1. S. 2(1A) : Agricultural income – Income derived from sale of saplings and seedling grown in a nursery alone shall deemed to be agricultural income – subsequent operation, i.e., supply of fertilizer, supply of soil, engaging horticulturists, insuring the plant, making pits and other related activities carried out in assessee’s nursery but in client’s site cannot be termed as secondary operation and hence not agricultural income. [S. 10(1)]

    The Tribunal observed that the primary operation done in assessee’s nursery confine only with regard to growing of plants and saplings. The subsequent operation, i.e., supply of fertilizer, supply of soil, engaging Horticulturists, insuring the plant, making pits and other related activities even assuming it is secondary operation was never carried out in assessee’s nursery but in client’s site. Plants and saplings are planted in the client’s site and became the property of the client. Thereafter the assessee’s role is only to tend these plants and saplings. The services so performed are in the nature of maintenance and cannot be termed as secondary operation in the strict sense of the term. The Tribunal held that income derived by the assessee by activities other than sale of plants raised in its own nursery is not in the nature of agricultural income falling within the definition of section 2(1A) of the I.T. Act. (AY. 2016-17)

    Jayanti Botanical Gardens v. ITO (2021) 61 CCH 342/ 211 TTJ 15 (UO) (SMC) (Bang) (Trib.)

  2. S. 9(1)(i): Income deemed to accrue or arise in India – Business connection – If an Indian agent has been paid an arm’s length remuneration, nothing further could be taxed in hands of Assessee – DTAA- India – Mauritius [Art, 5(4)]

    The Assessee being a foreign telecasting company incorporated in Mauritius sold advertising time and collected subscription revenues through its Indian affiliates Zee Telefilms and El Zee. It is the claim of the Assessee that it did not have any permanent establishment in India, and so, no part of its income was taxable in India. Further on without prejudice basis the Assessee contended that if that Assessee was held to have a dependent agent permanent establishment, no further profits could be attributed in the hands of the Assessee as the agent had been paid arm’s length remuneration services rendered. Upon appeal by the revenue, the Hon’ble Tribunal observed that the case of the revenue is clearly confined to the existence of DAPE on the facts of this case. The existence of dependent agency permanent establishment is wholly tax-neutral, unless it is shown that the agent has not been paid an arm’s length remuneration, and when it is not the case of the AO, that the agents have not been paid an arm’s length remuneration, the question regarding the existence of dependent agency permanent establishment, i.e., under article 5(4), is a wholly academic question. (AY. 02-03,04-05,05-06)

    ADIT v. Asia Today Ltd (2021) 210 TTJ 8 (Mum) (Trib.)

  3. S. 10B: Export oriented undertakings – Production and Export of pasteurized crab meat – procurement of non-living dead crab and then process into chemical mixed pasteurized crab meat in a series of manufacturing process – Fall under the new definition of manufacture -Deduction allowable [S. 2(29BA)]

    The AO disallow deduction claimed u/s.10B stating that, the activities carried out by the assessee for production and export of pasteurized crab meat is not a manufacturing activity because the term ‘manufacture’ has been defined by insertion of new definition by the Finance Act, 2009 u/s.2(29BA) of the Act. Tribunal held that, the assessee is a newly established 100% export oriented undertaking, set-up a new manufacturing facility at Madras Export Processing Zone. The EOU set up by the assessee for manufacture and export of pasteurized crab meat was approved by the Development Commissioner, Govt. of India as a 100% export oriented unit for manufacture and export of goods or things. The assessee is also registered under the Central Excise Act, 1944 as a manufacturer and the goods manufactured by the assessee are treated as distinct commodities under Customs and GST laws. Activities carried out by the assessee as a manufacturing or production of goods or article or thing, which qualifies for deduction u/s.10B and there is no change in activities carried out by the assessee in the year 2004-05 when the deduction was first allowed and in the year 2009-10 when the deduction was rejected by the AO by virtue of new word ‘manufacture’ inserted under clause 2.(29BA) of section 2 of the Act. As per activities undertaken by the assessee, said activity was considered as manufacture or production for the purpose of deduction u/s.10B of the Act. There is no change in physical activities carried out by the assessee. The purpose of S.10B is to give effect to EXIM policy. Therefore, the statute has provided deduction all units established as 100% EOU as per EXIM Policy u/s 10B of the IT Act. (AY. 2010 – 2011)

    Handy Waterbase India Pvt. Ltd. v. Dy. CIT (2021) 211 TTJ 950 (Chennai)(Trib.)

  4. S. 11: Property held for charitable purposes- Amount spent on construction of buildings for its medical college would be treated as application of income for objects of trust and, hence, would qualify for exemption under section 11- factum of incurring such expenses by way of cash alone could not be a ground to hold that those expenses were related to non-specified purpose- Denial of exemption was held to be not justified – No violation. Section. 13 of the Act [S. 2(15), 12A, 13 69C, 132(4)]

    The assessee is a charitable trust registered under Section 12A of the Act. A search was carried out at the premises of the assessee on 18th July, 2013. It was held that:

    1. Amounts paid to contractors in cash or for other non-specified purposes cannot be added as unexplained expenditure under Section 69C of the Act simply because they have been paid in cash, and without any material to sustain the addition and merely if the assessee has not produced evidence in addition to the books of account, if the assessee has accounted for the expenditure in its books of account, and the same has been audited as genuine and the Assessing Officer has not rejected the books of account, the addition is to be deleted. Even if the expenditure is deemed to be for non-specified purposes, the assessee must have the benefit of the Explanation to Sections 11(1) and 11(2) of the Act.

    2. Information found during the course of search pertaining to amounts given as unsecured loans cannot be added to the income of the assessee since the CIT(A) has given a clear finding that the amounts do not belong to the assessee. Also, the matter was remanded to the Assessing Officer for the limited purpose of verifying the bank statement showing payments of the amounts not from the assessee but from an account of a third party viz. Hotel Solitaire.

    3. Amounts withdrawn by the assessee from the bank and alleged to have been made to three parties cannot form the basis of addition since additions cannot be made on surmises and conjectures. The amounts were recorded in the books of account and there was nothing to show that payments had been made to the three parties mentioned. Also, the break-up of payments were not provided the Assessing Officer. The Assessing Officer ought to have made an enquiry pursuant to the books of account but none was made and hence the addition is deleted.

    4. Amounts received as development fee over and above that prescribed by the government cannot be termed as capitation fee is the Assessing Officer has no material to show that the amounts received were not in the nature of voluntary donations. Reliance placed on statements of persons that the assessee collected capitation fee cannot be accepted since no opportunity of cross examination was provided to the assessee. Also, there was no evidence to show that payments were made de hors the books of account. Hence, the additions on account of capitation fee are to be deleted and exemption under Section 11 to be given.

    5. A statement made during course of search under Section 132(4) of the Act cannot form basis of addition even if the same is not retracted since neither the assessee nor the AO could justify the addition and in fact the assessee has produced evidence through books of account that the payment was made towards construction. It is the duty of the Assessing Officer to prove the same with corroborative documentary evidence and failure to do so would warrant deletion of addition. Also, the assessee had made the statement under a wrong notion of law and to buy peace with the department . (AY. 2010-2011,2011-20122012-2013 2013-2014, 2014-2015)

    Sri Srinivasa Educational & Charitable Trust v. ACIT (2021) 211 TTJ 663 / 182 ITD 554/ 204 DTR 265 (Bang) (Trib.)

  5. S. 32 : Depreciation -Biometric system’ is a ‘Computer’ and depreciation is to be allowed @60%

    The Hon’ble Tribunal held that, if the biometric system is detached from the computer, the same does not serve the purpose for which it is intended. Therefore, held that biometric system is a computer and the depreciation required to be allowed is at higher rate. (AY. 13-14)

    Instrument Technologies v. ACIT (2021) 209 TTJ 675 (Vishakha) (Trib.)

  6. S. 32 :Depreciation -Goodwill – Capitalized goodwill on account of excess consideration – Commercial rights – Eligible depreciation. [S. 32 (1)(ii)]

    The Hon’ble Tribunal relying on the SC decision of CIT v. Smifs Securities Ltd. (2012) 348 ITR 302 (SC) and Hyderabad Tribunal in case of M/s SKS Micro Finance Ltd held that depreciation could not be denied to the Assessee merely because the assets were classified as ‘goodwill’ in the books of account without appreciating the true nature of the assets if they can fall under the scope of ‘any other business or commercial rights of similar nature’. It was further held that the specified intangible assets acquired under slump sale agreement were in the nature of “business or commercial rights of similar nature” specified in section 32(1)(ii) of the Act and were accordingly eligible for depreciation under that section. (AY. 2015-16)

    JX Nippon Two lubricant India Pvt Ltd v. DCIT (2021) 210 TTJ 722 /202 DTR 59 (Delhi)(Trib)

  7. S. 32 : Depreciation – Westland Helicopters – Block of asset User of asset – The concept of user of assets has to apply upon block of asset as a whole instead individual assets – Denial of depreciation is held to be not valid . [ S. 2(11) ]

    Held that when a particular asset is part of block of assets even when that particular asset is not used in the relevant assessment year, the depreciation is allowable. Followed Sony India (P) Ltd v. CIT ( 2017) 88 taxmann.com 580 ( Delhi)( HC),CIT v. Oswal Agro Mills Ltd (2011 ) 341 ITR 467 ( Delhi)( HC) ( AY. 1995 -96)

    Pawan Hans Helicopters Ltd. v. DCIT (2021) 212 TTJ 1010 / 204 DTR 347 / (2022) 192 ITD 142 (Delhi) ( Trib)

  8. S. 36(1)(va) : Any sum received from employees – Where assessee deposited employee’s contribution to ESI after the due date under the respective Act but before the due date of filing the return of income under the Act, the same would not warrant any disallowance.[ S. 2(24)(x), 139(1)]

    During the year, the assessee deposited employee’s contribution to ESI amounting to Rs. 5,540 after the due date under the respective Act but before the due date of filing the return of income under the Act. The AO disallowed the same and the Ld. CIT(A), on further appeal, remanded the issue back to the AO to verify the claim and allow the same in case the payment was made before the due date of filing the return of income for the year. On appeal by the Department, the action of the Ld. CIT(A) was confirmed by the Hon’ble Tribunal. (AY. 2015-16)

    DCIT v. Saileela Synthetics Pvt. Ltd. (2021) 199 DTR 201/ 210 TTJ 763 (Jodhpur) (Trib)

  9. S. 37(1):Business expenditure – The expenditure necessary to maintain Assessee’s corporate personality would be an allowable expenditure even when no business was undertaken.

    Tribunal held that the expenditure which was quite necessary to maintain Assessee’s corporate personality would be an allowable expenditure since without incurring the same, the Assessee could not have remained into existence. Therefore, directed the learned AO to identify such expenditure and allow the same to that extent. (AY. 08-09 to 14-15)

    Sir Pratap Heritage Hotels (P) Ltd v. ACIT (2021) 209 TTJ 1 (UO) (Jodhpur) (Trib.)

  10. S. 40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – Disallowance section is not warranted where the payee furnishes the return of income taking into account the sum(s) received from the payer, tax due on the return income has been paid and certificate of a Chartered Accountant to that effect has been furnished.[ S. 194C]

    Tribunal held that Pfizer Ltd. had taken into account the sum received from the assessee and has appropriately discharged it tax liability on its returned income. Further, it had also furnished a certificate from a Chartered Account to this effect. Accordingly, the Hon’ble Tribunal following the order of Assessee’s own case for AY 2009-10 and deleted the disallowance made by the AO by holding that the disallowance section 40(a)(ia) is not warranted in view of the second proviso read with the first proviso to section 201(1) inserted vide Finance Act, 2012 and which has been held to be retrospective by the Hon’ble Delhi High Court in CIT v. Ansal Land Mark Township (P.) Ltd ,ITA No. 160/ 2015 dt. 26 -8 -2015 . (AY. 2006-07)

    DCIT v. Pfizer Products (India) Pvt. Ltd. (2021) 198 DTR 273 / 210 TTJ 908 (Mum) (Trib)

  11. S. 43B : Certain deductions only on actual payment – Interest payable to Government of India is crystalized based on facts, even though not accounted in books due to comments of statutory auditor, and hence is allowed as expense on accrual basis even not accounted for in books.[S. 145]

    The Tribunal held that the liability to pay the interest amount payable to the Government of India is crystalized as evident from the waiver request of Aviation Ministry has been rejected by the Ministry of Finance and hence the deduction for the same cannot be disallowed on the grounds that it has not been accounted in the books of accounts when the same interest expenditure is allowed in the previous years. (AY. 1990-91)

    Pawan Hans Helicopters Ltd. v. DCIT (2021) 212 TTJ 1010/ 204 DTR 347/ (2022) 192 ITD 142 (Delhi) (Trib.)

  12. S. 45 : Capital gains – Amalgamation – sale of shares prior to transfer of business by way of slump sale and amalgamation – scheme of amalgamation approved by High Court and shareholders – allegation of scheme of amalgamation as an afterthought without any basis – capital gains already offered for tax by the amalgamating company – same cannot be taxed again in the hands of amalgamated company.

    In this case the Tribunal held that scheme of amalgamation was duly approved by two High Courts and shareholders, creditors and bankers of both the companies, Registrar of Companies, etc. at two places, after giving due notice by publication in newspapers and, therefore, it could not be said that the scheme of amalgamation was a colourable device and an afterthought. Therefore, consideration received on sale of share of another company by the amalgamating company prior to the scheme of amalgamation can be taxed in hands of amalgamating company only. (AY. 2003-04 to 2005-06).

    ACIT v. Investment trust of India Ltd. (2021) 211 TTJ 777 (Chennai) (Trib)

  13. S. 56: Income from other sources – Money kept in capital reserve account was invested in shares – Entire transactions were only in capital field no incidence of tax.[S. 2(47, 45(3) , 45(4), 56(2)(viia), 186]

    The Assessee was a partnership firm belonging to Shriram Group and held 100% shares in a group company Novus. Piramal Enterprises Ltd decided to acquire 20% stake in group company Shriram Capital Ltd (‘SCL’). However, since SCL could not allot shares to outsider directly due to restrictions from private equity investors, it decided to do so by joining assessee as a partner and infusing capital which was partly kept in capital reserve. The said money was utilized to make investment in the shares of Novus who inturn invested in shares of SCL and later got merged with SCL. As a result, SCL allotted shares to assessee.

    The AO held that Shriram group as a whole should have paid tax on the consideration received and the entire transaction was devised in order to avoid the tax liability and the same should be taxable under section 56(1) or section 56(2)(viia) of the Act.

    On assesses appeal the Ld. CIT(A) deleted the addition by holding that the capital reserves are created from capital receipts meant for capital investments and/or large anticipated expenses. As there was no income, section 56(1) is not applicable. The process adopted in assesses case was strategic and systematic investment by one industrial group in another group to synergise their mutual strengths and no colourable devise/tax planning was done.

    The Hon’ble Tribunal held that assessee firm even though had acted as an intermediate entity, it could not be construed as a conduit between the group companies and the whole transactions were to be understood in a holistic manner and could not be construed as a colorable device or a sham transaction. Accordingly, Hon’ble Tribunal held that the transaction was capital in nature and no addition under section 56(1) can be made. Further, since it is not the case of the AO that the money received is without any consideration or inadequate consideration, addition under section 56(2)(viia) could not be made. (AY. 2014 -15, 2015 -16)

    ITO v. Shrilekha Business Consultancy Pvt. Ltd (2021) 210 TTJ 34 / 202 DTR 361 (Hyd)(Trib)

  14. S. 56: Income from other sources – Not applicable where the sum has been received from non -resident -Addition was deleted. [S. 56(2)(viib), 68, Companies Act, 2013, S. 102]

    The Hon’ble Tribunal held that looking at the provisions u/s. 56 (2) (viib), it clearly applies to the resident and not to a sum received from a non-resident. Further looking at the various evidence produced by the Assessee, evidence obtained by the learned AO in terms of article 26 of the DTAA, the Tribunal held to not have found an iota of doubt about the creditworthiness and genuineness of the about transaction of allotment of compulsorily convertible redeemable shares resulting into allotment of shares from K start LLC of Mauritius. (AY. 16-17)

    Usekiwi Infolabs (P.) Limited v. ITO (2021) 209 TTJ 59/ 197 DTR 66 (Delhi) (Trib.)

  15. S. 56 : Income from other source – When the Assessee has adopted DCF method, one of the methods prescribed by the Act to determine fair value, then the AO cannot discard the same and adopt other method- The matter was restored back to the file of AO for afresh decision. [S. 56 (2)(vii)(b), R. 11UA]

    The Hon’ble Tribunal held that the AO could scrutinize the valuation report and if the AO is not satisfied with the explanation of the Assessee, he has to record the reasons and basis for not accepting the valuation report submitted by the Assessee and only thereafter, he can go for own valuation or to obtain the fresh valuation report from an independent valuer and confront the same to the Assessee. But the basis has to be DCF method, and he cannot change the method of valuation which has been opted by the Assessee. For scrutinizing the valuation report, the facts, and data available on the date of valuation only has to be considered and actual result of future cannot be a basis to decide about reliability of the projections. The primary onus to prove the correctness of the valuation Report is on the Assessee as he has special knowledge, and he is privy to the facts of the company and only he has opted for this method. The matter is thus restored back to the file of the AO for a fresh decision with directions as above stated. (AY. 2014-15 )

    TSI Yatra (P.) Ltd v. ACIT (2021) 209 TTJ 596 (Delhi)(Trib.)

  16. S. 68 : Cash Credit – Addition not sustainable when the assessee has discharged its onus by filing necessary documentary evidences to prove genuineness of the transaction – no evidence brought on by AO to prove that the assessee has introduced its undisclosed income in the form of share application money.

    Assessee was asked to prove the genuineness and creditworthiness of the share applicants for which its inter-alia submitted complete details of share allotment including PAN of the applicants and relevant financial statements. However, the AO observed that some of the share applicants shared the same address while opining that neither of the share applicants carried out significant business activities and their profits as well as reserves were low. Further, notices under section 133(6) of the Act were issued to confirm the transaction but they did not elicit any satisfactory response. Even when the assessee filed affidavits of all share applicants and their latest communication address, the AO still made additions under section 68 of the Act. The Hon’ble Tribunal, ongoing through the facts and relying on the decision of the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. (216 CTR 195), concluded that the assessee had sufficiently proved the identity, genuineness, and creditworthiness of the share applicants while the Revenue failed to bring on record any evidence indicate malice on part of the assessee. The Hon’ble Tribunal, therefore, quashed the addition made under section 68 of the Act. (AY. 2015-16)

    DCIT v. M/s. Saileela Synthetics Pvt. Ltd. (2021) 199 DTR 0201(Jd) / (2021) 210 TTJ 0763 (Jd)

    Editorial: Due to divergence in approach adopted by coordinate benches, the Hon’ble Mumbai Tribunal in the case of Lotus Logistics & Developers Ltd (ITA Nos. 4057/Mum/2019) has proposed to constitute and refer the matter to the larger bench to adjudicate on the validity of the addition of share premium under section 68 of the Act where the identity, genuineness and creditworthiness of the party and the transaction has been established by the Assessee.

  17. S. 72: Carry forward and set off of business losses – Set off of loss returned by Assessee in subsequent assessment years could not be declined only for the reason that assessment for assessment year in which the losses arose, was in progress and pending. [S. 240]

    The Hon’ble Tribunal held that bearing in mind entirety of the case, the plea of the Assessee is upheld so far as set-off of loss returned by the Assessee cannot be declined by the AO in subsequent assessment years, only for the reason that the assessment for the assessment year 2014-15 is in progress. The AO is to be directed to allow, for the time being, the claim for set-off of loss brought forward, in the light of the above observations. The above direction, however, should not be construed as a direction for the grant of refund, if any is found admissible as a result of income computed as above, for the simple reason that a call will have to be taken by the AO as to whether, in the light of the discussions above, refund of taxes is permissible in such a situation in the light of first proviso to section 240. (AY. 16-17)

    Shelf Drilling Ron Tappmeyer Ltd. v. DCIT (2021) 209 TTJ 587/ 197 DTR 265 (Mum) (Trib.)

  18. S. 73 : Losses in speculation business – Share broker – Purchase and sale of shares – Loss incurred from error trades – Not speculative – Allowable as business loss [S. 28(i)]

    Hon’ble Tribunal held that assessee had carried out the transactions of purchase and sale of shares on account of a business exigency and not with an intention to earn profit, therefore, the same would not come within the purview of “Explanation” to section 73 of the Act. The loss on account of transaction in shares cannot be held to be speculation loss hence deleted the disallowance. (AY. 2003-04)

    CLSA India Private Limited v. ACIT (2021) 210 TTJ 484 (Mum) (Trib.)

  19. S. 92B : Transfer pricing – The term international transaction includes capital financing, which, in turn, also includes guarantee – effects of furnishing corporate guarantee directly percolated to the principal debtor, namely, AE for whom the assessee stood surety – thus, the department contention that the act of furnishing guarantee be treated as shareholder’s activity, is devoid of any merit. [S. 92C, 92CA]

    In the present case, the Appellate Tribunal held that on going through the ambit of “shareholder activity” as given in the OECD Guidelines on a general perspective, it becomes imminent that such activities are certain acts performed by a company solely because of its shareholding in other group companies, which is obviously not the case here. Au contraire, the effect of furnishing corporate guarantee directly percolated to the principal debtor, namely, the AEs for whom the assessee stood surety. Thus, the ground urging that the act of furnishing guarantee be treated as shareholder’s activity, is devoid of merits. Moreover, now with the statutory amendment specifically treating ‘guarantee’ as an international transaction, there remains no doubt whatsoever that the furnishing of corporate guarantee by an assessee is an international transaction. This ground is thus dismissed. (AY. 2014-15)

    Bilcare Ltd. v. ACIT (2021) 211 TTJ 429/ 207 DTR 257 (Pune) (Trib.)

  20. S. 92C: Transfer pricing – Arm’s length price – Depreciation adjustment can be allowed for computation of operating profit, only if there is variance in the depreciation rates applied with the comparable.[S. 32]

    The Tribunal held that, an adjustment in terms of sub-clause (iii) of rule 10B(1)(e) may be warranted when there is a difference in recording certain expenses on principle i.e., in the instant case, depreciation adjustment in the computation of Operating Profit can be allowed only when the rates at which the Assessee charged depreciation on fixed assets are at variance with rates at which the chosen comparables charged depreciation. It was for the verification of this, that the Tribunal had restored the matter earlier, and not to adjudicate the proposition already rejected. Further heeding to the plea of the Assessee for providing another opportunity to furnish this data, the Tribunal restored to the file of AO/TPO for deciding this issue afresh in the light of new calculation sheet(s). (AY. 07-08, 08-09)

    Vishay Components India (P.) Ltd v. ACIT (2021) 209 TTJ 664 / 198 DTR 102 (Pune) (Trib.)

  21. S. 92C : Transfer pricing – Arm’s length price – Transfer Pricing adjustment cannot extend to non-AE transactions and to that extent a proportionate adjustment is warranted.

    The Tribunal held that the transfer pricing adjustment cannot extend to non-AE transactions. The matter is remitted to the file of AO/TPO for restricting the transfer pricing adjustment only in respect of the AE transactions. (AY. 2015-16)

    Knorr Bremse Systems for Commercial Vehicles India (P.) Ltd v. DCIT (2021) 209 TTJ 1035 (Pune) (Trib.)

  22. S. 92C : Transfer pricing – Arms’ length price – safe harbour rules are optional for an eligible assessee – assessee has not exercised option for the safe harbour rules – entire set of rules from 10TA to 10TG cannot be operationalised. (ITR, 10B(1)€ & 10 TA)

    In this case the Appellate Tribunal held that if an assessee has not exercised option for the safe harbour rules, the entire set of rules from 10TA to 10TG cannot be operationalized in determining the Arm’s Length Price under the TNMM, or for that matter any other method under rule 10B, rule 10TA is not relevant. As such the TPO is not justified in applying the definition of ‘operating profit’ and ‘operating expense’ given under rule 10TA for the purposes of determining the Arm’s Length Price of the international transactions in the ‘manufacturing activity’ under the TNMM as enshrined in rule 10B((1)(e) of the Income Tax Rules, 1962. (AY.203-14)

    Dana India (P) Ltd v. DCIT (2021) 211 TTJ 271 (Pune) (Trib.)

  23. S. 115BB : Winning from lotteries – Irrespective of the head of the income, the winnings from lotteries shall be taxed at a special rate-The business loss incurred by the assesse after exclusion of prize money earned from the unsold lottery tickets is eligible for set off against such winnings from lotteries. [S. 2(24) (ix) 28(i), 56(2)(ib), 58(4), 71]

    The Tribunal held that the loss incurred by the area distributor from the unsold lottery tickets shall be eligible for set off against winnings from lotteries under Section 71 of the Act and the lottery winnings from lotteries shall be taxed under Section 115BB irrespective of the head to be taxed i.e., business income or income from other sources. (AY. 2014-15)

    Pooja Marketing v. PCIT (2021) 212 TTJ 306/ 204 DTR 1 (Mum) (Trib)

  24. S. 115BB : Winning from lotteries – Irrespective of the head of the income, the winnings from lotteries shall be taxed at a special rate-The business loss incurred by the assesse after exclusion of prize money earned from the unsold lottery tickets is eligible for set off against such winnings from lotteries.[S. 2(24) (ix) 28(i), 56(2)(ib), 58(4), 71]

    The Tribunal held that the loss incurred by the area distributor from the unsold lottery tickets shall be eligible for set off against winnings from lotteries under Section 71 of the Act and the lottery winnings from lotteries shall be taxed under Section 115BB irrespective of the head to be taxed i.e., business income or income from other sources. (AY. 2014-15)

    Pooja Marketing v. PCIT (2021) 212 TTJ 306/ 204 DTR 1 (Mum) (Trib)

  25. S. 147: Reassessment – After the expiry of four years – No allegation in the reasons recorded of any omission or failure on the part of the assessee in disclosing fully and truly all material facts necessary of assessment – Notice is void-ab-initio.[S. 148]

    It has been held by the appellate tribunal that the impugned notice is issued under section 148 of the Act after the expiry of four years from the end of the relevant assessment year and the AO nowhere stated in the reasons recorded that there was any omission or failure on the part of the assessee in disclosing fully and truly all material facts necessary for assessment under section 143(3) of the Act, impugned notice under section 148 as well as subsequent proceedings under section 147 of the Act is invalid. (AY. 2004-05)

    Bharti Cellular Ltd. v. DCIT (20221) 211 TTJ 760 (Delhi) (Trib.)

  26. S. 147: Reassessment- Initial year was AY 2010-11 wherein AO after detailed verification allowed the deduction – Subsequent year i.e. AY 2013-14 also deduction was allowed – Reopening is nothing but change of opinion and hence quashed. S.80IB(11C), 148]

    The Tribunal held that reopening of assessment was on the basis of information that was already available on record and no fresh information was received by the AO. Revisiting the same issue which was already considered in original assessment and taken the decision amounts to difference of opinion and on difference of opinion the reopening of assessment is not permissible. The Tribunal held that the reopening of assessment is bad in law and accordingly, quashed the notice issued u/s 148 and annul the assessment. (AY .2012-13)

    Ramya Hospitals v. ITO (2021) 62 CCH 29 / 211 TTJ 36 (UO)(Vishakha) (Trib.)

  27. S. 147: Reassessment – Value of sub-registrar on spot verification or value as returned by assessee to be taken into consideration. [S.50C, 148]

    The Assessing Officer must have some material and the material must be reliable before reopening the assessment. The valuation of the sub-registrar on spot verification showing an increase in the value of property for the purpose of addition under Section 50C of the Act is not supported by any revaluation order and no reference is made by the Director of Stamps to the sub-registrar and therefore no addition can be made.(AY. 2009-2010)

    Dhoot Stono Crafts Private Ltd. v. ACIT (2021) 212 TTJ 409 (Jaipur) (Trib.)

  28. S. 147: Reassessment – Reopening by issuing notice under Section 148 but no notice under Section 143(2)- Reassessment is bad in law. [S.143(2), 292BB]

    The reopening of an assessment cannot take place if only the notice under Section 148 of the Act is issued and no notice under Section 143(2) of the Act is issued prior to passing the reassessment order under Section 143 r.w.s 147 of the Act. The defect is not curable under Section 292BB of the Act.(AY. 2008-2009 )

    DCIT v. Board of Cricket Control in India (2021) 212 TTJ 937 (Mum) (Trib)

  29. S. 153A: Assessment – Search or requisition-No additions can be made in case of completed Assessments under search, without any incriminating evidence. [S. 132, 143(1), 143(3)]

    The Hon’ble Tribunal held that no assessment proceedings were pending against Assessee on the date of search, and it was not a case of abated assessment. Upon perusal of the assessment, it is evident that learned AO has not referred to any incriminating material against the Assessee and the additions made therein are also not based on any incriminating material. The business expenditure claimed that is sought to be disallowed was already claimed in the original return of income. Hence the additions are set aside. (AY. 08-09 to 14-15)

    Sir Pratap Heritage Hotels (P) Ltd v. ACIT (2021) 209 TTJ 1 (UO) (Jodhpur) (Trib)

  30. S. 153C : Assessment – Income of any other person – Search and seizure – loose paper in question was found from the possession of searched party – affidavit of searched person filed by the assessee to show that cash payment were made to landowners – deponent was not examined by the AO – No adverse inference can be drawn against the assessee.[S. 132]

    It has been held by the appellate tribunal that addition on account of on-money allegedly received by the assessee on sale of land could not be made in the assessment under s. 153C simply on the basis of some vague noting on a nondescript loose paper seized from the possession of the searched person (purchaser) and the statement of the said third party, without cross-examination, more so when the purchaser has filed an affidavit whereby he has affirmed on oath that the cash payments were not made to the assessee but to some old landowners/ Banakhat owners and others who were claiming ownership in the said land and the contents of the affidavit remain uncontroverted. (AY.2013-14)

    Kantibhai P. Patel v. DCIT (2021) 211 TTJ 187/ 208 DTR 54 (Ahd) (Trib)

  31. S. 154: Rectification of mistake apparent from record- No merger of order passed under Section 143(3) r.w.s 144C(1) with the reassessment order passed under section 147 if issues forming subject matter of assessment order not part of reassessment order which is quashed and assessment order can be rectified by AO with respect to those issues-Rectification cannot be made after CIT(A) has quashed assessment order [S. 115JB, 143(3)]

    If the addition was made under Section 115JB inadvertently, the same can be rectified under Section 154 by the AO and added under Section 143(3) instead of Section 115JB, the mistake being one apparent from the face of the record. It is settled law that there is no merger of the order of assessment with respect to issues not forming part of the reassessment order. Hence, the rectification of the assessment order to that extent is permissible .The rectification of the assessment order cannot be made after the appellate authority namely the Commissioner(Appeals) has quashed the assessment order in appeal. This would amount to acting contrary to the provisions of law and not rectifying but enhancing the assessment.(AY. 2009-2010)

    Intelenet Global Services (P) Ltd. v. ACIT (2021) 212 TTJ 182/ 202 DTR 169 (Mum) (Trib.)

  32. S. 195: Deduction of tax at source-Other sums- Tax at source(TAS) not liable to be deducted and no interest payable for failure to deduct TAS[S. 201(IA)]

    Where a transaction takes place between two foreign companies such that the shares of a third company being held by one the companies are purchased from that company and such that the third company is a parent of companies holding assets located in India, no deduction of tax at source ought to be made by the purchaser of the shares since the provision providing for deduction of tax was not in existence when the transaction took place making the deduction at source impossible. The transaction was effected on 11th July, 2008 and Explanation 2 to Section 195 was introduced w.r.e.f from 1st April, 1962 by the Finance Act, 2012. The deduction of tax at source was therefore held to be impossible. Consequentially no interest under Section 201(1A) is payable.(AY. 2009-2010)

    DCIT v. WNS Capital Investment Ltd (2021) 211 TTJ 641 (Mum) (Trib.)

  33. S. 240 : Refund –Refund due to the assessee as per the order passed by settlement commission – AO is bound to issue refund. [S. 199, 245C, 245D(4)]

    In this case the Hon’ble Appellate Tribunal held that order passed by the Income Tax Settlement Commission under S.245D(4) of the Act even de hors the filing of return under s. 139 is an order passed under ‘other proceedings un this A

    td (2021) 211 TTJ 907 (SMC) (Pune) (Trib.)

  34. S. 251 : Appeal – Commissioner (Appeals) – Powers – Additional evidence -Where the AO has not been provided adequate opportunity to go through the additional evidence, the admission and examination of the additional evidence by Ld. CIT(A) is completely inadequate. [S. 254(1), Rule 46A of Income-Tax Rules, 1962]

    During the year under consideration, the assessee issued shares at a premium by way of preferential and equity allotment which the AO held as unjustifiable due to the assessee’s negative earnings per share. Consequently, the AO made additions of the capital raised under section 68 of the Act. On appeal to the Ld. CIT(A), the assessee argued that it was not given a proper opportunity of being heard and submitted certain evidence which he could not before the AO. The Ld. CIT(A) accepted the additional evidence noting that the AO did not provide his comments despite the matter being remanded to him. The appellant proceedings were concluded with the Ld. CIT(A) deleted the additions relying on the additional evidence.

    On further appeal, the Hon’ble Tribunal observed that the AO was not provided with adequate time to provide his comments on the additional evidence. Further, the additional evidence provided to the AO for his comments consisted of bank statement along with the annual report and confirmation of the share subscribers but the Ld. CIT(A)’s order also mentioned of a share subscription agreement between the subscribers, the assessee company and its promoters being filed which was not provided to AO. This agreement was one of the basis of the Ld. CIT(A)’s favourable order and it was not provided to the AO for his comments. Accordingly, the Hon’ble Tribunal held that the admission of the share subscription agreement was in violation of Rule 46A of the Income-Tax Rules, 1962. The Hon’ble Tribunal further went on to hold that the rule of natural justice applies equally to Assessees and the Revenue and that the Ld. CIT(A) has committed an error by not affording the AO an opportunity of being heard and provide his comments. Finally, the Hon’ble Tribunal observed that the Ld. CIT(A) has neither effectively assessed the reasonability of the premium charged by the Assessee nor established the genuineness of the transaction. Accordingly, the matter was remanded back to AO for verification of the Assessee’s claim considering the additional evidence. ( (AY. 2009-10)

    DCIT v. Pipal Tree Ventures Pvt. Ltd. (2021) 210 TTJ 258 (Mum) (Trib.)

  35. S. 253 : Appellate Tribunal – Order of CIT(A) quashing the reassessment proceedings in the absence of valid sanction under section 151 not challenged before Appellate Tribunal – Appeal not maintainable on merits of the case. [S. 143(2), 147, 151, 253(2)]

    In this case the department did not challenge the order of the first appellate authority in quashing of reassessment proceedings in the absence of fresh tangible material and sanction under section 151 of the Act is invalid. Thus, the order of the Ld. CIT(A) on these questions becomes final and any result of department appeal cannot change the fate of departmental appeal. The revenue appeal would not be maintainable and is liable to be dismissed on this ground alone. (AY.2007-08 to 2010-11)

    ACIT v. SG Portfolio (P) Ltd (2021) 211 TTJ 970(Delhi)(Trib.)

  36. S. 254(1): Appeal to Appellate Tribunal-Powers – Request for adjournments of six months on account of COVID-19 pandemic was rejected – Lat opportunity was granted.

    Adjournments cannot be granted routinely but in view of the prevailing situation and the impact of COVID-19, a last chance/adjournment was granted to the Revenue. Adjournment of six months to be granted to the Revenue was rejected.(AY. 2014-2015)

    DCIT v. Saroj Kumar Poddar (2021) 212 TTJ 250 / 90 ITR 223 (Kol) (Trib.)

  37. S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – Order of the Tribunal, accepting the withdrawal of the appeals, passed on incorrect facts which were mistakenly represented and admitted by assessee’s counsel has resulted in an error in such Order and is liable for rectification [S. 263]

    The Tribunal held that the Order of the Tribunal having passed the Order accepting the request for withdrawal of appeals on the basis of mistaken representation made by the assessee’s counsel that the appeals did not survive under a wrong impression that the related assessment has been set aside by the CIT for de novo assessment in his order under Section 263, whereas the CIT had directed to examine specific issues, same has resulted in an error in the Order which is liable for rectification under Section 254(2) of the Act. Therefore, the Order of accepting the withdrawal has been recalled and the appeal needs to be adjudicated on merits. (AY. 2006-07 & 2008-09)

    Motia Construction Ltd. v. DCIT (2021) 212 TTJ 398 (Chd) (Trib.)

  38. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Depreciation – Lease hold rights- Revision is held to be valid [S. 32 (1)(ii)]

    The Hon’ble Tribunal held that in order to fall within the realm of ‘any other business or commercial rights of similar nature’ as contemplated in S. . 32(1)(ii) of the Act, and therein to be construed as an “intangible asset” eligible for depreciation under the said statutory provision, the ‘right’ under consideration would require to cumulatively satisfy a twofold test viz. (i). the right should be a business or commercial right; and (ii) the right though need not answer the description of the six specified intangible assets viz knowhow, patents, copyrights, trademarks, licenses, or franchises, but must be of a similar nature. The claim of the Assessee is thus rejected.. (AY. 12-13)

    Goldmohar Design and Apparel Park Ltd v . PCIT (2021) 209 TTJ 863 (Mum) (Trib.)

  39. S. 263 : Commissioner – Revision of orders prejudicial to revenue – Limited scrutiny -The Revisional jurisdiction u/s 263 cannot be exercised for broadening the scope of jurisdiction that was originally vested with the A.O for limited scrutiny while framing the assessment and enlarging his scope of limited enquiry.[S. 143(3), 147]

    Held that the PCIT cannot invoke the jurisdiction under section 263 when there is no adverse finding in the limited scrutiny and in the absence of following the instructions No. 5/ 2016 dated 14-07-2016 issued by the CBDT, revisional jurisdiction under section 263 cannot be exercised. ((AY. 2015-16)

    Mahendra Singh Dhankar HUF v. ACIT (2021) 212 TTJ 902 / 204 DTR 377 (Jaipur)(Trib.)

  40. S. 263: Revision of orders prejudicial to Revenue- Twin conditions to be satisfied-Assessment order cannot be said to be erroneous in law- Revision was quashed.[S. 54F]

    Where the assessee, an individual, sold one property and purchased two properties, the disallowance with respect to 50% of the investment by the Assessing Officer cannot be said to be an erroneous decision. There must be some material with the Commissioner to revise the assessment order. Also, if the Assessing Officer has made all enquiries it cannot be said that there has been a lack of enquiry. Also, the proviso to Section 54F is not violated- the date of purchase vide registered sale deed and consequent possession is to be taken into consideration which is well beyond the period of one year, and not the agreement of sale.(AY. 2015-16)

    Virendra Singh Bhadauriya v. PCIT (2021) 211 TTJ 452/ 204 DTR 400 (Jaipur) (Trib.)

  41. S. 271(1)(c): Penalty for furnishing inaccurate particulars of income-Assessee intimated Assessing Officer well in advance of inadvertence of including receipt-Assessing Officer did not specify in notice whether notice is issued for concealing income or furnishing inaccurate particulars. [S. 143(2)]

    The Assessing Officer must clearly specify whether he is imposing penalty proceedings for inaccurate particulars of income or concealment of income. Also, when the assessee wrote to the Assessing Officer well in advance before the Section 143(2) notice was issued that the interest income was inadvertently not included then the Assessing Officer cannot initiate penalty proceedings against the assessee. (AY. 2009-2010)

    FCI Asia Pte Ltd. v. DCIT (2021) 212 TTJ 9 (UO) (Delhi)(Trib)

Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

  1. S. (11): Asset located outside India – Beneficial interest – Notice issued to assessee and order passed making addition on account of amount received in bank account where assessee is allegedly beneficial owner – Assessee not liable to be taxed. [S. 5, 10(3) Companies Act, 2013, S. 89(10), 90 (1)]

    The assessee cannot be held to be beneficial owner of the amounts lying in the bank account merely because its name appears as beneficial owner in the account opening form along with passport for identification. In the absence of corroborative evidence addition under the Act cannot be sustained. The money does not belong to the assessee but the son of the assessee on account of voluminous evidence produced in that regard. (AY. 2016-2017)

    ACIT v. Jatinder Mehra (2021) 212 TTJ 681 (Delhi) (Trib.)

Wealth-tax Act, 1957.

  1. S. 2(ea) : Asset- Lack of evidence to support the land being vacant as of the cut-off date and evidence to the contrary, issue set aside to the file of AO for verification, whether the particular asset can be brought to tax under the Wealth Tax Act [S. 16(3)]

The Assessee held immovable asset, the value of which during the relevant AY 2008-09 was more than Rs. 15 lakhs. The Assessee had not filed return of wealth for the AY 2008-09. Therefore, the assessment has been reopened under s. 16(3) of the WT Act, 1957 (hereinafter ‘the Act’).

The AO noticed that the Assessee is the owner of an asset on which a residential house originally existed. In the relevant AY, the Assessee entered into a joint development agreement (hereinafter JDA) and as a consequence, the building was demolished, and the asset became a vacant land as on 31st March 2008 and 31st March 2009.

The Assessee contended that there was a building on the land as on the valuation date i.e., on 31st March 2008 and 31st March 2009 and only after the JDA, the building was demolished between April 2009 to March 2010. Therefore, there was a building on the land as on 31st March 2008 and 31st March 2009 and hence, land cannot be included in the definition of asset as defined under s. 2(ea) of the Act. Upon further appeal to the CWT(A), the CWT(A)upheld the findings of the AO.

The Hon’ble Tribunal after much scrutiny observed that, for the impugned AY 2007-08 and 2008-09, the land was not a vacant urban land and the existing building was demolished, is not supported by any evidence. It restored the matter to the AO for his verification on whether building is used for own residential purpose or business purpose or the same has been let out during the relevant previous year. Further also held that simply on the ground that there was a building in the impugned land, the same cannot be excluded from the ambit of wealth-tax, & that the AO needs to verify above facts before concluding whether a particular asset comes under the definition of asset as defined under S. 2(ea) of the Act or not. (AY. 08-09; 09-10)

Giridhari Govindas (HUF) v. ACIT (2021) 209 TTJ 953 (Chennai) (Trib.)

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