On Direct Taxes

1. S. 54B: Capital Gain – land used for an agricultural purpose – in the name of wife, an exemption not allowed to Assessee.

The appellant had sold jointly owned his land and for his 1/4th share, he purchased another land in his wife’s name and claimed exemption under section 54B of the Act. The authorities following the decision of the CIT v. Dinesh Verma (2015) 233 Taxman 409 (P&H)(HC) denied the exemption to the appellant. The Appellant before the High Court contended that, in the decision of CIT v. Gurnam Singh (2010) 327 ITR 278 (P&H)(HC) held that the purchased land was being used by the assessee only for agricultural purposes, merely because in the sale deed his only son was also shown as co-owner, the assessee could be denied deduction under section 54B., the said decision is not considered while deciding the issue. The honourable High Court held that, in the present case after selling the agricultural land the appellant purchased a land his share, in the name of his wife. The said issue is directly covered by the decision of Dinesh Verma’s (supra). The reliance of Gurnam Singh’s (supra) will not enhance the case of the appellant as the property in that case was purchased in the joint name of the assessee and his only son, which is not the case in front of. Hence, the High Court denied the benefit to the assessee u/s.54B. Bahadur Singh v. CIT (2023) 154 taxmann.com 456 (P&H) (HC)

The Assessee filed an SLP, and the Honourable Supreme Court dismissed the same stating that the purchase of agricultural land in the name of his wife would not allow section 54B relief to Assessee.

Bahadur Singh v. CIT (2023) 154 taxmann.com 457 (SC)

2. S. 80-IB: Deductions – Profits and gains from industrial undertakings other than infrastructure development undertakings (Housing Project) – Approved plan of Municipal Authority, were having built-up area of less than 1000 sq.ft. and completion certificate was issued by the competent authority, issued only if construction was in accordance with sanctioned plans; the benefit of deduction cannot be denied to the Assessee.

The assessee has developed a residential project at Andheri in Mumbai. It claims deduction in terms of s. 80-IB(10) of the Act, the same was refused by the Assessing Officer on the ground that some of the flats constructed in Tower ‘A’ of its housing project had exceeded the area of 1000 sq. ft. as envisaged under the aforesaid section. This conclusion was arrived at by the Assessing Officer based on the survey report, which survey was conducted in the year 2011. The project is a residential project, which was initiated in the year 2002 and was completed in the year 2008. The completion certificate was obtained in the year 2008. On the basis of the survey report, the Assessing Officer denied the benefit of a 100% deduction on the profits derived from such a residential project to the Assessee. The CIT(A) affirms the view of the Assessing Officer. The Tribunal dismissed the view expressed by the CIT (Appeals). The revenue filed an appeal before the High Court, and the Honourable High Court held that, a completion certificate issued by the competent authority, which could not have been issued if there was any violation of approved plans by municipal authorities and therefore, benefit of deduction u/s. 80-IB(10) could not be denied. Pr. CIT v. Vardhan Builders (2023) 456 ITR 310 (Bombay)(HC)

The revenue filed an SLP, but the Honourable Supreme Court dismissed the same, as approved plans of BMC all flats in the building had a built-up area of less than 1000 sq. ft., and as per the possession certificate issued to buyers of flats, buyers had been given possession separately for each of individual flats, no evidence on record to indicate that assessee had combined two or more flats. The benefit of deduction u/s. 80-IB (10) could not be denied.

Pr. CIT v. Vardhan Builders (2023) 155 taxmann. com 391 (SC)

3. S.153C: Search and seizure – in the absence of any plausible explanation as to delay, in the face of statutory remedy of objection available to the assessee, not a fit case to offer any interference in the exercise of extraordinary jurisdiction under article 226 of the Constitution of India.

The Assessee by filing a writ petition challenged the notice issued by the Assessing Officer u/s. 153C by contending that they were not subjected to any search proceeding u/s. 132. The search was conducted in the case of the Saloni Group, of which the assessee was not a part. However, certain loose papers from the search were marked to and received by the Assessing Officer. The assessee before the Court argued that s. 153C(3) applied, and the relevant date should be the date of receipt of the documents by their Assessing Officer. The assessee contended that such loose papers could not be the basis for initiating proceedings u/s. 153C. The department stated that s. 153C(3) did not apply to the assessee since it applied to the person searched, which was the Saloni Group in this case. The assessee could raise this plea before the Assessing Authority. It further contended that the loose documents were claimed to constitute material indicating concealed income and could be considered during the proceedings u/s.153C (3). The Honourable High Court held that, the show-cause notice issued to the assessee, one year has already passed where after the present petition came to be filed. Further in the absence of any plausible explanation as to delay and also in the face of statutory remedy of objection available to the assessee, which objection has also been filed, it is not a fit case to offer any interference in the exercise of extraordinary jurisdiction of this Court under article 226 of the Constitution of India. Rajendra Kumar Sharma v. ITO (2023) 155 taxmann.com 232 (Allahabad)(HC)

The Assessee filed an SLP, the Honourable Supreme Court dismissed the same, having regard to observations made by High Court reserving liberty to Assessee to take all objections before the concerned statutory authority, and there was no reason to interfere with judgment and order impugned in these petitions.

Rajendra Kumar Sharma v. ITO (2023) 155 taxmann.com 233 (SC)

4. S. 220: Collection and recovery of tax – stay application hearing cannot be expedited, if the 20 percent of the amount demanded has neither been deposited nor any request to grant time to deposit.

According to C.B.D.T. Circular dated 31-7-2017 the amount of 20% of the demand has to be deposited. Then stay application can be heard on merits. Admittedly the petitioner has not deposited the amount of Rs. 20% under the C.B.D.T. Circular. The Honourable High Court held that, the admitted position that 20% of the amount deposited has neither been deposited nor any request to grant time to deposit the same is being made. Hence hearing was not expedite on stay application. Allahabad Devt. Autho v. CIT (Exemption) (2023) 155 taxmann.com 609 (Allahabad)(HC)

The Assessee filed an SLP, and prayed that appeal which was pending before the Commissioner may be expedited. The Honourable Supreme Court dismissed the same by stating that, according to the CBDT Circular amount of 20 percent of demand had to be deposited for the stay application to be heard on merits, as the assessee had not deposited the amount, that 20 percent of amount demanded had neither been deposited nor any request to grant time to deposit same was made, hence hearing on stay application could not been expedited.

Allahabad Development Authority v. CIT (Exemption) (2023) 155 taxmann.com 610 (SC)

5. S. 241A: Refund – Power to withhold, in certain cases (Conditions precedent) – mere issuance of notice u/s. 143(2) claiming an extended period for processing refund u/s. 143(1), would not be sufficient to withhold a refund.

The assessee filed the return of income declaring a total loss. The assessee had deposited sizeable tax primarily through suffering TDS at the hands of the payees. In the return, the assessee, therefore, claimed a refund. The Assessing Officer did not pass any order u/s. 143(1). However, a notice u/s. 143(2) was issued. The assessment was pending before the Assessing Officer. The assessee was facing extreme financial hardship. On one hand, it suffered a deduction of tax at source at the hands of the payees though due to the fact that it was making losses, there was no tax liability of the assessee and on the other hand, while making payments, it was required to deduct tax as per the statutory provisions and deposit the same with the Government. The Assessee traveled up to the CIT, but he did not respond. Hence, the Assessee filed a writ petition before the High Court. The High Court held that, once the time limit envisaged in the proviso to sub-section (1) of section 143 is over without the Assessing Officer processing return under sub-section (1), even though notice under sub-section (2) of section 143 may have been issued, Assessing Officer, by all reasonable interpretation of statutory provisions, would be expected to respond to assessee’s request for either granting a refund or indicating that in terms of adjustments impermissible under sub-section (1) of section 143, such refund or part thereof would not be available to assessee. Corrtech International (P.) Ltd. v. Dy. CIT (2018) 401 ITR 355 (Gujarat)(HC)

The Revenue filed an SLP, and the Honourable Supreme Court dismissed as infructuous by stating that, the mere issuance of notice under section 143(2) claiming an extended period for processing refund under section 143(1), would not be sufficient to withhold the refund.

Dy. CIT v. Corrtech International (P.) Ltd. (2023) 155 taxmann.com 600 (SC)