Research Team
30. S.2(14)(iii): Capital asset – Agricultural land-Capital gains – agricultural lands converted for non- agricultural purpose – lands did not fall within 8 kms from Municipality of Bangalore – Continued agricultural operation – Mere inclusion of land in Special Zone without any infrastructure development does not convert land into non-agricultural land – Not liable to capital gain tax – SLP of Revenue dismissed. [S. 45, Art.136]
Assessee got their agricultural lands converted for non-agricultural purpose. The assessee sold the part of the land and claimed the surplus as exempt. The Assessing Office assessed the surplus as capital gains. As per Certificate of Tahsildar and PWD Engineer ’s Certificate, distance between lands in question and BBMP was more than 8 kms. Tribunal had recorded that, though land was converted, assessee had continued agricultural operations which was evident from fact that income derived from agricultural operations declared by assessee were accepted by revenue. Even as per Notification issued by Central Government, lands did not fall within 8 kms from BBMP. The Tribunal held that the assessee was not liable to capital gains. Court also held that inclusion of lands in Special Zone cannot be a determining factor, hence, mere inclusion of land without any infrastructure development does not convert land into non-agricultural land. High Court affirmed the order of the Tribunal. SLP by the Revenue, was dismissed and the order of High Court affirmed. (AY. 2008-09)
CIT v. M.R. Anandaram (2023) 453 ITR 757 (SC)
Editorial: Refer, CIT v. M.R. Anandaram (HUF) (2022) 289 Taxman 121/ 216 DTR 432/ 328 CTR 90/ (2023) 450 ITR 94 (Karn) (HC), order of HighCourt affirmed.
31. S. 2(19AA): Demerger – Demerged entity not a running unit – Resulting entity eligible to set- off brought forward loss of demerged entity. [S.72A]
The High Court confirmed the order of the Tribunal wherein it was held that it would be incongruous to construe sub-clause (vi) of section 2 (19AA) as to mean a running unit. Thus, losses of demerged entity could be carried forward and set-off by the resulting entity. (AY. 2006-07)
CIT v. KBD Sugars And Distilleries Ltd. (2023)454 ITR 800 (SC)
32. S. 4 : Charge of income-tax – Capital or revenue – Subsidy – Sales tax exemption to be utilised for capital purposes – Cannot be treated as revenue in nature. [S. 28(i)]
The High Court affirmed the findings of the Tribunal that the sales tax exemption granted by the Government of Gujarat was a capital receipt exempt from tax instead of a revenue receipt as held by the AO. The Supreme Court while dismissing Department’s SLP also observed that the terms of the scheme require the recipient of the benefit to set up a new unit or substantially expand the existing unit and utilize a substantial portion of the amount retained (at least 50 percent of the subsidy) for capital purposes. (AY. 1999-2000, 2000-01)
CIT v. Gujarat Alkalies and Chemicals Ltd. (2023) 454 ITR 808 (SC)
33. S. 4: Charge of income-tax – Entrance fees paid by member – Capital receipt. [S.28 (i), Art.136]
Dismissing the SLP of the Revenue, the Court held that the order of the High Court affirming the order of the Tribunal holding that the entrance fees paid by a member of the assessee- club constituted a capital receipt. (AY. 2009-10)
PCIT v. Royal Western India Turf Club Ltd. (2023)453 ITR 460 (SC)
Editorial: Order in CIT v. Royal Western India Turf Club Ltd. (2023) 450 ITR 707 (Bom) (HC),affirmed.
34. S.9(1)(i) : Income deemed to accrue or arise in India Non-Resident – Software receipts – Not taxable in India – Supreme Court – special leave petition dismissed with liberty to revive if review petition in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT [2021] 432 ITR 471 (SC) allowed.
SLP dismissed against High Court order that payments received by assessee, US company, for grant of licence for use of software and further grant of rights for distribution of software products were not taxable as ‘royalty’ under provisions of Act and also under India-US DTAA
CIT v. Mol Corporation (2023) 454 ITR 32 (SC)
35. S.9(1)(i) : Income deemed to accrue or arise in India – Income attributed to PE set up in India is correct – No further attribution required – No reason to adjudicate whether there is a PE or not
If the High Court and ITAT have provided concurrent findings of fact that the profits attributable to the PE constituted from activity carried out in India relatable to bookings in India are at arm’s length then no further attribution is required. Also, on the same basis there is no reason to inquire whether a PE was constituted or not. (AY 2003-2004, 2006-2007)
DIT v. Travelport Inc. [2023] 454 ITR 289 (SC)
36. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty- Transferee authorised to use licensed software-No transfer of Copyright- Amount received is not royalty-DTAA- India-USA- SLP of Revenue dismissed. [S.90 (2) Art. 12, Art.136]
Dismissing the appeals of the Revenue the Court held that the Tribunal was right in holding that payments for licensing of software products of the assessee in the territory of India by it were not taxable in India as royalty under section 9(1) (vi) read with article 12 of the Double Taxation Avoidance Agreement. Dismissing the SLP the Court held that in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT (2021) 432 ITR 471 (SC) was allowed on the issue raised in the special leave petition, it would be open to the Department to get the special leave petitions revived.( AY. 1997-98, 1999-2000)
CIT (IT) v. Microsoft Corporation (Ms Corp) (2023)453 ITR 746 (SC)
Editorial: CIT (IT) v. Microsoft Corporation (Ms Corp) (2022) 445 ITR 6 (Delhi)(HC), affirmed.
37. S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty Import of licensed software under exclusive licences – Not royalty – Not liable to deduct tax at source – Pendency of Review petition – SLP of Revenue was dismissed. [S.195, 201(1), Art.136]
The High Court, following the ruling of the Supreme Court in Engineering Analysis Centre of Excellence Pvt. Ltd. v. CIT (2021) 432 ITR 471 (SC) answered in favour of the assessee the question whether the assessee was in default under section 201(1) of the Income-tax Act, 1961 for failure to deduct tax at source on payments in the nature of “royalty payments” as defined under Explanation 2 to section 9(1)(vi) of the Income-tax Act, 1961 and under the applicable Double Taxation Avoidance Agreements. SLP of Revenue dismissed giving liberty to the parties to rely upon the order if any passed in the review, disposed of the petition on the same terms leaving it open to the parties to initiate appropriate proceedings relying upon the order passed in review petition.(AY.2007-08 to 2012-13)
Add.CIT v. Wipro Ltd. (2023) 453 ITR 799 (SC)
Editorial: Affirmed, Wipro Ltd v. Addl. CIT (2023) 453 ITR 796 (Karn)( HC)
38. S.9(1)(vi) : Non-Resident – Royalty – Payment for software not royalty – DTAA India – China [Art. 12(3)].
Where the High Court following its order in the assessee’s own case in CIT (IT) v. ZTE CORPORATION [2017] 392 ITR 80 (Delhi)(HC) held that payment for software did not constitute royalty, on a petition for special leave to appeal to the Supreme Court :The Supreme Court dismissed the petition holding the issue is covered against the Department by its ruling in Engineering Analysis Centre of Excellence Pvt . Ltd. v. CIT [2021] 432 ITR 471 (SC) but granted liberty to the Department to get the special leave petition revived if the review petition in Engineering Analysis Centre of Excellence Pvt. ltd. v. CIT [2021] 432 ITR 471 (SC) was allowed on the issue raised in the special leave petition. (AY. 2013-14, 2015-16)
CIT (International Taxation) v. Zte Corporation (2023) 454 ITR 541 (SC)
S.9(1)(vii) : Income deemed to accrue or arise in India – Fees for
39. technical services – Non-Resident – Payments received from Indian customers for centralised services whether fees for technical services or fees for included services – special leave granted – DTAA -India -USA .[ S. 132, Art. 12((4)(a)]
The Tribunal held, following DIT v. Sheraton International Inc. [2009] 313 ITR 267 (Delhi) (HC) that the entire payments received by the assessee from its Indian customers on account of centralised services of sales and marketing, loyalty programs, reservation service, technological service, operational services and training programs or human resources did not constitute “fees for technical services” as defined under section 9(1)(vii) of the Income-tax Act, 1961 or “fees for included services” as defined under article 12(4)(a) of the Double Taxation Avoidance Agreement between India and the United States of America. The High Court, on appeal, held that no question of law arose, but that the orders passed in the appeal would abide by the final decision of the Supreme Court in the appeal against DIT v. Sheraton International Inc. [2009] 313 ITR 267 (Delhi)(HC)
On a petition for special leave to appeal to the Supreme Court, special leave was granted. (AY. 2016-17)
CIT (IT) v. Radisson Hotels International Incorporated (2023) 454 ITR 819 (SC)
40. S.9(1)(vi): Income deemed to accrue or arise in India – Royalty Receipts from sale of software licences to Indian customers – Not taxable in India – Special leave petition dismissed with liberty to revive if review petition in Engineering Aanalysis Centre of Excellence Pvt. Ltd. v. CIT [2021] 432 ITR 471 (SC), allowed.
On appeals from the order of the Tribunal holding that receipts of the assessee, a non- resident company, from sale of software licences to Indian customers and distributors were not taxable as royalty, the High Court, following Engineering Analysis Centre of Excellence Pvt.Ltd. v. CIT [2021] 432 ITR 471 (SC), dismissed the appeals, holding that no question of law arose. On a petition for special leave to appeal to the Supreme Court:
Held, dismissing the petition, that if the review petition in the case of Engineering Analysis Centre of Excellence Pvt. ltd. v. CIT [2021] 432 ITR 471 (SC) was allowed on the issue raised in the special leave petition, it would be open to the Department to get the special leave petitions revived. (AY. 1999-2000 to 2001-02)
DIT (IT) v. Microsoft Regional Sales Pte. Ltd. (2023)454 ITR 19 (SC)
41. S.10 (22): Income of educational institution- Exemption denied on facts and circumstances of the case-High court passes order against assessee and Supreme Court dismiss appeal.
The High Court held that the assessee-trust was not entitled to exemption under section 10(22) of the Act because the funds of the trust were being mis-utilised and misappropriated in the name of the managing trustee and chairman and his family members and the expenditure was incurred towards the house of the managing director and chairman-cum-managing trustee and huge amounts had been spent in the name of the family members of the managing trustee, the purchase of dental equipment for the college was not supported by valid receipts and documents, properties were purchased in the name of the managing trustee, the documentary evidence showed that the receipts were in the name of the trust and the collections of donations amounted to profit-making motive which could not be the object or the purpose of running a charitable educational institution, the Supreme Court dismissed the appeal.(AY. 1997-1998)
Sir M. Visveswaraya Education Trust v. CIT & Anr. [2023] 454 ITR 438 (SC)
42. S. 10 (23C): Educational institution – Exemption cannot be denied because a cess/fee/some other consideration is collected or received by an institution – it would not lose its character of having been established for a charitable purpose in the absence of any desire to earn profits. [S.2(15), 10(23C(iv), Companies Act, 1956 S. 25]
Assessee is an organisation incorporated u/s 25 of the Companies Act, 1956 as a not-for- profit organisation, registered u/s 12A of the Income-tax Act, 1961 to carry on the objects of promoting the Indian Trade through the medium of organizing trade fairs, exhibitions, etc in India and abroad and was also exempted from Income tax u/s 10(23)(iv) of the Act from 1989-90 onwards. It is a wholly owned Apex Trade Promotion body of the Government of India and Senior Officers of the Government are appointed as Directors and Members so as to ensure that the Government Rules and regulations are complied with. The AO following the earlier assessment orders, proceeded to conclude that the assessee is covered by the proviso to section 2(15) of the Act inasmuch as its activities are in the nature of business and thus held to be not charitable in nature and thereby denied the benefit of sections 11 & 12 of the Act despite the fact that it is registered u/s 12AA and notified u/s 10(23C) (iv) of the Act. The High Court dismissed the appeal of the Revenue by following the order in the Assessee’s own case, India Trade Promotion Organization v. Director General of Income-tax (Exemptions) [2015] 371 ITR 333 (Delhi) wherein it was held that exemption cannot be denied because a cess/fee/some other consideration is collected or received by an institution, it would not lose its character of having been established for a charitable purpose in absence of any desire to earn profits. Further, as both activities as mentioned in the first proviso viz (i) in the nature of trade, commerce or business or (i) the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen i.e., whether there is desire or motive to earn profits or do charity.
Accordingly, the High Court dismissed the appeal of Revenue. The Supreme Court dismissed the SLP holding that impugned order does not call for interference. (AY .2009-10 to 2011-12)
CIT (E) v. India Trade Promotion Organisation (2023) 454 ITR 799 (SC)
43. S. 10(23C) : Educational institution – On considering application of assessee for grant of exemption under S/10(23C)(vi), the CIT specifically observed that assessee’s activity could not be said to be solely for imparting education and that assessee was indulging in profits hence assessee was not entitled to exemption. [S. 10(23C) (vi)]
The appeal filed by the Revenue is allowed. The Hon’ble Supreme Court relied on the decision in the case of New Noble Educational Society (SC) which specifically observed, by the three- Judge Bench, that for claiming the benefit / exemption u/s 10(23C)(iiiab) of the Act which is para materia to Section 10(23C)(vi) of the Act, the activity of the assessee must be solely for educational purposes and if ultimately it is found that the activity is for profits the assessee is not entitled to the exemption u/s 10(23C) (vi) of the Act. As the factual finding of the CIT that the activity of the assessee could not be said to be solely for imparting the education is not disturbed by the High Court, hence the impugned order of the High Court needs to be quashed and set aside (AY 2006-07).
UOI v. Baba Banda Singh Bahadur Education Trust (2023) 293 Taxman 428 (SC)
44. S.10(23C): Educational institution – Exemption only if activity solely for educational purposes – Order of Commissioner valid – High Court judgment quashing order of Commissioner quashed and set aside. [S. 10(23C)(vi)]
The High Court fell in error in quashing the order of the Commissioner denying exemption to the Respondent educational institution. The profits amount to 67.81% without depreciation and 44.48% with depreciation hence the institution is not running solely for the purposes of education. (AY. 2006-2007)
UOI v. Baba Banda Singh Bahadur Education Trust [2023] 454 ITR 273 (SC)
45. S.10A: Free trade zone – Provisions written back and gains on foreign exchange fluctuation – Benefit of deduction u/s 10A could be allowed- Benefit to be granted before setting off of the brought forward losses
High Court held that the deduction under section 10A of the Act should be allowed for (i) Provisions written back towards link charges and annual day expenses; and (ii) the gains on foreign exchange fluctuation.
It further held that after the amendment of section 10A by Finance Act, 2000 with effect from 1-4-2001, said section has become a provision for deduction but the stage of deduction would be while computing the gross total income of eligible undertaking under Chapter IV of Act and not at a stage of computation of total income under Chapter VI of Act, thus, benefit of deduction under section 10A could be allowed before setting off of brought forward losses. The Department’s SLP against the said decision was dismissed. (AY. 2002-03, 2003-04)
CIT v. Cognizant Technology Solutions Of India Pvt. Ltd. (2023)454 ITR 1 (SC)
46. S. 11 : Property held for charitable purposes – statutory board set up by state – board constituted with object of aiding development of industries – Entitled to exemption – Special leave petition dismissed. [S. 2(15)]
SLP dismissed against order of High Court that where activity of assessee-development board, constituted under section 5 of Karnataka Industrial Area Development Act, 1966, was not commercial in nature, proviso to section 2(15) would not be applicable to assessee and, thus, it would be entitled to claim exemption under section 11 (AY.2011-12)
CIT (Ex. Karnataka Industrial Area Development Board (2023) 454 ITR 8 (SC)
47. S. 11 : Property held for charitable purposes – Activities carried on by the assessee, a development authority, constituted under the provisions of law with the object of development of areas according to plan are charitable in nature. [S. 2((15), 12AA]
Assessee is a development authority constituted under the provisions of the U. P. Urban Planning and Development Act, 1973 with the object of development of areas according to the plan and for that purpose, the authority has been empowered to acquire, hold, manage and dispose land and other properties to carry out building activities, engineering and other operations etc. The exemption was disallowed by the AO on the ground that registration u/s 12AA granted to the assessee stood cancelled vide order dated March 31, 2014, passed by the Commissioner of Income-tax, Ghaziabad. Further, the AO has disputed the charitable nature of activities carried out by the Assessee in terms of section 2(15) of the Act, 1961. The Tribunal relying on the co-ordinate bench’s decision observed that registration u/s 12AA had been restored. As far as activities in terms of section 2(15) were concerned, the Tribunal recorded a finding of fact that the nature of the activity of the respondent-assessee is charitable and it is not hit by the proviso to section 2(15) of the Act, 1961. It thereafter remanded the matter to the AO to examine the activity of the Assessee and if it is found to be in consonance with the object, to allow the benefit of exemption under section 11. Hon’ble High Court dismissed the Department’s appeal. Further, the SLP was dismissed by the Hon’ble SC, holding that the impugned order does not call for interference (AY. 2012-13).
CIT (E). v. Ghaziabad Development Authority (2023) 454 ITR 803 (SC)
48. S. 11 : Property held for charitable purposes – Assessee an authority established by the Government of Gujarat u/s. 27 of the Gujarat Town Planning Act with an object to develop Gandhinagar Urban Area in a controlled and disciplined manner – Work done in connection with supply of water, disposal of sewerage and provision of other services and amenities provided by the assessee an urban development authority are not commercial activities and thus not in nature of business. [S. 2(15), 12, 12AA]
Assessee is an authority established by the Government of Gujarat u/s. 27 of the Gujarat Town Planning Act with an object to develop the Gandhinagar Urban Area in a controlled and disciplined manner. It was incorporated to undertake the preparation of development plans, monitoring and control of development of town planning and carried out work in connection with the supply of water and disposal of sewage and provisions for other services and activities for the benefit of public at large. The Assessee was been granted registration u/s. 12AAA. The source of income of the authority was mainly grants either from the Government of Gujarat or the Central Government and various kinds of levies in the form of fees as fixed by the Government at an approved rate. The funds are used for the development of various public projects and a number of other public are also the beneficiaries. The AO was of the view that the assessee was carrying out activities of providing infrastructural facilities to the public and taking various fees like betterment charges, and development charges which was in the nature of advancement of general public utility. The AO has stated that the assessee being an urban development authority charges various types of fees from the public for providing certain amenities like roads, bridges etc. which was recovered from the beneficiaries who get benefit out of the development of such common infrastructure. The AO concluded that proviso to section 2(15) of the act becomes applicable to the facts of the case of the assessee, therefore, its income was calculated as a normal business income and no deduction u/s. 11 and 12 were allowed to it.
High Court following the co-ordinate bench decision in case of Ahmedabad Urban Development Authority v. ACIT (E) [2017] 396 ITR 323 (Gujarat) dismissed the Department’s appeal on the questions regarding allowing the benefit of exemptions under sections 11 and 12 of the Act. The SLP was dismissed by the Hon’ble SC, by following its decision in the case of ACIT (E) v. Ahmedabad Urban Development Authority 2022] 449 ITR 389 (AY. 2015-16)
CIT (E) v. Gandhinagar Urban Development Authority (2023) 454 ITR 43 (SC)
49. S. 11: Property held for charitable purposes -Imparting education-Surplus in educational activities-Alleged excess remuneration to trustee employees- Revenue has no power to interfere- Exemption cannot be denied – Order of High Court affirmed. [S. 2(15), 12A, 13, Art. 136]
On appeal to the High Court dismissing the appeal of the Revenue the Court held that the AO merely on surmises and conjectures had come to the conclusion that the salary and remuneration paid to the two trustees was highly excessive and not proportionate to the services rendered by them. The Department cannot regulate the management of the assessee- trust. Indeed, the salary or remuneration paid to the trustees were duly accounted and reflected in their returns as income. Merely on imagination, exemption under section 11 of the Act could not be denied. SLP of Revenue was dismissed. (AY.2009-10, 2010-11)
CIT (E) v. Krupanidhi Education Trust (2023)453 ITR 750/ 293 Taxman 2 (SC)
Editorial: CIT (E) v. Krupanidhi Education Trust (2022) 441 ITR 154 (Karn)(HC), affirmed.
50. S. 11: Property held for charitable purposes – Registration cancelled under section 12AA of the Act was overruled by the Tribunal – Notice issued by Supreme Court.[S. 2(15, 12AA)]
The Supreme Court has issued a notice in response to the High Court’s order. In this case, the Assessee is an urban development authority that was established with the objective of developing areas according to a specific plan. However, the Assessee’s claim for exemption under section 11 was disallowed by the AO on the grounds that its registration under section 12AA had been cancelled by the Commissioner. Additionally, the AO had raised questions regarding the charitable nature of the activities carried out by the Assessee, in accordance with section 2(15). In the High Court’s impugned order, it was determined that the Tribunal had set aside the cancellation of the Assessee’s registration under section 12AA and had restored the registration. As a result, the High Court concluded that the Assessee should be entitled to exemption under section 11.
CIT (E) v. Ghaziabad Development Authority [2023] 293 Taxman 171 (SC)
51. S.12AA: Procedure for registration – Trust or institution – cancellation of registration – Tribunal setting aside and high court affirming – Special leave petition dismissed but question of law kept open. [S. 12AA(3)]
The Tribunal allowed the assessee’s appeal for the AY. 2010-11 considering Circular No. 1 of 2011, dated April 6, 2011 ([2011] 333 ITR (St.) 7) issued by the Central Board of Direct Taxes holding that section 12AA(3) of the Income- tax Act, 1961 was applicable only from the AY. 2011-12. on appeal by the Department on the questions whether the Tribunal was right in holding that the action under section 263 of the Act could not be taken subsequent to cancellation of registration for the year and that the cancellation of registration could not be made with effect from April 1, 2009, the High Court dismissed the appeal. On a petition for special leave to appeal to the Supreme Court. The Supreme Court did not interfere with the order and judgment of the High Court but kept the question of law open. (AY. 2010-11)
CIT (E) v. Sarlaben Bhansali Charities Trust (2023) 454 ITR 46 (SC)
52. S 32: Depreciation – Explanation 5, inserted by Finance Act, 2001, to provide mandatory depreciation – Not applicable for AY 1999-2000.
In the revised return filed, Assessee withdrew the claim of depreciation. However, the AO denied such withdrawal and computed the loss as per the original return and not the revised return. High Court observed that Explanation 5, inserted by Finance Act, 2001, which provided mandatory depreciation was with effect from 1 April 2002. SLP filed by the Department was dismissed. (AY. 1999-2000)
ACIT v. G. E. Lighting (I) P. Ltd. (2023) 454 ITR 285 (SC)
CIT v. Southern Petro-Chemical Industries (2023) 454 ITR 285 (SC)
53. S. 36(1)(vii): Bad Debts – Business loss – Debts taken over from sister concern – Memorandum and Articles of Association permitted to carry on the business of money lending and the transactions in question were in the realm of business activity. [S. 28(i), 36(2)]
The High Court dismissed the Department’s appeals on the question, whether the Tribunal was right in allowing the bad debts taken over from a sister concern. The High Court observed that the Tribunal recorded a finding that the memorandum and articles of association permitted the assessee to carry on the business of money lending and the impugned transactions were in the realm of business activity. Department’s SLP was dismissed. (AY 2004-05)
CIT v. Elgi Equipments Ltd. (2023) 454 ITR 14 (SC)
54. S.37(1) : Business expenditure – Capital or revenue – Consistency – If expenditure on replacement of remembraning in Membrane Cell Plant was allowed as revenue expenditure in earlier years and there is no change in a legal position or any cogent material on record to prove otherwise consistency to be followed.
On the issue of whether the expenditure incurred by the assessee on replacement of remembraning in the membrane cell plant was capital expenditure, the High Court held that there was no material leading to the conclusion that the membrane itself could be treated as a separate and independent machine. Further Revenue was not able to prove its contention that the life of the membrane would be spread over from 3 to 5 years. Further, the expenditure was allowed as revenue expenditure in the earlier years and there was no change in legal position or any material on record to prove the contrary. Accordingly, the High Court dismissed the appeal of the Revenue. The Department’s SLP was also dismissed by the Hon’ble SC (AY.1999-2000, 2000-01)
CIT v. Gujarat Alkalies and Chemicals Ltd. (2023) 454 ITR 808 (SC)
55. S. 37(1): Business expenditure – Co-Operative Societies of milk producers – Assessee apex society purchasing milk from primary societies and others – price of milk fixed by state government in march of every year – Assessee paying purchase price of milk provisionally – Final difference in rate paid at end of accounting year – Not paid to shareholders but only to milk suppliers, for quantity of milk supplied and in terms of quality supplied – Not payment out of profits – Deductible.
The assessee-society was a federal milk society and its members were primary milk co-operative societies. The business of the assessee was to purchase milk from its members and other producers of milk and sell the milk to various parties. The assessee-society fixed the rate of processing of milk at the beginning of the year on the basis of the price declared by the Government and the price which other buyers paid to the vendors. These rates were revised from time to time. The primary milk society also in turn made payment of the final rate difference to the individual milk producers around Diwali. The assessee claimed deduction of the final rate difference. The AO made an addition of Rs. 1,55,81,519 treating the sum as appropriation of profits but the Tribunal, on the facts, found that the amount paid was not out of the profits but was paid to the milk suppliers for the quantity of milk supplied and in terms of the quality supplied. The order passed by the Tribunal was affirmed by the High Court.
On appeal held, dismissing the appeal, that although paid at the end of the previous year the amount was paid only to the milk suppliers, for the quantity of milk supplied and in terms of the quality supplied. The amount was not paid to all the shareholders and was not paid out of the profits ascertained at the annual general meeting. The amount paid to the milk suppliers and to non-members could not be said to be an appropriation of the profits. Therefore, there is no error in the judgment of the High Court.
CIT (Central) v. Kolhapur Zilla Sahkari Dudh Utpadak Sangh Ltd. (2023) 454 ITR 434 (SC)
56. S. 37(1): Business expenditure – Commission – Residence – Company – Control and management – Companies registered in Sikkim – Burden not discharged – Round tripping of funds liable to tax in India. [S. 2(35), 5, 6(3) (ii), 131, 142(1), 143(2), 148 , 234A, 282]
Assessee-Companies registered in Sikkim and carrying on business there as agents in cardamom and agricultural products. Commission earned in Sikkim during period prior to extension of Act to Sikkim. Assessee failing to produce evidence to prove genuineness of commission received in Sikkim. Summons issued to persons claimed to have paid commission to assessee not Complied with. Findings that inordinate amount of commission claimed to have been earned, that there were no employees or expenses incurred at Sikkim, and that there was round tripping of funds from Delhi into bank accounts at Sikkim to claim exemption in Sikkim. Burden of proof not discharged. Assessee liable to tax in India. (AY. 1987-88 to 1989-90) AY. 1987-88 to 1989-90)
Mansarovar Commercial Pvt. Ltd. v. CIT (2023)453 ITR 661/ 293 Taxman 312 / 332 CTR 137/ 224 DTR 305 (SC)
57. S.37 : Business expenditure – Lease of assets – Lease rent taxed as business income in hands of company from which assets leased – lease rent allowed as deduction in assessee’s hands – supreme court – Department is not entitled to contend that assessee was owner of asset. [S.32]
The assessee paid lease rent of Rs. 7.48 crores to its holding company G, in respect of certain assets taken on lease. According to the AO this was a financial transaction. The Commissioner (Appeals) concurred. The Tribunal noted that G had shown lease rent as income under the head “Business income” and on the issue it had been consistently decided that the assets were owned by G, and therefore, the lease rent received was to be assessed as its business income. The High Court dismissed the Department’s appeal on the question whether the Tribunal was right in reversing the decision of the Commissioner (Appeals), in allowing the lease rent paid to G from which it had leased certain equipment. On a petition for special leave to appeal to the Supreme Court:
Held, dismissing the petition, that once G was held to be the owner and entitled to depreciation, the Department thereafter could not be permitted to contend with respect to the same transaction, that the assessee was the owner and entitled to depreciation.
CIT v. Narmada Chematur Petrochemicals Ltd. (2023) 454 ITR 584 (SC)
58. S. 43B: Deductions on actual payment – Electricity duty – collected and paid on behalf of the Customer – Assessee only a collecting agent – No disallowance.
The Assessee engaged in power distribution in the State and obtained a licensee under the Electricity Act 2003. The question arises as to whether the amount towards electricity duty collected by the Assessee, as per the provisions of the Punjab Electricity (Duty) Act, 1958 (1958 Act), from customers and paid to the State Government, is payable by the Assessee or it is merely a collection agency discharging its duty under a statutory arrangement. The High Court noted that section 4 of the 1958 Act casts a duty on the licensee to collect the electricity duty from consumers and to pay the same to the State Government. The section, along with the rules, makes it abundantly clear that the Assessee is merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay the same to the State Government. The licensee is only a collecting agency. There is no such provision contained in the 1958 Act, which shows that the liability to pay the electricity duty rests upon the Assessee. The liability to pay electricity duty lies on the consumer. The Revenue must show that the duty, tax, cess or fee (in the present case, electricity duty) is payable by the Assessee. The Supreme Court dismissed the Special Leave Petition filed against the High Court decision.
Pr.CIT v. Dakshin Haryana Bijli Vitran Nigam Ltd. [2023] 293 Taxman 426 (SC)/ 454 ITR 801 (SC)
59. S.43B : Deductions on actual payment – As the Assessee is merely an agency to collect electricity duty from consumers and pay it to the State Government.
The Assessee, was a licensee under the Electricity Act, for distribution of power. It collected electricity duty from consumers for passing on to the State Government. The High Court observed that for invoking section 43B of the Income-tax Act, 1961, the Department was required to show that the electricity duty was payable by the assessee, that the assessee was merely an agency assigned with a statutory function to collect electricity duty from the consumers and to pay it to the State Government, and therefore, the provisions of section 43B of the Act would not be applicable to the assessee. The SLP filed by the Department was dismissed. (AY: 2008-09)
Pr. CIT v. Dakshin Haryana Bijli Vitran Nigam Ltd. (2023) 454 ITR 801 (SC)
60. S. 45: Capital gains – Capital loss – Capital asset – Loan given to its subsidiary in India – Short -term capital loss – Order of High Court affirmed – SLP of Revenue dismissed. [S.2 (14), Art.136]
The High Court held that the loan given by the assessee to its subsidiary in India constituted a capital asset within the meaning of section 2(14) of the Income-tax Act, 1961 and the consideration received when it was assigned was a short-term capital loss. On a petition for special leave to appeal to the Supreme Court dismissing the petition the Court held that the Tribunal had given strong reasons for holding that the transaction would come within the meaning of section 2(14) of the Act. Order of High Court affirmed. (AY. 2002-03)
CIT (IT) v. Siemens Nixdorf Information Systemse Gmbh (2023)453 ITR 741 / 293 Taxman 1 (SC)
Editorial: CIT v. Siemens Nixdorf Information Systemse GmbH (2020) 114 taxmann.com 531 (Bom) (HC) affirmed.
61. S. 45 : Capital gains – Liability To Tax – sum received by partner upon retirement from firm – tribunal holding sum not taxable – High court dismissing department’s appeal – Appeal to supreme court – department contending sum received far in excess of amount due to assessee under partnership deed and hence taxable as capital gains – Assessee claiming excess attributable to goodwill – no discussion in judgment of high court on points addressed before supreme court – order of high court set aside and matter remanded for reconsideration by high court.
The assessee-family was a partner in a firm with a 50 per cent. share. It retired on August 14, 2008 receiving a sum of Rs. 15 crores from the firm in full and final settlement of its right, title and interest as a partner. The consideration for payment of Rs. 15 crores received by the assessee was brought in by three incoming partners and was debited to the account of the new partners. The AO sought to bring this sum to tax after deducting Rs. 84,38,630 which stood to the credit of the assessee’s capital account. This order was upheld by the Commissioner (Appeals). However, the Tribunal, following the order passed by the High Court allowed the assessee’s appeal and the High Court dismissed the Department’s appeal from the Tribunal. On appeal to the Supreme Court by the Department contending that the sum of Rs. 15 crores received by the assessee was far in excess of the amount due to it by way of the share to which it was entitled under the partnership deed, which rendered the assessee liable to tax on capital gains under section 45 of the Income-tax Act, 1961, while the assessee claimed that the amount in excess was attributable to the goodwill:
Held, allowing the appeal, that there was no discussion in the judgment of the High Court on any submission on the lines addressed before the court. The matter should, therefore, be reconsidered by the High Court with reference to the facts and law which governed the field. The High Court would bear in mind the state of the law and the amendments engrafted later on. (AY. 2009-10)
Pr. CIT v. R. F. Nangrani HUF (2023) 454 ITR 426 (SC)
62. S. 45(4) : Capital gains – Distribution of capital asset – Dissolution of firm – On reconstitution of assessee- partnership firm, assets so revalued and credited into capital accounts be said to be ‘transfer’ which would fall in category of ‘otherwise’ u/s 45(4) of the Act and such amount would be chargeable to tax as STCG. [S. 2(47), 45]
Dismissing the review petitions of the assessee, the Supreme Court held that crediting of the amount (on revaluation of asset) to capital accounts of partners in their profit sharing ratio could be said to be in effect distribution of assets to partners and that since amount credited to capital accounts of partners was available for withdrawal, assets so revalued and credited to capital accounts of respective partners could be said to be ‘transfer’ which would fall in category of ‘otherwise’ and provision of Section 45(4) of the Act would be applicable (AY 1993-94 , 1994- 95).
Mansukh Dyeing and Printing Mills v. CIT (2023) 293 Taxman 516 (SC)
63. S. 50B: Capital gains – Slump sale -Sale of each asset – No liability was transferred – Not a slump sale – Question of fact. [S. 2(19AA), 2(42C), 45, Art.136]
The High Court dismissed an appeal by the Revenue holding that the Tribunal rightly held that the sale could not be regarded as a slump sale. The price had been received by the assessee by different account payee cheques during the previous year relevant to the A.Y. 2009-10, that on the date of transfer apart from the assets which were sold and transferred, the chemical unit had several other assets which were never sold or transferred to the purchaser, and that none of the liabilities were transferred to the purchaser and these continued to be the liabilities of the assessee to be discharged and were discharged by the assessee. SLP of the Revenue was dismissed. (AY 2009-10)
PCIT v. Hindusthan Engineering and Industries Ltd. (2023)453 ITR 763 (SC)
Editorial: Order of High Court in PCIT v. Hindustan Engineering and Industries Ltd. (2023)453 ITR 758 (Cal)(HC) is affirmed.
64. S.50C: Capital gains – Full value of consideration – Stamp valuation -Held that development rights transferred are stock in trade or capital asset is to be decided on the basis of factors like frequency and volume of trade, and nature of transactions over the years etc. – For further fact-finding, the matter was remanded back to the Tribunal.[ S. 45 ]
The assessee was engaged in the business of building and development of properties. It had entered into an agreement dated 6 May 2008 with one K Ltd. for the sale of development rights in a property for a total consideration of INR 15,94,06,500. The consideration received by the assessee was not disclosed in the return for the AY. 2009-10 nor entered in the profit and loss account. The assessee, in response to the notice, stated that it had entered into a “rectification deed” with the party on 30 May 2008 by which the value of the development rights was reduced to Rs. 5,24,27,354, further the rights it had sold were its stock-in-trade and not assets and that the profits were offered to tax in the AY 2008-09 i.e., the year in which MOU was entered into with K Ltd and possession was also handed over on 2 January 2008. However, the AO brought the sum of Rs. 15,94,06,500 to tax as short-term capital gains in AY. 2009-10 since the same was reflected in the AIR data. The Commissioner (Appeals) dismissed the assessee’s appeal affirming the view of the AO. The Tribunal held that development rights sold by the assessee were part of its inventory and not a capital asset, that the assessee had reduced the sale consideration from Rs. 15,94,06,500 to Rs.5,24,27,354 during the financial year 2007-08 on the basis of a memorandum of understanding dated December 27, 2007, that the income had already been declared in the AY. 2008-09 and therefore, could not be taxed in AY. 2009-10. The Tribunal also agreed with the rectified sale consideration. The High Court dismissed the Department’s appeal holding that no substantial question of law arise. On appeal, Supreme Court observed that the AO has specifically recorded the findings on examining the balance sheets for the AY 2006-07 to 2009- 10 that there was not even a single sale during all these years and that there were negligible expenses and the transaction in question was the only transaction i.e., transfer of development rights in respect of land and consequently, it was held that the transaction was one of transfer of capital asset. Supreme Court observed that the Tribunal had neither dealt with the findings given by the AO nor verified/examined the total sales made by the assessee during the relevant time and during the previous years and merely on the basis of recording of the rights as inventory in the books of account, accepted the same to be in stock in trade. Further both the High Court and Tribunal had not carried out verification w.r.t to the differential amount of INR 10,69,79,146 which the assessee has claimed it had reduced by rectification deed 30 May 2008. The Court further held that unless the assessee shows that the balance amount recorded earlier is shown to have been refunded/returned it is to be treated as income in the hands of the recipient. This aspect was not considered by the Tribunal. Accordingly, the Supreme Court remanded the matter back to the Tribunal with directions to examine whether the transaction in question was a sale of a capital asset or a business transaction by verifying multiple factors such as the frequency of trade and volume of trade, the nature of the transactions over the years, etc.
CIT v. Glowshine Builders and Developers Pvt. Ltd. (2023) 454 ITR 249 (SC)
65. S.68 : Cash credits – Burden of Proof – finding that assessee had failed to prove identity and creditworthiness of creditor and genuineness of transaction – supreme court – Special leave petition dismissed. [Art. 136]
Where the High Court dismissed the assessee’s appeal holding that though the assessee had disclosed the source of the deposit she could not establish the nature thereof and that she had not fulfilled the three conditions under section 68 of the Income-tax Act, 1961, (i) identity of the creditor; (2) capacity of such creditor to advance money; and (iii) genuineness of the transactions, to discharge her burden of proof.
On a petition for special leave to appeal to the Supreme Court, same was dismissed.
Rupal Jain v. CIT (2023) 454 ITR 813 (SC)
66. S. 69 : Unexpalined investment -Unexplained money – Assessee carrying on business in silver – Unaccounted silver found during search of assessee’s business premises by customs authorities and confiscated as smuggled silver – Value of silver treated as unaccounted investment in hands of assessee – loss on account of confiscation thereof not allowable as deduction. [S. 37(1) r.w expln. 1, 69A]
During a search conducted by the Directorate of Revenue Intelligence officers at the premises of the assessee, 144 slabs of silver were recovered. The Collector of Customs held that the assessee was the owner of the silver and bullion, ordered confiscation of the silver, and imposed a personal penalty on the assessee holding the silver under reference to be of smuggled nature. In the assessment proceedings, the AO, on the ground that the assessee was not able to explain the nature and source of acquisition of the silver of which he was the owner, and since the investment in this regard was not recorded in the books of account, brought to tax the value of the silver in a sum of Rs. 3,06,36,909 in the assessee’s hands under section 69A of the Income-tax Act, 1961 . The Commissioner (Appeals) dismissed the assessee’s appeal, as did the Tribunal. On a reference to the High Court on the questions whether the Tribunal was right in sustaining the addition of Rs. 3,06,36,909 as unexplained investment in the hands of the assessee under section 69A of the Act, and if so, whether the Tribunal was right in law in distinguishing the Supreme Court ruling in CIT v. PIARA SINGH [1980] 124 ITR 40 (SC), the High Court, relying on CIT v. PIARA SINGH [1980] 124 ITR 40 (SC), held that loss on account of confiscation by the Customs Department was allowable business loss. On appeal:
Held, allowing the appeal, held that the assessee did not claim the value of the confiscated silver bars as business expense but as business loss. The ownership of the confiscated silver bars of the assessee was not disputed, and there were concurrent findings by all the authorities below and including the Customs authorities to this effect. The main business of the assessee was dealing in silver. His business could not be said to be smuggling of the silver bars. He was carrying on an otherwise legitimate silver business and in attempt to make larger profits, he indulged in smuggling of silver, which was an infraction of the law. Looking to the business of the assessee, namely, silver business and the fact that he was not in the business of smuggling silver, allowing the value of the confiscated silver as business loss was unsustainable.
Explanation 1 to section 37 seeks to prohibit deduction of any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law. Due regard will have to be given to the words “any expenditure” and “any purpose”. The reiteration being a legislative clarification of the main provision is required to be taken note of, and the power of judicial review over an Explanation, which has been introduced to explain and remove the doubts of the main provision, is rather limited. Though the provision speaks of expenditure while not making a specific reference to loss, one has to press into service the accepted commercial practice and trading principles. If one is to treat the expenditure as a genus, a loss would become a specie. All losses would become expenditures but not vice versa. The word “any expenditure” mentioned in section 37 of the Act takes in its sweep loss occasioned in the course of business, being incidental to it.
If a loss in pursuance of an offence or prohibited business cannot be brought under section 115BBE of the Act for income assessed under sections 68, 69 and 69A to 69D of the Act, which deals with unexplained income, expenditure, etc., it can never be said that it could be brought under section 37(1) of the Act, despite the fact that the objectives behind both the provisions overlap with some connection. Section 115BBE being a subsequent legislation, the true meaning of section 37(1) can be understood on that basis. As a consequence, any loss incurred by way of an expenditure by an assessee for any purpose which is an offence or which is prohibited by law is not deductible in terms of Explanation 1 to section 37 of the Act.
The judgment in DR. T. A. QUERESHI v. CIT [2006] 287 ITR 547 (SC) was delivered by a two-judge Bench while not taking note of the three-judge Bench decision in HAJI AZIZ AND ABDUL SHAKOOR BROS. v. CIT [1961] 41 ITR 350 (SC), which has neither been disapproved nor distinguished. Hence, this decision is per incur am and not a binding precedent. (AY: 1989-90)
CIT v. Prakash Chand Lunia (Decd. Through Lrs) and another (2023)454 ITR 61 (SC)
67. S.69A: Unexplained money – Assessee not owner of valuable article – Bitumen is not a valuable article or thing
Where the assessee has stolen bitumen while acting a consignor of bitumen it does not become the owner of the goods for the purpose of Section 69A. Further, bitumen is not a valuable article or thing for the purposes of Section 69A and unless the assessee is the owner of a valuable article or thing no addition is sustainable under Section 69A. The impugned order is quashed and set aside.
D.N. Singh v. CIT [2023] 454 ITR 595 (SC)
68. S. 69C: Unexplained expenditure – Additions made in case of a diamond exporter on ground that there was excess consumption of rough diamonds High Court could not have deleted such addition, by merely relying on affidavits of typist and a Chartered Accountant and accepting submission on behalf of assessee that there was a typographical error in audit report, as assessee was maintaining books of account outside regular books.
Allowing the appeal of Revenue, the Supreme Court observed that the High Court set aside order passed by Tribunal, solely relying upon two affidavits of a typist and a Chartered Accountant and accepted submission on behalf of assessee that there was a typographical error in audit report in which consumption was shown at 4.30 lakh carats and that actual consumption was 2.90 lakh carats. However, except for statement of assessee, no further material was produced to substantiate the claim that figure of 4.30 lakh carat was a typing mistake. Hence, the Hon’ble SC held that:
High Court did not properly appreciate and consider the fact that affidavits of typist and Chartered Accountant , were filed for first time before Tribunal. During search operation conducted on assessee and its group concern in 1999, duplicate cash book, ledger and other books showing unaccounted manufacturing and trading arrived at by assessee in diamonds were found and huge additions were made in assessee’s group on the basis of such books found during search.
Assessee was maintaining books of accounts outside regular books, which was not at all considered by High Court in impugned order. Hence, the order passed by High Court was to be set aside and order of Tribunal confirming addition was to be restored.
ACIT v. Kantilal Exports Surat (2023) 293 Taxman 531 (SC).
69. S.69C: Unexplained expenditure – Books showing unaccounted manufacturing and trading in diamonds by assessee seized in search – finding of tribunal that assessee maintaining duplicate account outside regular books – no material to corroborate assessee’s claim that figure in audit report was typing mistake – unexplained expenditure brought to tax considering yield in various years, and addition affirmed by tribunal – finding reversed by high court solely relying upon statements filed for first time before tribunal – not proper – order of tribunal and assessment order restored.
The assessee – firm was engaged in the business of import of rough diamonds, and manufacture and export of polished diamonds. For the AY. 2001-02, the AO made an addition of Rs.17,15,00,000 (the difference between the declared carats and the carats mentioned in the audit report which he took as de hors the books of account) as unexplained expenditure under section 69C of the Income-tax Act, 1961 , taking into consideration the actual consumption of diamonds as 4,30,701.14 carats as mentioned in the audit report and after considering the consistent trend on yield for earlier years which was found to be between 10 and 18 per cent. The Commissioner (Appeals) reversed the addition, but the Tribunal, taking into consideration the remand order which was necessitated due to the affidavits filed before the Tribunal of the assessee’s typist and the chartered accountant, reversed the order passed by the Commissioner (Appeals) and restored the assessment order upholding the addition of Rs.17,50,00,000 as unexplained expenditure under section 69C of the Act.
The High Court set aside the order passed by the Tribunal relying upon the affidavits of the typist and the chartered accountant, and accepting the submission of the assessee that there was a typographical error in the audit report in which the consumption was shown at 4,30,701.14 carats whereas the actual consumption was 2,90,701.14 carats. On appeal :
Held, allowing the appeal, that before the AO, though it was the specific case of the assessee that the figure of Rs.4,30,701.10 was a typing mistake, except the statement of the assessee, no further material was produced before the AO. Taking into consideration the average yield in the last few AY.s, the AO had made the addition of Rs. 17,50,00,000 under section 69C. The Tribunal concurred with the finding. Solely relying upon the statements of the typist and the chartered accountant filed for the first time before the Tribunal, the High Court had reversed the findings of the AO and the Tribunal. The High Court had not considered the conduct of the assessee, which had been considered in detail by the Tribunal, nor the findings of the Tribunal that during search in the case of the assessee and its group concern, duplicate cash book, ledger and other books showing unaccounted manufacturing and trading by the assessee in diamonds were found, that huge additions were made in the case of assessee’s group in the block assessment on the basis thereof and that the assessee was maintaining books of account outside the regular books. The order passed by the Tribunal and the assessment order were to be restored. (AY. 2001-02)
ACIT v. Kantilal Exports (2023) 454 ITR 112 (SC)
70. S 72: Carry forward and set off of business losses -In case of Amalgamation, carry forward and Set off a business loss and unabsorbed depreciation of amalgamating company shall be available to the amalgamated company from the assessment year in which the scheme sanctioned by the court comes into force i.e., the year in which the appointed date falls and not subsequently in the assessment year when such scheme is effective.
Assessee is engaged in the business of manufacturing and trading of pharmaceutical products. The AO allowed the assessee to set off business losses of M/s. Dolphin Laboratories Limited (the company which was amalgamated). CIT formed an opinion that the assessment order was erroneous and prejudicial to the interest of the Revenue and thus passed an order u/s 263 setting aside the assessment order. The High Court decided against the Revenue by relying on the decision of Gujarat HC in the case of IRM LTD. v. DY. CIT [2017] 2016] 72 taxmann.com 288 (Guj.), which has followed the decision of SC court in the case of Marshall Sons & Co. (India) Ltd. v. ITO [1996] 89 Taxman 619. In the said decision it was held that the scheme of amalgamation shall take into effect from the appointed date and it would not be reasonable to say that the scheme of amalgamation takes effect on and from the order sanctioning the scheme. The High Court allowed the business losses and unabsorbed depreciation of the amalgamating company in the hands of the amalgamated company in the year in which the scheme sanctioned by the court comes into force i.e., the year in which the appointed date falls. The Supreme Court dismissed the Revenue’s SLP. (AY. 2006-07)
Pr. CIT v. Intas Pharmaceuticals Ltd. (2023) 454 ITR 421 (SC)
71. S.80HHC: Export business – Assessing Officer contradicted himself and has included income from sale of shares as business income- deduction to be allowed as per Section 80HHC(3) (b)-Interest income to be excluded from purview of Section 80HHC. [S.28(i), 56]
If the AO has classified income earned on sale of shares as business income then the deduction under Section 80HHC (3) (b) has to be worked out accordingly by including the said income in total turnover. The interest income earned on surplus funds parked in Fixed Deposits is to be taxed as income from other sources only and not liable to be included in Section 80HHC computation.(AY. 1989-1990, 1991-1992)
Magnum International Trading Co. (P.) Ltd. v. CIT [2023] 454 ITR 141 (SC)
72. S. 80IA: Industrial undertakings – Telecommunication Services Change in shareholding – Block of ten consecutive years – Losses which have lapsed cannot be taken into account for purposes profits of undertaking .[S.79, 80IA (5)]
Dismissing the appeal of the Revenue, the High
Court held that the AY. 2005-06 was the first year in the block of ten consecutive AYs for claiming deduction under section 80IA (1) of the Act. Circular No. 1 of 2016 ([2016] 381 ITR (St.) 1) would be applicable to the facts of the case. The lower Authorities were not justified in applying section 80IA (5) so as to ignore the losses which had already lapsed by operation of section 79. SLP of Revenue was dismissed (AY. 2005-06)
ACIT v. Vodafone Essar Gujarat Ltd. (2023) 453 ITR 755 (SC)
Editorial: Vodafone Essar Gujarat Ltd v. ACIT (2020) 424 ITR 498 (Guj)(HC) is affirmed.
73. S.80P: Deduction to co-operative society- In view of judgment of Supreme Court in Civil Appeal 8719 of 2022 which is in favour of assessee issue to be decided in favour of the assessee
In view of judgment of Supreme Court in Civil Appeal 8719 of 2022 which is in favour of assessee issue of revisional jurisdiction under Section 263 to be decided in favour of the assessee(AY: 2009-2010)
PCIT v. Annasaheb Patil Mathadi Kamgar Sahakari Patpedhi Maryadit Ltd. [2023] 454 ITR 528 (SC)
74. S.80P: Co-operative societies – A primary agricultural credit society could not be termed as a bank/co- operative bank under the Banking Regulation Act – entitled to exemption under section 80P (2) [S.80P(2), 80P(4), Art. 136]
Merely because a co-operative society gives credit to its members it cannot be said to be a co-operative bank under the Banking Regulation Act, 1949. Banking activities under that Act are altogether different activities. There is a vast difference between credit societies giving credit to their own members only and banks providing banking services including credit to the public at large. The High Court held that the assessee could not be termed a bank or co-operative bank and that being a credit society, it was entitled to exemption under section 80P (4) of the Act, the Court remarked that such finding of fact would not be interfered with by the Court in exercise of powers under article 136 of the Constitution of India. (AY: 2010-11)
Pr. CIT v. Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Ltd. (2023) 454 ITR 117 (SC)
75. S. 92C : Transfer pricing – Arm’s length price – Reasoned order based on cogent reasons – Order of High Court affirmed – Question of law left open. [S. 136, 260A]
High Court dismissed the Department’s appeal on the ground that the Tribunal had given cogent reasons for excluding the four companies as comparables to determine the arm’s length price hence no question of law arose. On SLP by Revenue the Court held that considering the peculiar facts and circumstances of the case, there was no reason to interfere with the judgment of the High Court. The question of law is left open. (AY. 2012-13)
PCIT v. Evalueserve.Com Pvt. Ltd. (2023) 453 ITR 8/ 292 Taxman 155/ 331 CTR 217/ 223 DTR 137 (SC)
Editorial: CIT v. Evalueserve.Com Pvt. Ltd (2022) 444 ITR 674 (Delhi)(HC) is affirmed.
76. S. 92C: Transfer pricing – Arm’s length price – Support services – Cost plus model – Commission based model – Comparable – Question of fact. [Art. 136, 226]
The Tribunal remanded the matter to the Transfer Pricing Officer to undertake a fresh search. On appeal the High Court held that no question of law arose because the Tribunal had consistently followed its orders for the A.Y.s 2006-07 and 2007-08 which were affirmed by the court, that “the assessee was a low risk procurement support service provider” mostly working towards recovering its cost and earning a reasonable mark-up in line with its functions performed, that there was no authority or discretion to the assessee in deviating or changing from the policies and procedures prescribed by the parent company, and accordingly that the assessee had not incurred any significant risk in its functions. On appeal by the Revenue the SLP of the Revenue was dismissed. (AY. 2012-13)
PCIT v. Gap International Sourcing (India) Pvt. Ltd. (2023)453 ITR 770/ 292 Taxman 413 (SC)
Editorial: PCIT v. Gap International Sourcing (India) Pvt. Ltd. (Delhi)( HC)( ITA No. 531 of 2019 dt 22 -5 2019), is affirmed.
77. S. 92C: Transfer pricing – Arm’s length price – Adjustment on account of interest-free loans – Libor +2 Per Cent – Corporate guarantee – Write- off of loss on account of investment in equity shares in subsidiary – Book profits – Provision for doubtful debts – No question of law – Order of High Court affirmed. SLP of Revenue is dismissed. [S.92B, 115JB, Art. 136]
The High Court dismissed the Department’s appeal on the questions whether the Tribunal was justified in restricting the adjustment on account of interest-free loans advanced to associated enterprises to prevailing LIBOR +2 per cent., deleting the adjustment on account of corporate guarantee, allowing the write off of loss on account of investment in equity shares of one of its subsidiary, allowing the write-off of investment for the purpose of computing “book profits” under section 115JB , remitting back the issues of disallowance out of provision for doubtful loans to a subsidiary and of disallowance out of bad debts provision claimed in minimum alternate tax to the Assessing Officer for verification. SLP of Revenue is dismissed. (AY. 2009-10)
PCIT v. Vaibhav Global Ltd. (2023) 453 ITR 31 (SC)
Editorial: PCIT v. Vaibhav Global Ltd. (2023) 453 ITR 24 (Raj)(HC) is affirmed.
78. S.119 : Central Board of Direct Taxes- Instructions – Condonation of delay- Order passed under Section 119(2)(b) valid no ground to interfere- Appeal dismissed. [S. 119(2)(b), Art. 136]
On a writ petition against the order passed under section 119(2)(b) of the Act seeking condonation of the delay in filing the return, the High Court held that ignorance of law was not an excuse, that the assessee had filed his return for the assessment year 2011-12 within the time limit and was aware of the process of filing the return, and the finding that there was no genuine hardship or reasonable cause for late filing of the return was justified. The court held that the order in question was clear and cogent and had been passed with the approval and sanction of the Principal Chief Commissioner (International Taxation), and that there had been no violation of principles of natural justice. Supreme Court finds no ground to interfere with impugned order. Appeal dismissed.(AY. 2011-2012)
Puneet Rastogi v. Pr. CCIT (International Taxation) And Anr [2023] 454 ITR 39 (SC)
79. S.124 : Jurisdiction of Assessing Officer – Assessment – Notice – Jurisdiction – High Court setting aside notice as without jurisdiction with liberty to officer having jurisdiction to issue notice – supreme court – order unwarranted as assessee submitted to jurisdiction of AO without questioning it within time allowed – AO free to complete assessment within 60 days – question of limitation not to be raised by assessee [S. 124(3)(A), 142(1), 143(2)]
On a writ petition, inter alia, against a notice under section 143(2) of the Income-tax Act, 1961 the High Court, held that jurisdiction was with the Commissioner (OSD) (Exemption) and thus quashed the notice issued by the Assistant Commissioner as without jurisdiction. On a petition for special leave to appeal to the Supreme Court:
Held, that the jurisdiction had been changed after the returns were filed. However, the assessee had participated in the proceedings pursuant to the notice issued under section 142(1) and had not questioned the jurisdiction of the AO. Section 124(3)(a) of the Act precludes the assessee from questioning the jurisdiction of the AO, if he does not do so within 30 days of receipt of notice under section 142(1). The facts did not warrant the order made by the High Court. At the same time, the High Court had granted liberty to the authority to issue appropriate notice. Therefore, the AO was free to complete the assessment (in case the assessment order had not been issued) within the next 60 days. In such event, the question of limitation shall not be raised by the assessee. (AY. 2014-15)
Dy. CIT (Exemptions) and anr. v. Kalinga Institute Of Industrial Technology (2023)454 ITR 582 (SC)
80. S. 127: Power to transfer cases – SLP dismissed – Observations of High Court to have no reflection on merits. [S.127(2), 132, 133A Art. 136, 226]
Dismissing the SLP the Court held that the assessee had been afforded effective opportunity to place all materials including an opportunity of personal hearing which had been availed of and that there was no good ground to interfere with the administrative order of transfer. Court also held that the observations in the order of the High Court shall be construed only as a prima facie expression and would have no reflection on the merits of the case.
Kamal Nath v. PCIT (2023)453 ITR 748/ 292 Taxman 240 (SC)
Editorial: Kamal Nath v. PCIT (No. 3) (2023) 453 ITR 604 / 292 Taxman 295/ 331 CTR 306/ 223 DTR 73 (Cal)(HC) is affirmed.
81. S.132: Search and seizure – In view of decision of Supreme Court in ITO v. Vikram Sujitkumar Bhatia [2023] SCC Online SC 370 issue covered in favour of Revenue and against the assessee
In view of decision of Supreme Court in ITO v. Vikram Sujitkumar Bhatia [2023] SCC Online SC 370 issue covered in favour of Revenue and against the assessee. (AY 2008-2009, 2014-2015)
ACIT v. Anilkumar Gopikishan Agrawal [2023] 454 ITR 531 (SC)
82. S. 133A: Power of survey – Residential premises – Held to be valid – SLP of assessee is dismissed. [S. 260A, Art. 136]
The High Court dismissed appeals filed by the assessee, holding that the survey conducted on July 14, 2014 at the residential house of R was valid and did not violate the provisions of section 133A of the Income-tax Act, 1961. SLP of Revenue is dismissed. (AY. 2008-09 to 2013-14)
Hillwood Furniture Pvt. Ltd. v. CIT (2023)453 ITR 749 (SC)
Editorial: Hillwood Furniture Pvt. Ltd. v. CIT (2023) 21 ITR -OL 634 (Ker)(HC)
83. S.144B : Faceless Assessment – Final assessment order without draft assessment order – Notice issued without sanction – Notice quashed, assessment order quashed. [S.147]
Where the High Court held that the final assessment order is passed without issue of draft assessment order, then the assessment order is liable to be quashed and also, the notice issued under Section 148 dated March 31,2021 is also liable to be quashed for not obtaining proper sanction, then no interference is called for by Supreme Court. However, the question of law is to be kept open. (AY. 2015-2016)
ITO v. Rinku R. Rai [2023] 454 ITR 35 (SC)
84. S. 144B : Faceless Assessment – Failure to serve draft assessment order – Department was allowed to file Review Petition before High Court to consider effect of omission of Section 144B(9) with effect from 1-4-2021. [S. 144B(9), Art. 136, 226]
On a writ petition against an order of faceless assessment, the High Court set aside the assessment as non est for failure to serve the draft assessment order on the assessee. On appeal to the Supreme Court the Court held that the omission of section 144B(9) of the Act with effect from April 1, 2021 was not before the High Court, the Department was to be allowed to file a review application before the High Court to press into service the effect of the omission of section 144B(9) of the Act with effect from April 1, 2021 on its judgment and the High Court was to pass an order in accordance with law and on the merits after hearing the parties.
Add. CIT v. Parull Isharani (2023)453 ITR 221 (SC)
Editorial: Parull Isharani v. Add.CIT (Bom)(HC), (W.P.) (L) No. 13138 of 2021 dt 13-9-2021), Department was allowed to file the Review petition before High Court.
85. S.144B: Faceless Assessment – Failure to issue notice and draft assessment order – Judgment modified and matter remanded to Assessing Officer. [144B (1) (xvib), Art.136, 226]
On appeal by the Revenue the Court held that considering that the assessment order was passed without issuing a show-cause notice with a draft assessment order as was mandatorily required under section 144B of the Act, it could not be said that the High Court had committed any error. However, at the same time, considering the fact that the faceless assessment scheme has been introduced recently, the Department ought to have been allowed to take corrective measures. The judgment of the High Court was modified and the matter remanded to the Assessing Officer to pass a fresh assessment order, after following due procedure in accordance with law under section 144B of the Act.
Add. CIT v. Multiplier Brand Solutions Pvt. Ltd. (2023)453 ITR 233 (SC)
Editorial: Multiplier Brand Solutions Pvt. Ltd v. ACIT (2022) 442 ITR 202 (Bom)(HC), order of High Court is modified and matter remanded to the Assessing Officer.
86. S. 144B: Faceless Assessment – Failure to issue show cause notice and draft assessment order – Order of High Court is not erroneous – Judgment modified and matter remanded to Assessing Officer to pass fresh assessment order. [144B (1) (xvib), Art. 136, 226]
Allowing the SLP of the Revenue the Court held, that considering that the assessment order was passed without issuing a show-cause notice with a draft assessment order as was mandatorily required under section 144B of the Act, it could not be said that the High Court had committed any error. However, at the same time, considering the fact that the faceless assessment scheme had been introduced recently, the Department ought to have been allowed to take corrective measures. The judgment of the High Court was modified and the matter remanded to the Assessing Officer to pass a fresh assessment order, after following due procedure in accordance with law under section 144B of the Act. (AY. 2018-19)
Dy. CIT v. Abacus Real Estate Pvt. Ltd. (2023) 453 ITR 224 (SC)
Editorial: Abacus Real Estate Pvt. Ltd v. Dy. CIT (2022) 284 Taxman 654 (Bom.)(HC), decision of the Bombay High Court is modified and matter remanded.
87. S. 144B: Faceless Assessment – Failure to follow procedure – Order declared non-est – liberty is given to the Department to revive the special leave petition in case of difficulty or if the necessity arose. [S. 144B (9), Art. 136, 226]
On a writ petition against an order of assessment under section 144B of the Income- tax Act, 1961, the High Court declared the assessment order non est for failure to follow the procedure as provided in sub-section (9) of section 144B of the Act, but leaving it open to the Department to take steps as advised in accordance with law. The Department filed a petition for special leave to appeal to the Supreme Court. During the pendency of the petition, and pursuant to the liberty reserved by the High Court, fresh proceedings were initiated against the assessee. SLP of Revenue dismissed, in view of the subsequent development with liberty to the Department to revive the special leave petition in case of difficulty or if the necessity arose.
Add.CIT v. Tatwajnana Vidyapeeth (2023)453 ITR 217 (SC)
Editorial: Tatwajnana Vidyapeeth v. Add.CIT (Bom) (HC) (WP.No. 1275 of 2021 dt. 16-9-2021), affirmed.
88. S. 144B : Faceless Assessment – Failure to serve draft assessment order- Order set aside – Order of High Court affirmed – SLP of Revenue dismissed – Liberty is given to the Revenue to proceed in accordance with the law. [Art. 136, 226]
On a writ petition against an order of faceless assessment, the High Court set aside the assessment order on the ground that the procedure as required under section 144B of the Income-tax Act, 1961, namely, to furnish the draft assessment order upon the assessee had not been complied with. The Department filed a special leave petition contending that the High Court ought to have remanded the matter to the Assessing Officer for a fresh assessment. The Supreme Court disposed of the petition with the clarification and observation, that even if the matter was not remanded to the Assessing Officer, it would always be open for the Department to initiate fresh assessment proceedings in accordance with law and the setting aside of the assessment orders shall not come in the way of the Department. (AY. 2018-19)
ACIT v. Trendsutra Client Services P. Ltd. (2023)453 ITR 219 (SC)
Editorial: Trendsutra Client Services P. Ltd v. ACIT (2021) 283 Taxman 558 / (2022) 19 ITR -OL 203 (Bom)(HC)
89. S. 144B: Faceless Assessment – Draft assessment order – Failure to issue notice and draft assessment order – Non est – Matter remanded to Assessing Officer to assess afresh. [Art, 136, 226]
On SLP by the Revenue the Court held, that considering the fact that the assessment order was passed without issuing a show cause notice with a draft assessment order, as was mandatorily required, under section 144B of the Act, it could not be said that the High Court had committed any error. However, at the same time, considering the fact that the faceless assessment scheme had been introduced recently and the High Court ought to have remanded the matter to the Assessing Officer to pass a fresh order in accordance with law, after following the due procedure, as required under the law. Matter remanded to Assessing Officer.
NFAC v. Automotive Manufacturers Pvt. Ltd. (2023)453 ITR 230 (SC)
Editorial: Decision of Bombay High Court, modified, Automotive Manufacturers Pvt. Ltd v NFAC (Bom) ( HC)(W.P.(L) No. 16281 of 2021 dt.14 -10 -2021)
90. S. 144B : Faceless Assessment – Failure to follow procedure – Subsequent omission of provision – Judgment of High Court set aside and matter remanded to the High Court to consider the effect of omission of provision. [S. 119, 144B (9), Art. 136, 226]
On a writ petition against an order of assessment the High Court quashed the assessment order, relying upon circular dated August 13, 2020 of the Central Board of Direct Taxes issued under section 119 of the Income- tax Act, 1961 stating that any assessment order which is not in conformity with paragraph 2 thereof, shall be treated as non est and shall be deemed to have never been passed. On appeal by the Department contending that section 144B(9) of the Act, with which the circular was in pari materia, had been omitted with effect from the date on which it came into force. Allowing the appeal of Revenue the Court held that in view of the subsequent development of omission of section 144B(9) of the Act, which was pari materia with paragraph 3 of the Central Board of Direct Taxes circular dated August 13, 2020, the judgment of the High Court was set aside and the matter remanded to the High Court to consider the effect of omission of section 144B(9) of the Act with effect from April 1, 2021 on para 3 of the Central Board of Direct Taxes Circular dated August 13, 2020, which, was prima facie, pari materia with section 144B(9) of the Act.( AY. 2018-19)
NFAC v. Chander Arjandas Manwani (2023)453 ITR 236 (SC)
Editorial: Chander Arjandas Manwani v. NFAC (2021) 283 Taxman 380 / (2022) 442 ITR 197 (Bom) (HC), set aside and matter remanded.
91. S. 144B: Faceless Assessment – Failure to follow the procedure – Certain observations of High Court is expunged – Liberty to Department to seek review in light of omission of section 144B (9)) of the Act. [S. 144B (9), Art. 136, 226]
On appeal the Court held that the appeal had been preferred only against the observations made in the judgment. The observations made in para 9 of the judgment and order passed by the High Court were unwarranted and not required and were ordered to be expunged. The Court also observed that however, as sub- section (9) of section 144B of the Act had been omitted subsequently, the Department was to be permitted to file a review petition before the High Court within six weeks which the High Court would consider in accordance with law and on its own merits and without raising the issue with respect to limitation, subject to giving the assessee opportunity to be heard. (AY. 2018-19)
NFAC v. Mantra Industries Ltd. (2023)453 ITR 239 (SC)
Editorial: Mantra Industries Ltd v. NFAC (2021) 283 Taxman 459/ 323 CTR 249/ 207 DTR 161/(2022) 441 ITR 467 (Bom)(HC), observation of the High Court was expunged.
92. S. 143(3) : Assessment -Income from undisclosed sources – Bogus purchases – Whether the Tribunal was right in reversing additions made on the basis of Sales Tax Department report – Appeal dismissed holding findings of fact did not give rise to substantial question of law.[S. 69, 145(3) 260A, Art. 136]
The Tribunal deleted the addition made by the AO based on the Sales Tax Department report by the State of Maharashtra holding that purchases by the assessee are bogus purchases. The Tribunal observed that CIT(A) after proper consideration of facts and circumstances and thereafter allowing an opportunity to the AO as well as to the assessee to present their respective stands deleted the the disallowance. Though High Court initially admitted the question of law, it later dismissed the department appeal holding that concurrent findings of fact given by the Commissioner (Appeals) and the Tribunal could not be reopened as those were concluded findings and no error in the view so taken by the two forums having emerged, no significant question of law arose. The SLP against the said high Court order was also dismissed. (AY:.2010-11)
Jt. CIT v. Bhilai Engineering Corporation Ltd. (2023)454 ITR 540 (SC)
Editorial: Jt. CIT v. Bhilai Engineering Corporation Ltd. (Chhattisgarh)(HC) (I.T.A.No.88 of 2017 dt.28-11-2018)
93. S. 147: Reassessment – Notice after six years – Notice issued prior to 1-4-2021 more than six years after expiry of Assessment year – High Court quashed notice and orders- SLP of Revenue is dismissed. [S. 148, Art. 136, 226]
On a writ petition against a reassessment notice pertaining to the AY. 2015-16 issued on March 30, 2021, the High Court, in the light of the judgments of the Supreme Court in UOI v. Ashish Agarwal (2022) 444 ITR 1 (SC) and of the court in Ambika Iron and Steel Pvt. Ltd. v. PCIT (2023) 452 452 ITR 285 (Orissa)(HC), quashed the notice under section 148 of the Income-tax Act, 1961, issued prior to April 1, 2021, holding that it was beyond the period of six years after the expiry of the Assessment year. SLP of Revenue is dismissed. (AY. 2015-16)
ITO v. Salu Agarwal (2023)453 ITR 786/ 293 Taxman 454 (SC)
Editorial: Refer Salu Agarwal v. ITO (2023) 453 ITR 784 (Orissa) (HC)
94. S.147: Reassessment – After the expiry of four years – No failure to disclose material facts – Change of opinion – Reassessment notice and order disposing the objection was quashed by the High Court was affirmed. [S. 143(3), 148, Art. 136, 226]
Allowing the petition of the assessee the High Court held that the Department had not discharged the onus to show that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment under the proviso to section 147 and that the reopening was only due to a change of opinion, which was not permissible. On a petition for special leave to appeal to the Supreme Court, dismissed the petition holding that all the conditions required for reassessment of the assessment of four years not being satisfied. Followed, ACIT v. CEAT Ltd (2022) 449 ITR 171(SC) (SLP No. 12643 of 2022 dt.10-10-2022) (AY. 2015-16)
ACIT v. E-Land Apparel Ltd. (2023)453 ITR 23 / 293 Taxman 453 (SC)
Editorial: E-Land Apparel Ltd v. ACIT (2023) 453 ITR 16 (Bom)(HC), is affirmed.
95. S.147: Reassessment – After the expiry of four years – Book profit – Revision was dropped- Sanction for reassessment was without application of mind – Reassessment notice and order disposing the objection was quashed. SLP of Revenue was dismissed. [S. 148, 151, 263, Art. 136, 226]
Held that the High Court allowed the assessee’s writ petition against a notice for reassessment holding that one of the reasons for reopening had already been considered by the Principal Commissioner under section 263 and in respect of which the Principal Commissioner had directed the proceedings initiated under section 263 be dropped. SLP against the order of High Court was dismissed. (AY. 2012-13)
ACIT v. Godrej and Boyce Manufacturing Co. Ltd. (2023) 453 ITR 14/ 293 Taxman 311 (SC)
Editorial: Decision in Godrej And Boyce Manufacturing Co. Ltd v. ACIT (2023) 453 ITR 10(Bom)(HC) is affirmed.
96. S.147: Reassessment – After the expiry of four years – compensation for cancellation of allotment in premise- Change of Opinion – SLP of Revenue is dismissed. [S. 37(1), 148, Art. 136
The Assessee paid compensation for the cancellation of allotment in premises within a proposed building to parties from whom deposits were taken in connection with a development project. The Assessee claimed compensation as an expenditure. During the survey proceedings, the genuineness of the compensation claim was examined, and AO passed the original assessment order. Subsequently, the AO issued a reassessment notice.
On challenge, the High Court held that having accepted the Assessee’s submissions, reopening on the ground that the compensation constituted a capital payment would amount to a mere change of opinion and was therefore not sustainable. On Appeal, the Supreme Court declined to intervene in the High Court judgment and dismissed the special leave petition on the grounds of delay. (AY. 2008-09)
CIT v. Anjis Developers (P.) Ltd. [2023] 293 Taxman 71 (SC)
Editorial : Refer Anjis Developers (P.) Ltd v. UOI (2023) 455 ITR 523 / 150 taxmann.com 112(Bom) (HC), affirmed.
97. S.147: Reassessment – After the expiry of four years – Specific query in the course of assessment proceedings – Expenditure on cost of samples – Advertisement and sales promotion – Change of opinion – SLP of Revenue is dismissed. [S. 37(1), Explanation, 148, Indian Medical Council (Professional, Conduct, Etiquette and Ethics) Regulations, 2002, Art.136]
On writ allowing the petition the High Court held that a specific query in respect of the expenditure in question was raised at the time of original assessment and was replied by the assessee. The assessee had truly and fully disclosed all material facts necessary for the purpose of assessment. Change of opinion of the Assessing Officer about the manner of computation of income, which was not permissible, in view of the proviso to section 147 of the Act. SLP of Revenue was dismissed. (AY. 2014-15)
ACIT v. Virbac Animal Health India Pvt. Ltd. (2023) 453 ITR 794 (SC)
Editorial: Virbac Animal Health India Pvt. Ltd v. ACIT (2023) 453 ITR 787 (Bom)(HC) is affirmed.
98. S.147: Reassessment – With in four years – Speculative transactions- loss of cancellation of forward contract – Change of opinion-No new material – SLP of Revenue dismissed. [S. 43(5), 148, Art. 136, 226]
The High Court allowed the assessee’s writ petition against the notice issued under section 148 of the Income-tax Act, 1961 and the order rejecting its objections to the notice, and quashed the notice and the order, holding that the reasons recorded for the notice did not indicate any failure on the part of the assessee, that the entire basis for reopening was a change of opinion of the Assessing Officer, that all the facts regarding the loss on cancellation of forward contracts, which the Assessing Officer should have disallowed as speculation loss, were available before the Assessing Officer, that nothing new had happened between the date of order of assessment and the date of formation of opinion by the Assessing Officer, and that when the primary facts necessary for assessment were fully and truly disclosed, the Assessing Officer was not entitled on a change of opinion to commence proceedings for reassessment. SLP of revenue was dismissed. (AY. 2012-13)
ACIT v. Parle Products Pvt. Ltd. (2023) 453 ITR 768 (SC)
Editorial: Parle Products (P.) Ltd. v. ACIT (2022] 286 Taxman 235 /(2023) 453 ITR 765(Bom)(HC), affirmed.
99. S. 147: Reassessment – Residential Status – Resident or non-resident – Service of notice on chartered Accountant – Reassessment notice was held to be valid- Interest – Levy of interest -Automatic – Working in ITNS 150 forming part of assessment order was proper -Sikkim – Commission – Burden not discharged – Round tripping of funds – Liable to tax in India. [S. 2(35), 5, 6(3)(ii), 131, 142(1), 143(2), 148, 234A, 282]
Question of law involved in High Court was challenging the notices issued u/s. 148 and notice not served in accordance to law and whether assessee was resident of India within the meaning of S. 6(3)(ii) of the IT Act, 1961. On appeal in High, by revenue, Hon’ble High Court allowed Department’s appeal and held that Rattan Gupta and Co Chartered Accountant was not only doing the audit work of the five assessee companies but determining who should be the directors of the said companies, this coupled with the fact that the blank signed cheque books of all the five companies together with rubber seals, the letterhead, the blank signed cheques and other records were also found in Delhi office of Rattan Gupta and Co Chartered Accountant the factual determination by the AO that the management and control of five companies was actually wholly situated in Delhi gets fortified, there were sufficient grounds for exercising the power u/s. 148, there was an implied authority of RG r/w. order V r.20 CPC. The Court also held that there were sufficient grounds for exercising the power u/s. 148, plea of the assessee that the notices u/s. 142(1) & 143(2) were issued for the first time in 1998 and were time barred was rejected. On appeal Supreme Court affirmed the order of the High Court. High Court held that no income by way of commission, as claimed by the assessees, had been established and proved by the assessees. In fact, the Assessing Officer issued notices or summons to different persons who had allegedly paid amounts as commission, but those persons had not responded. Therefore, the Assessing Officer had rightly drawn an adverse inference. The assessees did not produce any worthwhile evidence to prove the genuineness of the commission received. Once the Assessing Officer issued summons under section 131 to those who had allegedly paid the commission to the assessees and the summons were not complied with and it was the assertion on behalf of the assessees that they earned the income of commission within Sikkim, the burden to prove that was upon the assessees, wrongly and erroneously shifted by the Tribunal upon the Assessing Officer to prove the contrary. Therefore, in the absence of any material on record that the commission was earned only in Gangtok, the assessees could not be permitted to say that they were liable to pay the tax under the Sikkim Manual, 1948 and not under the 1961 Act. Order of High Court, affirmed. Liable to tax in India Working in ITNS 150 forming part of assessment order was proper. (AY. 1987-88 to 1989-90)
Mansarovar Commercial Pvt. Ltd. v. CIT (2023)453 ITR 661/ 293 Taxman 312 / 332 CTR 137/ 224 DTR 305 (SC)
Editorial: Decision of Delhi High Court, affirmed, CIT v. Mansarovar Commercial Pvt. Ltd (Delhi) (HC) (2016) 134 DTR 105 / 287 CTR 28 (Delhi)
(HC)/ CIT v. Pasupati Nath Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Sovereign Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Swastik Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Trishul Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
100. S. 148 : Reassessment –Notice – Declaration of undisclosed income (Income Declaration Scheme, 2016) – SLP dismissed against impugned order of High Court as assessee availed benefit of Declaration of Income Scheme, 2016 and submitted a declaration with respect to undisclosed income of relevant AY then AO would have no jurisdiction to assess income for which declaration was made and thus, reopening notice was to be set aside. [Income Declaration Scheme, 2016, Finance Act, 2016, S. 183, Art. 136]
Dismissing the SLP of the Revenue, the Hon’ble SC held that the SLP has to be dismissed as the High Court by impugned order has held that since assessee availed benefit of Declaration of Income Scheme, 2016 and submitted a declaration with respect to undisclosed income of the relevant assessment year, the AO would have no jurisdiction to assess income for which declaration was made and reopening notice was to be set aside. (AY 2012-13)
ACIT v. Kamla Chandrasingh Kabali (2023) 293 Taxman 492 (SC)
101. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice Transaction admitted by assessee – Notice issued under Section 148 and order under Section 148A (d) do not call for interference. [S. 148, 148A(d), Art. 136]
Where the High Court dismissed the writ petitions holding that in view of the information which was the basis of the initiation of the inquiry in the reassessment proceedings under section 147 of the Income-tax Act, 1961 and the fact that the transactions in issue having been admitted by the assessees the order under section 148A (d) and the notice under section 148 did not call for interference. The Supreme Court dismissed the special leave petitions. (AY. 2016-2017)
Ajay Gupta v. ITO [2023] 454 ITR 794 (SC)
Editorial: Ajay Gupta (HUF) v. ITO (2023) 454 ITR 787 (Delhi)(HC), affirmed.
102. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice SLP dismissed as petition is withdrawn against impugned order of High Court which held that when the AO admitted that no documents or relevant material were furnished to assessee along with the reopening notice issued to prove that income has escaped assessment, the impugned order passed u/s 148A(d) of the Act and notice issued u/s 148 of the Act were to be set aside and AO was directed to pass fresh order u/s 148A(d) of the Act after furnishing relevant documents to assessee.
Dismissing the SLP as withdrawn the Supreme Court observed that the assesse had filed present SLP against order of High Court but subsequently prayed to withdraw the SLP hence dismissed. The High Court by its impugned order held that where Revenue had admitted that no documents or relevant material was furnished to assessee along with reopening notice issued upon it then the impugned order passed u/s.148A (d) of the Act and notice issued u/s 148 of the Act were to be set aside and AO was to be directed to pass fresh order u/s 148A (d) of the Act after furnishing said documents/ relevant material to assessee (AY 2015-16).
Vertex International (P.) Ltd. v. ACIT (2023) 293 Taxman 72 (SC)
Editorial: Vertex International (P.) Ltd. v. ACIT (2023) 149 taxmann.com 480( Delhi)(HC), affirmed .
103. S. 148A: Reassessment – Conducting inquiry, providing opportunity before issue of notice – SLP dismissed against order of High Court – Since time period for issuance of reassessment notice for AY 2013-14 stood extended by section 3 of TOLA until 30-6-2021 and alleged escaped income of assessee was beyond Rs. 50 lakh, first proviso of S/149 (as amended by Finance Act, 2021) would not be attracted and thus reassessment proceeding initiated during time limit extended by TOLA was not barred by limitation. [S. 148, 149, Art. 136]
Dismissing the SLP of the assessee, the Supreme Court observed that assessee challenged notice issued u/s 148 on the ground that it was time- barred as per newly substituted Sections 149(1) (a) and 149(1)(b). The Revenue contended that the time limit for issuing notice was extended till 30-6-2021 as it was extended by Section 3 of TOLA read with Notification No. 20/2021 dated 31-3-2021, and Notification No. 38/2021 dated 27-4-2021, till 30-6-2021. The High Court by impugned order held that since time period for issuance of reassessment notice stood extended until 30 6-2021 and income alleged to have escaped assessment was over Rs 50 lakhs, first proviso of Section 149 would not be applicable. It further held that even without benefit of Instruction No. 01/2022 reopening notice issued on 23-6-2021 was within limitation. Based on such observation, the SC held that no interference was called for in order passed by High Court and SLP filed by assessee was to be dismissed. (AY 2013-14)
Salil Gulati v. ACIT (2023) 293 Taxman 75 (SC)
Editorial: Salil Gulati v. ACIT (2023) 150 taxmann. com 49 (Delhi)(HC) affirmed.
104. S. 151: Reassessment – Sanction for issue of notice – Sanction given mechanically – SLP of Revenue dismissed. [S. 147, 148, Art.136]
On appeal by the Revenue High Court dismissed the Department’s appeal from the order of the Tribunal quashing notices issued under section 148 of the Income-tax Act, 1961, holding that while according sanction to reopen the assessment, the Joint Commissioner had only recorded “Yes, I am satisfied” and that the mechanical way of recording satisfaction was clearly unsustainable, on a petition by the Department for special leave to appeal to the Supreme Court, The SLP of revenue is dismissed. (AY 1-4-1998 to 12-12-2002)
CIT v. S. Goyanka Lime and Chemical Ltd (2016) 237 Taxman 378 (2023)453 ITR 242 (SC)
Editorial: Refer CIT Jabalpur v. S. Goyanka Lime & Chemicals Ltd (2015) 231 Taxman 73 (MP)(HC), affirmed.
105. S. 151 : Reassessment – Sanction for issue of notice – Notice after four years – Capital gains – Sanction of prescribed Authority – Approval by Joint Commissioner held to be valid – SLP of Revenue dismissed. [S. 147, 148, 151(1), Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2002, Art. 136, 226]
The High Court allowed the assessee’s writ petition challenging the re-opening of its assessment for the A.Y. 2015-16 on the ground of invalid approval under section 151 of the Income-tax Act, 1961 by the Additional Commissioner, holding that since the reopening was more than four years after the end of the expiry of the relevant AY. The Taxation and Other Laws (Relaxation of Certain Provisions) Act, 2020 would not apply and only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could have accorded the approval. High court Followed, J.M. Financial and Investment consultancy Services Pvt Ltd v. ACIT (2023) 451 ITR 205 (Bom)(HC). On SLP by Revenue a dismissing the petition, the Court held that the reopening was after four years and it was apparent that the assessee had made disclosure of payment and deduction of Rs. 3.6 crores while computing capital gains in the regular assessment proceedings. Order of High Court is affirmed. (AY. 2015-16)
Dy. CIT v. Sidhmicro Equities Pvt. Ltd. (2023) 453 ITR 35 (SC)
Editorial: Sidhmicro Equities Pvt. Ltd v. Dy.CIT (2023) 451 ITR 33(Bom)(HC), affirmed.
106. S. 153A: Assessment – Search or requisition- In the absence of any incriminating material found during the search no assessment can be framed-It is however open to the Revenue to invoke the powers of reassessment under Section 147 in such situations.[S. 132 , 147, Art. 136]
The object of inserting section 153A was to do away with two parallel assessments which prevailed under the earlier block assessment regime, one upon the search being undertaken and the other being the regular assessment. In the new regime, there has to be incriminating material found during the search in the absence of which no assessment can be framed. However, in the absence of incriminating material found during the search the Revenue is not remediless and reassessment power can be resorted to.
PCIT v. Abhisar Buildwell P. Ltd. [2023] 454 ITR 212 (SC)
107. S. 153A: Assessment – Search or requisition – SLP dismissed against impugned order of High Court that where no incriminating material was found during search operations pertaining to year in question, the AO could not have proceeded to frame assessment u/s 153A of the Act. [S. 68, Art. 136]
Dismissing the SLP of the Revenue, the Supreme Court held that since the issues involved were squarely covered against Revenue in view of decision in the case of PCIT v. Abhisar Buildwell (P.) Ltd. (149 taxmann.com 399) (SC), SLP filed by Revenue was to be dismissed against impugned order passed by High Court wherein the High Court held that where no incriminating material was found during search operations pertaining to relevant AY, then the AO could not have proceeded to frame assessment u/s 153A of the Act (AY 2006-07)
PCIT v. S.S. Con Build (P.) Ltd (2023) 293 Taxman 491/ 455 ITR 506 (SC)
108. S. 153C : Assessment – Income of any other person – Search Reassessment – Asseessment of third person – Non recording of satisfaction Survey conducted on the basis of seized diary during the course of search on one Ashok Chowta – Addition made as unexplained investment u/s 69B – Department’s SLP dismissed. [S.69B, 132, 133A, 147, 148, 153C, Art. 136]
A search was conducted under section 132 of the Income-tax Act, 1961 in the residential premises of one Shri Ashok Chowta and amongst other documents/ papers, a diary was also seized. It contained details of payments made by Shri Ashok Chowta to the assessee. Thereafter a survey was conducted in the business premises of the assessee and his statement was recorded. The AO issued notice under section 148 of the Act for AYs 2005-06 to 2007-08. Further addition was made as unexplained investments u/s 69B. The High Court observed that no proceedings were initiated u/s 153C of the Act, and further the AO had not recorded his satisfaction with regard to escapement of income, and thus there was a patent non-application of mind. The Court further held that the author of the diary Smt. Soumya Shetty had passed away prior to the date of search. The Court also observed that a statement recorded under section 133A of the Act is not given any evidentiary value because the officer is not authorised to administer oath and to take any sworn statement. The High Court thus allowed Assessee’s appeal. The Supreme Court dismissed the Department’s SLP. (AY. 05-06 to 07-08)
Dy. CIT v. Dinakara Suvarna (2023) 454 ITR 27 (SC)
Editorial :Refer Dinakara Suvarna v. Dy.CIT (2023) 454 ITR 21 (Karn)(HC), order of High Court is affirmed.
109. S. 153C: Assessment – Income of any other person – Search – Prior to and after amendment by Finance Act, 2015, with effect from 1-6-2015 – Order of High Court set aside. [S. 132, Art. 136]
High Court, following the decision in Anilkumar Gopikishan Agrawal v. ACIT (2019) 418 ITR 25 (Guj)(HC) allowed writ petitions against notices under section 153C of the Income-tax Act, 1961, holding them to be without jurisdiction,. On appeal by the Department following the decision in ITO v. Vikram Sujitkumar Bhatia (2023) 453 ITR 417 (SC), the order passed by the High Court was quashed and set aside. (AY. 2009-10 to 2015-16)
ACIT v. Shruti Bhamasha Shah (2023)453 ITR 735 (SC)
110. S. 153C : Assessment – Income of any other person – Search – Provision applicable to searches conducted prior to date of amendment – (Prior to and after amendment by Finance Act, 2015, with Effect From 1-6-2015) – Search conducted prior to amendment with effect from 1-6-2015 – Books received by Assessing Officer of assessee after that date – Belongs or belong to – Deeming fiction that date of initiation of search would be date when Assessing Officer of third person receives seized material – Amended provision applicable – Interpretation of taxing statutes – Interpretation which effectuates object and purpose of statute preferred – Amendment bysubstitution – Rule against retrospectivity. [S. 132]
Allowing the appeals the Courts held that even though the search under section 132 was initiated prior to the amendment to section 153C with effect from June 1, 2015, the books of account or documents or assets were received by the Assessing Officer of the assessees (in respect of whom search was not conducted) only on April 25, 2017, which was subsequent to the amendment. Therefore, when the notice under section 153C was issued on May 4, 2018, the provision of the law existing as on that date, i. e., the amended section 153C shall be applicable. Court held that while interpreting machinery provisions of a taxing statute, the court must give effect to its manifest purpose by construing it in such a manner as to effectuate the object and purpose of the statute. Once the primary intention is ascertained and the object and purpose of the legislation is known, it becomes the duty of the court to give the statute a purposeful or a functional interpretation. The ascertainment of the legislative intent is a basic rule of statutory construction and a construction should be preferred which advances the purpose and object of a legislation. (AY. 2008-09 to 2014-15)
ITO v. Vikram Sujitkumar Bhatia (2023)453 ITR 417/ 293 Taxman 4/ 332 CTR 1/ 224 DTR 217 (SC)
Editorial: Anil Kumar Gopikrishna Agarwal v. ACIT (2019) 418 ITR 25 /(2020) 186 DTR 273 / 313 CTR 520 (Guj)(HC), reversed.
111. S. 153C : Assessment – Income of any other person – Search Assessments made in absence of incriminating materials being found during search – not sustainable – Department at liberty to initiate reassessment proceedings in accordance with law. [S. 147, 148]
On appeals against orders of the High Court setting aside assessments made under section 153C of the Income-tax Act, 1961, contending that the Department should be permitted to initiate reassessment proceedings under sections 147, 148 of the Act:
Held, dismissing the appeals, (i) that the assessment in the case of each of the assessees was made under section 153C of the Act, and in none of the cases was any incriminating material found during the search either from the assessee or from a third party. In that view of the matter, the assessments under section 153C of the Act had rightly been set aside by the High Court. (AY. 2002-03, 2005-06, 2006-07)
Dy. CIT v. U. K. Paints (Overseas) Ltd. (2023) 454 ITR 441 (SC)
112. S. 158BE : Block assessment – Time limit – Search and seizure – Limitation – From date of last Panchnama and not date of last warrant of authorisation [S. 132, 158C]
During the execution of a search warrant dated March 13, 2001, the Income-tax authorities got information about a locker belonging to the assessee in a bank. Therefore on March 26, 2001, a second authorisation was issued for searching the locker and the search was executed on March 26, 2001 itself. Notice under section 158BC was issued for block assessment. The assessee filed his return and the assessment was completed in April, 2003. Similar assessment orders were passed in the case of other assessees. The assessees filed appeals challenging the assessment orders, inter alia, on the ground that the assessment was time barred, contending that the two-year period as prescribed under section 158BE(b) of the Act from the date of the panchnama drawn on March 26, 2001, came to an end by March, 2003 and the assessment order was passed in April, 2003. The Commissioner (Appeals) dismissed the appeals. However, the Tribunal held that the assessment orders were barred by limitation but the High Court held that as the last panchnama though related to search authorisation dated March 13, 2001 was executed on April 11, 2001, limitation of two years was to be computed from April 11, 2001 and the assessments were within time. On appeals dismissing the appeal the Court held that the Limitation to be reckoned from date of last Panchnama and not date of last warrant of authorisation. (AY. Block period 1985-86 to 5-12-1995)
Anil Minda v. CIT (2023)453 ITR 1/ 292 Taxman 407 / 224 DTR 665 (SC)
Editorial: CIT v. Anil Minda (2010) 328 ITR 320 (Delhi)(HC) is affirmed.
113. S. 195: Deduction at source – Non- resident – Observations of High Court that if in assessment proceedings of Netherlands Company that company held liable to be taxed in India and assessee would also be treated as in default – Observation was quashed. [S.40(a)(i), Art. 136]
Held that once the assessee was held not liable to deduct the tax at source at all, merely because subsequently the foreign company was held liable to be taxed in India, the assessee could not be treated as in default. This was on surmises and conjectures. Whatever the consequences on the pending proceedings against or initiated by the Netherlands company pending in the High Court, the necessary consequences shall follow. However, at present the observations of the High Court that if in the assessment proceedings in the case of the Netherlands company, the Netherlands company was liable to be taxed in India, the assessee would also be treated as in default, were quashed and set aside.( AY 2003- 04)
Van Oord Acz India Pvt. Ltd. v. CIT (2023)453 ITR 214 / 292 Taxman 405/ 226 DTR 89 (SC)
Editorial: Observation of Delhi High Court set aside, Van Oord Acz India Pvt. Ltd. v. CIT (2010) 323 ITR 130 (Delhi)(HC)
114. S. 197: Deduction at source – Certificate for lower rate – Refund of interest – Allowed.[S. 201(IA), 244A]
The Assessee applied for the refund of interest levied under section 201(1A). The Revenue rejected the claim, arguing that the interest charge was imposed on the National Highways Authority of India (NHAI) and not on the Assessee, making the Assessee’s claim unjustifiable. However, the High Court ruled that since the Deputy Commissioner of Income Tax (DCIT) had determined that the Assessee had incurred a loss and therefore allowed the Tax Deducted at Source (TDS) credit in the Assessee’s favour, the reasons provided by the Revenue to deny the refund of interest, which had been recovered from NHAI on behalf of the Assessee, were untenable. The High Court also held that any payment of TDS by the deductor in relation to payments made to the Assessee deductee would entitle the Assessee to receive back such TDS with interest at the time of the assessment under section 143(3). Consequently, the Revenue was directed to refund the interest amount collected under section 201(1A) from NHAI to the Assessee, along with interest as per section 244A. The Supreme Court dismissed the Special Leave Petition (SLP) against the High Court’s order. This implies that the High Court’s decision regarding the refund of interest stands.
CIT (IT) v. IJM Corporation Berhad [2023] 293 Taxman 451 / 455 ITR 357 (SC)
115. S. 220 : Collection and recovery – Assessee deemed in default – Evasion of tax – Payment of interest on tax – Judgment of High court that order of AO not perverse – Appeal to Supreme court dismissed – No comment on payment in instalments. [S.220(2A)]
On the ground that the assessee had maintained certain documents showing goods taken on returnable basis from parties but the transactions were recorded as sales in the accounts and thus, the Assessing Officer found him guilty of evasion of tax which finding was affirmed in appeal. The Commissioner refused to waive interest under section 220(2A) of the Act holding that there was nothing to show that it was a case of genuine hardship. On a writ petition the court held that the order was based on findings of fact which had not been shown to be perverse, and refused to interfere. Supreme Court dismissed the appeal. No comment by Supreme Court on payment in instalments. (AY. 1990-1991)
Haji Ramzan and Sons v. CIT [2023] 454 ITR 440 (SC)
116. S. 234A: Interest – Default in furnishing return of income – Levy of interest is mandatory. [S. 2(35), 5, 6(3) (ii), 131, 142(1), 143(2), 148, 282]
Affirming the order of High Court the Court held that the assessees’ contention against levy of interest in the absence of any specific order passed in the assessment order to levy interest, was not tenable. When the interest was levied in accordance with the working mentioned in ITNS 150 which formed part of the assessment order, it was sufficient to charge interest. Applied. CIT v. Bhagat Construction Co. Pvt. Ltd. (2016) 383 ITR 9 (SC). Court also held that levy of interest under section 234A was mandatory and automatic. (AY. 1987-88 to 1989-90) AY. 1987-88 to 1989-90)
Mansarovar Commercial Pvt. Ltd. v. CIT (2023) 453 ITR 661/ 293 Taxman 312 / 332 CTR 137/ 224 DTR 305 (SC)
Editorial: Decision of Delhi High Court, affirmed, CIT v. Mansarovar Commercial Pvt. Ltd (Delhi) (HC) (2016) 134 DTR 105 / 287 CTR 28 (Delhi) (HC)
117. S.245D : Settlement Commission Settlement of cases -Procedure Order of Settlement Commission- Matter to be remanded to Settlement Commission for fresh decision- Settlement Commission may call for fresh Report from Commissioner. [S. 245D(4)]
If the Settlement Commission has disposed off the application contradicting itself by specifying that it is not practicable to pass any order under Section 245D(4) and also if it subsequently settles the amount of tax to be paid by the applicant then the High Court ought to have remanded the matter to the Settlement Commission(now the Interim Board) for a fresh order in accordance with law.(AY. 1998-1999, 2004-2005)
Jagdish Transport Corporation and Others v. UOI [2023] 454 ITR 264 (SC)
118. S. 255 : Appellate Tribunal – Procedure – Functions – Jurisdiction of Tribunal – Appeal to be heard and disposed of only by bench within whose jurisdiction Assessing Officer who passed assessment order situate. [S. 127, 252, (Appellate Tribunal) Rules, 1963, R. 4]
Where AO and Commissioner (Appeals) having passed order in Bangalore, appeal against order passed by Commissioner (Appeals) would only lie before Bangalore Bench of Tribunal and thus, High Court had not committed any error in setting aside order passed by President of Tribunal, transferring appeals from Bangalore Bench to Mumbai Bench. (AY. 2005-06 to 2008- 09)
PrCIT v. MSPL LTD. (2023)454 ITR 280 (SC)
119. S.260A: Appeal – High Court – Appeal against order of ITAT on determination of Arm’s length price maintainable before the High court [S.92C]
An appeal is maintainable to the High Court under Section 260A against the order of the ITAT determining the arm’s length price and the order of the ITAT does not in all cases attain finality pursuant to such determination. The High Court shall in all cases see whether the guidelines under the Act and Rules have been followed or not or the determination of ALP is perverse or not. The High Court does not only have the aforesaid power, it can inquire whether there is a proper selection of filters and of comparable companies and whether the same is done judiciously based on the relevant material evidence on record.(AY. 2003-2004)
Sap Labs India Pvt. Ltd. v. ITO [2023] 454 ITR 121 (SC)
120. S.260A – Appeal- High Court – International Transactions – Arm’s Length Price – Determination – questions arising out of – whether within scope of jurisdiction of high court – matter remanded to high court for disposal of appeal afresh in light of supreme court ruling in Sap labs India Pvt. ltd. (2023) 454 ITR 121 (SC).
Where, on the questions whether the Tribunalwas right in directing the assessing authority to include the foreign exchange fluctuation loss or gain as part of the operating income/loss and to exclude two companies as comparable holding that the companies were functionally different from the assessee, the High Court, following PR. CIT v. SOFTBRANDS INDIA P. LTD. [2018] 406 ITR 513 (Karn), dismissed the Department’s appeals holding they were not substantial questions of law within the scope of section 260A of the Income-tax Act, 1961 . On a petition for special leave to appeal to the Supreme Court:
Held, allowing the petition, that since the decision in SOFTBRANDS [2018] 406 ITR 513 (Karn) fell for consideration before the court in SAP LABS INDIA PVT. LTD. v. ITO (2023)454 ITR 121 (SC), in view of the decision in the case of SAP LABS INDIA PVT. LTD. (2023)454 ITR 121 (SC), the judgment of the High Court in so far as it related to transfer pricing, was to be set aside and the matter remitted to the High Court to decide the appeal afresh in accordance with law and on its own merits and in the light of the observations made by the court.( AY.. 2009-10)
Pr. CIT and Anr. v. Subex Ltd. (2023)454 ITR 519 (SC)
121. S. 263: Commissioner – Revision of orders prejudicial to revenue – Total income – Eligible profit – Export profit – Deduction under Section 80HHC to be computed on eligible profits only after reducing profits on which deduction availed of under Section 80IB of the Act – Revision was affirmed – Special Leave to appeal of the assessee was dismissed. [S.80HHC, 800IA (9), 80IB (13)]
The High Court affirmed the Tribunal’s order holding that when the provisions of section 80IB(13) were read in conjunction with section 80IA(9) of the Act, the deduction under section 80HHC of the Act was to be computed on the eligible business profits only after reducing therefrom the profits on which deduction has already been availed of by the assessee under this section, i. e., 80IB, and if an assessee has claimed deduction of profits or gains under section 80IB, deduction to that extent is not to be allowed under section 80HHC, and that the Assessing Officer had been rightly directed to recompute the total income of the assessee keeping in view the provisions of section 80- IB(13) read with section 80-IA(9) of the Act. On a petition for special leave to appeal, order of the High Court was affirmed. (AY. 2001-02)
Broadways Overseas Ltd. v. CIT (2023)453 ITR 774/ 292 Taxman 33 (SC)
Editorial: Broadways Overseas Ltd v. CIT (P&H) (HC)(ITA No.234 of 2009 dt.22-11-2013) is affirmed.
122. S. 263: Commissioner – Revision of orders prejudicial to revenue – Capital gains – Cost of improvement – Paid to shareholders under Family Settlement – Discharge encumbrances – Cost of improvement – Relinquishment of rights – Assessing Officer accepting claim – Order erroneous and prejudicial to Revenue – Revision is justified – Order of High Court reversed. [S.45, 48, 55(1)(b)]
The family settlement was arrived between the share holders of the Company who are family members. As per the Arbitration award the family settlement was recorded between parties. As per the family settlement the building of the company was sold. The assessee claimed the amount paid as part of settlement as cost of improvement while computing the capital gains. The Assessing Officer allowed the claim. Commissioner set aside the order of the Assessing Officer. On appeal the Tribunal held that the Commissioner wrongly invoked the revision Paville Projects Pvt. Ltd v. CIT (2014) 35 ITR 352(Mum)(Trib). Order of the Tribunal was affirmed by High Court, CIT v. Paville Projects Pvt. Ltd [2017] 398 ITR 603 (Bom) (HC).
On appeal by the Revenue allowing the appeal the Court held that the erroneous assessment order had resulted in loss of revenue in the form of tax. Under the circumstances and in the facts and circumstances of the case, the High Court had committed a serious error in setting aside the order passed by the Commissioner passed in exercise of powers under section 263 of the Act. The Court observed that if due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by person, it will certainly be prejudicial to the interest of the Revenue. The order passed by the Commissioner in exercise of powers under section 263 of the Act was restored. (AY. 2007-08)
CIT v. Paville Projects Pvt. Ltd. (2023) 453 ITR 447/ 293 Taxman 38/ 332 CTR 28/ 224 DTR 185 (SC)
Editorial: CIT v. Paville Projects Pvt. Ltd (2017) 398 ITR 603 (Bom)(HC), reversed. Refer Paville Projects Pvt. Ltd v. CIT (2014) 35 ITR 352/ (2016) 71 taxmann.com 287 (Mum)(Trib)
123. S.263: Commissioner – Revision of orders prejudicial to revenue – Matter remanded to CIT- No ground to interfere by Supreme Court and assessee can raise all grounds including that preconditions for exercise of power are not satisfied before CIT
It was held by the High Court that issues of depreciation on fixed assets, benchmarking of international transaction and TDS could be corrected by CIT in revisional jurisdiction. However, remand is to be made to CIT to give the assessee an opportunity of hearing. Supreme Court finds no ground to interfere and the assessee can raise all grounds before the CIT since assessee did not get an opportunity to raise grounds regarding preconditions for exercise of power under Section 263.
Bses Rajdhani Power Ltd. v. PCIT [2023] 454 ITR 436 (SC)
124. Commissioner – Revision of orders prejudicial to revenue – Period of limitation for revision with respect to the issues not covered in the reassessment proceedings is to be reckoned from the date of the original assessment order and not of the reassessment order. [S. 143)3), 147]
The CIT exercised powers u/s 263 with respect to the issues which were not covered in the reassessment proceedings. The Supreme Court held that the issue before the Commissioner while exercising the powers under Section 263 of the Act relates back to the original Assessment order and, therefore, the limitation would start from the original Assessment order and not from the Re-assessment order. The Court followed the decision of CIT v. Alagendran Finance Ltd. [2007] 293 ITR 1 (SC) wherein it was held that even in case of re-opening, the previous order is set aside and whole proceedings would start afresh, but in case the subject matter of reassessment is distinct and different from the issue under revision, period of limitation under Section 263 of the Act would start from the date of the original assessment order and not from the reassessment order.
CIT v. Industrial Development Bank of India Ltd. (2023)454 ITR 811 (SC)
125. S. 271(1)(c) : Penalty – Concealment – Cash sales – Value Added Tax Authorities accepting cash Sales- Independent finding of fact that the assessee had introduced unaccounted income as cash sales – Inaccurate particulars of income – Levy of penalty affirmed by High court – SLP of assessee is dismissed. [S.80IAC, Art. 136]
On appeal by the Department against the order of the Tribunal setting aside the penalty levied on the assessee under section 271(1)(c) of the Income-tax Act, 1961, the High Court allowed the appeal of the Revenue holding that merely because the value added tax authorities had accepted the cash sales set up by the assessee that was not sufficient ground to hold that the cash sales set up by the assessee were genuine, that the Assessing Officer and the appellate authority, had rightly given a finding of fact that the cash sales were not genuine and the assessee had introduced its unaccounted income in the garb of cash sales. The High Court restored the penalty in view of inaccurate particulars of income furnished by the assessee in the garb of fictitious cash sales with a view to claim exemption under section 80IC of the Act. SLP of assessee is dismissed. (AY. 2007-08)
J. M. J. Essential Oil Company v. CIT (2023)453 ITR 754/ 292 Taxman 314 (SC)
126. S. 271C : Penalty – Failure to deduct at source – Failure or delay in remittances of tax deducted at source – Attracts interest and prosecution – No provision for levy of penalty Interpretation Of Taxing statutes – Penal provisions – Strict construction. [S. 115O(2), 194B, 201(1A), 271C, 276B]
Allowing the appeals the Court held that all these cases were with respect to the belated remittance of the tax deducted at source by the assessee and not a case of non-deduction of tax at source at all and therefore, section 271C(1)(a) shall be applicable. As the respective assessees had remitted the tax deducted at source though belatedly and these were not cases of non-deduction of tax at source at all they were not liable to penalty under section 271C of the Act. Any question of applicability of section 273B of the Act did not arise. Courts also held that The Central Board of Direct Taxes Circular No. 551 dated January 23, 1990 ([1990] 183 ITR (St.) 7) deals with the circumstances under which section 271C was introduced in the statute, for levy of penalty. Paragraph 16.5 of the circular talks about the levy of penalty for failure to deduct tax at source. It also takes note of the fact that if there is any delay in remitting the tax, it will attract payment of interest under section 201(1A) of the Act and because of the gravity of the mischief involved, it may involve prosecution proceedings as well, under section 276B of the Act. Any omission to deduct the tax at source may lead to loss to the Department and hence remedial measures have been provided by incorporating the provision to ensure that tax liability to that extent would stand shifted to the shoulders of the party who failed to effect deduction, in the form of penalty. On deduction of tax, if there is delay in remitting the amount to Department, it had to be satisfied with interest as payable under section 201(1A) of the Act, besides the liability to face prosecution proceedings, if launched in appropriate cases, in terms of section 276B of the Act. Even the Board has taken note of the fact that no penalty is envisaged under section 271C of the Act for non- deduction tax at source and no penalty is envisaged under section 271C for belated remittance/payment/deposit of the tax deducted at source. (AY. 2003-04, 2010-11 to 2012-13)
US Technologies International Pvt. Ltd. v. CIT (2023)453 ITR 644/ 293 Taxman 27/ 332 CTR 176/224 DTR 265 (SC) Eurotech Maritime Academy Pvt. Ltd. v CIT (TDS) (2023)453 ITR 644/ 293 Taxman 27/ 332 CTR 176/ 224 DTR 265 (SC)
Editorial: Decision in CIT (TDS) v. Eurotech Maritime Academy Pvt. Ltd (2019) 415 ITR 463 (Ker)(HC), reversed.
127. S. 276B : Offences and prosecutions – Failure to pay to the credit tax deducted at source – High Court quashed prosecution holding tax deducted at source has been deposited with interest, and the deducted amounts not more than Rs. 50,000 – SLP dismissed. [S. 278B]
SLP dismissed against High Court’s order that quashed criminal proceedings and orders passed by the Special Economic Offences court taking cognizance against the assessee of offences under sections 276B and 278B of the Act holding that the tax deducted at source in all the cases had been deposited with interest prior to initiation of criminal proceedings and apart from one or two cases TDS was not more than Rs.50,000/-. Also, the Instruction of the Central Board of Direct Taxes mentioned that prosecution under section 276B shall not normally be proposed when the amount involved or the period of default was not substantial and the amount in default had been deposited in the meantime to the credit of the Government. (AY: 2017-18)
ACIT v. At-Dev Prabha (Jv) and Ors (2023) 454 ITR 59 (SC)
128. S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Application for bail – Time to surrender before Trial court and consider the application for bail – SLP of the assessee is dismissed. [S.276 (2) 278EE, Code of Criminal Procedure, 1973, S. 482. [Art. 136,226]
The High Court disposed of the bail application of the assessee under section 482 of the Code of Criminal Procedure, 1973, arising out of proceedings under section 276C (2) read with section 278E of the Income-tax Act, 1961, directing that if the assessee appeared and surrendered before the court below within 30 days and applied for bail, his prayer for bail shall be considered and decided in view of the law settled by the court. SLP of the assessee is dismissed. Followed Lal Kamlendra Pratap Singh v. State U.P. (2009) (3) ADJ (SC)
Ramendra v. PCIT (2023) 453 ITR 751 (SC)
Prohibition of Benami Property Transactions Act, 1988
129. S. 2(9): Benami transactions – Change in law – Transactions prior to amendment in 2016 – Notices, orders for provisional attachment and adjudicating orders set aside – supreme court – special leave petition dismissed – liberty to department to move court if review of Ganpati Dealcom Pvt. Ltd. [2022] 447 ITR 108 (SC) allowed. [S.24(1), 24(4)(a)(i), 26(3)
Where the High Court, following the Supreme Court ruling in UOI v. Ganpati Dealcom Pvt. Ltd. [2022] 447 ITR 108 (SC) to the effect that the amendments made in 2016 to the Prohibition of Benami Property Transactions Act, 1988 did not have retrospective effect, quashed notices, provisional attachment and adjudicating orders passed by the various authorities under that Act as amended by the Benami Transactions (Prohibition) Amendment Act, 2016 in relation to transactions pertaining to earlier years, on petitions for special leave to appeal to the Supreme Court, the same were dismissed. (AY. 2015-16)
ACIT (Initiating Officer) and Anr. v. Neopride Pharmaceuticals Ltd. and Anr. (2023) 454 ITR 580 (SC)