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S.4 : Charge of income-tax – Compensation received by the assessee in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging assessee’s signature on a document relating to sale of shares of a company is not taxable as income [S.2(24)]
Dismissing the appeal of the revenue the Tribunal held that compensation received by the assessee in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging Assessee’s signature on a document relating to sale of shares of a company is not taxable as income as the compensation received by the Assessee was not for his professional activities but for settlement of dispute between him and third party. Accordingly, the same cannot fit into the definition of income as per section 2(24) r.w.s 4 of the Act. (AY. 2011-12)
ACIT v. Jackie Shroff(2018) 167 DTR 133 / 172 ITD 425 / 194 TTJ 760 (Mum. Trib.)
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S.4 : Charge of Income tax – Capital or revenue – Subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt
Dismissing the appeal of the revenue the Tribunal held that subsidy received from West Bengal Incentive Scheme from State Government for setting up of an industry in the backward area is to be treated as a capital receipt. (AY. 2005-06)
ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243 / 192 TTJ 645 (Delhi)(Trib.)
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S.4 : Charge of income-tax –Development agreement – The “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt [S. 2(14) 28(va)]
Allowing the appeal of the assessee the Tribunal held that the “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt. (ITA. No. 2449/Ahd/2016, dt. 17-9-2018)(AY. 2008-09)
Bhojisaon Infrastructure Pvt. Ltd. v. ITO (Ahd.)(Trib.),
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S.4 : Charge of income-tax –Capital or revenue – compensation received on closure/termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilisation of profit making apparatus is capital receipts. [S.28(i)]
Dismissing the appeal of the revenue the Tribunal held that compensation received on closure/ termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilisation of profit making apparatus is capital receipts. (ITA No.157/RPR/2014, dt. 23-10-2018)(AY. 2011-12)
DCIT v. Rishabh Infrastructure Pvt. Ltd. (Raipur)(Trib),
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S.6(1) : Residence in India – Individual – Non-resident –Assessee was outside India for a period of more than 182 day, Salary income of assessee received outside India is not liable to tax merely because his foreign employer had deducted the tax at source on such income [S. 5(2), 192]
Allowing the appeal of the assessee the Tribunal held that since assessee was outside India for a period of more than 182 days, he had became a non-resident. Accordingly the salary income of assessee received outside India is not taxable in India merely because it was deducted on such income. (AY. 2013-14)
Avdesh Kumar v. DCIT (2018) 172 ITD 73 (Delhi) (Trib.)
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S.6(1) : Resident in India – Scope of total income – Non-Resident – Stationed in Switzerland for 331 days – Rendered his services outside India – Foreign assignment allowance received by him abroad, was not liable to tax in India [S. 5 (2)]
Dismissing the appeal of the revenue , the Tribunal held that since services of assessee were utilised outside India and, moreover, both accrual and receipt of income happened outside India, same was outside ambit of tax as per provisions of section 5(2) of the Act. (AY. 2013-14)
DCIT v. Sudipta Maity. (2018) 172 ITD 94 (Kol.) (Trib.)
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S.10(37) : Capital gains – Agricultural land – Within specified urban limits – Interest on compensation – Interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. [S.56, Land Acquisition Act, 1894, S.28]
Tribunal held that interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. (AY. 2013-14)
ITO v. Sangappa S. Kudarikannur. (2018) 172 ITD 332 (Bang.) (Trib.)
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S.11 : Property held for charitable purposes – Sports association – Merely because some sponsorship was accepted from a private company for Asian Games and Youth Olympic Games, exemption cannot be denied [S.2(15)]
Dismissing the appeal of the revenue, the Tribunal held that there was no material which suggests that the assessee was conducting its affairs solely on commercial lines with the motive to earn profit. There is also no evidence that the assessee has deviated from its objects which it has been pursuing since past many decades. Thus, proviso to S.2(15) of the Act is not applicable to the assessee. The assessee cannot lose its character of charitable purpose merely because some sponsorship was accepted from a private company in respect of Asian Games and Youth Olympic Games (AY. 2011-12)
Dy. CIT v. India Olympic Association (2018) 171 ITD 674 / 66 ITR 82 (Delhi)(Trib.)
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S.11 : Property held for charitable purposes – Application of income – Giving funds to various organisations which are carrying out activities of relief to poor or medical relief will constitute application of income [S.2(15) 12AA, 13]
During relevant year, assessee made donations in kind and by issuing cheques to various schools, colleges and other charitable institutions registered under section 12A of the Act. AO held that the amount and items given to institutions which were registered under section 12A, could not be allowed in view of section 13(3)(d). Allowing the appeal of the assessee the Tribunal held that instead of carrying out any charitable activity by itself, gives funds to various organizations and institutions who are carrying out activities of relief to poor or medical relief, in cheque or in kind, then it will still tantamount to incurring of expenditure for charitable purposes and, hence, will constitute application of income in hands of assessee. Accordingly the disallowance was deleted. (AY. 2013-14)
KPMG Foundation v. ITO (2018) 172 ITD 185 (Delhi) (Trib.)
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S.12A : Registration – Trust or institution – Corpus donations received by trust with specific directions by donors to be applied towards specific purpose be treated as capital receipts – Corpus donation cannot be taxed though the trust is not registered [S. 2(24) iia), 11, 12AA]
Allowing the appeal of the assessee the Tribunal held that corpus donations received by assessee-trust with specific directions by donors to be applied towards specific purpose for which respective fund was created would be treated as capital receipts. Accordingly the corpus donation is not taxable though the trust is not registered under S.12A of the Act. (AY. 2012-13)
Bank of India Retired Employees Medical Assistance Trust v. ITO (2018) 172 ITD 78 (Mum.) (Trib.)
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S.14A : Disallowance of expenditure – Exempt income –Net of interest – Benefits of netting of interest under Rule 8D(2)(ii) be allowed without even emphasising on need of having any inextricable link between interest earned and interest paid prior to 2-6-2016. [R.8D(2)(ii)]
Dismissing the appeal of the revenue the Tribunal held that for the purpose of applying Rule 8D(2)(ii) prior to its amendment with effect from 2-6-2016, what would be considered as amount of expenditure by way of interest would be the interest paid by the assessee on the borrowings minus the interest income earned during the financial year. The interest income earned during the year being more than the interest expenditure incurred, the disallowance made by the AO on account of interest u/s. 14A by applying Rule 8D(2)(ii) was deleted by the CIT(A) on the ground that there was no net interest expenditure incurred by the assessee. Before the ITAT revenue challenged the same stating that there nothing brought on record to show an inextricable link between the interest earned and interest paid. Tribunal affirmed the order of CIT(A). (AY. 2009-10)
Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713 (Kol.)(Trib.)
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S.14A : Disallowance of expenditure – Exempt income – Income from other sources –Dividend income on investment made in Oman – No disallowances can be made – DTAA-India – Oman [S.90(2), Art. 25, R.8D]
Dismissing the appeal of the revenue the Tribunal held that dividend income earned from investment made in Oman is chargeable to tax in India under head ‘Income from other sources’ and would form part of total income; rebate of taxes had to be allowed from total taxes in terms of section 90(2), read with article 25 of Indo-Oman DTAA, and, consequently, provisions of S. 14A were not applicable to dividend received. (AY. 2006 07)
ACIT v. Indian Farmers Fertiliser Cooperative Ltd. (2018) 171 ITD 504 (Delhi) (Trib.)
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S.17 : Perquisite – Employee Stock Option Plans – Tax arises in hands of employees, on date of allotment of shares and not on date of exercise of option. [S.15, 17(2), 192, 201(1A)]
Assessee deducted perquisite tax on ESOP on date of allotment of shares. AO held that perquisite tax on ESOP should have been deducted on date of exercise of option. Allowing the appeal of the assessee the Tribunal held that as per S.17(2)(vi) obligation for withholding tax accrues only when shares are allotted after completion of commitments on part of person who exercised option and not on date of exercise of option. (AY. 2012-13)
Bharat Financial Inclusion Ltd. v. DCIT (2018) 172 ITD 198 (Hyd.) (Trib.)
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S.23 : Income from house property – Annual value – vacancy allowance – The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23 (1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assessee’s attempts to let out and infallible proof should not be demanded [S.22, 23(1) (c)]
Allowing the appeal of the assessee the Tribunal held that The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23(1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assessee’s attempts to let out and infallible proof should not be demanded. (ITA. No. 3755/Mum/2016, dt. 10-8-2018) (2012-13)
Sachin R. Tendulkar v. DCIT (Mum)(Trib.),
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S.28(i) : Business income – Capital gains – Conversion into stock in trade – Development agreement – Project completion method –Advance received equivalent to share cannot be taxed in the year of receipt – As per the agreement, right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year – Taxable in subsequent year – Capital gains arising on conversion of land into stock-in-trade prior to development agreement would also be taxed in subsequent year in which the right to collect the amount is crystallized – Conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property. [S. 4, 5, 45, 145]
Tribunal held that advance received equivalent to share cannot be taxed in the year of receipt. As per the development agreement right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year. Developer had recognised completion and sale of developed portion in subsequent assessment year 2011-12, business profits arising would be taxable in assessment year 2011-12. Capital gains arising on conversion of capital asset into stock-in-trade would also be taxed in in subsequent assessment year 2011-12 in which business profits were to be taxed. On conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property. (AY. 2009-10)
Vilas Babanrao Rukari (HUF) (2018) 171 ITD 532 (Pune) (Trib.)
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S.28(i) : Business loss – Speculation – Tax planning – The fact that the assessee bought and sold shares of groups concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S.73 because the shares were held as investments
Dismissing the appeal of the revenue, the Tribunal held that the fact that the assessee bought and sold shares of group’s concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S.73 because the shares were held as investments. The assessee-company has given scientific reasons for investment in these companies which are supported by documentary evidences. The Revenue has only contended that Ld. CIT(A) has not seen whose shares are sold by the assessee-company. However, complete details of purchase and sales are mentioned in the orders of the authorities below supported by documentary evidences. (ITA. No. 3661/Del./2014, dt. 1-10-2018)(AY. 2009-10)
ACIT v. RJ Corp. Ltd. (Delhi) (Trib.),
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S.35 : Scientific research expenditure – Retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S.35(1)(ii). [S. 35(1)(ii)]
Allowing the appeal of the asssessee the Tribunal held that retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S.35(1)(ii). (AY. 2014-15 )
P. R. Rolling Mills (P.) Ltd. v. DCIT (2018) 171 ITD 683 (Jaipur)(Trib.)
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S.36(1)(ii) : Bonus or commission – Restriction of allowance would apply only to an employee who has also share in company – Payment made to agent who was an MD of company in earlier years and in the relevant year he was not an employee – Disallowance cannot be made
Allowing the appeal of the assessee the Tribunal held that restriction of allowance would apply only to an employee who has also share in company. Payment made to agent who is not an employee during the relevant year. Disallowance cannot be made. (AY. 2009-10)
Nat Steel Equipment (P.) Ltd. v. DCIT (2018) 171 ITD 482 (Mum.) (Trib.)
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S.37(1) : Business expenditure –Actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT [S.36(1)(v)]
Dismissing the appeal of the revenue, the Tribunal held that actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT. Followed District Co-operative Central Bank, Eluru (ITA No. 49 & 50/Viz/2012) (AYs. 2013-14 & 2014-15)
ACIT v. Guntur District Co-operative Bank Ltd. (2018) 66 ITR 61 (SN)(Vishakha) (Trib.)
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S.37(1) : Business expenditure –Where assessee was selling goods to retailers at a price less than their cost price, in view of fact that transaction was a bona fide one, taxing authority could not take into account market price of those goods, ignoring real price fetched to ascertain profit from said transaction. [S.145(3)]
On appeal to the Tribunal, it held that revenue authorities cannot disregard the books of accounts and resort to the process of estimating income of the Assessee, unless provisions of section 145(3) are invoked, which was not the case. It also held that there should be a real income which needs to be taxed and not ‘income which could have been earned but not earned’ and held that the tax return filed by the assessee needs to be accepted. The Tribunal also observed that one cannot go on the assumption that the profit forgone is expenditure incurred and further, that expenditure so incurred was for acquiring intangible assets like goodwill, brand, etc. Thus, the Tribunal held that assuming that the expenditure was incurred, the expenditure for building brand or goodwill was also revenue expenditure and allowable as deduction. Thus, the Tribunal held that the loss declared by the Assessee should be accepted and the Ld. AO’s action in disallowing the loss was not in accordance with the law. (AY. 2015-16)
Flipkart India Private Limited vs. ACIT (2018) 166 DTR 305 / 170 ITD 751 / 64 ITR 358 / 193 TTJ 685 (Bang)(Trib.)
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S.37(1) : Business expenditure – Capital or revenue – Expenses on renovation and refurbishing of a leased property – Held, expenses incurred to facilitate carrying out of catering / canteen services at the leased premises and formed integral part of profit earning process of assessee’s business – Held, revenue expenditure
Expenditure incurred on a leased property in the nature of construction of working slabs / counters for various purposes, teakwood partitions, stainless steel shutters, pipelines, purchase of tables, chairs, centrifugal blowers and fresh air inlets, duct fabrication, Stainless steel Hoods, POP ceilings, electrical works, water connections, paintings etc., & various other items of similar nature were mainly to facilitate carrying out of catering / canteen services at the leased premises and formed part and parcel of assessee’s trading operations and constitute an integral part of profit earning process of assessee’s business. Same was held by the Tribunal to be revenue in nature. (AY. 2002-03, 2003-04, 2009-10)
Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN)(Mum.)(Trib.)
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S.37(1) : Business expenditure – Compounding fees paid to RBI for post-facto approval from FIPB – Held, amount compensatory in nature and therefore, allowable as deduction. [Expln.]
Assessee paid aforesaid sum of ₹ 18 Lakh to Reserve Bank of India [RBI] as compounding fees under the provisions of Foreign Exchange Management Act, 1999. Assessee was categorised as operating company for the purposes of FIPB and FEMA. Subsequently, the assessee made investment in shares of its wholly owned subsidiary companies and accordingly its category changed from operating company to operating-cum-holding company, which required prior approval of FIPB. However, the said approval was not obtained and the assessee applied for post-facto approval of the same from FIPB which was granted subject to compounding of the same by RBI. Held, such compounding fees was compensatory in nature and therefore, allowable. (AYs. 2002-03, 2003-04, 2009-10)
Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN)(Mum.)(Trib.).
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S.37(1) : Business expenditure – Commercial expediency – Businessman’s point of view – Service charges were paid to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc. – There being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to refix amount that should have been paid. S.37(1) does not have any restriction to amount paid so long expenditure is incurred for business
Assessee has paid service charges of ₹ 3 lakh per month to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc. Assessing officer estimated at ₹ 25,000 per month. On appeal the Tribunal held that , there being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to refix amount that should have been paid. S. 37(1) does not have any restriction to amount paid so long expenditure is incurred for business. (Referred, CIT v. Bharat Carbon & Ribbon Mfg. Co. (P.) Ltd. [1999]239 ITR 505 (SC), Sasson J. David & Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 (SC)). Birla Cotton Spinning & Weaving Mills Ltd. v. CIT [1967] 64 ITR 568 (Cal.) (HC). CIT v. Dhanrajgiri Raja Narasingiri [1973] 91 ITR 544 (SC) Jamshedpur Motor Accessories Stores v. CIT [1974] 95 ITR 664 (Pat.) (HC) J.K. Woollen Mfgr. v. CIT [1969] 72 ITR 612 (SC). CIT v. Chandulal Keshavlal & Co. [1960] 38 ITR 601 (SC), (AY. 2005 -06)
Elem Investments (P.) Ltd. v. ACIT (2018) 172 ITD 58 (Hyd.) (Trib.)
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S.37(1) : Business expenditure – Corporate entity – even if no business was carried out during the year, expenditure incurred by it has to be allowed
During assessment proceedings, AO found that assessee had claimed expenditure towards business expenses but assessee had not carried out any business during year under consideration. Therefore, AO disallowed the said amount and added back the same to income of assessee. CIT(A) set aside the order of the AO. The Tribunal held that in case of Preimus Investment And Finance Ltd (ITA 4879/M/12) dt. 13th May 2015, it was held that expenditure incurred for retaining status of company, namely miscellaneous expenses, salary, legal expenses, travel expenses, would be expenditure wholly and exclusively for purpose of making and earning income. There was no doubt that assessee was a corporate entity and even if it did not carry any business activity it had to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred had to be allowed and thereby Revenue’s appeal was dismissed.
Ozoneland Agro Pvt. Ltd. (2018) 53 CCH 427 (Mum.)(Trib.)
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S.40(a)(ia) : Amounts not deductible – Deduction at source – Short deduction – Precedent – Deducted the tax applying the provision of S.194C @2% instead of 194J @ 10% – No disallowances can be made – Followed, CIT v. S.K. Tekriwal 206 CTR 73 (Cal.)(HC) instead CIT v. PVS Memorial Hospital Ltd. (60 taxmann.com 69)(Ker.) (HC). Tribunal held that in the absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which favour’s assessee had to be accepted. [S.194C, 194J]
Dismissing the appeal of the revenue the Tribunal held for short deduction of tax no disallowance can be made. Followed, CIT v. S.K. Tekriwal ( )(206 CTR 73 (Cal )(HC) instead CIT v. PVS Memorial Hospital Ltd.( ) (60 taxmann.com 69)( Ker) (HC). Tribunal held that in the absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which is favours assessee had to be accepted. (AY. 2010-11)
ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897 (Mum)(Trib.)
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S.40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – In absence of express or implicit contract between the assessee and the mastries, payments made to the labourers through mastries / group leaders did not attract deduction at source hence no disallowances can be made [S.194C]
Dismissing the appeal of the revenue the Tribunal held that in absence of express or implicit contract between the assessee and the mastries, payments made to the labourers through mastries / group leaders did not attract deduction at source hence no disallowances can be made. (AY. 2012-13)
ACIT v. Kasiviswanadham (A)(2018) 66 ITR 525 (Vizag) (Trib)
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S.45 : Capital gains – Allotment letter – Period of holdings –The law laid down in CIT v. Suraj Lamps & Industries Pvt. Ltd. (2012) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536 (Bom)(HC) is explained [S.2(42A), 2(47) 54]
Allowing the appeal of the assessee the Tribunal held that the law laid down in Suraj Lamps & Industries (2012) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017 )393 ITR 536 (Bom)(HC) is explained. (ITA No.4853/Mum/2016, dt. 14-8-2018)(AY. 2012-13)
Sanjay Kumar Footermal Jain, v. ITO (Mum)(Trib),
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S.45 : Capital gains – Long term capital gains from penny stocks-Tribunal held that it cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply – The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares – The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc. to prove the genuineness of the transactions are false or fictitious or bogus. [S.10(38), 68]
Allowing the appeal of the assessee the Tribunal held that long term capital gains on penny stocks cannot be assessed as cash credits or undisclosed income. it cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply – The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares. The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc. to prove the genuineness of the transactions are false or fictitious or bogus. (ITA No. 457/Del/2018, dt. 5-11-2018)(AY. 2014-15)
Arun Kumar v. ACIT (Delhi)(Trib),
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S.45 : Capial gains – Penny Stocks – Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker. [S.10(38)]
Dismissing the appeal of the revenue the Tribunal held that, assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt. depository and traded on stock exchange. Nothing on record to suggest assessee gave cash and purchased cheque from broker. (Sanjay Bimalchand Jain (Bom HC) distinguished). ( ITA. Nos. 93 to 99/RPR/2014, dt. 16-4-2018)(AY. 2004-05)
DCIT v. Rakesh Saraogi & Sons (HUF)(Rai)(Trib),
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S.45 : Capital gains – Business income – Merely because the Owner of an immovable property holds the land as stock-in-trade does not prove that assessee, being a co-owner, also held the property as stock in trade – Profits is assessable as capital gains [S.28(i) 54F]
Assessee worked out long term capital gains and claimed exemption under section 54F on sale proceeds received on sale of land co-owned by him. Since one of the co-owners, a company, who owned major portion of the land held the same as stock-in-trade in its books of account, AO treated the land held by assessee as stock in trade as well. The Tribunal observed that transaction entered by assessee was to make investment in capital asset as an investor and the land was sold under a common agreement for the sake of convenience which does not tantamount to joint venture. Hence it was held that assessee cannot be compared with the co-owners who were holding the property as stock in trade and since the motive of the assessee right from the beginning was never to indulge in trading activity, therefore CIT(A) was right in treating the profits as capital gains.
DCIT v. Mohinder Puri (2018) 172 ITD 29 / 53 CCH 573 (Delhi)(Trib.)
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S.50C : Capital gains – Full value of consideration – Stamp Duty Valuation – Where the assessee explained the reasons for fetching a lesser rate on sale of immovable property as compared to the Stamp Duty Valuation, the AO should have remitted the matter to the DVO for determination of the FMV of the immovable property.[S.45]
On Revenue’s appeal, the Tribunal held that the assessee brought on record the complexities involved in the sale of property and the reasons for getting a lesser rate and therefore, the Ld. AO should have referred the valuation of the property to the DVO as per section 50C(2) of the Act. Since proper procedure has not been followed, the Tribunal remitted the matter back to the Ld. AO to make a reference to the DVO for determination of FMV of the property. (AY. 2012-13)
ACIT v. Kishore Kumar (2018) 66 ITR 158 (Vizag) (Trib.)
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S.54 : Capital gains – Profit on sale of property used for residence
Eligible for Capital gains exemption even if the construction of property in which the capital gains (claimed exempt) is invested could not completed within the prescribed time limit. [S.45]
On Revenue’s appeal, the Tribunal held that the assessee had utilised the entire capital gain by way of making payment to the developer of the flat. The requirement of u/s. 54 of the Act is that capital gain shall be utilised or appropriated as specified in u/s. 54(2) of the Act, therefore Ld. CIT(A) has rightly allowed the appeal of the assessee. (AY. 2013-14)
ACIT v. M. Raghuraman (2018) 169 ITD 315 / 65 ITR 17 (Chennai)(Trib.)
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S. 54 : Capital gains – Profit on sale of property used for residence – Purchased new residential house before sale of another residential house owned – Investment is made within the stipulated period and the investment was more than the capital gains earned- Entitle to exemption. [S.45,54F]
Allowing the appeal of the assessee the Tribunal held that the assessee has made investment within the stipulated period and the investment was more than the capital gains earned. Accordingly the assessee is entitle to exemption though the assessee has purchased a new residential house before sale of another residential house owned by him. (AY. 2012-13)
Yatin Prakash Telang v. ITO (2018) 171 ITD 705 (Mum.)(Trib.)
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S.54 : Capital gains – Profit on sale of property used for residence –Unregistered document-Though an unregistered agreement to sell does not entitle the parties to seek part performance u/s. 53A of the Transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s. 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property [S. 2(47), 45, Transfer of Property Act, 1882, S.53A, Registration Act, 1908, 17(1)(a), 49]
Allowing the appeal of the assessee the Tribunal held that though an unregistered agreement to sell does not entitle the parties to seek part performance u/s. 53A of the transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s. 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property. (Followed K.B. Saha and Sons Pvt. Ltd. v. Development Consultant Ltd. (2008) 8 SCC 564) (ITA. No. 1356/Kol/2017, dt. 7-9-2018)(AY. 2012-13)
Gautam Jhunjhunwala v. ITO (Kol)(Trib),
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S.54F : Capital gains – Investment in a residential house – Exemption cannot be denied on the ground that residential building was used for business purpose [S.54]
AO and CIT(A) restricted the claim of deduction u/s. 54F of the Act by excluding the portion of the residential building which was used for business purpose. It was held by Hon’ble Tribunal that there was no bar on the assessee on the usage of the new residential property for business purpose. Section 54F of the Act only stipulates that the assessee should have constructed / purchased a residential house within the stipulated time in order to claim the benefit of deduction. It is not necessary that a person should reside in the house to call it a residential house. (AY. 2013-14)
Dy. CIT v. Subramanian (A. M.) (2018) 63 ITR 24 (SN.) (Chennai)(Trib.)
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S.68 : Cash credits – Share premium – The AO cannot assess the share premium as income on the ground that it is “excessive”. The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations – There is no bar on collecting higher amount as share premium – There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds – The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities – The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business
Dismissing the appeal of the revenue, Tribunal held that the AO cannot assess the share premium as income on the ground that it is “excessive”. The share premium worked out in the Valuation Certificate is the minimum amount that can be collected by the assessee under RBI regulations. There is no bar on collecting higher amount as share premium. There are several factors that are taken into consideration while issuing the equity shares to shareholders/investors, such as Venture capital funds and Private Equity funds. The premium is determined between the parties on the basis of commercial considerations and cannot be questioned by the tax authorities. The AO is not entitled to sit on the arm chair of a businessman and regulate the manner of conducting business. ITA. No. 6991/Mum/2016, dt. 24-10-2018)(AY. 2012-13)
DCIT v. Varsity Education Management Pvt. Ltd. (Mum.)(Trib)
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S.68 : Cash credits – Bogus share capital – If (a) the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants and (b) the bank statement show that money was received through banking channels and there were no immediate withdrawals to suggest that the share application amounts have been returned back to these parties in cash, it means the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions- Additions cannot be made as cash credits
Allowing the appeal of the assessee the Tribunal held that; If (a) the assessee has furnished the Name, Address, PAN no and Share Application Form to prove that the shares were allotted to the applicants and (b) the bank statement show that money was received through banking channels and there were no immediate withdrawals to suggest that the share application amounts have been returned back to these parties in cash, it means the assessee has discharged the primary onus cast upon it to prove the identity, capacity and genuineness of transactions. Additions can not be made as cash credits. (ITA No. 3212/Mum/2014, dt. 12-10-2018)(AY. 2008-09)
Sunshine Metal & Alloys v. ITO (Mum)(Trib),
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S.68 : Cash credits – Bogus share capital – Failure by the AO to offer cross-examination of the persons whose statements are relied upon means that no adverse inference can be drawn against the assessee. Dept’s plea for a remand is not acceptable if the assessee has discharged primary onus
Allowing the appeal of the assessee the Tribunal held that; failure by the AO to offer cross-examination of the persons whose statements are relied upon means that no adverse inference can be drawn against the assessee. Dept’s plea for a remand is not acceptable if the assessee has discharged primary onus. (ITA No. 5637/Del/2013, dt. 1-10-2018)( AY. 2004-05)
Rajat Export Import (India) Pvt. Ltd. v. ITO (Delhi)(Trib),
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S. 68 : Cash credits – Capital gains – Penny stocks – Reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE v. Andaman Timber Industries (2015) 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Addition cannot be made as cash credits. [S.10 (38), 45, 115BBE]
Dismissing the appeal of the revenue, reliance by AO on statements recorded by the Investigation Wing to conclude that the capital gains are bogus without giving an opportunity of cross examination is a complete violation of principles of natural justice as held in CCE v. Andaman Timber Industries (2015) 127 DTR 241(SC). The AO has not controverted the evidence of purchase bills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. Addition cannot be made as cash credits. (ITA No. 16/JP/2018, dt. 29-8-2018)(AY. 2014-15)
DCIT v. Saurabh Mittal (Jaipur)(Trib)
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S.68: Cash credits – Produced sufficient documentary evidence before AO, at the assessment as well as appellate stage to prove the genuineness of the transaction – Share capital, share premium received by a Company from investors cannot be assessed as unexplained cash credit – The valuation report filed by the assessee supports explanation of assessee that shares were issued at premium which were below the fair market value – Addition cannot be made as income from other sources. [S.56(2)(viib), R.11UA(2)(a)]
Allowing the appeal of the assessee the Tribunal held that failure to produce the assessment record by the revenue adverse inference against the Revenue and held that all the documents were filed before AO even at assessment stage. Considering the facts of the case, in the light of material on record and the decisions referred, it is clear that assessee produced sufficient documentary evidence before AO, at the assessment as well as appellate stage to prove ingredients of S. 68 of the Act. The AO however, did not make any further enquiry on the documents filed by the assessee. Thus, the AO failed to conduct scrutiny of the documents at assessment stage and merely suspected the transactions in question on the irrelevant reasons. The A.O. did not make any enquiry from the Banker of the Investor and Income Tax record of the Investor Company. The assessee, thus, proved the identity of the Investor, its creditworthiness and genuineness of the transaction in the matter. Accordingly the addition was deleted. The valuation report filed by the assessee supports explanation of assessee that shares were issued at premium which were below the fair market value per share of ₹ 1221/. Accordingly the addition cannot be made as income from other sources. (ITA.No.2534/Del./2018, dt. 10-8-2018) (AY. 2014-15)
Priyatam Plaschem Pvt. Ltd. v. ITO (Delhi)(Trib.),
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S.68 : Cash credits – Bogus share capital – A private limited co cannot say that it has no clue about the subscribers to its share capital. The genuineness of the transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. Even shell cos. have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials, the transaction cannot be regarded as genuine – Reassessment is held to be valid and addition is confirmed on merit [S. 147, 148, 151]
Dismissing the appeal of the assessee the Tribunal held that a private limited co. cannot say that it has no clue about the subscribers to its share capital. The genuineness of the transaction has to be determined by ground realities and not by documents like PAN cards, board resolutions, share certificates etc. Even shell cos. have these documents. If the assessee is not able to produce the brains behind these companies and the documents with respect to their financials, the transaction cannot be regarded as genuine. Reassessment is held to be valid and addition is confirmed on merit. (ITA No. 4978/Del/2014, dt. 23-8-2018)(AY. 2005-06)
Pee Aar Securities Ltd. v. DCIT ( Delhi)(Trib.),
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S.68 : Cash credits – share capital – Premium – Alleged excessive premium charged for allotment of shares – Addition cannot be made as cash credits [S.56(2) (viib)]
Dismissing the appeal of the revenue the Tribunal held that for alleged excessive premium charged for allotment of shares addition cannot be made as cash credits.(ITA No. 622/Mum/2016, dt. 20-6-2018)(AY. 2009-10)
ACIT v. Goldmohar Design and Apparel Park Ltd. (Mum)(Trib.).
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S.72 : Carry forward and set-off of business losses – losses from non-speculation business can be set off against profit from speculation business [S. 73]
The Tribunal held that there is no bar in adjustment of unabsorbed business losses from speculation profit of current year, provided speculation losses for earlier years has been first adjusted from speculation profit. If speculation losses for earlier years are carried forward and if in the year of account a speculation profit is earned by the assessee, then such speculation profits for the current accounting year should be adjusted against carried forward speculation losses of the earlier year, before allowing any other losses to be adjusted against those profits. Hence, it is clear that there is no bar in adjustment of unabsorbed business losses from speculation profit of the current year, provided the speculation losses for earlier years has been first adjusted from speculation profit.
(AY. 2011-12)Edel Commodities Ltd. v. Dy. CIT (2018) 194 TTJ 86 (Mum.)(Trib.)
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S.74 : Losses – Capital loss – shares sold at meagre value – sale price disbelieved by AO and accordingly, capital loss disallowed – Held, AO did not point out any discrepancy in the sale consideration – Held, AO did not conduct any enquiry in the hands of the purchaser – Held, loss cannot be disallowed
Capital loss was disallowed by disbelieving the sale consideration. The Tribunal held that if the revenue alleges that the assessee has grossly understated the sale consideration, then the onus is on the revenue to prove with cogent materials that the assessee had indeed received higher sale price. Further, it was held that if no enquiries whatsoever were conducted in the hands of the purchaser of shares, the entire disallowance of long term capital loss was made only out of surmises, suspicion and conjectures. It was incumbent on the part of the AO to make further investigations by cross verifying the same from the purchaser of shares. Without doing so, he cannot simply disbelieve the consideration reported by the assessee and disallow the long-term capital loss claimed thereon. (AY. 2011-12)
Electrocast Sales India Ltd. v. Dy. CIT (2018) 64 ITR 14 (Kol.)(Trib.)
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S.79 : Carry forward and set-off losses – Change in share holdings – Companies which public are not substantial interested – Amalgamation – Scheme of amalgamation approved by the High Court – Held, such scheme approved in public interest and cannot be disturbed by the Department merely because assessee was not eligible for the same u/s. 72A – Held, doctrine of acquiescence and estoppel applicable – Held, capital loss and business loss of amalgamating companies available to the amalgamated company [S. 72A]
Set off of capital loss and business loss of amalgamating companies denied to the amalgamated company by AO by invoking section 79. Same upheld by the CIT(A) u/s. 72A. The Tribunal held that merger scheme was duly approved by High Court having in mind larger public interest. It cannot be disturbed by revenue merely because assessee was not entitled for benefits under section 72A. Further, Department was also bound by the doctrine of acquiescence and estoppel as no objection was raised by the Department before the High Court and no further appeal was filed u/s. 391(7) of the Companies Act, 1956 against order of amalgamation sanctioned by High Court. Held, therefore, even if the conditions of section 72A are not fulfilled, losses of amalgamating companies allowable for set off to the amalgamated company. (AY. 2011-12)
Electrocast Sales India Ltd. v. Dy. CIT (2018) 64 ITR 14 (Kol.)(Trib.)
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S.90: Double taxation relief – If a non-resident assessee derives income from multiple sources in India, it is entitled to adopt the provisions of the Act for one source and the DTAA for the other source, whichever is more beneficial to it, even though the payer is common for both sources – Fees received by the assessee would be taxable under the Act as FTS (fees for technical services) under section 9(1)(vii) r.w.s. 115A(1)(b) @ 10% and not as business income and thus held that the maximum possible taxability in the hands of the assessee could not exceed 10%. – DTAA – India – Singapore [S.90(2),115A(1)(b), Art. 5(6)]
Tribunal held that if a non-resident assessee derives income from multiple sources in India, it is entitled to adopt the provisions of the Act for one source and the DTAA for the other source, whichever is more beneficial to it, even though the payer is common for both sources – Fees received by the assessee would be taxable under the Act as FTS (fees for technical services) under section 9(1)(vii) r.w.s. 115A(1)(b) @ 10% and not as business income and thus held that the maximum possible taxability in the hands of the assessee could not exceed 10%. (ITA Nos. 1635 & 1636/Mum/2017, dt. 12-10-2018)(AY. 2013-14)
Dimension Data Asia Pacific Pte. Ltd. v. DCIT (Mum.)(Trib.),
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S.93 : Transactions resulting in transfer – Non-residents – transfer of shares by wholly owned non-resident subsidiary of the Indian company to unrelated resident company – Held, S. 93 can apply only if transfer by the resident assessee to non-resident subsidiary – Provision is not applicable
The Tribunal held that S.93 is a deeming fiction and therefore, has to be construed strictly and that the same can be invoked only if the conditions enshrined therein are fulfilled. In the present case, there was transfer of shares by wholly owned non-resident subsidiary of the assessee company to unrelated resident company. One of the condition of S. 93 is that there should be transfer of property by the resident assessee to non-resident subsidiary. Since the same was not present, it was held that S. 93 is not applicable. (AY. 2007-08)
Dy. CIT v. Tata Industries Ltd. (2018) 192 TTJ 541 (Mum.)(Trib.)
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S.115BBE : Tax on income referred in section 69 – Survey – Surrender of excess stock – Prevailing price of gold had fallen as on 31-3-2013 – Unexplained investments – Loss is allowed to be set off against income disclosed in the course of survey – Provision is applicable with effect from 1-4-2017 which is prospective and not prior to that – Remanded for verification whether entire excess stock found in the course of survey remained unsold as on 31-3-2103 [S.69, 133A]
During course of survey on 1st March, 2013, the assessee surrendered income on account of excess stock, however, in return of income, assessee showed lower income on account of excess stock by taking a plea that prevailing price of gold had fallen as on 31-3-2013. AO rejected assessee’s explanation and made addition under S. 69, read with S .115BBE of the Act. CIT(A) deleted the addition. On appeal by revenue dismissing the appeal, the Tribunal held that, S. 115BBE is applicable with effect from 1-4-2017 and not prior to that. However, in view of fact that question as to whether entire stock which was found in excess at time of survey remained as unsold till 31-3-2013 so that assessee could take benefit of reduction in prevailing price of gold against surrendered income on account of unexplained investment in stock, had not been examined by lower authorities, matter was to be remanded back for said limited purpose of verification. Followed, ACIT v. Sanjay Bairathi Gems Ltd. [2017] 166 ITD 445 (Jaipur) (Trib.) (AY.2013-14)
ACIT v. Satish Kumar Agarwal (2018) 172 ITD 143 (Jaipur) (Trib.)
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S.115JAA : Book profit – Deemed income – Tax credit – Amount of MAT tax credit available from earlier year, inclusive of surcharge and education cess etc., should be reduced from amount of tax determined on total income of current year after adding surcharge and education cess, etc. [S. 234B, 234C]
Allowing the appeal of the assessee the Tribunal held that the amount of the MAT tax credit, inclusive of surcharge and education cess etc., of any, should be reduced from the amount of tax determined on the total income after adding surcharge and education cess, etc. Only the resultant amount payable will suffer interest under the relevant provisions of the Act. Since the amount of MAT tax credit is uncertain, the impugned order is to be set aside and remit the matter to the file of the Assessing Officer for ascertaining the correct amount of MAT tax credit available with the assessee inclusive of surcharge and education cess etc., if any, and then allow tax credit as indicated above. (AY. 2011-12)
Consolidated Securities Ltd. v. ACIT (2018) 172 ITD 163 (Delhi) (Trib.)
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S.115JB : Book profit – Provision for bad and doubtful debts – Assessee made a provision for bad and doubtful debts – It was maintaining a separate provision account – Certain bad debts were written off in such account – Provision amount lesser than the bad debts written off – Held, assessee eligible for higher deduction – Held, therefore, provision amount cannot be termed as unascertained liability and has to be allowed – Held, Tribunal cannot direct AO to allow greater deduction – Prior period expose cannot be added while computing book profits-Provision for leave encashment ascertained liability and therefore, cannot be added to book profit – Provision for non-moving and obsolete stock not a provision and also not debited to P&L account and therefore, cannot be added to book profit – Provision for fringe benefit tax not similar to provision for income tax and that fringe benefit was a liability of the employer therefore, cannot be added to book profit
The assessee-company was engaged in the business of purchase and distribution of electric power. It had made a provision for bad and doubtful debts. The Assessing Officer had disallowed the said provision made by the assessee as unascertained liability while computing book profit. The Tribunal held that, in the P&L account ₹ 22.89 crore was provided for with the narration ‘bad and doubtful debts/ written off’. It was not specified whether it was a provision or a write off. Assessee was maintaining a separate provision account wherein it was shown the bad debts written off was of ₹ 25.43 crore. Such write off was an ascertained liability. It was held that assessee was eligible for deduction of entire ₹ 25.43 crore whereas it had claimed a lower deduction of ₹ 22.89 crore. Held, no addition can be made qua ₹ 22.89 crore and also, no direction can be made to AO to grant higher benefit to the extent of ₹ 25.43 crore.
The Tribunal also held that prior period expose cannot be added while computing book profits as the AO cannot go beyond the accounts maintained in accordance with the Companies Act.
The Tribunal held that provision for leave encashment was an ascertained liability and therefore, cannot be added to the book profit.
The Tribunal held that provision for non-moving and obsolete stock was not a provision and was also not debited to P&L account and therefore, cannot be added to book profit.
The Tribunal also held that provision for fringe benefit tax was not similar to provision for income tax and that fringe benefit was a liability of the employer therefore, cannot be added to book profit. (AY. 2009-10)
Dy. CIT v. Southern Power Distribution Company of Andhra Pradesh Ltd. (2018) 170 ITD 1/ 166 DTR 1 / 64 ITR 257 / 193 TTJ 657 (TM)(Hyd.)(Trib.)
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S.143(2) : Assessment – Notice – Additional ground – Jurisdictional issue – Admitted – A notice u/s. 143(2) issued by the AO before the assessee files a return of income has no meaning – If no fresh notice is issued after the assessee files a return, the AO has no jurisdiction to pass the reassessment order and the same has to be quashed [S.147, 148, 254(1)]
Tribunal admitted the additional ground on question of law and the facts were already on record. Facts relating to the additional ground are that the assessee filed his return of income on 31-7-2010 declaring total income at ₹ 46,76,95,780/- and this return was processed under section 143(1) of the Act on 21-3-2012. Thereafter, the case was reopened by issuing notice under section 148 of the Act dated 1-4-2013, which was served on assessee at 8-4-2013. The ACIT, Central Circle-45, Mumbai issued notice under section 143(2) of the Act dated 3-5-2013 requiring the assessee to attend his office on 13-5-2013. The assessee in a response to notice under section 148 of the Act dated 1-4-2013, which was served on assessee on 8-4-2013, filed a letter dated 23-5-2013 stating that return originally filed be treated as return filed in response to notice under section 148 of the Act. According to the learned Counsel no notice under section 143(2) of the Act was issued after the filing of return by assessee i.e. vide letter dated 22-5-2013 which was received in the office of the ACIT, Central Circle-45, Mumbai on 23-5-2013. It means that the return of income was filed on 23-5-2013 in response to notice under section 148 of the Act. The learned Counsel for the assessee now before us stated that when no notice under section 143(2) of the Act, which is a jurisdictional notice, is issued to the assessee in response to return filed under section 148 of the Act, the assessment framed is invalid and bad in law. The learned Counsel for the assessee relied on the decision of Hon’ble Bombay High Court in of ACIT vs. Geno Pharmaceuticals Ltd. (2013) 32 taxmann.com 162 (Bombay) & in CIT vs. Ms. Malvika Arun Somaiya (2010) 2 taxmann.com 144 (Bombay) and Hon’ble Delhi High Court in the case of DIT vs. Society for Worldwide Inter Bank Financial, Telecommunications (2010)323 ITR 249 (Delhi) and also Tribunal’s decision of Delhi Bench in ITAs No. 5163 & 5164/Del/2010, 5554/Del/2012 for AY 2004-5 & 2005-06 vide order dated 2-7-2018. When these facts were pointed to the learned CIT Departmental Representative, he only relied on the orders of the lower authorities and on this jurisdictional issue he could not controvert the arguments of the learned Counsel of the assessee. Allowing the appeal the Tribunal held that; a notice u/s 143(2) issued by the AO before the assessee files a return of income has no meaning,if no fresh notice is issued after the assessee files a return, the AO has no jurisdiction to pass the reassessment order and the same has to be quashed. (ITA No. 1744/Mum/2016, dt. 3-10-2018)(AY. 2010-11)
Sudhir Menon v. ACIT (Mum)(Trib),
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S.143(3) : Assessment – Assessment has to be framed as per provisions – Instruction No. 13 of 2006 would not override the provisions – Revised return claiming refund of tax deduction at source – Assessment order as framed by the Assessing Officer is contrary to the provisions of law and beyond the jurisdiction of the Assessing Officer as the notice u/s. 143(2) of the Act is beyond the time prescribed under the law and is illegal. Accordingly, the assessment is quashed. The Assessing Officer is directed to allow the refund with interest as per law [S.119,143(2)]
Allowing the appeal of the assessee the Tribunal held that notice issued under section 143(2) is beyond the time prescribed under the law barred by limitation and was thus illegal. There is no ambiguity under the law that the scrutiny assessment is to be framed as per the provisions of section 143. The instruction No. 13 of 2006 would not override these provisions. From a bare reading of the instructions, it is evident that the instruction is related to condonation of delay in respect of refund due. This instruction is issued with an objective to mitigate the hardship to the assessee. Para 7 of the Instruction, is limited to the extent of ascertaining the claim of the assessee. This does not empower the Assessing Officer to make scrutiny of the entire case, which goes against the spirit of the law. In the instance, the Assessing Officer was required to ascertain that the tax has been deducted at source and on the returned income, such refund is available to the assessee or not. It is viewed that the Assessing Officer has misconstrued direction of the Commissioner and assessed the income by making scrutiny assessment. It is also noticed that there is an inordinate delay in disposing the application by the Commissioner. Under these facts, it is held that the impugned assessment order as framed by the Assessing Officer is contrary to the provisions of law and beyond the jurisdiction of the Assessing Officer. Accordingly, the assessment is quashed. The Assessing Officer is directed to allow the refund with interest as per law. (AY. 2000-01)
M. Lodha Impex v. ITO (2018) 171 ITD 659 (Indore) (Trib.)
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S.143(3) : Assessment – Survey – Bogus expenditure – Statement – Retraction – A statement recorded u/s. 133A under fear/ coercion cannot be relied upon by the AO if it is not corroborated by documentary evidence – The assessee is entitled to retract such statement. The AO is bound to give the assessee an opportunity to controvert evidence and cross examine the evidence on which the department places its reliance- A failure in providing the same can result in the order being a nullity – Income is estimated on the basis of gross profit. [S.133A]
Allowing the appeal of the assessee the Tribunal held that ; addition cannot be made merely on the basis of statement in the course of survey. A statement recorded u/s. 133A under fear/ coercion cannot be relied upon by the AO if it is not corroborated by documentary evidence- The assessee is entitled to retract such statement. The AO is bound to give the assessee an opportunity to controvert evidence and cross examine the evidence on which the department places its reliance-.A failure in providing the same can result in the order being a nullity. Income is estimated on the basis of gross profit. (ITA No.3026/Mum/2016 and other appeals,
dt. 14-11-2018)(AY. 2007-08 to 2011-12)Concept Communication Ltd. v. DCIT (Mum)(Trib),
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S.147 : Reassessment – If information is received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information cannot be said to be tangible material per se and, thus, reassessment on said basis is not justified [S.148, 151]
Allowing the appeal of the assessee the Tribunal held that if information is received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information cannot be said to be tangible material per se and, thus, reassessment on said basis is not justified (ITA No.132/Del/2018, dt. 6-8-2018) (AYs. 2009-10)
Pioneer Town Plannners Pvt. Ltd. v. DCIT (Delhi)(Trib),
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S.147 : Reassessment – Within four years – Change of opinion – Bogus share capital – Premium- Reassessment was held to be not valid [S.143(3) 148]
Dismissing the appeal of the revenue the Tribunal held that there was no failure on the part of the assessee to disclose material facts hence reassessment is bad in law. (ITA No. 622/Mum/2016, dt. 20-6-2018)(AY. 2009-10)
ACIT v. Goldmohar Design and Appearel Park Ltd. (Mum)(Trib.).
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S.147 : Reassessment – The information given by DIT (Inv.) can only be a basis to ignite/ trigger “reason to suspect”. The AO has to carry out further examination to convert the “reason to suspect” into “reason to believe”. If the AO acts on borrowed satisfaction and without application of mind, the reopening is void. [S. 92, 148]
Allowing the appeal of the assessee the Tribunal held that ; The information given by DIT (Inv) can only be a basis to ignite/ trigger “reason to suspect”. The AO has to carry out further examination to convert the “reason to suspect” into “reason to believe”. If the AO acts on borrowed satisfaction and without application of mind, the reopening is void. ( ITA. No. 2178/Kol/2017, dt. 15-10-2018)(AY. 2010-11)
Devansh Export v. ACIT (Kol)(Trib),
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S.151 : Reassessment – Sanction for issue of notice – If the AO issues the notice for reopening the assessment before obtaining the sanction of the CIT, the reopening is void ab initio – The fact that the sanction was given just one day after the issue of notice makes no difference. [S.147, 148]
Dismissing the appeal of the revenue the Tribunal held that, If the AO issues the notice for reopening the assessment before obtaining the sanction of the CIT, the reopening is void ab initio-The fact that the sanction was given just one day after the issue of notice makes no difference. (ITA.No.1505/Ahd/2017, dt. 14.11.2018)(AY. 2007-08)
ITO v. Ashok Jain (Surat)(Trib),
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S.151 : Reassessment – Sanction –Sanction granted by writing “Yes, I am satisfied” is not sufficient to comply with the requirement of s. 151 because it means that the approving authority has recorded satisfaction in a mechanical manner and without application of mind – Reassessment is bad in law. [S.147, 148, 292B]
Allowing the appeal of the assessee , the Tribunal held that sanction granted by writing “Yes, I am satisfied” is not sufficient to comply with the requirement of s. 151 because it means that the approving authority has recorded satisfaction in a mechanical manner and without application of mind. Reassessment is bad in law. (ITA No.132/Del/2018, dt. 6-8-2018) (AY. 2009-10)
Pioneer Town Plannners Pvt. Ltd. v. DCIT ( Delhi)(Trib), www.itatonline.org
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S.151 : Reassessment – Sanction for issue of notice – Even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority, the requirement of sanction u/s. 151 is mandatory for issuing notice u/s. 147- The failure to obtain sanction renders the reopening invalid – S. 150(1) overrides S. 149 but not S. 151 of the Act. [S.147, 148, 150]
Allowing the appeal of the assessee the Tribunal held that even if the assessment is reopened to make reassessment in consequence of or to give effect to any finding or direction of the appellate authority, the requirement of sanction u/s. 151 is mandatory for issuing notice u/s. 147- The failure to obtain sanction renders the reopening invalid – S. 150(1) overrides S. 149 but not S. 151 of the Act. (ITA Nos. 735 & 736/JP/2015, dt. 21-8-2018)(AY. : 2006-07, 2009-10)
Sonu Khandelwal ( Smt )v. ITO (Jai)(Trib),
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S.197 : Deduction at source –Certificate for lower rate – When tax was deducted on the basis of certificate issued by the AO i.e. on handling and transport charges under S.194C and on, ware housing charges under S.194I, the ITO (TDS) was unjustified in holding assessee in default for short deduction of tax on grounds that assessee was liable to deduct TDS on entire amount under S.194I. [s.194C, 194I, 201]
Allowing the appeal of the assessee the Tribunal held that when tax was deducted on the basis of certificate issued by the AO i.e. on handling and transport charges under S.194C and on, ware housing charges under S.194I, the ITO (TDS) was unjustified in holding assessee in default for short deduction of tax on grounds that assessee was liable to deduct TDS on entire amount under S.194I. (AY.2009 -10)
Kribhco Shyam Fertilizers Ltd. v. ITO (TDS) (2018) 172 ITD 319 (Luck) (Trib.)
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S.206C : Collection at source – Trading – Limitation – Order passed beyond limit of four years is bad in law – Though Section does not impose any limitation period for the AO to hold the assessee to be in default for collection of tax at source, a reasonable time limit of four years has to be read into the statute – Orders passed after this period are beyond the limitation and are void – The fact that the Dept. became aware of the default later is irrelevant. The fact that the assessee admitted his liability is also irrelevant – Assessment is held to be bad in law. [S.191, 201]
Allowing the appeal of the assessee the Tribunal held that though Section 206C does not impose any limitation period for the AO to hold the assessee to be in default for collection of tax at source, a reasonable time limit of four years has to be read into the statute. Orders passed after this period are beyond the limitation and are void. The fact that the Dept. became aware of the default later is irrelevant. The fact that the assessee admitted his liability is also irrelevant. Assessment is held to be bad in law. Followed CIT (TDS) v. Anagram Wellington Assets Management Co Ltd. (2016) 389 ITR 654 (Guj.) (HC), Vodafone Essar Mobile Services Ltd. v. UOI (2016) 385 ITR 436 (Delhi) (HC) (ITA 316 & 248/JP/2018, dt. 29-8-2018)(AY. 2009-10)
ITO v.EID Mohammad Nizamuddin (Jaipur) ( Trib)
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S.250 : Appeal – Commissioner (Appeals) – If a decision is challenged by the assessee both on the issue of jurisdiction as well as on merits, the appellate authority has to decide both issues. He cannot decline to decide one of the issues on the basis that the decision on the other issue renders it academic. This approach leads to multiplication of proceedings and leads to delay – CIT(A) is directed to decide both the issues [S.254(1), R.27]
Tribunal held that if a decision is challenged by the assessee both on the issue of jurisdiction as well as on merit, the appellate authority has to decide both issues. He cannot decline to decide one of the issues on the basis that the decision on the other issue renders it academic. This approach leads to multiplication of proceedings and leads to delay. CIT(A) is directed to decide both the issues Followed the ratio of judgment in CIT v. Ramdas Pharmacy [1970] 77 ITR 276 (Mad.) (HC) had expounded that an appellate authority cannot decide only one issue arising out of many issues and decline to go into the other issues raised before it on the ground that further issues will not arise in view of the finding on the issue decided by it. (ITA. No.6098/Mum/2016, dt. 2-7-2018) (AY. 2007-08)
ITO v. Mohanraj Trading & Exchange (Mum) (Trib),
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S.253 : Appellate Tribunal – Delay of 2819 days in filing the appeal caused by the fault of CA/ Counsel has to be condoned –the expression “sufficient cause” should be interpreted to advance substantial justice – If there is “sufficient cause”, the period of delay cannot be regarded as excessive or inordinate – Delay was condoned [S.254(1)]
Tribunal held that delay of 2819 days in filing the appeal caused by the fault of CA/ Counsel has to be condoned. The expression “sufficient cause” should be interpreted to advance substantial justice – If there is “sufficient cause”, the period of delay cannot be regarded as excessive or inordinate . Accordingly the delay was condoned. (I.T.A. No.288/Coch/2017, dt. 25-6-2018)(AY. 2006-07)
Midas Polymer Compounds v. ACIT (Cochin)(Trib.),
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S.254(1) : Appellate Tribunal – Duties – If the AO has failed to discharge his obligation to conduct a proper inquiry, it is the obligation of the ITAT to ensure that effective inquiry is carried out – The AO has not examined the crucial aspect whether the bad debts claimed by the assessee due to the NSEL scam constitutes a “speculative transaction” u/s. 43(5) and whether Explanation to S. 73(1) applies. [S.36(1(iii), 43(5), 73(1)]
Tribunal held that if the AO has failed to discharge his obligation to conduct a proper inquiry, it is the obligation of the ITAT to ensure that effective inquiry is carried out. The AO has not examined the crucial aspect whether the bad debts claimed by the assessee due to the NSEL scam constitutes a “speculative transaction” u/s. 43(5) and whether Explanation to S. 73(1) applies. (ITA No. 2818 / Ahd / 17, dt. 16-10-2018)(AY. 2014-15)
Omni Lens Pvt. Ltd. v. DCIT (Ahd)(Trib);
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S.254(2) : Appellate Tribunal – Rectification of mistake – Pronouncement of order – An order passed by the Tribunal even one day after the prescribed period of 90 days from the date of hearing causes prejudice to the assessee and is liable to be recalled and the appeal posted for fresh hearing [S.254(1), R. 34(5) (c)]
Allowing the petition the Tribunal held that an order passed by the Tribunal even one day after the prescribed period of 90 days from the date of hearing causes prejudice to the assessee and is liable to be recalled and the appeal posted for fresh hearing followed Otters Club v. DIT (E) (Bom.) (HC). Since, in the present case, the order has been pronounced one day beyond 90 days prescribed under the Rules, we respectfully, following the order of the Hon’ble High Court discussed above, recall the order dated 9-11-2017 without going into the merits of the other grounds raised in the application, for fresh hearing. Accordingly, we direct the registry to fix the case for fresh hearing by the regular Bench in the ordinary course. (M.A. No. 98/Mum/2018, dt. 1-11-2018)(AY. 2010-11)
Kaushik N. Tanna v. ACIT (Mum.)(Trib.),
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S.254(2A) : Appellate Tribunal – Stay – Arrest for recovery of arrears – It is a question of confinement of a person in jail due to non-payment of tax dues. Since the recovery of outstanding dues has been stayed except deposit of specified amount, the TRO is ordered to arrange for release of the assessee immediately on deposit of said amount. Income Tax Authorities are directed to promptly do the necessary formalities including issue of release warrant to the Jail officials on compliance of the directions of the Tribunal
Tribunal held that it is a question of confinement of a person in jail due to non-payment of tax dues. Since the recovery of outstanding dues has been stayed except deposit of specified amount, the TRO is ordered to arrange for release of the assessee immediately on deposit of said amount. Income Tax Authorities are directed to promptly do the necessary formalities including issue of release warrant to the Jail officials on compliance of the directions of the Tribunal. Considering the facts and circumstances of the case, the appeals of the assessee are directed to be heard out of turn on priority basis and is fixed for hearing on 30-8-2018.
Copy of the order be promptly supplied to the parties. Order pronounced in the Open Court. (SA. Nos. 43, 44-Chd-2018 in ITA Nos. 498, 499-Chd/2015,
dt. 24-8-2018)(AY. 2007-08, 2008-09)Devinder Singh Gill v. DCIT (Chd)(Trib),
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S.254(2A) : Appellate Tribunal –Stay – Penalty – The assessee has made out a prima facie case that the outcome of the appeal before the ITAT will directly impact the penalty proceedings which are hurriedly being finalized by the authorities which may entail huge liability by way of penalty on the assessee. The Revenue authorities are accordingly restrained from passing any order imposing penalty on the assessee so long as the appeal is pending before the Tribunal. [S. 206AA, 271C]
Tribunal held that the assessee has made out a prima facie case that the outcome of the appeal before the ITAT will directly impact the penalty proceedings which are hurriedly being finalised by the authorities which may entail huge liability by way of penalty on the assessee. Accordingly the Revenue authorities are restrained from passing any order imposing penalty on the assessee so long as the appeal is pending before the Tribunal. (Followed, Wander 44 Taxmann.com 103 (Bom.) & GE India Technology 46 Taxmann.com 374 (Guj) (HC). (SA NOS. 436 & 437/MUM/2018, dt. 28.09.2018)(AY. 2016-17 & 2017-18)
Uber India Systems Pvt. Ltd. v. JCIT ( Mum)(Trib),
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S.263 : Commissioner – Revision of orders prejudicial to revenue – It obligates the CIT to give the assessee an opportunity of being heard before passing of order-While the CIT is entitled to consider a point which is not stated in the show-cause notice, he cannot pass the revision order unless the assessee is given the opportunity of being heard – Such an order is untenable in the eyes of law
Tribunal held that it is obligates the CIT to give the assessee an opportunity of being heard before passing of his order. While the CIT is entitled to consider a point which is not stated in the show-cause notice, he cannot pass the revision order unless the assessee is given the opportunity of being heard. Such an order is untenable in the eyes of law. Accordingly the order of CIT was set aside. Ratio in CIT v. Amitabh Bachhan (2016) 384 ITR 200 (SC) is considered. (ITA No.3563/Mum/2016, dt. 10-11-2017)(AY. 2010-11)
Ambuja Cements Limited v. CIT (Mum.)(Trib.),
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S.263 : Commissioner – Revision of orders prejudicial to revenue Deduction at source – Commission or brokerage – The incentive paid by the dealers to sub-dealers cannot be equated with commission – Not liable to deduct tax at source – Revision is held to be bad in law [S.194H]
Allowing the appeal of the assessee the Tribunal held that the incentive paid by the dealers to sub-dealers cannot be equated with commission. The assessee is not liable to deduct tax at source. Revision is held to be bad in law. (I.T.A. No.3386/Del/2014, dt. 13-8-2018)(AY. 2009-10)
Rakesh Kumar v. CIT (Delhi)(Trib)
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S.271(1)(c) Penalty – Concealment – No penalty can be imposed where (i) income is added or disallowance is made on estimate basis, (ii) books of account cannot be produced for reasons beyond control, (iii) disallowance is made as per retrospective insertion of s. 37(1) Explanation & (iv) allegation regarding concealment vs. furnishing inaccurate particulars is vague & uncertain
Tribunal held that no penalty can be imposed where (i) income is added or disallowance is made on estimated basis, (ii) books of account cannot be produced for reasons beyond control, (iii) disallowance is made as per retrospective insertion of S. 37(1) Explanation & (iv) allegation regarding concealment vs. furnishing inaccurate particulars is vague & uncertain. (ITA No. 141/Agra/2009, dt. 11-9-2018)
Farrukhabad Investment (India) P. Ltd. v. DCIT (TM (Agra) (Trib.).
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