1. S. 4 : Charge of income-tax –Deposit – Subscription receipt – The primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account. [S. 145]

    Assessee treated subscription receipts as income. However the receipts in question were capital receipts and not income. Tribunal decided the issue in favour of the assessee. High Court reversed the order of the Tribunal. On appeal the Court held that the primary liability and onus is on the Dept to prove that a certain receipt is liable to be taxed. Deposits collected by a finance company are capital receipts and not revenue receipts. The fact that the deposits are credited to the profit and loss account is irrelevant. The true nature of the receipts have to be seen and not the entry in the books of account. Order of High Court is set aside and order of the Tribunal is affirmed. ( CA No. 1265 of 2007, dt. 09.07.2019).

    Peerless General Finance and investment Co. Ltd. v. CIT ( 2019) 416 ITR 1/ 107 taxmann.com 228 / 309 CTR 321/180 DTR 97(SC),
    www.itatonline.org

    Editorial : From the judgement in CIT v. Peerless General Finance and investment Co. Ltd (2006) 282 ITR 209/204 CTR 198 (Cal) (HC)

  2. S. 35AC : Expenditure on eligible projects – Schemes – Promissory estoppel is not available to an assessee against the exercise of legislative power nor any vested right accrues to an assessee in the matter of grant of any tax concession to him- In a taxing statute, a plea based on equity or/and hardship is not legally sustainable – Withdrawal of exemption is valid. S. 35AC(7) is prospective in nature – Provision is valid in law. [ S. 35AC(7) ]

    The appellant is a Charitable Trust registered under the provisions of the Bombay Public Trust Act, 1950. On 27.09.2014, the appellant filed an application under S.3 5AC of the Act to the National Committee for Promotion of Social and Economic Welfare, Department of Revenue, North Block, New Delhi for grant of approval to their hospital project as specified in S. 35AC of the Act so as to enable any “assessee” to incur expenditure by way of making payment of any amount to the appellant for construction of their approved hospital project and accordingly claim appropriate deduction of such payment from his total income during the previous year. Like the appellant, several persons, as specified in Section 35AC of the Act, also made applications to the Committee for grant of approval to their hospital projects. A notification was issued by the Government of India on 07.12.2015 mentioning therein that the Committee has approved 28 projects as “eligible projects” under Section 35AC of the Act. The name of the appellant appears at serial No. 10 in the notification dated 07.12.2015. The appellant, received amount by way of donation from several assesses. However due to insertion of S. 35AC(7) from the assessment year 2018¬-19 by the Finance Act, 2016 with effect from 01.04.2017 the benefit of the exemption was withdrawn. The appellant challenged the validity of the provision S. 35AC(7) with effect from 1-4 2017.. High Court dismissed the petition holding that the provision is valid in law. On appeal to supreme Court the Court held that a plea of promissory estoppel is not available to an assessee against the exercise of legislative power nor any vested right accrues to an assessee in the matter of grant of any tax concession to him. In a taxing statute, a plea based on equity or/and hardship is not legally sustainable. Accordingly the withdrawal of exemption is valid and dismissed the petition. (CAC No. 5849 of 2019, dt. 25.07.2019)

    Prashanti Medical Service & Research Foundation v. UIO (2019) 108 CTR 209, (SC),
    www.itatonline.org

  3. S. 43(5) : Speculative transaction – Non-banking financial company – Trading in shares and securities – Loss incurred as a result of trading in shares – cannot be set off against the business of futures and options as it did not constitute profits and gains of a speculative business. [S.73]

    The assessing officer held that in view of the provisions of Section 43(5)(d), activities pertaining to futures and options could not be treated as speculative transactions. The loss from speculation was held not to be capable of being set off against the profits from business. Tribunal also affirmed the view of the AO. High Court also affirmed the view of the Tribunal. On appeal the Apex Court held that, the amendment to the Explanation to s. 73 by the Finance (No 2) Act 2014 with effect from
    1st April, 2015 is not clarificatory or retrospective. Consequently, loss occurred to the assessee as a result of its activity of trading in shares (a loss arising from the business of speculation) is not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business. (AY. 2008-09)) (CA Nos. 4483 of 2019, dt. 30.04.2019)

    Snowtex Investment Ltd v. PCIT (2019) 414 ITR 227 / 265 Taxman 3/ 308 CTR 665 / 178 DTR 989 /105 taxmnn.com 282 (SC),
    www.itatonline.org

  4. S. 80IB(10): Housing project – Stay of judgement in CIT v. Global Reality(2015) 379 ITR 107 (MP) where it was held that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut – off date, does not satisfy the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder hence not entitle to exemption. [S. 80IB(10)(a)]

    Apex Court stayed the judgement in CIT v. Global Reality (2015) 379 ITR 107 (MP) (HC) where it was held that issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not satisfy the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder hence not entitle to exemption. ( SLP Nos. 35004-05/2015, dt. 08.07.2019)( AY. 2004-05 to 2006-07)

    Global Estate v. CIT (SC), www.itatonline.org

  5. S. 92CA: Reference to transfer pricing officer – CBDT’s Instruction No. 3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO – The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good – The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO. [S. 92C, 119]

    Court held that CBDT’s Instruction No. 3/2003 dated 20.05.2003 makes it mandatory for the AO to make a reference to the TPO. The failure to make reference to the TPO renders the Transfer Pricing Adjustments made therein are bad in law though the assessment order is good. The matter should be restored to the file of the AO so that appropriate reference could be made to the TPO. (CA NO. 6144 of 2019, dt. 13.08.2019)

    PCIT v. S. G. Asia Holding (I) Pvt. Ltd. (2019) 108 taxmann.com 213 (SC),
    www.itatonline.org

  6. S. 143(2) : Assessment – Notice –Failure to issue a notice u/s 143(2) renders the assessment order void even if the assessee has participated in the proceedings [S. 292BB]

    The failure to issue a notice u/s 143(2) renders the assessment order void even if the assessee has participated in the proceedings. S. 292BB does not save complete absence of notice. For S. 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. ( ACIT v. Hotel Blue Moon ( 2010) 321 ITR 362 (SC) is referred) ( CA Nos. 6261-6262 of 2019, dt. 13.08.2019) (AY. 2010-11)

    CIT v. Laxman Das Khandelwal( 2019) 108 taxman.com 183 (SC),
    www.itatonline.org 

    Editorial: CIT v. Laxman Das Khandelwal ( 2019) 108 taxmann.com 182 (MP )(HC ) is affirmed.

  7. S. 143(3): Assessment – Jurisdiction – Amalgamation of companies – Notice issued in the name of amalgamating entity after amalgamation is void – The amalgamating entity ceases to exist – Participation in the proceedings by the assessee cannot operate as an estoppel against law. [S. 144C(1), 170(2), 292BB ]

    Dismissing the appeal of the revenue the Court held that a notice issued in the name of the amalgamating entity after amalgamation is void because the amalgamating entity ceases to exist. Participation in the proceedings by the assessee cannot operate as an estoppel against law. This is a substantive illegality and not a procedural violation of the nature adverted to in s. 292BB. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable. (CA No 5409 of 2019, dt. 25.07.2019) (AY. 2011-12)

    PCIT v. Maruti Suzuki India Ltd. (2019) 309 CTR 453/ 180 CTR 185 / 107 taxmann.com 375 (SC),
    www.itatonline.org

    Editorial : Order in PCIT v. Maruti Suzuki India Ltd. (Successor of Suzuki Powertrain India Ltd.) (2017) 397 ITR 681 (Delhi) (HC) is affirmed.

  8. S. 254(1) : Appellate Tribunal – Capital or revenue – Tribunal Recording Inconsistent findings – Matter remanded to Tribunal for decision afresh. [S.37(1), 260A ]

    Allowing the appeal of the revenue the Court held that the Appellate Tribunal has recorded inconsistent findings which was affirmed by High Court. Accordingly the matter remanded to Tribunal for decision afresh (AY. 1993-94)

    PCIT v. Ballarpur Industries Ltd. (2019) 413 ITR 447 (SC)

  9. S.260A : High Court – Question of law – Reassessment – Book profit – Provisions – High Court was not justified in dismissing appeal on ground that appeal did not Involve any substantial question of law and case was remanded to High Court for deciding revenue’s appeal afresh on merits in accordance with law after framing substantial question of law in accordance with law.
    [S. 115JB 147 , 148 ]

    AO issued notice under S. 148 to assessee on ground that assessee made various provisions, namely, for gratuity, doubtful debts, warranty, and obsolescence which were in nature of unascertained liabilities and were not added to book profit resulting in under assessment of income and disallowed 20 per cent of said provision and made addition to closing stock. Tribunal held that the notice was issued on account of change of opinion hence bad in law. High Court dismissed revenue’s appeal against Tribunal’s order in limine holding that it did not involve any substantial question of law. Supreme Court held that High Court was not justified in dismissing appeal on ground that appeal did not Involve any substantial question of law and case was remanded to High Court for deciding revenue’s appeal afresh on merits in accordance with law after framing substantial question of law in accordance with law. (AY. 1999-2000)

    PCIT v. Nokia India (P.) Ltd. (2019) 263 Taxman 460 (SC)

    Editorial: Order in (ITA No.854 of 2016 dt 21-4 2017) PCIT v. Nokia India (P.) Ltd (2019) 104 taxmann.com 467/ 263 Taxman 463 ( Delhi ) (HC) is set aside.

  10. S. 260A : Appeal – High Court – Without admitting the appeal and framing any question of law and dismissing it is not in conformity with the mandatory procedure – High Court is directed to hear the appeal following the mandatory procedure. [S.260A(2) (C), 260A(3)]

    Allowing the appeal of the assessee the court held that, High Court was not justified in dismissing the appeal without admitting the appeal and framing any question of law and dismissing it is not in conformity with the mandatory procedure. High Court is directed to hear the appeal following the mandatory procedure. (AY. 2005-06, 2006-07)

    Ryatar Sahakari Sakkarre Karkhane Niyamit v. ACIT (2019) 308 CTR 507 / 264 Taxman 77 (SC)

    Editorial: From the judgement, Ryatar Sahakari Sakkarre Karkhane Niyamit v. ACIT (2016) 383 ITR 562 /287 CTR 649/ 137 DTR 383 ( Karn) (HC)

  11. S. 261 : Appeal – Supreme Court – Monetary limits – Tax effect of Less than of  1 crore – Appeal is allowed to with drawn, leaving all the questions of law open.
    [S. 80HHC]

    Tax effect is less than ₹ 1 crore. Appeal is allowed to with draw, leaving all the questions of law open. Circular No 3 of 2018 dt 11-08-2018, (2018) 405 ITR 29 (St) / amended circular dt 20 -08 208 (2008) 407 ITR 7 (St) From CIT v Mereena Creations ( 2011) 330 ITR 199 (Delhi) (HC) (AY. 2001-02)

    CIT v. Mereena Creations. (2019) 414 ITR 332 (SC)

  12. S. 293 : Bar of suits in civil courts – Review general principles – If the civil suit was not maintainable in view of S. 293 of the Act and this was the purported defence of the respondents and of the Department and consequential effect of the order dated September 8, 1965, no party could be left remediless and the grievance raised before the court of law, had to be examined on its own merits – There was no error committed by the High Court in its judgment rendered in exercise of its review jurisdiction calling for interference. Decision of the Calcutta High Court affirmed.

    Dismissing the appeal the Court held that S. 293 of the Income-tax Act, 1961 puts a complete bar on filing suits in any civil court against the Income-tax authority. The mandate of law remained unnoticed by the single judge of the Calcutta High Court on October 26, 1990 while relegating the parties to address in the pending civil suit at Delhi although it was dismissed much prior to the pronouncement of the judgment dated October 26, 1990. Even in the appeal, the Division Bench granted liberty to the respondents to file a fresh civil suit in respect of the subject property in Delhi and neither party had brought to the notice of the court the mandate of law as envisaged under section 293 of the Income-tax Act, 1961 that a civil suit against the Income tax Department was not maintainable under the law. The High Court took notice of this in its review jurisdiction when it arrived at the conclusion that there was an error apparent on the face of the record and consequently allowed the application for review, recalled the order dated October 19, 2012 and set aside the judgment and order dated March 31, 2006 passed in the miscellaneous application and for restoration of the writ petition to be heard on its own merits. The effect of S. 293 of the Act had been mistakenly omitted under the judgment in review. That apart, the effect of the order of the High Court on the Department’s application in the 1957 suit was open to examination in the writ proceedings as it was the defence of the Department in the reply to the review application and before the court that in the auction sale which was held in the month of August, 1964, permission of the court was not obtained. After the order was passed on the Department’s application by the single judge of the High Court in the 1957 suit, it would certainly affect the auction sale held by the Department in reference to the subject property in question. If the civil suit was not maintainable in view of section 293 of the Act and this was the purported defence of the respondents and of the Department and consequential effect of the order dated September 8, 1965, no party could be left remediless and the grievance raised before the court of law, had to be examined on its own merits. There was no error committed by the High Court in its judgment rendered in exercise of its review jurisdiction calling for interference. Decision of the Calcutta High Court affirmed. The court made it clear that its observations were only for the purpose of disposal of the appeal and the writ petition was to be decided by the High Court of Calcutta on its own merits, after hearing the parties, in accordance with law. The cases in which the review application could be entertained are : (i) discovery of new and important matter or evidence which, after the exercise of due diligence, was not within knowledge of the petitioner or could not be produced by him ; (ii) mistake or error apparent on the face of the record ; (iii) any other sufficient reason. A review will not be maintainable in the following cases : (i) repetition of old and overruled argument ; (ii) minor mistakes of inconsequential import. Review proceedings cannot be equated with the original hearing of the case. A review is not maintainable unless the material error, manifest on the face of the order, undermines its soundness or results in miscarriage of justice. A review is by no means an appeal in disguise whereby an erroneous decision is reheard and corrected but lies only for patent error. The mere possibility of two views on the subject cannot be a ground for review. The error apparent on the face of the record should not be an error which has to be fished out and searched. The appreciation of evidence on record is fully within the domain of the appellate court, it cannot be permitted to be advanced in the review petition. A review is not maintainable when the same relief sought at the time of arguing the main matter had been negatived.

    Sunil Vasudeva v. Sundar Gupta (2019) 415 ITR 281 (SC)

    Income Declaration scheme , 1996.- Finance Act , 2016

  13. S. 183 : Payment of tax – Failure to pay third instalment – Rejection of application was held to be not justified – Permitted assessee to deposit tax under Income Declaration Scheme belatedly subject interest @ 12%. [IDS, S. 196 ITACT , 119(2)]

    Assessee filed declaration of undisclosed income under Income Declaration Scheme, 2016. Subsequently, assessee paid 50 per cent of total tax, surcharge and penalty in two instalments, however, did not pay third instalment of remaining 50 per cent of tax, surcharge and penalty. Application to CBDT seeking extension of time for making payment of third instalment was rejected. High Court also dismissed writ petition. On appeal the Supreme Court held that the assessee was to be permitted to deposit third instalment with interest at rate of 12 per cent with Income Tax Department.

    Dal Chandra Rastogi. v. CBDT (2019) 264 Taxman 83 (SC)

    Editorial: Order of High Court is reversed , Siddharth Rastogi v. CBDT (2018) 402 ITR 17/ 301 CTR 545 / 163 DTR 449 (Delhi) (HC)

    Dal Chandra Rastogi v. CBDT (2018) 402 ITR 17/ 301 CTR 545 / 163 DTR 449 (Delhi) (HC)

    Meena Rastogi v CBDT (2018) 404 ITR 97/ 301 CTR 548 / 163 DTR 452(Delhi) (HC)

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