Research Team

260. S.10(34) : Dividend – Domestic companies – Tax on distribution of profits – Exemption cannot be denied to receiver of dividend, though the payer company had not paid tax on dividend distribution under section 115-O of the Act [S.(22)(d), 115-O]

     Dismissing the appeal of the revenue the Court held that exemption cannot be denied to receiver of dividend, though the payer company had not paid tax on dividend distribution under section 115-O of the Act. (AY 2008-09)

     PCIT v. Kayan Jamshid Pandole (Smt.) (2019) 260 Taxman 32 (Bom)(HC)

261. S.10B : Export Oriented undertakings – Entitled deduction in respect of ‘Deemed Export’ of goods made through a third party – The word ‘Export’ read with Exim Policy would certainly include ‘Deemed Export’ within the ambit of ‘Export Turnover’ [S. 10B(2), 10B(9A)]

     Assessee being a 100% Export Oriented Unit (EOU) for AYs in respect of deemed export of goods made by it during period under consideration through a third party. The Tribunal held that assessee was entitled to deduction under section 10B in respect of its profits and gains from its business. The High Court relied on the order of its Co-ordinate Bench in the case of CIT v. Tata Elxsi Ltd. (2016) 127 DTR 327) (Karn.)(HC) and agreed with the view taken by the earlier Division Bench and dismissed the appeal of the revenue. The High Court held that the word ‘export’ read with background of Exim Policy of Union of India would certainly include ‘Deemed Export’ also within ambit of ‘Export Turnover’ as explained in Explanation 2 of section 10B(9A). Further, there was no restriction imposed under section 10B(2) on quantum of deduction eligible under section 10B(1) with reference to export of goods manufactured by unit itself. Therefore, benefit of deduction under section 10B(1) cannot be restricted merely because the third party through which export has been made is not a 100% EOU. (AYs. 2009-10, 2010-11, 2011-12)

     PCIT v. International Stones India Pvt. Ltd. (2018) 168 DTR 21 / 304 CTR 492 / 102 CCH 311 (Karn.) (HC)

262. S.10B : Export oriented undertakings – Manufacture – Purchase of semi-finished garments and making them export worthy – Constitute manufacture – Entitle to exemption

     Dismissing the appeal of the revenue the Court held that purchase of semi-finished garments and making them export worthy, constitute manufacture hence entitled to exemption. Followed, Aspinwall and Co. Ltd. v. CIT (2001) 251 ITR 323 (SC) (AY. 2004-05)

     CIT v. A. P. Export. (2019) 410 ITR 168 (Cal.) (HC)

263. S.10B : Export oriented undertakings – Manufacture – Cutting and polishing of diamonds amounts to manufacture – Entitled to exemption

     Allowing the appeal of the assessee the Court held that the process of cutting and polishing diamonds is a complex one requiring specialised knowledge and expertise at every step. Rough unpolished diamonds on the one hand and cut and polished diamonds on the other differ completely in appearance, value and use. Thus this process of cutting and polishing diamonds brings into existence a new product which is a totally different marketable commodity. It amounts to manufacture. Accordingly, the assessee, who was engaged in the business of import of rough diamonds and export of finished diamonds after cutting and polishing them was entitled to exemption. (AY. 2001-02)

     J. B. Enterprise v. ACIT (2019) 410 ITR 138 (Guj.) (HC)

264. S.11 : Property held for charitable purposes – Rent paid to trustees for using land and building – Fair market value – Rent paid to Trustees was not excessive considering the fair market value of the property – Exemption could not be denied [S.12, 13(3)]

     Dismissing the appeal of the revenue the Court held that rent paid to trustees for using land and building was not excessive considering the fair market value of the property, exemption cannot be denied. (AY 2010-11)

     CIT v. Bholaram Education Society (2018) 100 taxmann.com 508 / (2019) 260 Taxman 369 (Guj.) (HC)

     Editorial: SLP of revenue is dismissed CIT v. Bholaram Education Society (2019) 260 Taxman 368 (SC)

265. S.35D : Amortisation of preliminary expenses – Bank extending financial services is an industrial undertaking – Entitled to benefit

     Allowing the appeal of the assessee Court held that the Income-tax Act, 1961 does not define what is “an undertaking” or what is an “industrial undertaking”. Words used in a statute dealing with matters relating to the general public are presumed to have been used in their popular rather than their narrow, legal or technical sense. The expression “industrial undertaking” therefore, should be understood to have been used in section 35D of the Act in a wide sense, taking in its fold any project or business a person may undertake. Hence a bank extending financial services, would be entitled to amortisation of preliminary expenses in connection with the issue of shares for public subscription. (AYs. 1996-97 to 2006-07)

     Dhanalakshmi Bank Ltd. v. CIT (2019) 410 ITR 280 (Ker.) (HC)

266. S.37(1) : Business expenditure – Capital or revenue – Purchase of software – Held to be revenue expenditure

     Dismissing the appeal of the revenue the Court held that payment made for acquisition of software utilised for assessee’s existing business is revenue expenditure as the US Company has granted licence for use of software only in India for limited right of user, without any right to sub licence and the software requires upgradation or replacement.

     (ITA. No 544 of 2018 dt. 12-2-2019 (AY. 1998-99) (ITA No. 5161/M/2001 dt. 20-4-2016 )(AY. 1998-99)

     CIT v. Global Tele-Systems Ltd. (Bom.) (HC) (UR)

267. S.37(1) : Business expenditure – Consultancy Services – Foreign travelling expenditure of representative – Allowable as business expenditure

     Dismissing the appeal of the revenue the Court held that foreign travelling expenditure of representative for expansion of existing business is held to be allowable as business expenditure.

     PCIT v. Business Match Services (I) (P.) Ltd. (2019) 260 Taxman 190 (Bom) (HC)

268. S.40(a)(ia) : Amounts not deductible – Deduction at source – Reimbursement of expenses – Federation of International Hockey for arranging for provisional services connected with event of Hockey World Cup – Not liable to deduct tax at source [S.9(1)(i), 195]

     Dismissing the appeal of the revenue the Court held that reimbursement of payments made by assessee to Federation of International Hockey for arranging for provisional services connected with event of Hockey World Cup such as travel, hospitality and provision of food etc., merely represented reimbursement of expenses not liable to tax in India, hence not liable to deduct tax at source. (AY. 2010-11)

     PCIT v. Organizing Committee Hero Honda FIH World Cup (2018) 100 taxmann.com 440/ 260 Taxman 180 (Delhi) (HC)

     Editorial: SLP of revenue is dismissed, PCIT v. Organizing Committee Hero Honda FIH World Cup. (2019) 260 Taxman 179 (SC)

269. S.40(a)(ia) : Amounts not deductible – Deduction at source Usance interest – Letter of credit discount charges – Merely in nature of reimbursement of cost incurred by suppliers under agreed arrangements and not interest – Not liable to deduct tax at source [S. 2(28A, 194A]

     Dismissing the appeal of the revenue the Court held that the assessee had opened LC in favour of its suppliers who had discounted same with bank. On account of early payment, bank had deducted some amount which assessee was liable to reimburse to its suppliers. The assessee had not made payment of interest to bank or to supplier and amount credited to suppliers’ account was towards reimbursement of expenses incurred by suppliers. Accordingly the provision of S.194A is not applicable and no disallowance can be made for failure to deduct tax at source. (AY. 2008-09)

     PCIT v. Plastene India Ltd. (2019) 260 Taxman 197 (Guj.)(HC)

270. S.40(a)(ia) : Amounts not deductible – Deduction at source – The second proviso to S.40(a) (ia) is beneficial to the assessee and is declaratory and curative in nature. Accordingly, it must be given retrospective effect [S.201(1)]

     Dismissing the appeal of the revenue, the Court held that the second proviso to S. 40(a)(ia) is beneficial to the assessee and is declaratory and curative in nature. Accordingly, it must be given retrospective effect Followed, CIT v. Ansal Land Mark Township P. Ltd. (2015) 377 ITR 635 (Delhi) (HC). Hindustan Coca Cola Beverages P Ltd v. CIT (2007) 293 ITR 226 (SC) (ITA No. 707 of 2016, dt. 7-1-2019)

     PCIT v. Perfect Circle India Pvt. Ltd. (Bom.)(HC), www.itatonline.org

271. S.45 : Capital gains – Business income- No distinction can be made whether borrowed money or own funds – Circular is binding on department – Consistency must be followed – Surplus from sale of shares is assessable as capital gains and not as business income. [S.28(i)]

     Dismissing the appeal of the revenue the Court held that the circular makes no distinction whether the investments made in shares were out of borrowed funds or out of its own funds. that the Department was bound by Circular No. 6 of 2016 dt. February 29, 2016 ( 2016) 382 ITR 14 (St). However, the stand once taken by the assessee would not be subject to change and consistently the income on the sale of securities which are held as investment would continue to be taxed as long-term capital gains or business income as opted for by the assessee (AY. 2008-09)

     CIT v. Hardik Bharat Patel. (2019) 410 ITR 202 (Bom.) (HC)

272. S.45 : Capital gains – Allotment letter – The allottee gets title to property on issue of allotment letter – the payment of instalments is only a follow-up action – Taking delivery of possession is only a formality – the date of allotment is the date on which the purchaser of a residential unit can be stated to have acquired the property and not on the date of registration of agreement – Assessable as long term capital gains – Entitled benefit of S.54F [S.2(14), 2(4). 54F]

     Affirming the order of Tribunal the High Court held that the allottee gets title to property on issue of allotment letter. The payment of instalments is only a follow-up action. Taking delivery of possession is only a formality. The date of allotment is the date on which the purchaser of a residential unit can be stated to have acquired the property and not on the date of registration of agreement. Sale consideration is assessable as long term capital gains. Followed CIT v. TATA Services Ltd. (1980) 122 ITR 594 (Bom) (HC) Circular No. 471 dt. 15-10-1986. (1986) 162 ITR 17 (St), Circular No. 672 dt. 16-12-1993 (1994) 205 ITR 329 (St) (ITA No. 1549 of 2016, dt. 22-1-2019) (AY. 2009-10))

     PCIT v. Vembu Vaidyanathan(Bom)(HC), www.itatonline.org
     

     Editorial: Order of DCIT v. Shri Vembu Vaidyanathan, ITA NO.5749/Mum/2013 dt. 29-10- 2015

273. S.54 : Capital gains – Profit on sale of property used for residence – Exemption is available though the construction of new property was not completed with in period of three years [S.45]

     Dismissing the appeal of the revenue the Court held that; exemption is available though the construction of new property was not completed within period of three years as the delay was beyond control of assessee because construction was put up by builder. (AY. 2012-13)

     PCIT v. Dilip Ranjrekar (2019) 260 Taxman 317 (Karn.)(HC)

274. S.68 : Cash credits – Share capital – Share premium – Bogus share capital in form of accommodation entries – Directors were working as peons, receptionists etc., who have admitted that they have signed the documents as per direction of Mr. Tarun Goyal – Details were filed, however they have been not produced before the AO for examination – Deletion of addition by the Tribunal is held to be not justified [S.133(6)]

     Allowing the appeal of the revenue the Court held that evidence was collected in the course of search proceedings by the Investigation Wing it was found that companies were not carrying on any genuine business activities. Directors of these companies were employees of Mr. Tarun Goyal, who were working as peons,

     receptionists etc. Entries in the books were bogus. Modus operandi in such cases is well known, money is circulated by first depositing cash in the bank account of one such company, and thereupon it is transferred/circulated within the group companies before cheque is issued to the beneficiary. Directors in the course of search proceedings have admitted that they have signed the documents as per direction of Mr. Tarun Goyal. In response to notice u/s. 133(6) details were filed however the respondent- assessee had failed to produce directors of the companies, though they had filed confirmations, and therefore, were in touch with the respondent- assessee. The respondent-assessee had also failed to produce the details and particulars with regard to issue of shares, notices etc., to the shareholders of AGM/EGM etc. Accordingly Court held that the transactions are clearly sham and make- believe with excellent paper work to camouflage their bogus nature. The reasoning is contrary to human probabilities. In the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment. The Tribunal’s order is clearly superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. Appeal of the revenue was allowed. (ITA No. 49 of 2018, dt. 17-1-2019) (AY. 2008-09)

     PCIT v. NDR Promoters Pvt. Ltd. (Delhi)(HC), www.itatonline.org

275. S.68 : Cash Credits – Deposits from members of pubic – PAN numbers, address and particulars relating to cheques were furnished – Assessing Officer has not carried out any further enquiry – Deletion of addition by the Tribunal was held to be justified

     Dismissing the appeal of the revenue the Court held that all relevant particulars such as identity details relating to depositors, their PAN numbers, addresses, and particulars relating to cheques paid were furnished by the assessee, however the Assessing Officer has not carried out any enquiries under law from concerned banks, addition was held to be not justified. (AYs. 2009- 10, 2010-11)

     PCIT v. DLF Commercial Project Corporation. (2019) 260 Taxman 2/ 100 taxmann.com 308 (Delhi) (HC) Editorial : SLP of revenue is admitted; PCIT v. DLF Commercial Project Corporation. (2019) 260 Taxman 1 (SC)

276. S.68 : Cash credits – Amount outstanding for six years – Addition cannot be made for the relevant accounting year

     Allowing the appeal of the assessee the Court held that the loan of ₹ 15,00,000 had been continuously carried forward from the assessment year 2001-02. The loan did not relate to the assessment year 2007-08, even for the sake of argument, if it were treated to be fictitious loan addition cannot be made for the relevant year. (AY. 2007-08)

     Kohinoor Enterprises v. ACIT (2019) 410 ITR 153 (J&K) (HC)

277. S.69A : Unexplained money – On money – Loose documents – There was no reliable or independent evidence to come to the conclusion that the assessee had accepted on – money in the sale of the constructed properties – Deletion of addition by the Tribunal is upheld

     Dismissing the appeal of the revenue the Court held that there was no reliable or independent evidence to come to the conclusion that the assessee had accepted on-money in the sale of the constructed properties. Accordingly the deletion of addition by the Tribunal is upheld .

     PCIT v. Nishant Construction (P) Ltd. (2019) 101 taxmann.com 179 / 260 Taxman 366 (Guj.) (HC)

     Editorial: SLP of revenue is dismissed PCIT v. Nishant Construction (P) Ltd. (2019) 260 Taxman 365 (SC)

278. S. 73 : Losses in speculation business – Commodity trading – Off market transaction – The AO cannot treat losses from off market commodity transactions as bogus and inadmissible in the eyes of the law if the transactions through the broker are duly recorded in the books of the assessee – The fact that the broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus

     Dismissing the appeal of the revenue the Court held that the AO cannot treat losses from off market commodity transactions as bogus and inadmissible in the eyes of the law if the transactions through the broker are duly recorded in the books of the assessee. The broker has also declared in its books of account and offered for taxation. To hold a transaction as bogus, there has to be some concrete evidence where the transactions cannot be proved with the supportive evidence. The fact that the broker was expelled from the commodity exchange cannot be the criteria to hold the transaction as bogus. No material was broght to show that off market transactions are prohibited. (ITAT No. 78 of 2017 GA No. 747 of 2017, dt. 19-6-2018) (AY. 2009-10)

     PCIT v. BLB Cables and Conductors Pvt. Ltd. (Cal) (HC), www.itatonlne.org

279. S.80IA : Industrial undertakings – Infrastructure development – Commission agent of BSNL – Providing basic telecommunication services as defined u/s. 2(k) of TRAI Act, 1997 to its customers – Entitled to deduction [S. 80IA(4) (ii), Indian Telegraph Rules 1951 and TRAI Act, 1997]

     The assessee is acting as commission agent of BSNL, claimed deduction u/s. 80IA(4)(ii) of the Act in respect of commission received by it. The AO held that nature of service done by assessee was of commission agent of BSNL and they do not render any telecommunication service thus, deduction claimed by assessee was denied. Tribunal held that the assessee was collecting commission charges and therefore, not a provider of telecommunication services. On appeal the Court held that the assessee is providing ‘basic telecommunication services’ in terms of relevant Rules in Indian Telegraph Rules 1951 and TRAI Act, 1997. Definition of ‘telecommunication service’, as defined u/s. 2(k) of TRAI Act, was a very wide and comprehensive definition, which includes services of any description, which was made available to users by means of any transmission or reception of signs, signals. definition being very wide and inclusive definition, it would encompass all types of services regardless of description and it would encompass type of service rendered by assessee and therefore, type of service rendered by assessee was a ‘basic telecommunication service’. Even official website of BSNL also shows EPABX as one of enterprises services provided by BSNL. Official website of BSNL also states that it permits telephone subscribers to use their own PABX/EPABX connected to BSNL network under certain commercial/technical conditions. Followed CIT Himanshu v. Shah (Guj) (HC)), (TCA No. 1098 of 2005 dt. 16-12-2014) and also referred ITO v. Quick Telecom (ITA No. 1654 of 2010 dt. 21-12-2009 (Mum.) (Trib.) (AY. 2003-04 2004-05) Sabdhagiri Telecom v. ITO (2019) 173 DTR 100 / 306 CTR 300 (Mad)(HC)

280. S.80IA : Industrial undertakings – Infrastructure development – Container Freight Station (CFS) – Eligible for deduction

     Dismissing the appeal of the revenue the Court held that Container Freight Station (CFS) run by the assessee is an infrastructure facility which is eligible for deduction. Followed Global Logistics Ltd. Continental Warehousing Corp. (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) (HC) Referred All Cargo Global Logistics Ltd. v. Dy. CIT (2012) 137 ITD 287 (SB) (Mum) (Trib)(AYs 2008-09, 2009-10)

     PCIT v. JWC Logistic Park (P.) Ltd. (2018) 100 taxman.com 355 / (2019) 260 Taxman 92 (Bom.) (HC)

     Editorial : SLP of revenue is dismissed, PCIT v. JWC Logistic Park (P.) Ltd. (2019) 260 Taxman 91 (SC)

281. S.80IB : Industrial undertaking – Business of manufacturing Menthol – Profit from hedging Hedging activity of Mentha Oil has direct nexus with the manufacturing activity and profit derived from hedging is eligible for deduction

     Dismissing the appeal of the revenue, the Court held that the assessee which is carrying on business of manufacturing Menthol, hedging activity of Mentha Oil has direct nexus with the manufacturing activity and profit derived from hedging is eligible for deduction. (AYs. 2006-07, 2007-08, 2009-10)

     PCIT v. Jindal Drugs Ltd ( 2019) 306 CTR 241 (Bom) (HC)

282. S.90 : Double taxation relief – Fees for technical services – Applicability of protocol – No separate notification required as protocol itself automatically applies of subsequent treaty with another OECD Treaty (Finland) DTAA-India – Netherlands [Article 12]

     Dismissing Revenue’s appeal, the High Court held that the protocol clause between India-Netherlands Tax Treaty provides for automatic application of subsequent treaty, to the India-Netherlands Treaty in hand and hence no separate notification was envisaged to be issued for enforcing such subsequent treaty with another OECD country (Finland) to facts of present case. On factual aspect (payment to be treated as FTS or not) matter remanded for re-consideration. (AYs. 2015-16, 2016-17)

     Apollo Tyres Ltd. v. CIT (IT) (2018) 167 DTR 51 (Karn.) (HC)

283. S.92C : Transfer pricing – Purchase and sale of shares – TPO was not justified in treating the transaction as loan and charging interest on notional basis – Corporate guarantee – Tribunal is justified in restricting the addition at 1% of guarantee commission as against addition of 5% of commission by the TPO [S.92B]

     Dismissing the appeal of the revenue the Court held that TPO was not justified in treating purchase and sale of shares as loan thereby charging interest on notional basis. Court also held that the Tribunal is justified in restricting the addition 1% of guarantee commission as against addition of 5% of commission by TPO. Followed CIT v. Everest Kento Cylinders Ltd. (2015) 58 taxmann.com 254 (Bom) (HC)(ITA No. 1248 of 2016, dt. 28-1-2019)

     PCIT v. Aegis Limited (Bom)(HC), www.itatonline.org 
     

284. S.92C : Transfer pricing – Purchase of equity shares at value in excess of FMV is capital transition and does not give rise to any income taxability under Transfer Pricing provisions of shares purchased at value in excess of FMV – As the transaction of purchase of equity shares is a capital transaction and does not give rise to any income, the transfer pricing provisions do not apply. Chapter X is a machinery provision – It can only be invoked to bring to tax any income arising from an international transaction. It is necessary for the revenue to show that income does arise from the international transaction. S. 2(24)(xvi) & 56(2)(viib) are prospective. [S. 2 (24) (xvi) 56 (2) (viib)]

     Dismissing the appeal of the revenue the Court held that purchase of equity shares at value in excess of FMV is capital transaction and does not give raise to any income taxability under Transfer Pricing provisions of shares purchased at value in excess of FMV. As the transaction of purchase of equity shares is a capital transaction and does not give rise to any income, the transfer pricing provisions do not apply. Chapter X is a machinery provision. It can only be invoked to bring to tax any income arising from an international transaction. It is necessary for the revenue to show that income does arise from the international transaction. Ss. 2(24)(xvi) & 56(2) (viib) are prospective. (ITA No. 1685 of 2016, dt. 20-2-2019)(AY. 2010-11)

     PCIT v. PMP Auto Components Pvt. Ltd. (Bom.) (HC), www.itatonline.org

285. S. 92C : Transfer pricing – Interest chargeable on delayed recovery of export receivables and expenses – LIBOR rates should be taken instead of SBI PLR [S. 144C]

     Assessee was engaged in the business of providing services of EPC in the field of petrochemical, oil and gas, fertilizers, instrumentation and electrical erection amongst others to its AE. TPO made an adjustment by charging notional interest on delayed recovery of export receivables from its AE. TPO applied interest rate at 12.25% i.e., SBI PLR. Tribunal held that interest chargeable on delayed recovery of export receivables and expenses from AE’s should be taken at LIBOR rates thereby relying on CIT v. Tata Autocomp Systems Ltd. (2015 374 ITR 516 (Bom.) (HC). Appeal of revenue was dismissed. (AY 2009-10)

     PCIT v. Technimont Pvt. Ltd. (2018) 168 DTR 377 / 304 CTR 145 / 102 CCH 305 (Bom.)(HC)

286. S.92C : Transfer pricing – Arm’s length price – Corporate guarantee – Arm’s length price of corporate guarantee cannot be determined on the basis of bank guarantee – Adjustment of 3% of the amount of guarantee given by the assessee is held to be not justified

     Dismissing the appeal of the revenue the Court held that arm’s length price of corporate guarantee cannot be determined on the basis of bank guarantee – Adjustment of 3% of the amount of guarantee given by the assessee is held to be not justified (Followed ITA No. 1302 of 2014 dt. 2-2-2017)(AY 2009-10)

     CIT v. Glenmark Pharmaceuticals Ltd. ( 2019) 260 Taxman 249 (Bom) (HC)

287. S.143(2) : Assessment – Notice – Defective return – On removing the defects in the return within time permitted relate back to the date of filing of original return – Limitation for issue of notice has to be from the date of filing of original return – Notice issued was held to be in valid [S. 139(9)]

     Allowing the petition the Court held that, on removing the defects in the return, within time permitted relate back to the date of filing of original return – Limitation for issue of notice has to be from the date of filing of original return. Accordingly the notice issued considering the date on which the defects were removed is held to be in valid. (WP No. 3501 of 2018 dt. 24-1-2019) (AY. 2016-17)

     Atul Projects India Pvt Ltd. v. UOI (Bom) (HC) (UR)

288. S.143(3) : Assessment – Jurisdiction – When the Commissioner requires the Assessing Officer to carry out inquiries with respect to specific issues, the jurisdiction of the Assessing Officer to pass fresh order must be confined to such issues only. [S. 263]

     Tribunal held that Commissioner’s revisional order required the Assessing Officer to examine certain aspects arising out of the return. He could not have travelled beyond such assessment and therefore, his action of making addition of ₹ 2-02 crores towards the entrance fee receipts was beyond the scope of revisional order. On appeal by the revenue, dismissing the appeal the Court held that when the Commissioner requires the Assessing Officer to carry out inquiries with respect to specific issues, the jurisdiction of the Assessing Officer to pass fresh order must be confined to such issues only, failing which we would be giving the power to the Assessing Officer to make reassessment. (ITA No. 1127 of 2016, 1276 of 2016 dt. 29-1-2019) (From the judgment of the Tribunal in ITA No. 1654/2012 dt 22-7-2015 (AY. 2005-06)

     PCIT v. Royal Western India Turf Club Ltd. ( Bom.) (HC) (UR)

289. S.147 : Reassessment – After the expiry of four years – If the AO is of the opinion that the issue requires verification, it tantamounts to fishing or roving inquiry. He is not permitted to reopen merely because in the later year, he took a different view on the basis of similar material – Even if the question of taxing interest income under the DTAA was not in the mind of the AO when he passed the assessment, he cannot reopen if there is no failure to disclose truly and fully all material facts – Reassessment is held to be not valid [S.148]

     Allowing the petition, the Court held that if the AO is of the opinion that the issue requires verification, it tantamounts to fishing or roving inquiry. He is not permitted to reopen merely because in the later year, he took a different view on the basis of similar material. Even if the question of taxing interest income under the DTAA was not in the mind of the AO when he passed the assessment, he cannot reopen if there is no failure to disclose truly and fully all material facts – Reassessment is held to be not valid. Ratio in decision in Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34(SC) is explained and decisions of Bombay High Court in Rabo India Finance Ltd. v. Dy CIT (2013) 356 ITR 200 (Bom.) (HC), Multiscreen Media Pvt. Ltd. v. UOI (2010) 324 ITR 54 (Bom.) (HC), Sociedade De Formento Industrial P Ltd. v. ACIT (2011) 339 ITR 595 (Bom.) (HC) is followed. (W No. 3342 of 2018, dt. 25-2- 2019.)(AY 2011-12)

     Precilion Holding Limited v. DCIT (Bom)(HC), www.itatonline.org
     

290. S.147 : Reassessment – After the expiry of four years – Bogus sales and purchases – Dealer in iron and steel – If the AO disallowed 2.5% of alleged bogus purchases during the regular assessment – Reassessment to disallow entire amount is said to be bad in law – There is difference between revisional powers and reassessment. [Ss. 68, 69 148, 263]

     Assessment which was accepted u/s. 143(1) which was reopened on the ground that the purchase from hawala dealers on the basis of information received from Sales tax department. The AO after detailed verification made an addition of 2.5% of alleged bogus purchases. AO once again issued notice u/s. 147 on the ground that as per N. K. Proteins Ltd 2017-TIOL-23-SC-IT the entire amount should have been disallowed. On writ allowing the petition the court held that as per settled law, if a claim or an issue had been examined by the Assessing Officer during the previous assessment proceedings, in absence of any material available to the Assessing Officer later on to reassess such income would be based on mere change of opinion and, therefore, impermissible. Court also observed, the Act recognises the revisional powers of the Commissioner to be exercised in case where the assessment order is erroneous and prejudicial to the interest of the Revenue. However, the reopening of assessment is an entirely independent and vastly different jurisdiction and cannot be confused with the revisional powers of the higher authority. WP No. 3495 of 2018, dt. 17-1-2019) (AY 2011-12)

     Saurabh Suryakant Mehta v. ITO (Bom)(HC), www.itatonline.org
     

291. S.147 : Reassessment – Delay in filing objections – If the assessee delays filing objections to the reasons and leaves the AO with little time to dispose of the objections and pass the assessment order before it gets time barred, it destroys the formula provided in Asian Paints Ltd. v. Dy. CIT ( 2008) 296 ITR 90 (Bom.) that the AO should not pass the assessment order for 4 weeks – A writ petition to challenge the reopening is not entertained [S.148]

     The petitioner has raised the objections before the Assessing Officer to the notice of reopening of the assessment on 14-12-2018. Objections were disposed off by the Assessing Officer on 28-12-2018. Since the last date for framing the assessment was fast approaching and the assessment would get time barred on 31st December, 2018, the Assessing Officer passed the order of assessment on 28-12-2018. The Petitioner has approached the Court challenging very notice of reopening of the assessment and also including the challenge to the order of reassessment as consequential to the main challenge to reopening of the assessment. Dismissing the petition the Court held that reasons for reopening of the assessment by the Assessing Officer was supplied to the assessee on 14-9-2018. Without filing the objection the assessee approached the Court by filing the Writ Petition in November, 2018 after withdrawing the petition on 13-11-2018 the objection was filed on 14-12-2018. Dismissing the petition, considering the facts of the case the Court held that if the assessee delays filing objections to the reasons and leaves the AO with little time to dispose off the objections and pass the assessment order before it gets time barred, it destroys the formula provided in Asian Paints Ltd. v. Dy. CIT (2008) 296 ITR 90 (Bom.) that the AO should not pass the assessment order for 4 weeks. Accordingly the writ petition was not entertained. (WP No. 284 of 2019, dt. 1-2-2019) (AY. 2011-12)

     Cenveo Publisher Services India Ltd. v. UOI (Bom) (HC), www.itatonline.org

292. S.147 : Reassessment – Notice – Expenditure on contact charges – Allegation of charges were high – Reopening on issues examined in detail in the assessment is bad in law [S. 37(1), 69C, 148]

     Assessments were sought to be reopened on the information received from the Investigation Wing that the expenditure incurred by the assessee on contract charges was unduly high. The assessee challenged the same by way of a writ. Quashing the reopening, the High Court noted that in an earlier AY, reopening on the same ground had been set aside by the Court. It was further noticed that in the course of the original assessment proceedings, detailed enquiry was done by the AO, after which the claim was allowed. In the circumstances, reopening proceedings were held to be bad in law. (AY 2010-11)

     Sky View Consultants (P) Ltd. v. ITO (2018) 96 taxmann.com 419 / 304 CTR 834 (Delhi)(HC)

293. S.147 : Reassessment – Non- resident – Limitation – Offshore trust – Amendment to S. 149, by Finance Act, 2012, which extended limitation for initiation of reassessment proceedings to sixteen years, could not be resorted for reopening concluded proceedings in respect of which limitation had already expired before amendment became effective – Notice issued in 2015 for the assessment year 1998-99 was quashed [S. 148, 149]

     The revenue relying upon his statement, issued impugned notice dated 24-3-2015 under section 148 seeking to initiate reassessment proceedings for assessment year 1998-99, on the suspicion that the income of the assessee had escaped assessment. The assessee contended that the limitation for re-assessment for assessment year 1998-99 had expired on 31-3-2005 and therefore, re-assessment was bared by limitation. The Assessing Officer contended that the proceedings were initiated within the extended period of 16 years from the end of the relevant assessment year by relying on section 149(1)(c), introduced by the Finance Act, 2012, with effect from 1-7- 2012. On writ allowing the petition the Court held that reassessment for 1998-99 could not be reopened beyond 31-3-2005 in terms of provisions of section 149 as applicable at the relevant time. The assessees return for assessment year 1998-99 became barred by limitation on 31-3-2005. The question of revival of the period of limitation for reopening assessment for assessment year 1998-99 by taking recourse to the subsequent amendment made in section 149 in the year 2012, i.e., more than 8 years after expiration of limitation on 31-3-2005, has been dealt with in M. Sharma v. ITO (2002) 254 ITR 772 (SC),
     accordingly the reassessment notice was quashed. (AY 1998-99) Brahm Datt v. ACIT (2019) 260 Taxman 380/ 173 DTR 1 (Delhi)(HC)

1. S.147 : Reassessment – Within four years – Intimation – Wrong recording of reasons – order on disposal of objections must deal with the objection – The mere fact that the return is processed u/s. 143(1) does not give the AO a carte blanche to issue a reopening notice – Reassessment notice is quashed [S.143(1), 148]

   Allowing the petition the court held that the basic condition precedent of ‘reason to believe’ applies even to S.143(1) intimations. If the assessee claims the facts recorded in the reasons are not correct, the order on objection must deal with them. Otherwise an adverse inference can be drawn against the revenue. (WP No. 3344 of 2018, dt. 10-1-2019) (AY. 2011-12]

   Ankita A. Choksey v. ITO (Bom)(HC), www.itatonline.org
   

2. S.147 : Reassessment – Information supplied by investigation wing – Issue of notice to a wrong person – Even in a case where return is accepted without scrutiny, the AO cannot proceed mechanically and on erroneous information supplied to him by investigation wing. If AO acts merely upon information submitted by investigation wing and on total lack of application of mind, the reopening is invalid [S.143((1), 148]

   Allowing the petition the Court held that even in a case where the return filed by the assessee is accepted without scrutiny, as per the settled law, the Assessing Officer can issue a notice of reopening of assessment provided he has reason to believe that income chargeable to tax has escaped assessment. The Assessing Officer cannot proceed mechanically and also on erroneous information that may have been supplied to him. In fact, we note that in the present case the Assessing Officer had issued a notice to a wrong person. The impugned notice is, therefore, set aside. [WP No. 14490 of 2018, dt. 17-1-2019) (AY 2011-12)]

   Akshar Builders and Development v. ACIT (Bom) (HC), www.itatonline.org

3. S.147 : Reassessment – Notice sent to old address – Duty of Assessing Officer to access changed Permanent Account Number database of assessee – Return filed showing new address – Reassessment is held to be bad in law. [S. 144, 148, R. 127]

   Allowing the petition, the Court held that Rule 127(2) states that the addresses to which a notice or summons or requisition or order or any other communication may be delivered or transmitted shall be either available in the permanent account number database of the assessee or the address available in the Income-tax return to which the communication relates or the address available in the last Income-tax return filed by the assessee : all these options have to be resorted to by the concerned authority, in this case the Assessing Officer. On facts the Assessing Officer had omitted to access the changed permanent account database and had mechanically sent notices to the old address of the assessee. The subsequent notices under section 142(1) were also sent to the old address and the reassessment proceedings were completed on best judgment basis. The Assessing Officer had mechanically proceeded on the information supplied to him by the bank without following the correct procedure in law and had failed to ensure that the reassessment notice was issued properly and served at the correct address in the manner known to law. The reassessment notice issued under section 148, the subsequent order under section 144 read with section 147 and the consequential action of attachment of the assessee’s bank accounts were quashed. (AY 2010-11)

   Veena Devi Karnani. v. ITO (2019) 410 ITR 23 (Delhi) (HC)

4. S.194H : Deduction at source – Commission or brokerage – Bank guarantee commission is not in the nature of commission paid to agent, it is bank charges for providing one of banking services – Not liable to deduct tax at source 

   Dismissing the appeal of the revenue the Court held that Bank guarantee commission is not in the nature of commission paid to agent, it is bank charges for providing one of banking services. Accordingly not liable to deduct tax at source. (AY 2010-11)

   CIT v. Larsen & Toubro Ltd. (2019) 260 Taxman 271 (Bom) (HC)

5. S.220 : Collection and recovery – Assessee deemed in default – Time available for filing appeal – Interim protection granted to the petitioners shall continue till the stay petitions in the tax case appeals are heard – During appeal time, if recovery proceedings are initiated, it would virtually render the appeal as infructuous. [S.260A]

   On Writ filed, the High Court held that it is settled legal principle that before expiry of appeal time, if recovery proceedings are initiated, it would virtually render the appeal as infructuous. Considering the fact that the said writ petitions were directed to be numbered and there was an interim stay order passed respective AOs of the petitioners insurance companies are directed not to initiate any recovery proceedings, as the insurance companies have filed appeals or are in the process of filing appeals under S. 260A of the Act. During appeal time, if recovery proceedings are initiated, it would virtually render the appeal as infructuous.

   Cholamandalam MS General Insurance Company Ltd. v. ITAT (2018) 305 CTR 891 /172 DTR 33 (Mad.) (HC)

6. S.226 : Collection and recovery – Stay – AO cannot direct the Assessee to pay 20% of tax in dispute without application of mind [S.225]

   Allowing the petition the Court held that the AO has to apply his mind to the application for stay of demand and pass appropriate order having regard to the facts and circumstances of the case. Referred CBDT circular (F. No. 404 /72/93-ITCC) dt. 29-2 2016 and (F. No. 404 /72 /93-ITCC) (FTS : 284146) 31-7 2007 www.itatonline. org (WP No. 682/2019 dt. 22-1-2019 (AY 2011-12)

   Turner General Entertainment Networks India Pvt. Ltd. v. ITO (Delhi (HC) (UR)

7. S.226 : Collection and recovery – Arrest and Detention – Since the detenue did not co-operate with IT Dept in any manner and the TRO has followed all the due procedures before his arrest, there was no need to produce assessee before the Magistrate and no violation has been made under Article 21 of the Constitution of India – Writ of Habeas Corpus is dismissed [R. 73, 76, CRPC. S.57 Art. 21]

   Dismissing the Assessee’s writ of Habeas Corpus, the High Court held that the detenue having ignored the notices issued to him under Rule 73 Sch. II and refused to pay the arrears of tax, and the TRO having followed the due procedure laid down under the provisions of the IT Act before directing the arrest for recovery of arrears of tax dues from him, no violation has been made under Article 21 of the Constitution of India and hence writ of Habeas Corpus be dismissed.

   Ayush Kataria v. UOI (2018) 305 CTR 110 / 170 DTR 408 (MP)(HC)

8. S.244A : Refunds – Interest on refunds – Project competition method – Tax deduction at source – Tax deducted earlier years on the basis of payment – Income was shown in the year of completion of project – Assessment resulting to refunds – Entitle to interest from the date of payment to Govt. [S.199]

   Dismissing the appeal of the revenue, the Court held that since the revenue which has received the tax deducted at source from the payments to be made to the assessee and appropriate the same, would refund the same but the interest would be accounted much later when the return giving rise to the refund, is filed. Accordingly the assessee following the project completion method is entitle to interest on refund which was deducted earlier and income is shown in latter year. Followed Tata Chemicals Ltd. 363 ITR 658 (SC) ITA No 1230 of 2016 dt. 29-1-2019) [From the judgment of the Tribunal in ITA No 5306 / 2012 dt. 23-9 2015 (AY. 2005-06)]

   PCIT v. Kumagai Shanka HCCITOCHU Group (Bom.) (HC) (UR)

9. S.254(1) : Appellate Tribunal – Duties – Co-operative societies – Tribunal while considering the issue of deduction under S. 80P(2) (a)(i) to assessee suddenly shifted to Section 80P(4) and held that the assessee is not entitled for the benefit of S. 80P(4) without providing an opportunity to the assessee – Order of Tribunal is set aside [S.80P(2)(a)(i), 80P(4)]

   On appeal, the High Court held that Tribunal while considering the issue of deduction under S. 80P(2)(a)(i) to assessee suddenly shifted to Section 80P(4) and held that the assessee is not entitled for the benefit of S. 80P(4) without providing an opportunity to the assessee. Hence, impugned orders are set aside and the matters are remanded to the AO to examine the case in the light of the judgment in Totgars Co-operative Sale Society Ltd. v. ITO (2010) 228 CTR (Kar) 526 as well as CBDT Circular No. 6 of 2010, dt. 20th Sept., 2010 and to take a decision in accordance with law. (AYs. 2007-2008 to 2009-2010).

   Bellad Bagewadi Krishi Seva Sahakari Bank Ltd. v. ITO (2018) 171 DTR 140 (Karn.)(HC)

10. S.254(1) : Appellate Tribunal – Duties – Failure of Appellate Tribunal to consider the question of jurisdiction is miscarriage of justice – Tribunal is required to reassess material and thereafter come to a logical conclusion – Order of Tribunal is set aside [S.147 ]

    Allowing the appeal of the assessee the Court held that failure of Appellate Tribunal to consider the question of jurisdiction is miscarriage of justice. Tribunal is required to reassess material and thereafter come to a logical conclusion. Accordingly the order of Tribunal is set aside. (AYs. 1999-2000, 2002-03 to 2004-05 )

    Prameela Krishna (Smt.) v. ITO (2019 ) 261 Taxman 37 (Karn.)( HC)

11. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Exposed to the odium of forum shopping – Order of Appellate Tribunal is reversed and cost of ₹ 1.5 lakh is imposed on the assessee

    Allowing the petition of the revenue, the Court held that the conduct of the assessee was speculative. It is not an uninformed litigant. It calculatedly chose not to question the rejection of its cross objection. Instead, waiting for the time till the two members who decided the first ITAT orders were not available and choosing to prefer the rectification application at a convenient time, the assessee no doubt technically was compliant, but stood exposed to the odium of forum shopping. Appellate Tribunal’s MA order reversed with costs of ₹ 1.5 lakh imposed on the assessee. (WP(C) 10846/2016 dt. 14-2-2019)

    PCIT v. N. R. Portfolio (Delhi)(HC), www.itatonline.org

12. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Failure to deal with an argument does not constitute a ‘mistake apparent from the record’ does not apply to a case where a fundamental submission is omitted to be considered by the ITAT – The omission is apparent from the record and should be rectified by the ITAT

    Allowing the petition the Court held that the law that failure to deal with an argument does not constitute a ‘mistake apparent from the record’ does not apply to a case where a fundamental submission is omitted to be considered by the ITAT. The omission is apparent from the record and should be rectified by the ITAT. Considered, CIT v. Ramesh Electrical Co (1993) 203 ITR 497

    (Bom) (HC). (WP No. 3508 of 2018, dt. 3-1-2019) (AY 2011-12)

    Sony Pictures Networks India Pvt. Ltd. v. ITAT (Bom)(HC), www.itatonline.org

13. S.254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Non consideration of case laws cited by assessee during the hearing by Tribunal – Impugned order passed by the Tribunal dismissing the assessee’s Miscellaneous Application as well as the Appellate order are set aside [S.254(1)]

    Allowing assessee’s Writ, High Court held that though Tribunal’s order renders a finding that no positive material was brought on record, there is no discussion whatsoever of the various case laws detailed in submissions which according to the petitioner clinches the issue in support of its case hence the Tribunal ought to have allowed assessee’s rectification application and considered the appeal taking into account the case laws which were already cited during the hearing of the appeal. (AY 2007-08)

    Amore Jewels (P) Ltd. v. DCIT (2018) 305 CTR 305 / 169 DTR 369 (Bom)(HC)

14. S.263 : Commissioner – Revision of orders prejudicial to revenue – Doctrine of merger – Relief granted by CIT(A) – Revision to consider eligibility of exemption is held to be not valid [S.10A(2)(ii) 10A(2) (iii)]

    Dismissing the appeal of the revenue, the Court held that the Tribunal was right in holding that the revisional authority had exceeded his jurisdiction in invoking the provisions of section 263 when the assessment order with regard to the claim of deduction under section 10A had merged with the order passed by the Commissioner (Appeals). The contention of the revenue that the the doctrine of merger was not applicable because the assessment order and the appellate order of the Commissioner (Appeals) had dealt with only the restriction in the quantum of deduction under section 10A allowable and not with the eligibility of the assessee for deduction under section 10A in the light of the conditions under section 10(A) (2)(ii) and (iii) of the Act, was not tenable. (AY 2002-03)

    CIT v. S. R. A. Systems Ltd. (2019) 410 ITR 392 (Mad.) (HC)

15. S.271(1)(c) : Penalty – Concealment – On excessive deduction and alleged excess stock – Deletion of penalty is held to be justified [S.10B]

    Dismissing the appeal of the revenue, the Court held that deletion of penalty by the Tribunal on account of excess deduction and alleged excess stock is held to be justified. (AY 2010-11)

    PCIT v. Deccan Mining Syndicate Pvt. Ltd. (2018) 168 DTR 161 / 102 CCH 315 (Karn.)(HC)

16. S.271(1)(c) : Penalty – Concealment – Not mentioning the specific charge – Grounds mentioned in show cause notice would not satisfy requirement of law for levying penalty as charges levied in the notice were not specific – Deletion of penalty is held to be valid. [Ss. 132, 139, 153A]

    Assessee filed his return of income and including additional income in its return under section 153A. Assessment under section 153A was completed and AO during the course of assessment proceedings held that assessee had shown additional income due to search. AO initiated penalty under section 271(1)(c) as the additional income was not declared in the return filed under section 139. Tribunal held that penalty levied under section 271(1)(c) was not sustainable in law as no specific charge was levied in penalty show cause notice. The High Court held that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific. The High Court placing reliance placed on the decisions of CIT v. Manjunatha Cotton Ginning Factory (2013) 359 ITR 565 (Karn)(HC) and CIT v. SSA’s Emerald Meadows

    (2016) 242 Taxman 180 (SC) held that the Tribunal was right in setting aside the order of penalty imposed by the AO. (AYs. 2002-03 to 2007-08)

    PCIT v. Kulwant Singh Bhatia (2018) 168 DTR 327 / 304 CTR 103 / 102 CCH 303 (MP)(HC)

17. S.271(1)(c) : Penalty – Concealment – Writing off capital work in progress – Penalty not sustainable on disallowance of assessee’s claim of loss – Legislature does not intend to penalise every person whose claim is disallowed

    Assessee wrote off capital work in progress as revenue loss. Assessee has disclosed all particulars of his income. AO disallowed claim without holding it to be bogus or false. Hence, genuineness of the loss is not a question under dispute. Assessee cannot be penalised for making a claim which in itself is unsustainable in law. Legislature does not intend to penalise every person whose claim is disallowed. Relied, CIT v. Reliance Petroproducts (2010) 322 ITR 158 (SC) and dismissed the appeal of the revenue. (AY 2009-10)

    PCIT v. Samtel India Ltd. (2018) 168 DTR 322 (Delhi)(HC)

18. S.276C : Offences and prosecutions – Wilful attempt to evade tax – Stay petition dismissed by Tribunal – Quantum appeal is pending – Launching of prosecution is held to be not justified – Prosecution was quashed and the assessee was discharged from the prosecution [S.276(2), Cr. PC S.498, Economic – Offences (Inapplicability of Limitation) Act, 1974)

    Tribunal dismissed the stay application of the assessee. Assessing Officer launched the prosecution under S. 276C(2) for non-payment of determined tax. Assessee’s application for discharge was dismissed by Trial Court. On Criminal revision petition, allowing the petition, the Court held when department was aware of fact that assessee was agitating his case before Tribunal, which was final fact-finding body, there was no necessity to launch prosecution hurriedly because law of limitation under section 468 Cr. P.C. for criminal prosecution was excluded by Economic Offences (Inapplicability of Limitation) Act, 1974. Court also observed that even otherwise, since it could not be concluded that assessee was wilfully evading payment of tax, impugned order passed by Trial Court was to be set aside and assessee was to be discharged from prosecution. (S.276C) (AY. 1998-99)

    Sayarmull Surana v. ITO (2019) 260 Taxman 397/ 173 DTR 338 (Mad.)(HC)

19. S.276C : Offences and prosecutions – Wilful attempt to evade tax – Penalty appeal is admitted by High Court –When the Appeal is admitted on substantial questions of law, there is no justification for the DCIT to threaten the assessee with prosecution – Even if such prosecution is launched, the same shall not proceed till the pendency of the appeal. [S. 260A, 271(1)(c)]

    Allowing the notice of motion the Court held that once appeal is admitted on substantial questions of law, there is no justification for the Dy. CIT to threaten the appellant/applicant with any prosecution. Even if such prosecution is launched, the same shall not proceed till the pendency of this Appeal. The Notice of Motion is made absolute in terms of prayer clause (a) (ITA No. 785 of 2017, dt. 21-8-2017)

    Deepak Fertilizer and Petrochemicals Corporation Ltd v. ACIT (Bom)(HC), www.itatonline.org

    Editorial. Also refer Suresh Company Pvt Ltd v. PCIT (ITA No 738 of 2016, Notice of Motion 84 of 2019 dt.25-1-2019) (Bom) (HC)

20. S.292BB : Notice of demand to be valid in certain circumstances – Reassessment – Notice issued on dead person – Reassessment is held to be bad in law [Ss.147, 148]

Allowing the petition the Court held that notice was issued in name of assessee when she was no longer alive. Therefore, provisions of S. 292BB were not applicable. Accordingly the reassessment proceedings were quashed. (AY. 2010-11)

Rajender Kumar Sehgal v. ITO (2019) 260 Taxman 412/173 DTR 251 (Delhi)(HC)