societies that do not see life in the light of reason and logic.

I am extremely saddened to see ourselves once again hiding behind the four walls of our homes, fearing for life; the crowding we find all around- social, political, religious etc., the COVID-19 inappropriate behavior all around coupled with Vaccine hesitancy makes me concur with Issac Asimov when he said “The saddest aspect of life right now is that Science gathers knowledge faster than society gathers wisdom” because all exhortations from the scientific community world over seem to have fallen on deaf ears when we find not just ordinary people but even people in responsible positions in public life resort to gross violation of COVID-19 norms of behavior.

The Hon’ble Finance Minister moved more than 100 amendments to the Finance Bill, 2021 before it became Finance Act, 2021. It is a disappointment to note that the Hon’ble Finance Minister not even bothered to acknowledge that several leading professional bodies, including All India Federation of Tax Practitioners have expressed serious concerns with respect to the insertion of Sub-sections (7) to (9) to section 255 of the Income tax Act, 1961 regarding the Scheme of Faceless operation of Income Tax Appellate tribunal. It is quite unfortunate to note that the North Block treats the professionals and professional bodies like ours as lobbies with vested interests. Here it may not be out of place to mention that the actions of the tax gatherers run contrary to the objects and intentions of the policy makers. The Direct Tax Vivad Se Vishwas Scheme, 2020 (DTVSV,2020) was introduced with an avowed object to mitigate undesirable and vexatious litigation, pending before CIT(A) to Supreme Court. With respect to treatment of assessments under regular scrutiny assessment proceedings under section 143(3) and 144 wherein additions are made, relying on a search and seizure operation made in case of a third party, the Central Board of Direct Taxes (CBDT), in its Circular no. 21 dated 4th December, 2020 in reply to answer to question no. 70 clarified that the same are to be treated as search cases for the purpose section 3(b) of the DTVSV 2020. However, on 23rd March, 2021 a further clarification was issued. Para 4 of the Clarification which is as under is self-explanatory:

  1. Several representations have been received seeking further clarity with regard to the classification of a case as a ‘search case’ for the purpose of Vivad se Vishwas. The matter has been examined. In order to remove any uncertainty in this regard, and in exercise of powers under section 10 and 11 of Vivad se Vishwas, it is hereby clarified that a ‘search case’ means an assessment or reassessment made under section 143(3)/144/147/153A/153C/158BC or section 158BD of the Income-tax Act on the basis of search initiated under section 132, or requisition made under section 132A of the Income-tax Act. The FAQ no. 70 of circular 21/2020 stands modified to this extent.

Despite the above clarification, the Department is not prepared to accept this position before the Hon’ble High Court where the stand of the department taken, relying on the circular 21/2020, is under challenge. We request the Hon’ble Finance Minister to interact with professionals without the interpreters from the officialdom. Our suggestions are not in favour or against the revenue or the assesses. The recent example is the success of the DTVSV, 2020.

The present issue is Tax Companion for professionals. All important decisions since the last issue of Tax Companion i.e. March, 2020 issue of the AIFTP Journal have been covered in this issue. I thank my research team and the esteemed members of the Editorial board for taking out their valuable time for the AIFTP Journal. Before I conclude I would like to correct my mistake of not including the name of Ms. Deepa Khare, Advocate from Pune in the research team for 80 Landmark Decisions of the Special Benches. My sincere apologies for the oversight on my part. I once again thank all the contributors of this issue of the AIFTP- Journal. Strictly adhere to COVID-19 appropriate behavior and remain safe.

 

K. Gopal,
Editor

Respectful Homage to Late Shri Bharat Ji Agarwal, Senior Advocate, Allahabad High Court and

Past National President, All India Federation of Tax Practitioners (AIFTP) (2008 & 2009)

4th April was one more shocking news about my respected Bharatji departure to his right place in Heaven. He was a roving encyclopaedic person, a judge maker and all-rounder in the letter and spirit. In Allahabad High Court I have seen him arguing with battery of juniors with him. His departure has ended one more era. I convey my heartfelt condolences to his family with prayer to give them enough strength to bear this irreparable loss. Om Shanti.

P. C. Joshi, Advocate,
Past National President, AIFTP

 

A Tribute of Remembrance – Late Shri Bharat Ji Agarwal, Senior Advocate, Allahabad High Court and Past National President of the All India Federation of Tax Practitioners (AIFTP), a legend of tax profession known for his integrity, ethics and above all a very good human being who possessed humility and respect for others – A role model to tax professionals.

Shri Bharat Ji Agarwal, Senior Advocate, Allahabad High Court one of the tallest figures of the Tax Bar has left for his heavenly Abode on 4-4-2021. I had an occasion to meet Shri Bharat Ji Agarwal in the year 1996 when AIFTP has arranged a National Convention at Kolkata, where in Shri P. C. Joshi, Advocate from Mumbai was elected as National President, wherein Shri Bharat Ji Agarwal was one of the Speaker. Ever since I am closely associated with Shri Bharat Ji Agarwal.

When I was elected as Dy. President of the AIFTP we desired that Shri Bharat Ji Agarwal may be requested to take the responsibility as Vice-President, North Zone and after the term of Shri V. Ramachandran, Senior Advocate, Madras High Court, Shri Bharat Ji Agarwal, Senior Advocate, Allahabad High Court should take over as National President of the AIFTP. Myself and Mr. Kishor Vanjara meet Shri Bharat Ji Agarwal at Mumbai and requested him to accept our request. He politely told us Mr. Sarin, Advocate from Delhi is much senior in the AIFTP if he agrees then only he will accept our request. After persuasion and a receiving the phone call from Shri N. M. Ranka, Senior Advocate, Jaipur, Shri V. Ramachandran, Senior Advocate, Madras High Court, Shri M. L. Patodi, Advocate, Kota and Shri P. S. Sarin, Advocate, Delhi, Shri Bharat Ji Agarwal has accepted the responsibility in spite of having large number of matters before Allahabad High Court every day, this proves the great quality of Shri Bharat Ji Agarwal who was not after the post and devotion to serve the tax profession.

The AIFTP was trying to hold at least one seminar at Allahabad since number of years, however, we could not hold a conference, when I became the National President we have made an request to Shri Bharat Ji Agarwal to hold Two Day National Conference at Allahabad, Shri Bharat Ji Agarwal agreed and made Mr. Sanjay Kumar, Advocate, Allahabad as a Convenor. It was a memorable Two Day Conference and it is only seminar of the AIFTP till date wherein more than 45 sitting Judges of the Allahabad High Court and six Judges of the Supreme Court attended the inaugural session. This showed the respect Shri Bharat Ji Agarwal had with the judiciary of the Allahabad High Court and Apex Court. The hospitality extended by Mrs. Agarwal and family still we cherish in our memory.

Shri Bharat Ji Agarwal was known for giving encouragement to young lawyers, he has generously contributed to the AIFTP National Tax Moot Court competition in memory of Padma Vibhushan Late Dr. Nani A. Palkhivala and also attended the competition which was held in Mumbai. When a National Tax Moot Court was held in the year 2009 at Allahabad in the memory of Late Shri Raja Ram Agarwal Former Advocate General of U.P. in which more than 30 Former Judges of Supreme Court participated.

When the AIFTP has organised First International Study tour from 16th May to 29th May, 2004 to England and other European Countries and second Study to USA in May 2006 under the Chairmanship of Shri J. D. Nankani, Advocate, Mumbai as International Study Tour Committee, Shri Bharat Ji Agarwal actively participated and addressed to Law Society of England and Wales and Professional organisations Washington DC and New York at USA.

It is in the term of Shri Bharat Ji Agarwal, we could hold first International Tax Conference at Mumbai on 21st November, 2009 with Asia Oceanic Tax Consultants Association (AOTCA) where in professional organisations heads from 14 Countries participated in the International Tax Conference which was held at Mumbai.

Shri Bharat Ji Agarwal‘s worthy son Shri Piyush Agarwal who was active member of the AIFTP was elevated as a Judge of the Allahabad High Court on 22-11-2018, which made all the members of the AIFTP feel proud.

The AIFTP has lost one of the strong pillar and guiding force of the AIFTP.

Shri Bharat Ji Agarwal a legend of tax profession known for his integrity, ethics and a very good human being who possessed humility and respect for others – A role model to tax professionals. Shri Bharat Ji Agarwal was strong believer of almighty and whenever he used to visit Mumbai he used to visit Siddhivinayak Temple at Prabhadevi.

I pray his may his soul may rest in peace and give strength to his family members to bear the irrecoverable loss suffered by them.

It is difficult to believe that Shri Bharat Ji Agarwal is no more with us but his smiling face, very

affectionate look and guidance will always remain in our hearts.

Dr. K. Shivaram, Senior Advocate,
Past National President, AIFTP

Shri Bharatji Agarwal, the scion of the All India Federation of Tax Practitioners, was the guiding force behind the functioning of the AIFTP.

He was like an elder brother to me and whenever I used to call him for any guidance, he was always willing to help and support.

He has been an Senior Advocate par excellence in the matters of Indirect Taxes and he was well respected in the fraternity and also among the judges, a very learned and knowledgeable person who had authored books on Indirect Taxes and got various articles published on various topics.

He was also a humanitarian, who was spiritually inclined and advocated the path of dharma and peaceful nonviolent living. He was a caring husband and an affectionate father who brought up his children with dedication and discipline. I bow down to Late Bharatji Agarwal and pray to God that his soul rest in peace. Om Shanti, Shanti, Shanti

J. D. Nankani, Advocate,
Past President, AIFTP

It is a very bleak and black day in the history of All India Federation of Tax Practitioners to experience the fall of the shining Sun when the whole family of the federation is grieved with sad and sudden demise of our worshipful leader on 4/4/2021. It’s an irreparable vacuum which cannot be replaced by any one. My purposive association with my elder brother is always memorable not capable of being forgotten. While he showered his affection upon me, I had simulates learnt a lot about the importance of the federation and it’s full throated encomiums services to the nation in general and the fraternity in particular. I had always interestingly looked for his valuable guidance and was an admirer of his values based principles. Though for some time he had been ailing, time it was never thought of would soon deprive us all of his presence amongst all of us.

I sincerely convey my heart felt condolence to the members of the bereaved family and pray God to grant eternal relief to the departed soul from the dreadful cycle of birth and death with immersion with Supreme Divine Soul. I also long for the earliest restoration of the normalcy in the family. I affectionately call upon brother Justice Piyushji to remain composed pledging complete support and solidarity at the federation through out.

Dr. M. V. K. Moorthy, Advocate,
Past National President, AIFTP

It’s a matter of great sorrow for me to pen down the message for our past president Shri Bharatji Agarwal. Apart from being an intelligent, astute and outstanding advocate Shri Bharatji Agarwal was a friend philosopher and guide to many like me. His contribution to development of law is evident in huge number of reported and unreported cases, as also in excellent articles written by him. It was a pleasure to hear his expert comments in seminars.

His contribution to the Federation and specially to the North Zone is unparalleled. He revived the North zone and ensured that the leaders are encouraged to come forward not only in North Zone, in all the other zones of Federation he has moved during his Presidency. His quality of leadership would be remembered by one and all on account of him being not only leader but a true friend to all the fellow members. He was very kind at heart.

He would have a special place in my heart as my beloved uncle, being close to my father, Shri B.
C. Joshi, the Founder of Federation.

My prayer to Almighty to bestow eternal peace to his pious soul and give strength to bear this loss to Mrs. Agarwal-Auntiji, Hon’ble Judge Shri Piyush Agarwalji and all other family members.

Om Shanti.

Nikita Badheka, Advocate,
Immediate Past President, AIFTP

A Tribute to the pillar of Federation Shri Bharatji Agarwal.

Bharatji Agarwal Sir was introduced by Late Shri V. Ramachandran, Sr. Advocate and Past President, AIFTP at his office at Chennai (Tamil Nadu) subsequently I have witnessed his orate ship in National Tax Conference at Hyderabad and other various places all over the Country after initiation of my life membership with AIFTP in the year 1994.

My introduction with Bharatji was on the platform of All India Federation of Tax Practitioners. I found a very distinct personality in him, very calm and cool but clear in his thoughts.

His contribution to AIFTP is commendable; it was a difficult task to bring the Advocates, CAs and Tax Professionals on one platform, to co-ordinate and to work for a common cause.

He used to give importance to unity of thoughts, unity of understanding and unity of action to achieve the goals with due regards to the duties. He used to preach that you will be tested by your deeds and therefore, lead a life full of duties.

His sudden demise has created a vacuum in the Federation. Not only his family has been shocked but the Federation has also become stray. Today Bharatji is not amongst us but his ideals, his values, his principles are with us which will guide to achieve the goals and to bring the Federation to greater heights of his dreams.

We pray that his departed soul rest in peace and strengthen his family members for this irreparable huge loss.

Shri M. Srinivasa Rao, TP,
National President, AIFTP