1. S. 4: Charge of income-tax – Subsidy – Capital or revenue –Technology Upgradation Fund –Focus Market Scheme – Electricity Duty Subsidy – Held to be capital receipts. [S. 28(i)]

    Dismissing the appeal of the revenue the Court held that the subsidy received by the respondent under the head Technology Upgradation Fund, Focus Market Scheme, Electricity Duty Subsidy is held to be a capital receipts. Order of Tribunal is affirmed. (AY. 2013-14)

    PCIT v. Nitin Spinners Ltd (2020) 185 DTR 110 / 312 CTR 540 (Raj.)(HC)

  2. S. 11: Property held for charitable purposes – Accumulation of income – Order of rejection by CIT (E) was set aside. [S. 11(2), 12AA, 119(2)(b), 139(4A), 143(1), Form No. 10, Art. 226]

    The Petitioner carries on various charitable activities including services of spiritual nature. The Petitioner filed the return of income on 19 September 2015 under S. 139(4A) disclosing ‘NIL’ income after claiming exemption under S. 11 of the Act. It is the Petitioner’s case that the Petitioner had claimed accumulation of income to the tune of ₹ 58,00,000/- under S. 11(2) of the Act. The Petitioner received an intimation under section 143(1) of the Act on 21 October 2016. By this intimation, the benefit of accumulation under S. 11(2) was refused, according to the Petitioner, because the Form 10 required to be filed under the Income-tax Rules, 1962, was filed beyond the period specified in S. 11(2). Application made for condonation of application was refused. On writ the petitioner contended that it has been made under a wrong head the error is procedural and the substantive claim of accumulation should not have been defeated in such a manner. High Court directed the CIT (E) to consider the claim on merits order of rejection by CIT (E) was set aside.

    St. Thomos Orthodox Syrain Church v. CIT (E) (2020) 185 DTR 326 / 312 CTR 430 (Bom.)(HC)

  3. S. 12A: Registration – Trust or institution – Registration cannot be refused on the ground that the Trust deed is not having any provision in relation to disbursement of balance funds in the eventuality of the dissolution of Trust. [S. 2(15), 11, 115TD(c), Code of Civil Procedure S. 91, 92]

    Dismissing the appeal of the revenue the Court held that, the certificate of registration is only an enabling provision to claim exemption. Even if the registration is granted, the exemptions from the provisions of the IT Act in particular S. 11 and 12 is not automatic. It is only when the assessee satisfies the requirement of S. 13, he would be eligible for exemption. Accordingly the registration cannot be refused on the ground that the Trust deed is not having any provision in relation to disbursement of balance funds in the eventuality of the dissolution of Trust.

    CIT (E) v. Shri Narsinghji Ka Mandir (2020) 185 DTR 30 / 312 CTR 307(Raj.)(HC)

    CIT (E) v. SHRI Agarwal Panchayat (2020) 185 DTR 30 / 312 CTR 307 (Raj.)(HC)

  4. S. 28(i): Business income – Client code modification – (CCM) – Shifting of profits – Addition as income on the basis of alleged doubtful transaction is held to be not valid – Deletion of addition b the Tribunal is affirmed. [S. 69, 143(3)]

    The assessee is a member of Multi Commodity Exchange of India Ltd (MCX) and National Commodity and Derivatives Exchange of India. The assessee is carrying on trading activities both on derivatives and delivery based transactions on its own account as well as on behalf of various clients. AO has added the entire amount of doubtful transactions by way of assessee’s additional income on the basis of client code modification. CIT (A) deleted the addition on the ground that all the clients are having PAN and regularly filing their returns and profits were taxed in their hands. Clients are not related parties. Modification was around 3% of the total transactions. All of them were complied with KYC norms. Tribunal affirmed the order of CIT (A). On appeal by the revenue , dismissing the appeal the Court held that, even if the Revenue’s theory of the assessee having enabled the clients to claim contrived losses is correct, the Revenue had to bring on record some evidence of the income earned by the assessee in the process, be it in the nature of commission or otherwise. Adding the entire amount of doubtful transactions by way of assessee’s additional income is wholly impermissible. The fate of the individual investors in whose cases the Revenue could have questioned the artificial losses is not known. Accordingly the appeal of the revenue is dismissed. (ITA No. 1257 of 2016, dt. 15-1-2019)(AY. 2006-07)

    (Editorial: Order of Mumbai Tribunal in ITO v. Pat Commodity Services P. Ltd (ITA No. 3498/3499/Mum/2012 dt.07/08/2015)(AY. 2006 07, 2007-08) is affirmed.

    PCIT v. Pat Commodity Service Pvt. Ltd. (Bom.)(HC), www.itatonline.org

  5. S. 28(i): Income from business – Income from house property – Exploitation of property commercially by way of complex commercial activities – Rental income is to be taxable as income from business – Not as Income from House Property. [S. 22]

    Assessee declared its income under the head Income from Business. The AO however, treated the same as Income from House Property which was affirmed by the CIT (A). Tribunal decided the issue in favour of the assessee. On appeal before the High Court, question raised is “Whether, on the facts and in the circumstance of the case and in law, the Hon’ble Tribunal was justified in holding that the assessee had exploited its property commercially by way of complex commercial activities and hence, the rental income received by the assessee to be taxable as income from business and not under the head “Income from House Property’?” The Honourable Court considered the object clause of the company and various services provided such as marketing and promotional activities and also organising various events and programs. Court also noted in the context of the revenue sharing agreement copies of which have been placed on record on which the revenue receives not only license fee of the amounts specified therein and percentage of net revenue. In some of the agreements the compensation is either license fee or percentage of net revenue, whichever is higher. The Intention of the Assessee is also a material circumstance and the objects of Association, the kind of services rendered clearly point out that the Income is from Business. All the factors cumulatively taken demonstrate that the assessee had intended to enter into a Business of renting out commercial space to interested parties. The other income is only an income which is a dividend income from the deposits received from the Business income. Therefore, considering all these factors which have been enumerated above and referred to by the Tribunal, the findings rendered by the Tribunal on assessment of the factual position before it that the income in question has to be treated as business Income. Referred Chennai Properties and Investments Ltd. v. CIT [2015] 373 ITR 673 (SC) Raj Dadarkar, Associates v. ACIT [2017] 394 ITR 592 / 81 taxmann.com 193 (SC) PCIT v. Krome Planet Interiors (P.) Ltd [2019] 107 taxmann.com 443 / 265 Taxman 308 (Bom.)(HC). (ITA No. 1783/Mum/2015 dt. 23-9-2016 (ITA No. 1583 of 2017 dt. 13/01/2020) (AY. 2010-11)

    PCIT v. City Centre Mall Nashik Pvt. Ltd. (Bom.)(HC)(UR)

  6. S. 28(i): Business loss – Business expenditure – Obsolescence allowance – Write of off obsolete stock – Allowable as business loss [S. 37(1), 145A]

    Dismissing the appeal of the revenue the Court held that the obsolete stock which was not disposed of or sold was allowable as expenditure. Order of Tribunal is affirmed.

    CIT v. Gigabyte Technology (India) Ltd. (2020) 421 ITR 21 (Bom.)(HC)

  7. S. 32: Depreciation – Special foundation of windmill – 80% depreciation allowed on Civil Construction, electrical and other non-integral part of installations as against 15% restricted by the AO.

    Revenue contended that the depreciation is allowable at 15% and not 80% claimed by the assessee. Dismissing the appeal of the revenue the Court held that windmill was erected in the desert area of Rajasthan which required special foundation of reinforced cement concrete and that said reinforced cement concreate formed integral part of wind mill. Referred CIT v. Herdilla Chemicals Ltd. (1995) 216 ITR 742 (Bom)(HC). Court followed ITA No. 1326 of 2010 dt. 14-6-2017. (ITA No. 1769 of 2016 dt.30/01/2019)

    PCIT v. Mahalaxmi Infra Projects Ltd. (Bom.)(HC) www.itatonline.org

  8. S. 44DA: Non-residents – Royalties – Computation – Prevails over S. 44BB after the amendment w.e.f. 01.04.2011 DTAA – India-Australia [S. 9(1)(vii), 44BB, Art. 12(3), Art. 226]

    Allowing the petition the Court held that, income from provision of services through high end customized software does not constitute “Fees For Technical Services” u/s. 9(1)(vii) as the definition excludes income from “mining or like project”. The Q whether income from composite software and maintenance services constitutes “royalty” for purposes of s. 44DA would have to be decided from the nature of services. The assessee is eligible to take benefit of the definition of ‘royalty’ as per the DTAA for the purpose of applicability of S. 44DA of the Act. S. 44DA prevails over S. 44BB after the amendment w.e.f. 1-4-2011. [W.P.(C) 1370/2019, dt. 13-3-2020]

    Paradigm Geophysical Pvt. Ltd. V. CIT (IT) (2020) 115 taxmann.com 254 (Delhi)(HC) www.itatonline.org

  9. S. 45: Capital gains – Land – Survey – Statement – There was no building on the land which was subject to depreciation – Rent was received only in respect of land – Provision of S. 50 cannot be applied merely on the basis of statement in the course of survey [S. 50, 133A, 194I]

    During the period relevant to the assessment year 2010-11, the assessee sold a piece of land and offered the consideration to long term capital gain. During the survey operation, the AO recorded a statement of the representative of the assessee company indicating that there was a factory building situated on the land. The revenue therefore contended that such building would be subject to depreciation and for the purpose of charging capital gain the depreciated value of the super structure should be taken in to consideration. The statement was promptly retracted. On appeal the Tribunal held that there was no super structure on the land which could be subjected to depreciation. Considering the records the Tribunal held that the provision of S. 50 cannot be applicable to the facts of the appellant. On appeal by the revenue, dismissing the appeal of the revenue the Court held that the Tribunal is justified in holding that there did not exist any building on the sold property especially in view of the fact the specification in agreement of sale and incriminating material found in survey confirmed existence of super structure on sold property. (Arising out of ITA. No. 6224/Mum/2012 dt. 22-1-2016) (ITA NO. 124 of 2017, dt. 12-3-2019) (AY. 2010-11)

    PCIT v. Firoz Tin Factory (Bom.)(HC)(UR)

    Editorial: SLP of revenue is dismissed (SLP No.21694 of 2019 dt.06/09/2019)(2019) 417 ITR 56 (St.)(SC)

  10. S. 56: Income from other sources – Relative – Gift from brother in law is relative – Cash credits – No addition can be made as cash credits – Genuineness is established [S. 56(2)(vii), 68, 132]

    Dismissing the appeal of the revenue the Court held that the Tribunal took into consideration the details of the donor, more particularly, the PAN number, capital gain statement, bank statements and the other relevant documents. Upon perusal of the same, the Tribunal concurred with the findings recorded by the CIT (A) as regards the genuineness of the transaction. The tribunal, thereafter, looked into the S. 56 of the Act. Court also held that plain reading of S. 56(2)(vi), more particularly, the explanation (e) of the provision would indicate that the assessee, would fall within the definition of the term “relative” as explained under S. 56 of the Act. (AY. 2008-09)

    PCIT v. Arvind N. Nopany (2020) 185 DTR 369 / 313 CTR 87 (Guj.)(HC)

  11. S. 80IA: Industrial undertakings – Separate and independent unit – Common excise registration – Common electricity – Common water connection – Not an extension of existing units – Different products manufactured – Written down value of machinery transferred was less than 20% of the value. [S. 80IB]

    The assessee is a private limited company and is engaged in manufacturing pharmaceutical products. The respondent had a manufacturing unit at Aurangabad. Later on, the assessee established another unit at Daman. Yet another unit referred to as Unit-2 at Daman was set up at the same site. The assessee claimed exemption of an income arising out of its manufacturing activities carried out at the Daman units in terms of S. 80IA of the Act. The Revenue rejected the claim on two grounds. Firstly, on the ground that the assessee had utilised old machinery, valuation of which was in excess of 20% of the total installed machinery. Secondly, that the Unit-2 was a mere extension of the existing Unit-1 and was not an independent manufacturing unit. The Tribunal had taken into account the valuation of the existing machinery used at Daman and the valuation of the written down value of the machinery transferred from Aurangabad to come to the conclusion that the same did not exceed 20% of the total value of the machinery. On appeal the Tribunal held that in Unit-1, the assessee was manufacturing oral liquids only, whereas at the Unit-2, the assessee had started manufacturing tablets, capsules as well as certain orally administered liquids. The assessee had also commenced for the first time manufacturing activity of certain antibiotics. The Tribunal, therefore, came to the conclusion that the formation of Unit-2 at Daman cannot be seen as a mere extension of the assessee’s existing unit-1. The Tribunal has discarded the Revenue’s contention that both the Units shared common amenities and common central excise registration and, therefore, cannot be seen as a separate industry, was rejected by the Tribunal. The assessee had presented full details of purchase of new plot, efforts made for obtaining separate excise registration for the new industry as well as for obtaining of a separate electric connection. No question of law. (AY. 1999-2000)

    PCIT v. Medley Pharmaceuticals Ltd. (2020) 185 DTR 213 (Bom.)(HC)

  12. S. 143(3): Assessment – Direction of Appellate Tribunal – Decide the issue a fresh – AO cannot go beyond the direction – Writ of the assessee is allowed. [S. 44AD, 254(1), Art. 226]

    Allowing the petition the Court held that, the Tribunal directed the assessee to attend the assessment proceedings and justify its case on lower rate of profit in accordance with its books of account. The AO directed to verify the same and decide the issue a fresh (the Tribunal says that “decide the issue a fresh” means the issue with regard to the claim of lower rate of profit. Writ application succeeds and is hereby allowed. The impugned order passed by the Assessing Officer is hereby quashed and set aside. The matter is remitted to the Assessing Officer for fresh consideration of the issue as specifically directed by the Appellate Tribunal. Court also observed that the Assessing Officer now needs to reconsider the issue with regard to claim of the writ applicant for lower rate of profit and not at the rate of 8%. Rule is made absolute to the aforesaid extent. (AY. 2004-05)

    Engineering professional Co. Pvt. Ltd. v. Dy. CIT (2020) 186 DTR 33 (Guj.)(HC)

  13. S. 147: Reassessment – After expiry of four years – A mere bald assertion by the AO that the assessee has not disclosed fully and truly all the material facts is not sufficient. The AO has to give details as to which fact or the material was not disclosed by the assessee, leading to its income escaping assessment. Otherwise, the reopening is not valid. [S. 80IB(10)(f), 148, Art. 226]

    Allowing the petition the court held that A mere bald assertion by the AO that the assessee has not disclosed fully and truly all the material facts is not sufficient. The AO has to give details as to which fact or the material was not disclosed by the assessee, leading to its income escaping assessment. Otherwise, the reopening is not valid. In order to sustain a notice seeking to reopen assessment beyond normal period of 4 years, it is necessary for revenue to establish, at least, prima facie that there was failure to disclose fully and truly all material facts necessary for assessment for that assessment year. (WP No. 17 of 2020 dt. 18-2-2020) (AY. 2012-13)

    Anand Developers v. ACIT (2020) 116 taxmnn.com 361 (Bom.)(HC) www.itatonline.org

  14. S. 147: Reassessment – With in four years – Commercial production – Every non-disclosure of material facts will not or cannot be a justifiable reason for reopening an assessment – What was required to be considered is that, substance over form – Order of single judge is affirmed. [S. 10B, 148, Art. 226]

    Assessment was completed u/s 143(3), single judge quashed the reassessment notice. On appeal by the revenue, Division Bench of High Court, affirmed the order of single judge. Court held that the learned Single Bench every non-disclosure of material facts will not or cannot be a justifiable reason for reopening an assessment. Court held that what was required to be considered is that, substance over form. Court held that he learned Single Bench was perfectly right in allowing the writ petition which had been done after thorough examination of the facts and the legal position. In our considered view the revenue has not made out any grounds to interfere with the order passed by the learned Single Bench. (AY. 2010-11) (WP. 2019 dt. 24-6-2019)

    ITO v. MBI KITS International Rep. by its Partner Sri. D. Chandrasekar (2020) 186 DTR 29 (Mad.)(HC)

  15. S. 220: Collection and recovery – Assessee deemed in default – Strictures – Tax recovery – Stay – Gross suppression and misstatement, which led to a false projection of the outstanding liability due from the petitioner – Sought adjournment before CIT(A) without seeking modification of earlier order – Cost of  5 lakh imposed – Petition is dismissed. [S. 220(6), Art. 226]

    Dismissing the petition the Court held that, petitioner invoking the discretionary extraordinary writ jurisdiction of the Court is expected to approach with clean hands. Instead, there is gross suppression and misstatement, which led to a false projection of the outstanding liability due from the petitioner. Also, the Petitioner ought not to have sought adjournment before the CIT(A) on the ground that the earlier year is pending without seeking modification of the Court’s order. Writ Petition dismissed with costs of  ₹ 5 lakh. (WP No 10289/2019 dt. 4-3-2020)
     (AY. 2011-12)

    Indus Tower Ltd. v. ACIT (Delhi)(HC) www.itatonline.org

    Editorial: The Supreme Court has stayed recovery of the demand, Indus Tower Ltd. v. ACIT (SLP No. 9011/2020 dt. 6-03-2020)(SC)

  16. S. 263: Commissioner – Revision of orders prejudicial to revenue – Business income or other sources – Income should be taxed as business income or as arising from the other source is a debatable issue – Revision is held to be not justified. [S. 28(i), 56]

    Dismissing the appeal of the revenue the Court held that whether the income should be taxed as business income or as arising from the other source was a debatable issue, the AO took a plausible view. Revision proceeding is unjustified. (Arising out of ITA No. 2637/Mum/2013 dt. 28-10-2015) (ITA No. 1761 of 2016, dt. 11-2-2019)(AY. 2008-09)

    PCIT v. Canara Bank Securities Ltd. (Bom.)(HC)(UR)

    Editorial: SLP of revenue is dismissed (SLP No.24546 of 2019 dt.14/10/2019) (2019) 418 ITR 17 (St.)(SC)

  17. S. 271(1)(c): Penalty – Concealment – Capital gains – Merely because claim is not accepted levy of penalty is held to be not justified. [S. 45, 54EC]

    Dismissing the appeal of the revenue that, merely because claim is not accepted levy of penalty is held to be not justified. Distinguished, Mak Data P. Ltd. v. CIT (2013) 358 ITR 593 (SC) UOI v. Dharmendra Textiles Processors and others (2008) 306 ITR 277 (SC) (AY. 2010 -11)

    CIT v. Bharatkumar Maneklal Parikh (2020) 185 DTR 77 (Bom.)(HC)

    Constitution of India, 1949

  18. Art. 362: Corona Virus Lockdown Crisis – Extension of interim orders – All interim orders operating till today and are not already continued by some other courts / authority including this court shall remain in force till 30-4-2020 subject to liberty to parties to move for vacation of interim orders only in extreme urgent cases. [Art. 226, 227]

    Full court of four judges of the Bombay High Court held that, all interim orders operating till today and are not already continued by some other courts / authority including this court shall remain in force till 30.04.2020 subject to liberty to parties to move for vacation of interim orders only in extreme urgent cases. Thus, all interim orders passed by this High Court at Mumbai, Aurangabad, Nagpur and Panaji as also all courts / Tribunal and authorities subordinate over which it has power of superintendence expiring before 30.04.2020, shall continue to operate till then. It is clarified that such interim orders which are not granted for limited duration and therefore, are to operate till further orders, shall remain unaffected by this order (WP 2 OF 2020 Dt. 26/3/2020)

    Court on its own Motion (FB)(Bom.)(HC ) www.itatonline.org

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