Sectionwise Digest 2016
Uploaded by
Swami GuruSectionwise Digest 2016
Uploaded by
Swami Guru2016
DIGEST OF CASE LAWS
DIRECT TAXES
Supreme Court
High Courts
Income-tax Appellate Tribunal
Authority for Advance Ruling
Allied Laws
Reference to CBDT Circulars and
Articles
(For Private Circulation)
Compiled by Research team
i
Disclaimer — The contents of this digest are solely for educational and informal purposes.
It does not constitute professional advice or formal documentation. While due care and
sincere efforts have been made in preparing this digest to avoid errors or omissions.
The existence of mistakes and omissions herein are not ruled out. Any mistake ,error or
discrepancy noted may be brought to the notice, which shall be considered in the next
digest. Neither the authors, publishers, nor itatonline.org and its affiliates accept any
liabilities for any loss or damage of any kind arising out of inaccurate or incomplete
information from this digest nor action can be taken in reliance thereon. It is requested
that, to avoid any doubt, the reader should cross check all the facts, law and contents of
the digest with original reports referred by the authors. No part of this digest should be
distributed or copied (Except for non-commercial use), without express written permission
of itatonlne.org. We also acknowledge that the digest is prepared on referring the following
Journals and magazines, we sincerely acknowledge their contribution. (ACCJ, BCAJ, CTC,
CTR, DTR, ITD, ITR, ITR (Trib.), TTJ, Taxman, itatonline.org, ctconline.org and taxmann.
com. Contribution by the authors to bring out this digest is only on honorary basis to help
the professionals to find out the case laws reported in various journals or magazines at
one stop.
All disputes are subject to Mumbai Jurisdiction.
Compiled by Research team of AIFTP Journal Committee and KSA LEGAL CHAMBERS
iii
ACKNOWLEDGEMENTS
Sincere thanks to the research team and the editorial team of the Journal Committee
of the All India Federation of Tax Practitioners (AIFTP), the editorial team of www.
itatonline.org and the research team of KSA Legal Chambers, staff members of the
AIFTP, ITAT Bar Association, Mumbai and KSA Legal Chambers.
Sincere thanks to the Editorial and Research team
of the AIFTP Journal Committee
Editorial Team
Adv. Aarti Vissanji
CA. H. N. Motiwalla
Adv. Keshav B. Bhujle
Adv. M. Subramanian
CA. Pradip Kapasi
Adv. Subhash S. Shetty
Research Team
Adv. Aditya Ajgaonkar
Adv. Arati Sathe
Adv. Ajay Singh
CA. Aliasger Rampurawala
Adv. Bharath Janarthanan
CA. Dhanesh Bafna
Adv. Dharan Gandhi
Adv .Gautam Thacker
Adv. Harsh Kothari
Adv. Hiten Chande
Adv. Jitendra Singh
Adv. Kalpesh Turalkar
CA. Ketan Ved
Adv. Neelam Jadhav
CA. Nikhil R. Tiwari
Adv. Paras S. Savla
Adv. Priyanka Jain
Adv. Prem Chandra Tripathi
Adv. Rahul Hakani
Adv. Rahul Sarda
Adv. Sashank Dundu
Adv. Viraj Mehta
iv
PREFACE
2016 – Digest of Case Laws on Direct Taxes
We are glad to present “2016 – Digest of case laws on direct taxes”. This year’s digest
is the fifth year of our private publication for the reference of professional colleagues
who regularly appear before High Courts, the Income Tax Appellate Tribunal and
Commissioners of Income-tax (Appeals).
In this publication, our research team has digested section-wise, --- cases which are
reported in the year 2016 in various reports, journals, magazines and online media.
The cases are digested in the descending order of relevance, i.e. Supreme Court,
High Courts, Income Tax Appellate Tribunal and Authority for Advance Ruling.
We have made an attempt to make editorial notes in some of the cases where the
judgment of Tribunal is affirmed or reversed by High Courts or where an SLP is
granted or rejected by the Supreme Court against the judgments of High Courts.
Important case laws on allied laws and interpretation of taxing statutes are also
digested. A separate chapter on reference to circulars and articles is also provided
which are arranged section wise and subject wise.
The index to case laws is prepared in alphabetical order. For instance, where the
Revenue is the petitioner/appellant, the index is shown as under:
Case Presented in index of case laws as;
CIT v. Miruri & Co. Ltd. Miruri & Co Ltd.; CIT v.
ITO v. Infinera India Ltd. Infinera India Ltd.; ITO v.
DCIT v. Suthanther Assumtha Suthanther Assumtha; DCIT v.
Jitendra Kumar Soneja v. ITO Jitendra Kumar Soneja v. ITO
This digest is for private circulation in print form with the objective of facilitating
quick reference for professional colleagues. The entire publication is hosted on
www.itatonline.org for the benefit of tax professionals and public at large. Those
who desire to refer to digest may download and store the same on their desktops/
laptops, mobiles and iPads.
While referring to the digest, if any error or mistake is noticed by readers, they
are requested to inform us by e-mail or in writing, which will enable us to take
v
Preface
corrective measure in our next publication. We hope this publication will serve as
a useful reference to busy professionals.
For Research and Editorial team,
Yours sincerely,
Dr. K. Shivaram
Senior Advocate
15th September, 2017
vi
ABBREVIATIONS
Journals, Reports, Magazines and online
Ahmedabad Chartered Accountants Journal – ACAJ
All India Federation of Tax Practitioners Journal – AIFTPJ
All India Tax Tribunal judgements – TTJ
All India Reporter – AIR
The Bombay Chartered Accountant Journal – BCAJ
Bombay Law Reporter – Bom.L.R.
The Chamber of Tax Consultants – The Chamber’s Journal
Company Cases – Comp-Cas
Current Tax Reporter – CTR
Direct Taxes Reporter – DTR
Excise Law Times – E.L.T.
Goods and Service Tax Reports – GSTR
Income-tax Tribunal Decisions – ITD
ITR’s Tribunal – Tax Reports – ITR (Trib.)
Income-tax Reports – ITR
Supreme Court Cases – SCC
Selected Orders of ITAT – SOT
Taxman – Taxman
VAT and Services Tax cases – VST
Online
www.bombayhighcourt.nic,in
www.ctconline.org
www.delhihighcourt.nic.in
www.itatonline.org
www.manupatra.com
www.taxlawsonline.com
www.taxmann.com
vii
Abbreviations
Abbreviations – Authorities
Additional Commissioners of Income-tax – Addl. CIT
Authority for Advance Rulings – AAR
Assistant Commissioner of Income-tax – ACIT
Assistant Directors of Income-tax – ADIT
Assessing Officer – AO
Appellate Tribunal – ITAT
Central Board of Direct Taxes – CBDT
Chief Commissioner of Income-tax – CCIT
Commissioner of Income-tax – CIT
Commissioner of Income-tax (Appeals) – CIT(A)
Deputy Commissioner of Income-tax – Dy. CIT
Director of Income-tax – DIT
Director General of Income-tax – DGI
High Court – HC
Income-tax Officer – ITO
Income-tax Settlement Commission – ITSC
Joint Commissioner of Income-tax – JCIT
Joint Directors of Income-tax – JDIT
Principal Chief Commissioner of Income Tax – PCIT
Principal Director General of Income Tax – PDGI
Supreme Court – SC
Tax Recovery Officer – TRO
Transfer Pricing Officer – TPO
Union of India – UOI
Courts
Supreme Court – (SC)
High Court – (HC)
Allahabad – (All.)
Andhra Pradesh – (T&AP)
viii
Abbreviations
Assam – (Guwahati)
Bombay – (Bom.)
Bombay – Aurangabad
Bombay – (Nagpur)
Bombay – (Panaji-Goa)
Calcutta – (Cal.)
Chhattisgarh – (Chhattisgarh)
Delhi – (Delhi)
Gauhati – (Gauhati)
Gujarat – (Guj.)
Himachal Pradesh – (HP)
Jammu & Kashmir – (J&K)
Jharkhand – (Jharkhand)
Karnataka – (Karn.)
Kerala – (Ker.)
Madhya Pradesh – (MP)
Madhya Pradesh (Gwalior) – (MP)
Madras – (Mad.)
Orissa – (Orissa)
Patna – (Patna)
Punjab & Haryana – (P&H)
Rajasthan – (Raj.)
Sikkim – (Sikkim)
Uttarakhand – (Uttarakhand)
Uttar Pradesh – (UP)
Tribunal Benches
Agra – (Agra)
Ahmedabad – (Ahd.)
Allahabad – (All.)
Amirtsar – (Asr.)
ix
Abbreviations
Bangalore – (Bang.)
Bilaspur – (Bilaspur)
Calcutta – (Kol.)
Chandigarh – (Chd.)
Chennai – (Chennai)
Cochin – (Cochin)
Cuttack – (Cuttack)
Delhi – (Delhi)
Guwahati – (Gau.)
Hyderabad – (Hyd.)
Indore – (Indore)
Jabalpur – (Jabalpur)
Jaipur – (Jp.)
Jodhpur – (Jodh.)
Lucknow – (Luck.)
Mumbai – (Mum.)
Nagpur – (Nag.)
Panaji – (Panaji)
Patna – (Patna)
Pune – (Pune)
Raipur – (Raipur)
Rajkot – (Rajkot)
Ranchi – (Ranchi)
Surat – (Srt)
Vishakhapatnam – (Vishakha)
x
Case Laws Index
Case Laws Index
Name Case Page
No. No.
A
A. I. Developer (P) Ltd.; ITO v. * (2016) 178 TTJ 332/46 ITR 321 (Delhi) 1167 361
(Trib.)
A. K. Capital Markets Ltd. v. Dy. CIT (2016) 156 ITD 528 (Delhi)(Trib.) 1252 389
A. P. Industrial Infrastructure Corporation Ltd.; Dy. CIT v. * (2016) 156 870 262
ITD 410 (Hyd.)(Trib.) 1319 412
A. P. Refinery P. Ltd. v. Addl. CIT (2016) 45 ITR 724 (Chd.)(Trib.) 1865 612
A. S. Precision Machines P. Ltd. v. CIT (2016) 388 ITR 440/(2017) 146 DTR 2328 784
161/293 CTR 340 (P&H)(HC)
Aakash Nidhi Builders & Developers; CIT v. * (Bom.)(HC) 1321 413
Aanchal Hotels (P) Ltd.; CIT v. * (2016) 138 DTR 169/287 CTR 233/241 1327 416
Taxman 108 (Uttarakhand)(HC)
Aavkar Infrastructure Company v. Dy. CIT (2016) 238 Taxman 644/136 1807 590
DTR 405/290 CTR 413 (Guj.)(HC)
ABB Lummus Heat Transfer BV; ADIT v. * (2016) 156 ITD 168/135 DTR 1494 473
233/177 TTJ 82 (Delhi)(Trib.)
Abbot India Limited v. ACIT (2016) 50 ITR 369 (Mum.)(Trib.) 380 130
Abc Classes PRS v. PCIT (2016) 387 ITR 119 (All.)(HC) 1766 573
Abdul Hameed Khan Mohammed; ITO v. * (2016) 156 ITD 778 (Chennai) 1080 331
(Trib.)
Aberdeen Asset Management Plc., In re (2016) 381 ITR 55/283 CTR 387/ 117 38
65 taxmann.com 246/131 DTR 1 (AAR)]
Aberdeen Claims Administration Inc., In re (2016) 381 ITR 55/283 CTR 117 38
387/65 taxmann.com 246/131 DTR 1 (AAR)]
Abha Gupta v. DCIT (2016) 385 ITR 452/240 Taxman 285/(2017) 146 DTR 1790 583
149 (Delhi)(HC)
Abhijit Subhash Gaikwad v. Dy. CIT (2015) 70 SOT 429/60 taxmann.com 1073 330
259 (Pune)(Trib.)
Abhinandan Investment Ltd.; CIT v. * (2016) 282 CTR 466 (Delhi)(HC) 978 297
Abhishek Estate P. Ltd. v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.) 2462 835
Abid Ali Khan v. ITO (2016) 389 ITR 82/144 DTR 372/(2017) 291 CTR 2178 732
312 (SC)
Aboobucker; ITO v. * (2016) 157 ITD 717/141 DTR 78/180 TTJ 510 12 4
(Chennai)(Trib.)
xi
Case Laws Index
Name Case Page
No. No.
Abu Dhabi Commercial Bank Limited v. ADIT (2016) 176 TTJ 115 (Mum.) 959 289
(Trib.)
Abu Dhabi Ship Building PJSC; DCIT v. * (2016) 159 ITD 438/ 138 DTR 2181 733
124/ 179 TTJ 537 (Mum.)(Trib.)
Accel Frontline Ltd. v. DCIT (2016) 46 ITR 138 (Chennai)(Trib.) 270 97
384 132
557 179
2368 800
Accordis Beheer B V v. DIT (IT) (2016) 157 ITD 373/176 TTJ 406/136 DTR 160 52
65 (Mum.)(Trib.)
Accura Bikes (P.) Ltd.; ACIT v. * (2016) 161 ITD 275/(2017) 146 DTR 222 1331 417
(SMC) (Ahd.)(Trib.)
ACE Manufacturing Systems Ltd. v. Addl. CIT (LTU) (2016) 380 ITR 1314 411
432/136 DTR 313/287 CTR 573 (Karn.)(HC)
Actis Global Services (P) Ltd. v. ITO (2016) 175 TTJ 506/141 DTR 40 1471 465
(Delhi)(Trib.)
Adani Enterprises Ltd.; PCIT v. * (2016) 241 Taxman 542/(2017) 152 DTR 354 123
102 (Guj.)(HC) 1380 435
Adani Welspun Exploration Ltd. v. ITO (IT) (2016) 48 ITR 533 (Ahd.) 181 61
(Trib.)
Aditya Medisales Ltd. v. Dy. CIT (2016) 242 Taxman 228 (Guj.)(HC) 1771 575
Admire Sign and Display P. Ltd. v. ITO (2016) 51 ITR 81 (Mum.)(Trib.) 602 190
Adobe Systems Incorporated v. ADIT (2016) 137 DTR 255/240 Taxman 1821 595
353/292 CTR 407 (HC)(Delhi)
ADP (P.) Ltd. v. Dy. CIT (2015) 70 SOT 716 (Hyd.)(Trib.) 1426 451
Advance Power Display Systems Ltd. v. CIT (2016) 382 ITR 607/237 688 213
Taxman 16/138 DTR 282/290 CTR 330 (Bom.)(HC) 1404 444
Advanta India Ltd. v. ACIT (2016) 137 DTR 233/179 TTJ 50 (Bang.)(Trib.) 1427 451
Advantage Strategic Consulting P. Ltd. v. UOI (2016) 389 ITR 87 (Mad.) 1595 515
(HC)
Advocates Welfare Fund of Bar Council of Tamil Nadu v. DIT (2016) 160 340 118
ITD 66/50 ITR 209/ 182 TTJ 922 (Chennai)(Trib.)
Advocates Welfares Fund of The Bar Council of Tamil Nadu v. DDIT (E) 336 117
(2016) 50 ITR 209 (Chennai)(Trib.)
Aegis Ltd. v. Addl. CIT (2016) 131 DTR 172 (Mum.)(Trib.) 1428 452
Aerens Development and Engineers Ltd. v. ACIT (Delhi)(Trib.); www. 104 33
itatonline.org
xii
Case Laws Index
Name Case Page
No. No.
Aggarwal & Co. (Engg. & Eractors) v. DY. CIT (2016) 160 ITD 540 (Asr.) 1329 416
(Trib.)
Aggarwal and Modi Enterprises (Cinema Project) Co. (P.) Ltd. v. CIT (2016) 693 216
381 ITR 469/238 Taxman 17/131 DTR 289/284 CTR 211 (Delhi)(HC)
Agilent Technologies India (P.) Ltd.; DDIT v. * (2016) 176 TTJ 415/67 1505 478
taxmann.com 95/136 DTR 25 (Delhi)(Trib.)
Agson Global P. Ltd. v. ITSC (2016) 380 ITR 342/237 Taxman 158/282 CTR 2170 727
441/130 DTR 1 (Delhi)(HC)
Agya Ram v. CIT (2016) 386 ITR 545/241 ITR 407/141 DTR 133/290 CTR 1785 580
539 (Delhi)(HC)
Ahmed Hussain (S. S. M.) v. ITO (2016) 48 ITR 417 (Chennai)(Trib.) 2185 734
Air Cargo Agents Association of India; CIT v. * (2016) 135 DTR 169/286 89 29
CTR 340/239 Taxman 212 (Bom.)(HC)
Air France; CIT v. * (2016) 384 ITR 142 (Delhi)(HC) 1988 657
Air India Ltd.; CIT v. * (2016) 383 ITR 284/237 Taxman 639/131 DTR 2238 754
81/289 CTR 287 (Bom.)(HC) 2317 780
Air India Ltd.; Dy. DIT (IT) v. * (2016) 158 ITD 555/178 TTJ 121/135 DTR 1977 652
153 (Mum.)(Trib.)
Aishwarya Rai Bachchan (Smt.) v. Addl. CIT (2016) 158 ITD 987/140 DTR 2498 846
297/180 TTJ 643 (Mum.)(Trib.)
Aiswarya Prints Dyeing & Printings Mills Pvt. Ltd. v. Addl. CIT (2016) 48 717 222
ITR 810 (Ahd.)(Trib.)
Ajanta Manufacturing Ltd. v. Dy. CIT (2016) 290 CTR 110/72 taxmann.com 2143 715
148/(2017) 391 ITR 33 (Guj.)(HC)
Ajay Electronic; CIT v. * (2016) 388 ITR 272 (P&H)(HC) 2217 746
Ajay Kalia; ACIT v. * (2016) 157 ITD 187/135 DTR 147/178 TTJ 507 2209 743
(Delhi) (Trib.) 1117 343
Ajay trader v. DCIT (Jaipur)(Trib.); www.itatonline.org 2469 837
Ajit Ramchandra Jadhav v. ACIT (2016) 178 TTJ 204/135 DTR 1 (Pune) 2442 829
(Trib.)
Aker Contracting FP ASA, In re (2016) 381 ITR 489/237 Taxman 427/283 957 288
CTR 250/ 130 DTR 321 (AAR)
Akshata Mercantile (P.) Ltd. v. Dy. CIT (2016) 290 CTR 381/143 DTR 1592 514
360/76 taxmann.com 228/(2017) 391 ITR 236 (Bom.)(HC)
Alabra Shipping Pte. Ltd. v. ITO (2016) 175 TTJ 359/129 DTR 43 (Rajkot) 1982 655
(Trib.)
xiii
Case Laws Index
Name Case Page
No. No.
Al-Ameen Charitable Fund Trust; DIT(E) v. * (2016) 383 ITR 517/238 278 99
Taxman 148/133 DTR 72 (Karn.)(HC)
Alapatt Jewellery; CIT v. * (2016) 386 ITR 338/242 Taxman 129 (Ker.)(HC) 568 182
Alcatel–Lucent France v. ADIT (2016) 384 ITR 113/240 Taxman 414/136 1794 584
DTR 209/287 CTR 488 (Delhi)(HC)
Alcove Industries Ltd.; CIT v. * (2016) 237 Taxman 226 (Cal.)(HC) 689 214
Alfa Sai Minerals (P.) Ltd.; CIT v. * (2016) 243 Taxman 216 (Bom.)(HC) 24 8
All Angels Educational Society v. CCIT (2016) 388 ITR 475/241 Taxman 216 77
421/289 CTR 637 (Mad.)(HC)
All India Pingalwara Cahritable Society; Dy. CIT v. * (2016) 158 ITD 1969 648
410/178 TTJ 602/47 ITR 1 (Amritsar)(Trib.); (2016) 141 DTR 153 (Amritsar) 1538 492
(Trib.) 1537 492
All India Union Bank Officers Federation v. UOI (2016) 385 ITR 114/240 408 138
Taxman 92/141 DTR 101/289 CTR 61 (Mad.)(HC)
All Saints College Society; CIT v. * (2016) 388 ITR 634 (Uttarakhand)(HC) 2295 772
Allahabad Bank v. ACIT (2016) 157 ITD 693/46 ITR 678 (Kol.)(Trib.) 610 192
615 194
Allied Strips Ltd. v. ACIT (2016) 384 ITR 424/69 taxmann.com 444 (Delhi) 1734 563
(HC)
Allscripts (India) (P) Ltd.; PCIT v. * (2016) 140 DTR 188/288 CTR 675/241 1372 431
Taxman 545 (Guj.)(HC)
Alpha Nipon Innovatives Ltd. v. DCIT (2017) 145 DTR 206/291 CTR 309 1387 437
(Guj.)(HC)
Alpha Plus Technologies (P.) Ltd. v. ITO (2016) 158 ITD 136 (SMC) (Mum.) 766 235
(Trib.)
Alstom Project India Limited; CIT v. * (2017) 394 ITR 141 (Bom.)(HC) 1377 433
Alstom Project Ltd.; DCIT v. * (Mum.)(Trib.); www.itatonline.org 1481 470
Alvares & Thomas; CIT v. * (2016) 239 Taxman 456 (Karn.)(HC) 907 273
Amadeus India P. Ltd. v. ACIT (2016) 52 ITR 83 (Delhi)(Trib.) 248 89
1420 449
1421 450
Amaltas Associates v. ITO (2016) 389 ITR 340 (Guj.)(HC) 1753 569
Amaltas Associates; CIT v. * (2016) 389 ITR 175 (Guj.)(HC) 1320 412
Aman Khera; CIT v. * (2016) 387 ITR 33/288 CTR 381/76 taxmann.com 2418 820
185 (Delhi)(HC)
Aman Khera; CIT v. * (2016) 387 ITR 33/288 CTR 381/76 taxmann.com 1676 545
185/140 DTR 1 (Delhi)(HC)
xiv
Case Laws Index
Name Case Page
No. No.
Amar Mukesh Shah; ACIT v. * (2016) 46 ITR 234 (Ahd.)(Trib.) 1930 635
Amar Ujala Publication Ltd.; CIT v. * (2016) 385 ITR 54/72 taxmann.com 575 184
159 (Delhi)(HC)
Amarjit Singh v. ITO (2016) 48 ITR 622 (Amritsar)(Trib.) 2 1
1692 549
Amarvathy Textiles; ACIT v. * (2015) 125 DTR 321/70 SOT 648/173 TTJ 851 256
641 (Chennai)(Trib.)
Amaya Infrastructure Pvt. Ltd. v. ITO(2016) 383 ITR 498/140 DTR 19/288 1826 597
CTR 340 (Bom.)(HC)
Ambalal Sarabhai Enterprises Ltd.; DCIT v. * (2016) 48 ITR 210 (Ahd.) 1113 342
(Trib.)
Ambit Realty (P) Ltd.; CIT v. * (2016) 139 DTR 43/288 CTR 50 (Bom.)(HC) 2285 769
American Express (I) (P) Ltd. v. Dy. CIT (2016) 177 TTJ 33 (Delhi)(UO) 1469 465
(Trib.) 253 91
American Express Banking Corporation v. CIT (2016) 286 CTR 126/134 406 137
DTR 273 (SC)
Amin Merchant v. Chairman CBEC (SC); www.itatonline.org 2543 869
Amit Engineers v. ACIT (2016) 156 ITD 556 (Chd.)(Trib.) 1866 612
Amit K. Jain alias Anil K. Jain.; CIT v. * (2016) 388 ITR 113/(2017) 148 1957 644
DTR 110/293 CTR 185 (Guj.)(HC)
Amit K. Shah; ITO v. * (2016) 159 ITD 767 (Ahd.)(Trib.) 1847 606
Amit Paccraft; Dy. CIT v. * (2015) 68 SOT 213 (URO) (Delhi)(Trib.) 2401 812
Amita Kochar v. ACIT (2016) 389 ITR 345 (Patna)(HC) 1952 643
Amitabh Bachchan; CIT v. * (2016) 384 ITR 200/135 DTR 73/286 CTR 2322 782
113/240 Taxman 221 (SC)
Amore Jewels (P.) Ltd. v. P CIT (2016) 290 CTR 681/241 Taxman 321/144 1730 562
DTR 101 (Bom.)(HC)
AMP Spinning & Weaving Mills (P.) Ltd. v. ITO (2016) 243 Taxman 1/ 1243 385
(2017) 393 ITR 349/150 DTR 390 (Guj.)(HC)
Amrik Singh v. ITO (2016) 159 ITD 329/181 TTJ 95 (Asr.)(Trib.) 1844 606
Amul Research & Development Association v. ITO (2016) 160 ITD 454/182 19 6
TTJ 794/145 DTR 30 (Ahd.)(Trib.)
Anagram Wellington Assets Management Co. Ltd.; CIT(TDS) v. * (2016) 2070 685
389 ITR 654/73 taxmann.com 164 (Guj.)(HC)
Anand Mehta v. UOI (2016) 385 ITR 379 (Delhi)(HC) 2410 817
Andhra University; ACIT v. * (2016) 158 ITD 389 (Visakha)(Trib.) 1985 656
xv
Case Laws Index
Name Case Page
No. No.
Anil Girishbhai Darji; ITO v. * (2016) 239 Taxman 146 (Guj.)(HC) 2270 764
Anil Kumar & Co.; CIT v. * (2016) 386 ITR 702/67 Taxman.com 278 (Karn.) 1682 546
(HC)
Anil Mahavir Gupta v. ACIT (Mum.)(Trib.); www.itatonline.org 1908 628
Anil Printers Ltd.; ACIT v. * (2016) 158 ITD 665/143 DTR 295/182 TTJ 528 170
112 (Mum.)(Trib.)
Anita Kochar (Smt.) v. ACIT (2016) 388 ITR 500/73 taxmann.com 96 2199 740
(Mad.)(HC)
Anita Raj Hingorani v. ITO (2016) 46 CCH 715/50 ITR 63 (Mum.)(Trib.) 1163 360
Anita Rani (Mrs.) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.) 429 144
1258 392
Anjana Devi Agarwal v. ACIT (2016) 157 ITD 702 (Kol.)(Trib.) 999 305
Anju Jindal (Smt.); CIT v. * (2016) 387 ITR 418 (P&H)(HC) 632 198
Ansal Housing & Construction Ltd.; CIT v. * (2016) 389 ITR 373/241 415 140
Taxman 418 (Delhi)(HC) 488 160
Ansaldo Energia SPA v. CIT (IT) (2016) 384 ITR 312/240 Taxman 107/ 2145 716
(2017) 148 DTR 250/293 CTR 461 (Mad.)(HC)
Anuben Lalabhai Bharwad v. PCIT (2016) 289 CTR 49/241 Taxman 511 1591 513
(Guj.)(HC)
Anugrah Varhney v. ITO (Agra)(Trib.); www.itatonline.org 1878 617
Anupam Biswas v. ITO (2016) 157 ITD 445 (SMC) (Kol.)(Trib.) 2248 757
Anupam Nagalia; CIT v. * (2016) 384 ITR 442 (P&H)(HC) 2228 750
Anupam Rasayan India Ltd. v. ITO (2016) 243 Taxman 472 (Guj.)(HC) 1724 559
Anurag Radhesham Attal v. ITO (2016) 158 ITD 867/(2017) 183 TTJ 902 272
423/147 DTR 207 (Pune)(Trib.) 1325 415
Anurag Rice Mills; CIT v. * (2016) 282 CTR 200/129 DTR 157 (Patna)(HC) 1149 356
ANZ Grindlays Bank v. DCIT (2016) 382 ITR 156/133 DTR 90/238 Taxman 882 266
128/290 CTR 188 (Delhi)(HC)
AOL Online India (P.) Ltd. v. Dy. CIT (2016) 158 ITD 437 (Bang.)(Trib.) 1430 452
Apeejay Education Society v. ACIT (2016) 47 ITR 33 (Amritsar)(Trib.) 1837 604
Apeejay Medical Ltd.; CIT v. * (2016) 383 ITR 297/68 taxmann.com 10 210 75
(Cal.)(HC)
Apeejay Medical Research and Welfare Association (P) Ltd.; CIT v. * (2016) 211 75
383 ITR 79/239 Taxman 266/286 CTR 182/135 DTR 145 (Cal.)(HC)
Apeejay Surrendera Park Hotels Ltd v. UOI (2016) 383 ITR 697/134 DTR 2034 672
169/287 CTR 161 (Delhi)(HC)
xvi
Case Laws Index
Name Case Page
No. No.
APL Co. Pte. Ltd.; DIT v. * (2016) 243 Taxman 84 (Bom.)(HC) 127 40
Apollo Fine Vest (I) Ltd.; CIT v. * (2016) 382 ITR 33 (Bom.)(HC) 500 163
Applitech Solutions Limited; Pr. CIT v. * (2016) 236 Taxman 602 (Guj.) 2126 709
(HC)
Arihant Aluminium Corporation v. ACIT (2016) 388 ITR 450/69 taxmann. 1915 631
com 286 (Karn.)(HC)
Arihantam Infraprojects (P.) Ltd. v. JCIT (2016) 156 ITD 425/176 TTJ 562 180
202/132 DTR 105 (Pune)(Trib.)
Arjundev K. Khanna (HUF) v. ITO (2016) 241 Taxman 380 (Guj.)(HC) 964 291
Arora Fabrics (P.) Ltd.; CIT v. * (2016) 131 DTR 308/284 CTR 293 (P&H) 1970 648
(HC)
Arpit Land (P) Ltd.; CIT v. * (2016) 139 DTR 43/288 CTR 50 (Bom.)(HC) 2285 769
Arun Mammen v. UOI (2016) 290 CTR 644/241 Taxman 135/(2017) 391 2156 720
ITR 23 (Mad.)(HC)
Arun Sunny v. CCIT (2016) 382 ITR 533 (Ker.)(HC) 1578 509
Arunbhai R. Naik v. ITO (2016) 131 DTR 402/284 CTR 284 (Guj.)(HC) 409 138
Arvik Properties and Investments P. Ltd. v. DCIT (2016) 52 ITR 74 (Mum.) 1604 518
(Trib.)
Arvind Asmal Mehta v. ITO (Mum.)(Trib.), www.itatonline.org 1177 365
Arvind Kumar v. ITO (2016) 180 TTJ 52 (UO)(Asr.)(Trib.) 1656 538
Arvinder Singh; CIT v. * (2016) 380 ITR 179 (Delhi)(HC) 2320 781
Asha Ashar v. ITO (2016) 46 ITR 492 (Mum.)(Trib.) 452 151
431 145
Asha Trading Co.; CIT v. * (2016) 382 ITR 438 (Cal.)(HC) 1279 397
Asharam Ashram v. ITO (E) (2016) 386 ITR 222 (Guj.)(HC) 1779 578
Ashian Needles P. Ltd.; CIT v. * (2016) 384 ITR 144 (Delhi)(HC) 1793 584
2306 776
Ashiana Amar Developers v. ITO (2016) 46 ITR 17/178 ITR 474/136 DTR 1324 414
137 (Kol.) (Trib.)
Ashish P. Deora; CIT v. * (2016) 242 Taxman 214 (Bom.)(HC) 476 157
Ashok Kumar Mondal v. ITO (2016) 161 ITD 521 (Kol.)(Trib.) 896 271
Ashok Kumar Sethi v. Dy. CIT (2016) 387 ITR 375/(2017) 244 Taxman 174 1974 650
(Mad.)(HC) 2554 872
Ashok Kumar v. CIT (2016) 386 ITR 342/239 Taxman 436/290 CTR 450 1196 370
(Patna)(HC)
xvii
Case Laws Index
Name Case Page
No. No.
Ashok Piramal Management Corpn. Ltd. v. ACIT (2016) 161 ITD 234 805 244
(Mum.)(Trib.)
Ashok Prapann Sharma v. CIT (SC), www.itatonline.org 1108 341
Ashok Sharma v. CIT (2016) 389 ITR 462/290 CTR 481/144 DTR 137/76 1107 340
taxmann.com 1 (SC)
Ashok Surana v. CIT (2016) 384 ITR 267 (Cal.)(HC) 6 2
669 207
Ashwani Kumar Arora v. ACIT (2016) 50 ITR 37 (Delhi)(Trib.) 2444 830
Ashwani Kumar Arora v. ACIT (Delhi)(Trib.); www.itatonline.org 2470 838
Ashwin Purshotam Bajaj v. ITO (Mum.)(Trib.); www.itatonline.org 1230 382
Asian Advertising v. ITO (2016) 158 ITD 145 (Mum.)(Trib.) 529 171
Asian Advertising v. ITO (2016) 158 ITD 145 (Mum.)(Trib.) 767 235
Asian Financial Services Ltd. v. CIT (2016) 240 Taxman 192/(2017) 148 1245 386
DTR 105/293 CTR 240 (Cal.)(HC)
Asian Handicrafts; CIT v. * (2016) 389 ITR 293/66 taxmann.com 38 (All.) 2327 784
(HC)
Asian Natural Resources India Ltd.; CIT v. * (2015) 235 Taxman 419/117 2169 726
DTR 426/(2016) 282 CTR 569 (MP)(HC)
Asian Paints (India) Ltd.; CIT v. * (2016) 243 Taxman 348 (Bom.)(HC) 630 198
Associated Electronics & Electrical Industries (Bangalore)(P.) Ltd.; CIT v. * 974 295
(2016) 65 taxmann.com 253/130 DTR 222 (Karn.)(HC)
ATN International Ltd.; DIT v. * (2016) 242 Taxman 8 (Cal.)(HC) 161 52
Atotech India Ltd.; PCIT v. * (P & H)(HC); www.itatonline.org 2416 820
Atulbhai Hiralal Shah v. Dy. CIT (2017) 244 Taxman 27 (Guj.)(HC) 1752 569
Audyogik Shikshan Mandal v. ITO (2016) 156 ITD 1/176 TTJ 202 (TM) 350 121
(Pune)(Trib.)
Augustan Knitwear (P.) Ltd. v. ACIT (2016) 157 ITD 741/180 TTJ 134 2485 842
(Chennai)(Trib.)
Autolite (India) Ltd.; ACIT v. * (2016) 143 DTR 98/180 TTJ 223 (Jaipur) 582 186
(Trib.)
Automobile Corporation of Goa Ltd.; CIT v. * (2016) 387 ITR 140/242 2280 767
taxman 101/290 CTR 485/144 DTR 166 (SC)
Avan Gidwani v. ACIT (Mum.)(Trib.); www.itatonline.org 2190 736
Avantor Performance Materials India Ltd. v. CIT (2016) 383 ITR 685/237 91 30
Taxman 603/282 CTR 494/130 DTR 33 (HP)(HC)
Avaya India (P.) Ltd. v. Dy. CIT (2016) 160 ITD 179 (Delhi)(Trib.) 1434 453
xviii
Case Laws Index
Name Case Page
No. No.
Avineon India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 483 (Hyd.)(Trib.) 1483 470
AVT McCormick Ingredients Ltd.; DCIT v. * (2016) 178 TTJ 99/137 DTR 1441 455
92/67 taxmann.com 322 (Chennai)(Trib.)
AVT McCormick Ingredients Ltd.; DCIT v. * (2016) 178 TTJ 99/67 1442 455
taxmann.com 322/137 DTR 92/67 taxmann.com 322 (Chennai)(Trib.)
AVTEC Ltd.; DCIT v. * (2016) 52 ITR 270 (Delhi)(Trib.) 517 168
AVTIEC Ltd.; DCIT v. * (2016) 52 ITR 270 (Delhi)(Trib.) 262 94
Awasthi Traders v. CIT (2016) 388 ITR 185 (SC) 946 285
Ayisha Fathima (Smt.); ITO v. * (2016) 160 ITD 377/182 TTJ 437 (Chennai) 10 3
(Trib.) 988 301
B
B. Arunkumar & Co; CIT v. * (Bom.)(HC) (Unreported) (2016) BCAJ- 1021 314
March-P. 46
B. Banamber and Co. v. ITO (2016) 48 ITR 41 (Cuttack)(Trib.) 1158 359
1691 549
B. D. Gupta & Sons v. ITO (2015) 70 SOT 16 (Delhi)(Trib.) 102 33
1976 651
B. J. N. Hotels Ltd.; CIT v. * (2016) 382 ITR 110 (Karn.)(HC) 1900 624
B. K. Jain v. CIT (2016) 387 ITR 605 (P&H)(HC) 2336 787
B. L. International v. ACIT (Delhi)(Trib.); www.itatonline.org 2484 842
B. L. Shah v. ACIT (2016) 131 DTR 265/284 CTR 165 (Bom.)HC) 410 139
B. M. Maniraju v. CIT (2015) 126 DTR 348/(2016) 282 CTR 108/(Karn.)(HC) 236 85
B. S. Abdur Rahman Institute of Science & Technology v. CCIT (2016) 141 219 78
DTR 60/289 CTR 631/78 taxmann.com 336 (Mad.)(HC)
B. Sudhakar Pai; Dy. CIT v. * (2016) 159 ITD 875 (Bang.)(Trib.) 987 301
B.A. Research India Ltd.; PCIT v. * (2016) 240 Taxman 443/288 CTR 1309 408
399/137 DTR 369 (Guj.)(HC)
B.K. Jain v. CIT (2016) 388 ITR 300 (P & H)(HC) 2420 821
B.M.J. Real Estate (P.) Ltd. v. CIT (2016) 236 Taxman 579 (P&H)(HC) 1047 322
B.P. Jain and Associates v. CIT (2016) 381 ITR 423/67 taxmann.com 2530 862
332/137 DTR 288/287 CTR 334 (Delhi)(HC)
BA Continuum India P. Ltd.; ACIT v. * (2015) 40 ITR 149/70 SOT 332 2076 690
(Hyd.)(Trib.)
Baan Global BV; ADIT (IT) v. * (2016) 49 ITR 73 (Mum.)(Trib.) 166 55
Baan Global BV; ADIT v. * (Mum.)(Trib.) www.itatonline.org 173 59
xix
Case Laws Index
Name Case Page
No. No.
Baba Kartar Singh Dukki Educational Trust v. ITO (2015) 171 TTJ 25/ 1861 610
(2016) 158 ITD 965 (Chd.)(Trib.)
Baberwad Shiksha Samiti v. CIT (E) (2016) 47 ITR 218/134 DTR 65/177 2367 799
TTJ 380 (Jaipur)(Trib.)
Babita Lila v. UOI (2016) 387 ITR 305/243 Taxman 258/140 DTR 241/288 2567 878
CTR 489 (SC)
Babita Lila v. UOI (2016) 387 ITR 305/288 CTR 489/243 Taxman 258 (SC) 2517 855
2541 868
Babita Lila v. UOI (2016) 387 ITR 305/288 CTR 489/73 taxmann.com 32 2566 877
(SC)
Babulal K. Daga; CIT v. * (2016) 387 ITR 114 (Guj.)(HC) 2331 786
Baddi Barotiwala Nalagarh Development Authority v. CIT (2016) 157 ITD 2249 757
571(Chd.)(Trib.)
Bahadursingh T. Waghela v. WTO (2016) 243 Taxman 86/(2017) 147 DTR 75 23
101/292 CTR 514 (Guj.)(HC)
Bahubali Neminath Muttin; CIT v. * (2016) 388 ITR 608/242 Taxman 2296 772
279/140 DTR 57 (2017) 291 CTR 214 (Karn.)(HC)
Bajaj Auto Ltd. v. CIT (2016) 389 ITR 259/(2017) 244 Taxman 31 (Bom.) 1673 543
(HC)
Bajaj Auto Ltd. v. CIT (2016) 389 ITR 259/(2017) 244 Taxman 31/146 DTR 550 176
210 (Bom.)(HC) 1688 549
Balaben B. Trivedi (Smt.); DCIT v. * (2016) 46 ITR 307(Ahd.)(Trib.) 1168 362
Baldev Singh and Co. v. CIT(2015) 60 taxmann.com 30/ (2016) 384 ITR 1652 536
91 (P&H)(HC)
Balmer Lawrie & Co. Ltd. v. ITO (2016) 159 ITD 73 (Kol.)(Trib.) 811 246
Banarsi Sweets P. Ltd.; CIT v. * (2016) 387 ITR 172 (P&H)(HC) 2218 746
Banca Sella S.P.A. In re (2016) 387 ITR 358/242 Taxman 475/288 CTR 661 1011 310
(AAR)
Bangalore Baptist Hospital Society; CIT v. * (2016) 240 Taxman 567 (Karn.) 275 98
(HC)
Bangalore Urban & Rural District Co-op Milk Producers Societies Members 310 107
and Employees Welfare Trust Bangalore Milk Union Ltd. v. DIT (E) (2016)
382 ITR 528 (Karn.)(HC)
Bank of Baroda v. ITO (2016) 288 CTR 478/73 taxmann.com 55 (Karn.)(HC) 2184 734
Bank of India v. ACIT (2016) 49 ITR 62 (Mum.)(Trib.) 375 129
708 221
xx
Case Laws Index
Name Case Page
No. No.
Bank of Nova Scotia; CIT v. * (2016) 380 ITR 550/237 Taxman 594/283 2492 844
CTR 128/130 DTR 240 (SC)
Banke Bihar Properties Pvt. Ltd. v. ITO (Delhi)(Trib); www.itatonline.org 1871 614
Bansal Credits Ltd.; Dy.CIT v. * (2016) 51 ITR 44 (Delhi)(Trib.) 1159 359
Banwarilal Jain v. ITO (2016) 181 TTJ 341 (Luck.)(Trib.) 1845 606
Bastimal K. Jain v. ITO (Mum.)(Trib.), www.itatonline.org 1078 331
Bata India Ltd.; CIT v. * (2016) 385 ITR 539/(2017) 152 DTR 145 (Cal.) 1888 620
(HC)
Bata India Ltd.; Dy. CIT v. * (2016) 179 TTJ 328/138 DTR 78 (Kol.)(Trib.) 1444 456
Batlivala & Karani Securities (India) (P.) Ltd. v. Dy. CIT (2016) 159 ITD 812 246
924/180 TTJ 558 (Kol.)(Trib.) 135 43
Batra Palace P. Ltd. v. CIT (2016) 385 ITR 144 (P&H)(HC) 416 141
Bausch & Lomb Eyecare (India) (P.) Ltd. v. ACIT (2016) 381 ITR 227/237 1405 445
Taxman 24/283 CTR 296/129 DTR 201 (Delhi)(HC)
Bayath Kutchhi Dasha Oswal Jain Mahajan Trust; CIT v. * (2016) 243 313 108
Taxman 60 (Guj.)(HC)
Bayer Crop Science Limited v. ACIT (Mum.)(Trib.), www.itatonline.org 768 236
Bayer Material Science Pvt. Ltd. v. DCIT (2016) 382 ITR 333/133 DTR 1831 600
53/237 Taxman 723 (Bom.)(HC)
BBC Worldwide Ltd. v. ADIT (IT) (2016) 383 ITR 197/239 Taxman 121/135 1736 563
DTR 86 (Delhi)(HC)
BDR Builders and Developers Ltd.; CIT v. * (2016) 385 ITR 111 (Delhi) 2171 728
(HC)
Bechtel International Inc v. DDIT (Mum.)(Trib.);www.itatonline.org 108 35
Bechtel International Inc. v. Dy. DIT (2016) 177 TTJ 58 (UO)(Mum.)(Trib.) 124 39
BEHR India Ltd. (No. 1); CIT v. * (2016) 389 ITR 419 (Bom.)(HC) 264 95
BEHR India Ltd. (No. 2); CIT v. * (2016) 389 ITR 459/74 taxmann.com 264 95
170 (Bom.)(HC)
BEHR India Ltd.; CIT v. * (No. 1) 389 ITR 419 (Bom.)(HC) 906 273
2212 744
Belgaum Merchants Co-op. Credit Society Ltd. v. CIT (2016) 236 Taxman 1345 421
351 (Karn.)(HC)
Bell Ceramics Ltd. v. Dy. CIT (2016) 242 Taxman 134 (Guj.)(HC) 646 202
Best & Crompton Engg. Ltd.; ACIT v. * (2015) 43 ITR 600/(2016) 176 TTJ 2477 839
224 (Chennai)(Trib.)
Best Corporation Ltd.; CIT v. * (2016) 76 taxmann.com. 286 (Mad.)(HC) 1287 400
xxi
Case Laws Index
Name Case Page
No. No.
Beta Cashew & Allied Products (P) Ltd. (2016) 139 DTR 233/242 Taxman 2137 712
373/289 CTR 564 (Ker.)(HC)
Beta Cashews & Allied Products (P.) Ltd. v. CIT (2016) 242 Taxman 2136 712
373/289 CTR 564 (Ker.)(HC)
Bhagheeratha Engineering Ltd. v. ACIT (2015) 379 ITR 244/127 DTR 245/ 1967 647
(2016) 282 CTR 209 (Ker.)(HC)
Bhagwan Singh Palaria v. CIT (2016) 134 DTR 67 (Raj.)(HC) 2257 761
Bhai Gurudas Educational Trust v. CIT (2016) 177 TTJ 25 (UO) (Chd.) 322 110
(Trib.)
Bhai Mansa Singh Ji Welfare Society (Regd.) v. CIT (2016) 156 ITD 117 345 119
(Chd)(Trib.)
Bhanuprasad O. Trivedi; DCIT v. * (2016) 46 ITR 307 (Ahd.)(Trib.) 1168 362
Bharat Heavy Electricals Ltd.; PCIT v. * (2017) 145 DTR 96/291 CTR 161 2012 665
(P&H)(HC)
Bharat Hi-Tech (Cement) P. Ltd.; ACIT v. * (2016) 176 TTJ 166 (Kol.)(Trib.) 773 237
921 278
1206 373
Bharat Hotels Ltd.; CIT (TDS) v. * (2015) 64 Taxmann.com 325/(2016) 384 2071 686
ITR 77/288 CTR 682/140 DTR 95 (Karn.)(HC)
Bharat Hotels Ltd.; CIT v. * (2015) 64 taxmann.com 14/(2016) 381 ITR 692 215
222 (Delhi)(HC)
Bharat Hotels Ltd.; CIT v. * (2016) 380 ITR 552/65 taxmann.com 39 (Delhi) 506 166
(HC)
Bharat Raojibhai Patel; ITO v. * (2016) 159 ITD 473 (Mum.)(Trib.) 1049 323
1097 336
Bharat Sanchar Nigam Ltd. v. Dy. CIT (2016) 156 ITD 847/175 TTJ 369/130 1305 407
DTR 161 (Delhi)(Trib.)
Bharat Sanchar Nigam Ltd.; PCIT v. * (2016) 141 DTR 16 (Delhi)(HC) 1297 404
Bharat Sanchar Nigam Ltd.; PCIT v. * (2016) 388 ITR 371/289 CTR 1289 401
198/141 DTR 16 (Delhi)(HC)
Bharath Beedi Works (P.) Ltd. v. ACIT (2016) 242 Taxman 492 (Karn.)(HC) 357 123
Bharti Airtel Ltd. v. ITO (TDS) (2016) 47 ITR 418/178 TTJ 708 (Delhi) 188 64
(Trib.)
Bharti Hexacom Ltd. v. ACIT (2016) 179 TTJ 25 (Delhi)(Trib.) 857 258
737 227
Bharti Overseas Pvt. Ltd.; PCIT v. * (2016) 237 Taxman 417 (Delhi)(HC) 365 126
xxii
Case Laws Index
Name Case Page
No. No.
Bhaskar Power Projects (P.) Ltd.; PCIT v. * (2016) 73 taxmann.com 382 2286 770
(Delhi)(HC)
Bhawani Silicate Industries; Pr. CIT v. * (2016) 236 Taxman 596 (Raj.)(HC) 1687 548
Bhura Ram (Dantaramgarh Group) v. CIT (2016) 388 ITR 259 (Raj.)(HC) 1661 540
Bhura Ram (Phulera Group) v. CIT (2016) 388 ITR 259 (Raj.)(HC) 1661 540
Bihar State Warehousing Corporation Ltd. v. CIT (2016) 386 ITR 410/242 904 273
Taxman 142/287 CTR 556/139 DTR 16 (Patna)(HC) 929 280
2303 774
Bijal Investment Co. P. Ltd. v. ITO (2016) 389 ITR 53/241 Taxman 435/ 963 291
(2017) 147 DTR 404 (Guj.)(HC)
Bijoy Kumar Jain; CIT v. * (2016) 385 ITR 339/240 Taxman 438/139 DTR 2342 790
283 (Cal.)(HC)
Bikram Singh v. Dy. CIT (2016) 48 ITR 689 (Delhi)(Trib.) 2194 738
Bina Malpani v. ITO (2016) 180 TTJ 1 (UO)/50 ITR 48 (Jaipur)(Trib.) 514 167
Binaguri Tea Company P. Ltd. v. Dy. CIT (2016) 389 ITR 648/75 taxmann. 2254 759
com 106/(2017) 147 DTR 364 (Cal.)(HC)
Binani Cement Ltd.; CIT v. * (2016) 384 ITR 457/136 DTR 177/239 Taxman 2349 793
29/289 CTR 181 (Cal.)(HC)
Bindiya H. Malkani v. CIT (2016) 386 ITR 87/138 DTR 46/287 CTR 184 62 19
(Bom.)(HC)
Bird Education Society for Travel & Tourism; ADIT v. * (2016) 160 ITD 319 109
18/181 TTJ 782/(2017) 147 DTR 169 (Delhi.)(Trib.)
Birla Corporation Ltd.; CIT v. * (2016) 131 DTR 153/ 284 CTR 97/238 2147 717
Taxamn 482 (Cal.) HC)
BOC Group Ltd.; Dy. CIT v.* (2016) 156 ITD 402 (Mum.)(Trib.) 1356 426
Bombay Chamber of Commerce & Industry v. ITO (2016) 157 ITD 861 314 108
(Mum.)(Trib.)
Bombay Plaza (P.) Ltd. v. ACIT (2016) 161 ITD 552/(2017) 184 TTJ 412/148 445 149
DTR 11 (Kol.)(Trib.)
Bombay Presidency Golf Club Ltd. v. ITO (2016) 159 ITD 1050/(2017) 147 280 100
DTR 304 (Mum.)(Trib.)
Bombay Suburban Electric Supply Ltd v. CIT (2016) 389 ITR 273/75 551 176
taxmann.com 264 (Bom.)(HC)
Bommidala Enterprises P. Ltd.; CIT v. *(2016) 389 ITR 1/242 Taxman 248 261 94
(SC)
xxiii
Case Laws Index
Name Case Page
No. No.
Bosch Ltd. v. Secretary, Dept. of Scientific & Industrial Research Ministry 546 175
of Science & Technology, Government of India (2016) 239 Taxman 480/
(2017) 147 DTR 115/293 CTR 355 (Karn.)(HC)
Boston Scientific India P. Ltd.; ACIT v. * (2016) 177 TTJ 729/137 DTR 2468 837
153/49 ITR 435 (Delhi)(Trib.)
Bovis Lend Lease (India) (P.) Ltd.; CIT v. * (2012) 208 Taxman 168 (Karn.) 2065 684
(HC)
BPL Ltd.; DCIT v. * (2016) 240 Taxman 301 (SC) 2525 859
Brakes India Ltd. v. DCIT (2016) 176 TTJ 716/140 DTR 207 (Chennai) 1838 604
(Trib.)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.) 269 96
525 169
820 248
1567 501
1836 603
Bramhacorp Hotels & Resorts Ltd.; Dy.DIT (IT) v. * (2015) 70 SOT 25 2186 735
(Pune)(Trib.)
Bridal Jewellery Manufacturing Co. v. ITO (2016) 45 ITR 119/175 TTJ 257 254 91
(Delhi)(Trib.)
Bright Star Syntax P. Ltd. v. ITO (2016) 387 ITR 231/240 Taxman 459/137 1781 579
DTR 362 (Bom.)(HC)
Brij Fertilizers Pvt. Ltd.; ITO v. * (2016) 48 ITR 125 (Agra)(Trib.) 1690 549
Brijwasi Impex P. Ltd. v. CIT (2016) 384 ITR 320 (Delhi)(HC) 2227 749
Broadway Charitable Trust v. CIT (2016) 158 ITD 886 (Kol.)(Trib.) 343 119
Brothers Pharma P. Ltd. v. ITO (2015) 174 TTJ 773/(2016) 45 ITR 154 903 272
(Jaipur)(Trib.)
Brothers Pharma P. Ltd. v. ITO (2016) 45 ITR 154 (Jaipur)(Trib.) 775 237
916 276
941 283
1220 378
BSR & Co.; ACIT v. * (Mum.)(Trib.), www.itatonline.org 863 261
BSR & Company; ACIT v. * (2016) 159 ITD 1068/182 TTJ 544 (Mum.) 807 244
(Trib.) 810 245
Bucyrus India P. Ltd. v. DCIT (2016) 45 ITR 216/176 TTJ 774/140 DTR 1868 612
202/65 taxmann.com 53 (Kol.)(Trib.)
Builders Association of India v. DCIT (2016) 46 ITR 295 (Mum.)(Trib.) 342 118
xxiv
Case Laws Index
Name Case Page
No. No.
C
C. Gopalaswamy; PCIT v. * (2016) 384 ITR 307 (Karn.)(HC) 1092 335
2551 871
C. J. International Hotels Ltd. v. Addl. CIT (2016) 158 ITD 287/177 TTJ 2022 667
447/137 DTR 289 (Delhi)(Trib.) 2079 690
2206 742
C. J. International Hotels Ltd. v. Dy. CIT (2016) 177 TTJ 124/133 DTR 81 1859 609
(Delhi)(Trib.)
C. M. Mahadeva v. CIT (Karn.)(HC); www.itatonline.org 1828 598
C. R. Developments Pvt. Ltd. v. JCIT (2016) BCAJ - February-P. 34 (Mum.) 425 143
(Trib.)
CADD Centre v. ACIT (2016) 383 ITR 258/237 Taxman 401 (Mad.)(HC) 1014 311
Calcutta Knitwears; CIT v. * (2016) 131 DTR 308/284 CTR 293 (P&H)(HC) 1970 648
Calico Dyeing and Printing Mills P. Ltd.; CIT v. * (2016) 386 ITR 132 968 292
(Bom.)(HC)
California Design & Construction INC India, Chandigarh v. ITO (2016) 156 2471 838
ITD 919 (Chd.)(Trib.)
Cama Hotels Ltd; PCIT v. * (2016) 240 Taxman 770 (Guj.)(HC) 885 267
Cambay Investment Corporation Ltd. v. DCIT (2016) 388 ITR 366/242 2330 785
Taxman 13 (Guj.)(HC)
Canara Bank; CIT (TDS) v. * (2016) 386 ITR 229 (P&H)(HC) 2000 660
Canara Bank; CIT (TDS) v. * (2016) 386 ITR 504/240 Taxman 249/289 CTR 1999 660
75/141 DTR 73 (All.)(HC)
Capgemini Business Services (I) Ltd. v. ACIT (2016) 158 ITD 1/178 TTJ 174 59
129 (Mum.)(Trib.)
Capgemini SA v. DCIT (2016) 160 ITD 13 (Mum.)(Trib.) 142 45
169 56
Capt. Avinash Chander Batra v. Dy. CIT (2016) 158 ITD 604 (Mum.)(Trib.) 1027 315
Carlsberg India (P) Ltd. v. UOI (2016) 139 DTR 289/288 CTR 128 (Delhi) 2575 889
(HC)
Carlyle India Advisors (P.) Ltd. v. ACIT (2016) 157 ITD 600 (Mum.)(Trib.) 1413 447
Carmelite Charitable Society; ACIT v. * (2016) 157 ITD 78 (SMC) 300 105
(Amritsar)(Trib.)
Carpi Tech SA v. ADIT (2017) 145 DTR 17 (Chennai)(Trib.) 143 46
Carrier Air Conditioning and Refrigeration Ltd.; PCIT v. * (2016) 387 ITR 2269 764
441 (P&H)(HC)
xxv
Case Laws Index
Name Case Page
No. No.
Carrier Race Technologies P. Ltd. v. ITO (2016) 380 ITR 483/64 taxmann. 1402 443
com 252 (Mad.) (HC)
Casby Logistics P. Ltd. v. DCIT (2016) 47 ITR 230 (Mum.)(Trib.) 385 132
939 282
583 186
Casio India Co. (P.) Ltd. v. Dy. CIT (2015) 70 SOT 48 (Delhi)(Trib.) 1418 449
CBDT v. Regen Infrastructure and Services P. Ltd. (2016) 389 ITR 138/ 1577 508
(2017) 244 Taxman 39 (Mad.)(HC)
C-Dot Alcatel-Lucent Research Centre (P.) Ltd.; Dy. CIT v. * (2016) 177 1416 448
TTJ 211 (Delhi)(Trib.)
CEAT Ltd. v. CBDT (2016) 383 ITR 300/ 240 Taxman 147/286 CTR 225/135 2138 713
DTR 50 (Delhi)(HC)
Cebon India Ltd. v. CIT (2016) 387 ITR 502 (P&H)(HC) 633 199
926 279
Centauto Automotives (P.) Ltd. v. Union Bank of India (2016) 236 Taxman 2113 704
68 (MP)(HC)
Central Advertising Agency v. UOI (2016) 389 ITR 320 (Ker.)(HC) 2066 684
Central Scientific Instruments Organisation v. CIT (TDS) (2016) 385 ITR 2507 850
617/143 DTR 234 (P&H)(HC)
Central Warehousing Corporation Ltd.; CIT v. * (2016) 382 ITR 172 (Delhi.) 1815 592
(HC)
Cenzer Industries Ltd v. ITO (2016) 385 ITR 582/239 Taxman 543/287 CTR 664 206
219/138 DTR 37 (Bom.)(HC)
Cerner Health Care Solutions P. Ltd.; ITO v. * (2016) 45 ITR 207 (Bang.) 258 92
(Trib.) 875 264
Cerner Healthcare Solutions (P) Ltd.; ITO v. * (2016) 176 TTJ 63/140 DTR 257 92
191 (Bang.)(Trib.)
Chaitanya Properties (P.) Ltd.; CIT v. * (2016) 240 Taxman 659/140 DTR 1733 562
224 (Karn.)(HC)
Chalasani Mallikarjuna Rao (Dr.); DCIT v. * (2016) 161 ITD 721 (Visakh) 1075 330
(Trib.) 1051 323
1100 337
Champaklal S. Kasat v. DCIT (2016) 50 ITR 465 (Ahd.)(Trib.) 1907 628
Chander Shekhar Aggarwal v. ACIT (2016) 157 ITD 626 (Delhi)(Trib.) 2068 685
Chandigarh Golf Club v. CIT (2016) 156 ITD 264/177 TTJ 47 (UO) (Chd.) 324 111
(Trib.)
xxvi
Case Laws Index
Name Case Page
No. No.
Chandmal Sancheti v. ITO (2016) 160 ITD 313/181 TTJ 906 (Jaipur)(Trib.) 2086 693
2087 694
2088 694
Chandra Cement Ltd.; CIT v. * (2016) 143 DTR 41/(2017) 291 CTR 581/ 2403 813
(2017) 393 ITR 324 (Raj.)(HC)
Chandrakant R. Shrivastav v. ITO (2016) 158 ITD 755/181 TTJ 713/(2017) 1176 364
152 DTR 72 (Ahd.)(Trib.) 1234 382
Chandraprabhu Jain Swetamber Mandir v. ACIT (2016) 50 ITR 355 (Mum.) 305 106
(Trib.)
Chandrasekhar Maruti Musale v. ACIT (2016) 159 ITD 822/(2017) 183 TTJ 34 10
459 (Mum.)(Trib.)
Chandrasekhar Maruti v. ACIT (2016) 159 ITD 822/(2017) 183 TTJ 459/146 30 9
DTR 198 (Mum.)(Trib.)
Chandubhai Ambalal Prajapati v. ACIT (2016) 50 ITR 74 (Ahd.)(Trib.) 2450 831
Charanjit Singh v. CBDT (2016) 388 ITR 469 (P&H)(HC) 2393 809
Chaturbhuj Manoj Kumar v. CIT (2016) 388 ITR 194 (Raj.)(HC) 1662 540
2547 870
Chaudhary Skin Trading Co. v. Pr. CIT (2016) 290 CTR 533/76 taxmann. 1590 513
com 169 (Delhi)(HC)
Chawara Educational Trust v. ITO (2016) 157 ITD 281 (Pune)(Trib.) 297 104
1647 534
Chawla Chemtech (P.) Ltd. v. JCIT (2016) 158 ITD 48 (Chd)(Trib.) 2502 848
Chenitan Color Chem (P.) Ltd v. ACIT (2015) 43 ITR 181/(2016) 156 ITD 826 250
509 (Chennai)(Trib.)
Cherokee India (P) Ltd. v. Dy. CIT (2016) 179 TTJ 9 2/ 136 DTR 353 2453 832
(Mum.)(Trib.)
Chetnaben J. Shah v. ITO (2016) 140 DTR 235/288 CTR 79 (Guj.)(HC) 1606 519
Chhaya P. Gangar (Ms). v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.) 1927 634
1222 379
1170 362
1926 634
1928 634
1929 635
Chirakkal Service Co-op. Bank Ltd. v. CIT (2016) 384 ITR 490/239 Taxman 1342 420
417/286 CTR 439/135 DTR 361 (Ker.)(HC)
Chironji Lal Virendra Pal Saraswati Shaiksha parishad; CIT(E) v. * (2016) 2321 781
380 ITR 265 (All.)(HC)
xxvii
Case Laws Index
Name Case Page
No. No.
Chittoor Dist. Co-operative Central Bank Ltd.; ACIT v. * (2016) 161 ITD 847 256
282/50 ITR 303 (Hyd.)(Trib.)
Choksi Vachharaj Makanji & Co. v. ACIT (2016) 243 Taxman 465 (Guj.) 1728 561
(HC)
Chunibhai Ranchhodbhai Dalwadi (Late) v. ACIT (2016) 388 ITR 130 1762 572
(Guj.)(HC)
Cincom System Inc v. DDIT (2016) 176 TTJ 245/131 DTR 345 (Delhi)(Trib.) 175 59
Cipla Ltd v. ACIT (2016) 387 ITR 52/290 CTR 387/141 DTR 73/73 2290 771
taxmann.com 22 (Bom.)(HC)
CISCO Systems Services v. JCIT (2016) 161 ITD 12 (Bang.)(Trib.) 814 246
Citi Bank N.A.; CIT v. * (SC); www.itatonline.org 618 195
Citrix R & D India (P.) Ltd. v. Dy. CIT (2016) 136 DTR 335 (Bang.)(Trib.) 1419 449
CJ International Hotels Ltd. v. CIT (2016) 286 CTR 126/134 DTR 273 (SC) 406 137
CJ. International Hotels Ltd. v. Dy. CIT (2016) 177 TTJ 124 (Delhi)(Trib.) 760 234
Classic Concepts Home India P. Ltd. v. CIT (2016) 383 ITR 626 (Ker.)(HC) 2499 847
Classy The Antique Defend Furniture v. Dy. CIT (2016) 387 ITR 212/242 2214 745
Taxman 469 (Ker.)(HC)
Classy The Antique Defend Furniture v. Dy. CIT (2016) 387 ITR 212/242 1607 519
Taxman 469/(2017 293 CTR 373 (Ker.)(HC)
CMS Securities Ltd.; DCIT v. * (2016) 47 ITR 378 (Mum.) (Trib) 605 191
Cochin International Airport Ltd. v. ITO (IT) (2016) 157 ITD 310/136 DTR 150 48
241/177 TTJ 578 (Cochin)(Trib.) 193 67
Coimbatore District Central Co-op. Bank Ltd v. ITO (2016) 382 ITR 2006 663
266/137 DTR 193/288 CTR 53 (Mad.)(HC)
Commissioner, Belgaum Urban Development Authority v. CIT (2016) 382 1993 658
ITR 8/243 Taxman 237/136 DTR 96/286 CTR 371 (SC)
Competent Authority (SAFEM (FOP) and NDPS Act v. M. Khader Moideen 2574 888
(2016) 387 ITR 390 (Mad.)(HC)
Compucom Software Ltd. v. DCIT (2016) 45 ITR 619 (Jaipur)(Trib.) 2476 839
Computer Point (I) Ltd.; CIT v. * (2016) 381 ITR 441 (Bom.)(HC) 2277 766
Concord International; CIT v. * (2016) 388 ITR 307 (Ker.)(HC) 1333 417
Contai Co-op. Bank Ltd v. ACIT (2016) 386 ITR 144 (Cal.)(HC) 1341 420
Continental Carriers v. CIT (2016) 384 ITR 102/135 DTR 293 (Delhi)(HC) 1334 418
Cooper Corporation (P.) Ltd. v. Dy. CIT (2016) 159 ITD 165/180 TTJ 727 710 221
(Pune)(Trib.)
xxviii
Case Laws Index
Name Case Page
No. No.
Copal Research India (P.) Ltd. v. Dy. CIT (2016) 160 ITD 523/(2017) 152 1414 448
DTR 94 (Delhi)(Trib.)
Corbett Educational Society v. CIT (2016) 48 ITR 743/181 TTJ 315/142 335 116
DTR 335 (Delhi)(Trib.)
Cornell Overseas (P.) Ltd. v. Dy. CIT (2016) 160 ITD 373 (Delhi)(Trib.) 727 224
728 225
Cornerstone Brands Ltd.; CIT v. * (2016) 387 ITR 455 (Guj.)(HC) 1541 494
2123 707
Cornerstone Exports (P.) Ltd.; CIT v. * (2016) 238 Taxman 465 (Guj.)(HC) 579 185
Coromandel Oils (P) Ltd. v. TRO & Ors. (2016) 143 DTR 97 (2017) 244 2111 703
Taxman 165/291 CTR 600 (Mad.)(HC)
Coronation Agro Industries Ltd. v. DCIT (Bom)(HC); www.itatonline.org 1778 578
Corpo Systems Ltd., In re (2016) 389 ITR 29/239 Taxman 185/289 CTR 956 288
306 (AAR)
Correspondent Holy Cross Primary School v. CBDT (2016) 388 ITR 162/240 1987 656
Taxman 395/ 141 DTR 257/289 CTR 293 (Mad.)(HC)
Council for Citrus and Agri Juicing in Punjab v. CIT (TDS) (2016) 236 2063 683
Taxman 489 (P&H)(HC)
Council of Institute of Chartered Accountants of India v. B. K. Dhingra 2560 874
(2016) 243 Taxman 90 (Delhi)(HC)
Council of the Institute of Chartered Accountants of India v. Devinder 2561 875
kumar Jain (2016) 242 Taxman 41 (Delhi)(HC)
Council of the Institute of Chartered Accountants of India v. Gurvinder 2563 875
Singh (2016) 242 Taxman 36 (Delhi)(HC)
Council of the Institute of Chartered Accountants of India v. Mahesh 2564 875
Kumar Gupta (2016) 242 Taxman 44 (Delhi)(HC)
Council of the Institute of Chartered Accountants of India v. Rakesh Verma 2565 876
(2016) 242 Taxman 55 (Delhi)(HC)
Council of the Institute of Chartered Accountants of India v. Uma 2562 875
Shanakar Jha (2016) 242 Taxman 49 (Delhi)(HC)
CREDAI Bengal v. CIT(E) (2016) 52 ITR 161 (Kol.)(Trib.) 289 102
Credit Lyonnais; DIT(IT) v. * (2016) 238 Taxman 157 (Bom.)(HC) 674 209
2055 680
Crompton Greaves Ltd. v. CIT (2016) 46 ITR 465/140 DTR 153/177 TTJ 1 2364 798
(Mum.)(Trib.)
CUB Pty Ltd. v. UOI (2016) 388 ITR 617/139 DTR 113/241 taxman 278/288 130 42
CTR 361 (Delhi)(HC)
xxix
Case Laws Index
Name Case Page
No. No.
Cummins Ltd., In re (2016) 381 ITR 44/237 Taxman 693/283 CTR 241/130 200 70
DTR 353 (AAR)
CWT v. Mohan Exports India P. Ltd. (2016) 387 ITR 252/70 taxmann.com 2533 865
220 (Delhi)(HC)
CWT v. Suman Dhamija (2016) 382 ITR 343 (Delhi)(HC) 2535 865
Cyber Park Development & Construction Ltd. v. Dy. CIT (2016) 159 ITD 377 130
648/181 TTJ 556 (Bang.)(Trib.) 511 166
712 221
Cyient Ltd. v. Dy.CIT (2015) 70 SOT 741( Hyd.)(Trib.) 133 42
D
D & H Enterprises; PCIT v. * (2016) 241 Taxman 157 (Guj.)(HC) 1131 350
D. B. Corp. Ltd v. Dy. CIT (2016) 389 ITR 162 (Guj.)(HC) 1359 427
D. Chetan & Co; CIT v. * (2016) 243 Taxman 356/(2017) 390 ITR 36/151 463 154
DTR 277 (Bom.)(HC)
D. Devadass v. ITO (2016) 48 ITR 613 (Chennai)(Trib.) 1094 336
D. E. Shaw India Software (P) Ltd.; ACIT v. * (2016) 156 ITD 594/175 TTJ 2210 743
492/129 DTR 199 (Hyd.)(Trib.)
D. H. Patkar & Co. v. ITO (2016) BCAJ-April-P. 32 (Mum.)(Trib.) 797 242
D. H. Patkar and Co. v. ITO (2016) 47 ITR 82 (Mum.)(Trib.) 751 232
D. Ramgopla v. M. Kalpalatha Rajan, ACIT (2016) 288 CTR 354/241 1586 512
Taxman 15 (Mad.)(HC)
D. S. (India) Jewelmart P. Ltd. v. UOI (2016) 387 ITR 593 (All.)(HC) 1599 516
D. Srinivas Vyas v. ITO (2016) 73 taxmann.com 4 (Mad.)(HC) 625 197
D.C. Mills P. Ltd.; CIT v. * (2016) 387 ITR 64 (Ker.)(HC) 2332 786
Daga Global Chemicals Pvt. Ltd. v. ACIT (2016) 46 ITR 70 (Mum.)(Trib.) 383 131
Daksh Business Process Services P. Ltd. v. DCIT (2016) 49 ITR 49 (Delhi) 1415 448
(Trib.) 1424 451
Dalmia Cement (Bharat) Ltd. v. CIT (2016) 137 DTR 217 (Delhi)(HC) 622 196
1891 622
Damodar Valley Corporation v. Add. CIT (2016) 157 ITD 415/139 DTR 1569 502
201/180 TTJ 82 (Kol.)(Trib.) 394 134
Damodar Valley Corporation v. DCIT (2016) 160 ITD 78/50 ITR 583/182 521 168
TTJ 765/(2017) 148 DTR 285 (Kol.)(Trib.)
Damsak Projects P. Ltd. v. DCIT (2016) 45 ITR 278 (Mum.)(Trib.) 418 141
2384 806
xxx
Case Laws Index
Name Case Page
No. No.
Datamine International Ltd. v. ADIT(IT) (2016) 158 ITD 84/178 TTJ 560/48 134 43
ITR 229 (Delhi)(Trib.)
Dattani Development; ACIT v. * (2017) 147 DTR 224 (Mum.)(Trib.) 1061 326
Davinder Kumar Bhasin; DCIT v. * (2015) 174 TTJ 844/128 DTR 218/(2016) 201 71
45 ITR 232 (Chd.)(Trib.) 1507 479
Dayawanati (Smt.) Through LH Smt. Sunita Gupta v. CIT (2016) 143 DTR 542 174
209 (Delhi)(HC)
DBS Bank Ltd. v. DDIT (2016) 157 ITD 476/176 TTJ 293 (Mum.)(Trib.) 1947 641
DBS Bank Ltd. v. Dy. IT(IT) (2016) 157 ITD 476/176 TTJ 293/131 DTR 121 825 250
(Mum.)(Trib.)
DDRC SRL Diagnostic (P.) Ltd. v. ITO (2016) 157 ITD 92/135 DTR 107/178 2024 668
TTJ 281 (Mum.)(Trib.) 2030 669
Deep Industries Ltd. v. ACIT (2016) 241 Taxman 355 (Guj.)(HC) 120 38
Deep Industries Ltd.; PCIT v. * (2016) 238 Taxman 198 (Guj.)(HC) 2346 791
Deepak Sogani v. DCIT (2016) 158 ITD 533 (Mum.)(Trib.) 1238 384
Deepak Verma v. CIT (2016) 384 ITR 154 (P&H)(HC) 1328 416
Defree Engineering (P.) Ltd.; CIT v. * (2016) 76 taxmann.com 11 (Mad.) 1282 398
(HC)
Dell India P. Ltd.; JCIT v. * (2016) 382 ITR 310/287 CTR 695 (Karn.)(HC) 1814 592
Dell International Services India P. Ltd. v. ACIT (2016) 382 ITR 37 (Karn.) 681 211
(HC) 2233 752
Deloitte Consulting India (P) Ltd.; ACIT v. * (2016) 175 TTJ 492/129 DTR 2210 743
199 (Hyd.)(Trib.)
Deloitte Support Services India (P) Ltd.; ACIT v. * (2016) 175 TTJ 492/129 2210 743
DTR 199 (Hyd.)(Trib.)
Deloitte Tax Services India (P) Ltd.; ACIT v. * (2016) 175 TTJ 492/129 2210 743
DTR 199 (Hyd.)(Trib.)
Denso India Ltd. v. CIT (2016) 388 ITR 324/133 DTR 33/240 Taxman 1398 442
713/287 CTR 597 (Delhi)(HC)
Desai Construction P. Ltd.; PCIT v. * (2016) 387 ITR 552 (Guj.)(HC) 1892 622
Det Norske Veritas A/S v. Addl. DIT (2016) 157 ITD 1022/178 TTJ 59 1468 465
(Mum.)(Trib.)
Det Norske Veritas A/S v. Addl. DIT (2016) 157 ITD 1022/178 TTJ 59/134 1464 463
DTR 97 (Mum.)(Trib.)
Dev Bhumi Industries v. CIT & Ors. (2016) 143 DTR 273/290 CTR 317 1587 512
(HP)(HC)
xxxi
Case Laws Index
Name Case Page
No. No.
Devindraben I. Barot (Smt.) v. ITO (2016) 141 DTR 302/159 ITD 162 (Ahd.) 1053 324
(Trib.)
Devindraben I. Barot (Smt.) v. ITO (2016) 159 ITD 162/182 TTJ 805 (Ahd.) 1050 323
(Trib.)
Devraj Infrastructures Ltd. v. Chairman/Member (Industrial Park) CIT 1288 400
(2016) 388 ITR 99/(2017) 145 DTR 131/292 CTR 58 (Guj.)(HC)
Devraj R. Agarwal v. ACIT (2016) 389 ITR 642 (Guj.)(HC) 1272 395
Dewanchand Ramsaran Industries (P.) Ltd. v. ACIT (2016) 158 ITD 645/47 754 233
ITR 687/179 TTJ 557 (Mum.)(Trib.) 755 233
759 234
Dhanashekar Muniswamy v. ACIT (2016) 161 ITD 366 (Bang.)(Trib.) 2018 666
Dhanlaxmi Equipment Pvt. Ltd.; ACIT v. * (Jaipur)(Trib.); www.itatonline. 1189 367
org
Dharampal Satyapal Ltd.; Dy. CIT v. * (2016) 130 DTR 241/175 TTJ 217 1885 619
(Delhi)(Trib.)
Dharampal Satyapal Ltd.; Dy. CIT v. * (2016) 130 DTR 241/175 TTJ 663 1648 535
(Delhi)(Trib.) 1864 611
Dharampal Satyapal; CIT v. * (2016) 380 ITR 527/283 CTR 37/237 Taxman 1038 319
452/130 DTR 145 (Delhi) (HC)
Dharamshibhai Sonani v. ACIT (2016) 161 ITD 627/181 TTJ 721 (SMC) 1052 323
(Ahd.)(Trib.)
Dharamshibhai Sonani v. DCIT (2016) 142 DTR 62 (Ahd.)(Trib.) 1058 325
Dharma Productions P. Ltd. v. ACIT (2016) 45 ITR 102 (Mum.)(Trib.) 779 238
780 238
Dharmaj Kelvani Mandal v. CCIT (2016) 161 ITD 841 (Ahd)(Trib.) 2205 742
225 80
Dharmidevi Kanaiyalal Suthar v. ITO (2016) 51 ITR 55 (Ahd.)(Trib.) 1054 324
Dhasawala Traders v. ITO (2016) 161 ITD 142 (Ahd.)(Trib.) 2089 694
DHFL Venture Capital Fund v. ITO (2016) 157 ITD 60 (Mum.)(Trib.) 232 83
Diamond Investment and Properties v. ITO (2016) 389 ITR 289 (2017) 292 2281 768
CTR 252/147 DTR 59/247 Taxman 225 (SC)
Dignity Innovations v. ITO (2016) 49 ITR 4 (Chennai)(Trib.) 182 61
Dilip Battu Karanjule v. ITO (2016) 161 ITD 172 (Pune)(Trib.) 449 150
Dilip Loyalka v. ACIT (2016) 130 DTR 73/175 TTJ 334 (Kol.)(Trib.) 422 142
1351 423
Dilip Manhar Parekh v. DCIT (2016) 136 DTR 113/178 TTJ 513 (Mum.) 1102 338
(Trib.)
xxxii
Case Laws Index
Name Case Page
No. No.
Dimension Data Asia Pacific Pte. Ltd. v. DCIT (2016) 52 ITR 155/(2017) 2242 755
183 TTJ 673 (Mum.)(Trib.)
Dinamalar v. ITO (2016) 389 ITR 94/242 Taxman 437 (Mad.)(HC) 489 161
Dinesh D. Ranka; CIT v. * (2016) 380 ITR 440/(2015) 280 CTR 224 (Karn.) 64 20
(HC)
Dinesh D. Rankha v. CIT (2016) 239 Taxman 262 (SC) 961 290
Dipesh Lalchand Shah v. ACIT (2016) 158 ITD 515/179 TTJ 654/138 DTR 35 10
155 (Ahd.)(Trib.)
Discovery Communications India v. Dy. CIT (2016) 130 DTR 137/175 TTJ 1497 474
271 (Delhi)(Trib.)
Dish TV India Ltd. v. ACIT (2016) 157 ITD 1096/177 TTJ 752 (Delhi)(Trib.) 2049 677
2078 690
Dish TV India Ltd. v. ACIT (2016) 157 ITD 1096/177 TTJ 752/134 DTR 2021 667
81 (Delhi)(Trib.)
Divine Infracon (P) Ltd.; CIT v. * (2016) 131 DTR 395 (Delhi)(HC) 2240 755
Dix Francis v. ITSC (2016) 289 CTR 404/(2017) 391 ITR 401/244 Taxman 2160 722
126 (Mad.)(HC)
DLF Hilton Hotels; CIT v. * (2016) 240 Taxman 495 (Delhi)(HC) 80 25
668 207
DLF Hotel Holdings Ltd. v. Dy. CIT (2016) 159 ITD 1075/181 TTJ 58 1364 429
(Delhi)(Trib.)
Dnyaneshwar Govind Kalbhor (HUF) v. ACIT (2016) 161 ITD 243/(2017) 1842 605
183 TTJ 203/(2017) 151 DTR 21 (Pune)(Trib.)
Dnyaneshwar Govind Kalbhor (HUF) v. ACIT (2017) 161 ITD 243/183 TTJ 1850 607
203 (Pune)(Trib.)
Dolarri Hemani v. ITO (Kol.)(Trib.); www.itatonline.org 982 299
Doosan Heavy Industries and Construction Co.; DIT(IT.) v. * (2016) 388 1763 572
ITR 557/243 Taxman 421 (Bom.)(HC)
Dow Agro Sciences Agricultural Products Ltd., In re (2016) 380 ITR 13 4
668/131 DTR 177/65 taxmann.com 245/284 CTR 50 (AAR)
DPIL Ltd. v. CIT (2016) 386 ITR 539/241 Taxman 66 (Cal.)(HC) 569 182
Dr. Ajit Gupta v. ACIT (2016) 383 ITR 361 (Delhi)(HC) 1829 598
Dr. Gautam Sen v. CCIT (2016) 289 CTR 478 /142 DTR 220/ 74 taxmann. 1962 645
com 128. (Bom.)(HC)
Dr. Gautam Sen v. CCIT v. (Bom)(HC), www.itatonline.org 1965 646
Dr. Pravan Prakash v. CIT (2016) 387 ITR 458 (Patna)(HC) 1959 644
xxxiii
Case Laws Index
Name Case Page
No. No.
Dr. Reddy Laboratories Ltd., In re (2016) 387 ITR 337/243 Taxman 127/289 197 69
DTR 24 (AAR)
Dr. Sarita Milind Davare v. ACIT (2017) 184 TTJ 184 TTJ 9 (UO)(Mum.) 2439 829
(Trib.)
Dr. Vasant J. Rath Trust; ITO v. * (Mum.)(Trib.); www.itatonline.org 1008 309
DSM Sinochem Pharmaceuticals India P. Ltd. v. DCIT (2016) 176 TTJ 322 538 173
(Chd.)(Trib.) 774 237
DSP Investment Pvt. Ltd. v. ACIT (Bom.)(HC); www.itatonline.org 2236 753
Dudani Metal Agencies; ITO v. * (2016) 157 ITD 1088 (Rajkot)(Trib.) 2092 695
Duncan Industries Ltd.; CIT v. * (2016) 385 ITR 150/138 DTR 241/288 464 154
CTR 107 (Cal.)(HC) 665 206
Dundload Shikshan Sansthan & Anr. v. UOI (2015) 235 Taxman 446 (2016) 2132 710
131 DTR 382/284 CTR 175 (Raj.)(HC)
Dushyant Kumar Jain v. CIT (2016) 381 ITR 428/237 Taxman 646/139 DTR 1823 596
209/288 CTR 124 (Delhi)(HC)
Dutta Automobiles (P) Ltd.; PCIT v. * (2016) 287 CTR 684 (Cal.)(HC) 1144 354
E
E. Ummer Bava v. CIT (2016) 72 taxmann.com 123 (Ker.)(HC) 1135 351
Eastern Power Distribution Company of A. P. Ltd.; Dy. CIT v. * (2016) 160 936 282
ITD 432 (Visakh) Trib.)
E-enable Technologies P. Ltd.; Dy.CIT v. * (2016) 46 ITR 546 (Delhi)(Trib.) 705 220
706 220
Effronics Systems Pvt. Ltd. v. ACIT (Vizag)(Trib.), www.itatonline.org 549 176
Efftronics Systems (P.) Ltd. v. (2016) 161 ITD 688 (Visakh.)(Trib.) 2027 668
Efftronics Systems (P.) Ltd. v. (2016) 161 ITD 688/52 ITR 497 846 255
(Visakha(Trib.)
E-Infochips Ltd. v. Dy. CIT (2015) 231 Taxman 838/123 DTR 199/(2016) 1739 565
380 ITR 449 (Guj.)(HC)
Elecon Engineering Co. Ltd. v. ACIT (2017) 148 DTR 81 (Guj.)(HC) 1777 577
Elegant Estates; CIT v. * (2016) 383 ITR 49 (Mad.)(HC) 1323 413
Elegant Travels P. Ltd.; CIT v. * (2016) 380 ITR 179 (Delhi)(HC) 2320 781
Eli Lilly & Co. (India) (P) Ltd v. ACIT (2016) 159 ITD 482/176 TTJ 234 1508 479
(Delhi)(Trib.) 1422 450
Elite Pharmaceuticals v. ITO (2016) 242 Taxman 345/(2017) 152 DTR 226 1745 567
(Cal.)(HC)
xxxiv
Case Laws Index
Name Case Page
No. No.
Emaar Alloys (P) Ltd. v. DGIT (Inv) & Ors. (2015) 235 Taxman 569 (2016) 1596 515
138 DTR 54/288 CTR 413 (Jharkhand)(HC) 1601 517
Emblem Fashion Wear Exports P. Ltd. v. ITO (2016) 45 ITR 358 (Mum.) 2479 840
(Trib.)
Emerald Co. Ltd. v. ITO (2016) 46 ITR 619/176 TTJ 276/133 DTR 177 2369 800
(Kol.)(Trib.)
Emerald Cruises v. ITAT (2016) 238 Taxman 143 (Bom.)(HC) 2231 751
Emgeeyar Pictures (P.) Ltd. v. DCIT (2016) 159 ITD 1/138 DTR 20/179 TTJ 1881 618
383 (TM) (Chennai)(Trib.)
Empire Package Pvt. Ltd.; PCIT v. * (2016) 136 DTR 342/286 CTR 457 366 126
(P&H)(HC)
Employees Provident Fund Organization v. Dy. CIT (2016) 160 ITD 611/181 1990 657
TTJ 494 (Delhi)(Trib.)
Enn Zen Enterprises (P) Ltd. v. ACIT (2016) 45 ITR 382 (Chd.)(Trib.) 458 153
EON Hadapsar Infrastructure (P.) Ltd. v. ACIT (2016) 159 ITD 532 (Pune) 709 221
(Trib.)
Equant Solutions India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 292 (Delhi) 1486 471
(Trib.)
Escorts Asset Management Limited; ITO v. * (2016) 49 ITR 37 (Delhi) 843 255
(Trib.) 844 255
ESPN Star Sports Mauritius S. N. C. et Compagnie v. UOI (2016) 388 ITR 1665 541
383/241 Taxman 38/290 CTR 49/142 DTR 296 (Delhi)(HC)
ESS Distribution (Mauritius) S. N. C. et Compagnie v. UOI (2016) 388 ITR 1665 541
383/241 Taxman 38/290 CTR 49/142 DTR 296 (Delhi)(HC)
Essae Teraoka Ltd. v. DCIT (2016) 157 ITD 728 (Bang.)(Trib) 986 300
1843 605
Essilor India Pvt. Ltd. v. DCIT (2016) 178 TTJ 69/135 DTR 20 (Bang.) 1526 488
(Trib.); www.itatonline.org
Euro Leder Fashions Ltd.; ACIT v. * (2016) 156 ITD 208 (Chennai)(Trib.) 827 250
Executive Engineer, O and M Division, (GESCOM); CIT v. * (2016) 386 2013 665
ITR 438 (Karn.)(HC) 2039 674
F
F.C. Sondhi & Co. (India) (P.) Ltd. v. Dy. CIT (2016) 156 ITD 103/178 TTJ 2268 764
237/134 DTR 186 (Asr.)(Trib.)
Facor Power Ltd.; PCIT v. * (2016) 380 ITR 474/237 Taxman 613/283 CTR 92 30
141/130 DTR 281 (Delhi)(HC)
xxxv
Case Laws Index
Name Case Page
No. No.
Fair Isaac India Software (P.) Ltd.; Dy. CIT v. * (2016) 51 ITR 117 (Bang.) 1417 449
(Trib.)
Famous Sand Dredging Co. v. CIT (2016) 386 ITR 450/ 239 Taxman 654 203
551/139 DTR 50 (Bom.)(HC)
Farid Gulmohamed v. ITO (Mum.)(Trib.); www.itatonline.org 1064 327
Farida Holdings (P.) Ltd.; CIT v. * (2016) 243 Taxman 428 (Mad.)(HC) 23 7
Farida Leather company; CIT v. * (2016) 238 Taxman 473/135 DTR 268/287 839 254
CTR 565 (Mad.)(HC)
Farrah Marker v. ITO (Mum.)(Trib.), www.itatonline.org 1173 363
Fatheraj Singhvi v. UOI (Karn.)(HC); www.itatonline.org 2131 710
FCG Software Services (India) (P) Ltd v. ITO (2016) 176 TTJ 145/66 2250 758
taxmann.com 296 (Bang.)(Trib.) 1510 480
259 92
Federation of Hotel and Restaurant Association of India v. UOI (2016) 383 2034 672
ITR 697/134 DTR 169/287 CTR 161 (Delhi)(HC)
Federation of Hotels & Restaurants Association of India v. UOI (2016) 139 2576 890
DTR 321/288 CTR 245 (Delhi)(HC)
FFC Aromas (P.) Ltd. v. ITO (2016) 161 ITD 539 (Mum.)(Trib.) 548 176
Fiberfill Engineers v. ACIT (2016) 177 TTJ 556/138 DTR 57 (Delhi)(Trib.) 1932 636
Fibres & Fabrics International (P.) Ltd. v. DCIT (2016) 160 ITD 102/182 TTJ 522 169
374 (Bang.)(Trib.) 1631 529
Fibres and Fabrics International P. Ltd. v. Dy. CIT (2016) 48 ITR 46 (Bang.) 1835 603
(Trib.)
Fiduciary Share & Stock P. Ltd. v. ACIT (Mum)(Trib.); www.itatonline.org 1250 389
Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554/181 TTJ 379 130
750 (Mum.)(Trib.) 2044 676
1247 387
Fiesta Properties (P.) Ltd.; ITO v. * (2016) 160 ITD 426/(2017) 53 ITR 614 913 275
(Mum.)(Trib.)
Film Logic India P. Ltd. v. ACIT (2016) 47 ITR 769 (Mum.)(Trib.) 451 151
Fino Fintech Foundation; ITO v. * (2016) 159 ITD 743 (Mum.)(Trib.) 2046 676
First Data (India) (P.) Ltd.; CIT v. * (2016) 384 ITR 260/237 Taxman 543 2436 828
(Bom.)(HC)
Food World Supermarkets Ltd. v. Dy. DIT (2015) 174 TTJ 859/(2016) 129 191 66
DTR 137 (Bang.)(Trib.)
xxxvi
Case Laws Index
Name Case Page
No. No.
Foods and Inns Ltd. v. ACIT (2016) 159 ITD 1007 (Mum.)(Trib.) 467 155
711 221
848 256
Fortis Healthcare Ltd.; ACIT v. * (2016) 157 ITD 746 (Chd.)(Trib.) 2045 676
Fortune Infotech Ltd. v. ACIT (2016) 157 ITD 1244/176 TTJ 619/47 ITR 1509 480
113/131 DTR 321 (Ahd.)(Trib.) 1511 481
Fortune Infotech Ltd. v. ACIT (2016) 157 ITD 1244/47 ITR 113/176 TTJ 1455 460
619/131 DTR 321 (Ahd.)(Trib.)
Fortune Technocomps (P) Ltd.; Pr. CIT v. * (Delhi)(HC); www.itatonline.org 2435 827
Fosroc Chemicals India (P.) Ltd.; CIT v. * (2016) 240 Taxman 731/290 CTR 1382 435
221/143 DTR 153 (Karn.)(HC)
Foster Wheeler France SA v. DDIT(IT) (2016) 157 ITD 793/176 TTJ 521/137 192 67
DTR 265 (Chennai)(Trib.)
Foster Wheeler France SA v. Dy. DIT (2016) 178 TTJ 354 (Chennai)(Trib.) 187 63
Foster Wheeler G. B. Ltd., In re (2016) 389 ITR 509/290 CTR 1 (2017) 77 799 242
taxmann.com 205/142 DTR 345 (AAR)
Foundation for Indo-German Studies v. DIT (2016) 161 ITD 226 (Hyd.) 332 115
(Trib.)
Foxconn India Developer (P) Ltd. v. ITO (2016) 288 CTR 173/239 Taxman 2031 670
513 (Mad.)(HC)
Foxconn India Developer (P.) Ltd. v. ITO (2016) 239 Taxman 513/288 CTR 2032 670
173/135 DTR 185 (Mad.)(HC)
Franchise India Holdings Ltd. v. ACIT (2016) 388 ITR 563/293 CTR 474 1764 573
(P&H)(HC)
Fritidsresor Tours & Travels India (P.) Ltd.; Dy. CIT v. * (2016) 157 ITD 1485 471
495/139 DTR 336/180 TTJ 65 (Delhi) (Trib.) 1484 471
Fritz D. Silva; DCIT v. * (Mum.)(Trib.); www.itatonline.org 1028 315
Fugro Rovtech Ltd. v. ACIT (IT) (2016) 157 ITD 250/175 TTJ 41 (UO) 954 287
(Mum.)(Trib.)
Furniture Concepts (I) Ltd. v. ACIT (2016) 156 ITD 233 (Mum.)(Trib.) 871 263
1632 529
Future Distributors v. PCIT (2016) 160 ITD 574/181 TTJ 1/50 ITR 515 2360 797
(Kol.)(Trib.)
Future Gaming & Hotel Services (P) Ltd. v. UOI (2016) 282 CTR 225/129 2577 890
DTR 275 (Sikkim)(HC)
xxxvii
Case Laws Index
Name Case Page
No. No.
G
G. M. Finance & Trading Co.; ACIT v. * (2016) 135 DTR 57/176 TTJ 638 2443 830
(Mum.)(Trib.) 2475 839
G. Ramesh v. ITO (2016) 159 ITD 633 (Chennai)(Trib.) 1096 336
G. S. Homes & Hotels P. Ltd. v. CIT (2016) 141 DTR 201/289 CTR 106 (SC) 436 146
G. S. Homes & Hotels P. Ltd. v. Dy.CIT (2016) 141 DTR 201/289 CTR 105 68 21
(SC)
G. S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 389 ITR 78 (SC) 433 145
G. D. Birla Medical Research & Educational Foundation; DIT v. * (2016) 484 159
243 Taxman 209 (Bom.)(HC)
G.R.T. Jewellers (India) Pvt. Ltd.; CIT v. * (Mad.)(HC); www.itatonline.org 1300 405
G.S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 387 ITR 126/242 Taxman 960 289
58/289 CTR 105/141 DTR 201 (SC) 434 146
Gajanan Constructions v. DCIT (2016) 161 ITD 313 (Pune)(Trib.) 2133 711
Gajanan Constructions v. DCIT (Pune)(Trib.), www.itatonline.org 2135 711
2180 733
Galatea Ltd. v. DCIT (IT) (2016) 157 ITD 938/46 ITR 690/179 TTJ 265/138 170 56
DTR 161 (Mum.)(Trib.) 172 57
Ganapathy & Co. v. CIT (2016) 381 ITR 363/237 Taxman 587/283 CTR 2276 766
121/130 DTR 233 (SC)
Ganarya Land (P) Ltd.; CIT v. * (2016) 139 DTR 43/288 CTR 50 (Bom.)(HC) 2285 769
Ganesh Metal Industries. v. ITO (2016) 157 ITD 828 (Amritsar)(Trib.) 1633 529
Ganpat University v. Arvind Shankar (2016) 242 Taxman 496/(2017) 293 215 77
CTR 113/147 DTR 335 (Guj.)(HC)
Garden Silk Mills Ltd.; PCIT v. * (2016) 388 ITR 237 (Guj.)(HC) 1678 545
Garment Exporters Association of Rajasthan; CIT v. * (2016) 386 ITR 330 114
20/138 DTR 214/289 CTR 652 (Raj.)(HC)
Gauri Shankar & Ors. v. DIT (2016) 289 CTR 203 (Delhi)(HC) 1600 516
Gauri Shankar; DIT v. * (2016) 384 ITR 545/137 DTR 84 (Delhi)(HC) 1602 517
Gayatri Chakraborty (Smt.); ITO v. * (2016) 45 ITR 197 (Kol.)(Trib.) 43 13
GE Capital Business Process Management Services (P) Ltd. (2016) 532 171
Chamber’s Journal- January–P. 95 (Delhi)(Trib.)
GE Capital Business Process Management Services (P) Ltd. (2016) 795 241
Chamber’s Journal-January–P. 95 (Delhi)(Trib.)
GE Money Financial Services Pvt. Ltd. Ltd. v. ACIT (Delhi)(Trib.); www. 1480 469
itatonline.org
xxxviii
Case Laws Index
Name Case Page
No. No.
Gebbs Healthcare Solutions Pvt. Ltd.; DCIT v. * (2016) 46 ITR 551 (Mum.) 36 11
(Trib.) 1566 501
Geeta Mishra (Smt.) v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.) 2462 835
Geeta Mishra (Smt.) v. Dy. CIT (2016) 178 TTJ 373/135 DTR 161 (Jaipur) 2455 833
(Trib.)
Gem and Jewellery Export Promotion Council; DIT(E) v. * (2016) 384 ITR 276 99
412 (Bom.)(HC)
Gemorium v. ITO (Trib.)(Jaipur); www.itatonline.org 2491 844
Gemstone Glass (P.) Ltd v. JCIT (2015) 174 TTJ 800/128 DTR 108/(2016) 1496 474
156 ITD 176 (Ahd.)(Trib.) 1495 474
General Atlantic (P.) Ltd.; CIT v. * (2016) 384 ITR 271/238 Taxman 535/136 1388 437
DTR 413/287 CTR 97 (Bom.)(HC)
General Electoral Trust v. ITO (2016) 141 DTR 294/289 CTR 284 (Bom.) 1796 585
(HC) 1748 568
Genius Printers P. Ltd. v. ACIT (2016) 48 ITR 588 (Mum.)(Trib.) 510 166
1161 360
Genus Electrotech Ltd. v. UOI (2016) 242 Taxman 336/(2017) 152 DTR 93 1583 511
(Guj.)(HC)
Genus Electrotech Ltd.; ACIT v. * (2016) 161 ITD 644 (Ahd.)(Trib.) 100 32
1546 496
Gera Developments (P.) Ltd. v. Dy. CIT (2016) 160 ITD 439/181 TTJ 510/52 2057 680
ITR 1 (Pune)(Trib.)
Gera Developments (P.) Ltd.; CIT v. * (2016) 387 ITR 691/240 Taxman 467 2338 788
(Bom.)(HC)
Gera Developments P. Ltd. v. Dy. CIT (2016) 52 ITR 1/160 ITD 439/181 842 254
TTJ 510 (Pune)(Trib.)
Gerard Perira v. ITO (2016) 389 ITR 547 (Mad.)(HC) 1275 396
Getrag Hi Tech Gears Pvt. Ltd. v. ACIT (2016) 47 ITR 545/69 taxmann. 1671 543
com 35 (Chd.)(Trib.)
Getrag Hi Tech Gears Pvt. Ltd.; ACIT v. * (2016) 47 ITR 545/69 taxmann. 1670 542
com 35 (Chd.) (Trib.)
Ghaziabad Development Authority v. CIT (2016) 161 ITD 637 (Delhi)(Trib.) 339 117
Gideons International in India; Dy. CIT v. * (2016) 156 ITD 666 (Hyd.) 351 122
(Trib.)
Gillco Developers & Builders (P) Ltd. v. Dy. CIT (2016) 175 TTJ 81 (UO) 783 239
(Chd.)(Trib.) 1210 374
xxxix
Case Laws Index
Name Case Page
No. No.
Gillette India Ltd. v. ACIT (2015) 70 SOT 289/(2016) 175 TTJ 35 (UO) 787 239
(Jaipur)(Trib.) 876 264
1209 374
1520 484
Gimpex Ltd.; ACIT v. * (2016) 48 ITR 347 (Chennai)(Trib.) 1530 490
Giridhar G. Yadalam v. CWT (2016) 384 ITR 52/237 Taxman 392/284 CTR 2534 865
433/132 DTR 289 (SC)
Girilal and Company v. ITO (2016) 387 ITR 122/243 Taxman 233/290 CTR 1715 556
487/144 DTR 105 (SC)
Girish Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC) 88 29
2318 780
Girish Bansal, Gynendra Bansal v. UOI (2016) 142 DTR 138/289 CTR 514 202 71
(Delhi)(HC)
Girish L. Ragha; CIT v. * (2016) 239 Taxman 449/140 DTR 418/289 CTR 1070 329
213 (Bom.)(HC)
Girish M. Kothari v. JCIT (2016) 157 ITD 451 (Mum.)(Trib.) 111 35
867 262
Girraj Mehta v. CIT (2016) 382 ITR 385/133 DTR 182/285 CTR 205 (Raj.) 2432 826
(HC)
GlaxoSmithkline Consumer Health Care Ltd.; CIT v. * (2016) 383 ITR 290 672 208
(P&H)(HC)
GlaxoSmithKline Consumer Healthcare Ltd. v. JCIT (2016) 175 TTJ 552/143 399 136
DTR 57 (Chd.)(Trib.)
GlaxoSmithKline Consumer Healthcare Ltd. v. Jt. CIT (2016) 175 TTJ 782 239
552/143 DTR 57 (Chd.)(Trib.)
Global Forwarding India Pvt. Ltd.; Pr.CIT v. * (Delhi)(HC); www.itatonline. 1399 442
org
Global Mercantiles (P.) Ltd.; Dy. CIT v. * (2016) 157 ITD 924 (Kol.)(Trib.) 1174 364
1223 379
Global Realty & Ors. v. CIT (2016) 134 DTR 334/286 CTR 216 (MP)(HC) 2310 777
Goa PWD Staff Co-op. Credit Society Ltd.; PCIT v. * (2016) 242 Taxman 1335 418
422 (Bom.)(HC)
Gokul Ceramics & Ors.; PCIT v. * (2016) 141 DTR 45/289 CTR 126/241 1744 567
Taxman 1 (Guj.)(HC) 1395 439
Gold Star Jewellery Design (P) Ltd.; CIT v. * (2016) 388 ITR 510/238 1391 438
Taxman 5/138 DTR 313/288 CTR 28 (Bom.)(HC)
Golden Tobacco Limited v. DCI (Mum.)(Trib.); www.itatonline.org 1876 615
xl
Case Laws Index
Name Case Page
No. No.
Goldman Sachs (India) Securities (P.) Ltd.; CIT v. * (2016) 240 Taxman 1383 436
736/290 CTR 236/143 DTR 158 (Bom.)(HC)
Goldman Sachs (India) Securities Pvt. Ltd. v. ITO (Mum.)(Trib.); www. 46 13
itatonline.org
Golkonda Aluminium Extrusion Ltd. v. ITO (2016) 161 ITD 273 1439 454
Goodlas Nerolac Paints Ltd.; CIT v. * (2016) 386 ITR 108/131 DTR 57/284 2316 780
CTR 266 (Bom.)(HC)
Goodview Trading P. Ltd.; ACIT v. * (2016) 47 ITR 555 (Delhi)(Trib.) 1931 636
Goodwill Theatres Pvt. Ltd.; CIT v. * (2016) 386 ITR 294/241 Taxman 352 84 27
(Bom.)(HC)
Goodwill Theatres Pvt. Ltd.; CIT v. * (2016) 386 ITR 294/241 Taxman 2304 775
352/144 DTR 221 (Bom.)(HC)
Goodyear Tire & Rubber Co.; DIT(IT) v. * (2016) 236 Taxman 389 (SC) 2176 730
Gopal S. Rajput; ITO v. * (2016) 156 ITD 827 (Mum)(Trib.) 868 262
Gopi Ram Goyal Charitable Trust; CIT v. * (2016) 240 Taxman 749/(2017) 308 107
392 ITR 285 (Raj.)(HC) 312 108
Gordhan Das Gilara v. ACIT (2016) 130 DTR 67/175 TTJ 627 (Jaipur)(Trib.) 2472 838
Grama Vidiyal Trust; ACIT v. * (2016) 180 TTJ 579/71 taxman.com 88 282 100
(Chennai)(Trib.)
Grass Field Farms and Resorts P. Ltd. v. DCIT (2016) 388 ITR 395/141 DTR 2419 821
205/289 CTR 312/(2017) 79 taxmann.com 426 (Raj.)(HC)
Green Acres Educational Trust v. Dy. CIT (2016) 159 ITD 671/182 TTJ 315 108
537/49 ITR 533 (Mum.)(Trib.)
Green Meadows Pvt. Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org 2267 763
Greenfield Hotels & Estates Pvt. Ltd.; CIT v. * (2017) 245 Taxman 125 1043 321
(Bom.)(HC)
Greenfield Hotels and Estates P. Ltd.; CIT v. * (2016) 389 ITR 68/(2017) 77 1041 320
taxmann.com 308 (Bom.)(HC) 2288 770
Gregory Mathias; CIT v. * (2016) 243 Taxman 25 (Karn.)(HC) 1089 334
Group M. Media India (P) Ltd. v. UOI (2016) 142 DTR 267/289 CTR 622 1638 531
(2017) 77 taxmann.com 106 (Bom.)(HC)
Group M. Media India Pvt. Ltd v. UOI (2016) 388 ITR 594 (Bom.)(HC) 1639 532
Gruh Finance Ltd. v. ACIT (2016) 160 ITD 89 (Ahd)(Trib.) 612 193
556 178
613 193
614 194
Gruh Finance Ltd.; PCIT v. * (2016) 242 Taxman 444 (Guj.)(HC) 437 147
xli
Case Laws Index
Name Case Page
No. No.
Gruner India (P.) Ltd. v. Dy. CIT (2016) 159 ITD 772/179 TTJ 1 (Delhi) 1431 453
(Trib.) 1432 453
1433 453
GSB Capital Markets Ltd. v. Dy. CIT (2016) 156 ITD 770 (Mum.)(Trib.) 1255 390
GTC Industries Ltd.; DGIT v. * (2016) 240 Taxman 209/286 CTR 355/135 2116 705
DTR 337 (SC)
Gujarat Alkalies & Chemicals Ltd.; CIT v. * (2016) 242 Taxman 125 (Guj.) 1986 656
(HC)
Gujarat Ambuja Exports Ltd. v. DCIT (2016) 46 ITR 519 (Ahd.)(Trib.) 2019 666
2091 695
Gujarat Ambuja Exports Ltd.; DCIT v. * (2016) 46 ITR 519 (Ahd.)(Trib) 2090 694
Gujarat Industrial Investment Corporation Ltd.; CIT v. * (2016) 387 ITR 2527 860
573 (Guj.)(HC)
Gujarat Industrial Investment Corporation; CIT v. * (2016) 388 ITR 484/243 2526 860
Taxman 56/144 DTR 337/(2017) 291 CTR 17 (SC)(HC)
Gujarat Pipavav Port Ltd. v. ITO (IT) (2016) 158 ITD 687/180 TTJ 354/140 2059 681
DTR 1(Mum)(Trib.)
Gujarat Reclaim & Rubber Products Ltd.; CIT v. * (2016) 383 ITR 236/136 564 181
DTR 138/287 CTR 83 (Bom.)(HC) 802 243
Gujarat Safai Kamdar Vikas Nigam Ltd. v. Dy. CIT (2016) 158 ITD 900 234 84
(Ahd.)(Trib.)
Gujarat State Board of School Textbooks v. ACIT (2016) 243 Taxman 311 1760 571
(Guj.)(HC)
Gujarat State Electricity Corporation Ltd.; PCIT v. * (2016) 242 Taxman 1552 498
357 (Guj.)(HC)
Gulbarga Electricity Supply Co. Ltd.; CIT v. * (2016) 386 ITR 622/69 2040 674
taxmann.com 252 (Karn.)(HC)
Gulbarga Electricity Supply Company Ltd.; CIT v. * (2016) 387 ITR 484/76 2038 673
taxmann. com 244/ 142 DTR 97 (Karn.)(HC)
Gulf Energy Maritime Services (P) Ltd. v. ITO (2016) 178 TTJ 683/136 DTR 1452 458
130 (Mum.)(Trib.)
Gurbinder Singh v. ACIT (2016) 161 ITD 256 (Chennai)(Trib.) 32 10
Gurdev Agro Engineers v. CIT (2016) 387 ITR 218 (P&H)(HC) 1624 526
Gurinder Singh Bawa; CIT v. * (2016) 386 ITR 483 (Bom)(HC) 1896 623
Gurpal Singh v. ITO (2016) 159 ITD 797 (Amritsar)(Trib.) 1621 524
1846 606
Gurpreet Kaur v. ITO (Asr.)(Trib.); www.itatonline.org 1660 540
xlii
Case Laws Index
Name Case Page
No. No.
Guru Angad Dev Veterinary Agricultural Science Universtity v. CIT (2016) 2011 665
387 ITR 670 (P&H)(HC)
Guru Dashmesh Rice and General Mills v. CIT (2016) 386 ITR 97 (P&H) 1044 321
(HC)
Gurudaspur Improvement Trust v. CIT (2016) 387 ITR 741 (P&H)(HC) 2220 747
GVK Jaipur-Kishangarh Expressway (P.) Ltd. v. Addl. CIT (2014) 166 TTJ 702 219
11 (UO)/(2015) 68 SOT 205 (Jaipur)(Trib.)
GVK Oil & Gas Ltd. v. ADIT (IT) (2016) 158 ITD 215 (Hyd.)(Trib.) 165 54
Gynendra Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC) 88 29
973 295
2308 777
2318 780
H
H. Gouthamchand Jain v. ITO (2016) 159 ITD 526 (Chennai)(Trib.) 2262 762
H. Gouthamchand Jain v. ITO (2016) 388 ITR 148/243 Taxman 198 (Mad.) 1623 525
(HC)
H. K. Pujara Builders v. ACIT (Mum.)(Trib.); www.itatonline.org 2246 757
H. R. Mehta v. ACIT (2016) 138 DTR 217 (Bom.)(HC); www.itatonline.org 1148 355
H. R. Mehta v. ACIT (2016) 387 ITR 561/72 taxmann.com 110 (Bom.)(HC) 1769 574
Haji Ramzan & Sons v. CIT (2016) 242 Taxman 380 (All.)(HC) 2099 697
Halliburton Export Inc; CIT v. * (2016) 386 ITR 123 (Delhi)(HC) 163 53
Halliburton Technology India Pvt. Ltd. v. Dy. CIT (2016) 178 TTJ 12 (UO) 1450 458
(Pune)(Trib.)
Harayana Television Ltd.; CIT v. * (2016) 237 Taxman 247 (P&H)(HC) 428 144
Harbans Singh v. CIT (2016) 382 ITR 600/237 Taxman 596 (P&H)(HC) 203 72
Hari Om Gupta; ITO v. * (2016) 45 ITR 137 (Lucknow)(Trib.) 1059 325
1066 328
Harihar Housing Agency v. CIT (2016) 177 TTJ 242/134 DTR 107 (Nag.) 2371 801
(Trib.)
Harjeev Aggarwal; CIT v. * (2016) 241 Taxman 199/133 DTR 122 (Delhi) 1605 518
(HC)
Harsh Kochar, Bahrat Ice Factory; CIT v. * (2016) 287 CTR 63/69 taxmann. 1964 646
com 322/136 DTR 393/(2017) 390 ITR 385 (Patna)(HC)
Harsha N. Biliangady (Dr.); CIT v. * (2015) 379 ITR 529/(2016) 133 DTR 2433 826
223 (Karn.)(HC)
Harvinder Singh Jaggiv. ACIT (2016)157 ITD 869/179 TTJ 232 (Delhi)(Trib.) 1594 514
xliii
Case Laws Index
Name Case Page
No. No.
Haryana Agro Industries Corporation Ltd. v. CIT (2016) 385 ITR 488 (P&H) 1792 584
(HC)
Haryana State Co-op. Supply and Marketing Federation Ltd. v. CIT (2016) 2253 759
389 ITR 266 (P&H)(HC)
Haryana State Counseling Society; ITO v. * (2016) 159 ITD 816/179 TTJ 856 258
660 (Chd.)(Trib.)
Haryana State Road & Bridge Development Corporation Ltd. v. CIT (P&H) 667 207
(HC); www.itatonline.org
Haryana State Road and Bridges Development Corporation Ltd. v. CIT 634 199
(2016) 388 ITR 253/243 Taxman 187 (P&H)(HC)
Haryana State Road and Bridges Development Corporation Ltd. v. CIT 2215 745
(2016) 388 ITR 253/ 243 Taxman 187 (P&H)(HC)
Hassan Ali Khan v. Dy. CIT (2016) 157 ITD 529/180 TTJ 209 (Mum.)(Trib.) 1217 378
1224 380
1235 383
Hatkesh Co-op. Housing Society Ltd. v. ACIT (2016) 234 Taxman 213 2225 748
(Bom.)(HC)
Hatkesh Co-op. Hsg. Society Ltd. v. CIT (Mum.)(Trib.); www.itatonline.org 110 35
Haworth (India) (P.) Ltd.; CIT v. * (2016) 241 Taxman 100 (Bom.)(HC) 1374 432
Hazariram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC) 1662 540
2547 870
HCL Infosystems Ltd.; CIT v. * (2016) 385 ITR 35/136 DTR 194 (Delhi) 970 293
(HC)
HDFC Bank Ltd. v. DCIT (2015) 155 ITD 765/173 TTJ 810/(2016) 45 ITR 748 230
529/130 DTR 219 (Mum.)(Trib.)
HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529/132 DTR 89/284 CTR 414 367 127
(Bom.)(HC) 2237 753
Headstrong Services India (P) Ltd v. DCIT (2016) 158 ITD 717/176 TTJ 1512 481
665/135 DTR 73 (Delhi)(Trib.) 1513 482
1514 483
1516 484
260 93
Headstrong Services India Pvt. Ltd. (2016) 158 ITD 717/176 TTJ 665/135 1525 487
DTR 73 (Delhi)(Trib.)
Helios and Matheson Information Technology Ltd.; DCIT v. * (2016) 46 387 132
ITR 172 (Chennai) (Trib) 251 90
252 90
Hem Raj v. ACIT (2016) 159 ITD 589 (Chd.)(Trib.) 1694 550
xliv
Case Laws Index
Name Case Page
No. No.
Hemal Dilipbhai Shah v. ACIT (2016) 386 ITR 91 (Guj.)(HC) 1612 521
Hemal Raju Shete (Mrs.); CIT v. * (2016) 136 DTR 417/239 Taxman 176 979 298
(Bom.)(HC)
Hemant Rajnikant Shroff v. Addl. CIT (2016) 47 ITR 388/179 TTJ 365 2504 848
(Ahd.)(Trib.) 2514 852
Hemdha Medi Resources (P.) Ltd. v. CIT (2016) 159 ITD 627 (Jaipur)(Trib.) 1261 392
Hemkunt Timbers Ltd.; CIT v. * (2016) 380 ITR 658/130 DTR 101/283 1805 589
CTR 1 (All.)(HC)
Hemkunt Timbers Ltd.; CIT v. * (2016) 380 ITR 658/283 CTR 1/67 1741 565
taxmann.com 231 (All.)(HC) 1880 617
Hemraj Mahabir Prasad Ltd.; CIT v. * (2016) 382 ITR 170/237 taxman 414 140
379/286 CTR 112/134 DTR 192 (SC) 2398 811
Heramec Ltd.; CIT v. * (2016) 238 Taxman 519 (AP&T)(HC) 2042 675
Herbalife International India Pvt. Ltd.; CIT v. * (2016) 384 ITR 276/136 803 244
DTR 33/286 DTR 372/240 Taxman 21 (Delhi)(HC)
Hercules Hoists Ltd.; CIT v. * (2016) 386 ITR 698 (Bom.)(HC) 1291 402
2301 774
Heritage Hospitality Ltd. v. Dy. CIT (2016) 158 ITD 179 (Hyd.)(Trib.) 454 152
Hero Cycles Ltd. (No 2); CIT v. * (2016) 243 Taxman 28/(2017) 393 ITR 629 198
164/293 CTR 23/147 DTR 265 (P&H)(HC) 1332 417
Hertz Chemicals Ltd.; CIT v. * (2016) 386 ITR 39/239 Taxman 431 (Bom.) 1246 386
(HC)
Hewitt Associates (India) P. Ltd. v. Dy. CIT (2016) 49 ITR 53 (Delhi)(Trib.) 2448 831
Hewlett Packard Global Soft Ltd.; CIT v. * (2016) 381 ITR 99/283 CTR 247 89
410/66 taxmann.com 152/130 DTR 362 (Karn.)(HC)
Hewlett-Packard Globalsoft P. Ltd.; CIT v. * (2015) 127 DTR 281/(2016) 380 1830 599
ITR 386 (Karn.)(HC)
Hewlett-Packard India Sales Pvt. Ltd.; CIT v. * (2016) 382 ITR 496 (Karn.) 2350 794
(HC)
Hightension Switchgears P. Ltd. v. CIT (2016) 385 ITR 575/240 Taxman 836 253
582/290 CTR 97/143 DTR 228 (Cal.)(HC)
HiKlass Moving Picture Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org 1925 633
Himachal Pradesh Board of School Education Act v. DCIT (2016) 176 TTJ 229 82
580/138 DTR 105 (Chd.)(Trib.)
Himachal Pradesh State Electricity Board v. Addl. CIT (TDS) (2016) 46 ITR 2497 846
113/177 TTJ 18 (UO)(Chd.)(Trib.)
Himanshu B. Kanakia; DCIT v. * (2016) 46 ITR 756 (Mum.)(Trib.) 1909 628
xlv
Case Laws Index
Name Case Page
No. No.
Himatsingka Seide Ltd.; CIT v. * (2016) 388 ITR 463/240 Taxman 753 578 185
(Karn.)(HC)
HimatsingkaSeide Ltd.; CIT v. * (2016) 388 ITR 463/240 Taxman 753 360 125
(Karn.)(HC)
Hindalco Industries Co. v. CIT (2016) 389 ITR 430 (All.)(HC) 565 181
Hinduja Foundries Ltd. ACIT (2016) 178 TTJ 88/(2017) 148 DTR 158 741 228
(Chennai)(Trib.)
Hinduja Foundries Ltd. v. ACIT (2016) 178 TTJ 88 (Chennai)(Trib.) 523 169
Hinduja Foundries Ltd. v. ACIT (2016) 178 TTJ 88 (Chennai)(Trib.) 524 169
Hindustan Coca Cola Beverages P. Ltd. v. JCIT (2016) 387 ITR 471/73 2493 845
taxmann.com 71/140 DTR 73 (Delhi)(HC)
Hindustan Gum & Chemicals Ltd.; CIT v. * (2016) 241 Taxman 401/(2017) 265 95
152 DTR 84 (Cal.)(HC)
Hindustan Latex Ltd.; CIT v. * (2016) 389 ITR 407/76 Taxamnn.com 332 1719 557
(Ker.)(HC)
Hindustan M-I Swaco Ltd. v. CIT (2016) 241 Taxman 239 (Guj.)(HC) 1585 512
Hindustan Organic Chemical Ltd. v. ACIT (2016) 48 ITR 646 646 (Mum.) 2440 829
(Trib.)
Hindustan Zinc Ltd.; CIT v. * (2016) 143 DTR 79/241 Taxman 392/290 1718 557
CTR 322 (2017) 393 ITR 264 (Raj.)(HC)
Hirachand Kanuga v. DY. CIT (2015) 68 SOT 205 (URO)(Mum.)(Trib.) 1840 605
Hiralal Chunilal Jain v. ITO (Mum.)(Trib.); www.itatonline.org 1237 383
Hiralal Doshi; CIT v. * (2016) 383 ITR 19 (Bom.)(HC) 2438 829
Hiranandani Foundation v. ADIT (E) (2016) 159 ITD 278/181 TTJ 471 287 101
(Mum.)(Trib.)
Hissaria Brothers; CIT v. * (2016) 386 ITR 719/243 Taxman 174/140 DTR 2512 851
18/288 CTR 244 (SC)
Hitender Pal Singh v. ITO (Delhi)(Trib.); www.itatonline.org 1188 367
Holcim Services South Asia Ltd. v. Dy. CIT (2016) 157 ITD 892 (Mum.) 823 249
(Trib.)
Honda Cars India Ltd.; Dy. CIT v. * (2016) 181 TTJ 36/161 ITD 655 (Delhi) 713 222
(Trib.) 816 247
Honda Cars India Ltd. v. Dy. CIT (2016) 382 ITR 88/285 CTR 39/133 DTR 1668 542
48/240 Taxman 707 (Delhi)(HC)
Honda Motor India (P) Ltd. v. ACIT (2016) 176 TTJ 282/66 taxmann.com 1500 476
9/137 DTR 254 (Delhi)(Trib.)
xlvi
Case Laws Index
Name Case Page
No. No.
Honda Siel Power Products Ltd. v. Dy. CIT (2016) 237 Taxman 304/283 1529 489
CTR 322/130 DTR 241 (Delhi)(HC)
Honey Enterprises v. CIT (2016) 381 ITR 258/236 Taxman 519/132 DTR 691 215
36/289 CTR 262 (Delhi)(HC)
Honey Enterprises v. CIT (2016) 381 ITR 258/236 Taxman 519/289 CTR 895 270
262 (Delhi)(HC)
Hosdurg Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham 1344 421
v. CIT (2016) 380 ITR 34 (Ker.)(HC)
Hosmat Hospital (P.) Ltd. v. ACIT (2016) 160 ITD 513 (Bang.)(Trib.) 1992 658
2047 676
Hotel Steelwell (P.) Ltd. v. DCIT (2016) 161 ITD 767 (Delhi)(Trib.) 698 218
2449 831
Housing and Urban Development Corpn Ltd v. Dy. CIT (2016) 386 ITR 2299 773
212/140 DTR 108 (Delhi)(HC) 2528 860
Hubli Electric Supply Co. Ltd.; CIT v. * (2016) 386 ITR 271/237 Taxman 2043 675
7/136 DTR 105/ 287 CTR 443 (Karn.)(HC)
Humayun Suleman Merchant v. CCIT (2016) 290 CTR 511/144 DTR 169 2118 705
(2017) 244 Taxman 230 (Bom.)(HC)
Humayun Suleman Merchant v. CCIT (2016) 387 ITR 421/242 Taxman 2548 870
189/140 DTR 209/290 CTR 496 (Bom.)(HC) 2555 872
1091 334
Huseina Dawoodi (Dr.) v. ITO (2016) 47 ITR 735 (Mum.)(Trib.) 1233 382
HVK International P. Ltd. v. Dy. CIT (2016) 389 ITR 630/72 Taxmann.com 1723 559
208 (Guj.)(HC)
Hyderabad Bottling Co. Ltd. v. ACIT (2015) 154 ITD 470/174 TTJ 898/130 2536 866
DTR 10 (Mum.)(Trib.)
Hyosung Corporation v. AAR (2016) 382 ITR 371/284 CTR 121/131 DTR 2177 731
369/238 Taxman 401 (Delhi)(HC)
Hyosung Corporation v. AAR (2016) 385 ITR 95/138 DTR 337/288 CTR 2174 729
19 (Delhi)(HC)
Hyundai Rotem Company v. ACIT (Delhi)(Trib.); www.itatonline.org 1460 462
I
I. Ifthiqar Ashiq; CIT v. * (2016) 239 Taxman 443 (Mad.)(HC) 1090 334
I.F.G.L. Refractories Ltd.; DCIT v. * (2016) 45 ITR 1 (Kol.)(Trib.) 776 237
Ian Peter Morris v. ACIT (2016) 389 ITR 501/(2017) 244 Taxman 219/145 2121 707
DTR 13/291 CTR 15 (SC)
IBAHN India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 382 (Mum.)(Trib.) 533 171
xlvii
Case Laws Index
Name Case Page
No. No.
IBC Knowledge Park P. Ltd.; CIT v. * (2016) 385 ITR 346/287 CTR 261/69 577 184
taxmann.com 108/136 DTR 65 (Karn.)(HC) 1919 632
496 162
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.) 784 239
785 239
786 239
1005 308
1948 641
ICICI Bank Ltd. v. Aburubam & Company (2016) 243 Taxman 72 (SC) 2115 704
ICICI Prudential Insurance Co. Ltd.; CIT v. * (2016) 242 Taxman 159 945 284
(Bom.)(HC)
IDBI Ltd.; CIT v. * (Bom.)(HC); www.itatonline.org 1788 582
Idea Cellur Ltd.; CIT v. * (2016) 76 taxmann.com 77 (Bom.)(HC) 620 195
Ideal Appliances Co. Pvt. Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org 1914 630
IDS Infotech Ltd. v. DY. CIT (2016) 181 TTJ 217 (Chd.)(Trib.) 806 244
IHI Corporation v. ADIT(IT) (2016) 156 ITD 677 (Mum.)(Trib.) 1355 425
IHP Finvest Ltd.; CIT v. * (2016) 236 Taxman 64 (Bom.)(HC) 980 298
IILM Foundation Academy; CIT v. * (2016) 389 ITR 148/243 Taxman 285 329 113
(P&H)(HC)
Ikea Trading (India) P. Ltd.; DCIT v. * (Delhi)(Trib.); www.itatonline.org 765 235
Imerys Asia Pacific (P) Ltd. v. DDIT (IT) (2016) 140 DTR 177/180 TTJ 544 1536 492
(Pune)(Trib.)
Imperial Imp & Exp. v. ITO (Mum.)(Trib.); www.itatonline.org 1211 375
Improvement Trust Bathinda v. CIT (2015) 70 SOT 345 (Amritsar)(Trib.) 334 116
Improvement Trust Moga; CIT v. * (2016) 76 taxmann.com 363/ (2017) 390 14 4
ITR 547/291 CTR 352/145 DTR 350 (P&H)(HC)
Incable Net (Andhra) Ltd v. ITO (2016) 47 ITR 356 (Hyd.)(Trib.) 858 259
Income-tax Settlement Commission; PCIT v. * (2016) 386 ITR 456/240 2165 724
Taxman 137/289 CTR 493 (Bom.)(HC)
Ind Sing Developers (P.) Ltd.; PCIT v. * (2016) 239 Taxman 350/288 CTR 972 294
154/139 DTR 237 (Karn.)(HC)
Indegene Life Systems (P.) Ltd. v. ACIT (2015) 70 SOT 279 (Bang.)(Trib.) 1412 447
Inder Singla v. ITO (2016) 181 TTJ 368/141 DTR 137 (Chd.)(Trib.) 983 300
Inderchand D. Kochar v. ACIT (2016) 388 ITR 500/73 taxmann.com 96/ 2199 740
(2017) 145 DTR 223/291 CTR 572 (Mad.)(HC)
Inderjeet Singh Sachdeva v. DCIT (Delhi)(Trib.), www.itatonline.org 1862 610
xlviii
Case Laws Index
Name Case Page
No. No.
India Advantage Securities Ltd.; CIT v. * (2016) 380 ITR 471 (Bom.)(HC) 370 128
India Capital Markets P. Ltd.; CIT v. * (2016) 387 ITR 510 (Bom.)(HC) 833 252
India Cements Educational Society; DDIT (E) v. * (2016) 157 ITD 1008/46 349 121
ITR 80 (Chennai)(Trib.)
India Cements Educational Society; Dy. DIT v. * (2016) 157 ITD 1008/46 1535 491
ITR 80 (Chennai)(Trib.)
India Jute & Industries Ltd.; Dy. CIT v. * (2016) 156 ITD 912 (Kol.)(Trib.) 1943 640
India Bulls Financial Service Ltd. v. DCIT (Delhi) (HC); www.itatonline.org 358 124
Indian Aluminum Co. v. CIT (2016) 384 ITR 386/135 DTR 305/239 Taxman 683 212
51/(2017) 291 CTR 196 (Cal.)(HC)
Indian Finance Ltd.; PCIT v. * (2016) 389 ITR 242 (Cal.)(HC) 2326 784
Indian Furniture Products Ltd. v. ACIT (2016) 161 ITD 148 (Panaji)(Trib.) 1562 500
Indian Leather Products Association; ITO v. * (2016) 156 ITD 393 (Kol.) 301 105
(Trib.)
Indian Medical Association v. Addl. DIT(E) (2016) 49 ITR 7 (Delhi)(Trib.) 333 116
Indian National Congress (I); CIT v. * (2016) 383 ITR 99/239 Taxman 352 122
72/285 CTR 97/134 DTR 1 (Delhi)(HC)
Indian Oil Corporation Ltd. v. DCIT (2016) 161 ITD 131/(2017) 183 TTJ 2017 666
624/147 DTR 77 (Kol.)(Trib.)
Indigra Exports (P) Ltd. v. DCIT (2016) 176 TTJ 384/64 taxmann.com 1501 476
370/135 DTR 225 (Bang.)(Trib.) 1502 476
1503 477
Indo American Hybrid Seeds India P. Ltd.; DCIT v. * (2016) 52 ITR 201 2203 741
(Bang.)(Trib.)
Indo American Hybrid Seeds India P. Ltd.; DCIT v. * (2016) 52 ITR 201/ 1645 534
(2017) 147 DTR 265/183 TTJ 474 (Bang.)(Trib.)
Indo Arab Air Services; CIT v. * (2015) 64 taxmann.com 257/(2016) 130 1806 589
DTR 78/283 CTR 92 (Delhi)(HC)
Indogem v. ITO (2016) 160 ITD 405 (Mum.)(Trib.) 1034 317
Indorama Synthetics (India) Ltd v. Addl. CIT (2016) 386 ITR 665/241 1363 428
Taxman 523/290 CTR 176/143 DTR 55 (Delhi)(HC)
Indra Sen Aggarwal; CIT v. * (2016) 383 ITR 592/138 DTR 76 (P&H)(HC) 2230 750
Indravadan Jain; ITO v. * (HUF) (Mum.)(Trib.), www.itatonline.org 1172 363
Indu Lalta Rangwala v. DCIT (2016) 384 ITR 337/136 DTR 289/286 CTR 1822 596
474 (Delhi)(HC)
Indu Surveyors & Loss Assessors Pvt. Ltd.; CIT v. * (Delhi)(HC); www. 1901 625
itatonline.org
xlix
Case Laws Index
Name Case Page
No. No.
Indus Finance Corporation Ltd. v. CIT (2015) 63 taxmann.com 244/(2016) 1937 638
380 ITR 504/136 DTR 118 (Mad.)(HC)
Indus Motor Co. (P) Ltd. v. Dy. CIT (2016) 134 DTR 94 (Ker.)(HC) 676 210
Indus Motor Company (P) Ltd. v. Dy. CIT (2016) 282 CTR 540 (Ker.)(HC) 673 209
Indus Motors Co. P. Ltd. v. Dy. CIT (2016) 382 ITR 503/134 DTR 73/285 677 210
CTR 209 (FB) (Ker.)(HC)
Industrial Feeders v. ACIT (2016) 240 Taxman 506 (Mad.)(HC) 571 182
Infinera India Ltd.; ITO v. * (2016) 157 ITD 637 (Bang.)(Trib.) 1410 447
INFOR Global Solutions (Barneveld) BV v. DDIT (IT) (2016) 49 ITR 73 166 55
(Mum.)(Trib.)
Information Systems Audit and Control Association v. DDIT (E) (2016) 157 20 7
ITD 815/46 ITR 665/179 TTJ 99 (Chennai)(Trib.)
Information Systems Audit and Control Association v. DDIT (E) (2016) 157 294 103
ITD 815/46 ITR 665/179 TTJ 99 (Chennai)(Trib.)
Infrastructure Development Finance Co. Ltd. v. ACIT (2016) 238 Taxman 233 84
212 (Mad.)(HC) 611 193
Infrastructure Leasing & Financial Services Ltd.; CIT v. * (2016) 239 493 161
Taxman 464 (Bom.)(HC) 573 183
656 204
Inox Leisure Ltd.; Dy.CIT v. * (2016) 386 ITR 626 (Guj.)(HC) 81 25
Instant Holdings Ltd. v. ACIT (2016) 49 ITR 32 (Mum.)(Trib.) 1657 538
Institute of Chartered Accountants of India; Dy. DIT v. * (2016) 159 ITD 318 109
573 (Delhi)(Trib.)
Instrumentarium Corporation Ltd. v. ADIT (2016) 160 ITD 1/179 TTJ 1447 457
665/138 DTR 225/49 ITR 489 (SB) (Kol.)(Trib.)
Intergarden India Pvt. Ltd. v. ACIT (Bag.)(Trib.); www.itatonline.org 273 98
1527 488
International Air Transport Association v. ADIT (2016) 140 DTR 225/179 2183 734
TTJ 254 (Mum.)(Trib.)
International Air Transport Association v. DCIT (2016) 142 DTR 293/241 1667 542
Taxman 249/290 CTR 46 (Bom.)(HC)
International Institute of Neuro Sciences & Oncology Ltd.; CIT v. * (2016) 1225 380
243 Taxman 364 (P&H)(HC)
International management Group (UK) Ltd. v. ACIT (Delhi)(Trib.), www. 186 63
itatonline.org
International Management Group (UK) Ltd. v. ACIT (IT) 2016) 51 ITR 180 61
372/182 TTJ 1 /(2017) 162 ITD 219/(Delhi)(Trib.)
l
Case Laws Index
Name Case Page
No. No.
International Technical Services LLC; ADIT v. * (2016) 159 ITD 958 (Delhi) 951 286
(Trib.)
Interpump Hydraulics India P. Ltd.; ACIT v. * (2016) 50 ITR 43 (Chennai) 1429 452
(Trib.)
Interroute Communication Ltd. v. DDIT(IT) (2016) 179 TTJ 355/139 DTR 168 56
175/68 taxmann.com 160 (Mum.)(Trib.)
Intertoll ICS india Private Limited; ITO v. * (Mum.)(Trib.); www.itatonline. 1477 467
org
Inventurus Knowledge Services (P.) Ltd v. ITO (2016) 156 ITD 727/45 ITR 922 278
57/177 TTJ 269/143 DTR 113 (Mum.)(Trib). 794 241
471 156
IPCA Laboratories Ltd. v. Rajaram, DCIT (2016) 140 DTR 89 (Bom.)(HC) 1934 637
ISC Investments & Finance (P) Ltd.; CIT v. * (2016) 242 Taxman 218/ 462 154
(2017) 393 ITR 195 (Mad.)(HC)
Ishwar Manufacturing Co. (P.) Ltd.; ACIT v. * (2016) 157 ITD 883 (Chd.) 1311 409
(Trib.)
ITC Limited v. CIT (2016) 384 ITR 14/286 CTR 126/134 DTR 273/239 406 137
Taxman 372 (SC)
ITC Ltd.; CIT v. * (2016) 236 Taxman 612/286 CTR 400 (Cal.)(HC) 1301 406
466 155
498 163
924 279
ITC Ltd.; CIT v. * (2016) 386 ITR 487 (Cal.)(HC) 1277 397
ITC Ltd.; CIT v.* (2016) 237 Taxman 533/134 DTR 293 (Cal.)(HC) 502 164
ITC, Infotech India Ltd.; CIT v. * (2016) 384 ITR 380/237 Taxman 476 1403 444
(Cal.)(HC)
ITSC; CIT v. * (2016) 241 Taxman 371/290 CTR 635/(2017) 390 ITR 306 2158 721
(Guj.)(HC) 2162 723
ITW India Ltd.; PCIT v. * (2016) 386 ITR 290 (P&H)(HC) 2298 773
Iveco Spa v. ADIT (IT (2016) 160 ITD 348/182 TTJ 464/(2017) 147 DTR 167 55
353 (Delhi)(Trib.)
IVRCL-KBL(JV) v. ACIT (2016) 386 ITR 564/239 Taxman 152/133 DTR 2067 684
234/289 CTR 111 (T& AP)(HC)
Ivy Health Life Sciences P. Ltd.; CIT (TDS) v. * (2016) 380 ITR 242/236 1989 657
Taxman 292/286 CTR 313/133 DTR 169 (P&H) (HC)
J
J. B. Engg. Works; DCIT v. * (2016) 176 TTJ 699/133 DTR 63 (Mum.)(Trib.) 1003 307
li
Case Laws Index
Name Case Page
No. No.
J. K. Cement; DCIT v. * (2016) 45 ITR 50 (Luck)(Trib.) 1944 640
J. K. Synthetics Ltd.; CIT v. * (2016) (2016) 243 Taxman 441 (All.)(HC) 1540 494
J. M. Financial Securities (P) Ltd.; CIT v * (2016) 241 Taxman 551 (Bom.) 623 196
(HC) 553 177
J. M. Financial Service Ltd. v. JCIT (Mum.)(Trib.); www.itatonline.org 1248 387
J. Ray McDermott Eastern Hemisphere Ltd.; Addl. DIT(IT) v. * (2016) 180 138 44
TTJ 660 (Mum.)(Trib.)
J. Ray McDermott Eastern Hemisphere Ltd.; ADIT (IT) v. * (2016) 158 ITD 149 48
923/49 ITR 300/180 TTJ 660 (Mum.)(Trib.) 952 287
148 48
J. S. Grover Constructions; ACIT v. * (2016) 181 TTJ 23 (UO) (Asr.)(Trib.) 512 167
849 256
J.G.A. Shah Brokers P. Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org 1253 390
J.K. Cement; DCIT v. * (2016) 45 ITR 50 (Luck)(Trib.) 1549 496
J.K. Synthetics Ltd.; CIT v. * (2016) 243 Taxman 411 (All.)(HC) 1542 494
J.N. Chandrashekar v. ITO (2016) 160 ITD 653 (Bang.)(Trib.) 2204 741
J.P. Morgan Services Pvt. Ltd. v. DCIT (2016) 46 ITR 561/70 taxmann.com 1456 461
228 (Mum.) (Trib.) 249 90
250 90
Jadau Jewellers & Manufacturers (P) Ltd. v. ACIT (2016) 130 DTR 17/175 1178 365
TTJ 344 (Jaipur)(Trib.) 1912 630
Jagjit Singh Jaswant Singh Oberoi; ACIT v. * (2015) 155 ITD 283/(2016) 38 11
177 TTJ 118/134 DTR 74 (Nag.)(Trib.)
Jagraon Export v. CIT (2016) 132 DTR 86/284 CTR 209/238 Taxman 88 1269 395
(SC)
Jai Chand v. ITO (2016) 157 ITD 684 (Chd.)(Trib.) 1026 315
Jai Hind Cycle Company Ltd. v. CIT (2016) 388 ITR 482/243 Taxman 2279 767
354/144 DTR 321/(2017) 291 CTR 239 (SC)
Jai Hind Sciaky Ltd. v. Dy. CIT (2016) 383 ITR 25/130 DTR 177/286 CTR 2539 867
76 (Bom.)(HC)
Jai Laxmi Rice Mills; CIT v. * (2015) 379 ITR 521/(2016) 134 DTR 223/286 2503 848
CTR 159/237 Taxman 375 (SC)
Jai Shiv Shankar Traders Pvt. Ltd.; CIT v. * (2016) 383 ITR 448/129 DTR 2522 857
63/282 CTR 435 (Delhi)(HC)
Jaipur Thar Gramin Bank; CIT v. * (2016) 388 ITR 228 (Raj.)(HC) 593 188
Jaipuria Infrastructure Developers v. ACIT (Delhi)(Trib.); www.itatonline.org 1911 629
lii
Case Laws Index
Name Case Page
No. No.
Jajodia Engineering (P) Ltd.; CIT v. * (2016) 289 CTR 208/(2017) 79 1550 497
taxmann.com 385 (Gau.)(HC)
Jajodia Engineering P. Ltd.; CIT v. * (2016) 384 ITR 364/141 DTR 243 1556 499
(Gauhati)(HC)
Jalan Distributors (P.) Ltd. v. CIT (2016) 243 Taxman 205 (Cal.)(HC) 566 181
Jamnagar Area Development Authority v. Principal CIT (OSD) (E) (2016) 2105 701
236 Taxman 484 (Guj.)(HC)
Janata Party; CIT v. * (2016) 383 ITR 146/239 Taxman 194/285 CTR 353 122
194/134 DTR 49 (Delhi)(HC)
Japan International Cooperation Agency v. DDIT (2016) 158 ITD 62/139 235 84
DTR 185/180 TTJ 152 (Delhi)(Trib.) 1573 504
Jaspal Singh Sehgal v. ITO (2016) 47 ITR 193 (Mum.)(Trib.) 1171 362
1203 372
Jat Education Society; CIT v. * (2015) 64 taxmann.com 312/(2016) 383 ITR 221 79
355 (P&H)(HC)
Jawahar Lal Oswal; CIT v. * (FB) (2016) 382 ITR 453/133 DTR 15/284 CTR 1214 376
188 238 Taxman 225 (P&H)(HC)
Jawaharla Agicha; ACIT v. * (Mum.)(Trib.), www.itatonline.org 993 303
Jawaharlal L. Agicha; ACIT v. * (2016) 161 ITD 429/(2017) 183 TTJ 176 991 302
(Mum.)(Trib.)
Jawaharlal L. Agicha; ACIT v. * (2016) 161 ITD 429/(2017) 183 TTJ 65 20
176/151 DTR 241 (Mum.)(Trib.)
Jawaharlal Nehru Port Trust; CIT v. * (2016) 383 ITR 339 (Bom.)(HC) 277 99
Jaya Hind Sciaky Ltd.; CIT v. * (2016) 156 ITD 547/137 DTR 329/179 TTJ 920 277
112 (Pune)(Trib.)
Jaya Hind Sciaky Ltd.; Dy.CIT v. * (2016) 156 ITD 547/137 DTR 329/179 917 276
TTJ 112 (Pune)(Trib.)
Jayanthi Shri, S. v. M. Kalpalatha Rajan, ACIT (2016) 288 CTR 354/241 1586 512
Taxman 15 /(2017) 148 DTR 355 (Mad.)(HC)
Jaybharat Textiles & Real Estate Ltd.; ACIT v. * (Mum)(Trib.) www. 1205 373
itatonline.org
Jayesh Govindbhai Balar v. ITO (2016) 240 Taxman 703 (Guj.)(HC) 1782 579
Jayeshbhai J. Shah v. CIT (2016) 388 ITR 293 (Guj.)(HC) 2421 821
Jaytick Intermediates (P.) Ltd. v. ACIT (2016) 242 Taxman 319 (Guj.)(HC) 1674 544
Jazzy Creations (P) Ltd. v. ITO (2016) 176 TTJ 393/133 DTR 1 (Mum.) 1672 543
(Trib.)
liii
Case Laws Index
Name Case Page
No. No.
JCIT v. Suttati Enterprises (P.) Ltd. (2016) 159 ITD 348/181 TTJ 199 (Pune) 1360 427
(Trib.)
JCT Ltd. v. CIT (2016) 159 ITD 983 (Kol.)(Trib.) 515 167
Jeans Knit Private Limited v. DCIT (2017) 390 ITR 10/244 Taxman 154/145 1713 555
DTR 16/291 CTR 13 (SC)
Jet Airways (India) Ltd.; CIT v. * (2016) 237 Taxman 572/(2017) 292 CTR 908 274
7 (Bom.)(HC)
Jever Jewellers; CIT v. * (2015) 236 Taxman 282/(2016) 286 CTR 528/133 1603 517
DTR 159 (Jharkhand)(HC)
Jewels Magnum v. ACIT (2016) 158 ITD 185/181 TTJ 137 (Chennai)(Trib.) 263 95
Jiauddin Mollah v. CIT (2016) 385 ITR 394 (Cal.)(HC) 835 253
Jigesh Venilal Koralwala; PCIT v. * (2016) 387 ITR 177/(2017) 147 DTR 2422 822
172/294 CTR 124 (Guj.)(HC)
Jindal Power Limited; ACIT v. * (2016) 179 TTJ 736/70 taxmann.com 764 235
389/138 DTR 313 (Raipur)(Trib.) 738 227
739 228
Jindal Steel & Power Ltd. v. PCIT (2016) 290 CTR 342/143 DTR 185/(2017) 2097 697
391 ITR 42/244 Taxman 3 (P&H)(HC)
Jitendra Chandralal Navlani v. UOI (2016) 386 ITR 288 (Bom.)(HC) 1798 585
Jitendra Kumar Soneja v. ITO (2016) 161 ITD 269 (SMC)(Mum.)(Trib.) 95 31
Jitendra Kumar Soneja v. ITO (Mum.)(Trib.); www.itatonline.org 105 34
Jivraj Tea Ltd v. ACIT (2016) 386 ITR 298 (Guj.)(HC) 1732 562
Jiya Devi Sharma (SMt.) v. ACIT (2014) 165 TTJ 20 (URO) (2016) 68 SOT 899 271
57 (Jodh.)(Trib.)
JLC Electromet P. Ltd. v. Addl. CIT (2016) 178 TTJ 28 (UO) (Jaipur)(Trib.) 742 228
JLC Electronet P Ltd v. ACIT (2016) 47 ITR 85/178 TTJ 28 (UO) (Jaipur) 889 269
(Trib.)
JMC Projects (India) Ltd. v. PCIT (2015) 67 taxmann.com 258/136 DTR 2339 788
279 (Guj.)(HC)
Jodhpur Development Authority; CIT v. * (2016) 139 DTR 1/287 CTR 473 307 106
(Raj.)(HC)
John Deere Equipment P. Ltd. v. ITO( 2015) 69 SOT 45 (URO)/172 TTJ 115 37
470/(2016) 45 ITR 389 (Pune)(Trib.)
John Deere India P. Ltd. v. DCIT & John Deere Equipment P. Ltd. v. ITO 1515 483
(2015) 172 TTJ 470/123 DTR 188/69 SOT 45 (2016) 45 ITR 389 (Pune)
(Trib.)
liv
Case Laws Index
Name Case Page
No. No.
John Deere India P. Ltd. v. DCIT (2015) 69 SOT 45 (URO)/172 TTJ 470 115 37
(2016) 45 ITR 389 (Pune)(Trib.)
John Energy Ltd. v. Dy. CIT (2015) 154 ITD 451/173 TTJ 713/130 DTR 348 531 171
(Ahd.)(Trib.)
John Energy Ltd. v. Dy. CIT (2016) 130 DTR 348 (Ahd.)(Trib.) 535 172
Jolly Fantasy World Ltd.; CIT v. * (2015) 373 ITR 530/231 Taxman 668/ 2221 747
(2016) 139 DTR 163 (Guj.)(HC)
Jose Thomas v. DCIT (2016) 243 Taxman 483 (Ker.)(HC) 1757 570
Josh Builders and Developers P. Ltd. v. PCIT (2016) 389 ITR 314 (P&H) 1641 532
(HC)
JSR Constructions (P.) Ltd.; Dy. CIT v. * (2016) 159 ITD 749 (Bang.)(Trib.) 581 186
909 274
1664 541
1689 549
947 285
Jubilant Foodworks Ltd.; DCIT v. * (Delhi) (2016) 48 ITR 302 (Delhi)(Trib.) 734 226
Just Lifestyle P. Ltd. v. DCIT (Chamber’s Journal 2016-April – P. 86 (Mum.) 2466 836
(Trib.)
JVS Export v. Dy. CIT (2016) 130 DTR 411 (Mad.)(HC) 1803 588
Jyoti Jajoo (Smt.) v. CIT (2016) 139 DTR 129/288 CTR 87 (Raj.)(HC) 1143 353
Jyoti Khera; CIT v. * (2016) 387 ITR 33/288 CTR 381/76 taxmann.com 185 2418 820
(Delhi)(HC)
Jyoti Khera; CIT v. * (2016) 387 ITR 33/288 CTR 381/76 taxmann.com 1676 545
185/140 DTR 1 (Delhi)(HC)
Jyotsna Holdings P. Ltd.; CIT v. * (2016) 382 ITR 451/238 Taxman 558 (SC) 2139 713
K
K. C. Pipes P. Ltd.; CIT v. * (2016) 386 ITR 532 (P&H)(HC) 1141 353
K. Cargo Global Agencies, Indonesia v. ITO (2016) 159 ITD 1042 (Ahd.) 1981 654
(Trib.)
K. Dhanakumar v. UOI (2016) 383 ITR 385/239 Taxman 283/286 CTR 28 1532 490
(Mad.)(HC)
K. G. Petrochem Ltd. v. ACIT (2016) 176 TTJ 1 (UO) (Jaipur)(Trib.) 1706 553
42 12
K. J. Somaiya Trust; ACIT (E) v. * (2016) 158 ITD 57 (Mum.)(Trib.) 283 100
K. N. Pannirselvam; CIT v. * (2016) 243 Taxman 219 (Mad.)(HC) 1 1
2289 770
K. R. Bakes Pvt. Ltd. v. ACIT (2016) 46 ITR 73 (Chennai)(Trib.) 746 230
lv
Case Laws Index
Name Case Page
No. No.
K. R. Ganesh Kumar v. ACIT (2016) 383 ITR 165 (Mad.)(HC) 893 270
K. Ratanchand and Co. v. ITO (2016) 45 ITR 608 (Ahd.)(Trib.) 396 135
K. Raveendranathan Nair v. CIT (2016) 236 Taxman 6 (SC) 2284 769
K. Ravikumar; CIT v. * (2016) 388 ITR 233 (Ker) (HC) 1955 643
1953 643
K. Suryakumari Venu (Smt.) v. ACIT (2016) 159 ITD 1034 (Visakh)(Trib.) 726 224
K. Sundaramoorthy; CIT v. * (2016) 388 ITR 154 (Karn.)(HC) 1956 643
Kabul Chawla; CIT v. * (2015) 281 CTR 45/126 DTR 130/234 Taxman 300 1905 627
(2016) 380 ITR 573 (Delhi)(HC)
Kailash Devi Prop (Smt.) v. ITO (2016) 158 ITD 709 (Asr.)(Trib.) 1698 551
Kailash Jewels (P.) Ltd. v. ITO (2016) 156 ITD 685 (Delhi)(Trib.) 1491 473
Kailash Shipping Services P. Ltd.; CIT v. * (2016) 383 ITR 630 (Mad.)(HC) 1298 404
Kaira District Co-op. Milk Producers Union Ltd v. Dy. CIT (2016) 386 ITR 2550 871
633 (Guj.)(HC) 2557 873
Kaira District Co-op. Milk Producers Union Ltd. v. Dy. CIT (2016) 387 ITR 1768 574
183 (Guj.)(HC)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.) 752 232
753 232
860 259
1317 412
1708 554
Kalanjiam Development Financial Services; ITO v. * (2016) 156 ITD 213 302 105
(Chennai)(Trib.)
Kalapet Primary Agricultural Co-op. Credit Society Ltd. v. ITO (2016) 241 2098 697
Taxman 367 ((Mad.)(HC)
Kalathingal Faizal Rahiman; ITO v. * (2016) 158 ITD 488 (Cochin)(Trib.) 8 3
Kalavathi v. ITO (2014) 47 taxmann.com 282/(2017) 393 ITR 486 (Karn.) 967 292
(HC)
Kalinga Cultural Trust; ITO v. * (2015)155 ITD 291/41 ITR 147/177 TTJ 861 259
233/137 DTR 103 (Hyd.)(Trib.)
Kalluri Krishan Pushkar v. Dy. CIT (2016) 236 Taxman 27/135 DTR 351 2515 853
(AP &T)(HC)
Kalpataru Power Transmission Ltd.; Dy. CIT v. * (2016) 177 TTJ 394/133 107 34
DTR 113/(2017) 162 ITD 18 (Ahd.)(Trib.) 2245 756
Kalpesh Laxminarayan Thakkar v. Dy. CIT (2016) 388 ITR 245 (Guj.)(HC) 1614 522
Kalyani Medical Stores v. CIT (2016) 386 ITR 387 (Cal.)(HC) 1194 369
lvi
Case Laws Index
Name Case Page
No. No.
Kamal Mahila Nagari Sahakari Patpedhi Maryadit; ITO v. * (2016) 178 TTJ 1350 423
381/137 DTR 210 (Pune)(Trib.)
Kamala Brothers v. ITO (2016) 176 TTJ 178/131 DTR 106 (Mum.)(Trib.) 1067 328
1207 373
Kamlesh K. Singhal General Manager (MM) v. CIT (2016) 389 ITR 247/243 407 137
Taxman 250 (Guj.)(HC) 2392 809
Kamlesh M. Kanungo HUF v. DCIT (2016) 160 ITD 331/182 TTJ 896 2110 703
(Mum.)(Trib.)
Kanaiyalal Dhansukhlal Sopariwala v. DVO (2016) 243 Taxman 378/(2017) 1042 320
391 ITR 56 (Guj.)(HC)
Kanco Enterprises Ltd.; JCIT v. * (2016) 156 ITD 926 (Kol.)(Trib.) 1564 501
Kandathil M. Mammen v. UOI (2016) 290 CTR 644/241 Taxman 135/(2017) 2157 720
391 ITR 23 (Mad.)(HC)
Kaneria Granito Ltd. v. ACIT (2016) 241 Taxman 315 (Guj.)(HC) 2117 705
Kanga & Co.; CIT v. * (2016) 133 DTR 257 (Bom.)(HC) 86 28
2311 778
Kannan Santhanam; ACIT v. * (2016) 161 ITD 792/(2017) 183 TTJ 8 1072 329
(Chennai)(UO)(Trib.) 1074 330
Kannur Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangam Ltd. 1346 422
v. ACIT (2016) 159 ITD 507/181 TTJ 538/(2017) 148 DTR 189 (Cochin)
(Trib.)
Kapil Ashok Bajaj; ITO v. * (2016) 49 ITR 44 (Mum.)(Trib.) 2447 831
Kapil Kumar Agarwal; CIT v. * (2016) 382 ITR 56/237 Taxman 555/284 1093 335
CTR 75/131 DTR 87 (P&H)(HC)
Kapsons Associates; CIT v. * (2016) 381 ITR 204 (P&H)(HC) 369 128
685 212
686 212
Karnataka Municipal Data Society v. ITO (2016) 389 ITR 441/76 Taxmann. 49 14
com 167 (Karn.)(HC)
Karnataka planters Coffee curing Work (P) Ltd.; CIT v. * (2016) 387 ITR 1137 352
1/140 DTR 20/288 CTR 241/243 Taxman 21 (SC)
Karnataka Power Transmission Corporation Ltd. v. CIT (TDS) (2016) 383 2005 662
ITR 59/238 Taxman 287/139 DTR 33/288 CTR 77 (Karn.)(HC)
Karnataka Reddy Janasangha; CIT v. * (2016) 389 ITR 229/241 Taxman 486 160
147 (Karn.)(HC)
Karnataka Soaps and Detergents Ltd.; CIT v. * (2016) 236 Taxman 395 (SC) 1544 495
Karnataka State Beverages Corpn. Ltd. v. CIT (2016) 238 Taxman 299/137 881 266
DTR 45/(2017) 391 ITR 185/294 CTR 155 (Karn.)(HC)
lvii
Case Laws Index
Name Case Page
No. No.
Karnataka State Co-operative Apex Bank Ltd. v. Dy. CIT (2016) 46 ITR 728 791 240
(Bang.)(Trib.) 1872 614
Karnataka State Industrial & Infrastructure Development Corpn. Ltd.; CIT 368 128
v. * (2016) 237 Taxman 240/143 DTR 67 (Karn.)(HC)
Karur Vysya Bank Ltd. v. CIT (2016) 388 ITR 37/74 taxmann.com 69/(2017) 2538 867
150 DTR 375 (Mad.)(HC)
Kavita Marketing (P.) Ltd. v. ITO (2016) 159 ITD 547 (Mum.)(Trib.) 447 150
720 223
Kawasaki Heavy Industries Ltd. v. ACIT (2016) 157 ITD 847/132 DTR 154 50
81/177 TTJ 90/46 ITR 739 (Delhi)(Trib.) 136 44
Kayal Syntex Ltd.; CIT v. * (2016) 389 ITR 84 (Guj.)(HC) 624 197
KBD Sugars & Distilleries Ltd.; CIT v. * (2016) 129 DTR 227 (Karn.)(HC) 1242 385
KEC Industries Ltd.; Dy. CIT v. * (2016) 177 TTJ 6 (UO) (Chd.)(Trib.) 1303 406
1304 407
Keihin Panalfa Ltd.; CIT v. * (2016) 381 ITR 407/286 CTR 107 (Delhi)(HC) 1393 438
Kerala Sponge Iron Ltd.; CIT v. * (2016) 133 DTR 265 (Ker.)(HC) 1241 384
Kerala State Beverages (M&M) Corpn. Ltd. v. JCIT (2016) 388 ITR 600/142 2152 718
DTR 134/293 CTR 581/79 taxmann.com 429 (Ker.)(HC)
Kerala State Beverages (M&M) Corporation Ltd. v. JCIT (2016) 386 ITR 148/ 2154 719
(2017) 149 DTR 45 (Ker.)(HC)
Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. 1343 421
CIT (2016) 383 ITR 610/ 238 Taxman 638 (Ker.)(HC)
Keshav & Company v. ITO (2016) 161 ITD 798 (Mum.)(Trib.) 1015 311
Kethin Panalfa Ltd.; CIT v. * (2016) 381 ITR 407/286 CTR 107/133 DTR 684 212
261 (Delhi)(HC)
Khairunnisa Ebrahim (Late) (Smt.); CIT v. * (2016) 386 ITR 430 (Ker.)(HC) 2302 774
Khandelwal Laboratories Pvt. Ltd. v. DCIT (2016) 383 ITR 485/238 Taxman 2107 701
620/285 CTR 178/ 133 DTR 253 (Bom.)(HC)
Khar Gyamkhana; DIT (E) v. * (2016) 385 ITR 162/137 DTR 249/240 331 115
Taxman 407/287 CTR 303 (Bom.)(HC)
Khedut Sahakari Khand Udyog Mandi Ltd.; CIT v. * (2016) 76 taxmann. 2010 664
com 117 (Guj.)(HC)
KHF Components Pvt. Ltd. v. ITO (2016) 49 ITR 46 (Bang.)(Trib.) 1423 450
Khivraj Motors; CIT v. * (2016) 133 DTR 142 (Karn.)(HC) 2347 792
Khoday Breweries Ltd.; CIT v. * (2016) 382 ITR 1/243 Taxman 229 (SC) 70 22
617 194
Khubchandani Healthparks Pvt. Ltd. v. ITO (2016) 384 ITR 322 (Bom.)(HC) 1832 601
lviii
Case Laws Index
Name Case Page
No. No.
Kiran Kanwar (Smt.) v. UOI (2016) 143 DTR 297/290 CTR 403 (Raj.)(HC) 1751 568
Kiran Kanwar v. UOI (2016) 135 DTR 209/286 CTR 262 (Raj.)(HC) 1780 578
Kiritbhai Jayantilal Kundalia (HUF) v. ITO (2016) 242 Taxman 182(Guj.) 1110 342
(HC)
Kirloskar Oil Engine Ltd.; Dy. CIT v. * (2016) 158 ITD 309 (Pune)(Trib.) 2028 669
2048 677
Kisan Proteins (P.) Ltd. v. ACIT (2016) 243 Taxman 11 (2017) 292 CTR 1759 571
345 (Guj.)(HC)
Kishore Ramchandani v. ITO (2016) 47 ITR 134 (Mum.)(Trib.) 1316 411
Kishore Rao; CIT v. * (HUF) (2016) 387 ITR 196 (Karn.)(HC) 832 251
Kiti Construction Ltd.; CIT v. * (2015) 280 CTR 73/124 DTR 289/(2016) 2168 726
380 ITR 82 (MP) (HC)
Kiwi Foods India P. Ltd. v. Dy. CIT (2016) 48 ITR 555/(2017) 145 DTR 41 1160 360
(Delhi)(Trib.)
Knight Frank (India) (P) Ltd.; CIT v. * (2016) 143 DTR 32/242 Taxman 925 279
313/290 CTR 25 (Bom.)(HC)
Knight Frank (India) (P.) Ltd.; CIT v. * (2016) 143 DTR 32/242 Taxman 1703 553
313/290 CTR 25 (Bom.)(HC)
Knight Frank (India) Pvt. Ltd.; CIT v. * (Bom.)(HC),www.itatonline.org 1705 553
931 280
Knorr Bremse India P. Ltd.; CIT v. * (2015) 128 DTR 25/(2016) 380 ITR 1396 440
307/236 Taxman 318/282 CTR 44 (P&H)(HC)
Knorr-Bremse India Pvt. Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org 1453 459
Knox Investments (P.) Ltd. v. ITO (2016) 161 ITD 527 (Pune)(Trib.) 695 216
Kodak India (P) Ltd.; CIT v. * (2016) 139 DTR 46/288 CTR 46 (Bom.)(HC) 1384 436
Kohinoor Hatcheries P. Ltd. v. Dy. CIT (2016) 389 ITR 493/76 taxmann. 1722 559
com 150 (T&AP)(HC)
Kondal Reddy Mandal Reddy; ITO v. * (2016) BCAJ–June P. 53 (Hyd.) 1057 325
(Trib.)
Kondal Reddy Mandal Reddy; ITO v. * (Hyd.)(Trib.); www.itatonline.org 1103 338
Koninklijke-DSM-NV; DIT v. * (2016) 243 Taxman 115 (Bom.)(HC) 2417 820
Koramangala Club v. ITO (2016) 387 ITR 630 (Karn.)(HC) 2489 843
Koramangala Club v. ITO (Kar.)(HC); www.itatonline.org 2490 844
Kotak Mahindra Bank Ltd. v. ITO (IT) (2016) 161 ITD 304/(2017) 183 TTJ 141 45
414/150 DTR 16 (Mum.)(Trib.)
lix
Case Laws Index
Name Case Page
No. No.
Kotak Securities Ltd.; CIT v. * (2016) 383 ITR 1/285 CTR 63/239 Taxman 828 250
139/133 DTR 151 (SC)
Kotak Securities Ltd.; DCIT v. * (2016) Chamber’s Journal-2016 - April-P. 761 234
86 (Mum.)(Trib.)
Kothari Metals v. ITO (2016) 140 DTR 150/288 CTR 606 (Karn.)(HC) 1749 568
Kottakkal Wood Complex v. DCIT (2016) 386 ITR 433/72 taxmann.com 63 1625 526
(Ker.)(HC)
KPMG v. ACIT (2016) 177 TTJ 708/137 DTR 1 (Mum.)(Trib.) 824 249
Krishan Kumar Saraf v. CIT (2016) 46 ITR 387 (Delhi)(Trib.) 2387 806
Krishi Upaj Mandi Samiti, Raisinghnagar; CIT v. * (2016) 240 Taxman 527/ 274 98
(2017) 390 ITR 59/293 CTR 348 (Raj.)(HC)
Krishna Enterprises v. ACIT (2017) 146 DTR 73 (Mum.)(Trib.) 1056 325
Krutika Land (P) Ltd.; CIT v. * (2016) 139 DTR 43/288 CTR 50 (Bom.)(HC) 2285 769
Krypton Datamatics Ltd. v. DCIT (2016) 176 TTJ 11(UO) (Chd.)(Trib.) 2383 806
KSB Pumps Ltd.; CIT v. * (2016) 243 Taxman 240 (Bom.)(HC) 628 197
Kshema Technologies Ltd.; CIT v. * (2016) 381 ITR 435/66 taxmann.com 245 88
165 (Karn.)(HC)
KSS Ltd. v. Dy. CIT (2016) 157 ITD 124 (Mum.)(Trib.) 1369 430
Kulbhushan Khosla v. CIT (2016) 143 DTR 281 (Delhi)(HC) 1750 568
Kumar Rajaram v. ITO (2016) 157 ITD 772/178 TTJ 168 (Chennai)(Trib.) 1022 314
2355 796
Kumarakom Lake Resort Pvt. Ltd. v. ACIT (Cochin)(Trib.); www.itatonline. 1318 412
org
Kundalika Nagari Sahakari Patpedhi Maryadit; ITO v. * (2016) 178 TTJ 1350 423
381/137 DTR 210 (Pune)(Trib.)
Kundles Loh Udyog v. ITO (2016) 45 ITR 11 (Chd.)(Trib.) 1179 365
Kurele Paper Mills P. Ltd.; PCIT v. * (2016) 380 ITR 571 (Delhi)(HC) 1903 626
L
L G Electronics India P. Ltd. v. P CIT (2016) 388 ITR 135/290 CTR 283/143 2329 785
DTR 105/ (2017) 79 taxmann.com 418 (All.)(HC)
L. G. Polymers India (P.) Ltd.; ACIT v. * (2016)157 ITD 1113 (Visakha) 762 234
(Trib.)
L. H. Sugar Factory Ltd.; ACIT v. * (Luck)(Trib.); www.itatonline.org 1547 496
L. G. Electronics India (P.) Ltd. v. ACIT (2016) 179 TTJ 705/64 taxmann. 2272 764
com 111/138 DTR 194 (Delhi)(Trib.)
lx
Case Laws Index
Name Case Page
No. No.
L. G. Polymers India (P.) Ltd.; ACIT v. * (2016) 157 ITD 1113 822 248
(Visakhapatnam)(Trib.)
L. K. India Pvt. Ltd.; PCIT v. * (2016) 240 Taxman 627/290 CTR 118/143 494 162
DTR 38 (Guj.)(HC)
Lahar Singh Siroya v. ACIT (2016) 138 DTR 331 (Karn.)(HC) 60 18
Lahoti Overseas Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org 2247 757
Lala Lajpatrai Memorial Trust; DIT (E) v. * (2016) 383 ITR 345/136 DTR 311 107
233/240 Taxman 557 (Bom.)(HC)
Lala Lajpatrai Memorial Trust; DIT(E) v. * (2016) 383 ITR 345/136 DTR 16 5
233/240 Taxman 557 (Bom.)(HC)
Lalabhai Kamabhai Bharwad v. CIT (2016) 140 DTR 153/289 CTR 36 72 1584 511
taxmann.com 184 (Guj.)(HC)
Laljibhai Mohanbhai Ghori v. CIT (2016) 243 Taxman 535 (Guj.)(HC) 1628 527
Lancy Constructions; CIT v. * (2016) 237 Taxman 728 (Karn.)(HC) 1904 626
Land Acquisition Collector v. Addl. CIT (2016) 242 Taxman 389 (P&H)(HC) 2052 678
Land End Co-operative Housing Society Ltd. v. ITO (Mum.)(Trib.); www. 103 33
itatonline.org
Land End Co-operative Housing Society Ltd. v. ITO (Mum.)(Trib.); www. 1349 422
itatonline.org
Lanxess India (P.) Ltd.; CIT v. * (2016) 242 Taxman 472 (Bom.)(HC) 1373 431
Laqshya Media (P.) Ltd.; DCIT v. * (2016) 160 ITD 35/182 TTJ 318 (Mum.) 59 17
(Trib.)
Laqshya Media (P.) Ltd.; DCIT v. * (2016) 160 ITD 35/182 TTJ 318 (Mum.) 1984 656
(Trib.)
Laqshya Media (P.) Ltd.; DCIT v. * (2016) 160 ITD 35/182 TTJ 318 (Mum.) 2026 668
(Trib.)
Larsen & Tourbo Limited v. UOI (Bom.)(HC), www.itatonline.org 2313 779
Last Peak Data (P) Ltd.; ITO v. * (2015) 155 ITD 1099/(2016) 175 TTJ 1568 502
65/131 DTR 31 (Kol.)(Trib.)
Lata Jain (Ms.); Pr. CIT v. * (2016) 384 ITR 543 (Delhi)(HC) 1902 625
Lavanya Land (P) Ltd.; CIT v. * (2016) 139 DTR 43/288 CTR 50 (Bom.) 2285 769
(HC)
Laxmandas Sujandas Dalpat v. ITO (2016) 381 ITR 283/236 Taxman 1154 358
372/134 DTR 351/287 CTR 666 (Guj.)(HC)
Laxmi Agencies; CIT v. * (2016) 388 ITR 307 (Kar.)(HC) 1333 417
Laxmi Business Promotions P. Ltd. v. CIT (2016) 386 ITR 558 (Cal.)(HC) 1963 646
lxi
Case Laws Index
Name Case Page
No. No.
Lead Counsel of Qualified Settlement Fund (QSF). In RE (2016) 381 ITR 2061 682
1/237 Taxman 667/283 CTR 361/130 DTR 369 (AAR)
Leena R. Phadnis (Mrs.) v. CIT (2016) 387 ITR 721/241 Taxman 34/(2017) 1629 528
293 CTR 175 (Bom.)(HC)
Lehman Brothers & Advisors (P.) Ltd.; ACIT v. * (2016) 157 ITD 1003 821 248
(Mum.)(Trib.)
Leighton Welspun Contractors (P.) Ltd.; ADIT v. * (2016) 156 ITD 515/47 2500 847
ITR 97 (Mum.)(Trib.)
Leighton Welspun Contractors P. Ltd.; Addl. DIT v. * (2016) 156 ITD 2496 845
515/47 ITR 97 (Mum.)(Trib.)
LGW Ltd.; ITO v. * (2016) 130 DTR 201 (Kol.)(Trib.) 237 85
395 135
772 236
923 278
1065 328
2198 739
Li & Fung (India) (P) Ltd. v. Dy. CIT (2016) 158 ITD 498/178 TTJ 10/136 1451 458
DTR 15 (Delhi)(Trib.)
Liberty Footwear Co. v. CIT (2016) 383 ITR 195/238 Taxman 89/286 CTR 1266 394
369/136 DTR 31 (SC)
Limtex Tea & Industries Ltd. v. ACIT (2016) 156 ITD 900/176 TTJ 265/131 56 17
DTR 209 (Kol.)(Trib.)
Lincoln Pharmaceuticals Ltd.; CIT v. * (2016) 129 DTR 355/282 CTR 588 1801 587
(Guj.)(HC)
Little Servants of Divine Providence Charitable trust v. ITO (Cochin)(Trib.); 2134 711
www.itatonline.org
Liva Healthcare Ltd.; ACIT v. * (2016) 161 ITD 63 (Mum.)(Trib.) 733 226
735 227
Liva Healthcare Ltd.; ACIT v. * (2016) 161 ITD 63/181 TTJ 433 (Mum.) 696 217
(Trib.) 697 217
714 222
Living Media India Ltd.; ACIT v. * (2015) 70 SOT 536/40 ITR 610 (Delhi) 603 190
(Trib.)
Lohia Securities Ltd. v. Dy. CIT (2016) 157 ITD 265 (Kol.)(Trib.) 1251 389
Loreal India Private Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org 1478 468
LS Cable and Systems Ltd. v. CIT (2015) 288 CTR 23/(2016) 385 ITR 2175 730
99/138 DTR 340/(2017) 78 taxmann.com 55 (Delhi)(HC)
LS Cable Ltd.; DIT v. * (2016) 243 Taxman 427 (Delhi)(HC) 128 41
lxii
Case Laws Index
Name Case Page
No. No.
Lubrizol Advanced Materials India (P.) Ltd v. Dy. CIT (2016) 156 ITD 1493 473
249/180 TTJ 616 (Ahd.)(Trib.)
Lupin Ltd. v. ACIT (2016) 159 ITD 10 (Mum)(Trib.) 721 223
935 282
1126 347
M
M Sons Gems N Jewellery (P.) Ltd.; PCIT v. * (2016) 239 Taxman 530 2004 661
(Delhi)(HC)
M. Amareswara Rao v. Dy. CIT (2016) 157 ITD 657/136 DTR 153/178 TTJ 39 11
700 (Visakha)(Trib)
M. Bala Narasimha Reddy v. PCIT (2016) 382 ITR 307 (T&AP)(HC) 2102 699
M. G. Contractors Pvt. Ltd. v. DCIT (Delhi)(Trib); www.itatonline.org 2451 832
2274 765
M. Hemanathan; CIT v. * (2016) 384 ITR 177/239 Taxman 533/133 DTR 1975 651
226/285 CTR 182 (Mad.)(HC)
M. M. Aqua Technologies Ltd.; CIT v. * (2016) 386 ITR 441/242 Taxman 930 280
153/288 CTR 372/139 DTR 315 (Delhi)(HC)
M. S. Luvish Projects (P) Ltd.; Dy. CIT v. * (2016) 175 TTJ 153 (Mum.) 459 153
(Trib.)
M. Sathyanarayana v. ITO (2016) 238 Taxman 79 (Karn.)(HC) 85 28
M. D. Infra Developers v. DCIT (2016) 385 ITR 82/240 Taxman 237/287 2100 698
CTR 431/138 DTR 298 (Guj.)(HC)
Macleods Pharmaceuticals Ltd. v. ACIT (2016) 161 ITD 291 (Mum.)(Trib.) 699 218
Macro Marvel Projects Ltd. v. ACIT (2016) 142 DTR 358 (Mad.)(HC) 619 195
Macro Marvel Projects Ltd. v. ACIT (2016) 239 Taxman 189 (Mad.)(HC) 655 204
Madanlal F. Jain v. DCIT (2016) 160 ITD 1/143 DTR 150/181 TTJ 948 430 144
(Ahd.)(Trib.) 740 228
Madhu Keshwani; CIT v. * (Smt.)(2016) 380 ITR 566 (All.)(HC) 1922 633
Madhukar C. Ashar v. UOI (2016) 239 Taxman 367/139 DTR 268 (Bom.) 2394 810
(HC)
Madura Micro Finance Ltd.; Dy. CIT v. * (2016) 157 ITD 918 (Chennai) 2465 836
(Trib.)
Magneti Marelli Power Train India P. Ltd. v. Dy. CIT (2016) 389 ITR 1376 432
469/290 CTR 60/75 taxmann.com 213/142 DTR 329 (Delhi)(HC)
Mahagun Hotels P. Ltd. v. DCIT (2016) 45 ITR 347 (Delhi)(Trib.) 456 152
457 153
536 172
lxiii
Case Laws Index
Name Case Page
No. No.
Mahanagar Gas Ltd.; DCIT v. * (Mum.)(Trib.); www.itatonline.org 873 263
Mahanagar Gas Ltd.; Dy. CIT v. * (2016) 158 ITD 1016 (Mum.)(Trib.) 2050 677
Maharani Luxmi Bai Memorial Education Society; CCIT v. * (2015) 235 220 79
Taxman 556/(2016) 287 CTR 109/(Uttarakhand) (HC)
Maharao Bhim Singh of Kota v. CIT (2016) 290 CTR 601/144 DTR 249/ 209 74
(2017) 390 ITR 532/244 Taxman 139 (SC)
Maharashtra Industrial Development Corporation (MIDC) v. CIT (2016) 136 2106 701
DTR 233/290 CTR 337 (Bom.)(HC)
Mahender Kumar Bader; Dy. CIT v. * (2016) 48 ITR 596 (Jaipur)(Trib.) 985 300
Mahendra Brothers Exports (P.) Ltd.; DCIT v. * (2016) 161 ITD 772 (Mum.) 381 131
(Trib.) 469 156
Mahendra Kumar Bader; DCIT v. * (Jaipur)(Trib.); www.itatonline.org 998 305
Mahendra Kumar Saha v. ACIT (2016) 47 ITR 590 (Cuttack)(Trib.) 749 231
Mahendrabhai B. Shrivastav v. ITO (2016) 158 ITD 755/181 TTJ 713 (2017) 1176 364
152 DTR 72 (Ahd.)(Trib.) 1234 382
Maheshbhai Shantilal Patel v. ITSC (2016) 241 Taxman 94 (Guj.)(HC) 2164 724
Mahindra Navistar Automotives Ltd. v. Dy. CIT (2016) 159 ITD 123/181 722 223
TTJ 271 (Mum.)(Trib.) 2015 665
Mahindra Telecommunications Investment (P.) Ltd. v. ITO (2016) 159 ITD 448 150
600/180 TTJ 434 (Mum.)(Trib.)
Mahindra-BT Investment Company (Mauritius) Ltd., In re (2016) 389 ITR 1010 309
19/289 CTR 614/73 taxmann.com 74 (AAR)
Maine Global Enterprises (P.) Ltd v. ACIT (2016) 156 ITD 841 (Mum.) 1490 472
(Trib.)
Majmudar & Co.; ACIT v. * (2016) 181 TTJ 577/52 ITR 54/73 taxman.com 267 96
77 (Mum.)(Trib.)
Makhan Singh v. ITO (2016) 236 Taxman 364/136 DTR 336 (P&H)(HC) 18 6
Malankara Plantations Ltd. v. ACIT (2016) 236 Taxman 61 (Ker.)(HC) 1125 347
Malay Shrivastava v. DCIT (2016) 385 ITR 14/135 DTR 249/287 CTR 387 1791 584
(MP)(HC)
Maltex Malsters Ltd. v. CIT (2016) 243 Taxman 581 (P&H)(HC) 438 147
Managing Director, Tamil Nadu State Transport Corpn (Salem) Ltd. v. 2003 661
Chinnadurai (2016) 385 ITR 656/240 Taxman 162/142 DTR 65/290 CTR 2542 868
297 (Mad.)(HC)
Manas Sewa Samiti v. CCIT (2016) 282 CTR 302/236 Taxman 546 (All.) 223 80
(HC)
Manasi Mahendra Pitkar (Smt.) v. ITO (2016) 160 ITD 605 (Mum.)(Trib.) 1165 361
lxiv
Case Laws Index
Name Case Page
No. No.
Manbhar Devi Meena (Smt.); CIT v. * (2016) 240 Taxman 235 (Raj.)(HC) 2396 811
Mangal Keshav Securities Ltd. v. ACIT (2016) 46 ITR 458 (Mum.)(Trib.) 745 229
Mangalam Drugs & Organics Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org 2483 841
Mangalam Timber Products Ltd v. ITO (2016) 47 ITR 758 (Cuttack)(Trib.) 918 277
Mangalam Timber Products Ltd.; ACIT v. * (2016) 176 TTJ 21 (UO)(Ctk.) 1946 641
(Trib.)
Mangalore Ganesh Beedi works; CIT v. * (2016) 289 CTR 457/142 DTR 1036 318
201 (SC)
Manganese Ore India Ltd.; CIT v. * (2016) 384 ITR 413/238 Taxman 682 212
315/138 DTR 364 (Bom.)(HC)
Manish H. Agarwal v. ACIT (2016) 159 ITD 287 (Ahd.)(Trib.) 1201 372
Manishkumar Tulsidas Kaneriya v. Dy. CIT (2016) 242 Taxman 164/(2017) 1773 576
145 DTR 26 (Guj.)(HC)
Manjet Singh (HUF) Karta Manjeet Singhv. UOI (2016) 237 Taxman 116 1115 343
(P&H)(HC)
Manoj Murarka v. ACIT (2016) 156 ITD 793/(2017) 184 TTJ 555 (Kol.) 45 13
(Trib.)
Mansarovar Commercial (P) Ltd.; CIT v. * (2016) 134 DTR 105/287 CTR 1799 586
28 (Delhi)(HC)
Mansi Finance Chennai Ltd.; PCIT v. * (2016) 388 ITR 514/141 DTR 5 2
321/289 CTR 381 (Mad.)(HC)
Manural Huda Trust v. CIT (2016) 138 DTR 28 (Ker.)(HC) 2424 822
Marcopolo Products (P.) Ltd.; ITO v. * (2016) 159 ITD 266 (Kol.)(Trib.) 718 223
719 223
887 268
912 275
Marine Geology Services LLP U. K., In re (2016) 242 Taxman 491 (AAR) 955 287
Market Committee Sirsa; ITO v. * (2016) 179 TTJ 29 (UO)(Chd.)(Trib.) 2452 832
Market Committee, Shahabad; CIT v. * (2016) 240 Taxman 535 (P&H)(HC) 497 162
1683 546
Maroli Vibhag Khand Udyog Sahakari Mandi Ltd.;ACIT v. * (2016) 239 1711 554
Taxman 393 (SC)
Martin & Harris Laboratories Ltd.; DCIT v. * (2016) 48 ITR 641 (Mum.) 855 258
(Trib.)
Marubeni Itochu Steel India (P.) Ltd. v. Dy. CIT (2016) 156 ITD 620/177 1492 473
TTJ 539/134 DTR 145 (Delhi)(Trib.).
Maruti Impex v. JCIT (Mum.)(Trib.); www.itatonline.org 1212 375
lxv
Case Laws Index
Name Case Page
No. No.
Mashreq Bank PSC v. DDIT (2016) 176 TTJ 85/131 DTR 1 (Mum.)(Trib.) 1357 426
Mastek Ltd. v. A CIT (2016) 387 ITR 72 (Guj.)(HC) 1725 560
Matchless Glass Services P. Ltd.; PCIT v. * (2016) 380 ITR 370/237 Taxman 1151 356
195/284 CTR 150 (Delhi)(HC)
Max Healthscribe Ltd. v. ITO (2016) 386 ITR 479 (Karn.)(HC) 241 86
Max India Ltd. (No. 2); CIT v. * (2016) 388 ITR 81/75 taxmann.com 268 355 123
(P&H)(HC) 638 200
Max India Ltd.; CIT v. * (No. 1) (2016) 388 ITR 74/243 Taxman 40 (P&H) 491 161
(HC) 637 199
Mayank Chaturvedi v. UOI (2016) 387 ITR 593 (All.)(HC) 1599 516
Mazgaon Dock Ltd. v. ITO (2016) 46 ITR 162 (Mum.)(Trib.) 404 137
388 133
747 230
1707 553
792 241
943 283
1710 554
MBG Commodities (P.) Ltd. v. DCIT (2016) 50 ITR 129/(2017) 163 ITD 130 2127 709
(Hyd.)(Trib.)
McDowell and Co. Ltd.;CIT v. * (2016) 380 ITR 80 (Karn.)(HC) 932 281
Mcleod Russel India Ltd. v. ACIT (2016) 45 ITR 182 (Kol.)(Trib.) 1575 507
Md. Sayeed v. Dy. CIT (2016) 389 ITR 351 (Patna)(HC) 2211 744
Medall Health Care P. Ltd. v. CIT (2016) 46 ITR 36 (Chennai)(Trib.) 2389 807
Medplus Health Services (P.) Ltd. v. ITO (2016) 158 ITD 105/48 ITR 396 1123 346
(Hyd.)(Trib.)
Megatrends Inc v. CIT (2016) 388 ITR 16/74 taxmann.com 197/(2017) 149 2191 737
DTR 113 (Mad.)(HC)
Megatrends Inc. v. CIT & Anr. (2016) 287 CTR 687 (Mad.)(HC) 1649 535
Megatrends Inc. v. CIT (2016) 382 ITR 13/238 Taxman 192/139 DTR 96/287 2193 738
CTR 689 (Mad.)(HC)
Megatrends Inc. v. CIT (2016) 383 ITR 53/139 DTR 93/287 CTR 689 (Mad.) 2192 737
(HC)
Megh Chand Meena, HUF; ITO v. * (2016) 159 ITD 457/181 TTJ 240 9 3
(Jaipur)(Trib.)
Megh Malhar Finstock (P.) Ltd; ACIT v. * (2016) 157 ITD 593 (Ahd.)(Trib.) 2275 765
Meghalaya Steel Ltd.; CIT v. * (2016) 383 ITR 217/132 DTR 273/284 CTR 1312 409
321/238 Taxman 559 (SC)
lxvi
Case Laws Index
Name Case Page
No. No.
Meghalaya Steel Ltd.; CIT v. * (2016) 383 ITR 217/132 DTR 273/284 CTR 2544 869
321/238 Taxman 559 (SC)
Meghmani Energy Ltd. v. DCIT (2016) 243 Taxman 551/389 ITR 281 (Guj.) 1729 561
(HC)
Meghmani Energy Ltd. v. Dy. CIT (2016) 389 ITR 281/243 Taxman 551 1721 558
(Guj.)(HC)
Mehru Electricals and Mechanical Engineers Pvt. Ltd.; CIT v. * (2016) 388 492 161
ITR 169 (Raj.)(HC)
Mercedes Benz Education Academy v. ITO (2016) 156 ITD 488/176 TTJ 228 81
365/131 DTR 302 (Pune)(Trib.) 1867 612
Merciful Jesus Church v. CIT (2016) 160 ITD 42 (Cochin)(Trib.) 320 110
Merck Ltd.; CIT v. * (2016) 389 ITR 70/241 Taxman 535/290 CTR 226/143 1371 431
DTR 86 (Bom.)(HC)
MERO Asia Pacific Pte Ltd., In re (2016) 387 ITR 274/243 Taxman 322/289 155 50
CTR 1/140 DTR 394 (AAR)
Metrochem Industries Ltd.; CIT v. * (2016) 389 ITR 181 (Guj.)(HC) 1273 396
627 197
MGF Automobiles Ltd.; CIT v. * (2015)63 taxmann.com 137 (Delhi)(HC) 1895 623
Micro Ink Ltd. v. Add. CIT (2016) 157 ITD 132/175 TTJ 8 (Ahd.)(Trib.) 1488 472
Micro Ink Ltd. v. Add. CIT (2016) 157 ITD 132/175 TTJ 8/129 DTR 49 1370 430
(Ahd.)(Trib.)
Micro Instruments Company; CIT v. * (2016) 388 ITR 46/289 CTR 152/75 1307 408
taxmann.com 304 (P&H)(HC) 1677 545
2292 771
Micro Labs Ltd.; ACIT v. * (2016) 380 ITR 1/283 CTR 9/237 Taxman 1268 394
74/130 DTR 113 (SC)
Micro Spacematrix Solution P. Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org 2521 856
Microlabs Ltd.; CIT v. * (2016) 383 ITR 490 (Karn.)(HC) 363 125
547 176
Microsemi India (P.) Ltd. v. Dy.CIT (2016) 157 ITD 220 (Hyd.)(Trib.) 255 91
Milestone Tradelinks P. Ltd. v. ITO (2016) 47 ITR 606 (Ahd.)(Trib.) 2366 799
Milestone Tradelinks P. Ltd. v. ITO (Ahad.)(Trib.); www.itatonline.org 2379 804
Mili Consultants & Investment (P.) Ltd. v. DCIT (2016) 160 ITD 72 (Mum.) 470 156
(Trib.)
Minitechs Aerotools P. Ltd.; PCIT v. * (2016) 387 ITR 166 (Karn.)(HC) 2297 772
Mintu Sayermal Jain (Mrs) v. ITO (Mum.)(Trib.); www.itatonline.org 1213 376
Mirco Instruments Company (P & H) (HC); CIT v. * www.itatonline.org 1313 410
lxvii
Case Laws Index
Name Case Page
No. No.
Mirco Instruments Company; CIT v. * (P&H)(HC); www.itatonline.org 2305 775
Mitchell Drilling International P. Ltd.; PCIT v. * (2015) 234 Taxman 818/ 950 286
(2016) 380 ITR 130 (Delhi)(HC)
Mitsubishi Motors corporation; DIT v. * (2016) 179 TTJ 25 (UO) (Delhi) 1533 491
(Trib.)
Mitsui & Co. Ltd.; CIT v. * (2016) 238 Taxman 575 (SC) 2325 783
Mitsui and Co. India P. Ltd.; PCIT v. * (2016) 384 ITR 360 (Delhi)(HC) 1899 624
Mitsui Prime Advanced Composites India (P) Ltd. v. Dy. CIT (2016) 178 2456 833
TTJ 490/136 DTR 282 (Delhi)(Trib.)
Mobisoft Tele Solutions (P.) Ltd.; CIT v. * (2016) 237 Taxman 221 (P&H) 690 214
(HC)
Modern Motors; ACIT v. * (2016) 48 ITR 579/142 DTR 0145/181 TTJ 813 509 166
(Jaipur)(Trib.) 883 267
933 281
Modern Spinners Ltd.; CIT v. * (2016) 382 ITR 472 / 243 Taxman 437 (SC) 616 194
Mohanjeet Singh v. JCIT (2016) 159 ITD 582 (Chd.)(Trib.) 2404 814
Mohd. Imran Baig v. ITO (2016) 130 DTR 33 / 175 TTJ 319 (Hyd.)(Trib.) 1060 326
Mohd. Imran Baig v. ITO (Hyd.)(Trib.); www.itatonline.org 1063 327
Monarch Educational Society; CIT(E) v. * (2016) 387 ITR 416 (Delhi)(HC) 1767 574
Monica India (No.1); CIT v. * (2016) 386 ITR 608 / 240 Taxman 60 / 286 648 202
CTR 426 / 135 DTR 281 (Bom.)(HC)
Monica Oswal (Ms)(FB); CIT v. * (2016) 382 ITR 453 / 133 DTR 15 / 284 1214 376
CTR 188 (P&H)(HC)
Monika India v. ITO (2016) 386 ITR 639 (Bom.)(HC) 2300 773
Monika India; CIT v. * (No.2) (2016) 386 ITR 617 / 286 CTR 435 / 135 2222 748
DTR 290 (Bom.)(HC)
Moonlight Tools (P) Ltd. v. DCIT (2016) 49 ITR 39 (Chd.)(Trib.) 707 220
Moradabad Development Authority; ITO v. * (2016) 159 ITD 971 / 49 ITR 288 101
270 / (2017) 183 TTJ 278 (Delhi)(Trib.)
Mother Theresa Educational Society; ITO v. * (2016) 158 ITD 473 291 102
(Visakha)(Trib.) 854 257
Motherson Sumi Infotech & Design Ltd.; ACIT v. * (2015) 155 ITD 8 / 174 1476 467
TTJ 766 / 129 DTR 106 (Delhi)(Trib.)
Motilal R. Todi v. ACIT (2016) 47 ITR 149 (Mum.)(Trib.) 1854 608
Motto Tiles P. Ltd. v. ACIT (2016) 386 ITR 280 / 73 taxmann.com 176 1886 619
(Guj.)(HC)
lxviii
Case Laws Index
Name Case Page
No. No.
Movaliya Bhikhubhai Balabhai v. ITO (2016) 138 DTR 223 / 70 taxmann. 2001 661
com 45 (Guj.)(HC)
Movaliya Bhikhubhai Balabhai v. ITO (TDS) (2016) 388 ITR 343 / 70 1994 658
taxmann.com 45 (Guj.)(HC)
Mridu Hari Dalmia Parivar Trust v. ITO (2016) 158 ITD 521 / 139 DTR 143 1114 343
/ 179 TTJ 577 (Delhi)(Trib.) 995 304
Mridul Garg v. UOI (2016) 387 ITR 593 (All.)(HC) 1599 516
Mridula Prop. Dhruv Fabrics; CIT v. * (2015) 234 Taxman 245 / (2016) 131 1970 648
DTR 308 / 284 CTR 293 (P&H)(HC)
MSM Satellite (Singapore) Pte. Ltd. v. DIT (2016) 161 ITD 602 (Mum.) 1669 542
(Trib.)
MSV International Inc.; DDIT (IT) v. * (2016) 157 ITD 757 / 143 DTR 249 183 62
/ 181 TTJ 480 / 51 ITR 428 (Delhi)(Trib.)
Mudra Foundation for Communications Research & Education v. CCIT 17 5
(2016) 237 Taxman 139 / 137 DTR 293 / 287 CTR 135 (Guj.)(HC)
Mukesh Ratilal Marolia; CIT v. * (Bom.)(HC), www.itatonline.org 1198 371
Mul Chand Malu (HUF) v. ACIT (2016) 384 ITR 46 / 286 CTR 448 / 241 1618 523
Taxman 189 / 136 DTR 12 (Gau.)(HC)
Mul Chand Malu v. UOI (2016) 383 ITR 367 / 285 CTR 89 / 69 taxmann. 1593 514
com 4 / 132 DTR 297 (Gauhati)(HC)
Muller and Philips (India) Ltd v. ITO (2016) 47 ITR 69 (Mum.)(Trib.) 1856 609
Multi Act Realty Enterprises Pvt. Ltd. v. ACIT (Mum.)(Trib.); www. 798 242
itatonline.org
Mundial Export Import Finance (P) Ltd. v. CIT (2016) 131 DTR 195 / 284 694 216
CTR 87 / 238 Taxman 34 (Cal.)(HC)
Munjal Sales Corpn. v. CIT (2016) 243 Taxman 523 / (2017) 393 ITR 248 1675 544
/ 150 DTR 293 (P&H)(HC)
Munjal Showa Ltd. v. Dy. CIT (2016) 382 ITR 555 / 239 Taxman 239 / 137 1817 593
DTR 231 (Delhi)(HC)
Murasoli Trust v. ADIT (E) (2016) 156 ITD 761 / 48 ITR 472 / 139 DTR 298 104
320 / 179 TTJ 378 (Chennai)(Trib.)
Muthappan Enterprises; CIT v. * (2016) 237 Taxman 551 / 138 DTR 310 2104 700
(Ker.)(HC)
Muthoot Bankers (Aryasala); CIT v. * (2016) 385 ITR 51 / 71 taxmann.com 2511 851
110 / 141 DTR 198/289 CTR 309 (Ker.)(HC)
lxix
Case Laws Index
Name Case Page
No. No.
Muthoot Finance Ltd. v. Addl. CIT (2016) 52 ITR 241 (Cochin)(Trib.) 600 190
704 220
809 245
55 16
N
N. Jegatheesan v. Dy. CIT (2016) 388 ITR 410 / 237 Taxman 490 / 138 DTR 2103 699
17 / 287 CTR 292 (Mad.)(HC)
N. K. Industries Ltd. v. Dy. CIT (2016) 142 DTR 162 / 72 taxmann.com 289 1229 381
/ (2017) 292 CTR 354 (Guj.)(HC) 1681 546
1961 645
N. Mohammed Ali v. ITO (2016) 237 Taxman 211 (Mad.)(HC) 894 270
N.G. Jewellers; CIT v. * (2016) 389 ITR 403 (Raj.)(HC) 1916 631
N.K. Proteins Ltd. v. ITO (2016) 389 ITR 541 / 76 taxmann.com 241 (Guj.) 1754 569
(HC)
Naath industries Pvt. Ltd. v. CIT (Bom.)(HC); www.itatonline.org 2278 766
Nadim Dilip Bhai Panjvani v. ITO (2016) 383 ITR 375 / 237 Taxman 480 1619 524
(Guj.)(HC)
Nagarbail Salt-Owners Co-operative Society Ltd.; CIT v. * (2016) 238 53 15
Taxman 689 / 135 DTR 22 / 290 CTR 211 (Karn.)(HC)
Nagarbail Salt-Owners Co-operative Society Ltd.; CIT v. * (2016) 76 53 15
taxmann.com 2 / (2017) 390 ITR 415 / 291 CTR 287 (Karn.)(HC)
Nahar Export Ltd.; CIT v. * (2016) 389 ITR 33 / 76 taxmann.com 146 1284 399
(P&H)(HC) 2397 811
Nai Rajdhani Path Pramandal v. CIT (TDS) (2016) 384 ITR 328 / 238 2072 687
Taxman 281 (Patna)(HC)
Namdev Arora v. CIT (2016) 389 ITR 434 / 241 Taxman 303 / (2017) 147 1132 350
DTR 138 (P&H)(HC)
Namita V. Samant v. CIT (2016) 161 ITD 15 (Mum.)(Trib.) 33 10
Nand Lal Popli v. Dy. CIT (2016) 160 ITD 413 (Chd.)(Trib.) 948 285
1025 314
Nanubhai Keshavlal Chokshi HUF v. ITO (2016) 161 ITD 211 (Ahd.)(Trib.) 1024 314
Narain Singla v. Pc.CIT (2016) 156 ITD 275 (Chd.)(Trib.) 2382 805
Narasu’s Spinning Mills v. ACIT (2016) 157 ITD 512 (Chennai)(Trib.) 590 187
596 189
864 261
Narayan Rao; ITO v. * (2016) 46 ITR 178 (Hyd.)(Trib.) 1082 332
Narayan Tatu Rane v. ITO (Mum.)(Trib.), www.itatonline.org 2375 803
lxx
Case Laws Index
Name Case Page
No. No.
Narayani & Sons (P) Ltd.; CIT v. * (2016) 141 DTR 315 / 289 CTR 301 / 2501 847
73 taxmann.com 21 (Cal.)(HC)
Narendra N. Thacker; ACIT v. * (2016) 45 ITR 188 (Kol.)(Trib.) 1620 524
Naresh Chauhan v. Dy. CIT (2016) 48 ITR 1 (Chd.)(Trib.) 1906 627
2195 739
Narindera Industries v. ACIT (2016) 176 TTJ 35 (UO)(Chd.)(Trib.) 2478 840
Narmina Trade Investment P. Ltd.; CIT v. * (2016) 388 ITR 243 (Bom.)(HC) 25 8
National Co-op. Bank Ltd.; CIT v. * (2016) 387 ITR 702 (Karn.)(HC) 1997 659
National Council of Science Museum; ITO v. * (2016) 159 ITD 180 (Kol.) 224 80
(Trib.)
National Dairy Development Board v. ACIT (2016) 243 Taxman 560 (Guj.) 1756 570
(HC)
National Insurance Co. Ltd. v. Lakhwinder Kaur (2016) 236 Taxman 558 72 23
(P& H)(HC)
National Insurance Co. Ltd. v. Ritu Kunawar and ors. (2016) 380 ITR 467 2008 664
/ 282 CTR 597 / 129 DTR 418 (P&H)(HC)
National Petroleum Construction Company v. DIT(IT) (2016) 383 ITR 648 1353 425
/ 131 DTR 113 / 284 CTR 373 / 238 Taxman 40 (Delhi)(HC)
National Stock Exchange v. Addl. CIT (2016) 158 ITD 850 / 178 TTJ 409 2532 864
/ 136 DTR 49 (Mum.)(Trib.)
Natraj Engineers (P.) Ltd.; CIT v. * (2016) 66 taxmann.com 48 / 286 CTR 2124 708
103 (Patna)(HC)
Nav Maharashtra Vidyalaya. v. (2016) 161 ITD 732 / 182 TTJ 729 (Pune) 2508 850
(Trib.)
Nayan C. Shah v. ITO (2016) 386 ITR 304 / 240 Taxman 115 (Guj.)(HC) 2427 823
Nayan Kothari; Dy. DIT(I) v. * (2016) 383 ITR 276 / 236 Taxman 398 (MP) 1613 522
(HC)
NCR Corporation India (P.) Ltd.; CIT v. * (2016) 387 ITR 725 / 240 Taxman 928 280
598 / 293 CTR 225 (Karn.)(HC)
NE Technologies India (P) Ltd.; CIT v. * (2016) 237 Taxman 151 (AP)(HC) 2239 754
NEC HCL System Technologies Ltd. v. ACIT (2016) 176 TTJ 436 (Delhi) 1239 384
(Trib.) 874 264
Neela S. Karyakarte v. ITO (2016) 176 TTJ 52 (URO) / BCAJ–March–P. 30 1086 333
(Mum.)(Trib.)
Neeraj Badaya v. ADIT (2016) 157 ITD 1016 / 137 DTR 283 / 179 TTJ 387 159 51
(SMC)(Jaipur) (Trib.)
Nemichand P. Jain HUF; ACIT v. * (2016) 157 ITD 257 (Mum.)(Trib.) 1001 306
lxxi
Case Laws Index
Name Case Page
No. No.
Neo Sports Broadcast (P.) Ltd. v. CIT (2016) 159 ITD 136 / 181 TTJ 417 2359 797
(Mum.)(Trib.)
Neo Sports Broadcast Pvt.Ltd. v. CIT (2016) 142 DTR 329 (Mum.)(Trib.) 2376 803
Neon Solutions P. Ltd.; CIT v. * (2016) 387 ITR 667 (Bom.)(HC) 1679 545
Neon Solutions Pvt. Ltd.; CIT v. * (Bom.)(HC); www.itatonline.org 90 30
Nestle India Ltd. v. Dy. CIT (2015) 384 ITR 334 (Delhi)(HC) 1731 562
1735 563
Neuland Laboratories Ltd.; DCIT v. * (2016) 161 ITD 422 (Hyd.) (Trib.) 817 247
Neuland Laboratories Ltd.; DCIT v. * (2016) 161 ITD 422 (Hyd.)(Trib.) 818 247
New Delhi Television Ltd. v. ACIT (2016) 160 ITD 491 / 182 TTJ 46 1365 429
(Delhi)(Trib.)
New India Assurance Co. Ltd v. Sunita Sharma and Ors. (2016) 380 ITR 2008 664
467 / 282 CTR 597 / 129 DTR 418 (P&H)(HC) 2008 664
New India Insurance Co. Ltd. v. Bhoyabhai Haribhai Bharvad (2016) 242 1998 660
Taxman 415 (Guj.)(HC)
New Kenilworth Hotel P. Ltd v. CIT (2016) 387 ITR 201 / (2017) 292 CTR 1281 398
336 (Cal.)(HC) 77 24
440 147
New Mangalore Port Trust v. ACIT (2016) 157 ITD 399 (Bang.)(Trib.) 455 152
769 236
New Mangalore Port Trust; CIT v. * (2016) 382 ITR 434 / 238 Taxman 397 2344 790
/ 283 CTR 342 (Karn.)(HC) 2200 740
New Okhla Industrial Development Authority v. CIT (2016) 161 ITD 105 317 109
/ 181 TTJ 289 (Delhi)(Trib.)
New Skies Satellite BV; DIT v. * (2016) 382 ITR 114 / 238 Taxman 577 / 164 54
285 CTR 1 / 133 DTR 185 (Delhi)(HC)
Neyveli Lignite Corporation Ltd.; CIT v. * (2016) 388 ITR 172 (Mad.)(HC) 639 200
Neyveli Lignite Corporation Ltd.; CIT v. * (2016) 388 ITR 172 / 240 649 202
Taxman 473 (Mad.)(HC)
NGC Network Asia LLC v. Jt. CIT (2016) 47 ITR 162 / 175 TTJ 403 / 131 190 65
DTR 145 (Mum.)(Trib.)
NHPC Ltd. v. ACIT (2016) 47 ITR 561 (Delhi)(Trib.) 1940 639
2129 709
Niagam Hotels & Builders (P) Ltd. v. CIT (2016) 134 DTR 158 (Delhi)(HC) 417 141
Nicholas Piramal (India) Ltd.; CIT v. * (2016) 239 Taxman 470 (Bom.)(HC) 359 124
572 183
657 204
lxxii
Case Laws Index
Name Case Page
No. No.
Nikki Drug & Chemicals (P.) Ltd.; PCIT v. * (2016) 386 ITR 680 / 236 1921 632
Taxman 305 / 129 DTR 393 / 293 CTR 398 (Delhi)(HC)
Nilesh Pravin Vora & Yatin Pravin Vora (Legal heirs of Pravin Laxmidas 1081 332
Vora) v. ITO (2016) 45 ITR 228 (Mum.)(Trib.)
Nileswar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham 1344 421
v. CIT (2016) 380 ITR 34 / 129 DTR 161 (Ker.)(HC)
Nilkanth Concast P. Ltd. v. DCIT (2016) 48 ITR 264 (Delhi)(Trib.) 1637 531
Nilkanth Concast P. Ltd.; PCIT v. * (2016) 387 ITR 568 / 241 Taxman 194 1636 531
(Delhi)(HC) 2219 747
Nimbus Communications Ltd. v. ACIT (2016) 47 ITR 496 (Mum.)(Trib.) 386 132
859 259
1454 460
Nimesh N. Kampani v. ACIT (Mum.)(Trib.); www.itatonline.org 743 229
Nirav Modi; CIT v. * (2016) 138 DTR 81 / 241 Taxman 255 / (2017) 390 2340 789
ITR 292 / 291 CTR 245 (Bom.)(HC)
Nirma Chemicals and works Pvt. Ltd. v. ACIT (2016) 286 CTR 505 / 132 2125 708
DTR 63 (Guj.)(HC)
Nirma Ltd. v. Dy. CIT (2016) 242 Taxman 286 (Guj.)(HC) 1774 576
Nirmal Bang Securities (P) Ltd. v. ACIT. (2016) 382 ITR 93 / 131 DTR 35 1738 565
/ 284 CTR 244 (Bom.)(HC)
Nirmal Kumar Agarwal; DCIT v. * (2016) 161 ITD 749 (Jaipur)(Trib.) 2487 843
Nirmal Kumar Ravindra Kumar-HUF v. CIT (2016) 386 ITR 10 / 240 1111 342
Taxman 404 / 288 CTR 710 / 140 DTR 432 (Cal.)(HC)
Nirmala Keshwani (Smt.); CIT v. * (2016) 380 ITR 566 (All.)(HC) 1922 633
Nisha Keshwani (Smt.); CIT v. * (2016) 380 ITR 566 (All.)(HC) 1922 633
Nishith Surendrabhai Soni v. ACIT (2016) 387 ITR 99 (Guj.)(HC) 1726 560
Nitrex Chemicals India Ltd.; PCIT v. * (2016) 243 Taxman 371 (Delhi)(HC) 631 198
1019 313
Nitta Gelatine India Ltd. v. ACIT (2016) 243 Taxman 245 (Ker.)(HC) 554 177
Nitul B. Shah v. ITO (2016) 158 ITD 830 / 141 DTR 180 / 181 TTJ 284 61 18
(Mum.)(Trib.)
NMDC Ltd.; CIT v. * (2016) 383 ITR 56 (T&AP)(HC) 1572 503
Noble Medical Foundation & Research Centre; ITO v. * (2015) 68 SOT 343 292 102
(URO)(Pune) (Trib.)
Noorul Islam Educational Trust v. CIT (2016) 388 ITR 489 / 243 Taxman 1582 511
519 / 144 DTR 339 (2017) 291 CTR 230 (SC)
lxxiii
Case Laws Index
Name Case Page
No. No.
Norma Detergent (P) Ltd.; ACIT v. * (2016) 386 ITR 56 / 238 Taxman 259 2125 708
/ 286 CTR 505 / 132 DTR 63 (Guj.)(HC)
Nortel Networks India (P.) Ltd.; DCIT v. * (2016) 176 TTJ 25 (UO) / 66 1504 477
taxmann.com 177 (Delhi)(Trib.)
Nortel Networks India (P.) Ltd.; Dy. CIT v. * (2016) 157 ITD 971 / 176 TTJ 1465 463
25 (UO) (Delhi)(Trib.)
Nortel Networks India International Inc. v. DIT (2016) 386 ITR 353 / 241 129 41
Taxman 464 / 288 CTR 383 (Delhi)(HC)
Novell Software Development (India) (P.) Ltd. v. Dy. CIT (2016) 158 ITD 2244 756
237 / 178 TTJ 629 (Bang.)(Trib.)
Novo Nordisk Pharma India Ltd. v. CIT (2016) 389 ITR 134 / 144 DTR 369 2282 768
/ (2017) 244 Taxman 53 / 291 CTR 21 (SC)
NTT Data India Enterprises Application Services (P.) Ltd v. ACIT (2016) 1466 464
157 ITD 897 (Hyd.)(Trib.)
Nukala Ramakrishna Eluru v. DCIT (Vizag)(Trib.); www.itatonline.org 2457 833
Nuts ‘n’ Spices v. ACIT (2016) 159 ITD 293 (Chennai)(Trib.) 2128 709
NYK Line India Ltd. v. ACIT (2016) 175 TTJ 180 / 132 DTR 7 (Mum.) 390 133
(Trib.)
O
O.G. Sunil v. Dy. CIT (2016) 383 ITR 617 (Ker.)(HC) 2309 777
O.P. Srivastava; CIT v. * (2013) 219 Taxman 133 / (2014) 265 CTR 481 / 574 183
(2016) 385 ITR 547 (All.)(HC) 1129 348
O.P. Srivastava; CIT v. * (2013) 219 Taxman 133 / (2014) 265 CTR 484 / 28 9
(2016) 385 ITR 547 (All.)(HC)
Object Frontier Software (P.) Ltd.; CIT v. * (2016) 75 taxmann.com 169 2402 813
(Mad.)(HC)
Obopay Mobile Technology India (P) Ltd. v. Dy. CIT (2016) 157 ITD 982 / 453 151
177 TTJ 191 / 46 ITR 42 (Bang.)(Trib.) 1470 465
1467 464
1458 462
Obopay Mobile Technology India Pvt. Ltd. v. Dy. CIT (2016) 157 ITD 982 1523 485
/ 46 ITR 42 / 176 TTJ 191 (Bang.)(Trib.)
Office of XEN, PHED v. ITO (2016) 161 ITD 373 / (2017) 183 TTJ 283 2081 691
(Jaipur)(Trib.)
Official Assignee, High Court, Madras v. T.R. Bhuvaneswari (2016) 385 ITR 2119 706
105 / 240 Taxman 266 (Mad.)(HC)
Oil & Natural Gas Corporation Ltd. v. ACIT (2016) 243 Taxman 105 / 289 208 73
CTR 403 / 142 DTR 57 (Guj.)(HC)
lxxiv
Case Laws Index
Name Case Page
No. No.
Oil and Natural Gas Corporation Ltd.; CIT v. * (2016) 387 ITR 710 641 200
(Uttarakhand)(HC)
Olwin Tiles (India) (P.) Ltd. v. Dy. CIT (2016) 382 ITR 291 / 237 Taxman 1824 597
342 / 283 CTR 200 / 13O DTR 209 (Guj.)(HC)
Om Prakash Kukreja; ITO v. * (2016) 159 ITD 190 / 178 TTJ 1 / 134 DTR 1851 607
208 (Chd.)(Trib.)
Om Sakthi Narayani Siddar Peedam Charitable Trust; DCIT v. * (2016) 47 347 120
ITR 787 (Chennai)(Trib.)
Om Shakthy Agencies (Madras) (P.) Ltd. v. Dy. CIT (2016) 157 ITD 1062 / 1910 628
177 TTJ 419 (Chennai)(Trib.) 901 272
Oman International Bank S.A.O.G.; DIT (IT) v. * (2016) 386 ITR 151 50 14
(Bom.)(HC) 647 202
Omax Bikes Ltd.; ACIT v. * (2016) 156 ITD 566 (Chd.)(Trib.) 591 188
Omni Farms Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 505 (Delhi)(Trib.) 1184 366
Oracle India (P) Ltd.; CIT v. * (2016) 386 ITR 1 / 241 Taxman 253 / 288 1381 435
CTR 118 / 139 DTR 186 (Delhi)(HC)
Oracle Systems Corporation v. DIT(IT) (2016) 383 ITR 434 / 238 Taxman 1737 564
165 / 137 DTR 33 / 287 CTR 636 (Delhi)(HC)
Orchid Griha Nirman (P.) Ltd.; ITO v. * (2016) 161 ITD 818 / 182 TTJ 415 1012 310
(Kol.)(Trib.)
Orchid Pharma Ltd. v. Dy. CIT (2016) 182 TTJ 809 / (2017) 162 ITD 303 1362 428
(Chennai)(Trib.)
Orient Blackswan (P.) Ltd. v. ACIT (2016) 159 ITD 944 / 181 TTJ 124 96 31
(Hyd.)(Trib.)
Orpak Systems Ltd. v. ADIT(IT) (2016) 176 TTJ 655 / 133 DTR 137 (Mum.) 153 50
(Trib.)
Overseas Enterprises v. UOI (Patna)(HC); www.itatonline.org 2568 880
Overseas Infrastructures; DCIT v. * (Mum.)(Trib.); www.itatonline.org 1187 367
Oxford Softech P Ltd v. ITO (2016) 47 ITR 794 (Delhi)(Trib.) 2458 834
P
P. M. Abdulla v. ITO (2015) 60 taxmann.com 52 / (2016) 380 ITR 125 / 1228 381
139 DTR 124 (Karn.)(HC)
P. S. Velusamy; CIT v. * (2016) 243 Taxman 408 (Mad.)(HC) 1285 399
P. Sasikumar (Dr.); CIT v. * (2016) 287 ITR 8 (Ker.)(HC) 1893 622
P.G.& W. Sawoo Pvt. Ltd. v. ACIT (2016) 385 ITR 60 / 136 DTR 113 / 286 1712 555
CTR 460 / 239 Taxman 257 (SC)
P.K. Rajasekar v. ITO (2016) 161 ITD 189 (Chennai)(Trib.) 1157 359
lxxv
Case Laws Index
Name Case Page
No. No.
P.M. Rungta; ITO v. * (HUF) (2016) 176 TTJ 648 / 133 DTR 146 (Mum.) 1002 306
(Trib.)
P.M. Rungta; ITO v. * (HUF) (2016) 46 ITR 579 (Mum.)(Trib.) 997 305
P.V. Chandran; CIT v. * (2016) 385 ITR 479 (Mad.)(HC) 1292 402
Page Industries Ltd. v. Dy. CIT (2016) 159 ITD 680 / 181 TTJ 798 (Bang.) 1361 428
(Trib.)
Pahilajrai Jaikishin; ACIT v. * (2016) 157 ITD 1187 / 179 TTJ 148 (Mum.) 373 129
(Trib.) 804 244
Pal Gram Hindu Sarvajanik Trust v. ITO (2016) 241 Taxman 84 (Guj.)(HC) 1776 577
Pala Marketing Co-op. Society Ltd. v. CIT (2016) 389 ITR 304 / (2017) 291 2141 714
CTR 116 (Ker.)(HC)
Palki Investment & Trading Co. (P) Ltd. v. ITO (2016) 139 DTR 57 / 288 2423 822
CTR 473 / 71 taxmann.com 322 (Bom.)(HC) 2425 823
Pallav Sheth; ACIT v. * (2016) 241 Taxman 13 (SC) 2094 696
Pankaj Investments v. ACIT (2016) 46 ITR 345 (Mum.)(Trib.) 2406 814
Pankaj Nagalia; CIT v. * (2016) 138 DTR 169 / 287 CTR 233 / 241 Taxman 1327 416
108 (Uttarakhand)(HC)
Param Hans Swami Uma Bharti Mission v. CCIT (2016) 238 Taxman 538 / 222 79
138 DTR 102 / 287 CTR 350 / (2017) 391 ITR 131 (P&H)(HC)
Paras Buildtech India P. Ltd. v. (2016) 382 ITR 630 / (2017) 145 DTR 313 1685 547
/ 291 CTR 549 / 80 taxmann.com 335 (Delhi)(HC)
Paras Rice Mills v. UOI (2016) 236 Taxman 21 (P&H)(HC) 2524 858
Paras S. Savla v. ACIT (2016) 389 ITR 336 / 244 Taxman 17 (Guj.)(HC) 1983 655
Paras Shantilal Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC) 1608 520
Pardeep Kumar Aggarwal; ACIT v. * (2016) 159 ITD 54 (Chd.)(Trib.) 376 130
580 185
1162 360
1200 371
Paresh Dhanji Chedda v. Dy. CIT (2016) 160 ITD 656 / (2017) 184 TTJ 132 2263 762
/ 149 DTR 124 (Hyd.)(Trib.)
Paresh Pritamlal Mehta v. ITO (Pune)(Trib.);www.itatonline.org 392 134
Parrys (Eastern) (P) Ltd.; CIT v. * (2016) 384 ITR 264 / 238 Taxman 14 1254 390
(Bom.)(HC)
Parryware Roca (P) Ltd.; Dy. CIT v. * (2016) 175 TTJ 450 / 129 DTR 257 877 264
(Chennai)(Trib.) 1521 485
Parshwa Corporation and others v. Dy. CIT (2016) 46 ITR 266 / 178 TTJ 1913 630
394 (Ahd.)(Trib.)
lxxvi
Case Laws Index
Name Case Page
No. No.
Partha Mitra v. ITO (2016) 161 ITD 25/ (2017) 183 TTJ 330 / 145 DTR 99 2241 755
(TM)(Kol.)(Trib.)
Pasupati Nath Commercial (P) Ltd.; CIT v. * (2016) 134 DTR 105 / 287 1799 586
CTR 28 (Delhi)(HC)
Patel Brothers v. DCIT (2016) 240 Taxman 487 (Guj.)(HC) 661 205
Pattambi Services Co-operative Bank Ltd. v. UOI (2016) 387 ITR 299 / 240 1622 525
Taxman 593 / 289 CTR 559 / 142 DTR 48 (Ker.)(HC)
Pavittar Singh v. CIT (2016) 282 CTR 285 (P&H)(HC) 1134 351
Pawan Kumar Jhunjhunwala; ACIT v. * (2016) 157 ITD 667 (Kol.)(Trib.) 403 136
770 236
865 261
866 261
1531 490
2380 805
Pawar Patkar Construction (P.) Ltd. v. JCIT (2016) 159 ITD 406 (Pune)(Trib.) 898 271
PBS Developers v. ITO (2016) 161 ITD 27 (Hyd.)(Trib.) 736 227
Peass Industrial Engineers Pvt. Ltd. v. Dy. CIT (2016) 289 CTR 139 / 72 1775 576
taxmann.com 302 (Guj.)(HC)
Peerless General Finance and Investment Co. Ltd. v. CIT (2016) 380 ITR 483 159
165 / 242 Taxman 173 (SC)
Peerless General Finance and Investment Co. Ltd.; CIT v. * (2016) 385 ITR 1543 495
130 (Cal.)(HC)
Pentair Water India Pvt. Ltd.; CIT v. * (2016) 381 ITR 216 / 282 CTR 160 1397 441
/ 69 taxman.com 180 (Bom.)(HC)
Pepsico India Holdings (P.) Ltd. v. ADCIT (2016) 157 ITD 1 (Delhi)(Trib.) 1489 472
Peravoor Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham 1344 421
v. CIT (2016) 380 ITR 34 (Ker.)(HC)
Peri (India) (P.) Ltd. v. JCIT (2016) 159 ITD 541 (Mum.)(Trib.) 482 159
Pfizer Corporation, Panama v. Dy. DIT (2016) 160 ITD 644 / 182 TTJ 902 2149 717
(2017) 145 DTR 234 (Mum.)(Trib.)
Pfizer Ltd. v. ACIT (2015) 64 taxmann.com 465 / (2016) 175 TTJ 92 / 139 1472 466
DTR 81 (Mum.)(Trib.)
Pfizer Ltd.; Dy. CIT v. * (2015) 64 taxmann.com 465 (2016) 175 TTJ 92 / 781 238
139 DTR 81 / (Mum.)(Trib.) 1522 485
PGS Exploration (Norway) AS v. Addl. DIT (2016) 383 ITR 178 / 239 178 60
Taxman 333 / (2017) 291 CTR 146 (Delhi)(HC) 949 286
Philips India Ltd.; CIT v. * (2016) 237 Taxman 538 (Cal.)(HC) 2351 795
lxxvii
Case Laws Index
Name Case Page
No. No.
Pilani Investments & Industries Corporation Limited; CIT v. * (2016) 383 2429 824
ITR 635 / 238 Taxman 384 / 284 CTR 272 / 131 DTR 321 (Cal.)(HC)
Pine Tree Finserve Pvt. Ltd. v. CIT (Bom.)(HC); www.itatonline.org 442 148
Pinebridge Investments Capital India (P.) Ltd. v. ITO (2016) 160 ITD 566 729 225
(Mum.)(Trib.)
Pipelines India v. ACIT (2016) 238 Taxman 9 / 288 CTR 603 (Mad.)(HC) 1013 310
Piramal Fund Management (P.) Ltd. v. Dy. CIT (2016) 383 ITR 581 / 133 2101 698
DTR 250 / 286 CTR 175 (Bom.)(HC)
Pirmal Fund Management Pvt. Ltd. v. DCIT (Bom.)(HC); www.itatonline.org 2108 702
Piu Ghosh v. Dy. CIT (2016) 386 ITR 322 / 73 taxmann.com 226 (Cal.)(HC) 829 251
Plant Lipids (P) Ltd.; ACIT v. * (2016) 157 ITD 811 (Cochin)(Trib.) 934 281
Pondicherry Chlorate Ltd.; CIT v. * (2016) 384 ITR 371 (Mad.)(HC) 1294 403
Pooja Forge Ltd.; CIT v. * (2016) 389 ITR 382 (Delhi)(HC) 1950 642
Power Soaps P. Ltd.; DCIT v. * (2016) 45 ITR 250 (Chennai)(Trib.) 537 172
891 269
Pr.CIT v. M. Tech India P. Ltd. (2016) 381 ITR 31 / 238 Taxman 178 / 132 840 254
DTR 57 / 287 CTR 213 (Delhi)(HC)
Prabhu Spinning Mills (P.) Ltd.; PCIT v. * (2016) 243 Taxman 462 (Mad.) 1286 399
(HC)
Pradeep Kar; CIT v. * (2016) 380 ITR 121 (Karn.)(HC) 1938 638
Pradeep Khanna v. ACIT (Delhi)(HC), www.itatonline.org 361 125
Pradip Burman v. ITO (2016) 382 ITR 418/ 236 Taxman 606 / 129 DTR 2516 853
404 (Delhi)(HC)
Praful Chandaria v. ADDIT (2016) 161 ITD 153 / 181 TTJ 731 / 143 DTR 990 302
1 (Mum.)(Trib.)
Praful Chandaria v. ADIT (2016) 143 DTR 1 (Mum.)(Trib.) 994 303
Pragati Vanijya Ltd.; ACIT v. * (2016) 48 ITR 77 (Delhi)(Trib.) 2400 812
Pragna R. Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC) 1960 645
Prahlad Bhattacharya v. CIT (2016) 386 ITR 708 / 71 taxmann.com 63 1138 352
(Cal.)(HC)
Prakash v. Phulvati (SC); www.itatonline.org 2570 883
Prakash V. Sanghavi; DCIT (Inv.) v. * (2016) 236 Taxman 176 (Karn.)(HC) 1597 515
Prakriya Pharmacem v. ITO (2016) 238 Taxman 185 (Guj.)(HC) 1808 590
Prahlad @Pratap S/o. Tanbaji Pawar v. State of Maharashtra (2016) 238 2572 886
Taxman 83 (Bom.)(HC)
lxxviii
Case Laws Index
Name Case Page
No. No.
Pramod H. Lele; ACIT v. * (2016) 156 ITD 571 (Mum.)(Trib.) 1007 308
Pranay Towers; ITO v. * (2016) 52 ITR 258 (Delhi)(Trib.) 897 271
Prasad Construction and Co. v. CIT (2016) 388 ITR 579 / (2017) 152 DTR 2216 746
72 (Patna)(HC)
Prasanna Radha Krishnan (Smt.) v. ITO (2016) 387 ITR 162 / 73 taxmann. 834 252
com 72 (Ker)(HC)
Prashant Chandra v. CIT (2016) 387 ITR 88 / (2017) 292 CTR 481 (All.) 1581 510
(HC)
Prashant J. Agarwal; CIT v. * (2016) 243 Taxman 119 (Bom.)(HC) 205 72
Prashnath Project Ltd. v. DCIT (Bom.)(HC); www.itatonline.org 2226 749
Prayagraj Power Generation Co. Ltd. v. ITO (2016) 158 ITD 909 / 139 DTR 66 20
161 / 180 TTJ 271 (Luck)(Trib.)
Preetam Singh Luthra v. CIT (2016) 389 ITR 447 (2017) 291 CTR 595 / 77 460 153
taxmann.com 222 / 145 DTR 440 (SC)
Preetam Singh Luthra; CIT v. * (2016) 386 ITR 408 / 289 CTR 476 (SC) 461 154
Prem Chand Shaw (Jaisal) v. ACIT (2016) 383 ITR 597 / 238 Taxman 423 1883 619
/ 286 CTR 252 / 135 DTR 172 (Cal.)(HC) 1818 593
Premkumar Arjundas Luthra (HUF); CIT v. * (2016) 240 Taxman 133 2187 735
(Bom.)(HC)
Presentation Social Service Centre v. DDIT (2016) 45 ITR 23 (Hyd.)(Trib.) 303 105
Primenet Global Ltd.; ITO v. * (2016) 48 ITR 451 (Delhi)(Trib.) 185 63
Principal Officer, Hill View Infrastructure (P) Ltd.CIT v. * (2016) 384 ITR 1684 547
451 (P&H)(HC)
Pritam Singh v. ITO (2016) 139 DTR 28/179 TTJ 776 (Chd.)(Trib.) 1166 361
Prithvi Associates v. ACIT (2016) 240 Taxman 621 (Guj)(HC) 660 205
Priti Paras Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC) 1960 645
Priya Blue Industries Pvt. Ltd.; CIT v. * (2016) 381 ITR 210 / 237 Taxman 2085 693
1 / 135 DTR 163/ 286 CTR 210 (Guj.)(HC)
Priya Desh Gupta v. DCIT (2016) 385 ITR 452 / 240 Taxman 285 / (2017) 1790 583
146 DTR 149 (Delhi)(HC)
Project Director, National Highways Authority of India; ITO v. * (2016) 158 2093 696
ITD 994 / 181 TTJ 113/ 140 DTR 286 (Nag.)(Trib.)
Project Director, NHAI; Dy. CIT v. * (2016) 159 ITD 367 (Visakh.)(Trib.) 2014 665
Prolific Consultancy Services (P.) Ltd. v. ITO (2016) 161 ITD 296 / (2017) 2265 763
183 TTJ 801 / 151 DTR 107 (Mum.)(Trib.)
Promain Ltd. v. CIT (2016) 382 ITR 25 (Delhi)(HC) 2259 761
lxxix
Case Laws Index
Name Case Page
No. No.
Promy Kuriakose; CIT v. * (2016) 386 ITR 597 / (2017) 148 DTR 287 / 293 1642 533
CTR 440 (Ker.)(HC) 1920 632
1195 370
Prothious Engineering Services Pvt. Ltd. v. ITO (2016) 46 ITR 438 (Mum.) 1839 604
(Trib.)
Prudent Finance P. Ltd. v. ACIT (2016) 389 ITR 488/ 75 taxmann.com 110 1720 558
(Guj.)(HC)
Puneet Bhagat v. ITO (2016) 157 ITD 353 (SMC)(Delhi)(Trib.) 41 12
Punjab Cricket Association v. CIT (2016) 157 ITD 227 (Chd.)(Trib.) 325 111
Punjab National Bank v. JCIT (TDS) (2016) 48 ITR 8 (Chd.)(Trib.) 2510 851
Punjab State Co-op Agricultural Development Bank Ltd.; CIT v. * (2016) 1337 419
389 ITR 607 (P&H) (HC) 1336 418
1338 419
Punjab State Co-operative Federation of House Building Societies Ltd. v. 1339 419
CIT (2016) 76 taxmann.com 98 (P& H)(HC)
Punjab State Co-operative Milk Producers Federation Ltd. v. CIT (2016) 364 126
238 Taxman 207 (P&H)(HC)
Punjabi Co-op House Building Society v. CIT (2016) 386 ITR 116 (P&H) 969 293
(HC)
Purewal & Associates Ltd.; CIT v. * (2016) 131 DTR 63 / 286 CTR 297 / 1280 398
243 Taxman 392 (HP) (HC)
Purewal and Associates Ltd.; CIT v. * (2016) 243 Taxman 392 / 286 CTR 1276 396
297 (HP)(HC)
Purse Holdings India P. Ltd. v. ADDIT(IT) (2016) 143 DTR 1 (Mum.)(Trib.) 1884 619
Pushpak Logistics (P.) Ltd.; ACIT v. * (2016) 157 ITD 471 (Rajkot)(Trib.) 2023 667
Pushpawati Singhania Research Institute for Liver, Renal and Digestive 306 106
Diseases; CIT v. * (2016) 386 ITR 43 (Delhi)(HC)
PVP Ventures Ltd. v. ITO (2016) 387 ITR 716 / 72 taxmann.com 129 1770 575
(Mad.)(HC)
Q
Qpro Infotech Ltd. v. DCIT (2016) 49 ITR 41 (Mum.)(Trib.) 2446 831
Qualcomm India (P) Ltd. v. Dy. CIT (2016) 130 DTR 1 / 175 TTJ 497 / 45 1499 475
ITR 370 (Delhi)(Trib.)
Quality Industries v. JCIT (2016) 161 ITD 217 / (2017) 183 TTJ 350 / 145 372 129
DTR 215 (Pune) (Trib.)
R
R K P Company v. ITO (Raipur)(Trib.); www.itatonline.org 862 260
lxxx
Case Laws Index
Name Case Page
No. No.
R. B. Shreeram Durgaprasad v. CIT (2016) 237 Taxman 189 / 137 DTR 332 2513 852
/ 287 CTR 228 (Bom.)(HC)
R. L. Kalathia and Co.; Dy. CIT v. * (2016) 381 ITR 180 / 237 Taxman 621 981 299
/ 139 DTR 189 (Guj.)(HC)
R. P. Import and Export Pvt. Ltd. v. CIT (2016) 46 ITR 97 (Chd.)(Trib.) 2388 807
R. Sethuraman; CIT v. * (2016) 237 Taxman 581 (Mad.)(HC) 443 149
R.B. Shreeram Durgaprasad v. CIT (2016) 237 Taxman 189 / 137 DTR 332 1889 621
/ 287 CTR 228 (Bom.)(HC)
R.G. Gurjar v. ITO (2016) 387 ITR 696 / 240 Taxman 273 (Guj.)(HC) 1935 637
Rachana Finance & Investments Pvt. Ltd. v. CIT (Mum.)(Trib.); www. 2377 803
itatonline.org
Radhey Shyam Mittal v. Dy. CIT (2016) 175 TTJ 70 (UO)(SMC)(Jaipur) 2480 840
(Trib.)
Radiant Premises Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org 426 143
Radio Today Broadcasting Ltd.; CIT v. * (2016) 382 ITR 42 / 237 Taxman 501 164
126 / 282 CTR 272 / 129 DTR 1 (Delhi)(HC)
Rain Cements Ltd. v. DCIT (2016) 243 Taxman 496 (AP&T)(HC) 1666 541
Rain Commodities Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.) 592 188
790 240
942 283
2182 733
Raj Dhulari Bhasin v. CIT (2016) 236 Taxman 573 (Delhi)(HC) 975 295
Raj Kumar Tewatia v. CIT (2016) 380 ITR 110 (P&H)(HC) 93 31
Raja Harpal Singh Inter College v. PCIT (2016) 386 ITR 327 / 240 Taxman 2506 849
123 / 288 CTR 435 / 138 DTR 289 (All.)(HC)
Rajabhai Lumbhabhai Hadiya; PCIT v. * (2016) 237 Taxman 528 (Guj.)(HC) 1045 322
Rajagopal (R.) Member-I, Appropriate Authority v. N. Sasikala (Smt.) (2015) 2408 816
64 taxmann.com 254 / (2016) 381 ITR 79 / 139 DTR 70 (Mad.)(HC)
Rajagopal (R.) Member-I, Appropriate Authority v. S. Ramayama (Smt.) 2408 816
(2015) 64 taxmann.com 254 (2016) 381 ITR 79 (Mad.)(HC)
Rajagopal (R.) Member-I, Appropriate Authority v. V. N. Sudhagaran and 2408 816
another. (2015) 64 taxmann.com 254 / (2016) 381 ITR 79 (Mad.)(HC)
Rajan Knit Fab. (P.) Ltd.; CIT v. * (2016) 131 DTR 308 / 284 CTR 293 1970 648
(P&H)(HC)
Rajan Pai (Dr.); DCIT v. * (2016) 48 ITR 170 / 143 DTR 20 / 180 TTJ 0714 1122 346
(Bang.)(Trib.)
lxxxi
Case Laws Index
Name Case Page
No. No.
Rajapalayam Mills Ltd. v. DCIT (2016) 241 Taxman 50 / 293 CTR 518 1244 386
(Mad.)(HC)
Rajaram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC) 1662 540
Rajaram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC) 2547 870
Rajaram Rajendra Bhandari (Ajmer Group) v. CIT (2016) 388 ITR 259 1661 540
(Raj.)(HC)
Rajaratna Mills Ltd. v. CIT (2015) 64 taxmann.com 89 (Mad.)(HC) 2140 714
Rajashekhar Swaminathan Iyer v. Dy. CIT (2016) 160 ITD 638 (Mum.) 2148 717
(Trib.)
Rajasthan Knowledge Corporation Ltd.; CIT (TDS) v. * (2016) 385 ITR 427 2041 674
/ 141 DTR 249 (Raj.)(HC)
Rajasthan State Seed Corporation Ltd.; PCIT v. * (2016) 386 ITR 267 (Raj.) 595 189
(HC) 650 203
651 203
Rajat Saurabh Chatterji v. ACIT (Delhi)(Trib.), www.itatonline.org 1870 613
Rajdeep & PMCC Infrastructure; CIT v. * (2016) 73 taxmann.com 255 71 22
(Bom.)(HC)
Rajeev B. Shah v. ITO (2016) 159 ITD 964 (Mum.)(Trib.) 1095 336
Rajeev B. Shah v. ITO (Mum.)(Trib.), www.itatonline.org 1101 338
Rajeev Chandrashekar; PCIT v. * (2016) 239 Taxman 216 (Karn.)(HC) 27 8
Rajeev Gupta; CIT v. * (2016) 389 ITR 456 (All.)(HC) 1954 643
Rajendra Agarwal v. DCIT (Mum.)(Trib.), www.itatonline.org 1973 650
Rajendra Kumar Verma; CIT v. * (2016) 380 ITR 430 / 243 Taxman 172 / 2172 728
135 DTR 244 / 286 CTR 343 (SC)
Rajeshwari Cotton Ginning & Pressing Industries v. ACIT (2016) 94 CCH 499 163
208 / 130 DTR 274 / 284 CTR 300 (Karn.)(HC)
Rajeshwari Sangeet Academy v. ACIT (2016) 47 ITR 33 (Amritsar)(Trib.) 1837 604
Rajkumari Chandak (Smt.) v. ACIT (2016) 382 ITR 312 (Mad.)(HC) 1968 647
Rajmandir Estates (P) Ltd. v. PCIT (2016) 386 ITR 162 / 240 Taxman 306 2348 792
/ 287 CTR 512 / 136 DTR 345 (Cal.)(HC)
Rajya Krishi Utpadan Mandi Parishad v. ITO (2015) 153 ITD 101 / (2016) 2208 743
158 ITD 71(TM) (Luck)(Trib.)
Rakesh Tak v. ITO (Jai)(Trib); www.itatonline.org 872 263
Ram Kanwar Rana v. ITO (2016) 159 ITD 431 (Delhi)(Trib.) 204 72
Rama Panels P. Ltd.; ACIT v. * (2016) 181 TTJ 698 (Jab.)(Trib.) 446 149
468 155
lxxxii
Case Laws Index
Name Case Page
No. No.
Raman Chopra. v. Dy. CIT (2016) 158 ITD 904 / 48 ITR 164 (Delhi)(Trib.) 2464 835
Raman Khera; CIT v. * (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann. 1676 545
com 185 / 140 DTR 1 (Delhi)(HC) 2418 820
Ramanbhai B. Patel; CIT v. * (Guj.)(HC) www.itatonline.org 1654 537
Ramaniyam Homes P. Ltd; CIT v. * (2016) 384 ITR 530/ 239 Taxman 486 477 157
/ 137 DTR 319 / 287 CTR 200 (Mad.)(HC)
Ramesh D. Murpana v. ACIT (2016) 159 ITD 1019 (Mum.)(Trib.) 723 224
1231 382
Ramesh Kumar Kochar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 2199 740
(Mad.)(HC)
Ramesh Steel; PCIT v. * (2016) 384 ITR 437/ 290 CTR 93 (P&H)(HC) 670 208
Ramnath and Co.; CIT v. * (2016) 388 ITR 307 (Ker.)(HC) 1333 417
Rampgreen Solutions Pvt. Ltd. v. Dy. CIT (2016) 175 TTJ 531 (Delhi)(Trib.) 1473 466
Ramshila Enterprises P. Ltd. v. PCIT (2016) 383 ITR 546 / 239 Taxman 17 2345 791
(Cal.)(HC) 2520 856
Ramswaroop v. CIT (2016) 388 ITR 208 / 241 Taxman 21 / 290 CTR 520 / 1588 513
143 DTR 367 (Bom.)(HC)
Rana Polycot Ltd. v. CIT (2016) 236 Taxman 567 (P&H)(HC) 504 165
Rana Sugar Ltd.; CIT v. * (2016) 386 ITR 316 (P&H)(HC) 2428 824
Ranglal Bagaria (HUF) v. ACIT (2016) 384 ITR 477 / 241 Taxman 72 / 1795 585
(2017) 292 CTR 100 (Cal.)(HC)
Ranjeet Singh v. CIT (2016) 382 ITR 409 / 238 Taxman 522 (P&H)(HC) 1882 618
1813 591
2312 778
Rashid Exports Industries; CIT v. * (2016) 389 ITR 293 / 66 Taxmann.Com 2323 782
38 (All.)(HC)
Rashtriya Ispat Nigam Ltd. v. Add. CIT (2016) 157 ITD 366 / 176 TTJ 747 2082 691
/ 132 DTR 1 (Visakha)(Trib.)
Ratilal Becharlal & Sons; CIT v. * (2016) 237 Taxman 71 / 138 DTR 316 / 1394 439
288 CTR 31 (Bom.)(HC) 1389 438
Rattan Brothers v. ACIT (2016) 160 ITD 365 (Amritsar)(Trib.) 730 225
852 257
Ravi M. Arabatti v. ITO (2016) Chamber’s Journal-April, P. 87 2467 836
Ravjibhai Nagarbhai Patel v. ITO (2016) 387 ITR 639 (Guj.)(HC) 1727 561
Ravjibhai Nagjibhai Thesia; CIT v. * (2016) 388 ITR 358 / 76 taxmann.com 1039 319
76 / (2017) 150 DTR 166 (Guj.)(HC)
lxxxiii
Case Laws Index
Name Case Page
No. No.
Rayala Corporation P. Ltd. (2016) 386 ITR 500 / 243 Taxman 360 / 139 435 146
DTR 265 / 288 CTR 121 (SC)
Rayban Sun Optics India Ltd.; Dy. CIT v. * (2016) 179 TTJ 219 / 69 1445 456
taxmann.com 137 / 138 DTR 329 (Delhi)(Trib.) 1446 457
Raymond Ltd. v. Dy. CIT (2015) 173 TTJ 572 / 129 DTR 269 (Mum.)(Trib.) 2151 718
Raytheon Ebasco Overseas Ltd. v. DCIT (2016) 158 ITD 200 / 178 TTJ 39 195 68
(UO) (Mum.)(Trib.)
Red Brick Realtors P. Ltd.; ACIT v. * (2015) 38 ITR 749 / 70 SOT 592 850 256
(Chennai)(Trib.)
Refam Management Services P. Ltd.; CIT v. * (2016) 386 ITR 693 (Delhi) 1918 631
(HC)
Regen Infrastructure & Services (P.) Ltd. v. CBDT (2016) 384 ITR 407 / 238 1630 528
Taxman 530 / 141 DTR 20 / 289 CTR 220 (Mad.)(HC)
Regen Powertech (P.) Ltd.; DCIT v. * (2016) 161 ITD 43 (Chennai)(Trib.) 1436 454
Regents of the University of California UCLA Anderson School of 157 51
Management Executive Education, USA, In re (2016) 243 Taxman 122
(AAR)
Reliance BPO Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 (Mum.)(Trib.) 2266 763
Reliance Communication Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 2266 763
(Mum.)(Trib.)
Reliance Communication Ltd.; CIT v. * (2016) 240 Taxman 655 (Bom.)(HC) 2337 787
Reliance Industries Ltd.; CIT v. * (2016) 382 ITR 574 (Bom.)(HC) 1816 592
Reliance Industries Ltd.; DDIT v. * (2016) 159 ITD 208 / 180 TTJ 22 2060 681
(Mum.)(Trib.) 813 246
Reliance Infrastructure Ltd. v. CIT (2016) 76 taxmann.com 257 / (2017) 1265 393
390 ITR 271 (Bom.)(HC)
Reliance Infrastructure Ltd. v. CIT (2016) 76 taxmann.com 257 / (2017) 390 879 265
ITR 271 / 145 DTR 233 (Bom.)(HC) 1358 426
Reliance Telecom Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 (Mum.) 2266 763
(Trib.)
Remfry & Sagar v. JCIT (2016) 182 TTJ 744 / (2017) 162 ITD 324 (Delhi) 732 226
(Trib.)
Renu Sagar Power Col. Ltd v. CIT (2016) 389 ITR 310 (All.)(HC) 48 14
Reuters India P Ltd.; CIT v. * (2016) 239 Taxman 428 / 288 CTR 714 / 140 1385 436
DTR 436 (Bom.)(HC)
Rheinbraun Engineering Und Wasser GmbH v. Dy. CIT (2016) 158 ITD 144 47
359 (Mum.)(Trib.)
lxxxiv
Case Laws Index
Name Case Page
No. No.
Richa Dubey (Mrs.) v. ITO (2016) 158 ITD 541 / 48 ITR 195 / 179 TTJ 78 2463 835
/ 137 DTR 65 (Mum)(Trib.)
Rick Lunsford Trade and Investment Ltd. v. CIT (2016) 385 ITR 399 (Cal.) 1147 355
(HC)
Rifah Shoes (P.) Ltd. v. ACIT (2016) 241 Taxman 345 (Mad.)(HC) 884 267
Rimjhim Ispat Ltd.; CIT v. * (2016) 382 ITR 152 (All.)(HC) 678 211
679 211
Rite Pack Industries P. Ltd. v. Dy. CIT (2016) 48 ITR 555 / (2017) 145 DTR 1160 360
41 (Delhi)(Trib.)
Ritika Ltd.; CIT v. * (2016) 384 ITR 434 (Cal.)(HC) 1966 647
Rittal India P. Ltd. (No.2); CIT (LTU) v. * (2016) 380 ITR 423 / 282 CTR 505 165
431 / 129 DTR 153 (Karn.)(HC)
Rivera Home Furnishing v. ACIT (2016) 237 Taxman 520 / 138 DTR 149 266 95
(Delhi)(HC)
RJD Impex (P) Ltd.; PCIT v. * (2016) 240 Taxman 502 (Guj.)(HC) 598 189
RNS Infrastructure Ltd.; CIT v. * (2016) 238 Taxman 416 / 135 DTR / 2167 725
(2017) 292 CTR 507 370 (Karn.)(HC)
Roca Bathroom Products P. Ltd. v. Jt. CIT (2016) 175 TTJ 450 / 129 DTR 1521 485
257 (Chennai)(Trib.) 877 264
Rockland Hotels Ltd. v. ITSC (2016) 380 ITR 197 / 236 Taxman 160 / 282 2161 722
CTR 142 (Delhi)(HC)
Roger Enterprises (P.) Ltd. v. CIT (2016) 382 ITR 639 / 238 Taxman 434 2430 825
(Delhi)(HC)
Roger Enterprises (P.) Ltd. v. CIT (2016) 382 ITR 639 / 238 Taxman 434 / 1226 381
134 DTR 337 (Delhi)(HC) 675 209
Royal Bank of Scotland N.V v. DDIT (2016) 47 ITR 513 (Kol.)(Trib.) 526 170
750 232
Royal Beverages (P.) Ltd. v. Dy. CIT (2016)158 ITD 125 / 140 DTR 52 / 180 527 170
TTJ 521 (TM) (Chd.)(Trib.)
Royal Jordanian Airlines; DIT v. * (2016) 383 ITR 465 / 236 Taxman 10 / 1820 595
129 DTR 364 / 287 CTR 407 (Delhi)(HC) 958 288
Royal Rich Developers Pvt. Ltd. v. DCIT (Mum.)(Trib); www.itatonline.org 1156 359
Royal Western India Turf Club Ltd.; ACIT v. * (2016) 52 ITR 235 (Mum.) 99 32
(Trib.)
RPG Enterprises Ltd v. DCIT (2016) 386 ITR 401 / 240 Taxman 614 / 138 658 204
taxman 49 (Bom.)(HC) 480 158
lxxxv
Case Laws Index
Name Case Page
No. No.
RRJ Securities Ltd.; CIT v. * (2015) 62 taxmann.com 391 / (2016) 380 ITR 1923 633
612 / 282 CTR 321 (Delhi)(HC) 1924 633
RS Components & Controls Ltd. v. DCIT (2016) 158 ITD 118 (Delhi)(Trib.) 1408 446
Ruchika Oswal (Ms); CIT v. * (2016) 382 ITR 453 / 133 DTR 15 / 284 CTR 1214 376
188 (FB)(P&H)(HC)
Ruchita Gir (Smt.); ITO v. * (2015) 70 SOT 486 / 41 ITR 634 (Hyd.)(Trib.) 1055 324
Rukmani Santhanam (Smt.) v. ITO (2016) 160 ITD 338 / 182 TTJ 388 1071 329
(Chennai)(Trib.) 1098 337
Rupam and Ors v. CIT (2016) 383 ITR 276 (MP)(HC) 1613 522
Rupam Impex; ACIT v. * (2016) 157 ITD 360 (Rajkot)(Trib.) 1941 639
Rusabh Diamonds v. ACIT (2016) 158 ITD 564 / 48 ITR 707 / 178 TTJ 425 1367 429
/ 135 DTR 121 (Mum.)(Trib.)
Rustagi Engineering Udyog P. Ltd. v. DCIT (2016) 382 ITR 443 (Delhi)(HC) 1812 591
Rustom Homi Vakil v. ACIT (2016) 158 ITD 588 (Mum.)(Trib.) 1077 331
Ryatar Sahakari Sakkare Karkhane Niyamit; ACIT v. * (2016) 383 ITR 561 837 253
/ 67 taxmann.com 283 / 137 DTR 383 / 287 CTR 649 (Karn.)(HC)
S
S. Baskar Mathuram v. the state of Tamilnadu (Mad.)(HC), www.itatonline. 2559 874
org
S. D. Public School; ITO v. * (2016) 157 ITD 521 (Chd.)(Trib.) 296 104
S. D. Vimalchand Jain v. ITO (2016) 45 ITR 628 (Chennai)(Trib.) 1068 328
S. Ganesh; CIT v. * (Bom)(HC); www.itatonline.org 1686 548
S. Goyanka Lines & Chemical Ltd.; CIT v. * (2016) 237 Taxman 378 (SC) 1717 557
S. Jayalakshmi Ammal; CIT v. * (2016) 242 Taxman 449 / (2017) 390 ITR 1221 379
189 (Mad.)(HC)
S. Jayalakshmi Ammal; CIT v. * (2016) 242 Taxman 449 / (2017) 390 ITR 1609 520
189 (Mad.)(HC)
S. Narendrakumar & Co v. Dy. CIT (2016) 156 ITD 440 / 175 TTJ 113 / 1118 344
129 DTR 1 (Mum.)(Trib.)
S. R. Thorat Milk Products (P.) Ltd. v. ACIT (2016) 159 ITD 255 (Pune) 724 224
(Trib.)
S. S. Jyothi Prakash v. ACIT (2016) 240 Taxman 741 (Karn.)(HC) 1193 369
S.J.A Alumi Association v. CIT (2016) 47 ITR 274 (Mum.)(Trib.) 1262 393
S.R. Industries Ltd. v. ACIT (2016) 156 ITD 384 (Chd.)(Trib.) 1945 640
S.R.M. Agro Foods; DCIT v. * (2016) 161 ITD 786 (Mum.)(Trib.) 815 247
lxxxvi
Case Laws Index
Name Case Page
No. No.
S.S. Food Industries; PCIT v. * (2016) 382 ITR 388 (P &H)(HC) 2434 827
Sabharwal Apartments Pvt. Ltd. v. ITO (2016) 382 ITR 547 (Delhi)(HC) 1833 602
Sabharwal Properties Industries Pvt. Ltd. v. ITO (2016) 382 ITR 547 (Delhi) 1833 602
(HC)
Sabic Research & Technology (P.) Ltd. v. ITO (2016) 156 ITD 327 (Ahd.) 1869 613
(Trib.)
Sadanand B. Sule.; CIT v. * (2016) 242 Taxman 116 (Bom.)(HC) 965 291
Sadguru Land Finance; DCIT v. * (2016) 52 ITR 182 (Amritsar)(Trib.) 910 275
Safari Mercantile Private Limited v. ITAT (2016) 386 ITR 4 / 287 CTR 593 2256 760
/ 73 taxmann.com 287/ 139 DTR 89 (Bom.)(HC)
Safina Hotels Pvt. Ltd. v. CIT (2016) 237 Taxman 702 / 137 DTR 89 (Karn.) 2431 825
(HC)
Sage Publications Ltd. v. Dy. CIT(IT) (2016) 387 ITR 437 / 73 taxmann. 2173 729
com 85 (Delhi)(HC)
Sahana Dwellers (P.) Ltd. v. ITO (2016) 158 ITD 78 / 180 TTJ 139 (Mum.) 2035 672
(Trib.)
Sahara Investment India Ltd.; CIT v. * (2016) 242 Taxman 121 (All.)(HC) 73 23
Sahil Study Circle Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 182 (Delhi)(Trib.) 793 241
1626 526
Sai Televisions Limited v. ITO (2016) 47 ITR 651 (Chennai)(Trib.) 2460 834
Sajani Jewels v. Dy. CIT (2016) 143 DTR 263 / 241 Taxman 383 (Guj.)(HC) 1772 575
Sakunthala Rangarajan (Smt.); CIT v. * (2016) 389 ITR 103 / 292 CTR 451 4 1
/ 74 taxmann.com 94 (Mad.)(HC)
Salasar Stock broking Ltd.; DCIT v. * (2016) 47 ITR 616 (Kol.)(Trib.) 2488 843
Salasar Stock Broking Ltd.; Dy. CIT v. * (2016) 181 TTJ 526 (Kol.)(Trib.) 2486 842
Salcomp Manufacturing India (P.) Ltd. v. ACIT (2016) 161 ITD 35 1437 454
(Chennai)(Trib.) 1438 454
Sale Tax Tribunal Bar Association v. The State of Maharashtra (Bom.)(HC); 2573 887
www.itatonline.org
Salora International Ltd.; CIT v. * (2016) 386 ITR 580 / 240 Taxman 7 1020 313
(Delhi)(HC)
Sami Labs Ltd.; PCIT v. * (2016) 386 ITR 81 / 241 Taxman 102 (Karn.)(HC) 653 203
Samiksha Mahajan (Mrs) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.) 432 145
429 144
1258 392
Samson Perinechery; CIT v. * (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC) 2285 769
lxxxvii
Case Laws Index
Name Case Page
No. No.
Samurai Techno Trading P. Ltd.; CIT v. * (2016) 389 ITR 357 (Ker.)(HC) 2412 818
Samwon Precision Mould Mfg. (India) P. Ltd. v. ITO (2016) 48 ITR 630 911 275
(Delhi)(Trib.) 1693 549
Samwon Precision Mould Mfg. (India) P. Ltd. v. ITO (Delhi)(Trib.); www. 1702 552
itatonline.org
Sangam Theatre P. Ltd v. CIT (2016) 386 ITR 23 / 137 DTR 281 (Delhi) 2153 718
(HC)
Sangeeth Textiles Ltd.; CIT v. * (2016) 384 ITR 218 (Mad.)(HC) 1295 403
Sanghavi Savla Commodity Brokers Pvt. Ltd. v. ACIT (Mum.)(Trib.); www. 2482 841
itatonline.org
Sangu Chakra Hotels P. Ltd.; CIT v. * (2016) 389 ITR 117 / 74 taxman.com 2179 732
76 / (2017) 150 DTR 259 (Mad.)(HC) 2287 770
490 161
Sanjay Jaiswal; DCIT v. * (2016) 158 ITD 397 (Kol.)(Trib.) 1890 621
Sanjeev Aggarwal v. Dy.CIT (2016) 159 ITD 302 (Chd.)(Trib.) 1646 534
Sanjeev Kumar v. CIT (2016) 385 ITR 493 (P&H)(HC) 1146 354
Sanju Verma v. Dy. CIT (2016) 158 ITD 837 / 182 TTJ 909 (Mum.)(Trib.) 1534 491
Sansera Engg. P. Ltd.; CIT v. * (2016) 386 ITR 349 (Karn.)(HC) 1554 498
Santosh R. Jain (Smt.) v. ITO (2016) 46 ITR 246 (Chd.)(Trib.) 1874 615
Santur Developers (P.) Ltd.; ITO v. * (2015) 70 SOT 475 (Delhi)(Trib.) 2058 680
Sanwar Mal Jangid v. ITO (2016) 178 TTJ 25 (UO)(Jodh)(Trib.) 1852 607
SAP Labs India (P.) Ltd. v. ACIT (2016) 157 ITD 705 / 179 TTJ 515 (Bang.) 2273 765
(Trib.)
Sapna Sanjay Raisoni v. ITO (2016) 159 ITD 1 / 179 TTJ 34 (UO) (Pune) 900 272
(Trib.)
Sara Lee TTK Ltd. v. DCIT (2016) 142 DTR 258 (Mum.)(Trib.) 1440 455
Sarala Kanwar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 (Mad.) 2199 740
(HC)
Saravana Developers; CIT v. * (2016) 387 ITR 239 / 289 CTR 550 / 68 2333 786
taxmann.com 148 (Karn.)(HC)
Saraya Sugar Mills P. Ltd. v. CIT (2016) 384 ITR 186 / 239 Taxman 499 / 1887 620
286 CTR 345(SC)
Sarika Jain (Smt.) v. ITO (2016) 46 ITR 246 (Chd.)(Trib.) 1874 615
Sarita Aggarwal v. ITO (2016) 131 DTR 103 / (2017) 294 CTR 71 (Delhi) 1155 358
(HC)
lxxxviii
Case Laws Index
Name Case Page
No. No.
Sartaj Singh v. PCIT (2016) 48 ITR 604 / 179 TTJ 17 (UO)(Asr.)(Trib.) 2363 798
2358 796
SAS Hotels and Enterprises Ltd.; CIT v. * (2016) 385 ITR 324 (Mad.)(HC) 1293 402
Satbir Nijjer v. CIT(A) (2016) 383 ITR 71 / 139 DTR 138 / 288 CTR 96 1936 637
(P&H)(HC)
Satbir Nijjer v. CIT(A) (2016) 383 ITR 71 / 288 CTR 96 / 139 DTR 138 2109 702
(P&H)(HC)
Satellite Television Asian Region Ltd. v. Dy. CIT (2016) 177 TTJ 249 / 133 1461 463
DTR 153 / 66 taxmann.com 247 (Mum.)(Trib.)
Satish B. Kaushik v. ACIT (2016) 47 ITR 739 (Mum.)(Trib.) 106 34
Satish B. Kaushik v. ACIT (2016) 47 ITR 739 (Mum.)(Trib.) 601 190
606 191
Satish Bala Malhotra (Smt.) CIT v. * (2016) 143 DTR 321 (P&H)(HC) 1124 347
Satish Bala Malhotra (Smt.); CIT v. * (No.1) (2016) 387 ITR 403 (P&H)(HC) 567 182
1680 546
Satish Kumar Goyal v. JCIT (2016) 159 ITD 393 (Agra)(Trib.) 1164 360
Satish Kumar Keshri; CIT v. * (2016) 387 ITR 447 (Patna)(HC) 2334 787
Satya Kant Khosla v. ITO (2015) 174 TTJ 825 / 63 taxmann.com 293 / 411 139
(2016) 129 DTR 19 (Delhi)(Trib.)
Satyam Computer Services Ltd. (2016) 380 ITR 189 / 236 Taxman 199 / 116 37
282 CTR 41 / 129 DTR 14 (AAR)
Satyam Computer Services Ltd., In re (2016) 380 ITR 189 / 236 Taxman 2062 682
199 / 282 CTR 41 (AAR)
Satyug Darshan Trust; ITO(E) v. * (2016) 156 ITD 524 (SMC) (Delhi)(Trib.) 1539 493
Saumya Construction P. Ltd.; PCIT v. * (2016) 387 ITR 529 (Guj.)(HC) 1894 623
2545 870
Saurasthra Cement & Chemical Industries Ltd.; CIT v. * (2016) 384 ITR 1887 620
186 / 239 Taxman 499 / 286 CTR 345 (SC)
Savvis Communication Corporation; Dy. DIT v. * (2016) 158 ITD 750 / 178 189 64
TTJ 116 / 134 DTR 140 (Mum.)(Trib.)
Saxo India (P) Ltd. v. ACIT (2016) 176 TTJ 540 / 67 taxmann.com 155 1517 484
(Delhi)(Trib.) 1518 484
Saxo India (P.) Ltd.; PCIT v. * (2016) 243 Taxman 411 (Delhi)(HC) 1378 433
SBL (P.) Ltd. v. ITO (2016) 161 ITD 379 (Jaipur)(Trib.) 1330 416
1563 501
Schlumberger Global Support Centre Ltd. v. Dy. DIT (2016) 131 DTR 58 / 1474 467
176 TTj 30 (Pune)(Trib.)
lxxxix
Case Laws Index
Name Case Page
No. No.
Schmetz India P. Ltd.; CIT v. * (2016) 384 ITR 140 (Bom.)(HC) 1296 403
Seema Singh Beniwal v. Dy. CIT (2016) 45 ITR 664 (Jaipur)(Trib.) 1106 339
1105 339
Sella Synergy India P. Ltd. v. ITO (2016) 388 ITR 539 / 290 CTR 154 / 76 1765 573
taxmann.com 93 / 142 DTR 33 (Mad.)(HC)
Semi-Conductor Laboratory, Deptt. of Space, Govt. of India; DCIT v. * 290 102
(2016) 161 ITD 584 (Chd.)(Trib.)
Senate v. Dy. CIT (2016) 158 ITD 315 (Bang.(Trib.) 584 186
Sengunthar Matriculation Higher Secondary School v. CCIT (2016) 47 ITR 227 81
107 (Chennai)(Trib.)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 161 ITD 457 / 52 ITR 700 218
252 (Chennai)(Trib.) 478 158
845 255
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 52 ITR 252 / 161 ITD 703 219
457 (Chennai) (Trib.) 808 245
Sesa Goa & Co Ltd. v. CIT (2016) 381 ITR 303 / 131 DTR 217 / 284 CTR 1980 654
1 / 66 taxmann. com 93 (FB) (Bom.)(HC)
Sesa Resources Ltd.; DCIT v. * (Panji)(Trib.); www.itatonline.org 869 262
Sesa Resoureces Ltd. v. DCIT (2016) 136 DTR 169 / 287 CTR 89 (Bom.) 838 253
(HC)
Settlement Commission; PCIT v. * (2016) 386 ITR 660/ 65 taxmann.com 2166 724
309 (Guj.)(HC)
Shakti Bhog Foods Ltd. v. Dy. CIT (2016) 388 ITR 280 / (2017) 244 Taxman 1627 527
206 (Delhi)(HC)
Shakuntala Devi (Mrs.); CIT v. * (Decd.) (2016) 389 ITR 366 / 75 taxmann. 1069 329
com 222 (Karn.)(HC)
Shalibhadra Developers v. Secretary & Ors. (2016) 143 DTR 1 / (2017) 291 2159 722
CTR 87 / 245 Taxman 160 (Guj.)(HC)
Shalini Seekond (Mrs.) v. ITO (2016) 159 ITD 905 / 180 TTJ 1 (Mum.) 126 40
(Trib.)
Sham Sunder Khanna v. CIT (2016) 386 ITR 461 (P&H)(HC) 465 155
Shangkalpam Industries (P.) Ltd. v. ITO (2016) 161 ITD 193 (Chennai) 2114 704
(Trib.)
Shantai Exim Ltd. v. CIT (2016) 178 TTJ 451 / 136 DTR 313 (Ahd.)(Trib.) 2361 797
Shanti Buildcon v. Secretary & Ors. (2016) 143 DTR 1 / (2017) 291 CTR 2159 722
87 / 245 Taxman 160 (Guj.)(HC)
Shanti Enterprise; ITO v. * (2016) 240 taxman 698 (Guj.)(HC) 1145 354
xc
Case Laws Index
Name Case Page
No. No.
Shanubhai M. Patel; PCIT v. * (2016) 73 taxmnn.com 138 (Guj.)(HC) 1040 320
Sharadha Terry Products Ltd. v. ACIT (2016) 180 TTJ 284 (Chennai)(Trib.) 1016 312
Sharda Sinha; CIT v. * (2016) 237 Taxman 111 (Delhi)(HC) 54 16
Sharma and Gangadhar Build and Colonziers P. Ltd. v. CIT (2016) 386 ITR 1139 352
527 (P&H)(HC)
Sharon Nayak (Mrs.) v. Dy. CIT (2016) 159 ITD 143 (Bang.)(Trib.) 1121 346
1979 652
Shasun Chemicals and Drugs Ltd v. CIT (2016) 388 ITR 1 / 243 Taxman 552 177
47 / 289 CTR 97 / 141 DTR 161 (SC) 561 180
Shaw Wallace Distilleries Ltd.; CIT v. * (2016) 386 ITR 14 / 240 Taxman 1650 535
348 / 290 CTR 684 (Cal.)(HC) 3 1
SHCIL Services Ltd. v. Dy. CIT (2016) 158 ITD 1006 / 181 TTJ 408 (Mum.) 890 269
(Trib.) 2029 669
Shell Global Solutions International BV v. DDIT (IT) (2016) 182 TTJ 830 / 1407 446
(2017) 162 ITD 193 (Ahd) (Trib.)
Shell Global Solutions International BV v. ITO (2016) 157 ITD 24 / 175 196 68
TTJ 286 / 129 DTR 217 (Ahd.)(Trib.)
Sheo Kumar Mishra v. Dy. CIT (2016) 382 ITR 424 / 134 DTR 376 / 287 2234 752
CTR 75 (Cal.)(HC)
Sheo Murti Singh (Dr.) v. CIT (2016) 383 ITR 174 / 236 Taxman 405 (All.) 1879 617
(HC)
Sherwood Diocesan College Society; CIT v. * (2016) 388 ITR 634 2293 771
(Uttarakhand)(HC) 2294 772
Shibu Soren v. CIT (2016) 239 Taxman 512 (SC) 1949 642
Shimbhu Mehra; CIT v. * (2016) 236 Taxman 561 (All.)(HC) 1046 322
Shin Satellite Public Co. Ltd.; DIT v. * (2016) 382 ITR 114 / 238 Taxman 164 54
577 / 285 DTR 1 / 133 DTR 185 (Delhi)(HC)
Shinsei Investment I Ltd. In re (2016) 389 ITR 11 / 242 Taxman 293 / 290 1009 309
CTR 490 (AAR)
Shipping Torm India Pvt. Ltd. v. ITO (2017) 145 DTR 152 / 183 TTJ 145 1841 605
(Mum.)(Trib.)
Shirpur Gold Refiner Ltd. v. ITAT (2017) 291 CTR 112 / 144 DTR 108 2255 760
(Bom.)(HC)
Shiv Dhoot Pearls & Investment Limited; CIT v. * (2016) 237 Taxman 104 1152 357
(Delhi)(HC)
Shiv Mahima Township (P.) Ltd. v. ITO (2016) 385 ITR 609 / 133 DTR 87 1810 591
/ 286 DTR 222 (Raj.)(HC)
xci
Case Laws Index
Name Case Page
No. No.
Shiv Pratap Raghuvanshi v. ACIT (2016) 139 DTR 57 / 179 TTJ 761 1695 550
(Jaipur)(Trib.)
Shiv Shakti Rice Mills v. ACIT (2016) 389 ITR 255 (P&H)(HC) 1274 396
Shiv Transport & Travels v. ITO (2016) 157 ITD 835 (Kol.)(Trib.) 31 9
Shiva Credit Souhard Sahakari Niyamit; ITO v. * (2016) 68 SOT 228 1347 422
(Panaji)(URO)(Trib.)
Shivam Gramodyog Sanstan v. CIT (2016) 282 CTR 96 / 129 DTR 18 (All.) 1802 588
(HC)
Shivanna, M. v. ACIT (2016) 142 DTR 319 (Karn.)(HC) 121 38
966 291
Shivender Singh v. ACIT (2016) 159 ITD 977 (Mum.)(Trib.) 725 224
Shivinder Singh Brar, Karta HUF v. CBDT (2016) 243 Taxman 176 / 290 1088 334
CTR 121 / 142 DTR 154 (P&H)(HC)
Shivshankar R. Sharma; DCIT v. * (Mum.)(Trib.), www.itatonline.org 1232 382
Shobha Jain (Smt.) v. CIT (2016) 243 Taxman 368 (All.)(HC) 1087 333
Shree Balaji Alloys; CIT v. * (2016) 138 DTR 36 / 287 CTR 459 (SC) 69 22
Shree Balaji Educational Trust v. CIT (2016) 47 ITR 595 (Delhi)(Trib.) 321 110
Shree Balaji Glass Manufacturing P. Ltd.; CIT v. * (2016) 386 ITR 128 / 26 8
241 Taxman 265 (Cal.)(HC)
Shree Balaji Products v. ITO (2016) 161 ITD 598 (Ahd.)(Trib.) 519 168
Shree Hanuman Sugar and Industries Ltd.; CIT v. * (2016) 386 ITR 218 / 51 14
243 Taxman 417 (Cal.)(HC)
Shree Kamdar Education Trust v. ITO (2016) 243 Taxman 76 (Guj.)(HC) 346 119
Shree Parleshwar Co-operative Housing Society Ltd.; CIT v. * (2016) 138 79 25
DTR 145 / 287 CTR 468 / 71 taxmann.com 179 (Bom.)(HC)
Shree Public Charitable Trust; CIT v. * (2016) 388 ITR 222 (Karn.)(HC) 1259 392
Shree Sidhnath Enterprise v. ACIT (2016) 387 ITR 644 / 240 Taxman 631 1783 580
/ 293 CTR 535 (Guj.)(HC)
Shreekant Phumbhra; CIT v. * (2016) 387 ITR 523 (Cal.)(HC) 356 123
927 280
Shreemati Devi v. CIT (All)(HC),; www.itatonline.org 1616 523
Shreyash Pratisthan; ACIT v. * (2016) 51 ITR 134 (Pune)(Trib.) 281 100
Shri Anand Rishi Jain Society; CCIT v. * (2016) 141 DTR 58 (Mad.)(HC) 218 78
Shri Balaji Prem Ashram & Nikhil Vidyalaya; ITO v. * (2016) 156 ITD 479 231 82
(Chd.)(Trib.)
xcii
Case Laws Index
Name Case Page
No. No.
Shri Basaveshwara Sahakari Bank.; CIT v. * (2016) 242 Taxman 411 (Karn.) 119 38
(HC) 1995 659
Shri Durdundeshwar Urban Co-operative Credit Society Ltd.; ITO v. * 1348 422
(2015) 68 SOT 240 (Panaji)(URO)(Trib.)
Shri Guru Ram Dass Ji Educational Trust v. CCIT (2016) 389 ITR 423 / 243 217 77
Taxman 94 /(2017) 147 DTR 108 / 293 CTR 144 (P&H)(HC)
Shri Mahila Sewa Sahakari Bank Ltd.; PCIT v. * (2016) 242 Taxman 60 / 118 38
289 CTR 225 (Guj.)(HC)
Shri Siddeshwar Co-operative Bank Ltd.; CIT v. * (2016) 240 Taxman 588 594 188
(Karn.)(HC)
Shri Siddeshwar Co-operative Bank Ltd.; CIT v. * (2016) 388 ITR 588 / 2002 661
240 Taxman 588 (Karn) (HC) 640 200
1996 659
122 39
1528 489
Shri Vishnu Eatables (India) Ltd. v. Dy. CIT (2016) 389 ITR 385 / 243 1375 432
Taxman 446 / 289 CTR 337 (P&H)(HC) 2505 849
Shrimati Roma Sengupta v. CIT (2016) 385 ITR 663 / 238 Taxman 682 / 83 26
288 CTR 234 / 139 DTR 26 (Cal.)(HC)
Shroff Textiles Ltd. v. DCIT (2016) 49 ITR 20 (Mum.)(Trib.) 888 268
Shubhankar Estates (P.) Ltd. v. Senior Sub-Registrar (2016) 237 Taxman 2036 673
731 / 136 DTR 61 (Karn.)(HC)
Shushrutha Educational Trust; ACIT v. * (2016) 161 ITD 565 (Bang.)(Trib.) 226 81
1849 607
1978 652
Shyam Century Ferrous Ltd.; CIT v. * (2016) 386 ITR 477 (Cal.)(HC) 1555 498
Shyam Mandir Committee, Khatushyamji v. ACIT (2016) 138 DTR 367 / 1853 608
179 TTJ 752 (Jaipur)(Trib.)
Shyam Sel Ltd. v. Dy. CIT (2016) 386 ITR 492 / 72 taxmann.com 105 / 652 203
(2017) 148 DTR 167 / 293 CTR 316 (Cal.)(HC)
Shyam Sel Ltd.; CIT v. * (2016) 386 ITR 312 (Cal.)(HC) 1140 353
Shyam Steel Industries Ltd. v. DCIT (2016) 161 ITD 1 / (2017) 183 TTJ 101 33
304 / 145 DTR 177 (TM)(Kol.)(Trib.)
Shyam Sundar Nirankari v. CIT (2016) 236 Taxman 591 (P&H)(HC) 1579 509
Siddeshwar Co-operative Bank Ltd.; CIT v. * (2016) 388 ITR 588 / 240 76 24
Taxman 588 (Karn.)(HC)
Siemens Nixdorf Informationssysteme GmbH v. DIT (2016) 158 ITD 480 / 7 2
179 TTJ 71 (Mum.)(Trib.)
xciii
Case Laws Index
Name Case Page
No. No.
Siemens Public Communications Network Ltd. v. CIT (2016) 144 DTR 370 67 21
/ (2017) 390 ITR 1 / 291 CTR 22 / 244 Taxman 188 (SC)
Siemoffshore Crewing AS v. ADIT (Delhi)(Trib.); www.itatonline.org 953 287
Silicon Graphics Systems (India) Pvt. Ltd. v. DCIT (Delhi)(Trib.); www. 744 229
itatonline.org
Silver Line; PCIT v. * (2016) 383 ITR 455 / 283 CTR 148 / 65 taxmann. 1797 585
com 137 / 129 DTR 191 (Delhi)(HC) 2229 750
Sindagi Urban Co-operative Bank Ltd.; CIT v. * (2016) 388 ITR / 240 76 24
Taxman 588 (Karn.)(HC) 640 200
1996 659
Sindhu Holdings Ltd.; DCIT v. * (2016) 176 TTJ 41 (UO) (Delhi)(Trib.) 44 13
Sindhu Holdings Ltd.; DCIT v. * (2016) 46 ITR 771 (Delhi)(Trib.) 37 11
Sindhu Realtors Pvt. Ltd.; Dy. CIT v. * (2016) 45 ITR 448 (Delhi)(Trib.) 44 13
40 12
587 187
Singara Nilgiri Plantation Co. v. Dy. CIT (2016) 238 Taxman 613 / 138 2201 741
DTR 139 (Mad.)(HC)
Singla Cables.; DCIT v. * (2016) 157 ITD 617 (Amritsar)(Trib.) 94 31
Singlo (India) Tea Ltd. v. CIT (2016) 382 ITR 537 / 238 Taxman 666 / 286 544 175
CTR 242 / 135 DTR 31 (Cal.)(HC)
Siro Clinpharm Private Ltd. v. DCIT (2016) 177 TTJ 609 / 134 DTR 1 1368 430
(Mum.)(Trib.)
SIS Live v. ACIT (2016) 175 TTJ 643 / 131 DTR 221 (Delhi)(Trib.) 763 234
2207 742
Sita Bai Khetan v. ITO (2016) 142 DTR 122 (Jaipur)(Trib.) 1062 326
Siyaram Metal Udyog (P) Ltd.; CIT(TDS) v. * (2016) 240 Taxman 578 / 289 2084 692
CTR 649 (Guj.) (HC)
Skill Infrastructure Ltd.; ITO v. * (2015) 70 SOT 186 (Mum.)(Trib.) 184 62
Skyline Great Hills; CIT v. * (2016) 238 Taxman 675 (Bom.)(HC) 29 9
441 148
SMAA Enterprises P. Ltd.; CIT v. * (2016) 382 ITR 175 / 138 DTR 373 / 977 297
288 CTR 103 (J&K)(HC)
Smart Value Product and Services Ltd.; DCIT v. * (2016) 45 ITR 33 (Chd.) 1699 551
(Trib.)
SNDP Yogam v. ADIT (2016) 161 ITD 1 / (2017) 152 DTR 137 (Cochin) 316 109
(Trib.)
xciv
Case Laws Index
Name Case Page
No. No.
Snowtex Investment Ltd.; ITO v. * (2015) 174 TTJ 875 (Kol.)(Trib.) 586 187
1249 388
Snowtex Investment Ltd.; ITO v. * (2015) 174 TTJ 875 / (2016) 129 DTR 391 134
203 (Kol.)(Trib.)
Societe Generale; DIT v. * (2016) 237 Taxman 182 (Bom.)(HC) 2232 751
Society For Participatory Research in Asia v. ITO (2016) 159 ITD 887 / 180 284 100
TTJ 596 (Delhi)(Trib.)
Society for the Promotion of Education, adventure sport & Conservation 326 112
of Environment; CIT v. * (2016) 382 ITR 6 / 133 DTR 1 / 284 CTR 207 /
238 Taxman 330 (SC)
Society of Indian Automobile Manufacturers v. ITO (2016) 159 ITD 659 285 101
(Delhi)(Trib.)
Sodecia India P. Ltd v. DCIT (2016) 47 ITR 297 (Chennai)(Trib.) 1315 411
Softline Creations P. Ltd.; CIT v. * (2016) 387 ITR 636 (Delhi)(HC) 1133 350
Soham Trading & Investments (P.) Ltd. v. (2016) 161 ITD 761 (Mum.)(Trib.) 450 150
Soignee R. Kothari v. DCIT (2016) 386 ITR 466 / 285 CTR 230 / 134 DTR 1819 595
193 (Bom.)(HC)
Soignee R. Kothari v. Dy. CIT (2016) 386 ITR 466 / 285 CTR 230 / 134 2558 873
DTR 193 (Bom.)(HC)
Soma Textiles and Industries Ltd.; DCIT v. * (2016) 45 ITR 147 / 175 TTJ 2459 834
1 / 129 DTR 12 (Ahd.)(Trib.)
Somaiya Organo Chemicals Ltd v. CIT (2016) 388 ITR 423 / 290 CTR 30 800 243
/ 142 DTR 361 (Bom.)(HC) 2553 872
439 147
635 199
905 273
Soundarrajan Parthasarathy v. Dy. CIT (2016) 159 ITD 21 (Chennai)(Trib.) 412 140
Southern Sea Foods Ltd. v. JCIT (2016) 382 ITR 306 / 243 Taxman 231 / 1270 395
137 DTR 192 / 287 CTR 108 (SC)
Sovereign Commercial (P) Ltd.CIT v. * (2016) 134 DTR 105 / 287 CTR 28 1799 586
(Delhi)(HC)
Span Overseas Ltd. v. CIT (Mum.)(Trib.); www.itatonline.org 2378 804
Special Land Acquisition Officer; CIT v. * (2016) 242 Taxman 398 (Guj.) 2053 679
(HC)
SPL Industries Ltd.; ACIT v. * (2016) 47 ITR 204 (Delhi)(Trib.) 2461 834
Spporthi Sadan Convent v. CIT (2016) 239 Taxman 68 (Karn.)(HC) 2223 748
Spytech Buildcon v. ACIT (2016) 51 ITR 40 (Jaipur)(Trib.) 715 222
xcv
Case Laws Index
Name Case Page
No. No.
Sree Anjaneya Medical Trust v. CIT (2016) 382 ITR 399 / 239 Taxman 229 309 107
/ 135 DTR 199 (Ker.)(HC)
Srei Infrastructure Finance Ltd. v. DCIT (2016) 289 CTR 412 / (2017) 244 1548 496
Taxman 197 (Cal.)(HC)
Sri Chaitanya Educational Society v. ITO (2016) 159 ITD 763 (Visakh.) 1939 639
Trib.)
Sri Chamundeshwari Sugar Ltd.; DCIT v. * (2016) 47 ITR 291 (Bang.) 1697 551
(Trib.)
Sri Guru Har Rai ji Religious & Charitable Trust v. CIT (2016) 179 TTJ 46 341 118
(UO) (Chd.)(Trib.)
Sri Hariram Hotels (P.) Ltd. v. CIT (2016) 237 Taxman 564 / 285 CTR 190 1557 499
/ 133 DTR 102 (Karn.)(HC)
Sri Koundinya Educational Society v. ACIT (2016) 159 ITD 416 / 181 TTJ 348 120
677 (Visakha) (Trib.) 841 254
Sri Kuthethur Gururajachar Charities; DIT v. * (2016) 242 Taxman 292 327 113
(Karn.)(HC)
Sri Magunta Raghava Reddy Charitable Trust.; CIT v. * (2016) 242 Taxman 279 99
18 / (2017) 292 CTR 464 (Mad.)(HC)
Sri Ram Chandra Mission v. CIT (2016) 239 Taxman 170 / 289 CTR 439 1634 529
(Delhi)(HC)
Sri Ram Samaj v. JDIT (E) (2016) 158 ITD 676 / 47 ITR 629 / 181 TTJ 837 293 103
(Chennai)(Trib.)
Sri Renganathar Industries (P.) Ltd.; CIT v. * (2016) 242 Taxman 427 1283 398
(Mad.)(HC)
Sri Sai Padhuga Trust v. ITO(E) (2016) 45 ITR 633 (Chennai)(Trib.) 2391 808
Sri Scorpio Engineering P. Ltd.; CIT v. * (2016) 388 ITR 266 (Karn.)(HC) 831 251
Sri Seetharamachandra Swamy Temple v. CIT (E) (2016) 159 ITD 655 337 117
(Hyd.)(Trib.)
Sri Suru Bhaskar Rao v. CIT (2016) 386 ITR 419 / 286 CTR 200 / 239 1128 348
Taxman 6 / 135 DTR 41 (Orissa)(HC)
Sri. Ponkumar Magnesite Mines Lorry Transport Operator Periyagollapatti; 2260 761
CIT v. * (2016) 236 Taxman 410 (Mad.)(HC)
Srikrishan Agarwal v. Dy. CIT (2016) 48 ITR 548 (Jaipur)(Trib.) 2445 830
Srini Pharmaceuticals Ltd. v. ACIT (2016) 158 ITD 275 / 180 TTJ 742 1409 446
(Hyd.)(Trib.)
SSA Global Technologies (I) P. Ltd.; ITO v. * (2016) 49 ITR 73 (Mum.) 166 55
(Trib.)
xcvi
Case Laws Index
Name Case Page
No. No.
SSA’S Emerald Meadows; CIT v. * (2016) 73 taxmann.com 241 (Karn.)(HC) 2414 819
ST Microelectronics P. Ltd v. Dy. CIT (2016) 384 ITR 550 / 72 taxmann. 1653 537
com 203 / 137 DTR 352 / 287 CTR 324 (Delhi)(HC)
St. Francis Clay Décor Tiles; CIT v. * (2016) 385 ITR 624 / 240 Taxman 1898 624
168 / 137 DTR 340 / 287 CTR 187 (Ker.)(HC)
St. Joseph’s Convent Chandannagar Educational Society v. Jt. CIT (2016) 295 103
158 ITD 1022 (Kol.)(Trib.)
St. Jude Medical Inc v. Dy.CIT (2016) 156 ITD 387 (Mum.)(Trib.) 152 49
St. Peter’s Educational Society; CCIT v. * (2016) 385 ITR 66 / 240 Taxman 213 76
392 / 287 CTR 132 / 137 DTR 37 (SC)
Standard Chartered Bank Ltd. v. CIT (2016) 286 CTR 222 / 134 DTR 273 406 137
(SC)
Standard Chartered Finance Ltd. v. CIT (2016) 381 ITR 453 / 238 Taxman 2529 861
87 / 284 CTR 210 /132 DTR 87 (SC)
State Bank of Hyderabad; CIT v. * (2016) 382 ITR 499 (T&AP)(HC) 2258 761
State Bank of India v. CIT (2016) 389 ITR 578 / 241 Taxman 163 / 290 2324 783
CTR 129 (Guj.)(HC)
State Bank of India v. DCIT (2016) 158 ITD 194 (Luck.)(Trib.) 1991 658
State Bank of PatialaCIT (TDS) v. * (2016) 386 ITR 533 (P&H)(HC) 2009 664
State Bank of Travancore v. CCIT (2016) 389 ITR 449 / 290 CTR 103 / 2142 714
(2017) 244 Taxman 222 (Ker.)(HC)
STCL Ltd.; PCIT v. * (2016) 239 Taxman 2 (Karn.)(HC) 1704 553
Stefon Constructions (P.) Ltd v. CIT (2016) 156 ITD 615 (Mum.)(Trib.) 540 173
Stempeutics Research (P.) Ltd. v. (2016) 161 ITD 677 (Bang.)(Trib.) 179 61
Steria (India) Ltd. v. CIT (2016) 386 ITR 390 / 241 Taxman 268 / 288 CTR 2054 679
694 / 140 DTR 64 (Delhi)(HC)
Sterling Oil Resources (P) Ltd.; ITO v. * (2016) 137 DTR 308 / (2016) 179 1443 456
TTJ 298 (Mum.) (Trib.)
Stewarts & Lloyds of India Ltd. v. CIT (2016) 158 ITD 456 / 178 TTJ 188 1109 341
(Kol.)(Trib.) 2354 796
Stock Traders (P.) Ltd. v. ACIT (2016) 158 ITD 620 / 178 TTJ 265 / 135 758 233
DTR 41 (Mum)(Trib.) 757 233
Stone India Ltd. v. CIT (Appeals) (2016) 385 ITR 542 (Cal.)(HC) 1553 498
Subex Ltd. v. CIT (2016) 156 ITD 938 / 182 TTJ 846 (Bang.)(Trib.) 113 36
558 179
Subhash Chander Goel v. ITO (2016) 156 ITD 808 (Chd.)(Trib.) 1218 378
1236 383
xcvii
Case Laws Index
Name Case Page
No. No.
Subhash Chander Goel v. ITO (2016) 156 ITD 808 / 177 TTJ 353 / 137 1858 609
DTR 22 (Chd.)(Trib.)
Subhash Kabini Power Corporation Ltd.; CIT v. * (2016) 385 ITR 592 / 240 82 26
Taxman 514 / 287 CTR 147 (Karn.)(HC) 2343 790
Subhotosh Majumdar; DDIT v. * (2016) 156 ITD 708 / 176 TTJ 600 / 142 194 67
DTR 285 (Kol.)(Trib.)
Subhra Agrawal (Mrs) v. DCIT (2016) 47 ITR 283 (Agra)(Trib.) 1216 377
Subrat Roy; CIT v. * (2013) 219 Taxman 133 / (2014) 265 CTR 484 / (2016) 28 9
385 ITR 547 (All.)(HC)
Subrata Roy; CIT v. * (2013) 219 Taxman 133 / (2014) 265 CTR 481 / 574 183
(2016) 385 ITR 547 (All.)(HC) 1129 348
Subrata Roy; CIT v. * (2016) 385 ITR 570 / 287 CTR 129 (SC) 2283 768
Sudershan Prasad Bagaria v. ACIT (2016) 384 ITR 477 / 241 Taxman 72 / 1795 585
(2017) 292 CTR 100 (Cal.)(HC)
Sudhir Budharaja; CIT v. * (2016) 236 Taxman 50 (Delhi)(HC) 1153 357
Sudhir Kumar Sharma (HUF) v. CIT (2016) 239 Taxman 264 (SC) 1136 351
Sudhir v. CIT (2016) 388 ITR 208 / 241 Taxman 21 / 290 CTR 520 / 143 1588 513
DTR 367 (Bom.)(HC)
Sudip Roy; ITO v. * (2016) 161 ITD 709 (Kol.)(Trib.) 1023 314
Suguna Charitable Trust v. ITO (2016) 159 ITD 838 (Chennai)(Trib.) 286 101
516 167
Sujata Sharma v. Manu Gupta (2016) IIAD (Delhi) 312 / 226 (2016) DLT 2571 884
647 (Delhi)(HC); www.itatonline.org
Sujaysingh P. Bobade (HUF) v. ITO (2016) 158 ITD 125 / 140 DTR 132 / 2370 801
180 TTJ 631 (Mum.)(Trib.)
Sulzer India Ltd.; CIT v. * (2014) 369 ITR 717 (Bom.)(HC) 906 273
Suman Dhamija; CIT v. * (2016) 382 ITR 343 (Delhi)(HC) 1017 312
Sumathi Gedupudi (Smt.) v. Add. CIT (2016) 156 ITD 419 / 177 TTJ 660 2381 805
/ 133 DTR 188 (Hyd.)(Trib.)
Sumit Passi v. ACIT (2016) 386 ITR 46 / 240 Taxman 82 / 139 DTR 224 1784 580
(P&H)(HC)
Sumitomo Corporation India P. Ltd. v. CIT (2016) 387 ITR 611 / 242 1379 434
Taxman 260 / 288 CTR 1 (Delhi)(HC)
Sumitomo Corporation; CIT v. * (2016) 382 ITR 75 / 137 DTR 94 / 287 177 60
CTR 420 (Delhi)(HC)
Sumitomo Mitsui Banking Corpn.; DIT v. * (2016) 242 Taxman 378 (Bom.) 2122 707
(HC)
xcviii
Case Laws Index
Name Case Page
No. No.
Sumitomo Mitsui Banking Corporation; Dy. DIT v. * (2016) 387 ITR 164 / 1714 555
243 Taxman 514 /290 CTR 484 / 144 DTR 167 (SC)
Sun Life India Service P. Ltd.; CIT v. * (2016) 381 ITR 516 (P&H)(HC) 246 88
Sun Pharmaceutical Industries Ltd.; PCIT v. * (2016) 240 Taxman 686 / 1278 397
(2017) 148 DTR 332 / 293 CTR 489 (Guj.)(HC)
Sun Pharmaceutical Industries Ltd.; PCIT v. * (2016) 241 Taxman 332 1746 567
(Guj.)(HC)
Sun Pharmaceuticals Industries Ltd. v. ACIT (2016) 243 Taxman 299 (Guj.) 1761 572
(HC)
Sun Pharmaceuticals Industries Ltd. v. DCIT (2016) 381 ITR 387 / 237 1742 566
Taxman 709 / 137 DTR 18 / 287 CTR 621 (Delhi)(HC)
Sun Pharmaceuticals Industries Ltd.; PCIT v. * (2016) 240 Taxman 686 / 1545 495
(2017) 148 DTR 332 / 293 CTR 489 (Guj.)(HC)
Sunaero Ltd.; DCIT v. * (2016) 161 ITD 472 (Delhi)(Trib.) 1018 312
Sundaram Finance Ltd v. Dy. CIT (2016) 387 ITR 155 (Mad.)(HC) 543 174
Sundaram Finance Ltd. v. CIT (2016) 240 Taxman 297 (SC) 2411 818
Sundaram Medical Foundation v. Dy. CIT (E) (2016) 45 ITR 500 (Chennai) 22 7
(Trib.) 304 105
Sundaram Medical Foundation v. Dy. CIT (E)-I (2016) 45 ITR 500 2197 739
(Chennai)(Trib.)
Sundaramoorthy (HUF); CIT v. * (2016) 388 ITR 154 (Karn.)(HC) 1956 643
Sunflag Iron & Steel Co. Ltd. v. CBDT (2016) 387 ITR 674 / 238 Taxman 2146 716
243 / 137 DTR 177 / 287 CTR 309 (Bom.)(HC)
Sunil Gavaskar v. ITO (2016) 47 ITR 243 / 177 TTJ 500 / 134 DTR 113 1352 423
(Mum.)(Trib.)
Sunil Gavaskar v. ITO (IT) (2016) 47 ITR 243 / 177 TTJ 500 / 134 DTR 1855 608
113 (Mum.)(Trib.) 2540 868
Sunil Kumar Gupta v. ACIT (2016) 389 ITR 38 / 243 Taxman 65 (P&H)(HC) 420 142
Sunil Kumar Saha v. ITO (2016) 156 ITD 1 (Kol)(Trib) 424 142
1119 344
423 142
1085 333
Sunil Vishwambharnath Tiwari; CIT v. * (2016) 388 ITR 630 / 290 CTR 1322 413
234 / 143 DTR 94 (Bom.)(HC)
Sunila Sharma; CIT v. * (2016) 380 ITR 462 (P&H)(HC) 2437 828
Sunlife Insurance Company Ltd. v. Jt. CIT (2016) 157 ITD 16 (Mum.)(Trib.) 1942 640
xcix
Case Laws Index
Name Case Page
No. No.
Sunny Sounds P. Ltd.; CIT v. * (2016) 381 ITR 443 / 237 Taxman 295 / 2399 812
283 CTR 158 / 130 DTR 265 (Bom.)(HC)
Sunquest Information Systems (India) (P.) Ltd.; DCIT v. * (2016) 160 ITD 1448 457
49 (Bang.)(Trib.) 1449 458
Sunshield Chemicals (P.) Ltd. v. ITO (2016) 156 ITD 452 / 175 TTJ 129 / 1709 554
129 DTR 113 (Mum.)(Trib.) 534 172
Super Auto Forge (P.) Ltd. v. ACIT (2016) 156 ITD 467 (Chennai)(Trib.) 393 134
1240 384
Super Malls Pvt. Ltd. v. Dy. CIT (2016) 176 TTJ 563 / 132 DTR 48 (Delhi) 1933 636
(Trib.)
Superline Construction Pvt. Ltd.; ITO v. * (2016) BCAJ-January-P. 1186 367
18(Mum.)(Trib.)
Superman Knitters (P) Ltd.; CIT v. * (2016) 387 ITR 494 / 69 taxmann. 2335 787
com 181 (P&H)(HC)
Surat National Co-operative Bank Ltd.; ACIT v. * (2016) 51 ITR 136 (Ahd.) 716 222
(Trib.)
Surat Textile Mills Ltd. v. Dy. CIT (2016) 159 ITD 373 / 181 TTJ 181 / 1561 500
(2017) 148 DTR 297 (Ahd.)(Trib.)
Surbhi Goel (Mrs.); CIT v. * (2016) 387 ITR 575 / 243 Taxman 539 / 290 1958 644
CTR 14 (Raj.)(HC)
Surender Paul v. CIT (2016) 389 ITR 58 (P&H)(HC) 2413 818
Suresh Babulal Shah (HUF) v. DCIT (2016) 161 ITD 514 (Pune)(Trib.) 992 303
Suresh Jain; CIT v. * (2016) 242 Taxman 460 (Karn.)(HC) 1191 368
Suresh Kumar Goyal v. CIT (2016) 139 DTR 362 / 73 taxmann.com 10 2519 856
(Delhi)(HC)
Suresh Kumar K. Tek v. ITO (2016) 157 ITD 119 (Mum.)(Trib.) 1079 331
Suresh Kumar Kochar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 2199 740
(Mad.)(HC)
Suresh M. Bajaj v. ITO (Delhi)(Trib.); www.itatonline.org 1877 616
Suresh Sharma v. ACIT (2016) 383 ITR 44 / 68 taxmann.com 163 (Karn.) 2120 706
(HC)
Suresh v. Addl. CIT (2016) 385 ITR 1 / 139 DTR 213 / 288 CTR 203 1789 583
(Bom.)(HC)
Surjeet Bahadur Khurania v. CIT (2016) 389 ITR 211 / 75 taxmann.com 1951 642
229 / (2017) 292 CTR 491 (P&H)(HC)
Surya Merchants Ltd.; CIT v. * (2016) 387 ITR 105 / 290 CTR 168 / 72 1308 408
taxmann.com 16 (All.)(HC)
c
Case Laws Index
Name Case Page
No. No.
Sushil Kumar Co. v. CIT (2016) 387 ITR 192 (Cal.)(HC) 78 24
Sushila Devi v. CIT (2017) 292 CTR 116 (Delhi)(HC) 1617 523
Suthanther Assumtha; DCIT v. * (2016) 161 ITD 546 / 51 ITR 154 508 166
(Chennai)(Trib.)
Suvaprasanna Bhatacharya v. ACIT (2016) 130 DTR 49 / 175 TTJ 238 2473 838
(Kol.)(Trib.) 2474 839
Suzlon Energy Ltd. v. ACIT (2016) 156 ITD 7 (Ahd.)(Trib.) 2064 683
SVE Engineers P. Ltd.; CIT v. * (2016) 388 ITR 11 / 243 Taxman 193 636 199
(Mad.)(HC)
SVP Builders (India) Ltd.; CIT v. * (2016) 238 Taxman 653 (Delhi)(HC) 1150 356
Swami Dayanand Educational Trust v. CIT (2016) 157 ITD 564 (Delhi) 323 111
(Trib.)
Swastik Commercial (P) Ltd.; CIT v. * (2016) 134 DTR 105 / 287 CTR 28 1799 586
(Delhi)(HC)
Swastik Industries; PCIT v. * (2016) 240 Taxman 510 (Guj.)(HC) 495 162
Swati Saurin Shah v. ITO (2016) 386 ITR 256 / 240 Taxman 758 (Guj.)(HC) 1787 581
Symphony Marketing Solutions India P. Ltd.; CIT v. * (2016) 388 ITR 457 207 73
/ (2017) 150 DTR 172 (Karn.)(HC)
Synbiotics Ltd.; ACIT v. * (2016) 48 ITR 210 (Ahd.)(Trib.) 1112 342
Synchem Chemicals (I) Ltd.; CIT v. * (2016) 384 ITR 498 (Bom.)(HC) 2307 777
Syncom Formulation (I) Ltd.; DCIT v. * (Mum.)(Trib.); www.itatonline.org 796 242
Syngene International Ltd.; Dy. CIT v. * (2016) 157 ITD 542 (Bang.)(Trib.) 271 97
Synopsys International Ltd. v. DDIT (IT) (2016) 76 taxmann.com 18 (Karn) 162 53
(HC)
T
T. C. Vavachan v. ITO (2016) 159 ITD 48 (Cochin)(Trib.) 11 3
T. K. Dhanashekar v. UOI (2016) 383 ITR 385 / 239 Taxman 283 / 286 1532 490
CTR 28 (Mad.)(HC)
T. Kurvilla; CIT v. * (2016) 242 Taxman 139 (Ker.)(HC) 830 251
T. Lakamshi Ladha and Co. v. CIT (2016) 386 ITR 233 / 240 Taxman 49 / 662 205
286 CTR 494 (Bom.)(HC)
T. Lakhamshi Ladha & Co. v. CIT (No. 2) (2016) 386 ITR 245 / 242 Taxman 645 201
325 / 288 CTR 330 (Bom.)(HC) 663 206
T. Rajkumar v. UOI (2016) 383 ITR 385 / 239 Taxman 283 / 286 CTR 28 / 1532 490
134 DTR 225 (Mad.)(HC)
T. Shiva Kumar v. ITO (2016) 158 ITD 329 (Bang.)(Trib.) 1076 330
ci
Case Laws Index
Name Case Page
No. No.
T.T. Siddarth v. DCIT (2016) 159 ITD 519 (Chennai)(Trib.) 1032 316
Taj TV Ltd.; ADDIT v. * (2016) 161 ITD 339 / (2017) 184 TTJ 202 / 147 819 248
DTR 30 (Mum.)(Trib.)
Taj TV Ltd.; ADIT v. * (2016) 161 ITD 339/ (2017) 184 TTJ 202 / 147 DTR 140 45
30 (Mum.)(Trib.)
Takshila Educational Society; Dy. CIT v. * (2016) 131 DTR 332 / 284 CTR 1825 597
306 (Pat.)(HC)
Talbros Engineering Ltd.; PCIT v. * (2016) 386 ITR 154 (P&H)(HC) 52 15
1142 353
1651 536
Tally Solutions (P.) Ltd. v. ACIT (2016) 160 ITD 465 (Bang.)(Trib.) 1366 429
Tally Solutions Pvt. Ltd. v. ACIT (Bang.)(Trib.); www.itatonline.org 1459 462
Talwalkar Bhalerao & Mate; ITO v. * (2016) 178 TTJ 1 (UO)(Pune)(Trib.) 2454 832
Tamasek Holdings Advisors India (P.) Ltd. v. Dy. CIT (2016) 177 TTJ 678 1462 463
/ 138 DTR 282 (Mum.)(Trib.)
Tamil Nadu State Transport Corporation (Salem) Ltd. v. Chinnadurai 2007 663
(Mad.)(HC); www. itatonline.org
Tamil Nadu Tourism Development Corporation Ltd.; CIT v. * (2016) 241 74 23
Taxman 441 / 288 CTR 444 (Mad.)(HC) 626 197
Tanuj Holdings Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 420 (Kol.)(Trib.) 2385 806
Tapas Kr. Bandopadhyay v. Dy.CIT (2016) 159 ITD 309 / 180 TTJ 702 (Kol.) 123 39
(Trib.)
Tara Jewels Exports P. Ltd.; CIT v. * (2016) 381 ITR 404 / 129 DTR 410 / 1390 438
282 CTR 525 (Bom.)(HC)
Tara Singh v. ITO (2016) 387 ITR 587 (P&H)(HC) 1663 541
Taragauri T. Doshi v. ITO (2016) 160 ITD 343 (Mum.)(Trib.) 206 72
Tarsem Singla v. DCIT (2016) 385 ITR 138 (P&H)(HC) 1897 623
Tarujyot Investment Ltd. v. ACIT (2016) 48 ITR 33 (Ahd.)(Trib.) 984 300
Tarus Shipping Services; CIT v. * (2016) 236 Taxman 555 / 288 CTR 718 131 42
(Guj.)(HC)
Tata Consultancy Services Ltd.; ACIT v. * (2016) 130 DTR 90 (Mum.)(Trib.) 1834 602
Tata Consultancy Services Ltd.; Dy. CIT v. * (2015) 174 TTJ 570 / (2016) 878 265
46 ITR 394 (Mum.)(Trib.) 880 265
1524 486
Tata Consultancy Services Ltd.; Dy. CIT v. * (2016) 46 ITR 394 / (2015) 256 92
174 TTJ 570 (Mum.)(Trib.)
cii
Case Laws Index
Name Case Page
No. No.
Tata Elxi Ltd.; CIT v. * (2016) 382 ITR 654 (Karn.)(HC) 244 88
2552 872
Tata Industries Ltd.; ACIT v. * (2016) 51 ITR 101 (Mum.)(Trib.) 2441 829
Tata Metalics Ltd.; ACIT v. * (2016) 48 ITR 272 (Kol.)(Trib.) 1558 499
Tata Metaliks Ltd.; CIT v. * (2016) 387 ITR 411 (Cal.)(HC) 1290 401
Tata Teleservice v. UOI (2016) 385 ITR 497 / 132 DTR 1 / 284 CTR 337 / 2075 689
238 Taxman 331 (Guj.)(HC)
Tata Teleservices (Maharashtra) Ltd.; CIT v. * (2016) 133 DTR 119 / 286 2271 764
CTR 336 (Bom.)(HC)
Tata Teleservices Limited v. CBDT (2016) 386 ITR 30 / 136 DTR 145 / 240 1640 532
Taxman 182 / 286 CTR 465 (Delhi)(HC)
Tata Teleservices Ltd. v. ACIT (2016)385 ITR 436 / 238 Taxman 625 / 285 2074 688
CTR 48 / 133 DTR 57 (Delhi)(HC)
Tata Teleservices v. UOI (2016) 385 ITR 497 / 238 Taxman 331 / 284 CTR 2073 687
337 (Guj.)(HC)
TCL India Holding Pvt. Ltd.; CIT v. * (2016) / 241 Taxman 138 / 138 DTR 2315 780
319 / 288 CTR 34 (Bom.)(HC)
TCL India Holding Pvt. Ltd.; CIT v. * (Bom.)(HC); www.itatonline.org 2314 779
Tech Books Electronics (P) Ltd.; ACIT v. * (2016) 176 TTJ 20 / 65 1519 484
taxmann.com 241 / 138 DTR 145 (Delhi)(Trib.)
Tech Books Electronics P. Ltd.; ACIT v. * (2016) 176 TTJ 20 / 65 taxmann. 2251 758
com 241 / 138 DTR 145 (Delhi)(Trib.) 1506 478
Tech Mahindra Limited; CIT v. * (2016) 240 Taxman 143 / 141 DTR 202 2144 715
/ 289 CTR 454 (Bom.)(HC)
Technip Singapore Pte Ltd v. DIT (2016) 385 ITR 408 / 240 Taxman 373 / 176 60
137 DTR 113 / 289 CTR 421 (Delhi)(HC)
Technological Institute of Textile & Science v. DIT (2016) 158 ITD 808 21 7
(Kol.)(Trib.) 344 119
Techpac Holdings Ltd. v. Dy. CIT (2016) 382 ITR 474 / 238 Taxman 542 / 1809 590
286 CTR 412 / 135 DTR 322 (Bom.)(HC)
Teenlok Advisory Services (P.) Ltd.; Dy. CIT v. * (2016) 159 ITD 991 (Kol.) 444 149
(Trib.) 378 130
Telestar Investments P. Ltd.; PCIT v. * (2016) 387 ITR 248 (Karn.)(HC) 962 290
Textile Dye Chem Corporation; CIT v. * (2015) 237 Taxman 354 (Mad.)(HC) 687 213
Thakur Prasad Sao and Sons (P) Ltd.; CIT v. * (2016) 386 ITR 448 (Cal.) 2426 823
(HC)
ciii
Case Laws Index
Name Case Page
No. No.
The Regents of the University of California UCLA Anderson School of 198 69
Management Executive Education, USA, In re (2016) 387 ITR 398 / 243
Taxman 122 / 290 CTR 10 (AAR)
The Saraswat Co-operative Bank Limited; DCIT v. * (Mum.)(Trib); www. 371 129
itatonline.org 886 268
701 219
The Solution; CIT v. * (2016) 382 ITR 337 / 136 DTR 388 (Raj.)(HC) 892 270
The Tribune Trust v. CIT (2016) 76 taxmann.com 363 / (2017) 390 ITR 547 15 5
/ 291 CTR 352 / 145 DTR 350 (P&H)(HC)
Thomas Cook (India) Limited v. ACIT (Mum.)(Trib.); www.itatonline.org 1482 470
Thukral Regal Shoes v. CIT (2016) 241 Taxman 361 / 290 CTR 596 / (2017) 563 180
391 ITR 119 (P&H)(HC)
Thyssen Krupp Industries India P. Ltd.; CIT v. * (2016) 381 ITR 413 / 129 1392 438
DTR 412 / 70 taxmann.com 329 (Bom.)(HC)
Thyssen Krupp Industries India P. Ltd.; CIT v. * (2016) 385 ITR 612 / 239 1386 436
Taxman 46 (Bom.)(HC)
Tibetan Children’s Village; CIT v. * (2016) 388 ITR 126 (P&H)(HC) 2291 771
Tigrania Steel Corporation v. CIT (2016) 143 DTR 310 / (2017) 496 (Bom.) 2531 863
(HC)
Tiong Woon Contracting Pte Ltd., In re (2016) 387 ITR 350 / 243 Taxman 156 51
58 / 289 CTR 353 (AAR)
Tiong Woon Project and Contracting (Pte) Ltd. In, re (2016) 380 ITR 187 / 125 40
282 CTR 39 / 129 DTR 16 (AAR)
Tirupati Foam Ltd. v. Dy. CIT (2016) 380 ITR 493 (Guj.)(HC) 1740 565
Today Homes and Infrastructure Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 586 475 157
(Delhi)(Trib.) 788 240
789 240
1182 366
Toll Global Forwarding India (P.) Ltd.; CIT v. * (2016) 381 ITR 38 / 237 1406 445
Taxman 326 / 283 CTR 346 / 130 DTR 401 (Delhi)(HC)
Tongani Tea Co. Ltd.; Dy.CIT v. * (2016) 156 ITD 188 (Kol.)(Trib.) 1006 308
Topsgroup Electronic Systems v. ITO (Mum.)(Trib.); www.itatonline.org 1479 468
Topsgrup Electronic Systems Ltd. v. ITO (2016) 157 ITD 1123 / 48 ITR) 1411 447
753 / 178 TTJ 19 (Mum.)(Trib.)
Torque Pharmaceuticals P. Ltd.; PCIT v. * (2016) 389 ITR 46 (P&H)(HC) 2415 819
Torsa Machines Ltd. v. CIT (2016) 389 ITR 377 (Gauhati)(HC) 1326 415
civ
Case Laws Index
Name Case Page
No. No.
Trans Asian Shipping service Pvt. Ltd.; CIT v. * (2016) 385 ITR 637 / 138 1574 506
DTR 1 / 240 Taxman 669 / 287 CTR 113 (SC)
Trans Global PLC v. DIT (IT) (2016) 158 ITD 230 (Kol.)(Trib.) 132 42
Transcend MT Services (P.) Ltd. v. ACIT (2016) 159 ITD 967 (Delhi)(Trib.) 1435 453
Transcend MT Services (P.) Ltd.; ACIT v. * (2016) 158 ITD 507 (Delhi) 1425 451
(Trib.)
Travancore Diagnostics (P.) Ltd. v. ACIT (2016) 290 CTR 241 / (2017) 244 1747 567
Taxman 316 / 390 ITR 167 (Ker.)(HC)
Travancore Diagnostics P. Ltd v. ACIT (2016) 290 CTR 241 / (2017) 390 1743 566
ITR 167 / 244 Taxman 316 (Ker.)(HC)
Travotel (India) (P.) Ltd. v. ITO (2016) 158 ITD 878 (Mum.)(Trib.) 1084 333
Trendsetter Construction Pvt. Ltd.; ITO v. * (2016) 46 ITR 132 (Mum.) 1696 550
(Trib.)
Triad Resorts & Hotels (P.) Ltd. v. WTO (2016) 160 ITD 668 (Bang.)(Trib.) 2264 763
Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. ACIT (2016) 45 ITR 636 1208 374
(Mum.)(Trib.) 1219 378
Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. ACIT (2016) 45 ITR 636 / 1610 521
177 TTJ 306 (Mum.)(Trib.)
Tribhovandas Bhimji Zaveri; CIT v. * (2016) 45 ITR 636 / 177 TTJ 306 1658 538
(Mum.)(Trib.)
Trident Infotech Corporation Ltd. v. CIT (2016) 385 ITR 335 (P&H)(HC) 576 184
TRIL Infopark Ltd v. ITO (TDS) (2016) 385 ITR 465 / 288 CTR 188 / 138 2033 671
DTR 201 / 70 taxmann. com 44 (Mad.)(HC)
Trimurty Buildcon (P) Ltd. v. Dy. CIT (2016) 178 TTJ 373 / 135 DTR 161 2455 833
/ 47 DTR 50 (Jaipur.)(Trib.)
Trimurty Buildcon P. Ltd. v. DCIT (2016) 47 ITR 50 / 135 DTR 161 / 178 2462 835
TTJ 373 (Jaipur)(Trib.)
Trimurty Famrs & Retreats v. Dy. CIT (2016) 178 TTJ 373 / 135 DTR 161 2455 833
(Jaipur)(Trib.)
Trimurty Farms and Retreats v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.) 2462 835
Trio Elevators Company (India) Ltd. v. ACIT (2016) 157 ITD 1170 / 178 530 171
TTJ 258 / 134 DTR 201 (Ahd.)(Trib.)
Triple V Timber Sales Corpn; ITO v. * (2015) 70 SOT 811/40 ITR 204 1202 372
(Chd.)(Trib.)
Trishul Commercial (P) Ltd.; CIT v. * (2016) 134 DTR 105 / 287 CTR 28 1799 586
(Delhi)(HC)
cv
Case Laws Index
Name Case Page
No. No.
Triumph International Finance India Ltd. v. ACIT (2016) 161 ITD 464 518 168
(Mum.)(Trib.) 1127 347
Triune Energy Services (P.) Ltd. v. Dy. CIT (2016) 237 Taxman 230 / 129 503 165
DTR 422 (Delhi)(HC)
Triune Project Pvt. Ltd. v. DCIT (2017) 145 DTR 190 / 291 CTR 268 (Delhi) 1037 318
(HC)
Troikaa Pharmaceuticals Ltd. v. UOI (2016) 385 ITR 497 / 132 DTR 1 / 284 2075 689
CTR 337 / 238 Taxman 331 (Guj.)(HC)
Tsurphu Labrang v. DIT (E) (2016) 159 ITD 848 / 182 TTJ 176 / (2017) 148 338 117
DTR 246 (Delhi)(Trib.)
TTK Healthcare Ltd.; CIT v. * (2016) 385 ITR 326 / 70 taxmann.com 263 479 158
(Mad.)(HC)
Tube Investments of India Ltd v. JCIT (2016) 240 Taxman 543 (Mad.)(HC) 597 189
555 178
801 243
Tulsi Food Products v. Dy. CIT (2016) 380 ITR 192 (All.)(HC) 1643 533
Tulsi Mall (Association of Person) v. CIT (2016) 236 Taxman 586 (Guj.)(HC) 1580 510
Tulsidas Trading Pvt. Ltd. v. TRO (2016) 139 DTR 175 / 288 CTR 202 2188 736
(Bom.)(HC)
Tupperware India (P.) Ltd.; PCIT v. * (2016) 236 Taxman 494 / 284 CTR 1827 598
68 (Delhi)(HC)
Twin Earth Securities (P.) Ltd. v. ACIT (2016) 158 ITD 764 / 177 TTJ 527 1035 317
/ 136 DTR 300 (Mum.)(Trib.)
U
U P Hotels Ltd. v. CIT (2016) 131 DTR 99 / 283 CTR 417 (All.)(HC) 1644 533
2319 781
U.G. Hospitals P. Ltd.; CIT v. * (2016) 386 ITR 520 (P&H)(HC) 481 158
570 182
U.P. Forest Corporation v. CIT (2015) 235 Taxman 270 / (2016) 131 DTR 2352 795
274 / 284 CTR 311 (All.)(HC)
U.P. Transformers (I) P. Ltd. v. CIT (2016) 382 ITR 66 / 137 DTR 273 / 287 1264 393
CTR 450 (All.)(HC)
UC Berkeley Center for Executive Education, USA, In re (2016) 242 158 51
Taxman 360 / 289 CTR 106 (AAR)
UC Berkeley Center for Executive Education, USA, In re (2016) 387 ITR 199 70
385 (AAR)
Ucal Fuel Systems Ltd.; CIT v. * (2016) 383 ITR 15 (Mad.)(HC) 1299 404
cvi
Case Laws Index
Name Case Page
No. No.
Ucal Machine Tools (P.) Ltd. v. ITO (2016) 159 ITD 1061 (Chennai)(Trib.) 731 225
1848 607
UCO Bank v. Dy. CIT (2016) 156 ITD 146 / 175 TTJ 607 / 130 DTR 113 1571 502
(Kol.)(Trib.)
UCO Bank v. Dy. CIT (2016) 49 ITR 34 (Kol.)(Trib.) 608 192
1560 500
374 129
Uday K. Pradhan v. ITO (Mum.)(Trib.); www.itatonline.org 47 14
UE Trade Corporation India (P) Ltd. v. ITO (2016) 130 DTR 345 / 176 TTJ 1498 474
252 (Delhi)(Trib.)
UFO Movies India Ltd. v. ACIT (2016) 175 TTJ 633 / 131 DTR 81 (Delhi) 1475 467
(Trib.) 398 135
Uhde India P. Ltd. v. ACIT (2016) 45 ITR 177 (Mum.)(Trib.) 2481 841
Ujagar Holding Pvt. Ltd. v. ITO (Delhi)(Trib.), www.itatonline.org 1863 611
Umesh Goel (Smt.); CIT v. * (2016) 387 ITR 575 / 243 Taxman 539 / 290 1958 644
CTR 14 (Raj.)(HC)
UMT Investment Ltd.; ITO v. * (2016) 176 TTJ 53 / 136 DTR 39 (Kol.) 114 36
(Trib.)
Uni Deritend Limited v. ACIT (Mum.)(Trib.); www.itatonline.org 919 277
109 35
Union Bank of India v. ACIT (2016) 52 ITR 221 / (2017) 162 ITD 142 2150 718
(Mum.)(Trib.)
Unitech Holdings Ltd v. DCIT (2016) 240 Taxman 70 / 138 DTR 272 / 290 1786 581
CTR 201 (Delhi)(HC)
Unitech Ltd. and another v. UOI (2016) 381 ITR 456 / 133 DTR 2 / 237 2407 815
Taxman 361 / 285 CTR 162 (SC)
Unitech Ltd. v. UOI (2016) 381 ITR 456 / 237 Taxman 361 / 285 CTR 162 2409 817
/ 133 DTR 2 (SC)
United Breweries Limited v. DCIT (Karn.)(HC), www.itatonline.org 362 125
United Breweries Ltd.; CIT (TDS) v. * (2016) 387 ITR 150 / 293 CTR 500 2025 668
/ 80 taxmann.com 123 (T & AP)(HC)
United Healthcare India (P.) Ltd.; ACIT v. * (2016) 160 ITD 631 (Mum.) 2495 845
(Trib.)
United Spirits Ltd.; CIT v. * (2016) 386 ITR 718 / 242 Taxman 98 / 289 541 173
CTR 655 (SC)
UOI v. Central India Institute of Medical Sciences (2016) 243 Taxman 151 545 175
/ 389 ITR 4 / 144 DTR 370 / (2017) 291 CTR 19 (SC)
cvii
Case Laws Index
Name Case Page
No. No.
UOI v. Subhash Kumar (2016) 237 Taxman 547 (P&H)(HC) 1576 508
Urvi Chirag Sheth v. ITO (2016) 159 ITD 199 / 179 TTJ 245 / 136 DTR 97 32
345 / 51 ITR 491 (Ahd.)(Trib.) 1120 345
Usha Offset Printers (P.) Ltd. v. Bank of Maharashtra (2016) 238 Taxman 2112 703
363 (Bom.)(HC)
Utsav Cold Storage (P.) Ltd. v. ITO (2016) 159 ITD 639 / 181 TTJ 704 1031 316
(Jaipur)(Trib.)
Uttam v. Saubhag Singh, AIR 2016 SC 1169, 2016 (3) Bom CR 83 / (2016) 2569 882
286 CTR 15 / 134 DTR 145 (SC)
Uttar Pradesh Bhumi Sudhar Nigam Ltd. v. PCIT (2016) 387 ITR 268 (All.) 2095 696
(HC)
Uttar Pradesh Financial Corporation; ITO v. * (2016) 143 DTR 213 / 181 2077 690
TTJ 927 (Luck.)(Trib.)
Uttaranchal Jal Vidyut Nigam Ltd. v. ACIT (2016) 47 ITR 198 (Delhi)(Trib.) 1857 609
UTV Software Communications Ltd. v. ACIT (2016) 157 ITD 71 / 176 TTJ 1004 307
315 / 131 DTR 352 (Mum.)(Trib.)
V
V. A. Haseeb and Co. (Firm) v. CCIT (2017) 152 DTR 306 (Mad.)(HC) 2518 855
V. M. Mathai v. CIT (2016) 242 Taxman 385 (Ker.)(HC) 2096 697
V. M. Reality P. Ltd.; CIT v. * (2016) 388 ITR 225 (P&H)(HC) 1611 521
V. R. Usha (Mrs.) v. ITO (2016) 159 ITD 402 (Chennai)(Trib.) 1099 337
V. R. Venkatachalam v. ACIT (2016) 48 ITR 13 (Chennai)(Trib.) 2357 796
V. Ram Prasad; Dy. CIT v. * (2016) 236 Taxman 479 (SC) 1598 516
V. Reginakantham v. CIT (2016) 242 Taxman 466 (Mad.)(HC) 1615 522
V. S. Dempo & Co Pvt. Ltd.; CIT v. * (2016) 381 ITR 303 / 131 DTR 217 / 1980 654
284 CTR 1 / 238 Taxman 91 (FB) (Bom.)(HC)
V.S. Balasubramanyam v. ITO (2014) 47 taxmann.com 282 / (2017) 393 967 292
ITR 486 (Karn.)(HC)
V.S. Dempo Company Ltd.; CIT v. * (2016) 387 ITR 354 / 242 Taxman 434 1033 317
/ 290 CTR 401 / 144 DTR 1 (SC)
Vadodara District Co-op. Sugarcane Growners Union Ltd.; DCIT v. * (2016) 1716 556
242 Taxman 110 (SC)
Vaipa Pharmaceuticals Pvt. Ltd. v. ACIT (2016) 46 ITR 109 (Mum.)(Trib.) 1029 315
Vairams Kindergarten Society v. ITO (2015) 40 ITR 694 / (2016) 156 ITD 230 82
381 (Chennai)(Trib.)
Valley Extraction (P.) Ltd. v. Jt. CIT (2016) 158 ITD 976 (Chd.)(Trib.) 2405 814
cviii
Case Laws Index
Name Case Page
No. No.
Vandana Bhulchandani (Dr.); ITO v. * (2016) 140 DTR 25 (Mum.)(Trib.) 996 304
Vandana Bhulchandani (Dr.); ITO v. * (2016) 160 ITD 552 / 180 TTJ 505 1130 349
(Mum.)(Trib.)
Vaneet Sood v. ACIT (2016) 159 ITD 320 (Chand.)(Trib.) 1310 409
937 282
Vardhaman Estate Corporation; ACIT v. * (2016) 175 TTJ 15 (UO)(Mum.) 1700 552
(Trib.)
Vardhman Holdings Ltd. v. ACIT (2016) 158 ITD 843 (Chd.)(Trib.) 1860 610
Varshaben Sanatbhai Patel v. ITO (2016) 282 CTR 75 (Guj.)(HC) 1800 586
Vasant J. Khetani v. JCIT (2016) 158 ITD 339 / 179 TTJ 475 / 138 DTR 940 282
265 (Mum.)(Trib.) 2020 667
Vatika Landbase Pvt. Ltd.; CIT v. * (2016) 383 ITR 320 / 238 Taxman 448 1197 370
/ 136 DTR 262 (Delhi)(HC)
Vatsala Shenoy v. JCIT (2016) 389 ITR 519 / 243 Taxman 152 / 289 CTR 1036 318
457 / 142 DTR 201 (SC)
Ved Prakash Contractors v. CIT (2016) 175 TTJ 19 (UO) (Chd.)(Trib.) 2372 802
Veejay Marketing v. CIT (2016) 382 ITR 395 / 239 Taxman 392 / 243 1267 394
Taxman 232 (SC)
Veerakeralam Primary Agricultural Co-operative Credit Society; CIT v. * 1340 419
(2016) 388 ITR 492/ 241 Taxman 324 (Mad.)(HC)
Veerprabhu Marketing Ltd.; CIT v. * (2016) 388 ITR 574 / 73 taxmann.com 1917 631
149 / (2017) 149 DTR 87 / 294 CTR 103 (Cal.)(HC)
Vegesina Kamala v. ITO (2016) 157 ITD 457 (Visakha)(Trib.) 1104 339
2386 806
Vels Institute of Science, Technology & Advanced Studies; Dy. DIT (E) v. * 299 104
(2016) 157 ITD 237 / 130 DTR 331 / 175 TTJ 593 (Chennai)(Trib.) 539 173
Vels Institute of Science, Technology & Advanced Studies; Dy. DIT (E) v. *
(2016) 157 ITD 237 / 130 DTR 331 / 175 TTJ 593 (Chennai)(Trib.)
VeriSign Services India (P.) Ltd. v. Dy. CIT (2016) 177 TTJ 372 / 132 DTR 1463 463
73 (Bang.)(Trib.)
Vernan Private Trust; ACIT v. * (2016) 157 ITD 211 / 137 DTR 223 / 178 1000 306
TTJ 550 (Mum.)(Trib.)
Vertex Customer Management Ltd.; Dy.CIT v. * (2016) 158 ITD 365 / 178 145 47
TTJ 580 (Delhi)(Trib.) 146 47
147 47
171 57
Vicky Rajesh Jhaveri v. DCIT (2016) 243 Taxman 573 / (2017) 148 DTR 1758 571
150 / 293 CTR 291 (Guj.)(HC)
cix
Case Laws Index
Name Case Page
No. No.
Video Plaza v. ITO (2016) 385 ITR 404 (Cal.)(HC) 666 207
Vijay Agarwal v. CIT (2016) 236 Taxman 542 (P& H)(HC) 1227 381
Vijay Aggarwal v. CIT (2016) 236 Taxman 542 / 135 DTR 276 / 286 CTR 427 143
452 (P&H)(HC)
Vijay Aggarwal v. CIT (2016) 236 Taxman 542 / 286 CTR 452 (P & H)(HC) 1257 391
Vijay Gupta v. CIT (2016) 386 ITR 643 / 238 Taxman 505 / 137 DTR 401 2395 810
(2017) 291 CTR 517 (Delhi)(HC)
Vijay Power Generators Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org 1875 615
Vijay Shanti Educational Trust; PCIT v. * (2016) 243 Taxman 212 (Raj.) 485 160
(HC)
Vijay Singh kadam v. CCIT (2016) 384 ITR 69 (Delhi)(HC) 2155 719
Vijay Trading Co. v. ITO (2016) 388 ITR 377 (Guj.)(HC) 1192 369
Vijaya Mahantesh Vidyavardak Sangha; CIT v. * (2016) 236 Taxman 414 1260 392
(Karn.)(HC)
Vijayashanthi Builders Ltd. v. JCIT (2016) 158 ITD 635 / 48 ITR 310 756 233
(Chennai) (Trib.) 585 186
472 156
Vikas Chimakurty v. Dy. CIT (2016) 159 ITD 413 (Mum.)(Trib.) 413 140
Vikas Coal Co.; CIT v. * (2016) 385 ITR 536 (Cal) (HC) 2224 748
Vikas Keshav Garud v. ITO (2016) 160 ITD 7 (Pune)(Trib.) 421 142
Vikram A. Pradhan; ITO v. * (Mum.)(Trib.), www.itatonline.org 915 276
Vikram Jain and Sons, HUF v. ITO (2016) 46 ITR 246 (Chd.)(Trib.) 1874 615
Vikram Kaswan v. CIT (2016) 47 ITR 322 (Chd.)(Trib.) 2365 799
Vikrant Dutt Chaudhary v. CIT (2016) 389 ITR 411 (P&H)(HC) 1190 368
Vikrant Mehra v. ITO (2016) 178 TTJ 53 (UO) / 48 ITR 382 (Asr.)(Trib.) 2362 797
Vikrant Puri; ACIT v. * (2016) 47 ITR 708 (Delhi)(Trib.) 1169 362
2189 736
Vimal Chand Surana; CIT v. * (2016) 137 DTR 131 (Raj.)(HC) 1271 395
Vinergy International Pvt. Ltd.; CIT v. * (Bom.)(HC); www.itatonline.org 671 208
Vinod Chadha; ITO v. * (2016) 160 ITD 558 / 50 ITR 119 / (2017) 183 TTJ 1215 377
380 / 145 DTR 169 (Delhi)(Trib.)
Vinod R. Jadhav v. ITSC (2016) 144 DTR 112 / 290 CTR 674 (Bom.)(HC) 2163 723
Vipin Aggarwal; DCIT v. * (2016) 46 ITR 367 (Chd.)(Trib.) 1204 372
cx
Case Laws Index
Name Case Page
No. No.
Vipin Malik v. ACIT (2016) 45 ITR 589 (Delhi)(Trib.) 112 36
405 137
2252 758
Vipin Walia v. ITO (2016) 382 ITR 19 / 238 Taxman 1 / 141 DTR 36 1811 591
(Delhi)(HC)
Virage Logic International; Dy. DIT v. * (2016) 389 ITR 142 / 143 DTR 239 86
385 (Delhi)(HC)
Viraj Profiles Ltd.; Dy. CIT v. * (2016) 156 ITD 72 / 135 DTR 169 / 46 ITR 1570 502
626 / 177 TTJ 466 (Mum.)(Trib.)
Viraj Profiles Ltd.; Dy. CIT v. * (2016) 156 ITD 72 / 46 ITR 626 / 177 TTJ 389 133
466 (Mum.)(Trib.)
Virtusa (India) (P.) Ltd. v. DCIT (2016) 157 ITD 1160 / 139 DTR 72 / 179 1565 501
TTJ 527 (Hyd.)(Trib.)
Vishay Components India P. Ltd. v. Addl. CIT (2015) 174 TTJ 354 / 128 268 96
DTR 178 / (2016) 45 ITR 471 (Pune)(Trib.) 1457 461
Vishishth Chay Vyapar Ltd.; CIT v. * (2016) 384 ITR 505 / 130 DTR 87 1804 588
(Delhi)(HC)
Vishwachetan Foundation IBMR; ACIT (E) v. * (2016) 48 ITR 481 (Bang.) 513 167
(Trib.)
Vishwanath Acharya v. ACIT (2016) 157 ITD 1032 / 45 ITR 554 (Mum.) 419 141
(Trib.) 1180 365
1181 366
1701 552
Vishwanath Khanna v. CCIT (2016) 237 Taxman 502 (Delhi)(HC) 2523 858
Visvesaraya Technological University v. ACIT (2016) 389 ITR 10 / 242 212 75
Taxman 247 (SC)
Visvesvaraya Technological university v. ACIT (2016) 384 ITR 37 / 239 214 76
Taxman 395 / 286 CTR 1 / 134 DTR 215 (SC)
Vithal Nagar Co-operative Housing Society Ltd. and Ors. v. CIT (2016) 52 2356 796
ITR 21 / (2017) 185 TTJ 780 (Mum.)(Trib.)
Vitrag Metal Pvt. Ltd. v. ITO (2016) 46 ITR 201 (Mum.)(Trib.) 1183 366
Vivek Engineering and Casting Ltd.; CIT v. * (2016) 383 ITR 480 (Cal.)(HC) 599 190
Vivek Prahladbhai Patel; PCIT v. * (2016) 237 Taxman 331 / 138 DTR 158 1199 371
(Guj.)(HC)
VLS Finance Ltd v. CIT (2016) 386 ITR 407 / 142 DTR 318 / 289 CTR 656 1971 649
/ (2017) 81 taxmann.com 358 (SC)
cxi
Case Laws Index
Name Case Page
No. No.
VLS Finance Ltd. v. CIT (2016) 384 ITR 1 / 286 CTR 146 / 134 DTR 305 1635 530
/ 239 Taxman 404 (SC) 1972 649
2546 870
VMT Spinning Co. Ltd. v. CIT (2016) 389 ITR 326 / 74 taxmann.com 33 2213 744
(P&H)(HC)
Vodafone Cellular Ltd. v. Dy. CIT (2016) 45 ITR 333 / 177 TTJ 105 / 134 2051 678
DTR 52 (Chennai)(Trib.)
Vodafone Essar Gujarat Ltd.; CIT v. * (2016) 242 Taxman 352 / (2017) 151 1551 497
DTR 204 (Guj.)(HC)
Vodafone Essar Mobile Service Ltd. v. UOI (2016) 385 ITR 436 / 238 2074 688
Taxman 625 / 285 CTR 48 / 133 DTR 57 (Delhi)(HC)
Vodafone India Services (P.) Ltd. v. DCIT (2016) 158 ITD 264 (Mum.)(Trib.) 2243 755
Vodafone India Services P. Ltd. v. CIT (2016) 385 ITR 169 / 284 CTR 441 2549 871
/ 69 taxmann.com 283 (Bom.)(HC)
Vodafone India Services P. Ltd. v. CIT (2016) 385 ITR 169 / 284 CTR 441 971 294
/ 69 taxmann.com 283 / 132 DTR 121 (Bom.)(HC)
Vodafone Mobile Services Ltd.; DDIT v. * (2016) 130 DTR 195 / 176 TTJ 777 238
430 (Delhi)(Trib.) 778 238
771 236
Vodafone South Ltd. v. CIT (TDS) (2015) 155 ITD 109 / 174 TTJ 246 / 2373 802
(2016) 131 DTR 92 (Chd.)(Trib.)
Vodafone South Ltd.; CIT v. * (2016) 142 DTR 19 / 241 Taxman 497 / 290 2037 673
Taxman 436 (Karn.)(HC)
Voltas Ltd. v. ITO (2016) 161 ITD 199 (2017) 183 TTJ 788 / (2017) 148 1559 500
DTR 84 (Mum.) (Trib.) 1048 322
W
Wallace Flour Mills Co. Ltd. v. CIT (2016) 142 DTR 1 / 289 CTR 444 621 195
(Bom.)(HC)
Warangal Urban Co-operative Bank Ltd.; ACIT v. * (2016) 161 ITD 56 853 257
(Hyd.)(Trib.)
Weatherguard Aircon (P) Ltd. v. Addl.CIT (2016) 130 DTR 133 / 176 TTJ 2509 850
141 (Mum.)(Trib.)
West Bengal Infrastructure Development Finance Corporation Ltd.; CIT v. 2261 762
* (2016) 385 ITR 672 (Cal.)(HC)
cxii
Case Laws Index
Name Case Page
No. No.
West Bengal Infrastructure Development Finance Corporation v. ACIT 1659 539
(2016) 45 ITR 285 (Kol)(Trib.) 58 17
397 135
559 179
607 192
609 192
944 284
2130 710
2196 739
57 17
West Bengal Infrastructure Development Finance Corporation; DCIT v. * 1659 539
(2016) 45 ITR 285 (Kol)(Trib.) 57 17
58 17
397 135
559 179
609 192
944 284
2130 710
2196 739
607 192
West Gujarat Expressway Ltd.; CIT v. * (No.2) (2016) 242 Taxman 127 / 487 160
(2017) 390 ITR 400 (Bom.)(HC)
Western Union Financial Services Inc; Dy. CIT v. * (2016) 156 ITD 882 151 49
(Delhi)(Trib.)
Westlife Development Ltd. v. Pr. CIT (Mum.)(Trib.); www.itatonline.org 2374 802
Whirlpool of India Ltd.; CIT v. * (2016) 381 ITR 154 / 237 Taxman 49 / 1400 443
283 CTR 273 / 129 DTR 169 (Delhi)(HC)
Windlass Steel Craft; ACIT v. * (2016) 175 TTJ 1 (UO)(Delhi)(Trib.) 589 187
Windlass Steel Craft; ACIT v. * (2016) 45 ITR 259 / 175 TTJ 1 (UO) (Delhi) 272 97
(Trib.) 588 187
Wipro GE Medical System Ltd.; CIT v. * (2016) 387 ITR 77 (Karn.)(HC) 240 86
642 200
643 201
644 201
Wipro Limited v. ITO (IT) (2016) 47 ITR 404 (Bang.)(Trib.) 2069 685
Wipro Ltd. v. DCIT (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 1354 425
/ 129 DTR 68 (Karn.)(HC)
Wipro Ltd. v. ITO (Bang.)(Trib.); www.itatonline.org 2083 692
cxiii
Case Laws Index
Name Case Page
No. No.
Wipro Ltd.; Dy. CIT v. * (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 680 211
346 (Karn.)(HC) 976 296
1655 538
2056 680
87 28
242 87
243 88
Wockhardt Hospitals Ltd. v. ACIT(TDS) (2016) 46 ITR 259 (Mum.)(Trib.) 2080 691
Woodward Governor (India) Ltd. v. CIT (2016) 389 ITR 65 (Delhi)(HC) 2494 845
1755 570
Wular Trust v. ADIT (WT(E) (2016) 134 DTR 359 (Delhi)(HC) 2537 866
X
Xpro India Ltd.; DCIT v. * (2016) 161 ITD 93 (Kol.)(Trib.) 63 19
98 32
604 190
938 282
Y
Y. V. Ramana v. CIT (2016) 183 TTJ 337 / (2017) 145 DTR 202 (Vizag.) 2353 795
(Trib.)
Yama Finance Limited v. ITO (2016) 47 ITR 642 (Delhi)(Trib.) 382 131
Yamuna Estate P. Ltd. v. ITO (2016) 45 ITR 517 (Mum.)(Trib.) 1185 367
1873 614
Yamuna Power and Infrastructure Ltd.; DCIT v. * (2016) 47 ITR 533 (Chd.) 1302 406
(Trib.)
Yamunaji Mandir Trust v. CIT (2016) 46 ITR 283 (Rajkot)(Trib.) 1263 393
Yash Creation; ITO v. * (2015) 70 SOT 130 (Ahd.)(Trib.) 507 166
Yash Jewellery (P.) Ltd. v. Dy. CIT (2016) 157 ITD 340 / 180 TTJ 464 1487 472
(Mum.)(Trib.)
Yash Raj Films (P.) Ltd.; Dy. CIT v. * (2016) 160 ITD 626 (Mum.)(Trib.) 2016 666
Yashovardhan Birla v. Dy. CIT (2016) 140 DTR 177 / 289 CTR 482 (Bom.) 2156 720
(HC)
Yashovardhan Sinha v. ITO (2016) 156 ITD 540 (Patna)(Trib.) 1030 315
1083 332
Yes Bank Ltd v. ACIT (2016) 46 ITR 88 (Mum.)(Trib.) 2390 808
Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.)(Trib.) 400 136
401 136
473 156
560 179
cxiv
Case Laws Index
Name Case Page
No. No.
Yes Bank Ltd. v. Dy. CIT (2015) 68 SOT 291 (URO) / (2016) 46 ITR 121 402 136
(Mum.)(Trib.) 474 157
Yes Bank Ltd.; Dy. CIT v. * (2016) 46 ITR 317 (Mum.)(Trib.) 400 136
401 136
473 156
560 179
YKK India (P) Ltd.; ACIT v. * (2016) 139 DTR 353 (Delhi)(Trib.) 2202 741
Yogakshemam Loans Ltd. v. ITO (2016) 243 Taxman 102 (Ker.)(HC) 328 113
Yokogawa India Limited; CIT v. * (2017) 391 ITR 274 / 145 DTR 1 / 291 238 86
CTR 1 / 244 Taxman 273 (SC) 2556 872
Yum Restaurants (I) P. Ltd.; ITO v. * (2016) 380 ITR 637 / 131 DTR 23 / 1401 443
237 Taxman 652 / 283 CTR 129 (Delhi)(HC) 1256 391
Yunus Haji Ibrahim Fazalwala v. ITO (2016) 240 Taxman 198 (Guj.)(HC) 659 205
Z
Z Square Shopping Mall (P.) Ltd.; ACIT v. * (2016) 157 ITD 105 (Luck.) 1116 343
(Trib.)
Zazsons Exports Ltd.; ITO v. * (2015) 153 ITD 1 (2016) 158 ITD 1 (TM) 1175 364
(Luck)(Trib.)
Zealous Web Technologies; PCIT v. * (2016) 239 Taxman 224 (Guj.)(HC) 2341 789
Zodiac Developers P. Ltd v. PCIT (No. 2) (2016) 387 ITR 223 / 241 Taxman 1589 513
230 (Bom.)(HC)
ZTE Corporation v. ADIT (2016) 159 ITD 696 / 179 TTJ 424 (Delhi)(Trib.) 139 45
ZTE Corporation; Addl. DIT (IT) v. * (2016) 140 DTR 81 / 179 TTJ 424 137 44
(Delhi)(Trib.)
Zuari Estate Development & Investment Company (P.) Ltd. v. JCIT (2016) 989 301
159 ITD 28 (Panaji)(Trib.)
Zuari Global Ltd. v. Pr. CIT (2016) 383 ITR 171 (Bom.)(HC) 2235 752
Zydus Infrastructure (P.) Ltd.; ACIT v. * (2016) 161 ITD 611 (Ahd.)(Trib.) 520 168
1306 407
914 276
cxv
Section wise Index
Section wise Index
Income-tax Act, 1961
Arrangement of Section
Sections Chapters Page Nos. Case Nos.
CHAPTER I
PRELIMINARY
2. Definitions 1-20 1-65
3. Previous year 20 66
CHAPTER II
BASIS OF CHARGE
4 Charge of income-tax 21–38 67–117
5. Scope of total income 38-39 118-124
6. Residence in India 39-40 125-126
9. Income deemed to accrue or arise in India 40-70 127-200
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
10. Incomes not included in total income 71-85 201-237
10A. Special provision in respect of newly established 85-93 238-260
undertakings in Free Trade Zone, etc.
10AA. Special provisions in respect of newly established 93-95 261-263
Units in Special Economic Zones
10B. Special provisions in respect of newly established 95-98 264-273
hundred per cent Export-Oriented Undertakings
11. Income from property held for charitable or 98-105 274-304
religious purposes
12. Income of trusts or institutions from 106 305
contributions
12A. Conditions for applicability of sections 11 and 12 106-111 306-325
12AA. Procedure for registration 112-119 326-345
13. Section 11 not to apply in certain cases 119-122 346-351
13A. Special provision relating to incomes of political 122 352-353
parties
CHAPTER IV
COMPUTATION OF TOTAL INCOME
Heads of income
14A. Expenditure incurred in relation to income not 123-137 354-405
includible in total income
cxvi
Section wise Index
Sections Chapters Page Nos. Case Nos.
A – Salaries
17. “Salary”, “perquisite” and “profits in lieu of 137-140 406-413
salary” defined
C – Income from house property
22. Income from house property 140-141 414-419
23. Annual value how determined 142-143 420-426
24. Deductions from income from house property 143-145 427-432
D – Profits and gains of business or profession
28. Profits and gains of business or profession 145-158 433-479
30. Rent, rates, taxes, repairs and insurance for 158-159 480-482
buildings
32. Depreciation 159-173 483-540
32A. Investment allowance 173-174 541-543
32AB. Investment deposit account 174-175 544
35. Expenditure on scientific research 175-176 545-549
35B. Export markets development allowances 176 550-551
35D. Amortisation of certain preliminary expenses 177-179 552-560
36. Other deductions 179-194 561-615
37. General 194-243 616-801
40. Amounts not deductible 243-267 802-883
40A. Expenses or payments not deductible in certain 267-273 884-905
circumstances
41. Profits chargeable to tax 273-276 906-916
43. Definitions of certain terms relevant to income 276-278 917-923
from profits and gains of business or profession
43A. Special provisions consequential to changes in 279 924
rate of exchange of currency
43B. Certain deductions to be only on actual payment 279-283 925-943
43D. Special provision in case of income of public 284 944
financial institutions, public companies etc.
44. Insurance business 284 945
44AD. Special provision for computing profits and gains 284-285 946-948
of business of civil construction, etc.
cxvii
Section wise Index
Sections Chapters Page Nos. Case Nos.
44BB. Special provision for computing profits and gains 285-288 949-957
in connection with the business of exploration,
etc., of mineral oils
44BBA. Special provision for computing profits and gains 288 958
of the business of operation of aircraft in the case
of non-residents
44C. Deduction of head office expenditure in the case 289 959
of nonresidents
E – Capital gains
45. Capital gains 289-312 960-1017
47. Transactions not regarded as transfer 312 1018
48. Mode of computation 313-315 1019-1030
49. Cost with reference to certain modes of 316 1031-1032
acquisition
50. Special provision for computation of capital gains 317 1033-1035
in case of depreciable assets
50B. Special provision for computation of capital gains 318-319 1036-1038
in case of slump sale
50C. Special provision for full value of consideration 319-328 1039-1068
in certain cases
54. Profit on sale of property used for residence 329-332 1069-1083
54EC Capital gains not to be charged on investment in 332-333 1084-1086
certain bonds
54F. Capital gains on transfer of certain capital assets 333-339 1087-1106
not to be charged in case of investment in
residential house
55. Meaning of “adjusted”, “cost of improvement” and 339-341 1107-1109
“cost of acquisition”
55A. Reference to Valuation Officer 342 1110-1113
F – Income from other sources
56. Income from other sources 342-346 1114-1123
57. Deductions 347 1124-1127
CHAPTER V
INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME
64. Income of individual to include income of 348-349 1128-1130
spouse, minor child, etc.
cxviii
Section wise Index
Sections Chapters Page Nos. Case Nos.
CHAPTER VI
AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS
Aggregation of income
68. Cash credits 350-367 1131-1189
69. Unexplained investments 368-376 1190-1213
69A. Unexplained money, etc. 376-378 1214-1220
69B. Amount of investments, etc., not fully disclosed 379-380 1221-1224
in books of account
69C. Unexplained expenditure, etc. 380-383 1225-1237
70. Set off of loss from one source against income 383-384 1238-1239
from another source under the same head of
income
71. Set off of loss from one head against income from 384 1240
another
72. Carry forward and set off of business losses 384 1241
72A. Provisions relating to carry forward and set off of 385 1242
accumulated loss and unabsorbed depreciation
allowance in amalgamation or demerger, etc.
73. Losses in speculation business 385-390 1243-1253
74. Losses under the head “Capital gains” 390 1254-1255
79. Carry forward and set off of losses in the case of 391 1256
certain companies
CHAPTER VI-A
DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME
B – Deductions in respect of certain payments
80C. Deduction in respect of life insurance premia, 391-392 1257-1258
deferred annuity, contributions to provident
fund, subscription to certain equity shares or
debentures, etc.
80G. Deduction in respect of donations to certain 392-393 1259-1263
funds, charitable institutions, etc.
C – Deductions in respect of certain incomes
80HH. Deduction in respect of profits and gains from 393 1264
newly established industrial undertakings or hotel
business in backward areas
80HHB. Deduction in respect of profits and gains from 393 1265
projects outside India
cxix
Section wise Index
Sections Chapters Page Nos. Case Nos.
80HHC. Deduction in respect of profits retained for export 394-398 1266-1280
business
80HHD. Deduction in respect of earnings in convertible 398 1281
foreign exchange
80-IA. Deduction in respect of profits and gains of new 398-407 1282-1305
industrial undertakings
80-IAB. Deduction in respect of profits and by an 407 1306
undertaking or enterprise engaged in development
of Special Economic Zone
80-IB. Deduction in respect of profits and gains from 408-415 1307-1325
certain industrial undertakings other than
infrastructure development undertakings
80-IC. Special provisions in respect of certain 415-417 1326-1331
undertakings or enterprises in certain special
category States
80M. Deductions in respect of certain incorporate 417 1332
dividends
80-O. Deduction in respect of royalties, etc., from 417-418 1333-1334
certain foreign enterprises
80P. Deduction in respect of income of co-operative 418-423 1335-1350
societies
80QQB. Deduction in respect of royalty income, etc. of 423 1351
authors of certain books other than test books.
80RR. Deduction in respect of professional income from 423 1352
foreign sources in certain cases
CHAPTER VIII
REBATES AND RELIEFS
CHAPTER IX
DOUBLE TAXATION RELIEF
90. Agreement with foreign countries or specified 424-426 1353-1357
territories
91. Countries with which no agreement exists 426 1358
CHAPTER X
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX
92. Computation of income from international 427 1359
transaction having regard to arm’s length price
92A. Meaning of associated enterprise 427-428 1360-1362
cxx
Section wise Index
Sections Chapters Page Nos. Case Nos.
92B. Meaning of international transaction 428-430 1363-1370
92C. Computation of arm’s length price 431-488 1371-1527
92CA. Reference to Transfer Pricing Officer 488-489 1528-1529
94. Avoidance of tax by certain transactions in 490 1530-1531
securities
94A. Special measures in respect of transactions with 490 1532
persons located in notified jurisdictional area
CHAPTER XII
DETERMINATION OF TAX IN CERTAIN SPECIAL CASES
112. Tax on long-term capital gains 491 1533-1535
115A. Tax on dividends, royalty and technical service 492 1536
fees in the case of foreign companies
115BBC. Anonymous donations to be taxed in certain 492-493 1537-1539
cases
CHAPTER XII-B
SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
115J. Special provisions relating to certain companies 494-495 1540-1543
115JA. Deemed income relating to certain companies 495-496 1544-1547
115JAA. Tax credit in respect of tax paid on deemed 496 1548-1549
dividend income relating to certain companies
115JB. Special provision for payment of tax by certain 497-502 1550-1571
companies
CHAPTER XII-D
SPECIAL PROVISION RELATING TO TAX ON DISTRIBUTED PROFITS OF
DOMESTIC COMPANIES
115O. Tax on distributed profits of domestic companies 503 1572
CHAPTER XII-F
SPECIAL PROVISION RELATING TO TAX ON INCOME RECEIVED FROM
VENTURE CAPITAL COMPANIES AND VENTURE CAPITAL FUNDS
115U. Tax on income in certain cases 504 1573
CHAPTER XII-G
SPEACIAL PROVISION RELATING TO INCOME OF SHIPPING COMPANIES
115VB. Operating ships 505-506 1574
CHAPTER XII-H
INCOME-TAX ON FRINGE BENEFITS
A – Meaning of certain expressions
cxxi
Section wise Index
Sections Chapters Page Nos. Case Nos.
B– Basis of charge
115WA. Charge of fringe benefit tax 507 1575
CHAPTER XIII
INCOME-TAX AUTHORITIES
A – Appointment and control
116. Income-tax authorities 508 1576
119. Instructions to subordinate authorities 508-510 1577-1580
B – Jurisdiction
124. Jurisdiction of Assessing Officers 510 1581
127. Power to transfer cases 511-514 1582-1594
131. Powers regarding discovery, production of 515 1595-1597
evidence, etc.
C – Powers
132. Search and seizure 516-521 1598-1610
132A. Powers to requisition books of account, etc. 521-522 1611-1613
132B. Application of seized or requisitioned assets 522-524 1614-1620
133. Power to call for information 524-525 1621-1622
133A. Power of survey 525-526 1623-1626
CHAPTER XIV
PROCEDURE FOR ASSESSMENT
139. Return of income 527-529 1627-1633
139A. Permanent Account Number 529 1634
142. Inquiry before assessment 530-531 1635-1637
143. Assessment 531-541 1638-1663
144. Best judgment assessment 541 1664
144C. Reference to dispute resolution panel 541-543 1665-1672
145. Method of accounting 543-552 1673-1702
145A. Method of accounting in certain cases 553-554 1703-1710
147. Income escaping assessment 554-617 1711-1878
148. Issue of notice where income has escaped 617 1879
assessment
149. Time limit for notice 617 1880
150. Provision for cases where assessment is in 618 1881
pursuance of an order on appeal etc.
cxxii
Section wise Index
Sections Chapters Page Nos. Case Nos.
151. Sanction for issue of notice 618-619 1882-1885
152. Other provisions 619 1886
153. Time limit for completion of assessments and 620-621 1887-1890
reassessments
153A. Assessment in case of search or requisition 621-630 1891-1914
153C. Assessment of income of any other person 630-636 1915-1933
154. Rectification of mistake 637-641 1934-1948
CHAPTER XIV-B
SPECIAL PROCEDURE FOR ASSESSMENT OF SEARCH CASES
158BB. Computation of undisclosed income as a result 641-642 1949
of search
158BC. Procedure for block assessment 642-648 1950-1969
158BD. Undisclosed income of any other person 648 1970
158BE. Time limit for completion of block assessment 649-650 1971-1973
158BFA. Levy of interest and penalty in certain cases 650 1974
CHAPTER XV
LIABILITY IN SPECIAL CASES
159. Legal representatives 651 1975-1976
163. Who may be regarded as agent 651-652 1977
164. Charge of tax share of beneficiaries unknown 652 1978
166. Direct assessment or recovery not barred 652 1979
H – Profits of non-residents from occasional shipping business
172. Shipping business of non-residents 653-655 1980-1982
M – Private companies
179. Liability of directors of private company in 655 1983
liquidation
CHAPTER XVII
COLLECTION AND RECOVERY OF TAX
A – General
B – Deduction at source
190. Deduction at source and advance payment 656 1984
191. Direct payment 656 1985
192. Salary 656-658 1986-1992
194A. Interest other than “Interest on securities” 658-664 1993-2009
cxxiii
Section wise Index
Sections Chapters Page Nos. Case Nos.
194C. Payments to contractors 664-668 2010-2024
194H. Commission or brokerage 668-669 2025-2030
194-I. Rent 669-672 2031-2035
194-IA Payment on transfer of certain immovable 672-673 2036
property other than agricultural land
194J. Fees for professional or technical services 673-678 2037-2051
194LA. Payment of compensation on acquisition of 678-679 2052-2053
certain immovable property
195. Other sums 679-682 2054-2062
196. Interest or dividend or other sums payable to 683 2063
Government, Reserve Bank or certain corporations
196C. Income from foreign currency bonds or shares of 683 2064
Indian company
197. Certificate for deduction at lower rate 684 2065-2066
199. Credit for tax deducted 684-685 2067-2068
200A. Processing of statements of tax deducted at 685 2069
source
201. Consequences of failure to deduct or pay 685-691 2070-2080
206AA Requirement to furnish Permanent account 691-692 2081-2083
number
BB – Collection at source
206C. Profits and gains from the business of trading in 692-696 2084-2093
alcoholic liquor, forest produce, scrap, etc.
D – Collection and recovery
220. When tax payable and when assessee deemed in 696-702 2094-2108
default
221. Penalty payable when tax in default 702-703 2109-2110
222. Certificate to Tax Recovery Officer 703-704 2111-2114
226. Other modes of recovery 704-705 2115-2117
F – Interest chargeable in certain cases
234A. Interest for defaults in furnishing return of 705-706 2118-2120
income
234B. Interest for defaults in payment of advance tax 707-709 2121-2129
234C. Interest for deferment of advance tax 709-710 2130
234E. Fee for default in furnishing statements 710-711 2131-2135
cxxiv
Section wise Index
Sections Chapters Page Nos. Case Nos.
CHAPTER XIX
REFUNDS
237. Refunds 712-713 2136-2138
244. Interest on refund where no claim is needed 713 2139
244A. Interest on refunds 714-718 2140-2151
245. Set off of refunds against tax remaining payable 718 - 719 2152-2155
CHAPTER XIX-A
SETTLEMENT OF CASES
245C. Application for settlement of cases 720-722 2156-2161
245D. Procedure on receipt of an application under 723-726 2162-2169
section 245C
245F. Powers and procedure of Settlement Commission 727 2170
245H. Power of Settlement Commission to grant 727-728 2171
immunity from prosecution and penalty
245HA. Abatement of proceeding before Settlement 728 2172
Commission
CHAPTER XIX-B
ADVANCE RULINGS
245R. Procedure on receipt of application 729-731 2173-2177
CHAPTER XX
APPEALS AND REVISION
A – Appeals to Commissioner (Appeals)
246A. Appealable orders before Commissioner (Appeals) 732-733 2178-2182
248. Appeal by a person denying liability to deduct 734 2183
tax in certain cases
249. Form of appeal and limitation 734-735 2184-2186
250. Procedure in appeal 735-736 2187-2190
251. Powers of the Commissioner (Appeals) 737-739 2191-2198
B – Appeals to the Appellate Tribunal
253. Appeals to the Appellate Tribunal 740-743 2199-2210
254. Orders of Appellate Tribunal 744-765 2211-2273
255. Procedure of Appellate Tribunal 765 2274-2275
C – Reference of case to the High Court
256. Reference to the High Court 765-766 2276-2278
cxxv
Section wise Index
Sections Chapters Page Nos. Case Nos.
CC – Appeals to High Court
260A. Appeal to High Court 767-781 2279-2321
E – Revision by the Commissioner
263. Revision of orders prejudicial to revenue 782-808 2322-2391
264. Revision of other orders 808-810 2392-2395
268A. Filing of appeal or application for reference by 811-812 2396-2401
income-tax authority
CHAPTER XX-B
REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR REPAYMENT IN
CERTAIN CASES TO COUNTERACT EVASION OF TAX
269SS. Mode of taking or accepting certain loans and 813-814 2402-2406
deposits
269T. Mode of repayment of certain loans or deposits 1042 3308
CHAPTER XX-C
PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE PROPERTIES IN
CERTAIN CASES OF TRANSFER
269UA. Definitions 815 2407
269UC. Restrictions on transfer of immoveable property 815-816 2408
269UD. Order by appropriate authority for purchase by 816-817 2409-2410
Central Government of immovable property
CHAPTER XXI
PENALTIES IMPOSABLE
271. Failure to furnish returns, comply with notices, 818-842 2411-2484
concealment of income, etc.
271AA. Penalty for failure to keep and maintain 842 2485
information and document in respect of
international transaction
271AAA. Penalty where search has been initiated 842-843 2486-2488
271B. Failure to get accounts audited 843-844 2489-2491
271C. Penalty for failure to deduct tax at source 844-847 2492-2500
271D. Penalty for failure to comply with the provisions 847-848 2501-2502
of section 269SS
271E. Penalty for failure to comply with the provisions 848 2503-2504
of section 269T
271G. Penalty for failure to furnish information or 849 2505
document under section 92D
cxxvi
Section wise Index
Sections Chapters Page Nos. Case Nos.
272A. Penalty for failure to answer questions, sign 849-851 2506-2510
statements, furnish information, returns or
statements, allow inspections, etc.
273B. Penalty not to be imposed in certain cases 851 2511
275. Bar of limitation for imposing penalties 851-852 2512-2514
CHAPTER XXII
OFFENCES AND PROSECUTIONS
276C. Wilful attempt to evade tax, etc. 853 2515
276D. Failure to produce accounts and documents 853 2516
277. False statement in verification, etc. 854-855 2517
279. Prosecution to be at instance of Principal Chief 855 2518
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner
CHAPTER XXIII
MISCELLANEOUS
281. Certain transfers to be void 856 2519
282. Service of notice generally 856 2520-2521
292BB. Notice deemed to be valid in certain 857 2522
circumstances
293. Bar of suits in civil courts 857-258 2523-2524
Income-tax Rules. 1962 1112 3518
Gift-tax Act, 1958
6. Gifts includes certain transfer 859 2525
Interest-tax Act, 1974
2. Definition 860 2526-2528
10. Interest escaping assessment 860-861 2529
Kar Vivad Samadhan Scheme, 1988
88. Settlement of tax payable 862 2530
95. Scheme not to apply in certain cases 862-863 2531
Securities Transaction Act – Finance Act, 2004
100. Collection and recovery of security transaction 864 2532
tax
cxxvii
Section wise Index
Sections Chapters Page Nos. Case Nos.
Wealth-Tax Act, 1957
2. Definitions – Assets 865-866 2533-2536
5. Exemption in respect of certain assets 866 2537
17. Wealth escaping assessment 866-867 2538
Finance Act, 1983 (1983) 142 ITR 41 (St.)
40. Revival of levy of wealth tax in the case of 867 2539
closely held companies
Interpretation of taxing statutes 868-872 2540-2556
Constitution of India 873 2557-2558
Allied Laws 874 2559
Chartered Accountants Act, 1949 874-876 2560-2565
The Code of Criminal Procedure, 1973 877-878 2566-2567
Customs Act, 1962 879-880 2568
Hindu Succession Act, 1956 881-884 2569-2571
Indian Penal Code, 1860 885-886 2572
Sales Tax Tribunal 887 2573
Smugglers and Foreign Exchange Manipulators 888 2574
(Forfeiture of Property) Act, 1976
Service Tax – Finance Act, 1994 889 2575
Service Tax 890 2576-2577
Circulars/Instructions/Orders/Press Notes/ 891-923
Releases/Articles/Opinions/ Guidelines –
Referencer
cxxviii
Income-tax Act, 1961
CHAPTER 1
PRELIMINARY
S.2. Definitions
S. 2(1A) : Agricultural income – Growing of plants in nursery is an agricultural 1
activity as this involves all activities of agricultural farming. [S. 147, 148, 260A]
Dismissing the appeal of revenue, the Court held that; growing of plants in nursery is
an agricultural activity as this involves all activities of agricultural farming. Revenue
contended that assessee did not submit any document with regard to expenditure
incurred towards agricultural operations of nursery. Court held that, where revenue had
not raised issue of expenditure on income from flowers and petals of nursery during
assessment proceedings and even during appeal, it could not be introduced for first time
in appeal under section 260A. (AY. 2007-08)
CIT v. K. N. Pannirselvam (2016) 243 Taxman 219 (Mad.)(HC)
S. 2(1A) : Agricultural income – Estimation of income without considering the land 2
holding by the assessee was deleted.
Allowing the appeal of the assessee, the Tribunal held that, the assessee had land
holding of 75 acres therefore estimation of income was not justified. (AY. 2008-09)
Amarjit Singh v. ITO (2016) 48 ITR 622 (Amritsar)(Trib.)
S. 2(IB) : Amalgamation – Order passed on amalgamating company was held to be 3
not nullity [S. 143(3)]
Assessment completed on the amalgamating company. Held, amalgamation took place
after the completion of the financial year in respect of which assessment was completed,
held, order passed on the amalgamating company was not a nullity. (AY. 2002-03)
CIT v. Shaw Wallace Distilleries Ltd. (2016) 386 ITR 14 / 240 Taxman 348 / 290 CTR 684
(Cal.)(HC)
S. 2(14) : Capital asset – Agricultural land – Method of measurement – Distance to 4
be measured taking into account access road – Certificates of Revenue and transport
authorities relevant – Certificates that land was beyond specified limit. [Ss. 2(14)(iii)
(b), 45, General Clauses Act, 1897, S. 11]
Dismissing the appeal of the revenue, the Court held that; there could not be any
justifiable reason to reject the certificates of the Village Administrative Officer, Deputy
Surveyor and the General Manager, Metropolitan Transport Corporation. No reason had
been given by the AO for the rejection of the certificates. Method of measurement of
distance to be measured taking into account access road. The profit from sale of the
land was not assessable as capital gains. (AY. 2009-10)
CIT v. Sakunthala Rangarajan (Smt.) (2016) 389 ITR 103 / 292 CTR 451 / 74 taxmann.
com 94 (Mad.)(HC)
1
Capital asset S.2(14)
5 S.2(14) : Capital asset – Sale of land – Land was not situated within jurisdiction of
a municipality or a cantonment board – Not assessable as capital gains or business
income – Entitle exemption. [Ss. 2(IA), 2(13), 2(14)(iii), 28(i), 45, 260A]
Assessee did not pay capital gains tax on sale of a land by treating it as agricultural land,
on the ground that the land was not situated within jurisdiction of a municipality or a
cantonment board as contemplated under clause (iii). Assessee was engaged in agricultural
operations on such land. It was specified as agricultural land in revenue records and
was not subjected to any conversion as non-agricultural land. AO called the report from
Tahsildar who stated that the land are not cultivated for the past 8 years. AO assessed
the income under the head capital gains. CIT(A) accepted the contention of assessee and
deleted the addition as capital gains. On appeal by revenue dismissing the appeal Tribunal
held that since intention of assessee from inception was to carry on agricultural operations
and there was no intention to sell land in future at that point of time and it was only
due to boom in real estate market which came into picture at a later stage, assessee sold
land, merely because of fact that land was sold for profit, it could not be held that income
arising from sale of land was taxable as profit arising from adventure in nature of trade.
On appeal High Court dismissed the appeal of revenue. (AY. 2011-12)
PCIT v. Mansi Finance Chennai Ltd. (2016) 388 ITR 514 / 141 DTR 321 / 289 CTR 381
(Mad.)(HC)
Editorial: Order of Tribunal in ACIT v. Mansi Finance Chennai Ltd. (2016) 157 ITD 194/
141 DTR 305/ 181 TTJ 821 (Chennai) (Trib.) is affirmed.
6 S. 2(14) : Capital asset – Capital gains – Sale of silver utensils – Loss incurred on sale
of silver utensils is held to be not allowable. [Ss. 28(i), 45]
The assessee claimed loss on sale of silver utensils. The Assessing Officer held that
silver wares being personal effects were not within the purview of the capital assets
in accordance with the definition of “capital asset” under section 2(14) of the Act. The
CIT(A) and the Tribunal confirmed this. On appeal : Held, that the silver utensils were
purchased in the year 1966-67. The occasion to use the silver utensils for the purpose
of business of the assessee arose at least 30 years after the silver utensils were allegedly
purchased. Therefore, the silver utensils could not be said to have been purchased for
the business of the assessee. The silver utensils were the personal effects of the assessee
and they were out of the purview of capital assets. The loss incurred on sale of silver
utensils was not allowable. (AY. 2001-02)
Ashok Surana v. CIT (2016) 384 ITR 267 (Cal.)(HC)
7 S. 2(14) : Capital asset – Advance given to subsidiary – Loss arising on sale of said
asset was held to be treated as short term capital loss – OECD Model Convention
[S. 2(47)(i), 9(1)(i), Art. 13]
Allowing the appeal of the assessee, the Tribunal held that Advance given by assessee, a non-
resident company, to its wholly owned subsidiary is a property in sense it is an interest which
a person can hold and enjoy, and since it is a property and it is not covered by exclusion
clauses set out in section 2(14), it is required to be treated as a ‘capital asset’ and if any loss
arises on sale of said asset, it would be treated as short term capital loss. (AY. 2002-03)
Siemens Nixdorf Informationssysteme GmbH v. DIT (2016) 158 ITD 480 / 179 TTJ 71
(Mum.)(Trib.)
2
S. 2(14) Capital asset
S. 2(14) : Capital asset – Agricultural land – Situation of a land nearby a highway and 8
appreciation in price would not alter character of land leading to conclusion that land
was not an agricultural land [S. 2(IA), 2(14)(iii), 45]
Dismissing the appeal of the revenue, the Tribunal held that; situation of a land nearby
a highway and appreciation in price would not alter character of land leading to
conclusion that land was not an agricultural land. (AY. 2010-11)
ITO v. Kalathingal Faizal Rahiman (2016) 158 ITD 488 (Cochin)(Trib.)
S. 2(14): Capital asset – Agricultural land – Agricultural land beyond 8 Kms. of 9
municipal limits, is it not a capital, hence not liable to be assessed as capital gains
[Ss. 2(14) (iii), 45]
Dismissing the appeal of revenue, the Tribunal held that since agricultural land in
question was lying in an area beyond 8 Kms. of municipal limits, it was not a capital
asset u/s. 2(14)(iii). Therefore, sale consideration was not liable to capital gains tax. (AY.
2008-09)
ITO v. Megh Chand Meena, HUF (2016) 159 ITD 457 / 181 TTJ 240 (Jaipur)(Trib.)
S. 2(14) : Capital asset – Agricultural land – Beyond 8 kms from municipal limits – 10
Land bought by developer, could not be a determining factor by itself to say that land
was converted into use for non – agricultural purposes, gain is exempt from tax. [S.
2(14)(iii), 45]
Dismissing the appeal of the revenue, the Tribunal held that mere fact that land in
question was bought by Developer, could not be a determining factor by itself to say
that land was converted into use for non-agricultural purposes. Since land was situated
beyond 8 km from municipal limits, it did not come within purview of s. 2(14)(iii)
either under item (a) or (b) and hence same could not be considered as capital asset
and, thus, no capital gain tax could be charged on sale transaction of this land entered
by assessee. (AY. 2009-10)
ITO v. Ayisha Fathima (Smt.) (2016) 160 ITD 377 / 182 TTJ 437 (Chennai)(Trib.)
S. 2(14) : Capital asset – Agricultural land – Compensation on acquisition of 11
agricultural land, were existence of cattle shed, well, pump house, septic tank and
compound wall on said land would not convert it into non-Agricultural land. [S. 2(IA),
2(14)(iii), 45]
The AO held that 30 cents of land acquired consisted of a residential building with plinth
area of 1200 sq. feet, a cattle shed, a well, a pump house, septic tank, compound wall,
etc., and it would be fair and reasonable to hold that out of 30 cents of land, 20 cents of
land was required to accommodate above structures. He accordingly treated 1/3rd of value
of land as agricultural and 2/3rd of value along with surplus attributable to building as
non-agricultural. Allowing the appeal of the assessee the Tribunal held that the assessee
was actually cultivating land with agricultural crops. Moreover, land was located within
a Panchayat far away from notified areas in Municipal Corporation. Mere existence of
well, septic tank, compound wall, cattle shed, pump house, a small house, etc., would
not convert agricultural land into a non-agricultural land. (AY. 2011-12)
T. C. Vavachan v. ITO (2016) 159 ITD 48 (Cochin)(Trib.)
3
Capital asset S.2(14)
12 S. 2(14) : Capital asset – Agricultural land – Land situated beyond 8KMs from
municipality or cantonment board cannot be considered as agricultural land merely
because it was recorded as agricultural land from revenue records. [S.2(14)(iii), 45]
Allowing the appeal of the revenue, the Tribunal held that, Land situated beyond 8KMs
from municipality or cantonment board cannot be considered as agricultural land merely
because it was recorded as agricultural land from revenue records. (AY. 2006-07)
ITO v. Aboobucker (2016) 157 ITD 717 / 141 DTR 78 / 180 TTJ 510 (Chennai)(Trib.)
13 S. 2(14) : Capital asset – Shares – Non-resident not having permanent establishment
in India – Provisions relating to minimum alternate tax, transfer pricing and TDS
not applicable – Non-resident not bound to file return in India – DTAA – India –
Mauritius. [S. 92 to 92F, 115JB, 139, 195, Art. 5, 13]
Non-resident not having permanent establishment in India, Transaction not for
avoidance of tax. Shares to be treated as capital asset not stock-in-trade. Profits not
business income but capital gains which is not taxable in India. Even if treated as
business income not taxable in absence of permanent establishment. Provisions relating
to minimum alternate tax, transfer pricing and TDS not applicable. Non-resident is not
bound to file return in India considering the DTAA-India-Mauritius.
Dow Agro Sciences Agricultural Products Ltd., In re (2016) 380 ITR 668 / 131 DTR 177 /
65 taxmann.com 245 / 284 CTR 50 (AAR)
14 S. 2(15) : Charitable purpose – Town improvement trust formed under Act – Entitled
to exemption. [S.11, 12, 12A, 12AA]
Assessee deriving income from constructing and selling residential apartments,
commercial flats and booths. Activities carried out with larger and predominant objective
of general public utility of satisfying need for housing accommodation. Merely referring
to extent of profit making activities without correlating it to other activities of trust not
proper. Assessee entitled to exemption. (AY. 2009-10, 2011-12)
CIT v. Improvement Trust Moga (2016) 76 taxmann.com 363/ (2017) 390 ITR 547 / 291
CTR 352 / 145 DTR 350 (P&H)(HC)
15 S. 2(15) : Charitable purpose – Publication of newspapers – Business income of the Trust
predominant motive was profit motive denial of exemption was justified [S. 11, 12, 12A].
The issue involved was interpretation of section 2(15) of the Act, and in particular
proviso thereto. Court held that the amendment also indicates that the legislature
accepted the observations in Surat Art Silk’s to the effect that the purpose of the
enacting section 2(15) in 1961 was to overcome the decision of the Privy Council in
the Tribune’s case. While the legislature in the 1984 amendment which continued up
to the year 2009 altered this position by deleting the words “not involving the carrying
on of any activity for profit”, it reintroduced an exclusionary clause albeit in different
and wider terms in the 2009 amendment. The exclusionary clause related to the object
of general public utility and not the advancement thereof.
The normal incidence of trade and commerce is also profit. Considering the nature of
the legislation, we are inclined to accept Mr. Bhan’s contention that each of these three
words indicates the element of profit. A wider meaning ought not to be given to these
words especially in a taxing statute. Section 2(15) defines charitable purpose. As in the
4
S. 2(15) Charitable purpose
case of any other definition, it is to assist the construction of the main provisions in
which the terms defined are used. The main provisions such as sections 11, 12 and 13
use the words “charitable purpose” in the context of granting the assessee’s the relief
against taxation partly or fully often subject to certain conditions. If a trade or business
or commercial activity does not result in profit, it would not be necessary to deal with
the same in the Income-tax Act. The relief from taxation partly or fully predicates
taxability and taxability predicates income and income predicates profit. This is the
normal sense of these terms. There is nothing in the Act which persuades us that the
words are used in section 2(15) with a different intention. There is nothing in the Act
and in particular section 2(15) thereof that indicates that the legislature contemplated
a trade or a business or a commercial activity other than for profit. It is obviously for
this reason that the legislature did not add to the words “trade, commerce or business”
(used twice in the proviso) the words “carried on for profit”. On facts the question was
answered in favour of revenue. (AY. 2009-10)
The Tribune Trust v. CIT (2016) 76 taxmann.com 363 / (2017) 390 ITR 547 / 291 CTR 352
/ 145 DTR 350 (P&H)(HC)
S. 2(15) : Charitable purpose – No denial of exemption under S. 11 to an educational 16
trust if it lets out its auditorium for educational activities. [S. 11, 12A]
Dismissing the appeal of the revenue, the court held that ;if the pre-dominant object
is to carry out a charitable purpose and not to earn profit, the purpose would not
lose its charitable character merely because the some profit arises from the activity.
Therefore exemption cannot be denied under S. 11 to an educational trust if it let out
its auditorium for educational activities. (AY. 2009-10)
DIT(E) v. Lala Lajpatrai Memorial Trust (2016) 383 ITR 345 / 136 DTR 233 / 240 Taxman
557 (Bom.)(HC)
S. 2(15) : Charitable purpose – For providing training charging fees – Such activity 17
does not amount to services in relation to trade, commerce and industry it amounts
to imparting education. [S. 10(23C)(vi)]
Assessee institution engaged in imparting higher and specialized education in field
of communication including advertising and its related subjects. Training given to
individual as well as to persons sent by companies to meet needs of Indian industry
and commerce. Held, such activity does not amount to services in relation to trade,
commerce and industry it amounts to imparting education, it will still be held that the
institution exist solely for educational purpose.
Mudra Foundation for Communications Research & Education v. CCIT (2016) 237 Taxman
139 / 137 DTR 293 / 287 CTR 135 (Guj.)(HC)
S. 2(15) : Charitable purpose – Activities undertaken by the assessee cannot be said to 18
be of a charitable and religious nature in the absence of any trust deed, registration
under sections 12AA/80G and further where the bank accounts were maintained in
the individual assessee’s name. [S.12AA, 80G]
Assessee filed a return of income declaring his total income of ` 2,10,870/-. The
assessee, in the course of assessment proceedings, stated that he was a religious
5
Charitable purpose S. 2(15)
preacher and that he did not have any personal bank account and that he did not
carry out any business activity. AO obtained information from the bank under section
133(6) and treated income from bank deposits as assessee’s income from profession and
vocation and after disallowing certain expenses made an addition of ` 1,21,67,653/-.
CIT(A) and ITAT dismissed the assessee’s appeals against the above stated additions.
Before the High Court, the assessee submitted that he managed an old historic Dera
carrying on charitable and religious activities and the bank accounts were that of
the Dera and the assessee merely managed the same. High Court noted that the bank
account was in the name of the assessee and had a nomination in favour of the
assessee’s son and therefore could not be said to be that of the Dera. High Court rejected
the argument that the activities done by the appellant were of charitable and religious
nature and were being done in the name of Dera. High Court noted that there was no
trust deed, no registration sought under section 12AA, etc. High Court dismissed the
assessee’s appeal as no illegality or perversity in the order of the Tribunal was pointed
out. (AY. 2009-10)
Makhan Singh v. ITO (2016) 236 Taxman 364 / 136 DTR 336 (P&H)(HC)
19 S. 2(15) : Charitable purpose – Medical relief – Running veterinary hospitals is covered
under specific category of ‘medical relief’ hence eligible exemption. [S.11]
Assessee engaged in running veterinary hospitals, collected nominal cess from milk
producers members in lieu of providing them research, animal nursery, fertility,
vaccination and breed improvement facilities, it could be regarded as rendering medical
relief services, therefore, assessee could not be regarded as an entity advancing any other
object of general public utility covered by proviso to S. 2(15). (AY 2010-11)
Amul Research & Development Association v. ITO (2016) 160 ITD 454 / 182 TTJ 794 /
145 DTR 30 (Ahd.)(Trib.)
20 S. 2(15) : Charitable purpose – Coaching for particular examination does not amount
to imparting education – Not entitle to exemption. [S. 11]
The main object of the assessee, a trust registered under section 12A of the Income
tax Act, 1961, was conducting review and courses for helping aspiring members in
preparing for Certified Information Systems Auditor and Certified Information Security
Manager certification and organizing seminars and workshops on various topics in
the field of information technology, security, control and audit. The assessee claimed
exemption under section 11 of the Act. The Assessing Officer denied the claim on
the ground that the assessee had collected a sum from persons appearing for the
examination for the course of certified information system auditor and seminar fees from
the participants which showed that the assessee was engaged in commercial activity in
the nature of trade, business and commerce and hence the object of the assessee fell
under advancement of any other object of general public utility and the provisions of
section 2(15) were clearly attracted. The Commissioner (Appeals) confirmed the order
of the Assessing Officer. The Tribunal held that the definition of charitable purpose was
inclusive and not exhaustive. A coaching institute could not be considered an institution
as normal schooling. Mere coaching classes might provide some kind of knowledge to
the students but that kind of acquisition of knowledge through coaching classes could
6
S. 2(22)(e) Deemed dividend
not fall within the meaning of “education” as provided in section 2(15) of the Act. The
assessee carried on advancement of any other object of general public utility and in
terms of the proviso to section 2(15), advancement of any other object of general public
utility would not be charitable purpose if it involves any activity of rendering any
service in relation to any trade, commerce or business for consideration, irrespective of
the application of the money. Therefore, the assessee was hit by the proviso to section
2(15) and was not entitled to the benefit of section 11. It could not be considered to
be an “educational trust” within the meaning of section 2(15) of the Act and it was not
entitled to exemption under section 11 of the Act and the income of the assessee was to
be assessed as business income under the head “association of persons”. (AY. 2009-10)
Information Systems Audit and Control Association v. DDIT (E) (2016) 157 ITD 815 / 46
ITR 665 / 179 TTJ 99 (Chennai)(Trib.)
S. 2(15) : Charitable purpose – Education – Proviso would not apply where assessee 21
– society, running an educational institution for courses of B.Tech, M.Tech, and MBA,
maintained a textile unit for purpose of imparting practical training to students. [S.11]
Allowing the appeal of assessee the Tribunal held that; Proviso would not apply where
assessee-society, running an educational institution for courses of B.Tech, M.Tech, and
MBA, maintained a textile unit for purpose of imparting practical training to students.
Technological Institute of Textile & Science v. DIT (2016) 158 ITD 808 (Kol.)(Trib.)
S. 2(15) : Charitable purpose – Provision of Medical Relief is charitable activity hence 22
surplus generated does not disentitle assessee from exemption. [S. 11, 12AA]
The activity in the nature of ‘medical relief ’ fell outside the scope of the proviso to
section 2(15). Hence, any surplus resulting from the aforementioned activity would
not be taxable, if the surplus was dealt with in the manner provided under the Act.
Accordingly, the corpus donations were not to be included in the assessee’s total
income. (AY. 2010-11)
Sundaram Medical Foundation v. Dy. CIT (E) (2016) 45 ITR 500 (Chennai)(Trib.)
S. 2(22)(e) : Deemed dividend – Loan from subsidiaries – Intermediary between the 23
two subsidiaries – Additions cannot be made as deemed dividend.
Dismissing the appeal of revenue, the Court held that in view of the decision of
the Division Bench of the Madras High Court made in [Tax Case (Appeal) No. 16 of
2010, dated 17-6-2013], wherein the assessee-company received loans from some of its
subsidiaries and advanced money to some of the subsidiaries and on the basis of the
available particulars it has been held that the assessee-company is only a intermediary
between the two subsidiary companies and no beneficial interest has been accrued to it
by the advances between the subsidiary companies and sub-subsidiary companies and
consequently the ingredients of section 2(22)(e) is not attracted, the instant Bench is of
the considered view that the revenue has not shown sufficient cause or reason to interfere
with the order passed by the Tribunal confirming the order passed by the Commissioner
(Appeals). Accordingly, the appeal was liable to be dismissed. (AY. 2006-07)
CIT v. Farida Holdings (P.) Ltd. (2016) 243 Taxman 428 (Mad.)(HC)
Editorial: SLP was granted to the revenue, CIT v. Farida Holdings (P.) Ltd. (2016) 243
Taxman 434 (SC)
7
Deemed dividend S. 2(22)(e)
24 S. 2(22)(e) : Deemed dividend – Not a shareholder – Addition cannot be made as
deemed dividend.
Tribunal held that as assessee was not shareholder of two companies, amount received
by it did not attract provisions of deemed dividend. On appeal to High Court: The
Bombay High Court in the cases of CIT v. Universal Medicare (P.) Ltd. [2010] 324 ITR 263
and CIT v. Impact Containers (P.) Ltd. [2014] 367 ITR 346 has held that deemed dividend
has to be taxed in the hands of the shareholder of the company giving the loans and/
or advance. In the instant case, admittedly, the assessee is not a shareholder of the two
companies. In the above view, the question as formulated by the revenue did not give
rise to any substantial question of law. Thus not entertained. (AY. 2005-06)
CIT v. Alfa Sai Minerals (P.) Ltd. (2016) 243 Taxman 216 (Bom.)(HC)
Editorial : SLP was granted to the revenue, CIT v. Alfa Sai Mineral (P.) Ltd. (2016) 243
Taxman 140 (SC)
25 S. 2(22)(e) : Deemed dividend – Not a shareholder – Not liable to be taxed as deemed
dividend.
Dismissing the appeal of revenue, the Court held that; the assessee is not shareholder
of company advancing loan, hence not be liable to be taxed on deemed dividend. (AY.
2007-08)
CIT v. Narmina Trade Investment P. Ltd. (2016) 388 ITR 243 (Bom.)(HC)
26 S. 2(22)(e) : Deemed dividend – Share premium does not constitute accumulated profits
or even profits of company – Payment made by company in ordinary course of its
business of money lending being substantial part of its business – Payment does not
amount to deemed dividend.
An advance or loan made to a shareholder or the concern by a company in the
ordinary course of its business, where the lending of money was a substantial part of
the business of the company was not deemed dividend under section 2(22)(e). Further,
share premium would not constitute accumulated profits or even profits of the company.
(AY. 2004-05)
CIT v. Shree Balaji Glass Manufacturing P. Ltd. (2016) 386 ITR 128 / 241 Taxman 265
(Cal.)(HC)
27 S. 2(22)(e) : Deemed dividend – Loan or advance to a non-shareholder, though
beneficial owner, cannot be treated as deemed dividend.
The assessee received a loan from M/s. Jupiter Capital Pvt. Ltd. whose 99% of shares
were held by M/s. Vectra Holding Pvt. Ltd. in which the assessee owns 95% of the
shares. The AO treated the said loan as deemed dividend u/s. 2(22)(e) of the Act. The
CIT(A) confirmed the AO’s action, however, the Tribunal reversed the same. On appeal,
the High Court held that since the assessee is not a shareholder in the lender company
which is condition for invoking section 2(22)(e), loan amount cannot be taxed in the
hands of assessee. (AY. 2008-09)
PCIT v. Rajeev Chandrashekar (2016) 239 Taxman 216 (Karn.)(HC)
Editorial : SLP was granted, PCIT v. Rajeev Chandrashekar (2016) 243 Taxman 139 (SC)
8
S. 2(22)(e) Deemed dividend
S. 2(22)(e) : Deemed dividend – Shareholder – Deposits made by the investors were 28
retained by the assessee in the firm for a longer period – Assessable as deemed
dividend.
The assessee could not explain why the heavy deposits made by the investors were
retained by the assessee in the firm for a longer period, it was held to be a case of
deemed income as the assessee was a shareholder in all the companies. (AY. 1995-1996
to 1998-1999)
CIT v. O.P. Srivastava (2013) 219 Taxman 133 / (2014) 265 CTR 484 / (2016) 385 ITR
547 (All.)(HC)
CIT v. Subrat Roy (2013) 219 Taxman 133 / (2014) 265 CTR 484 / (2016) 385 ITR 547
(All.)(HC)
Editorial : The decision was recalled by order dt 21 February, 2014. The Supreme Court
seta aside the order (CIT v. Subrata Roy (2016) 385 ITR 570 / 287 CTR 129 / 71 taxmann.
com 89 (SC)
S. 2(22)(e) : Deemed dividend – Deposits received by the Assessee, a partnership firm, 29
who is not a shareholder in a concern from which deposit was received – Deemed
dividend taxable only in the hands of shareholders.
Dismissing the appeal of revenue; The High Court observed the definition of the effect
of clause (e) of section 2(22) was to broaden the ambit of the expression ‘dividend’ by
including certain payments which company had made by way of loan or advance or
payments made on behalf of or for individual benefit of a shareholder. However the
definition did not alter the legal position that dividend has to be taxed in the hands of
the shareholder. The High Court thus ruled in favour of the Assessee.
CIT v. Skyline Great Hills (2016) 238 Taxman 675 (Bom.)(HC)
S. 2(22)(e) : Deemed dividend – Inter-corporate transactions – Loans given by 30
companies to each other in course of inter se business transactions could not be
regarded as deemed dividend.
Allowing the appeal of the assessee the Tribunal held that; Assessee is major share
holder in three companies, loans given by those companies to each other in the course
of inter se business transactions could not be regarded as deemed dividend in the hands
of the assessee. (AY. 2009-10)
Chandrasekhar Maruti v. ACIT (2016) 159 ITD 822 / (2017) 183 TTJ 459 / 146 DTR 198
(Mum.)(Trib.)
S. 2(22)(e) : Deemed dividend – Assessee-firm was not shareholder of its sister concern, 31
provisions was not attracted
Tribunal held that; since assessee-firm was not shareholder of its sister concern,
provisions of deemed dividend was not attracted. (AY. 2007-08)
Shiv Transport & Travels v. ITO (2016) 157 ITD 835 (Kol.)(Trib.)
9
Deemed dividend S. 2(22)(e)
32 S. 2(22)(e) : Deemed dividend – Loan received and paid – Only excess amount of debit
in books of account of company can be considered as deemed dividend, matter was
remanded.
Tribunal held that where the assessee, received the loan and also paid the loan, only
excess amount of debit in books of account of company can be considered as deemed
dividend. Matter was remanded. (AY. 2005-06 to 2007-08)
Gurbinder Singh v. ACIT (2016) 161 ITD 256 (Chennai)(Trib.)
33 S. 2(22)(e) : Deemed dividend – Advance in course of a commercial transactions the
said advance cannot be assessed as deemed dividend.
Allowing the appeal of the assessee, the Tribunal held that advance is in course of a
commercial transaction between advancer company and the advance company, it would
not be regarded as ‘loan’ or ‘advance’ to be assessed as deemed dividend. (AY. 2011-12)
Namita V. Samant v. CIT (2016) 161 ITD 15 (Mum.)(Trib.)
34 S. 2(22)(e) : Deemed dividend – Commercial transactions between closely held
companies cannot be assessed as deemed dividend.
The Tribunal held that when the amount was advanced or paid out of any commercial
expediency or in the course of business and were not gratuitous payments for
the benefit of the shareholders, then such payment made through inter corporate
transactions between the parties cannot be treated deemed dividend at the hands of
assessee shareholder. Thus the provisions of section 2(22)(e) are not applicable in this
case. (AY. 2009-10)
Chandrasekhar Maruti Musale v. ACIT (2016) 159 ITD 822 / (2017) 183 TTJ 459 (Mum.)
(Trib.)
35 S. 2(22)(e) : Deemed dividend – Loan by proprietary concern of assessee was held to
be deemed dividend.
Dismissing the appeal of assesse the Tribunal held that there is nothing on record
to suggest that the amounts given by the company to the assessee shareholder were
consideration for the personal guarantees and collateral securities given by him for the
loans raised by the company. VFPL has accumulated profits in reserves and surplus and
therefore the amounts received by the assessee are in the nature of loans and advances
attracting the provisions of S. 2(22)(e) and, therefore, the same are taxable as deemed
dividend. (AY. 2008-09, 2009-10)
Dipesh Lalchand Shah v. ACIT (2016) 158 ITD 515 / 179 TTJ 654 / 138 DTR 155 (Ahd.)
(Trib.)
36 S. 2(22)(e) : Deemed dividend – Assessee was neither beneficial shareholder nor even
a shareholder, provisions of section 2(22)€ cannot be applied.
The assessee was not a registered shareholder of GTL from which it had received an
advance during the previous year in question. The only ground on which the Assessing
Officer had treated the amount as deemed dividend was that both the companies had
common shareholders. That could not be a reason for treating the amount as deemed
dividend under section 2(22)(e). Since the Assessing Officer had failed to establish that
10
S. 2(22)(e) Deemed dividend
the assessee was the beneficial shareholder or even a shareholder of GTL, the provisions
of section 2(22)(e) could not be applied. (AY. 2009-10)
DCIT v. Gebbs Healthcare Solutions Pvt. Ltd. (2016) 46 ITR 551 (Mum.)(Trib.)
S. 2(22)(e) : Deemed dividend – Loan or advance by NBFC to be excluded – Literal 37
interpretation to deeming provisions. [S.115-O]
The assessee was engaged in the business of media operation. It received loan from
two non-banking financial companies. The Assessing Officer treated the advances as
deemed dividend under section 2(22)(e) read with sections 56 and 115-O of the Income
tax Act, 1961, holding that the directors of the assessee were substantially interested in
the lender companies and some of the shareholders were common in both companies.
The Commissioner (Appeals) deleted the addition. The Tribunal held that the lender
companies were registered with the Reserve Bank of India since 1998 in the category
of loan investment company. The lender companies were public limited companies
and so the loan or advance given to the assessee would not fall in the ken of section
2(22)(e) and, moreover, the lender companies were non-banking financial companies
which were also excluded from the deeming provision. Further a deeming provision
has to be interpreted strictly and it cannot be stretched to more than that for which the
deeming provision can be literally interpreted. Nothing can be added or implied while
interpreting a deeming provision. One can only look at the language used. (AY. 2008-09)
DCIT v. Sindhu Holdings Ltd. (2016) 46 ITR 771 (Delhi)(Trib.)
S. 2(22)(e) : Deemed dividend – Loan by company – Percentage of shareholding has to 38
be checked at the time of availing loan for purpose of deemed dividend.
For invoking the provision of section 2(22)(e), percentage of shareholding has to be
checked at the time of availing loan for purpose of deemed dividend, therefore, the
loan given to the assessee should not be treated as ‘deemed dividend’ for the purpose
of invoking provisions of section 2(22)(e). (AY. 2005-06)
ACIT v. Jagjit Singh Jaswant Singh Oberoi (2015) 155 ITD 283 / (2016) 177 TTJ 118 / 134
DTR 74 (Nag.)(Trib.)
S. 2(22)(e) : Deemed dividend – Loan – Beneficial ownership of more than 10 per cent 39
shares in a closely held company – Assessable as deemed dividend. [S. 153A]
Assessee, who was a shareholder and director in a closely held company having
beneficial ownership of more than 10 per cent shares, had taken certain loan from
company. In assessment proceedings assessee submitted that loan was taken for purpose
of purchase of land for company and, therefore, could not be treated as deemed
dividend. However, assessee failed to prove by furnishing relevant details in form of
agreements or details of amount spent for purpose for which it was drawn and he kept
on changing his arguments at each stage of proceedings. Tribunal held that loan taken
by assessee was rightly considered as deemed dividend. (AY. 2007-08 to 2009-10)
M. Amareswara Rao v. Dy. CIT (2016) 157 ITD 657 / 136 DTR 153 / 178 T TJ 700
(Visakha)(Trib)
11
Deemed dividend S. 2(22)(e)
40 S. 2(22)(e) : Deemed dividend – Not applicable to loans or deposits from public
company.
On appeal by revenue, the Tribunal while deciding the issue in favour of the assessee,
held that since S Ltd. was a public limited company and registered with RBI since
1998 in the category of loan investment company and engaged in activities of share
sale, financing activities, etc. the loan or advance or inter-corporate deposit given to the
assessee did not fall within section 2(22)(e) and moreover, it was a non-banking financial
company which was excluded from the deeming provision. (AY. 2008-09)
Dy. CIT v. Sindhu Realtors Pvt. Ltd. (2016) 45 ITR 448 (Delhi)(Trib.)
41 S. (22)(e) : Deemed dividend – Loans and advances to shareholders – Loans received
by the company would be treated as deemed dividend in hands of P and S in
proportion to their shareholdings.
Assessees P and S were directors in two sister companies namely AI and AE.
Shareholdings of both directors in AE was 50 per cent whereas in AI it was 53.85 per
cent for P and 46.11 per cent for S. AI had received ` 10 lakh as loan from AE. AO held
that loan received from was to be treated as deemed dividend in the hands of individual
directors and since P and S were equal beneficiary of shares to tune of 50 per cent each
in AI the company which had received the loan. On appeal CIT(A) affirmed the order
of AO. On appeal the assessees contended that no mechanism had been provided in
Act regarding computation of deemed dividend in hands of directors and in absence of
any such mechanism, charging provisions would fail and no additions could be made.
Tribunal held that if by reasonable construction of relevant section, income could be
deduced, then merely on ground that specific provision had not been provided, it could
not be held that computation provisions failed; therefore, percentage of shareholdings in
concern to which loan was given would be determining factor of deemed dividend in
case of shareholder and accordingly, 53.85 per cent, i.e., ` 5,38,850 should have been
assessed as dividend in hands of P and 46.11 per cent, i.e. ` 4,61,100, in hands of S.
(AY. 2007-08)
Puneet Bhagat v. ITO (2016) 157 ITD 353 (SMC)(Delhi)(Trib.)
42 S. 2(22)(e) : Deemed dividend – Business transactions – Accounts produced by assessee
shows that it has several transactions with the company relating to purchase and
sale of goods, job work charges, rent paid and received – Transactions are business
transactions in ordinary course of business – Could not be treated as deemed dividend
Held that copy of account shows that the assessee has number of transactions related
to purchase & sale of goods, job work charges, rent received & paid. Also, there was
debit balance in the books of assessee and there was a closing credit balance. Thereby,
these are business transactions during the ordinary course of business. Said cannot be
construed as deemed dividend u/s. 2(22)(e). (AY. 1999-00, 2005-06)
K. G. Petrochem Ltd. v. ACIT (2016) 176 TTJ 1(UO) (Jaipur)(Trib.)
12
S. 2(22)(d) Deemed dividend
S. 2(22)(e) : Deemed dividend – Loan account is different from a current account on 43
which provisions of s. 2(22)(e) are not applicable.
There was a running current account between the assessee and the private limited
company in which she was a director. At the end of the year, the balance was squared
off and there was no closing balance. The AO held that the monies lent by the company
to the Assessee were loans and advances within the meaning of s. 2(22)(e). The ITAT
deleted the addition made by the AO and held that the current account between the
Assessee and the Director was a mutual account which was reciprocal demands between
the parties and did not benefit the assessee alone. It was thus held that s. 2(22)(e)
cannot be invoked on current account transactions. (AY. 2009-10)
ITO v. Gayatri Chakraborty (Smt.) (2016) 45 ITR 197 (Kol.)(Trib.)
S. 2(22)(e) : Deemed dividend – Not applicable to loans from NBFCs and companies 44
which are listed on a stock exchange.
The assessee had received inter-corporate deposit from another company which was an
NBFC and was listed in the Delhi Stock Exchange. The AO treated the same as deemed
dividend and added the same to the income of the Assessee. On appeal, the ITAT held
that the said loan could not be considered as deemed dividend since deeming provisions
were to be read strictly and NBFCs and listed companies were excluded from the said
provision. (AY. 2008-09)
DCIT v. Sindhu Realtors Pvt. Ltd. (2016) 45 ITR 448 (Delhi)(Trib.)
DCIT v. Sindhu Holdings Ltd. (2016) 176 TTJ 41 (UO) (Delhi)(Trib.)
S. 2(22)(e) : Deemed dividend – Son and daughter had over dawn from the company 45
where the assessee was a share holder having 41 percent of shares – Addition cannot
be made as deemed dividend.
Allowing the appeal of assessee the Tribunal held that; Where assessee was a
shareholder in a company holding 41 per cent of shares and during year he and his son
and daughter had overdrawn certain amount from said company and Assessing Officer
treating said amount as deemed dividend under section 2(22)(e) added same in income
of assessee, since both son and daughter were not shareholders in company and during
year company got only negative accumulated profits, provisions of section 2(22)(e) could
not be invoked. (AY. 2007-08)
Manoj Murarka v. ACIT (2016) 156 ITD 793 / (2017) 184 TTJ 555 (Kol.)(Trib.)
S. 2(22)(d) : Deemed dividend – Buy-back cannot be assessed as deemed dividend – 46
The capital gains on buy – back are exempt under the India-Mauritius DTAA – [Art.
10, Companies Act, S.77, 100, 105, 391]
A buy back cannot be regarded as a “colourable transaction” and cannot be assessed as
“deemed dividend”. The capital gains on buy-back are exempt under the India-Mauritius
DTAA. (ITA No. 3726/Mum/2015, dt. 12.02.2015)(AY. 2011-12)
Goldman Sachs (India)Securities Pvt. Ltd. v. ITO (Mum.)(Trib.); www.itatonline.org
13
Deemed dividend S. 2(22)(d)
47 S.2(22)(d) : Deemed dividend – Redemption of preference shares does not constitute
“deemed dividend”. [S.2(47), Companies Act, S. 80(3), 100]
Redemption of preference shares does not constitute “deemed dividend”. (ITA No. 4669/
Mum/2014. Dt. 06.04.2016)(AY. 2005-06)
Uday K. Pradhan v. ITO (Mum.)(Trib.); www.itatonline.org
48 S. 2(24) : Income – Interest – Accrual – Rate of interest reduced by passing resolution
by board of directors before end of year – Interest taxable at reduced rate. [S. 4, 145]
On a reference answering the question in favour of assessee the Court held that the
Appellate Tribunal was not justified in holding that the interest had accrued on day-to-day
basis and not at the end of the year and that the interest rate stood reduced only from
March 17, 1989. On facts the rate of interest was reduced by passing resolution by board
of directors before end of year hence interest was taxable at reduced rates. (AY. 1989-90)
Renu Sagar Power Col. Ltd v. CIT (2016) 389 ITR 310 (All.)(HC)
49 S. 2(24) : Income – Accrual – Amount given by Government for a specified purpose
for utilisation in Government scheme, said amount and interest could not be assessed
as income of the assessee. [S. 4, 145]
Allowing the appeal of the assesse, the Court held that; the assessee was to act as a
custodian of the money, the utilisation thereof was fully controlled by the Government,
the money remained as given for the specified purpose and the interest earned was also
to be utilised for specified purpose, but under the control of the Government as per
the conditions of the grant. There was no liberty available to the assessee to utilise the
amount of interest as it desired. Hence no income accrued to the assessee.(AY. 2008-09,
2010-11)
Karnataka Municipal Data Society v. ITO (2016) 389 ITR 441 / 76 Taxmann.com 167
(Karn.)(HC)
50 S. 2(24) : Income – Interest received from overseas head office – Not taxable.
Interest received by the Indian branch of a foreign bank from the head office is not
taxable in India. (AY. 1998-99, 1999-2000)
DIT (IT) v. Oman International Bank S.A.O.G. (2016) 386 ITR 151 (Bom.)(HC)
51 S. 2(24) : Income – Accrual – Lease of factory to group company – Reduction in lease
rent by resolution of board of directors on account of financial inability – Bona fides
of transaction not in dispute – Reduced rent alone to be taxed. [S. 145]
The assessee took a sugar factory on lease and sub-leased it to its sister concern on an
annual rental of ` 225 lakhs. In the previous year relevant to the AY. 2002-03, due to
extensive repairs and renovations, the assessee agreed to reduce the lease rent to ` 75
lakhs and a board resolution was adopted on March 5, 2002 by the board of directors
of the assessee in respect of the reduction in the lease rent from the sub-lessee. Held,
since the bona fides of the transaction were never in dispute and there was evidence
to show that the assessee had resolved to remit the sum of ` 150 lakhs and that it had
received only ` 75 lakhs, no addition could be made.(AY. 2002-03)
CIT v. Shree Hanuman Sugar and Industries Ltd. (2016) 386 ITR 218 / 243 Taxman 417
(Cal.)(HC)
14
S. 2(24) Income
S. 2(24) : Income – Capital or revenue – Sales tax subsidy – Subsidy for encouraging 52
industries to set up units in rural areas – Subsidy constituted a capital receipt. [S.4]
Subsidy given in accordance with the scheme of the State Government for encouraging
the industries to set up their units in rural areas and for compensating for the hardship
in setting up such industries in remote rural areas was capital receipt and not taxable.
(AY. 2005-06)
PCIT v. Talbros Engineering Ltd. (2016) 386 ITR 154 (P&H)(HC)
S. 2(24) : Income – Society, which ran a business enterprise in its own name was duty 53
bound to offer its profits to tax before diverting any funds to ‘Distributable Pool Fund
Account’ for distribution to its members – Amount transferred is not assessable as
income of the Society. [Ss. 4, 80P]
The assessee was a society of ‘Maliks’ who were owners of land (Agar) on which salt
was manufactured. The society was formed inter alia to acquire from the ‘Maliks’ their
rights and to manufacture salt and its bye-products. Assessee manufactured and sold salt
and other bye-products in its own name. The sale proceeds were being transferred to an
account called ‘Distributable Pool Fund Account’ for distribution among the members
of the society. After such transfer to the members, the society would offer remaining
income to tax. The AO held that such transfer could not be considered as expenditure,
accordingly assessed the amount transferred to ‘Distributable Pool Fund Account’ during
the year.
The High Court held that society earns ‘profits’ which falls within the definition of
‘income’ under Section 2(24) of the Act. Therefore the AO was right in holding that the
transfer of ‘fund’ for subsequent distribution to the members before payment of tax is
not a ‘deductible expenditure’ in computation of business income of the assessee, further
held that the income declared after disbursement of profits is not logical and has no
relevance in determination of taxable profit under the Income-tax Act. Further the High
Court held that assessee, a co-operative entity which runs a business enterprise is duty
bound to offer its profits to tax before diverting any funds to the ‘Distributable Pool
Fund Account’ and dismissed the Revenue’s appeal. Amount transferred is not assessable
as income of the Society. (AY. 2007-08)(2006-07)
CIT v. Nagarbail Salt-Owners Co-operative Society Ltd. (2016) 238 Taxman 689 / 135 DTR
22 / 290 CTR 211 (Karn.)(HC)
CIT v. Nagarbail Salt-Owners Co-operative Society Ltd. (2016) 76 taxmann.com 2 / (2017)
390 ITR 415 / 291 CTR 287 (Karn.)(HC)
S. 2(24) : Income – Capital or revenue – Receipt representing compensation for loss of 54
source of income would be treated as capital receipt.
Assessee was a journalist by profession and was appointed as the foreign correspondent
in India of a German news magazine. German publisher paid a lump sum amount upon
termination as sign off compensation for association of past 23 years and loss of work
space. Assessing Officer treated the compensation received to be revenue in nature and
chargeable to tax under Income-tax Act, 1961.
High Court noted that the receipt in the hands of the Assessee was compensation for
loss of an income generating asset. Termination of contract had fatally injured the
15
Income S. 2(24)
appellant’s only source of income for the last 23 years. The mere fact that the Assessee
was free to earn through other sources would not make a difference. High Court relied
on Supreme Court ruling in Kettlewell Bullen and Co. Ltd. v. CIT (1964) 53 ITR 261(SC)
and Oberoi Hotel Pvt. Ltd. v. CIT (1999) 236 ITR 903(SC) wherein the court held that if
receipt represents compensation for the loss of a source of income, it would be capital
and it matters little that the assessee continues to be in receipt of income from its other
similar operations. Accordingly the Court ruled in favour of the Assessee and treated
the receipt as capital receipt. (AY. 1994-95)
CIT v. Sharda Sinha (2016) 237 Taxman 111 (Delhi)(HC)
55 S. 2(24) : Income – Contribution by employees to staff welfare scheme is similar to
sundry creditors and hence is not taxable [S. 2(24)(x)]
The employees of the assessee had contributed to a staff welfare scheme. The AO taxed
the same considering that it would fall within the category of any other fund for the
welfare of employees as specified in s. 2(24)(x). The ITAT held that the staff welfare
scheme account could be considered as sundry creditors and not as a welfare scheme
account as defined in s. 2(24)(x). (AY. 2010-11)
Muthoot Finance Ltd. v. Addl. CIT (2016) 52 ITR 241 (Cochin)(Trib.)
56 S. 2(24) : Income – Insertion of sub-clause (xviii) is not retrospective – Assessee
received subsidy from Tea Board and Ministry of Commerce & Industry, Government
of India – Prior to aforesaid amendment, if a subsidy was regarded as revenue subsidy,
it would be taxable besides value of subsidy getting reduced from actual cost of
depreciable assets for purpose of allowing depreciation [S. 2(24)(xviii), 43(1)]
Held that the aforesaid amendment to S. 2(24)(xviii) of the Act has two parts. The first
part says that any subsidy whether it is capital or revenue will be regarded as “income”.
The second part is that, if the value of the subsidy is reduced from the value of actual
cost u/s.43(1) of the Act for allowing depreciation, then the subsidy will not be taxed
as “income”. If, we were to hold that the amendment is retrospective then the 1st part
of the amendment by which any subsidy, whether capital or revenue, is to be regarded
as “Income” will create a charge to tax and unless the legislature specifically imposes
a charge to tax, retrospectively cannot be given. Therefore the first part cannot be
regarded as having retrospective operation. The second part of the amended provision
of S.2(24)(xviii) of the Act gives a relief in the form of relieving double taxation, one
in the form of the subsidy being taxed as income and again the value of subsidy being
reduced from the actual cost of fixed assets on which depreciation is to be allowed.
It is not possible to regard one part of an amended provision as having retrospective
operation and the other part having only prospective operation. If the legislature wanted
the amendment to be applicable in the manner as contended by assessee, it would have
so provided in the Finance Act, 2015. By a process of interpretation it would not be
proper to regard retrospectively to only one part of an amendment. Therefore prior to
the amendment referred to above, if a subsidy is regarded as revenue subsidy, it would
be taxable besides the value of the subsidy getting reduced from the actual cost of
16
S. 2(28A) Interest
depreciable assets for the purpose of allowing depreciation, if the conditions laid down
in Explanation 10 to S.43(1) of the Act are satisfied. (AY. 2006-07)
Limtex Tea & Industries Ltd. v. ACIT (2016) 156 ITD 900 / 176 TTJ 265 / 131 DTR 209
(Kol.)(Trib.)
S. 2(24) : Income – Interest from recurring deposits is taxable on maturity when it 57
gets entitled and due.
The Assessee deposited funds in recurring deposits with banks for varying periods from
3-10 years. Since, the interest on the recurring deposits was payable at the time of maturity,
the same was not offered for tax. The AO held that since in case of recurring deposit the
interest is received and reinvested, it has to be taxed every year. The ITAT held that the
interest in respect of securities were entitled, due and receivable only on maturity and
accordingly, it would taxed in that year. Further, the entire income had accrued and was
offered to tax in subsequent AY by the assessee. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 2(24) : Income – Interest is crystallized and accrues in the year in which it gets 58
finalized and quantified and would be taxable in that year.
The assessee had deposited sums with Pay and Accounts Office of the Government
of West Bengal, which did not initially carry interest. In 2001 it was pointed out that
the funds were kept in interest bearing account, and interest was due to be paid to
public sector undertakings. Subsequently, after much negotiations, in 2004, the State
Government decided that it would pay interest. According to the assessee, the interest
had crystallized in 2005 when it was ultimately quantified and accrued to it. According
to the AO, the interest had accrued in the impugned AY. It was held by the ITAT that
considering the fact that the interest was finalized and quantified in 2005, it would have
crystallized then and would be taxable in that year. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 2(28A) : Interest – Loan processing fees – Tax deduction at source provisions will 59
not apply to loan processing fees paid to any banking company to which Banking
Regulations Act, 1949 applies. [S. 194A, 194J, Banking Regulations Act, 1949]
Definition of interest as given in S. 2(28A) will include any service fee or any other
charge in respect of money borrowed; thus, loan, processing fee falls within such
definition and, therefore, it cannot be reckoned as payment for rendering of any
managerial services by bank. Loan processing fees paid to any banking company to
which Banking Regulations Act, 1949 applies, is not liable to deduction of TDS. (AY.
2010-11)
DCIT v. Laqshya Media (P.) Ltd. (2016) 160 ITD 35 / 182 TTJ 318 (Mum.)(Trib.)
17
Short-term capital asset S. 2(42A)
60 S. 2(42A) : Short-term capital asset – Period of holding is to be determined from the
date on which the agreement to purchase is entered into by paying a substantial
amount though the sale deed is executed at a later point in time.
Assessee agreed to purchase land by way of an agreement dated 1st April, 1995 for
which an advance of ` 40 lakh was paid by the assessee to the seller in terms of the
agreement. However, due to certain disputes the sale deed could not be executed.
Ultimately, a compromise was entered into between the parties, and in terms of the
said compromise, instead of 3 acres 39 guntas of land which was to be sold in favour
of the assessee, only 27 guntas of land was agreed to be sold to the assessee. A sale
deed was executed in favour of the assessee on 5th December, 2002 and the balance
sum of ` 1 lakh was paid by the assessee. Assessee sold the land to a third party on
20th May 2005 for ` 1,02,50,000/- and treated the gains as long term capital gains. AO
held the gains to be short term in nature. HC, following the SC decision in the case of
Sanjeev Lal, held the gains to be long term in nature. HC observed that in the facts of
the present case out of a sum of ` 41 lakh which was payable, the assessee had already
paid ` 40 lakh at the time of entering into of the agreement to sell. HC further held that
determination of period of holding was a beneficial piece of legislation and the same
had to be construed liberally. (AY. 2006-07)
Lahar Singh Siroya v. ACIT (2016) 138 DTR 331 (Karn.)(HC)
61 S. 2(42A) : Short-term capital asset – Immovable property – Period of holding
would commence from date when he became owner of property, by virtue of family
arrangement and not from date when his grandmother expired. [S.45, 49(1) (iii), 54EC]
Assessee received immovable property belonging to his grandmother, by way of family
settlement, to determine nature of capital gain arising from sale of said property, the
period of holding would commence from date when he became owner of property,
by virtue of family arrangement and not from date when his grandmother expired.
Accordingly the appeal of assessee was dismissed. (AY. 2009-10)
Nitul B. Shah v. ITO (2016) 158 ITD 830 / 141 DTR 180 / 181 TTJ 284 (Mum.)(Trib.)
62 S. 2(42B) : Short-term capital gain – Long-term capital asset – Short-term capital
asset – An agreement to purchase property merely creates a right to seek specific
performance. The asset cannot be considered to be “held” from the date of the
agreement so as to constitute long-term capital gains [S.2(14), 2(29A), 2(42A), 45]
The appellant entered into an agreement on 18th May, 1980 with M/s. Shubhada Prints
Pvt. Ltd. for acquiring leasehold rights of immovable property (said land) situated at
Majas Village, Jogeshwari (E), Mumbai, for consideration set out therein. The appellant
purchaser was required to file a Suit in this Court being Suit No.1077 of 1981 against
the vendor Shubhada Prints Pvt. Ltd., inter alia, seeking specific performance of
the agreement to assign the leasehold rights in the said land. An earnest money of
` 25,000/ – had been paid at the time of execution of the agreement. During the
pendency of the Suit, the parties arrived at Consent Terms on 11th March, 1988
pursuant to which the defendant – vendor agreed to assign the leasehold rights in
the said land at a lump sum of ` 4,50,000/ – instead of lower consideration originally
payable under the suit agreement. The appellant thereafter sold the said land to one
18
S. 2(47) Transfer
M/s. Associated Estate and Investment Corporation vide agreement dated 29th November,
1988 for a price of ` 37,70,000/ – resulting in capital gain to him. According to the
appellant, he was holding the said land since 1980 i.e. from the date of the agreement
dated 18th May, 1980 and hence the gain was long term in nature. The Assessing
Officer and Tribunal, however, found that the appellant came into possession only
pursuant to the Consent Terms and therefore the amount of consideration received on
sale by the appellant is to be treated as short term capital gain and he was assessed
accordingly. On appeal by the assessee, the High Court HELD dismissing the appeal:
(i) Consequent to the vendor not honouring the agreement dated 18th May, 1980, all that
the appellant had was a right to seek specific performance which he sought to enforce
by filing the suit. The appellant did not have possession of the said land. It is only on
the Consent Terms being filed in Court that the appellant got ownership and possession.
(ii) In our opinion, the assessee-appellant ‘held’ the property only upon the order being
passed upon filing of the Consent Terms in Court on 11th March, 1988. The said land
was sold on 29th November, 1988. Therefore it falls beyond the scope of long term
capital gains and within the province of short term capital gain. Accordingly, we are of
the view that the gains resulting from the sale of the said land in November 1988 would
be a short term capital gain. (AY. 1989-90)
Bindiya H. Malkani v. CIT (2016) 386 ITR 87 / 138 DTR 46 / 287 CTR 184 (Bom.)(HC)
S. 2(42C) : Slump Sale – Transferee had taken over all fixed assets and specified 63
current assets but did not take over loans and liabilities, hence transaction of sale of
fixed and current assets was out of purview of slump sale and direction to compute
the income on the basis of item wise sale was held to be justified. [S. 45, S.50B]
The assessee-company was engaged in the manufacturing of thermoplastic films, sheets
and liners. It sold its manufacturing division to ‘T’ Ltd. The assessee’s case was that the
transaction for transferring the undertaking was not covered within the definition under
section 2(42C). The Assessing Officer disregarded the claim of the assessee and treated
the transaction of sale of undertaking as slump sale.
The Commissioner (Appeals) held that in the case of assessee there was no slump
section 50B will be attracted when an undertaking is transferred for lump sum
consideration without values being assigned to the individual assets and liabilities in
such sales. Dismissing the appeal of the Revenue, the Tribunal held that in the instant
case the transferee had taken over all fixed assets, specified current assets but did
not takeover all the loan and liabilities, and, thus, transaction of sale of the fixed and
current assets was out of the purview of slump sale. (AY. 2005-06)
DCIT v. Xpro India Ltd. (2016) 161 ITD 93 (Kol.)(Trib.)
S. 2(47) : Transfer – Transfer includes extinguishment of rights in capital asset – 64
Surrender of floor area ratio rights in land amounts to transfer – Liable to capital
gains tax. [S. 2(14), 2(47)(ii), 45]
Held, the assessee had relinquished his rights over the floor area and, consequently,
his right in the floor area got extinguished to a certain extent. The seized material also
disclosed that the developer had paid ` 3.15 crores towards such surrender of floor area
ratio and the sum would amount to sale proceeds. Thus, it was a clear case of transfer
19
Transfer S. 2(47)(v)
within the definition as found in section 2(47) of the Act. The transfer was complete
on the day when the plan was sanctioned and the building of the apartment complex
started since there was no way for the assessee either getting back the floor area ratio
or using it. (AY. 1999-2000)
CIT v. Dinesh D. Ranka (2016) 380 ITR 440 / (2015) 280 CTR 224 (Karn.)(HC)
Editorial: SLP of assessee is rejected Dinesh D. Ranka v. CIT (2016) 239 Taxman 262 (SC)
65 S. 2(47)(v) : Transfer – Any transaction involving the allowing of the possession of
any immoveable property – Land development agreement with developer, possession
of land was not given, cannot be assessed as capital gains. [S.45, 51]
The Tribunal held that the assessee has not given the possession of the land to the
developer in the terms of development agreement as the land was in the occupation of
slum dwellers and no sanction and other permissions were obtained by the developer
which was a precondition for delivery of possession under the said agreement there was
no transfer of land even under section 2(47)(v) in the relevant year so as to give rise
to capital gains more so the agreement was not registered with the Registrar under the
Registration Act. (AY. 2008-09)
ACIT v. Jawaharlal L. Agicha (2016) 161 ITD 429 / (2017) 183 TTJ 176 / 151 DTR 241
(Mum.)(Trib.)
Section 3 : Previous year
66 S. 3 : Previous year – Setting up of business – New business or for a new source of
income, previous year would start from date of setting up of new business or from
date when new source of income has come into existence – Interest – Income from
other sources – Interest income was to be reduced from capital cost of project instead
of taxing as income from other sources. [S.4, 56]
During relevant financial years, assessee’s business undertaking of generation of power
was not set up and plant and machinery was in process of installation. Assessee
contended that its previous year was not started in relevant years, Revenue authorities,
however, opined that assessee’s business was set up in relevant previous year. Tribunal
held that for an assessee, there may be a previous year from 1st April in respect of an
existing business or existing source of income while in case of a new business or a new
source of income which has come into existence in that financial year, previous year
will start from date of setting up of new business or from date when new source of
income has come into existence. Where business of generation of power was not set up
during relevant financial year, interest income from fixed deposit on temporarily placing
of fund with bank, would be reduced from capital cost of project instead of taxing it as
income from other sources. (AY. 2010-11, 2011-12)
Prayagraj Power Generation Co. Ltd. v. ITO (2016) 158 ITD 909 / 139 DTR 161 / 180 TTJ
271 (Luck)(Trib.)
20
S. 4 Charge of income-tax
CHAPTER II
BASIS OF CHARGE
S. 4 : Charge of income-tax
S. 4 : Charge of income-tax – Capital or revenue – Voluntary subsidies (subvention) paid 67
by a holding company to its loss making subsidiary is to protect the capital investment
of the holding company and is a capital receipt in the hands of the recipient.
Allowing the appeal the Court held that; The subvention received by the assessee, from
its parent Company in Germany in a situation where the assessee, company was making
losses is a capital receipt. (AY. 1999-00, 2000-01, 2001-02)
Siemens Public Communications Network Ltd. v. CIT (2016) 144 DTR 370 / (2017) 390
ITR 1 / 291 CTR 22 / 244 Taxman 188 (SC)
Editorial: Decision of Karnataka High Court is reversed Siemens Public Communications
Network Ltd. v. CIT, ITA No. 59, 488 489 of 2007 dt 9-10-2013
S. 4 : Charge of income-tax – Share capital received for allotment of flats is a 68
capital receipt and not income. The principles of mutuality does not apply to such
transactions. [S. 28(i)]
The Karnataka High Court held, following Shree Nirmal Commercial v. CIT 193 ITR 694
(Bom) and 213 ITR 361 (FB), that share capital received by a housing company from its
shareholders in consideration of allotting area to them is assessable as business profits.
It was also held that the principles of mutuality are not applicable. It was also held that
deposits received from the shareholders for future maintenance is assessable as business
income. On appeal to the Supreme Court HELD:
After hearing the learned counsels for the parties and perusing the relevant material,
we modify the order of the High Court by holding that the amount (` 45,84,000/-) on
account of share capital received from the various shareholders ought not to have been
treated as business income. (AY.1996-97)
G. S. Homes & Hotels P. Ltd. v. Dy.CIT (2016) 141 DTR 201 / 289 CTR 105 (SC)
Editorial : Review petition was dismissed, G. S. Homes & Hotels P. Ltd. v. Dy.CIT (2017)
291 CTR 240 / 144 DTR 371 (SC)
S. 4 : Charge of income-tax – Derived – Subsidy by way of refund of excise duty and 69
interest for setting up a new industrial undertaking is a capital receipt & not taxable
as income. Alternatively, such receipts are “derived” from the industrial undertaking
and are deductible u/s. 80-IB. [S.80-IB]
The assessee, pursuant to the New Industrial Policy announced for the State of J&K,
received excise refund and interest subsidy, etc. which it claimed to be a capital receipt.
In the alternative, it was claimed that the same was eligible for deduction u/s. 80-IB.
The AO, CIT(A) and Tribunal rejected the claim and held the receipts to be revenue on
the ground that the subsidy (i) was for established industry and not to set up a new
one, (ii) it was available after commercial production, (iii) it was recurring in nature,
(iv) it was not for purchasing capital assets and (v) it was for running the business
profitably. On appeal by the assessee, the High Court (333 ITR 335) reversed the orders
of lower authorities and held as follows:
21
Charge of income-tax S. 4
(i) The ratio of Sahney Steel 228 ITR 253 (SC), Ponni Sugars 306 ITR 392 (SC) and
Mepco Industries 319 ITR 208 (SC) is that to determine whether incentives &
subsidies are revenue or capital receipts, the purpose underlying the incentives is
the determinative test. If the object of the subsidy scheme is to enable the assessee
to run the business more profitably then the receipt is on revenue account. On
the other hand, if the object of the subsidy scheme is to enable the assessee to
set up a new unit or to expand the existing unit then the receipt of the subsidy
was on capital account. It is the object for which the subsidy/assistance is given
which determines the nature of the incentive/subsidy. The form or the mechanism
through which the subsidy is given is irrelevant;
(ii) On facts, the object of the subsidy scheme was (a) to accelerate industrial
development in J&K and (b) generate employment in J&K. Such incentives,
designed to achieve a public purpose, cannot, by any stretch of reasoning, be
construed as production or operational incentives for the benefit of assesses alone.
It cannot be construed as mere production and trade incentives;
(iii) The fact that the incentives were available only after commencement of commercial
production cannot be viewed in isolation. The other factors which were weighed
by the Tribunal are also decisive to determine the character of the incentives/
subsidies in view of the stated objects of the subsidy scheme;
(iv) Question whether the subsidy receipts are eligible u/s. 80-IB were not decided.
On appeal by the department to the Supreme Court HELD dismissing the appeal:
The issue raised in these appeals is covered against the Revenue by the decision of this
Court in “Commissioner of Income Tax, Madras vs. Ponni Sugars and Chemicals Ltd.”,
reported in (2008) 9 SCC 337, or in the alternate, in “Commissioner of Income Tax v.
Meghalaya Steels Ltd.”, reported in (2016) 3 SCALE 192 (383 ITR 217 (SC)). The appeals
are, therefore, dismissed.(AY. 2005-06)
CIT v. Shree Balaji Alloys (2016) 138 DTR 36 / 287 CTR 459 (SC)
70 S. 4 : Charge of income-tax – Sums collected towards apprehended sales tax liability
– Refundable – Cannot be assessable as income.
Dismissing the appeal, the Court held that the amounts collected by the assessee from
its customers towards apprehended sales tax liability on sale of bottles and packing
materials was not taxable because it was refundable. (AY. 1988-89, 1989-90, 1990-91)
CIT v. Khoday Breweries Ltd. (2016) 382 ITR 1 / 243 Taxman 229 (SC)
71 S. 4 : Charge of income-tax – Income was assessed in respective individual shares
hence income cannot be assessed as an Association of Persons. [S. 260A]
High Court held that where the view expressed by Tribunal was consistent with
materials placed on record, no substantial questioning of law would arise. The Tribunal
on the facts of the case had held that where no income accrued to assessee-AOP but
to respective constituents of AOP in their individual capacities, then assessee was not
liable to be taxed.
CIT v. Rajdeep & PMCC Infrastructure (2016) 73 taxmann.com 255 (Bom.)(HC)
Editorial : SLP of revenue is dismissed; CIT v. Rajdeep & PMCC Infrastructure Ltd. (2016)
242 Taxman 181 (SC)
22
S. 4 Charge of income-tax
S. 4 : Charge of income-tax – Compassionate appointment given to dependent of 72
deceased employee is not ‘Pecuniary Advantage’ and, therefore, amount received on
such appointment is not liable for deduction for determination of compensation under
Motor Vehicle Act [S. 192, Motor Vehicles Act, 1988, S. 168]
Dismissing the appeal the Court held that compassionate appointment given to
dependent of deceased employee cannot be termed as ‘Pecuniary Advantage’ under
periphery of Motor Vehicles Act and, therefore, amount received on such appointment
is not liable for deduction for determination of compensation under Motor Vehicle Act.
National Insurance Co. Ltd. v. Lakhwinder Kaur (2016) 236 Taxman 558 (P& H)(HC)
S. 4 : Charge of income-tax – Capital or revenue – Money deposited by public with 73
assessee was capital in nature
Dismissing the appeal of the revenue, the Court held that Money deposited by public
with assessee was capital in nature. (AY. 1988-89, 1990-91)
CIT v. Sahara Investment India Ltd. (2016) 242 Taxman 121 (All.)(HC)
Editorial: SLP of revenue was dismissed CIT v. Sahara Investment India Ltd. (2016) 242
Taxman 106 (SC)
S. 4 : Charge of income-tax – Capital or revenue – Grant received by corporation from 74
Central Government and State Government for restoration of tourist sites damaged by
tsunami was to be regarded as capital receipt. [S.28(i)]
Dismissing the appeal of revenue, the Court held that; grant received by assessee-
corporation from Central Government and State Government for restoration of tourist
sites damaged by tsunami was to be regarded as capital receipt. (AY. 2005-06, 2006-07)
CIT v. Tamil Nadu Tourism Development Corporation Ltd. (2016) 241 Taxman 441 / 288
CTR 444 (Mad.)(HC)
S. 4 : Charge of income-tax – Amount was received by trust and not by individual 75
trustee in his individual capacity, assessee was not liable to pay tax on assumed
income [Wealth-tax Act, 1957, S.3]
Trustee purchased lottery ticket with amount withdrawn from trust account. Amount
received on winning lottery was distributed amongst all beneficiaries of trust.
Beneficiaries paid taxes individually on their respective share of income, even TDS was
shown in balance sheet of trust account. Since amount was received by trust and not
by individual trustee in his individual capacity, assessee was not liable to pay tax on
assumed income. Since income of Trust is accepted, the appellant cannot be assessed
under wealth tax Act, 1957
Bahadursingh T. Waghela v. WTO (2016) 243 Taxman 86 / (2017) 147 DTR 101 / 292 CTR
514 (Guj.)(HC)
S. 4 : Charge of income-tax – Interest from non-performing assets was held to be not 76
assessable. [S.145]
Dismissing the appeal of revenue the Court held that once a particular asset was shown
to be a non-performing asset, then the assumption was that it was not yielding any
revenue. When it was not yielding any revenue, the question of showing that revenue
and paying tax would not arise. It was evident that the mere nomenclature adopted
23
Charge of income-tax S. 4
with reference to the bad loans and advances receivable, would refer to all non-
performing assets of any nature, of whatever category. Hence interest receivable from
non-performing assets, bad and doubtful debts though the actual expression used was
interest payable and not reflected in the profit and loss account, could be deducted.
(AY. 2009-10)
CIT v. Siddeshwar Co-operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588 (Karn.)
(HC)
CIT v. Sindagi Urban Co-operative Bank Ltd. (2016) 388 ITR / 240 Taxman 588 (Karn.)
(HC)
77 S. 4 : Charge of income-tax – Income – Sale of property – Part of consideration unpaid
– Notional interest not chargeable.
Court held that unless the contract was taken into account and the terms and conditions
of sale were examined, it could not be said with any amount of certainty whether the
contract between the parties provided for payment of interest or was silent as regards
the liability of the buyer to pay interest or there was any stipulation not to pay interest.
There was no room for speculation in that regard. There was nothing in the orders
of the Assessing Officer, the Commissioner (Appeals) the Tribunal to show that the
subsidiary (HRL) did not use its funds for the running of the hotel or for the purpose of
providing for facilities for the growth of tourism in India nor was there any evidence to
show that any part of the money due and owing by HRL to the assessee was spent for
any personal business of any of the directors. In that view of the matter, the addition
made by the Assessing Officer and upheld by the Commissioner (Appeals) and the
Tribunal were not sustainable. (AY. 2003-04)
New Kenilworth Hotel P. Ltd. v. CIT (2016) 387 ITR 201 / (2017) 292 CTR 336 (Cal.)(HC)
78 S. 4 : Charge of income-tax – Amount received under compromise decree in connection
with dispute regarding leave and licence agreement – No details regarding dispute was
furnished – Tribunal is justified in assessing the amount.
Dismissing the appeal of assessee the Court held that the terms of agreement dated
September 1, 1989 revealed that it was a leave and licence agreement. Within a few days
from the date of entering into the agreement, a suit was filed before the Small Causes
Court at Bombay which ended with the passing of the compromise decree on the terms
and conditions as mutually agreed between the parties to the suit. The appellant in the
income-tax proceedings had relied on that decree. However, as evident from the order
of the Special Bench in the assessee’s own case, though sought for repeatedly by the
Assessing Officer, Commissioner (Appeals) and the Special Bench of the Tribunal, the
assessee failed to file a copy of the plaint. In such facts and circumstances, the Special
Bench was justified in drawing an adverse presumption since as a Tribunal specifically
adjudicating revenue matters, it had the authority to examine the plaint which led to
the passing of the compromise decree to investigate the real nature of the issue involved
in the suit. The written notes of submission filed by the appellant were silent why
the plaint was not filed. The Tribunal was justified in holding that the amount was
assessable. (AY. 1998-99)
Sushil Kumar Co. v. CIT (2016) 387 ITR 192 (Cal.)(HC)
24
S. 4 Charge of income-tax
S. 4 : Charge of income-tax – Mutuality – Amounts received by the assessee society 79
from its members for allotment of a tenement is not taxable on the grounds of
mutuality.
Dismissing the appeal of revenue, the High Court has noted the three tests of mutuality
laid down by the Supreme Court in the case of Bangalore Club v. CIT (2013) 350
ITR 509 (SC). HC observed that all these three tests were satisfied in the given
case. (1) Revenue had not contended that there was absence of complete identity of
the contributors and participants of the Society. (2) Actions of the Society were in
furtherance of the object of the Society. It was not the case of the Revenue that building
tenements and giving it to its members was not the object of the Society. (3) There was
no scope for profiteering in the present facts, as the members had not purchased the flat
but had only got a right to occupy a tenement allotted by the Society. HC held that no
substantial question of law arose on these facts. (AY. 1998-99 to 2001-02)
CIT v. Shree Parleshwar Co-operative Housing Society Ltd. (2016) 138 DTR 145 / 287 CTR
468 / 71 taxmann.com 179 (Bom.)(HC)
S. 4 : Charge of income-tax – Interest on fixed deposits-addition of interest accrued of 80
Rs. 1.27 crore – Held, the impugned entries were journal entries for booking interest
accrued for the purpose of closing of quarterly results – Held, entries were reversed
and interest actually received offered to tax – Held, no suppression of income.
The AO found that during the year, interest income of ` 6.22 crores had accrued to the
assessee, out of which only ` 4.95 crores had been offered to tax and ` 1.27 crores had
not been offered to tax. Therefore, the said amount of ` 1.27 crore was added to the
income of the assessee. CIT(A) and ITAT found that interest on time deposits shown by
the assessee in the accounts on accrual basis was for the purpose of closing of quarterly
results. The accrual entries made in the accounts were subsequently reversed and the
actual interest income earned by the assessee was duly accounted for. The entries
totalling to ` 1.27 crores were memorandum entries and had no relation with the actual
interest earned. There was no suppression of income accrued on the fixed deposits and
the entire income received had been offered to tax. High Court held that the finding
returned by the CIT(A) and ITAT were purely factual and there was nothing perverse
in the same. (AY. 2008-09)
CIT v. DLF Hilton Hotels (2016) 240 Taxman 495 (Delhi)(HC)
S. 4 : Charge of income-tax – Capital or revenue – Entertainment tax subsidy – Subsidy 81
granted under scheme to promote construction of multiplex theatre and to boost
tourism – Receipt is capital in nature. [S. 28(i)]
Dismissing the appeal of revenue the court held that the purpose of the scheme
formulated by the State Government was to give incentive to multiplex units which
were found to be highly capital incentive and the object of subsidy was to promote
construction of multiplex theatre complexes and to boost tourism and therefore, the
receipt of subsidy would be on capital account.
Dy.CIT v. Inox Leisure Ltd. (2016) 386 ITR 626 (Guj.)(HC)
Editorial : SLP was granted to the Department CIT v. Inox Leisure Ltd [2016] 380 ITR 3
(St.)
25
Charge of income-tax S. 4
82 S. 4 : Charge of income-tax – Capital or revenue – Income from sale of carbon credits
– Carbon credits is not a by-product of business – Capital receipt. [S.2(24), 28(i), 263]
Carbon credit is not an offshoot of business, but an offshoot of environmental concerns.
Income received by sale of carbon credits is a capital receipt. Revision of order was held
to be not justified. (AY. 2009-10)
CIT v. Subhash Kabini Power Corporation Ltd. (2016) 385 ITR 592 / 240 Taxman 514 /
287 CTR 147 (Karn.)(HC)
Editorial: Subhash Kabini Power Corporation Ltd. v. CIT [2015] 37 ITR 106 (Bang.)(Trib.)
is affirmed.
83 S. 4 : Charge of income-tax – Capital or revenue – Sum received by assessee from ex-
husband on sale of property – Finding by Tribunal that money received by assessee
amount to lump sum alimony – Department not preferring appeal against finding of
Tribunal indicating Department satisfied with finding – Lump sum alimony in nature
of capital receipt and not taxable. [S. 2(24), 260A]
Sale proceeds were received by the assessee on account of alimony from her former
husband, it was open to the assessee to contend that the receipt was capital in nature
and therefore not taxable. When the alternative case, which the assessee could have
made, was not only found against her but also put forward as an answer to her claim,
it was not improper to grant her the benefit on the basis that alimony was not taxable.
When the Department did not prefer an appeal against the finding of the Tribunal
that the payment was “on account of alimony”, the Department must be deemed to be
satisfied by such finding. Therefore, it was to be concluded that lump sum alimony
received by the assessee was in the nature of a capital receipt and was not taxable. (AY.
1997-98)
Shrimati Roma Sengupta v. CIT (2016) 385 ITR 663 / 238 Taxman 682 / 288 CTR 234 /
139 DTR 26 (Cal.)(HC)
84 S. 4 : Charge of income-tax – Capital or revenue – Mesne profits (Amount received
from a person in wrongful possession of property) is a capital receipt and not
chargeable to tax either as income or as “book profits” u/s. 115JB. As the department
has implicitly accepted Narang Overseas v. ACIT (2008) 100 ITD (Mum) (SB), it
cannot file an appeal on the issue in the case of other assesses. [S. 115JB, 260A]
The High Court had to consider two questions in an appeal filed by the Department:
(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal
was correct in holding that mesne profits are capital receipts in the hands of the
assessee and not revenue receipts chargeable to tax?
(b) Whether on the facts and in the circumstances of the case and in law, the Tribunal
was correct in holding that mesne profits, cannot be part of book profit u/s. 115JB,
as it was held as “capital assets?”.
HELD by the High Court dismissing the appeal:
(i) The Tribunal has held that the mesne profits received by the assessee for the
unauthorized occupation of its premises from Central Bank of India is a receipt of
capital nature and thus not taxable. To reach the above conclusion, the impugned
order placed reliance upon the decision of Special Bench of the Tribunal in Narang
26
S. 4 Charge of income-tax
Overseas Pvt. Ltd., v. ACIT 100 ITD (Mum) S.B. The issue before the Special Bench
in Narang Overseas Pvt. Ltd. (supra) was whether the mesne profits received by
an assessee is revenue or capital in nature. The Special Bench, in its order placed
reliance upon the definition of mesne profits in Section 2(12) of the Code of Civil
Procedure, 1908 which reads as under:
“Mesne profits of property means those profits which the person in wrongful
possession of such property actually received or might with ordinary diligence
have received therefrom, together with interest on such profits, but shall not
include profits due to improvements made by the person in wrongful possession.”
On the basis of above, it held that any amount received from a person in wrongful
possession of its property, would be mesne profits and it is capital in nature.
(ii) We find that the issue before the Special Bench of the Tribunal in Narang Overseas
Pvt. Ltd. was to determine the character of mesne profits being either capital or
revenue in nature. The Special Bench of the Tribunal in Narang Overseas Pvt.
Ltd held that the same is capital in nature. There is no doubt that the issue
arising herein is also with regard to the character of mesne profits received by
the assessee. In this case also, the amounts are received by the assessee from a
person in wrongful possession of its property i.e., after the relationship of landlord
and tenant has come to an end. Once the Special Bench order of the Tribunal in
Narang Overseas Pvt. Ltd. has taken a view on the character of mesne profits,
then unless the Revenue challenges the order of the Special Bench of the Tribunal
it would be unfair of the Revenue to pick and choose assessees where it would
follow the decision of the Special Bench of the Tribunal in Narang Overseas Pvt.
Ltd. The least that is expected of the State which prides itself on Rule of Law is
that it would equally apply the law to all assessees’s.
(iii) We make it clear that we have not examined the merits of the question raised
for our consideration. We are not entertaining the present appeal on the limited
ground that the Revenue must adopt a uniform stand in respect of all assessees.
This is more so as the issue of law is settled by the decision of the Special Bench
of the Tribunal in Narang Overseas Pvt. Ltd., (supra). The fact that even after the
dismissal of its Appeal (L) No.1791 of 2008 for non-removal of office objections
on 25th June, 2009, no steps have been taken by the Revenue to have the appeal
restored, is evidence enough of the Revenue having accepted the decision of the
Special Bench of the Tribunal in Narang Overseas Pvt. Ltd. Thus, the question as
framed in the present facts does not give rise to any substantial question of law.
(AY. 2008-09)
CIT v. Goodwill Theatres Pvt. Ltd. (2016) 386 ITR 294 / 241 Taxman 352 (Bom.)(HC)
S. 4 : Charge of income-tax – Merely because PAN of Karta was mentioned in TDS 85
Certificate could not be a reason to tax the rental income in the hands of Karta
especially when, in all the years except the present year the Department has not
challenged the taxability of the said income in the hands of HUF.
Assessee was an individual and also Karta of his HUF. He declared rental income from
a property belonging to HUF as income of HUF. AO assessed said income in the hands
of the assessee on ground that TDS certificate given by tenant mentioned PAN of the
27
Charge of income-tax S. 4
assessee. High Court held that income from the property was declared by the assessee
as income of HUF for all the years and has been accepted by the Department except in
the current year, therefore the stand taken by the AO in current year was not justified.
High Court directed the AO to verify the rental agreement and decide the issue as per
law. (AY. 2005-06)
M. Sathyanarayana v. ITO (2016) 238 Taxman 79 (Karn.)(HC)
86 S. 4 : Charge of income-tax – Diversion by overriding title – Payments made under
legal obligation cannot be assessed as income. [S.260A]
Dismissing the appeal of Revenue the Court held that;Tribunal as well as High Court
for earlier years in assessee’s own case allowed the claim, hence payments made out of
amounts relatable to retired/ deceased partners under the legal obligation by virtue of
partnership deed to ex-partner/s or their legal heirs/ executors, should not be treated as
its income. (AY.2008-09)
CIT v. Kanga & Co. (2016) 133 DTR 257 (Bom.)(HC)
87 S. 4 : Charge of income-tax – Unutilised MODVAT credit – Not income – Interest on
refund is liable to tax. [S.145]
It is clear from the pronouncement of the Supreme Court in CIT v. Indo Nippon
Chemicals Co. Ltd. [2003] 261 ITR 275 (SC) that the unavailed Modvat credit cannot
be construed as income and there is no liability to pay tax on such unavailed Modvat
credit. Interest on refund is liable to tax. (AY. 2001-02 to 2004-05)
Dy.CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
88 S. 4 : Charge of income-tax – Capital or revenue – compensation received for
cancellation of a sale deed of immovable property is held to be capital receipt –
Revenue cannot be permitted to shift its stand from one forum to another. [S. 2(24),
10(3), 45, 56]
Allowing the appeal of revenue the Court held that the Revenue cannot be permitted to
shift its stand from one forum to another. The consistent case of the Revenue is to be
tested at various levels for its correctness. It is possible that in the interregnum there
might be decisions of the Supreme Court which might support or negate the case of
the Revenue. That would then have to be taken to its logical end. In the circumstances,
the Court is not prepared to permit the Revenue to urge a new plea for the first time
in this Court. Having held that it could not be in the nature of capital gain it was not
open to the Revenue to seek to bring it to a tax under the Revenue receipt that the
above sum of ` 20 lakhs constituted revenue receipt in the hands of the assessees. Not a
receipt taxable under Section 10(3). The settled legal position is that all receipts do not
constitute income. For a receipt sought to be taxed as income, the burden lies upon the
Revenue to prove that it is within the taxing provision. Among the earlier decisions of
the Supreme Court is Parimisetti Seetharamamma v. CIT (1965) 57 ITR 532 (SC) where
it was held “Whether a receipt is liable to be treated as income depends very largely
upon the facts and circumstances of each case; it is open to the income-tax authorities
to raise an inference that a receipt by an assembly is assessable income where he fails
to disclose satisfactorily the source and the nature of the receipt. But here the source of
28
S. 4 Charge of income-tax
income was disclosed by the appellant and there was no dispute about the truth of the
disclosure. Examined in light of the legal position explained in the above decisions, the
Court is of the view that as far as the present case is concerned, the sum of ` 20 lakhs
received by the assessees was in the context of the cancellation of the sale certificate
and the sale deed executed in their favour in relation to an immovable property and
neither assessee was dealing in immovable property as part of his business. While it
could if at all be said to be in the nature of a capital receipt, what is relevant for the
present case is that the Revenue has been unable to make out a case for treating the
said receipt as of a casual and non-recurring nature that could be brought to tax under
Section 10(3) read with Section 56 of the Act. Following the decision in Cadell Weaving
Mill (supra), there can be no manner of doubt that what is in the nature of capital
receipt, cannot be sought to be brought to tax by resorting to S.10(3) read with S. 56 of
the Act. (AY.1993-94, 1995-96)
Girish Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
Gynendra Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
S. 4 : Charge of income-tax – Mutuality – The contributions made by the members to 89
the assessee cannot be a subject matter of tax merely because the part of its excess of
income over expenditure is invested in mutual funds.
The contributions made by the members to the assessee cannot be a subject matter
of tax merely because the part of its excess of income over expenditure is invested in
mutual funds. The concept of Mutual concerns not being subject to tax is based on the
principle of no man can profit out of itself. Therefore the test to be satisfied before an
association can be classified as a Mutual concern are complete identity between the
members i.e. contributors and the participants, the action of the mutual concern must
be in furtherance of its objectives and there must be no scope of profiteering by the
contributors from a fund. (AY. 2007-08)
CIT v. Air Cargo Agents Association of India (2016) 135 DTR 169 / 286 CTR 340 / 239
Taxman 212 (Bom.)(HC)
S. 4 : Charge of income-tax – Accrual of income – Mercantile system of accounting – 90
Waiver of income recoverable from person facing financial difficulties [S. 145]
Even in mercantile system of accounting an item would be regarded as accrued income
only if there is certainty of receiving it and not when it has been waived, therefore
non recognition of income on the ground that the income had not really accrued as the
realisability of the principal outstanding itself was doubtful, is legally correct under the
mercantile system of accounting, when the same is in accordance with ASI notified by
the Government and the provisions of Section 145(1) are subject to, inter alia, mandate
of ASI which also prescribes that ‘Accounting policies adopted by an assessee should
be such so as to represent a true and fair view of the state of affairs of the business,
profession or vocation in the financial statements prepared and presented on the basis
of such accounting policies.’ In the name of compliance with Section 145(1), it cannot
be open to anyone to force adoption of accounting policies which result in a distorted
view of the affairs of the business. Therefore, even under the mercantile method of
accounting, and, on peculiar facts of instant case, the assessee was justified in following
29
Charge of income-tax S. 4
the policy of not recognizing these interest revenues till the point of time when the
uncertainty to realize the revenues vanished. The Tribunal further referred to the
fact that the various resolutions which The decision rendered by the Tribunal in the
impugned order is a decision on facts and nothing has been shown to us which would
warrant interference by this Court on account of any finding being perverse or arbitrary.
(ITA No. 2251 of 2013 with 2360 of 2013, dt. 05.04.2016)(AY. 2007-08, 2009-10)
CIT v. Neon Solutions Pvt. Ltd. (Bom.)(HC); www.itatonline.org
91 S. 4 : Charge of income-tax – Capital or Revenue – Compensation received in
connection with termination of share purchase agreement to be taxed as Revenue
receipt.
The assessee-a company, paid certain amount as earnest money to purchase shares
under SPA (Special Purchase Agreement) from shareholders of Zydus. Zydus was
engaged in the same business as the assessee. The shares of Zydus had been pledged
to Cadila. In the event of sale of shares by the seller, Cadila had the right of first
refusal. The SPA between the provided that where Cadila was to exercise their right to
purchase the shares under the right of first refusal, the purchaser would terminate the
SPA. As per the SAP, the sellers had no right to terminate the agreement. Subsequently,
the sellers expressed their inability to sell their shares. The assessee entered into a
supplementary agreement with the seller to terminate the SPA. The supplementary
provided that the seller would pay the assessee the earnest money paid by the assessee,
interest, penalty and compensation for termination of SPA. The assessee claimed the
compensation amount as a capital receipt. The Assessing Officer rejected assessee’s
claim and reassessed income by claiming the same as revenue receipt. The CIT(A), and
Tribunal confirmed the order of the Assessing Officer.
The High Court observed that the intent was not to purchase the shares of Zydus, but
to takeover its business for expansion and accordingly the compensation was for the
loss of profit and not for the impairment of a source of income. Therefor the High Court
confirmed the order of the lower authorities in holding the compensation as revenue
income. (AY. 2008-09)
Avantor Performance Materials India Ltd. v. CIT (2016) 383 ITR 685 / 237 Taxman 603 /
282 CTR 494 / 130 DTR 33 (HP)(HC)
92 S. 4 : Charge of income-tax – Capital or Revenue – Money to be used in purchase of
plant and machinery temporarily placed in fixed deposits – Inextricably linked with
setting up of plant – Interest on fixed deposits – Capital receipt. [S. 2(24)]
Held, the test that is required to be employed is whether the activity which is taken
up for setting up of the business and the funds which are garnered are inextricably
connected to the setting up of the business. The findings of fact had been returned
by the Commissioner (Appeals) and had been confirmed by the Tribunal to the effect
that the funds were inextricably connected with the setting up of the power plant of
the assessee. The Revenue had also not been able to point out any perversity in such
finding and, therefore, interest earned by the assessee from fixed deposits in the pre-
commencement period. (AY. 2009-10)
PCIT v. Facor Power Ltd. (2016) 380 ITR 474 / 237 Taxman 613 / 283 CTR 141 / 130 DTR
281 (Delhi)(HC)
30
S. 4 Charge of income-tax
S. 4 : Charge of income-tax – Accrual of income – Acquisition of land – Enhanced 93
compensation – Award disputed in appeal before High Court – Right to receive not
crystallised – Status – Whether assessment in status of individual or Hindu undivided
family – Disputed questions of law and fact – Matter remanded. [S. 2(31)(i), 2(31)(ii)]
On appeal The CIT(A) annulled the assessment made in the status of individual. The
Tribunal remanded the matter to the Commissioner (Appeals) to decide the issue
on the merits. On appeal: Held, that the issue arising in the appeal raised a mixed
question of law and fact and required to be remanded to the Tribunal to decide afresh.
Accordingly, the order passed by the Tribunal was set aside and the matter was remitted
to the Tribunal to adjudicate the issue afresh after hearing the parties and by passing a
speaking order in accordance with law.(AY. 2000-01, 2001-02, 2002-03)
Raj Kumar Tewatia v. CIT (2016) 380 ITR 110 (P&H)(HC)
S. 4 : Charge of income-tax – Capital or revenue – Excise duty refund in terms of 94
new industrial policy and concessions formulated by Central Government for State of
Jammu and Kashmir was held to be capital receipt.
Dismissing the appeal of the revenue, the Tribunal held that; Excise duty refund in
terms of new industrial policy and concessions formulated by Central Government for
State of Jammu and Kashmir was held to be capital receipt. (AY. 2012-13)
DCIT v. Singla Cables. (2016) 157 ITD 617 (Amritsar)(Trib.)
S. 4 : Charge of income-tax – Capital or revenue – Amount received from developer 95
as corpus fund towards hardship caused to flat owners on redevelopment was held to
be capital receipt and not assessable as income.[S.2(24)(vi), 56]
Allowing the appeal of the assessee, the Tribunal held that ; amount received by the
assessee as a flat owner in a housing society from developer as corpus fund towards
hardship caused to flat owners on redevelopment, impugned amount would be in nature
of capital receipt simplicitor not includible in income as per section 2(24)(vi). (AY. 2007-08)
Jitendra Kumar Soneja v. ITO (2016) 161 ITD 269 (SMC)(Mum.)(Trib.)
S. 4 : Charge of income-tax – Capital or revenue – Compensation received upon 96
settlement of a trademark dispute in which trademark itself had been cancelled would
be capital receipt and not taxable as business income [S.28(va)(b)]
Allowing the appeal of the assessee the Tribunal held that; compensation received for
losing right to use trademark could not be bought to tax as business income in terms
of S.28(va)(b), as the said section only deals with payment received for not sharing
trademark etc., while in instant case, sharing or otherwise was not possible as trademark
itself had been cancelled; said receipt was capital receipt. (AY. 2008-09 to 2010-11)
Orient Blackswan (P.) Ltd. v. ACIT (2016) 159 ITD 944 / 181 TTJ 124 (Hyd.)(Trib.)
S. 4 : Charge of income-tax – Interest awarded by Court on motor accident 97
compensation is a capital receipt not taxable as income – Tribunal directed the CBDT
to issue appropriate circular to avoid hardship to the citizens. [S.56(2)(viii), 145A]
Allowing the appeal of the assessee, the Tribunal held that ;compensation for motor
accident received from the Supreme Court is a capital receipts it is not taxable. Interest
31
Charge of income-tax S. 4
awarded by Court on said compensation in value of compensation money from day
when compensation becomes payable to day when it is actually paid is also a capital
receipt not liable to tax. Tribunal also directed the CBDT to issue appropriate circular
to avoid hardship to the citizens. (AY.2012-13)
Urvi Chirag Sheth v. ITO (2016) 159 ITD 199 / 179 TTJ 245 / 136 DTR 345 / 51 ITR 491
(Ahd.)(Trib.)
98 S. 4 : Charge of income-tax – Capital or revenue – Compensation arising out of a
settlement agreement was to be regarded as capital receipt, not liable to tax. [S. 43(1)]
The assessee purchased the plant and machinery from a company based in UK. The
plant and machineries did not function as per the performance parameters set out
by the machine supplier. So the assessee filed a claim for compensation on the said
UK Company in terms of the agreement for the purchase of plant and machinery.
The Assessing Officer treated the amount to be a reduction from cost of the machine
and thus recomputed the depreciation allowable to assessee. In appeal CIT(A) held
that the compensation was capital in nature. On appeal by revenue, dismissing the
appeal the Tribunal held that ;the compensation paid was neither in form of discount
nor against the price nor was it in the nature of subsidy nor was it in the nature of
any reimbursement. It was not even compensation for recouping any damage caused
to the plant and machinery. Thus, none of the conditions specified in section 43(1)
for deducting the actual cost from value of the machines were applicable to the
compensation. Therefore, compensation arising out of a settlement agreement was to be
regarded as capital receipt, not liable to tax. (AY. 2005-06)
DCIT v. Xpro India Ltd. (2016) 161 ITD 93 (Kol.)(Trib.)
99 S. 4 : Charge of income-tax – Capital or revenue – One time Entrance Fees received from
members were in nature of lifetime membership fees was held to be capital receipt.
Right from the year 1925 onwards, Entrance Fees has been accepted as capital receipt
by passing orders under section 143(3). Further, the jurisdictional High Court held that
any sum paid by a member to acquire the rights of a club was a capital receipt. If the
issue is analyzed on the principle of consistency, in earlier years, identical claim of the
assessee was decided in favour of the assessee by accepting the entrance fees as capital
receipt, and therefore, unless and until contrary facts are brought on record by the
Revenue, no U-turn is permissible. (AY. 2007-08, 2008-09, 2009-10)
ACIT v. Royal Western India Turf Club Ltd. (2016) 52 ITR 235 (Mum.)(Trib.)
100 S. 4 : Charge of income-tax – Capital or revenue – Sales tax and excise duty subsidy
received from State for purpose of industrialisation is capital receipt. [S.28(i)]
Assessee engaged in business of manufacturing of CTVs, PCBs, and Washing Machines
etc. received subsidy by way of sales tax benefit under scheme of Gujarat Government
for setting up unit in Gujarat and as excise duty benefit under scheme of Government
of India. Assessee claimed the same as capital receipt. AO treated as revenue receipt.
ITAT by following decision of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273
(Mum.)(SB), held that sales tax and excise duty subsidy received from State for purpose
of industrialisation are capital receipts. (AY. 2006-07)
ACIT v. Genus Electrotech Ltd. (2016) 161 ITD 644 (Ahd.)(Trib.)
32
S. 4 Charge of income-tax
S. 4 : Charge of income-tax – Capital or revenue – Power subsidy received for setting 101
up a new industrial unit in backward area is a capital receipt. [S.28(i)]
Power subsidy received from State Government under Power Intensive Industries
Scheme, 2005, for setting up a new industrial unit in backward area is capital receipt
hence not liable to tax. (AY. 2006-07 and 2007-08)
Shyam Steel Industries Ltd. v. DCIT (2016) 161 ITD 1 / (2017) 183 TTJ 304 / 145 DTR
177 (TM)(Kol.)(Trib.)
S. 4 : Charge of income-tax – Hindu undivided family – Property belong individual 102
before his death and died intestate without execution any will – Income cannot be
assessed in the hands of the – Hindu undivided family [S. 171]
On facts the Tribunal held that; property belong individual before his death and died
intestate without execution any will, therefore income cannot be assessed in the hands
of the Hindu undivided family. Accordingly the addition which was made in the
assessment of HUF was directed to be deleted. (AY. 1992-93)
B. D. Gupta & Sons v. ITO (2015) 70 SOT 16 (Delhi)(Trib.)
S. 4 : Charge of income-tax – Mutuality – Transfer fee and non-occupancy charges 103
received from the members was held to be not taxable.
Allowing the appeal of the assessee the Tribunal held that Transfer fee and non –
occupancy charges received from the members was held to be not taxable. Followed CIT
v. Darbhanga Mansion CHS Ltd. (2015) 370 ITR 443 (Bom.)(HC) & Mittal Court Premises
Co-operative Society Ltd v. ITO (2010) 320 ITR 414 (Bom.)(HC) (ITA No. 3566/Mum/2014,
dt. 15.01.2016))(AY.2009-10)
Land End Co-operative Housing Society Ltd. v. ITO (Mum.)(Trib.); www.itatonline.org
S. 4 : Charge of income-tax – Capital or revenue – Compensation for breach of promise 104
to provide land to the assessee is not compensation for loss of profits but is for injury
caused to the profit making apparatus. Such compensation is a capital receipt not
chargeable to tax. [S. 28(i)]
Allowing the appeal of assessee the Tribunal held that Compensation for breach of
promise to provide land to the assessee is not compensation for loss of profits but is for
injury caused to the profit making apparatus. Such compensation is a capital receipt not
chargeable to tax.(ITA No. 5054/Del/2011, dt. 12.08.2016)(AY. 2007-08)
Aerens Development and Engineers Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org
S. 4 : Charge of income-tax – Capital or revenue – Capital gains – Computation 105
– Compensation received by flat owner from builder for hardship caused due to
redevelopment of the building is a non-taxable receipt and has to be reduced from
the cost of the flat. Amount received from builder to meet rental costs during the
redevelopment is also not taxable as income and amount spent on rent has to be
allowed. [S. 2(24)(vi), 4, 45, 48, 56]
Compensation received by flat owner from builder for hardship caused due to
redevelopment of the building is a non-taxable receipt, However tribunal observed that
“in our considered opinion and as learned counsel for the assessee fairly agrees, the
33
Charge of income-tax S. 4
impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and,
therefore, the same will be taken into account as such, as and when occasion arises
for computing capital gains in respect of the said asset. Subject to these observations,
grievance of the assessee is upheld.”
Tribunal has also held that; the issue regarding addition of ` 8,55,800. In fact, this
amount was given by Developer for paying rent while development of the project was
taking place. In fact, assessee submitted before me that he has made expenditure of
` 6,80,000/- towards rent while development activity of the project was taken place. So,
Assessing officer is directed to allow the claim of assessee to same extent because it is
nothing but compensation received by assessee for paying rent. This cannot be said to
be income of assessee. (ITA No. 291/Mum/2015, dt. 12.08.2016)(AY. 2007-08)
Jitendra Kumar Soneja v. ITO (Mum.)(Trib.); www.itatonline.org
106 S. 4 : Charge of income-tax – Accrual of income – Assessee received advance on a
condition to refund the same in event of not starting of film – Assessee not holding
amount in his own right – Not to be treated as income.
The assessee received an advance from Tips Industries Limited (‘TIL’). The AO added the
amount to the total income of the assessee holding that since the assessee was following
the cash system of accounting, any income becomes assessable only when it is received
and thus the advance received is also a receipt in the nature of income irrespective of
the fact that when and how services are going to be performed. On appeal to Tribunal,
it was held that the assessee received the amount from TIL for accepting the assignment
to work as director for 2 forthcoming films. It was specifically mentioned as advance
and not as remuneration and in the event of the first film not starting, the assessee
was required to refund the advance forthwith to TIL. The addition made by AO was
not sustainable in law because the amount is being still held by the assessee on behalf
of TIL and not on his own right as per the agreed terms of conditions as agreed, vide
mutual understanding dated February 5, 2008, as the assessee will be deemed to
appropriate the said amount or hold the same amount in his own right only on the
commencement of the film and till then the assessee is holding the said amount of
` 25,00,000/- on behalf of Tips Industries Ltd. which is refundable in case of non-
starting of the film. Therefore the addition made by AO was to be deleted. (AY 2008-09)
Satish B. Kaushik v. ACIT (2016) 47 ITR 739 (Mum.)(Trib.)
107 S. 4 : Charge of income-tax – Accrual – Carbon Emission Reduction Certificate (CERs)
is taxable only when the right to receive consideration for transfer of these CERs is
quantified and crystallized.
The Tribunal held that income from Carbon Emission Reduction Certificate (CERs)
is taxable only when the right to receive consideration for transfer of these CERs is
quantified and crystallized. It is not the case of the AO that the sale was made in the
relevant previous year. Once the sale is not effected in the relevant previous year, there
cannot be any good reasons to bring the CER value to tax in this assessment year.
Accordingly, the value of CERs even though quantifiable, cannot be brought to tax by
the reason of accrual simpliciter. (AY. 2009-10)
Dy. CIT v. Kalpataru Power Transmission Ltd. (2016) 177 TTJ 394 / 133 DTR 113 / (2017)
162 ITD 18 (Ahd.)(Trib.)
34
S. 4 Charge of income-tax
S. 4 : Charge of income-tax – Income does not accrue if the debtor is in a precarious 108
financial position and recovery is doubtful. [S. 145]
The Tribunal held that income did not accrue in the hands of the assessee owing to the
precarious financial condition of the debtor notwithstanding that, services were rendered
and the income was recorded in the books of account of the assessee during the relevant
year and bad debts were claimed in subsequent years when the dispute was settled.( ITA
No.39/07, ITA No.650/07 & CO No.122/07, dt. 30.10.2015) (AY. 2002-03)
Bechtel International Inc v. DDIT (Mum.)(Trib.);www.itatonline.org
S. 4 : Charge of income-tax – Subsidy granted to set up a windmill project is a capital 109
receipt. [S. 41(1), 43(1), 50]
Subsidy granted to set up a wind project is a capital receipt. The subsidy cannot
be reduced under Explanation 10 to S. 43(1) from the cost of the assets acquired
though 100% depreciation is allowed on the cost of the assets. The subsidy is also not
assessable either u/s. 41(1) or u/s 50.( ITA No. 3473/M/2013, dt. 26.11.2015) (AY. 2008-
09)
Uni Deritend Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 4 : Charge of income-tax – Mutuality – Co-Operative housing Society – TDR 110
Premium received from members is not liable to tax.
CIT(A) relied on ITAT order for A.Y. 2006-07 (ITA No. 499/M/2011) & A.Y. 2007-08 (ITA
No. 500/M/2011) and held that TDR Premium received by Society from its members
was not covered by principle of Mutuality. The Tribunal for A.Y. 2008-09 reversed the
order of Learned CIT(A) and held that TDR premium will be covered by the principle of
mutuality. Tribunal followed the order of High Court in ITA No.427 / 428 / 590 of 2012.
(ITA No. 66 & 67 /Mum/2014. Dt. 09.03.2015) (AY. 1995-96, 2008-09)
Hatkesh Co-op. Hsg. Society Ltd. v. CIT (Mum.)(Trib.); www.itatonline.org
Editorial: Order of Tribunal, in Hatkesh Co-op. Hsg. Society v. ACIT (2013) 27 ITR 494
(Mum) (Trib.) is no longer good law, High court has set a side the order of Tribunal.
Hatkesh Co-op. Hsg Society Ltd. v. CIT ITA NO 328 OF 2014 dt. 22-8-2016)
S. 4 : Charge of income-tax – Mercantile system of accounting AIR information – 111
Interest credited – tax deducted by payer – Liable to be offered as income though not
received during the year.[S.5, 56, 145]
Assessee, in his return of income, had not shown certain amount of interest received
from a party on which payer had also deducted tax at source on ground that he actually
did not receive such interest. AO on the basis of AIR information added the interest
income as income from other sources. CIT (A) affirmed the view of AO. On appeal the
Tribunal held that since assessee was following mercantile system of accounting, once
interest amount had been credited to assessee and tax had been deducted by payer,
assessee could not take plea of not offering it as income on ground that he had not
actually received same. However, if said amount was treated as income of assessee, then
credit of TDS had to be given. (AY. 2009-10)
Girish M. Kothari v. JCIT (2016) 157 ITD 451 (Mum.)(Trib.)
35
Charge of income-tax S. 4
112 S. 4 : Charge of income-tax – Accrual – Advance professional fees received from clients
– Not taxable as income. [S. 145]
Assessee receiving advances from clients to meet expenses for and on behalf of
its clients. Assessee keeping advance receipts in separate ledger account. Assessee
transferring professional fees to Profit and Loss account and carry forward credit balance
to next year as sundry creditors. Professional advance received is not taxable in the
hands of the assessee.(AY. 2009-10)
Vipin Malik v. ACIT (2016) 45 ITR 589 (Delhi)(Trib.)
113 S. 4 : Charge of income-tax – Increase or decrease in liability on account of fluctuation
in foreign exchange – Capital account not taxable. [S. 263]
In case of issue of FCCB, increase or decrease in liability on account of fluctuation in
foreign exchange as on date of balance sheet would be on capital account and, therefore,
any gain or loss is not taxable (AY. 2008-09)
Subex Ltd. v. CIT (2016) 156 ITD 938 / 182 TTJ 846 (Bang.)(Trib.)
114 S. 4 : Charge of income-tax – Foreign Exchange gain – Arose due to restatement of
loan balance at the end of the year – Assessee credited such gain in its P&L a/c – Loan
has been utilized only on revenue account – Foreign exchange gain is taxable – Since
in subsequent years, foreign exchange loss has not been claimed as deduction, AO is
directed to allow deduction of notional loss in subsequent years to be in consonance
with aforesaid finding.
Borrowings were made from foreign shareholder and was utilized by advancing to its
subsidiary in ordinary course of business. Loan agreement clearly specifies that the
borrowings are meant for general corporate purpose. Held that even if assessee did not
receive interest income from such loan, it would not shift the business purpose. Foreign
Exchange gain arose due to restatement of loan balance at the end of the year at the
prevailing exchange rate. Assessee credited such gain in its P&L a/c. Amount advance
is meant for business purpose of the assessee and has to be construed as amounts lent
in ordinary course of business. Even if no interest income is received on such advance,
resultant exchange gain restated at the end of the year has to be construed as a revenue
receipt. However, in subsequent years, assessee has incurred foreign exchange loss and
has not claimed it as a deduction since notional in nature. Since, to be in consonance
and take consistence stand AO is directed to grant deduction of notional foreign
exchange loss in subsequent years. (AY. 2004-05)
ITO v. UMT Investment Ltd. (2016) 176 TTJ 53 / 136 DTR 39 (Kol.)(Trib.)
115 S. 4 : Charge of income-tax – Capital or revenue-Subsidy received by way of exemption
from sales tax was capital in nature since the object of the incentive was to develop
backward areas. [S.28(i)]
The Assessee set up a unit in backward area and it was granted benefit of deferring the
payment of sales tax collected by it for 15 years. Subsequently, the Assessee opted for
the Exemption Scheme wherein it was exempt from levy of sales tax. The benefit that
arose was offered to tax as a capital receipt in its revised return of income. The AO held
that it was a revenue receipt. The ITAT held that the subsidy was capital in nature since
36
S. 4 Charge of income-tax
the object and purpose of the incentive was to develop industries in the backward area,
to remove imbalance and to maintain regional economic growth. (AY. 2006-07, 2007-08)
John Deere India P. Ltd. v. DCIT (2015) 69 SOT 45 (URO) / 172 TTJ 470 (2016) 45 ITR
389 (Pune)(Trib.)
John Deere Equipment P. Ltd. v. ITO( 2015) 69 SOT 45 (URO) / 172 TTJ 470 / (2016) 45
ITR 389 (Pune)(Trib.)
S. 4 : Charge of income-tax – Penalty to be paid outside India for violation of law of 116
other country does not attract tax in India therefore tax is not to be deducted. [S. 195]
The Assessee was a listed company in India and ADR of the company were also
listed on carried on the New York Stock Exchange. The US Court levied a penalty
of 10 million $ for violation of Securities Exchange Act, 1934. The Assessee
made an application to AAR to ascertain whether it was required to deduct tax at
source. The AAR held that penalty to be paid for violation of law cannot attract
tax under the Income-tax Act and therefore, provisions of section 195 were not
attracted.
Satyam Computer Services Ltd. (2016) 380 ITR 189 / 236 Taxman 199 / 282 CTR 41 /
129 DTR 14 (AAR)
S. 4 : Charge of income-tax – Settlement amount received in pursuance for surrender 117
right to sue is a capital receipt and not a business income, hence not chargeable to
tax in India. [S.28(i), 45]
The Applicant, a foreign institutional investor (‘FII’) alongwith its affiliates purchased
shares of Satyam Computer Services Limited (‘Satyam’) and Satyam’s American
Depository Shares (‘ADRs’). Subsequently, in January 2009, the CEO confessed that the
accounts of the company were manipulated, pursuant to which, the Appellant and its
affiliates disposed of the shares of Satyam and ADRs.
Thereafter, the Appellant filed claims against Satyam for fraudulent misrepresentation.
Finally, a Settlement agreement was entered with Satyam whereby for an agreed
amount, the Appellant on behalf of the Aberdeen Investors would forever waive, release,
discharge and dismiss all legal claims against Satyam.
An application was filed with Authority of Advance Ruling (‘AAR’), to seek a ruling
in respect of the taxability of the agreed amount received from Satyam under the
Settlement Agreement under the Income-tax Act, 1961.
The AAR held that the nature of settlement amount is of a capital receipt and the
amount has been received against surrender of right to sue cannot be considered for
the purpose of capital gains u/s.45, relying on the AAR decision in the case Qualified
Settlement Fund (QSF), In re (2016) 130 DTR (AAR) 367. In the said case, under
similar situation, AAR held that if right to sue is considered as a capital asset, its cost
of acquisition cannot be determined and in the absence of such cost of acquisition, the
computation provisions fails. Therefore, right to sue cannot be subjected to income tax
under the head ‘capital gains’.
Further, it was held that the settlement amount have been received not as part of
business profit or to compensate the future income but as a result of surrender of the
37
Scope of total income S. 5
claim. Thus, even in accordance with the principle of surrogatum such amount is not
assessable as income because it does not replace any business income.
Aberdeen Asset Management Plc., In re (2016) 381 ITR 55 / 283 CTR 387 / 65 taxmann.
com 246 / 131 DTR 1 (AAR)]
Aberdeen Claims Administration Inc., In re (2016) 381 ITR 55 / 283 CTR 387 / 65
taxmann.com 246 / 131 DTR 1 (AAR)]
S. 5 : Scope of total income
118 S. 5 : Scope of total income – Accrual – Co–operative bank is also a banking company;
not liable to pay tax on NPA interest on accrual basis in view of RBI norms relating
to income recognition and assets classification. [S. 4, 145, Reserve Bank of India Act,
1934 S.45O, Banking Regulation Act, 1949]
Dismissing the appeal of the revenue, the Court held that; Co-operative bank is also a
banking company; not liable to pay tax on NPA interest on accrual basis in view of RBI
norms relating to income recognition and assets classification. (AY. 2010-11)
PCIT v. Shri Mahila Sewa Sahakari Bank Ltd. (2016) 242 Taxman 60 / 289 CTR 225
(Guj.)(HC)
119 S. 5 : Scope of total income – Accrual – Interest receivable from non-performing assets,
which were not reflected in profit and loss account, would not be liable to tax. [S.145]
Dismissing the appeal of the Revenue, the Court held that; interest receivable from non-
performing assets or from, bad and doubtful debts, which were not reflected in profit
and loss account, could not be liable to tax.
CIT v. Shri Basaveshwara Sahakari Bank. (2016) 242 Taxman 411 (Karn.)(HC)
120 S. 5 : Scope of total income – Disputed liability – When contractee disputed liability
to pay amount under contract, entire disputed amount would not be taxable in current
year. [S. 4, 145]
Assessee carried out contractual work and raised bill at agreed rate. ONCG disputed
liability and undertook to make interim payment - assessee offered only 50% of the bill
amount as income. AO taxed the entire income on accrual basis. Court held that since
ONGC had disputed its liability, it could not be said that there was any corresponding
liability on ONGC to pay assessee full amount and therefore, the said amount was not
chargeable to tax.
Deep Industries Ltd. v. ACIT (2016) 241 Taxman 355 (Guj.)(HC)
121 S. 5 : Scope of total income – Interest on compensation under dispute – chargeable to
tax only upon resolution of dispute by High Court [S.4]
Allowing the appeal, High Court held that only upon receipt of the final order, the
assessee became entitled to withdraw even the interest, which had accrued on such
compensation amount which was kept as deposit with the bank and the same would
then alone be liable to tax.
Shivanna, M. v. ACIT (2016) 142 DTR 319 (Karn.)(HC)
38
S. 6 Residence in India
S. 5 : Scope of total income – Interest accrued on non-performing assets could not be 122
brought to tax on notional basis even if Assessee had adopted mercantile system of
accounting. [S. 4, 145]
During the assessment proceedings, the AO made an addition of interest income
accrued on non-performing assets. The AO was of the view that as the Assessee follows
mercantile system of accounting, therefore the interest accrued should be chargeable to
tax.
On appeal before the High Court, the High Court after placing reliance on case of CIT v.
Canfin Homes Ltd. (2012) 347 ITR 382 (Karn.)(HC) held that interest on non-performing
asset cannot be brought to tax on notional basis. Further the High Court held that the
nomenclature ‘non-performing asset’ would also include bad loans and advances. As a
result the Revenue’s appeal challenging the Tribunal’s order was dismissed. (AY. 2009-
10, 2010-11)
CIT v. Shri Siddeshwar Co-Operative Bank Ltd (2016) 388 ITR 588 / 240 Taxman 588
(Karn.)(HC)
S. 5 : Scope of total income – A non-resident, rendered services as a marine engineer, 123
salary received by him in India by fund transfer from foreign companies directly in
NRE account in India is held to be taxable in India [S. 5(2)(a)]
The assessee claimed that he had to float on foreign water to render services during
the course of voyage and, when he would stay more than 182 days outside India or on
foreign water, his residential status would be treated as ‘non-resident’ as per provision of
law and his salary income which were received outside India in foreign currency would
not be taxable u/s. 5. Dismissing the appeal of the assesse, the Tribunal held that; where
assessee, a non-resident, rendered services on board a ship outside territorial waters of
any country, salary received in India by way of transfer of funds in his NRE account in
India, would be taxable in India u/s. 5(2)(a). (AY. 2010-11)
Tapas Kr. Bandopadhyay v. Dy.CIT (2016) 159 ITD 309 / 180 TTJ 702 (Kol.)(Trib.)
S. 5 : Scope of total income – Accrual of income – Method of accounting – The income 124
cannot be said to have accrued when the realization was uncertain.
The Tribunal held that the income cannot be said to have accrued to assessee though
following mercantile system of accounting as the assessee contractor had terminated the
contract for non-payment of earlier bills and realization was uncertain. (AY. 2002-03)
Bechtel International Inc. v. Dy. DIT (2016) 177 TTJ 58 (UO)(Mum.)(Trib.)
S. 6. Residence in India
S. 6 : Residence in India – Installation project continuing only for 178 days in fiscal 125
year, less than 183 days – No permanent establishment of applicant in India –
Business profits from execution of project taxable only in country where applicant
was resident – DTAA-India-Singapore. [S.6(3), Art. 7(1)]
Since the project executed by the applicant in India continued only for 178 days in a
fiscal year, less than 183 days in a fiscal year, there was no permanent establishment of
the applicant in India and that the business profits accruing or arising to the applicant
39
Residence in India S. 6
by way of the execution of the project under reference were taxable only in the country
where the applicant was a resident in terms of Article 7(1) of the Double Taxation
Avoidance Agreement between India and Singapore. (AY.2013-14)
Tiong Woon Project and Contracting (Pte) Ltd. In, re (2016) 380 ITR 187 / 282 CTR 39 /
129 DTR 16 (AAR)
126 S. 6 : Residence in India – Individual – Capital gains – Resident in India who earned
capital gains on sale of immovable property situated in Sri Lanka shall be chargeable
to tax only in Sri Lanka DTAA-India-Sri Lanka [S.6(1)), Art. 4, 13]
Assessee, a Sri Lankan National, was married to an Indian National and was living in
India after her marriage. She had sold her immovable property and claimed that capital
gain arising on sale of said property fell within purview of Article 13. Assessing Officer
rejected the contention of the assessee on the ground that as per provisions of S. 6 and
Article 4, assessee was resident in India during relevant previous year as she stayed for
more than prescribed period u/s. 6 in India and had personal and economic relations
with India, therefore any income arising in India or outside India was fully taxable
under section 5 of the Act. On appeal Tribunal held that ; capital gains earned on sale
of immovable property situated in Sri Lanka would be chargeable to tax only in Sri
Lanka while same income would be included in income of assessee chargeable to tax
in India under provisions of Act and relief would be granted in manner laid down in
Notification No. 91 of 2008, dated 28-8-2008.(AY. 2007-08)
Shalini Seekond (Mrs.) v. ITO (2016) 159 ITD 905 / 180 TTJ 1 (Mum.)(Trib.)
S. 9 : Income deemed to accrue or arise in India
127 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Income
arising by way of slot chartering, would form a part of income from operations of ships,
is exempt under article 8 of India Singapore DTAA – DTAA-India-Singapore [Art.8]
Revenue, on appeal filed against order of Tribunal, raised following question for
consideration of High Court: whether Tribunal was justified in holding that income of
assessee, arising by way of slot chartering, would form a part of income from operations
of ships, exempt under article 8 of India Singapore DTAA. Dismissing the appeal of
revenue the Court held that above question stood concluded against revenue by a
decision of Bombay High Court rendered in case of DIT (IT) v. Balaji Spg. UK Ltd.
[2012] 211 Taxman 535, therefore, said question did not give rise to any substantial
question of law. (AY. 2004-05)
DIT v. APL Co. Pte. Ltd. (2016) 243 Taxman 84 (Bom.)(HC)
Editorial : SLP is granted to the revenue, DIT v. APL Co. Pte Ltd. (2016) 243 Taxman 141
(SC)
128 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – When
under offshore contract, equipment was transferred outside India, necessarily taxable
income also accrued outside India and, hence, no portion of such income was taxable
in India, writ petition of revenue was dismissed.
Revenue filed writ petition against an order passed by Authority for Advance Rulings.
Whether as point arising under section 9 sought to be urged was covered against
40
S. 9(1)(i) Income deemed to accrue or arise in India
revenue by two decisions of Delhi High Court rendered in assessee’s own case, i.e.,
DIT v. LG Cables Ltd. [2011] 197 Taxman 100 and DIT v. L.S. Cables Ltd. [IT Appeal
No. 707 of 2011, dated 30-9-2011], wherein it has been held that (i) since there was no
material to show that accrual of income under offshore supply contract was attributable
to any operations carried out by assessee, a Korean company, in India and furthermore
scope of work under onshore contract was under a separate agreement and for separate
consideration, there was no justification to treat onshore contract and offshore contract
as a composite contract, and (ii) when under offshore contract, equipment was
transferred outside India, necessarily taxable income also accrued outside India and,
hence, no portion of such income was taxable in India, writ petition was liable to be
dismissed
DIT v. LS Cable Ltd. (2016) 243 Taxman 427 (Delhi)(HC)
Editorial : SLP is granted, DIT v. L S Cable Ltd. (2016) 243 Taxman 435 (SC)
S. 9(1)(i) : Income deemed to accrue or arise in India – Non-resident – Apportionment 129
of such income – Non-resident company assigned rights and obligations to sell and
deliver equipment manufactured by its parent non-resident company – Equipment
supplied outside India – No installation or commissioning activity by assessee – No
part of income from transaction assessable in India.
The task of installation, commissioning and testing was contracted to assessee’s
subsidiary in India and thus, the operations pertaining to installation and commissioning
were not performed by that subsidiary on behalf of the assessee but on its own behalf.
Thus, the assessee could be stated to have performed any installation or commissioning
activity in India. The equipment contract also indicated that the vendor had other
obligations such as coordinating its efforts with the sub-contractors, etc. The supplier
was liable to deliver the equipment to the carrier at the port of shipment or the airport
of departure which would be outside India. The assessee only assumed the obligation to
sell, supply and deliver equipment in terms of the equipment contract and was paid in
terms of the pricing mechanism as agreed to under the equipment contract. The income
from installation, commissioning and testing activities as well as any function performed
by expatriate employees of the group companies seconded to Indian subsidiary would
be subject to tax in the hands of the subsidiary and could not be considered income of
the assessee. (AY. 2003-04, 2004-05, 2005-06)
Nortel Networks India International Inc. v. DIT (2016) 386 ITR 353 / 241 Taxman 464 /
288 CTR 383 (Delhi)(HC)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Transfer 130
of trade mark “Foster” in India – Since it was transfer of intangible asset and the
assessee was not located in India at time of transaction, income accruing to assessee
from transfer of its right, title or interest in trade mark was not taxable in India –
DTAA-India-Australia. [Art. 13]
AAR has answered the question by holding that the income “accrued” to the applicant,
from the transfer of its right title and interest in and the trade mark and Foster’s Brand
Intellectual Property is taxable in India under the Income-tax Act, 1961. The issue in
HC was whether the receipt arising to the applicant from the transfer of its right, title
41
Income deemed to accrue or arise in India S. 9(1)(i)
and interest in and to the trademark foster’s brand Intellectual Property was taxable
in India under the IT Act, 1961. Insofar as the income attributable to brewing IPR
was concerned, the same was not liable to be taxed under the I.T. Act? Allowing the
appeal of the assessee the court held that the situs of the Trademarks & ITR, which
were assigned pursuant to the owner thereof was not located in India at the time of the
transaction, receipt arising to the assessee from the transfer of its right, title and interest
in and to the trademarks’ Foster’s brand IPR and grant of exclusive perpetual licence of
Foster brewing IPR was not taxable in India.
CUB Pty Ltd. v. UOI (2016) 388 ITR 617 / 139 DTR 113 / 241 taxman 278 / 288 CTR 361
(Delhi)(HC)
131 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Shipping
company – “international traffic” India-Singapore DTAA][Art. 3(h), 8]
Transportation of goods from Kandla port to Vizag Port in a vessel from Singapore bound
to Dubai falls within the definition of the term “international traffic” under Article 3(h)
of India-Singapore DTAA and cannot be said to be operating solely between the places
in India and therefore, as per the provisions of Article 8 of India-Singapore DTAA, the
profits arising out of the same is not taxable in India.
CIT v. Tarus Shipping Services (2016) 236 Taxman 555 / 288 CTR 718 (Guj.)(HC)
132 S. 9(1)(i) : Income deemed to accrue or arise in India – Business income – UK-based
non-resident company was not having permanent establishment in India and received
non-compete fee, same would not be taxed in India – DTAA-India-UK [S. 28(va), 55,
Art. 7]
Tribunal held that; UK-based non-resident company was not having permanent
establishment in India and received non-compete fee, same would not be taxed in India.
(AY. 2008-09)
Trans Global PLC v. DIT (IT) (2016) 158 ITD 230 (Kol.)(Trib.)
133 S. 9(1)(i): Income deemed to accrue or arise in India – Business profits – Foreign
subsidiaries performed its operations outside India and no technical knowledge was
made available to assessee amount paid to subsidiary was held to be not taxable in
India – DTAA-India USA [Art, 7, 12]
Assessee-company was engaged in business of software development and other allied
activities. Assessee parcelled out a portion of its work to its foreign subsidiaries. The AO
held that the amount paid by assessee to foreign subsidiaries was in nature of technical
service fee liable to tax in India. On appeal allowing the appeal, the Tribunal held that;
since no operations had been undertaken by foreign subsidiaries in India and they even
did not have permanent establishment in India, amount paid to said companies was not
taxable in India. The Tribunal also held that since no technical knowledge was made
available to assessee, by its foreign subsidiary which was the requirement under the
DTAA for payment to qualify as technical services fee, payment in question was not
taxable in India. (AY. 2002-03, 2004-05, 2005-06)
Cyient Ltd. v. Dy.CIT (2015) 70 SOT 741( Hyd.)(Trib.)
42
S. 9(1)(i) Income deemed to accrue or arise in India
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Revenue 134
from ‘software sale’ by assessee shall be taxable – Receipts from annual maintenance
contract would also be covered as ‘business profits – Training of personnel of endusers
for which this consideration had been received was ancillary and subsidiary to sale
of software, was assessable as business profits – DTAA-India-UK [Art. 7, 13]
Assessee was a tax resident of UK having a PE in shape of branch office in India,
declared ‘software sales’ in its profit & loss account as business receipts, however
Assessing Officer treated Revenue from ‘software sales’ as ‘royalty’ which was subjected
to tax accordingly. Tribunal held that; the assessee simply purchased shrink-wrapped
software or off-the-shelf software from UK company without any right to use copyright
of such software, thus Revenue from ‘software sale’ by assessee shall be taxable under
article 7 as ‘business profits’ and not royalty under Article 13 of India-UK DTAA and
the consideration for sale of copyrighted product and not use of any copyright. Tribunal
also held that since the receipts from sale of original software had been held to be in
nature of business profits covered under Article 7 and not as royalty under article 13
of DTAA, following this, receipts from annual maintenance contract would also be
covered under Article 7 ‘business profits’. As regards training of personnel of end users
for which this consideration had been received was ancillary and subsidiary to sale of
software, assessee’s stand of including such receipts under Article 7 of DTAA was to be
allowed. (AY. 2007-08)
Datamine International Ltd. v. ADIT(IT) (2016) 158 ITD 84 / 178 TTJ 560 / 48 ITR 229
(Delhi)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – In 135
absence of Permanent Establishment of foreign subsidiaries in India, amount received
by said companies could not be brought to tax in India as business income – DTAA-
India-UK-Singapore [S.195, Art. 5, 7]
As per Article 7 of UK and Singapore Treaty, in the absence of PE in India, the business
income also would not get taxed in India. Hence the payment made by the assessee
to its subsidiaries is not chargeable to tax in India in the hands of the subsidiaries in
India. The provisions of section 195(1) mandate a requirement that the income should
be chargeable to tax in India to assume jurisdiction in India. It is proved beyond doubt
that the subsidiaries do not have any income chargeable to tax in India. (AY. 2008-09,
2009-10)
Batlivala & Karani Securities (India) (P.) Ltd. v. Dy.CIT (2016) 159 ITD 924 / 180 TTJ 558
(Kol.)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – liaison 136
office in India not authorized to do core business activity or sign or execute contracts
– no permanent establishment – no attribution of profits – DTAA-India-Japan [Art. 5]
AO held that the assessee had a fixed place PE and the core business activities were
carried out though the liaison office and the conditions laid down in RBI permission
were violated. The Tribunal held that, there was no PE, as the Liasion office and its
employees were not authorized to do core business activity or sign or execute contracts,
they were only authorized to engage in preparatory/auxiliary activities and not carry out
43
Income deemed to accrue or arise in India S. 9(1)(i)
entire business activity. The power of attorney gave restricted and specific authority to
the Liasion office. All purchase orders were raised directly on the head office by Indian
customers, and the head office directly sent quotations/invoices to the customers without
any involvement of Liasion office in India. As no PE in India the question of attribution
of income from off-shore supplies does not arise. (AY. 2011-12)
Kawasaki Heavy Industries Ltd. v. ACIT (2016) 157 ITD 847 / 46 ITR 739 / 177 TTJ 90
(Delhi)(Trib.)
137 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Supply
of software was integrally connected to supply of hardware – Receipts from supply of
software could not be taxed as royalty
Where supply of software was integrally connected to supply of hardware, receipts from
supply of software could not be taxed as royalty. (A.Y. 2004-05 to 2009-10)
Addl. DIT (IT) v. ZTE Corporation (2016) 140 DTR 81 / 179 TTJ 424 (Delhi)(Trib.)
138 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Where
project of assessee did not have work duration of more than 9 months during year, a
back-up-cum-support office simpliciter would not constitute PE of assessee.
Where only activities carried out by assessee in India were through various construction
projects meant for exploration and production of mineral oil, and no other business
activities had been carried out which could be called as independent business activities
yielding separate/independent business profits, aforesaid activity of construction project
were to be considered primarily under article 5(2)(i) and not under any other clause. PE
of assessee had to be determined, keeping in view work carried out at its project sites
and since project of assessee did not have work duration of more than 9 months during
a year, an activity of maintenance of back-up cum support office simpliciter would not
constitute PE of assessee. (AY. 1998-99, 2004-05, 2005-06, 2008-09)
Addl. DIT(IT) v. J. Ray McDermott Eastern Hemisphere Ltd. (2016) 180 TTJ 660 (Mum.)
(Trib.)
139 S. 9(1)(i) : Income deemed to accrue or arise in India–Permanent Establishment–
For purpose of attribution of profits to Permanent Establishment, Permanent
Establishment’s participation in economic life of source country is to be considered,
Accordingly, 35 per cent of net global profits as per published accounts out of
transactions of assessee with India were attributed to Permanent Establishment in
India – Receipts from supply of software could not be taxed as royalty – DTAA-India
-China [S. 9(1)(vi), Art. 5, 7]
Assessee a Chinese Company, supplied telecom equipment’s to Indian Telecom
Operators. For the purpose of attribution of profits to PE, most important aspect to be
kept in mind is level of PE’s participation in economic life of Source Country and for
this, level of operations carried out by PE in India are to be considered to arrive at
a reasonable percentage of profit to be attributed to PE in India. Level of operations
carried out by assessee, a Chinese Company, through its PE in India, were considerable
enough to conclude that almost entire sales functions including marketing, banking
44
S. 9(1)(i) Income deemed to accrue or arise in India
and after sales were carried out by PE in India, it would meet ends of justice if 35 per
cent of net global profits as per published accounts out of transactions of assessee with
India were attributed to PE in India. In respect of both hardware and software supplied
by assessee to Indian customers. Since supply of software was integrally connected to
supply of hardware, CIT(A) had rightly held that receipts from supply of software could
not be taxed as royalty. (AY. 2004-05 to 2009-10)
ZTE Corporation v. ADIT (2016) 159 ITD 696 / 179 TTJ 424 (Delhi)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent Establishment 140
– Entire relationship was principal to principal basis and Indian subsidiary acting
independently, it did not constitute an agency PE in terms of article 5(4), distribution
income could not be taxed in India – DTAA-India-Mauritius. [Art. 5(4)]
Assessee engaged in business of broadcasting of sports all across globe including India.
Since assessee did not have any branch or business premises in India, it had formed
a subsidiary, namely ‘Taj India’ as its advertising sales agent. A distribution agreement
was entered into by assessee with Taj India for distribution of paid channel to various
cable operators and ultimately to consumers in India. Distribution revenue collected by
Taj India was to be shared between assessee and ‘Taj India’ in ratio. Entire relationship
qua distribution revenue was that of principal to principal basis and Subsidiary was
acting independently, not constitute an agency PE in terms of Article 5(4) of DTAA. (AY.
2003-04 to 2005-06)
ADIT v. Taj TV Ltd. (2016) 161 ITD 339/ (2017) 184 TTJ 202 / 147 DTR 30 (Mum.)(Trib.)
S. 9(1)(i): Income deemed to accrue or arise in India – legal fees to a firm in UK for 141
creating/earning a new source of income outside India by way of establishment of
new bank branch or acquisition of a bank is not taxable in India – DTAA-India-UK
[S.195, Art. 13]
Assessee engaged in banking business, paid legal fees to a firm in UK for creating/
earning a new source of income outside India by way of establishment of new bank
branch or acquisition of a bank. Payments fall under the exceptions of S. 9(1)(vi)/(vii)
and therefore not taxable under Indian law. Firm had neither any business connection
nor any PE in India, payment was not taxable as per S. 9(1)(i) (AY. 2012-13)
Kotak Mahindra Bank Ltd. v. ITO (IT) (2016) 161 ITD 304 / (2017) 183 TTJ 414 / 150
DTR 16 (Mum.)(Trib.)
S. 9 (1)(i) : Income – Deemed to accrue or arise in India – Corporate guarantee – 142
Extended credit facilities by branch of said bank, guarantee commission received by
assessee did not accrue in India – DTAA-India-France. [Art. 23]
Assessee, a French company, had given corporate guarantee to French bank on
behalf of its Indian subsidiaries. Extended credit facilities by branch of said bank,
guarantee commission received by assessee did not accrue in India. Article 23 had no
applicability-India-France. (AY. 2012-13)
Capgemini SA v. DCIT (2016) 160 ITD 13 (Mum.)(Trib.)
45
Income deemed to accrue or arise in India S. 9(1)(i)
143 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – A
“power of attorney” holder of a non-resident can constitute a “dependent agent”, “fixed
place of business” and a “permanent establishment” under Article 5 of the DTAA. The
fact that the physical presence of the non-resident in India is nominal is irrelevant –
DTAA-India-Swiss. [S. 195, Art. 5, 7]
Dismissing the appeal of assessee the Tribunal held that ; the reference by AO to Article
5 draws special importance. While business constitutes continuous activity in organized
manner it is often a question of fact & law. “Place of business” usually means a premises
of the enterprise used for carrying on the business, whether or not exclusively used
for business. The residence of the country Manager was held to be a fixed place of
business as the same was used as an office address in Sutron Corporation In re 268 ITR
156 AAR. Similarly an office space of 3 x 6 metres in Motorola Inc & Ors 95 ITD 269
(Del). To constitute a PE, the business must be located at a single place for a reasonable
length of time. The activity need not be permanent, endless or without interruptions.
It may not be out of place to mention that functions performed by Sri V. Subramanian
or the Indian subsidiary could not be classified as preparatory or auxiliary in character.
The facts strongly indicate towards Sri V. Subramanian constituting a dependent agent/
PE for reasons brought on record by the AO and as discussed in foregoing paragraphs.
There were no presence of a number of principals who exercised legal and or economic
control over the agent Sri V. Subramanian. The principal i.e. the assessee has failed to
demonstrate this aspect when confronted by the AO. The principal i.e. the assessee
was relying on the special skills and knowledge of the agent Sri V. Subramanian
the Managing Director of the Indian entity by the same name and rendering similar
functions. Sri V. Subramanian was acting exclusively or almost exclusively for and on
behalf of the assessee during the currency of the contracts in question. To that extent
it was not in furtherance of his ordinary course of business. Finally the refuge taken
of Article 5(2)(j) on the short period of contracts and the interregnum does not offer
any solace to the assessee either. The assessee has not demonstrated it was a mere
passing, transient or casual presence for its activity in India. In view of this, we confirm
the order of the lower authorities. This ground is therefore dismissed. (ITA No. 1742/
Mad/2011, dt. 24.08.2016) (AY. 2008-09)
Carpi Tech SA v. ADIT (2017) 145 DTR 17 (Chennai)(Trib.)
144 S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent Establishment–
Continuous period of stay of its employees in India which had to be taken into
consideration and not entire contract period– DTAA-India-Germany. [S. 115A, Art.5,
7, 12(2)]
The assessee filed the return of income wherein amount received from Indian companies
for providing technical consultancy services was offered to tax under Article 12(2) of
the DTAA at 10%. The AO taxed at 30% and in respect of two contracts at 20%. On
appeal the Tribunal held that ;in order to determine as to whether assessee, a German
company, rendering services in field of exploration, mining and extraction to Indian
companies, had PE in India, it was continuous period of stay of its employees in India
which had to be taken into consideration and not entire contract period. Since assessee
46
S. 9(1)(i) Income deemed to accrue or arise in India
had deputed one of its employees to India and he did not stay in India for more than
180 days, it could not be concluded that assessee had PE in India. Therefore, provisions
of S. 115A would not be applicable to assessee. (AY. 2002-03)
Rheinbraun Engineering Und Wasser GmbH v. Dy. CIT (2016) 158 ITD 359 (Mum.)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business profits – Assessee 145
secured order on behalf of its Indian entity and outsourced work thereto, such entity
constituted assessee’s business connection in India hence liable to be assessed. [Art. 7
of OECD Model Convention]
Assessee a UK based company secured orders on behalf of its Indian entity and
outsourced work thereto. Responsibility of assessee vis-a-vis its customer was concluded
in India. Responsibility of assessee could not be segregated and would not complete
unless Indian entity provided services to customers. Assessee had continuous revenue
generating business activities with Indian entity and there was real and intimate
relationship between activities of assessee outside India and those inside India therefore,
assessee had business connection in India, hence liable to be assessed. (AY. 2004-05)
Dy.CIT v. Vertex Customer Management Ltd. (2016) 158 ITD 365 / 178 TTJ 580 (Delhi)
(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment – 146
Assessee received BPO services from its Indian entity, it did not constitute fixed place
PE in India hence cannot be assessed – DTAA-India-UK.[Art. 5]
Assessee received BPO services and back office operations from its Indian entity. Back
office services did not constitute permanent establishment in India. As assessee had no
right to occupy premises but was merely given access for purposes of works, disposal
test was not satisfied and, therefore, assessee did not have fixed place PE in India, hence
cannot be assessed. (AY.2004-05)
Dy.CIT v. Vertex Customer Management Ltd. (2016) 158 ITD 365 / 178 TTJ 580 (Delhi)
(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment – 147
AO held that expatriate employees of assessee were providing services in India but
he could not render any evidence in this regard, it did not constitute service PE in
India – DTAA-India-UK [Art. 5]
The assessee, a UK based company, outsourced certain work to its Indian entity.
It received reimbursement from Indian entity for certain expenses. It claimed said
amount was on cost to cost basis and therefore was not taxable. The A.O. held that
reimbursement had an effect of reducing income of the Indian entity. He, therefore,
taxed said reimbursement and also held that assessee had business connection and PE in
India. The honourable ITAT held that AO. did not produce any evidence in this regard
to reimbursement amount pertaining to third party cost directly relatable to Indian
entity, amount allocated to Indian entity was taxable as royalty. Therefore, assessee did
not have service PE in India.
Dy.CIT v. Vertex Customer Management Ltd. (2016) 158 ITD 365 / 178 TTJ 580 (Delhi)
(Trib.)
47
Income deemed to accrue or arise in India S. 9(1)(i)
148 S. 9 (1)(i) : Income deemed to accrue or arise in India – Part of business operations in
India – Only part of income reasonably attributable to operations carried on in India
shall be deemed to accrue or arise in India – DTAA-India-Mauritius. [Art. 5, 7]
As per Explanation 1 to section 9(1)(i), income from business would be deemed to be
only such part of income, as was reasonably attributable to operations carried out in
India. Thus where part of business operations of assessee were carried out outside India,
only part of income reasonably attributable to operations carried on in India shall be
deemed to accrue or arise in India. (AY. 2005-06 to 2007-08)
ADIT(IT) v. J. Ray McDermott Eastern Hemisphere Ltd. (2016) 158 ITD 923 / 180 TTJ 660
(Mum.)(Trib.)
149 S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment –
Project of assessee did not have work duration of more than 9 months during year, a
back-up-cum-support office simpliciter would not constitute Permanent establishment
of assessee – DTAA-India-Mauritius. [S.5(2)(i), 90, Art. 5, 7]
Where only activities carried out by assessee in India were through various construction
projects meant for exploration and production of mineral oil, and no other business
activities had been carried out which could be called as independent business activities
yielding separate/independent business profits, aforesaid activity of construction project
were to be considered primarily under article 5(2)(i) and not under any other clause. PE
of assessee had to be determined, keeping in view work carried out at its project sites
and since project of assessee did not have work duration of more than 9 months during
year, an activity of maintenance of back-up cum support office simpliciter would not
constitute PE of assessee. (AY. 1998-99, 2004-05, 2005-06, 2008-09)
ADIT (IT) v. J. Ray McDermott Eastern Hemisphere Ltd. (2016) 158 ITD 923 / 180 TTJ
660 (Mum.)(Trib.)
150 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection –
Commission – Services of non-resident companies for running duty free retail shops
– Matter remanded – DTAA-India-UK-UAE. [Art. 7, 13]
Assessee company was engaged in business of operation and maintenance of an
International Airport. It had established duty free retail outlet shop at international
terminals of Airport. Assessee engaged services of two non-resident companies namely
Alpha and Kreol in running duty free retail outlet shop. In consideration of services
rendered by Alpha and Kreol, assessee agreed to pay ‘commission fee’ at 2 per cent
of gross sales from duty free retail outlet. Assessing Officer held that commission fees
was to be considered as business income deemed to accrue or arise in India through a
‘business connection’ in India under section 9(1)(i). CIT(A) also confirmed the order of
AO. On appeal the Tribunal held that; revenue authorities had not examined existence
of ‘business connection’ as per statutory definition mentioned in Explanation 2 to section
9(1)(i). Moreover, authorities below failed to conclude under which clause of relevant
DTAAs existence of PE was satisfied. Therefore in aforesaid circumstances, impugned
order was to be set aside and, matter was to be remanded back for disposal afresh.
Matter remanded. (AY. 2005-06, 2009-10)
Cochin International Airport Ltd. v. ITO (IT) (2016) 157 ITD 310 / 136 DTR 241 / 177 TTJ
578 (Cochin)(Trib.)
48
S. 9(1)(i) Income deemed to accrue or arise in India
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Indian 151
Liaison Office and agents of US money transfer company, rendering services to Indian
relations of American residents in India, were not its PE in India; profit attributable
to Indian activities was not liable to tax in India – DTAA-India-USA [Art. 5, 7]
Assessee-US company was engaged in business of transfer of money across countries
through specialised software. It set up Liaison Office which appointed agents in India
for rendering said services to Indian relations of American resident. Assessee provided
software enabling agents to access its mainframes in USA. No copyright over software
was given to agents. Agents owned computer system independently and assessee had no
control over them. Further, activities of agents were not wholly or almost wholly devoted
on behalf of assessee. Transaction in question/compensation was under arm’s length
price. The assessee filed its return declaring ‘nil’ income by contending that it was not
liable to pay any tax in India on income arising from money transfer services as it did
not have any permanent establishment in India. The Assessing Officer held that income
arising to the assessee from money transfer services was taxable in India, both under the
Income-tax Act and the DTAA between India and the USA. The Commissioner (Appeals)
set aside the order of the Assessing Officer. On appeal by revenue the Tribunal held
that; Indian Liaison Office and agents of US money transfer company, rendering services
to Indian relations of American residents in India, were not its PE in India; profit
attributable to Indian activities was not liable to tax in India.(AY. 2004-05, 2009-10)
Dy. CIT v. Western Union Financial Services Inc (2016) 156 ITD 882 (Delhi)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Branch 152
office – Compensated at arm’s length for performing services–No part of assessee’s
profit could be taxed in India as profits attributable to PE – DTAA-India-USA [Art. 5, 7]
Allowing the appeal assessee the Tribunal held that where assessee’s branch office,
which was considered as assessee’s PE in India, was compensated at arm’s length for
performing services in respect of direct sales made by assessee in India, no part of
assessee’s profit could be taxed in India as profit attributable to Indian PE. (AY. 2002-
03 to 2004-05)
St. Jude Medical Inc v. Dy.CIT (2016) 156 ITD 387 (Mum.)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – 153
Composite contract to supply, install and implement retail automation system would
be taxable in India through the project office in India. The sub-contract of service
component could not be used to split the composite contract.
Assessee entered into a composite contract to supply, install and implement retail
automation system. The installation of systems was sub-contracted to another party in
India. Assessee alleged that the income from supply of equipment was not taxable in
India since it was supplied outside India and payments were received outside India. The
AO alleged that the contract could not be split into supply of equipment and service
income, and held that the project office was PE in India. ITAT held that the project
office opened in India to oversee the implementation of the project would constitute
a PE in India. Further, it was held that the income could not be split by the Assessee
since it had entered into a composite contract and was responsible for both the supply
49
Income deemed to accrue or arise in India S. 9(1)(i)
of equipment as well as installation services. The sub-contract was only of the methods
of executing the project and could not be used to split the composite contract. (AY.
2008-09)
Orpak Systems Ltd. v. ADIT(IT) (2016) 176 TTJ 655 / 133 DTR 137 (Mum.)(Trib.)
154 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Power
of attorney – Liaison office – Does not constitute permanent establishment – DTAA –
India-Japan. [S. 90, Art. 5]
A Power of Attorney executed by the Head Office in favour of the Liaison Office in
India does not create a Permanent Establishment if the powers are specific to the liaison
office and are not unfettered powers to enable to Liaison Office to act on behalf of the
enterprise. (AY 2011-12)
Kawasaki Heavy Industries Ltd. v. ACIT (2016) 157 ITD 847 / 132 DTR 81 / 177 TTJ 90 /
46 ITR 739 (Delhi)(Trib.)
155 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Intention
of parties that property in goods would pass only when installation and erection of
entire works completed – Entire amount received from contractor taxable in India –
DTAA-India-Singapore [Art.7]
Authority held that nowhere in the agreement was contractual bifurcation available.
There was no mention of two transactions. The clause in the agreement dealing with
the scope of work was not divisible in two parts. The payment schedule depended upon
the stages of completion of the project and not on shipment of goods or completion of
services. Intention of parties that property in goods would pass only when installation
and erection of entire works completed. Entire amount received from contractor taxable
in India.
MERO Asia Pacific Pte Ltd., In re (2016) 387 ITR 274 / 243 Taxman 322 / 289 CTR 1 /
140 DTR 394 (AAR)
156 S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Lease
of cranes in mineral oil project – Section 44BB applicable – Business profits taxable
at 40 per cents – DTAA-India-Singapore. [S.44BB, Art.5(3), 7]
The applicant was a tax resident of Singapore engaged in the business of renting/
leasing of heavy lifting cranes for use and providing erection and installation of heavy
equipment such as furnaces, boilers, coke drums, fractionators, chimneys, turbines and
generators in many countries in Asia. It rented out a crane having a capacity to lift 1600
metric tons in terms of a work order for a period of 7 months from February 17, 2015
to GR for use at the refinery of Bharat Petroleum at its integrated refinery expansion
project site at its Kochi refinery, which was engaged in refining of mineral oils. The
total consideration was ` 19.45 crores. It sought an advance ruling on the questions
whether it could be held to have earned any income taxable in India from its activities
renting out of its cranes for use in India, under the provisions of the Income-tax Act,
1961 and if so, how the total income of the applicant should be computed in terms of
the provisions of the Act. The Department contended that the installation of project was
carried out by the applicant commencing on February 16, 2015 and expected it to end
50
S. 9(1)(ii) Income deemed to accrue or arise in India
on January 31, 2016 and this constituted a permanent establishment of the applicant
in India in terms of article 5(3) of the Double Tax Avoidance Agreement between India
and Singapore (DTAA) and hence, the business profits attributable to the permanent
establishment were the applicant’s income arising in India under section 9(1)(i) of the Act
and assessable as such in India in terms of Article 7 of the DTAA for assessment years
2015-16 and 2016-17, which were the years where the applicant had not exceeded 183
days and that for the purpose of computing the business profits, section 44BB of the Act
being applicable to the case of the applicant, such business profits were taxable at the
rate of 40 per cent. The applicant not having any dispute with the inferences raised by
the Department, the Authority, on the stated facts, disposed of the application in terms of
the conclusions drawn by the Department in its response. (AY. 2015-16, 2016-17)
Tiong Woon Contracting Pte Ltd., In re (2016) 387 ITR 350 / 243 Taxman 58 / 289 CTR
353 (AAR)
S. 9(1)(i) : Income deemed to accrue or arise in India – Business connection – Program 157
fee received by applicant from Northwest is neither taxable as royalty nor as business
profits – DTAA-India-USA. [Art. 5, 7]
Program fee received by applicant from Northwest is not taxable in India either as
royalty or as business profits
Regents of the University of California UCLA Anderson School of Management Executive
Education, USA, In re (2016) 243 Taxman 122 (AAR)
S. 9(1)(i): Income deemed to accrue or arise in India – Management programmes for 158
senior executives – Fees received was held to be not liable to tax in India – DTAA-
India-USA [Art. 5,12(5)]
Applicant, a US based non-profit corporate organisation, has entered into an agreement
with an Indian company to launch management programmes for senior executives of
various companies in India, since applicant manages to prove that it is an educational
institution, programme fees received by applicant from Indian concern will be covered
by Article 12(5)(c) of India, USA DTAA and, thus, it is not liable to tax in India
UC Berkeley Center for Executive Education, USA, In re (2016) 242 Taxman 360 / 289
CTR 106 (AAR)
S. 9(1)(ii) : Income deemed to accrue or arise in India – Salaries – Assessee rendered 159
services in USA, salary received by him for such services in India from sister concern
of US employer would be exempt from Indian taxation – DTAA-Indo-US [S. 5, Art. 16(1)]
Assessee was transferred from Indian company to its American sister concern to act as
a lead software engineer and accordingly he left India on 30-5-2007 in connection with
his US employment. However, for internal facilitation, his salary for relevant period was
paid by Indian company in India. Since services in question were rendered by assessee
in USA, his salary income during relevant year was exempt from tax under Article
16(1). Applicability of article 16(1) depends on country where services were rendered
and merely because salary was paid by Indian entity, application of Article 16(1) could
not be denied. (AY. 2008-09)
Neeraj Badaya v. ADIT (2016) 157 ITD 1016 / 137 DTR 283 / 179 TTJ 387 (SMC)(Jaipur)
(Trib.)
51
Income deemed to accrue or arise in India S.9(1)(vi)
160 S. 9(1)(iv) : Income deemed to accrue or arise in India – Dividend by Indian company
– Mere reduction in capital occurred due to transfer of shares under scheme of
buy back which was approved by High Court does not fall under definition of
‘reorganization’ specified in Article 13(5) – Held that gain was taxable in India –
DTAA-India-Netherlands [Art. 13(5)]
The assessee tendered equity shares of a public listed Indian company under a scheme
of arrangement by way of buy back of own shares as per approval of High Court which
resulted in capital gain. The AO and CIT(A) rejected the claim of the assessee that as
per paragraph 5 of Article 13 of India Netherlands DTAA, the transaction felt under
the definition of ‘reorganization’ as specified in Article 13(5) and that the gain was
not taxable. On appeal to ITAT, it was held that the object of arrangement was not
financial restructuring but to enable assessee to transfer its shareholding and there was
only reduction in share capital and security holders continued to enjoy same types of
rights and interests. It further held thatthe attempt of the assessee to bring transferring
of shares within the ambit of the term ‘reorganization’ may not be correct, since the
objective of the arrangement was not financial restructuring, but to provide an exit route
to the non-resident shareholders. (AY. 2006-07)
Accordis Beheer B V v. DIT (IT) (2016) 157 ITD 373 / 176 TTJ 406 / 136 DTR 65 (Mum.)
(Trib.)
161 S. 9(1)(vi) : Income deemed to accrue or arise in India – Broadcasting payment was
held to be not in the nature of royalty – DTAA-India-Thailand [Art. 12]
Assessee was a producer of tele-programmes and engaged in the operation of Satellite
T.V. Channel. It entered into an agreement for hiring of transponder for transmitting
the TV programmes through satellite with Thailand based company. Said company
broadcast said contents through its satellite. In lieu of such broadcasting, it was paid
various sums from time-to-time. AO held the payments to be in the nature of royalty.
On appeal by the revenue, the Court held that; as per the agreement the assessee
facilitated transmission and broadcasting of various programs in India and earned the
income mainly from advertisement as it was a free to Air Channel. The AO held that
payment made to non-resident company was from the source in India and was in the
nature of Royalty within the meaning of sub clause (b) of section 9(1)(vi) read with
clause (iii) of explanation 2 of the said section. The High Court held that, the issue
is decided in favour of the assessee by the Delhi High Court in case of Asia Satellite
Telecommunications Co. Ltd. v. DIT [2011] 332 ITR 340/197 Taxman 263 (Delhi) and DIT
v. New Skies Satellite B.V. [2016] 382 ITR 114 (Delhi) and they agreed with the views
expressed therein. (AY. 2001-02 to 2003-04)
DIT v. ATN International Ltd. (2016) 242 Taxman 8 (Cal.)(HC)
162 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Payments received
by assessee amounted to royalty as defined under Explanation 2 to section 9(1)(vi) and
under Article 12 of applicable DTAA thereby giving rise to an income chargeable to tax
in India – Held liable to deduct tax at source – DTAA-India-USA [S.195, 90, Art. 12]
Tribunal held that payments received by assessee amounted to royalty as defined under
Explanation 2 to section 9(1)(vi) and under article 12 of applicable DTAA thereby
giving rise to an income chargeable to tax in India. Assessee raised following questions
52
S.9(1)(vi) Income deemed to accrue or arise in India
of law for consideration of High Court: (i) whether Tribunal was right in disposing of
assessee’s appeal by placing reliance on judgment of Karnataka High Court in case of
CIT v. Samsung Electronics Co. Ltd. [2012] 345 ITR 494 and on its earlier order made
in assessee’s own case [IT Appeal No. 550 (Bang.) of 2011, dated 31-10-2012], and (ii)
whether Tribunal was justified in holding that payments received by assessee amounted
to royalty as defined under Explanation 2 to section 9(1)(vi) and under Article 12 of
applicable DTAA thereby giving rise to an income chargeable to tax in India. High Court
held that said questions were already covered by decision of Karnataka High Court in
case of CIT v. Synopsis International Old Ltd. [2013] 212 Taxman 454 and, therefore, no
substantial question of law arose for consideration. (AY. 2007-08)
Synopsys International Ltd. v. DDIT (IT) (2016) 76 taxmann.com 18 (Karn.)(HC)
Editorial: SLP was to be granted to the assesse, Synopsys International Ltd. v. DDIT (IT)
(2016) 243 Taxman 512 (SC)
S. 9(1)(vi) : Income deemed to accrue or arise in India – Fees for technical services 163
– Payment for pre-packed software is neither royalty nor fees for technical services –
As between provisions of agreement or Act which ever more beneficial to assessee is
applicable – DTAA-India-USA. [S.9(i), 90(3), Art. 12]
The Court had to consider whether the consideration received by the Assessee on sale
of pre-packaged software was “royalty” or “fee for technical services” and was, therefore,
not taxable as business income. HELD by the High Court dismissing the Department’s
appeal:
(i) It is not in dispute that Article 12(3) of the Double Taxation Avoidance Agreement
(“DTAA”) between India and the United States of America (USA) is relevant for
deciding the above issue.
(ii) The short question considered by the Court in Director of Income Tax v. Infrasoft
Limited (2014) 220 Taxman 273 (Del) was whether the term “royalty” covered by
Article 12(3) of the DTAA would apply in the context of sale of pre-packaged
copyrighted software. The Court stated that it has not examined the effect of
the subsequent amendment to Section 9 (1) (vi) of the Act and also whether the
amount received for use of software would be royalty in terms thereof for the
reason that the Assessee is covered by the DTAA, the provisions of which are more
beneficial.
(iii) Section 90(3) of the Act makes it clear in the context of an agreement (‘treaty’) for
avoidance of double taxation, that it is only when the provisions of the Act are
more beneficial to the Assessee the Act will prevail over the treaty. Conversely,
where the provision of the treaty is more beneficial to the Assessee, the treaty
would prevail over the Act. This legal position has been reiterated in Director
of Income Tax v. Infrasoft Limited (supra) which was followed in dismissing the
Revenue’s appeal in the Assessee’s own case for AY 2008-09 i.e. ITA No. 477 of
2014.
(iv) The Court is not persuaded to re-examine the above issue which stands answered
against the Revenue by the aforementioned order.( AY. 2009-10, 2010-11)
CIT v. Halliburton Export Inc (2016) 386 ITR 123 (Delhi)(HC)
53
Income deemed to accrue or arise in India S.9(1)(vi)
164 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Non-resident –
Providing data transmission services were not taxable in India – Amendment inserted
by Finance Act, 2012 have no effect unless DTAA is amended jointly by both parties
– DTAA-India-Thailand-Netherlands. [S. 2(30), Art. 12]
The assessees derived income from the “lease of transponders” of their respective
satellites. This lease was for the object of relaying signals of their customers ; both
resident and non-resident television channels that wished to broadcast their programs
for a particular audience situated in a particular part of the world. The assessees were
chosen because the footprint of their satellites, i.e. the area over which the satellite
could transmit its signal, included India. Having held the receipts taxable under section
9(1)(vi) of the Act, the Assessing Officer also held that the assessees would not get
the benefit of the Double Taxation Avoidance Agreements between India and Thailand
and between India and Netherlands. The Tribunal held that they were not taxable in
India. On appeals to the High Court: Unless DTAA is jointly amended by both parties
to incorporate income from data transmission services as partaking of the nature of
royalty or amend definition in a manner so that such income automatically becomes
royalty, Finance Act, 2012 which inserted Explanation 4, 5, and 6 to section 9(1)(vi) by
itself would not affect the meaning of term ‘royalties’ as mentioned in article 12 of India
-Thailand DTAA, hence the receipts of the assessees from providing data transmission
services were not taxable in India. (AY. 2007-08, 2009-10)
DIT v. New Skies Satellite BV (2016) 382 ITR 114 / 238 Taxman 577 / 285 CTR 1 / 133
DTR 185 (Delhi)(HC)
DIT v. Shin Satellite Public Co. Ltd. (2016) 382 ITR 114 / 238 Taxman 577 / 285 DTR 1
/ 133 DTR 185 (Delhi)(HC)
Editorial: SLP is granted to the Revenue; DIT v. New Skies Satellite B. V. (2016) 242
Taxman 3 (SC)
165 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Payment made to
data relating to the geophysical and geological information about the east and west
coast of India was held to be not royalty hence not liable to deduct tax at source –
DTAA-India-USA-UK [S. 195, [Art. 12]
Allowing the appeal the Tribunal held that the licence is for a fixed period and that on
the expiry of the licence, the assessee is required to return the product or destroy the
data accessed by the assessee during the licence period but is not required to destroy
the product produced by the assessee by use of such data. Thus, it is clear that access
to the technical knowledge is granted to the assessee in order to enable it to process
the same and use such data for furtherance of its objects. All that is provided by the
licensor was the data relating to the geophysical and geological information about the
east and west coast of India and it was not responsible for the accuracy or usefulness
of such data. Thus, licensors had only made available the data acquired by them and
available with them but was not making available any technology available for use of
such data by the assessee and hence payments made were not in nature of ‘Royalty’ as
per DTAAs with USA and UK. (AY. 2009-10)
GVK Oil & Gas Ltd. v. ADIT (IT) (2016) 158 ITD 215 (Hyd.)(Trib.)
54
S.9(1)(vi) Income deemed to accrue or arise in India
S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Sale of copyrighted 166
software to customer along with licence ley – No copyright to use software or licence
given either to Indian distributor or customer – No royalty – One Contracting State
cannot unilaterally alter domestic provision and enlarge or amend scope under
Agreement – Amendment to S. 9 enlarging scope of royalty will not affect scope of
royalty under Article 12 of Treaty – DTAA-India-Netherlands [Art. 7, 12]
The Tribunal on Revenue’s appeal held that under the terms of the agreement
specifically prohibited decompiling, reverse engineering, disassembling of the software,
modifying in any manner or sub-licensing of the software. The sine qua non for
payment to be royalty is that the payment must fall within scope of Article 12(4) of
the Treaty. The sale of software cannot be held to be covered under the words “use
of process” because the customer does not have any access to the source code. The
software product is available for use, but not the process embedded within. None of
the conditions mentioned u/s 14 of the Copyright Act, 1957 were applicable to the said
transfer. The consideration received by the assessee was for sale of shrink wrapped
software and not royalty within Art. 12(a) of the Tax Treaty. Moreover, amendment
in the definition of “royalty” u/s. 9(1)(vi) vide Finance Act 2012 could not be read
into the Tax Treaty as the Treaty had not been correspondingly amended in line with
the enlarged definition. If a term has not been defined in the Treaty but under the
domestic law, then definition under the latter will be used to interpret the Agreement.
However, if a term has been specifically defined under the Treaty, then any reference
to the domestic law or any amendment to such term thereunder will have no bearing
on the definition under the Treaty, as one contracting State cannot unilaterally alter
its domestic provision to later the scope of the term under the Treaty except by
corresponding negotiation between the two States. Thus amended and enlarged scope
of “royalty” u/s. 9(1)(vi) has no bearing on the Tax Treaty. (AY. 2008-09)
ADIT (IT) v. Baan Global BV (2016) 49 ITR 73 (Mum.)(Trib.)
ITO v. SSA Global Technologies (I) P. Ltd. (2016) 49 ITR 73 (Mum.)(Trib.)
INFOR Global Solutions (Barneveld) BV v. DDIT (IT) (2016) 49 ITR 73 (Mum.)(Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Services was not 167
rendered by employees of branch office, hence royalty income earned on account of
technical agreement was chargeable to tax as ‘royalty’ income and not as business
income – DTAA-India-Italy [S.9(1)(i), Art. 13(1), (13(2)]
AO held that royalty income was effectively connected to permanent establishment
of assessee in India and, therefore, same was not chargeable to tax as royalty income
but as business income. On appeal Tribunal held that; in absence of any positive and
substantive material to effect that services had been rendered by employees of branch
office of assessee, royalty income earned by assessee on account of technical agreement
was not effectively connected with branch office of assessee and therefore, same was
chargeable to tax as ‘royalty’ income as per Article 13(1) and (2) at 20% and not as
business income at 41.82%. (AY. 2007-08, 2009-10)
Iveco Spa v. ADIT (IT (2016) 160 ITD 348 / 182 TTJ 464 / (2017) 147 DTR 353 (Delhi)
(Trib.)
55
Income deemed to accrue or arise in India S.9(1)(vi)
168 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Fees for technical
services – Payments received by the assessee from Indian entities on account of
connectivity charges are not taxable in India either as royalty or as fees for technical
services – DTAA-India-UK [S. 90, Art. 13]
The Tribunal held that, use of virtual voice network is standard facility provided by
the assessee in the course of its business of providing international telecommunication
network connectivity to various telecom operators with the help of certain scientific
equipment whereby no technology is made available. Therefore, the payments received
by the assessee from Indian entities on account of connectivity charges are not taxable
in India either as royalty or as fees for technical services under Art.13 of Indo-UK
DTAA. (AY. 2009-10)
Interroute Communication Ltd. v. DDIT(IT) (2016) 179 T TJ 355 / 139 DTR 175 / 68
taxmann.com 160 (Mum.)(Trib.)
169 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – 10% and rate of
tax cannot be enhanced by including surcharge and education cess separately – DTAA-
India-French. [Art. 2, 13]
Provisions of Article 13 of Indo-French DTAA prescribing a cap of 10% on rate of tax,
read with article 2 thereof, would prevail over provisions of domestic income-tax and thus
tax liability on royalty income shall be capped at 10% and rate of tax @ 10% cannot be
enhanced by including surcharge and education cess separately. (AY. 2012-13)
Capgemini SA v. DCIT (2016) 160 ITD 13 (Mum.)(Trib.)
170 S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Embedded software
on hardware supplied is not royalty.
The Tribunal held that where the assessee, engaged in the business of development of
proprietary technology for automated evaluation of internal features of diamond, sold to
its customers machines used in the diamond industry along with operating application
software which was an integral part of the machine, payments received for the same
could not be treated as royalty since the software loaded on the hardware did not have
any independent existence and could not be used independently. The software was
supplied predominantly as a part of equipment and was an integral part thereof and
therefore the transaction was to be treated as a sale and purchase of machine and not
a sale and purchase of computer software. Consideration received by assessee for sale
of software supplied as part of machine to end user was not royalty under article 12
of DTAA between India and Israel as there was no transfer of copyright or any rights
therein nor was there any situation giving rise to any type of infringement of copyright
by customers of assessee. It held that the amendment made in section 9(1)(vi) by
way of insertion of an Explanation by Finance Act, 2012, for extending scope of term
‘Royalty’, could not be read into provisions of Article 12(3) of the Indo-Israel tax treaty
as amendment made in provisions of Act cannot be automatically read into articles of
treaty unless corresponding amendment is made in treaty as well. Since the payment
was not taxable as FTS and the assessee did not have a PE in India, the receipts from
sale of machinery could not be taxed in India. (AY.2011-12)
Galatea Ltd. v. DCIT (IT) (2016) 157 ITD 938 / 46 ITR 690 / 179 TTJ 265 / 138 DTR 161
(Mum.)(Trib.)
56
S.9(1)(vi) Income deemed to accrue or arise in India
S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Assessee received 171
reimbursement from its India entity for use of equipment situated outside India and it
could not be established that same was on cost to cost basis, it was taxable as royalty
in India – DTAA-India-UK. [Art. 13]
Assessee, a UK based company, outsourced certain work to its Indian entity. It received
reimbursement from Indian entity for certain expenses. The A.O imposed tax on said
reimbursement. Total reimbursement, (a) one part pertained to third party costs directly
relatable to Indian entity and (b) balance part pertained to costs allocated to Indian
entity. Amount allocated to Indian entity pertained to use of equipment outside India
and, therefore, it constituted royalty as defined under article 13(3)(b). It could not be
said with certainty that said amount was on cost to cost basis, as it was taxable as
royalty in India. (AY. 2004-05)
Dy.CIT v. Vertex Customer Management Ltd. (2016) 158 ITD 365 / 178 TTJ 580 (Delhi)
(Trib.)
S. 9(1)(vi): Income – Deemed to accrue or arise in India – Royalties and fees for 172
technical services/Software) – Consideration received by assessee for sale of software
claimed to have been supplied as part of machine to end user is not royalty – DTAA-
India-Israel. [Art. 12]
Assessee non-resident company sold to its customers machines and operating software.
In invoice issued by Assessee Company, consideration was mentioned separately for
machine and operating software. However, there was no separate transaction of sale of
software. Dominant character and essence of transaction was sale of machine by assessee
and software, independently, had no value for customer. Thus it was predominantly
transaction of sale of machine and therefore, it could not have been brought within
definition of ‘Royalty’ as envisaged in s. 9(1)(vi). Further in absence of there being any
P.E. of assessee in India, income arising from sale of machine could not have been taxed
in its hands in India. (AY.2010-11)
Galatea Ltd. v. Dy. CIT (2016) 157 ITD 938 / 46 ITR 690 / 179 TTJ 265 (Mum.)(Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India – Fees for technical services 173
– Consideration received for sale of computer software programme in CD Rom is not
assessable as “royalty”. The retrospective amendment in Explanation 4 to section 9(1)(vi)
to tax such receipts as royalty has no application to DTAA if the definition of the term
“royalty” in the DTAA has remained unchanged – DTAA-India-Netherland. [Art. 23(4)]
Dismissing the appeal of revenue the Tribunal held that (i) From the plain reading
of Article 23(4) of the India-Netherlands DTAA it can be inferred that, it refers to
payments of any kind received as a consideration for the use of, or the right to use
any ‘copyright’ of literary, artistic or scientific work including cinematograph films, any
patent, trade mark, design or model, plan, secret formula or process, or for information
concerning industrial, commercial or scientific experience. Thus, in order to tax the
payment in question as “royalty”, it is sine qua non that the said payment must fall
within the ambit and scope of Para 4 of Article 12. The main emphasis on the payment
constituting ‘royalty’ in Para 4 is for a consideration for the ‘use of’ or the ‘right to use’
any copyright………. The key phrases “for the use” or “the right to use any copyright
of”; “any patent…….; “or process”, “or for information………,”; “or scientific experience”,
57
Income deemed to accrue or arise in India S.9(1)(vi)
etc., are important parameter for treating a transaction in the nature of “royalty”. If
the payment doesn’t fit within these parameters then it doesn’t fall within the terms
of “royalty” under Article 12(4). The Computer software does not fall under most of
the terms used in the Article barring “use of process” or “use of or right to use of
copyrights”. Here first of all, the sale of software cannot be held to be covered under
the word “use of process”, because the assessee has not allowed the end user to use the
process by using the software, as the customer does not have any access to the source
code. What is available for their use is software product as such and not the process
embedded in it. Several processes may be involved in making computer software but
what the customer uses is the software product as such and not the process, which are
involved into it. What is required to be examined in the impugned case as to whether
there is any use or right to use of copyright? The definition of copyright, though has not
been explained or defined in the treaty, however, the various Courts have consistently
opined that the definition of “copyright” as given in the ‘Copyright Act, 1957’ has to be
taken into account for understanding the concept.
(ii) The definition of ‘copyright’ in section 14 is an exhaustive definition and it refers to
bundle of rights. In respect of computer programming, which is relevant for the issue
under consideration before us, the copyright mainly consists of rights as given in clause
(b), that is, to do any of the act specified in clause (a) from (i) to (vii) as reproduced
above. Thus, to fall within the realm and ambit of right to use copyright in the
computer software programme, the aforesaid rights must be given and if the said rights
are not given then, there is no copyright in the computer programme or software. As
noted by the CIT(A), under the terms of the agreement between the assessee and INFOR
India, the agreement specifically forbids them from decompiling, reverse engineering
or disassembling the software. The agreement also provides that the end user shall use
the software only for the operation and shall not sub-license or modify the software.
None of the conditions mentioned in section 14 of the Copyright Act are applicable.
If the conclusions of Ld. CIT(A) are based on these facts and agreement, then he has
rightly concluded that the consideration received by the assessee is for pure sale of
“shrink wrapped software” off the shelf and hence, cannot be considered as “royalty”
within the meaning of Article 12(4) of the DTAA, as the same is consideration for sale
of copyrighted product and not to use of any copyright.
(iii) One of the issue which was raised by the Ld. DR before us is that, the Explanation
4 to section 9(1)(vi) which has been brought by Finance Act 2012 with retrospective
effect in section 9(1)(vi), therefore, the meaning and definition of ‘royalty’ as given
therein should be read into the DTAA. We are unable to appreciate this contention
of the Ld. DR because the retrospective amendment brought into statute with effect
from 01.06.1976 cannot be read into the DTAA, because the treaty has not been
correspondingly amended in line with new enlarged definition of ‘royalty’. The
alteration in the provisions of the Act cannot be per se read into the treaty unless
there is a corresponding negotiation between the two sovereign nations to amend the
specific provision of “royalty” in the same line. The limitation clause cannot be read
into the treaty for applying the provisions of domestic law like in Article 7 in some of
the treaties, where domestic laws are made applicable. Here in this case, the ‘royalty’
has been specifically defined in the treaty and amendment to the definition of such
term under the Act would not have any bearing on the definition of such term in the
58
S. 9(1)(vii) Income deemed to accrue or arise in India
context of DTAA. A treaty which has entered between the two sovereign nations, then
one country cannot unilaterally alter its provision. Thus, we do not find any merit in
the contention of the Ld. DR that the amended and enlarged definition should be read
into the Treaty. (ITA No. 7048/Mum/2010, dt. 13.06.2016) (AY. 2006-07)
ADIT v. Baan Global BV (Mum.)(Trib.) www.itatonline.org
S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Consideration paid 174
for use of computer software cannot be considered as royalty – Not liable to deduct
tax at source – DTAA-India-Singapore. [Art. 12, Copyright Act, 1957, S.52]
Allowing the appeal of assessee the Tribunal held that; the assessee cannot be said
to have paid the consideration for use of or the right to use copyright but has simply
purchased the copyrighted work embedded in the CD- ROM which can be said to be
sale of ‘good’ by the owner. The consideration paid by the assessee thus as per the
clauses of DTAA cannot be said to be royalty and the same will be outside the scope of
the definition of ‘royalty’ as provided in DTAA and would be taxable as business income
of the recipient. The assessee is entitled to the fair use of the work/product including
making copies for temporary purpose for protection against damage or loss even without
a license provided by the owner in this respect and the same would not constitute
infringement of any copyright of the owner of the work even as per the provisions of
section 52 of the Copyright Act,1957.(AY.2007-08)
Capgemini Business Services (I) Ltd. v. ACIT (2016) 158 ITD 1 / 178 TTJ 129 (Mum.)(Trib.)
S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Consideration 175
received for providing access to internet and other e-mail and networking facilities to
Indian entity – Amounts to use of embedded software – Taxable as Royalty – DTAA-
India-USA [Art. 12]
The assessee entered into agreement called Communication Agreement with Cincom
Systems India Private Limited (‘CS India’). As per the said agreement the assessee had
to provide access to internet and other e-mail and networking facilities. It was like
a gateway that facilitated call centers to incoming and outgoing calls from India to
the people of USA. On appeal to Tribunal, it held that consideration received by the
assessee for providing services to CS India was royalty under Article 12(3) of the India-
US DTAA observing that such payment was for the use of embedded secret software
enabling Indian customers to call residents of the USA and vice versa. Following the
AAR Ruling in the case of ABC (238 ITR 296), it held that the transaction would to
related to scientific work and would partake the character of intellectual property.
(AY.2002-03, 2003-04, 2006-07)
Cincom System Inc v. DDIT (2016) 176 TTJ 245 / 131 DTR 345 (Delhi)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 176
– Consideration not royalty and cannot be characterised as fees for technical services
– No part of income taxable in India. [DTAA-India-Singapore [Arts. 5(3), 7, 12(4)(a)].
Assessee not having permanent establishment in India. Control of equipment with
assessee and not transferred. Contract for rendering services and not for hiring
equipment. Services not involving transfer of technology, skill, experience or know-
how and constituting integral part of contract. Consideration not royalty and cannot
59
Income deemed to accrue or arise in India S. 9(1)(vii)
be characterised as fees for technical services. No part of income taxable in India. (AY.
2009-10)
Technip Singapore Pte Ltd v. DIT (2016) 385 ITR 408 / 240 Taxman 373 / 137 DTR 113 /
289 CTR 421 (Delhi)(HC)
Editorial: Ruling of the Authority for Advance Rulings in Global Industries Asia Pacific Pte.
Ltd., In re [2012] 343 ITR 253 (AAR) set aside
177 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Liaison office not involved in supervisory activities and not allowed to do trading,
commercial or industrial activity – Not supervisory permanent establishment in India
– Income not taxable as business income but as fees for technical services – DTAA-
India-Japan. [Art. 7, 12(2), (5)]
On appeals: Held, dismissing the appeals, that on examination of the purchase orders,
a common feature that emerged was that the supervisors were to come from Japan and
MUL had to bear the cost of their air tickets as well as their boarding and lodging in
India. The period of supervision in the case of the individual contracts did not exceed
a period of 180 days. They did not constitute a supervisory permanent establishment
in terms of Article 5(4) of the Double Taxation Avoidance Agreement. There was
no effective connection between the execution of the purchase orders for supply of
equipment and supervision of their installation, and the project office for the paint and
assembly shop of the car project of MUL. Additionally, the supervisory fee paid by MUL
was on the basis of “man days”. The number of days per supervisor was calculated by
dividing the man days by the number of supervisors. If 10 supervisors had stayed for
100 man days, the supervision period would be 10 days only, though the man days
were 100. Thus, the period of stay would be only of 10 days and not 100 days. The
liaison offices only facilitated the communication between the head office and MUL.
The explanation that its letter on the rate of tax deducted at source was given only to
expedite the payment from MUL, was tenable. The assessee offered the fees for technical
services to be taxed at 20% and claimed refund. The communication of the assessee to
MUL could not be viewed as an estoppel against the assessee from claiming to be taxed
in accordance with law. The fees for technical services was liable to be taxed at 20%
under article 12(2) of the Agreement. (AY. 1992-93 to 1996-97)
CIT v. Sumitomo Corporation (2016) 382 ITR 75 / 137 DTR 94 / 287 CTR 420 (Delhi)(HC)
Editorial : Order in Sumitomo Corporation v. Dy.CIT (2014) 31 ITR 310 (Delhi)(Trib.) is
affirmed.
178 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services–
Geophysical services in connection with exploration of oil, would not be in nature of
fees for technical services.
Held, that the Appellate Tribunal was not justified in holding that the activity of
two dimensional and three dimensional seismic survey carried on by the assessee in
connection with the exploration of oil was in the nature of “fees for technical services”
in terms of Explanation 2 to section 9(1)(vii) of the Act. (AY. 2008-09)
PGS Exploration (Norway) AS v. Addl. DIT (2016) 383 ITR 178 / 239 Taxman 333 / (2017)
291 CTR 146 (Delhi)(HC)
60
S. 9(1)(vii) Income deemed to accrue or arise in India
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 179
– Payments made for carrying out clinical trial and R&D pursuant to Product
Development Agreement with Cipla was held to be fees for technical services and
liable to deduct tax at source – DTAA-India-Malaysia [S. 195, 201, Art. 13]
Dismissing the appeal of the assessee, the Tribunal held that payments made for carrying
out clinical trial and R&D pursuant to Product Development Agreement with Cipla was held
to be fees for technical services and liable to deduct tax at source. (AY. 2011-12, 2012-13)
Stempeutics Research (P.) Ltd. v. (2016) 161 ITD 677 (Bang.)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 180
– Payment made to Event Management Company for IPL hosted in South Africa was
held to be fees for Technical Services – DTAA-India-UK [Art. 13]
Dismissing the appeal of the assessee, the Tribunal held that; payment made to Event
Management Company for IPL hosted in South Africa was held to be fees for Technical
services, in terms of Article 13(4)(c) as it made available technology to recipient of
services. (AY 2010-11)
International Management Group (UK) Ltd. v. ACIT (IT) 2016) 51 ITR 372 / 182 TTJ 1 /
(2017) 162 ITD 219 / (Delhi)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 181
– Interpretation report of data provided by assessee – Remittances to non-resident is
not liable for deduction of tax at source. [S.195]
There was no obligation for withholding tax on any person making payment to non-
resident, if payment made to non-resident was not chargeable under the provisions of
the I.T. Act, hence Assessee could not be treated as assessee in default
Adani Welspun Exploration Ltd. v. ITO (IT) (2016) 48 ITR 533 (Ahd.)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical Services 182
– Payment to foreign agent – Not liable to deduct tax at source.
It was held that nature of services mentioned in the case above will come not within
the definition of “fees for technical services” given under explanation 2 to Section 9(1)
(vii) of the Act. By virtue of such services, the concerned recipients had not made
available to the assessee any new technic or skill which assessee could use in its
business. The services rendered by the said parties related to clearing, warehousing and
freight charges, outside India. The logistics service rendered was essentially warehousing
facility. In our opinion, this cannot be equated with managerial, technical or consultancy
services. Even if it is considered as technical service, the fee was payable only for
services utilized by the assessee in the business or profession carried on by the said
non-residents outside India. Such business or profession of the non-residents, earned
them income outside India. Thus, it would fall within the exception given under sub-
clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee
is liable to deduct tax only where the payment made to non-residents is chargeable to
tax under the provisions of the Act. In the circumstances mentioned above, assessee
was justified in having a bona fide belief that the payments did not warrant application
of Section 195 of the Act.
Dignity Innovations v. ITO (2016) 49 ITR 4 (Chennai)(Trib.)
61
Income deemed to accrue or arise in India S. 9(1)(vii)
183 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Presumptive taxation for fees for technical services u/s. 44D could not be invoked
if services fell within Explanation 2 to section 9(1)(vii) and since service in question
was related to construction activity being specifically excluded from said Explanation,
presumptive taxation for said service could not be invoked – DTAA-India-USA [S.44D,
Art. 12]
Tribunal held that in case of receipts through permanent establishment in respect of
which profits are to be computed under Article 12(3) of the DTAA, section 44D was
not to be applied for the purpose of deduction of expenses. The Court further held that
section 44D and for that matter explanation 2 to section 9(1)(vii) do not apply.
This controversy has now been laid to rest by insertion of new section 44DA in the
Act w.e.f. 1.04.2004 by the Finance Act, 2003 where assessee has been given explicit
option to compute its income on net basis if it has maintained books of account. The
explanatory memorandum to the finance act stated that the section 44DA was inserted
with a view to harmonize the scheme of taxation of royalty and fee for technical
services under the Act with the provisions of the treaty with various countries. It means
that even prior to the insertion of section 44DA, the fee for technical services provided
through a PE in India was to be taxed on net basis under the provisions of the treaty,
if there existed such a clause in the treaty, i.e., similar to Article 12(6) in the India-US
treaty or India-Singapore Treaty etc. (AY. 2006-07, 2008-09)
DDIT (IT) v. MSV International Inc. (2016) 157 ITD 757 / 143 DTR 249 / 181 TTJ 480 /
51 ITR 428 (Delhi)(Trib.)
184 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Make available – Global market survey – Not liable to deduct tax at source – DTAA
– India-UK [S. 195, Art 13]
Assessee entered into an agreement with a U.K. based company, to undertake evaluation
of business opportunities to carry out projects in India. U.K. based company had carried
out global market survey to determine demand for repairs, conversions, new builds and
to determine short/medium/long term business prospects in India. Since these services
were neither geared to nor did they ‘make available’ any technical knowledge, skill or
experience to assessee or consisted of development and transfer of a technical man or
technical design to assessee, payments made by assessee for these services were not
taxable as per Article 13. (AY. 2004-05 to 2006-07)
ITO v. Skill Infrastructure Ltd. (2015) 70 SOT 186 (Mum.)(Trib.)
185 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Payments made for providing network connectivity to its customers, it made
arrangements with Authorized International Gateway Providers (AIGP) was not in the
nature of technical services hence not liable to deduct tax at source. [S.194J, Art. 12
of OECD]
Assessee was engaged in business of providing integrated network solutions, which
included internet service. For providing network connectivity to its customers, it made
arrangements with Authorized International Gateway Providers (AIGP) and having
acquired bandwidth from them, it made payment to AIGP. Since payment was made for
utilizing standard facilities which were provided by way of use of technical gadgets, it
62
S. 9(1)(vii) Income deemed to accrue or arise in India
did not involve any technical services as there was only interconnection of networks to
equipment’s of other service providers. Payments made for utilizing such services was
not in nature of technical services hence not liable to deduct tax at source. (AY. 2009-10)
ITO v. Primenet Global Ltd. (2016) 48 ITR 451 (Delhi)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical 186
services – There is a difference between “effectively connected” with the permanent
establishment and “legally connected” with it. Only those activities necessary for the
functioning of the PE are “effectively connected” with the PE – Concept of “make
available” technical knowledge etc. – DTAA-India-UK [S. 44DA, Art. 4, 7, 13]
Dismissing the appeal of assessee, the Tribunal held that; the appeal of the assessee as
under:
(a) with respect to ground No. 2,3, 4, 5 and 6 of the appeal of the assessee we
hold that that (a) the receipts from the services rendered outside India of
` 23,77,50,181/- are chargeable to tax as Fees for Technical Services in terms of
Article 13(4)(c) as it makes available the technology to the recipient of services and
further the provisions of article 13(6) of the Indo UK Double Taxation Avoidance
Agreement does not apply to this sum, as it does not “arise through” and also not
“effectively corrected” with the permanent establishment of the appellant.
(b) With respect to the ground No. 7 and 8 of the appeal we hold that income of
` 23,77, 50, 181/-is chargeable to tax under section 9(1)(vii)(b) of the Income Tax
Act as fees for technical services and it does not fall into the exception thereof.
(c) With respect to ground No. 9 of the appeal we hold that receipt of the appellant
satisfies the “make available” test as provided under article 13 (4) (c) of the India
UK DTAA as fees for technical services. (ITA No. 1613/Del/2015, dt. 04.10.2016)
(AY. 2010-11)
International management Group (UK) Ltd. v. ACIT (Delhi)(Trib.), www.itatonline.org
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – 187
Liable to deduct tax at source – DTAA-India-USA.[S. 195]
The Tribunal held that the payment made by the assessee with regard to managerial,
technical and consultancy services is liable to be taxed in India since the services are
utilized in the business for earning income in India. Therefore, the income accrued
to an associate concern of the assessee in India is liable for taxation under the Indian
Income-tax Act. Hence, the assessee was liable to deduct tax while making the payment
to its associate concern. (AY. 2008-09, 2009-10)
Foster Wheeler France SA v. Dy. DIT (2016) 178 TTJ 354 (Chennai)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 188
– Payment in the nature of interconnection charges was not in the nature of fees for
technical services and hence tax was not to be deducted. [S. 195, 201(1), 201(IA)]
The Assessee made payment in the nature interconnection charges, port / access charges
on which tax was not deducted at source. In the proceedings u/s. 201, the AO claimed
that tax ought to be deducted since the payments were in nature of fees for technical
services, but did not raise any demand u/s. 201(1) since the payee had paid tax on the
same. However, interest u/s. 201(1A) was levied by the AO. The matter reached the SC,
63
Income deemed to accrue or arise in India S. 9(1)(vii)
which had remanded the matter to the AO to verify whether the process of carriage of
calls required any manual intervention. In the second round of proceedings, the AO
held that there was human intervention and hence payments were covered within the
meaning of ‘technical services’. Further, the AO also claimed, in separate proceedings
u/s 201, that similar payments made to foreign telecom operators was taxable as fees
for technical services u/s. 9(1)(vii) or royalty u/s. 9(1)(vi). The ITAT allowed the appeal
of the Assessee and held that the payments were not taxable in India since there was
no human intervention involved in the process of transportation of calls. Further, there
was no ‘make available’ of technology since no knowledge was imparted to the Assessee.
Further, it was also observed by the ITAT that there was no human intervention in the
services received by the Assessee and hence no tax was required to be deducted.
The ITAT also rejected the additional evidence that was sought to be submitted by the
Assessee which was written opinion of retired Chief Justice of India, who had also
written the judgement in the case of the assessee. (AY. 2008-09 to 2011-12)
Bharti Airtel Ltd. v. ITO (TDS) (2016) 47 ITR 418 / 178 TTJ 708 (Delhi)(Trib.)
189 S. 9(1)(vii) : Income deemed to accrue or arise in India – Royalty – Payment received
for providing web hosting services, though involving use of certain scientific
equipment, cannot be treated as ‘consideration for use of, or right to use of, scientific
equipment’ which is a sine qua non for taxability – DTAA-India-USA. [Art. 12]
Use of a scientific equipment by assessee, in course of giving a service to customer,
is something very distinct from allowing customer to use a scientific equipment
and consideration for rendition of services, even though involving use of scientific
equipment is not taxable under section 9(1)(vi), read with Explanation 2(iva) thereto.
Therefore, payment received by assessee, an American company for providing web
hosting services, though involving use of certain scientific equipment, could not be
treated as ‘consideration for use of, or right to use of, scientific equipment’ which is a
sine qua non for taxability under s. 9(1)(vi), read with Explanation 2(iva) thereto as also
article 12 of Indo-US DTAA. (AY. 2009-10)
Dy. DIT v. Savvis Communication Corporation (2016) 158 ITD 750 / 178 TTJ 116 / 134
DTR 140 (Mum.)(Trib.)
190 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Broadcasting of television programmes and advertisements in India – Right to
distribute channels telecast by assessee through any means to intermediaries in
assigned territory – Matter remanded – DTAA-India-USA [Art.5, 12]
Assessee, a US based company, was engaged in business of broadcasting of television
programmes and advertisements in India. It appointed NGC, an Indian company, to
procure advertisements for telecasting in its channels. Assessing Officer as well as
DRP held that advertisement revenues were taxable in India since NGC constituted
permanent establishment of assessee in India. It was found from records that
‘advertisement airtime’ did not give purchasers any right of universal use and same
was restricted to channels owned by assessee only, further, assessee’s involvement till
completion of telecasting of advertisement material was essential in order to maintain
value of advertisement airtime - In view of above, ‘advertisement airtime’ could not be
categorised as ‘goods’ sold by assessee to NGC on principal-to-principal basis. Moreover,
64
S. 9(1)(vii) Income deemed to accrue or arise in India
in view of fact that NGC habitually exercised in India an authority to conclude contracts
on behalf of assessee and same was binding on assessee, it was rightly regarded as
‘dependent agent’ of assessee in terms of Article 5(4)(a) of India-USA DTAA.
Assessee a US company entered into distribution agreement with NGC India - In terms
of agreement, NGC India was given right to distribute channels telecasted by assessee
through any means to intermediaries in assigned territory. Assessing Officer treated
distribution fee paid by NGC India as ‘royalty’ liable to tax in India. It was undisputed
that Assessing Officer had not examined Explanation 6 while passing assessment order.
Moreover, fact that assessee was having dependent agent PE in India was also required
to be taken into consideration while examining issue in dispute, Hence, impugned order
passed by Assessing Officer was to be set aside and, matter was to be remanded back
for disposal afresh. (AY. 2007-08, 2008-09)
NGC Network Asia LLC v. Jt. CIT (2016) 47 ITR 162 / 175 TTJ 403 / 131 DTR 145 (Mum.)
(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 191
– Foreign company deputed its employees in India rendering managerial services
to assessee-company – Payment being FTS or royalty is made to non-resident, then
concept of total income becomes irrelevant and provisions of section 44D recognize
gross payment chargeable to tax – DTAA-India-Hong Kong. [S. 44DA, 192]
On appeal, the Tribunal held that, the employees were deputed at high level managerial/
executive positions which shows that they are deputed because of expertise and
managerial skills in the field which in fact was also evident from the agreement. The
secondees are assigned by DFCL and there is no separate contract of employment
between the assessee and the secondees. The secondees are under the legal obligation
as well as employment of DFCL and assigned to the assessee only for a short period of
time. In the absence of any contract between the assessee and the secondees, the parties
cannot enforce any right or obligation against each other. The secondees can claim their
salary only from the parent company i.e. DFCL and not from the assessee. Thus, the
expatriates were performing their duties for and on behalf of the DFCL.
In the case of payment being FTS or royalty as per section 9(1), it is irrelevant whether
there is any profit element in the income or not. It is not only a matter of computation of
total income when the concept of profit element in payment is relevant. If the payment
being FTS or royalty is made to non-resident, then the concept of total income becomes
irrelevant and the provisions of section 44D recognize the gross payment chargeable to
tax. Thus, all the payments made by the assessee to non-resident on account of FTS or
royalty are chargeable to tax irrespective of any profit element in the said payment or
not. However, there is an exception to this rule of charging the gross amount when the
non-resident is having fixed place of business or PE in India and the amount is earned
through the PE, then the expenditure incurred in relation to the PE for earning said
amount is allowable as per the provisions of section 44DA of the Act. Therefore, in view
of the judgment of Delhi High Court in the case of Centrica India Offshore (P.) Ltd. v. CIT
[2014] 364 ITR 336, the payment made to foreign company DFCL partakes the character
of FTS as per the definition under Explanation 2 to section 9(1)(vii).
An alternative point was raised by the assessee that the secondment of employees
constitute a service PE and secondly the amount would be chargeable to tax as per the
65
Income deemed to accrue or arise in India S. 9(1)(vii)
provision of section 44DA of the Act. Admittedly there is no DTAA between India and
Hong Kong and under the provision of Act there is no concept of service PE. Since
this plea was raised before the Tribunal for the first time and since there is no DTAA
between India and Hong Kong, the concept of service PE requires proper examination
and hence the issue was remitted to the files of the Assessing Officer for adjudication
on the issue as to whether the secondment of the employees constitute a service PE and
the applicability of the provisions of section 44DA. (AY. 2008-09)
Food World Supermarkets Ltd. v. Dy. DIT (2015) 174 TTJ 859 / (2016) 129 DTR 137 (Bang.)
(Trib.)
192 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Assessee entered into an agreement with US company for providing technical and
engineering services – In view of Expl. 2 to S. 9(1)(vii), payment made by assessee with
regard to managerial, technical and consultancy services liable to tax since services
utilized in the business for earning income in India – Under DTAA, foreign company
reviewed the executions plans, with emphasis on key milestones, provided the best
practices available in form of written procedures, specifications and details – Assessee
can use the specifications and procedures for other projects also – foreign company has
made available its technical knowledge to assessee as it is capable of deploying such
technology in future – Assessee liable to deduct TDS [India-USA [S.195, Art. 12]
Assessee entered into an agreement with RPL in India for providing technical and
engineering services. For providing such services, the assessee-company had entered into
another agreement with Foster Wheeler USA (Foster), an associate of the assessee-company.
AO found that the payment made by the assessee to Foster (USA) was liable for deduction
of tax at source under section 195. Since tax was not deducted, AO disallowed the entire
payment by applying provisions of section 40(a)(i). On appeal, assessee contended that
the U.S. company did not make available any technical knowledge, expertise, and know-
how to the assessee. Therefore, the payment made by the assessee could not be construed
as fee for technical services under India-US DTAA. Held that, as per Explanation 2 to
section 9(1)(vii) payment made by the assessee with regard to managerial, technical and
consultancy services was liable to be taxed in India since the services were utilized in
the business for earning income in India. Under DTAA, the beneficial clause is used
by invoking the concept of “make available”. Therefore, to consider the payment as fee
for technical services, the technical knowledge, expertise or know-how shall be made
available to the assessee. It is an admitted position that the assessee was engaged in the
business of engineering and construction contract, engineering equipment and power
equipment supplier. For the purpose of carrying out the business in India, the assessee
received the above services from Foster Wheeler USA and assessee had received execution
plans with schedules, specifications, etc. Foster Wheeler USA reviewed the working of
the assessee in respect of its plans, execution and also provided time schedule with
emphasis on key milestones and assessee had also received systems for meeting the
project budget and client satisfaction. The job specification was also given by Foster
Wheeler USA. Assessee was an expertise company in engineering and construction works
and specifications and other procedures were made available to the assessee-company
and the foreign company was reviewing and tracking the execution plans periodically,
not only the execution but also the project budget and client satisfaction, said foreign
66
S. 9(1)(vii) Income deemed to accrue or arise in India
company had made available its technical knowledge, expertise, know-how in execution
of the contract by the assessee in India. Hence, assessee is liable to deduct tax at source.
(AY. 2008-09, 2009-10)
Foster Wheeler France SA v. DDIT(IT) (2016) 157 ITD 793 / 176 TTJ 521 / 137 DTR 265
(Chennai)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 193
– Where assessee made payment to a China based company for designing, drawing,
supply and installation of three passenger boarding bridges at airport, matter was to
be remanded back to determine as to whether said payment was taxable in India in
terms of ‘fee for technical services’– DTAA-India-China. (Art. 12(3)]
Assessee made payment to a China based company for designing, drawing, supply
and installation of three passenger boarding bridges at Airport without deducting tax
at source. Assessing Officer was of view that tax had to be deduct at source. It was
noted from records that revenue authorities did not consider as to whether payments
in question fell within definition of ‘royalty’ under Article 12(3) of India-China DTAA.
Moreover, question as to whether aforesaid payments could be regarded as ‘fee for
technical services’ under section 9(i)(vii) was also not a subject matter of examination
before lower authorities. In view of above, impugned order was to be set aside and,
matter was to be remanded back for disposal afresh. (AY.2006-07)
Cochin International Airport Ltd. v. ITO(IT) (2016) 157 ITD 310 / 136 DTR 241 / 177 TTJ
578 (Cochin)(Trib.)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – 194
Article 12 of Model OECD Convention – Explanations to section 9(2) were inserted by
Finance Act, 2010, with retrospective effect from 1-6-1976 by which payments made by
assessee to non-residents were taxable in India as ‘fee for technical services’; however
in view of law as it existed at an earlier point of time when payments were made, it
was not possible to comply with tax withholding liability.
The assessee was an advocate specialized in Intellectual Property Laws (IPR). The
services of assessee were utilized by its clients in India which included multinational
major corporate etc. During the year under consideration, assessee’s clients expressed
interest in protecting their IPR in foreign territories, he acted as a facilitator and
entrusted work to a foreign attorney in respective jurisdictions who rendered services
to clients of assessee. The fees of foreign attorneys were remitted by assessee upon
receipt of payment/instructions from his clients and such amounts including fees of
assessee for facilitation were borne by clients. The AO held that the payments made by
assessee to non-residents were taxable in India as ‘fee for technical services ‘in view of
insertion of Explanation 2 to Section 9(1)(vii)(b) by Finance Act, 2010 with retrospective
effect from 1-6-1976. On appeal to Tribunal, it held that even though law amended was
retrospective in nature but so far as tax withholding liability was concerned, it depended
on law as it existed at point of time when payments from which taxes ought to have
been withheld were made. Assessee therefore could not be faulted for not deducting
TDS.(AY. 2006-07, 2008-09, 2009-10)
DDIT v. Subhotosh Majumdar (2016) 156 ITD 708 / 176 TTJ 600 / 142 DTR 285 (Kol.)
(Trib.)
67
Income deemed to accrue or arise in India S. 9(1)(vii)
195 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services –
“Startup services”, though technical in nature, are not assessable as “fees for technical
services” if they do not involve any “construction, assembly mining or like projects”.
The services are also not taxable under Article 12 as they do not “make available”
technical knowledge – DTAA-India-USA. [S.195(2), Art. 12]
“Startup services”, though technical in nature, are not assessable as “fees for technical
services” if they do not involve any “construction, assembly mining or like projects”.
The services are also not taxable under Article 12 as they do not “make available”
technical knowledge- DTAA-India-USA. (AY. 1998-99)
Raytheon Ebasco Overseas Ltd. v. DCIT (2016) 158 ITD 200 / 178 TTJ 39 (UO) (Mum.)
(Trib.)
196 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services –
In view of Most favoured Nation (MFN) clause in Treaty of India and Netherlands, to
decide scope of ‘fee for technical services’ under India – Netherland DTAA, one has
to see scope of taxability of similar payment as explained in DTAA of India and USA
– DTAA-India-Netherland [S. 195, Art. 12]
Assessee, a Netherland based company, rendered services towards agreement for basic
refinery package (BRP) to an Indian company. AO held that the assessee has provided
technical services hence taxable at the rate of 10 percent as PER THE India Dutch
DTAA. CIT (A) held that agreement for basic refinery package being a composite one,
any bifurcation of services rendered under said agreement would be self-contradictory.
On appeal Tribunal held that ;as long as Assessing Officer could demonstrate after
collecting necessary details that only a part of service was taxable and non-taxable
consideration component (i.e. consideration for physical deliverables, consideration
for services other than technical services and consideration for services which do not
transmit technical know-how etc.) was less than 50 per cent of overall consideration
paid for basic refinery package, he could certainly conclude that only a part of total
services was taxable on account of its being composite contract. In favour of assesessee.
In view of Most favoured Nation clause set out in Treaty between India and Dutch, to
decide scope of ‘fees for technical services’ under Article 12 of India Dutch treaty one
has to see scope of taxability of similar payments in treaty of India and USA and unless
Indo-Netherlands treaty is more beneficial to assessee, provisions of Indo-US tax treaty
will apply. Fees for non-technical consultancy services cannot be treated as covered by
scope of ‘fees for technical services’. (AY. 2005-06)
Shell Global Solutions International BV v. ITO (2016) 157 ITD 24 / 175 TTJ 286 / 129
DTR 217 (Ahd.)(Trib.)
197 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Product promotion service agreement between Indian company and its Russian
subsidiary to promote sales in Russia – Not taxable in India – DTAA-India-Russia.
[Art. 7, 12]
Product promotion service agreement between Indian company and its Russian
subsidiary to promote sales in Russia is not taxable in India. The product promotion
agreement could not be related with the distribution agreement signed two years
earlier, under which exports were made. Therefore it could not be said that service fees
68
S. 9(1)(vii) Income deemed to accrue or arise in India
under the product promotion agreement were paid in order to promote its products for
enhancing export in the Russian market.
Dr. Reddy Laboratories Ltd., In re (2016) 387 ITR 337 / 243 Taxman 127 / 289 DTR 24
(AAR)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services – 198
Activities of providing education not business activity – No permanent establishment
– Program fee not chargeable to tax in India as “fees for included services” – Not
subject to withholding tax – DTAA-India-USA. [S.195, Art. 5, 12]
That the activity of the applicant could not be said to be a business activity particularly
because the applicant was registered in the United States as a non-profit public benefit
corporation formed for the purpose of providing education. Its activities of providing
education could not be said to be business activity of the applicant. Article 7 of the
DTAA specifically deals with business income. There was no permanent establishment
of the applicant in India as defined in article 5. Every time a program was undertaken
in India, it was N which arranged for the place for conducting the programs. N need not
every time arrange for the same place and arrange different locations for conducting the
program. There could not be any fixed place of business on the part of the applicant.
What the applicant did was to make available the programs of Harvard Publishing
University which published material for all over the world. Therefore, it could not be
covered in royalty also. Therefore, the program fee received by the applicant in terms of
the agreement was not chargeable to tax in India as “fees for included services” within
the meaning of the term under article 12 of the DTAA or the provisions of section 9(1)
(vii) of the Act, 1961 and, therefore, was not subject to withholding tax under section
195 of the Income-tax Act, 1961
The Regents of the University of California UCLA Anderson School of Management
Executive Education, USA, In re (2016) 387 ITR 398 / 243 Taxman 122 / 290 CTR 10
(AAR)
S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services 199
– Conducting courses of short duration in India for senior corporate executives is
educational institution, as there is no permanent establishment in India, Program fee
not chargeable to tax in India as “fees for included services” – DTAA-India-USA. [S.9(1)
(i), 195, Art. 5, 12(5)]
Authority held that ; the objections raised by the Department that the applicant was
not an educational institution and that it was merely a facilitating institution were not
tenable. The certificate of its incorporation showed that it was an educational institution
for carrying on charitable and educational activities allowed by law. The certificate
issued by the Department of the Treasury, Internal Revenue Service, Philadelphia,
showed that the applicant was an exempt organization under the United States Internal
Revenue Code. The objection that all the faculties provided for educating were provided
by Berkeley University and not by the applicant was also not tenable. The fact that the
professors who came for a short period were well accommodated by N did not create a
permanent establishment of the applicant in India. The programme fee received by the
applicant from N would be governed by Article 12 of the DTAA and would be free from
69
Income deemed to accrue or arise in India S. 9(1)(vii)
tax. There would, therefore, be no necessity to withhold the tax under section 195 of the
Income-tax Act, 1961. There would be no permanent establishment in India.
UC Berkeley Center for Executive Education, USA, In re (2016) 387 ITR 385 (AAR)
200 S. 9(1)(vii) : Income deemed to accrue or arise in India – Fees for technical services
– Supply management service fees received by Applicant – Not liable to deduct tax at
source – DTAA-India-UK [S. 195, Art. 13]
The applicant is a company incorporated in UK. The Indian affiliate is engaged in
the business of manufacture and sale of turbo-chargers and purchases turbo-charger
components directly from third party in UK and US and in relation to such purchases,
the applicant provides supply management services vide material suppliers management
service agreement. AAR ruling was sought on question whether the supply management
service fees received by applicant from Indian affiliate is in the nature of “fees for
technical services” (FTS) or “royalties” within the meaning of the term Article 13 of the
India-UK DTAA.
The AAR held that, the Applicant is not imparting its technical knowledge and expertise
to the Indian Company based on which the Indian company will acquire such skills and
will be able to make use of it in future. Therefore, the ‘Make available’ clause under
India-UK DTAA is not satisfied and hence such fee is not FTS under the Article 13 of
the India-UK Treaty.
AAR further held that the nature of services related to the identification of products
and competitive pricing cannot qualify as royalties under the provisions of Article 13
under India-UK DTAA because it is not related with the use of, or the right to use any
copyright, patent, trademark, design, or modal, plan secret formula or process etc. Thus,
Indian affiliate is not required to withhold tax under section 195 of the Act.
Cummins Ltd., In re (2016) 381 ITR 44 / 237 Taxman 693 / 283 CTR 241 / 130 DTR 353
(AAR)
70
S. 10(10) Gratuity
CHAPTER III
INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
S. 10 : Incomes not included in total income
S. 10(1) : Agricultural income – Lease deed and certificate of Wakf Board transferring 201
lease in favour of assessee are sufficient to prove that the claim of agricultural income
was valid.
The assessee declared agricultural income being income from sale of poplar tree.
The AO did not allow the claim of the assessee since proof of ownership of the land
and cultivation. The CIT(A) allowed the claim based on the copy of the lease deed,
certificate issued by the Wakf Bard transferring the lease in favour of the assessee and
that the income was received in cheque. The ITAT upheld the order of the CIT(A) and
held that the adequate evidences were filed by the Assessee to prove the agricultural
activity. (AY. 2006-07)
DCIT v. Davinder Kumar Bhasin (2015) 174 TTJ 844 / 128 DTR 218 / (2016) 45 ITR 232
(Chd.)(Trib.)
S. 10(3) : Casual and non-recurring receipts – Sum received as compensation as a 202
result of the settlement arrived at in pursuance of the order of the Supreme Court
annulling the auction is neither in the nature of capital receipt nor is the same
assessable under section 56. [S. 4, 56]
The High Court held that the Sum received as compensation as a result of the
settlement arrived at in pursuance of the order of the Supreme Court annulling the
auction is neither in the nature of capital receipt nor is the same assessable under
section 56 following the decision in the case of Cadell Weaving Mill Co. Ltd v. CIT (2001)
249 ITR 265 (Bom) (HC) (AY 1993-94, 1994-95)
Girish Bansal, Gynendra Bansal v. UOI (2016) 142 DTR 138 / 289 CTR 514 (Delhi)(HC)
S. 10(10) : Gratuity – Leave Salary – Employee of the Central Government or State 203
Government – Whether Gratuity and leave encashment are to be governed by
definition of salary [S. 10(10AA)]
The assessee had retired from a Government bank under the ‘Exit Option Scheme’
floated by the bank. He filed his return after claiming certain deductions under section
10(10) and 10(10AA) of the Act in respect of gratuity and leave encashment. The
Assessing Officer disallowed the excess amount of gratuity and excess amount of leave
encashment claimed by the assessee. The CIT(A) as well as the Tribunal had upheld the
order of the Assessing Officer by stating that the definition of salary as per Rule 2(h)
Part A, Fourth Schedule, no other payment or allowance other than dearness allowance
can be taken into consideration.
The main question under consideration was whether any benefit or allowance other
than dearness allowance was to be included in the basic salary of the assessee for
computation of exemption on gratuity and leave encashment. The CIT(A) referred
the circular No. 46 dated 14th September 1970 issued by CBDT which said that
salary would include periodical payments made to the employee by the employer as
71
Gratuity S. 10(10)
compensation for the services and payment made by way of allowances or perquisites
will not be taken into consideration as salary. However when DA is merged with salary
it no longer remains DA but becomes part of salary. The assessee relied on the definition
of salary as laid down in the 8th Bipartite Settlement agreement on wage revision
between Indian Banks Association and their workmen. However the High Court held
that the definition of salary is to be governed by the Rule 2 of part A of the Fourth
Schedule and cannot be imported and applied from other agreements and acts.
Thus the High Court held that the assessee was not able to demonstrate the approach
of the below authorities was erroneous or perverse or that the findings of fact
recorded were based on misreading or misappreciation on record so as to warrant any
interference. Thus the High Court held that there was no merit found in the appeal and
hence the same was thereby dismissed. (AY. 2008-09)
Harbans Singh v. CIT (2016) 382 ITR 600 / 237 Taxman 596 (P&H)(HC)
204 S. 10(10) : Gratuity – Charan Singh Haryana Agricultural University (CCSU) which
was established by an Act of Parliament and entirely funded by State Government
would be treated as State, therefore entire amount of gratuity received therefrom
would be exempt from tax.
Allowing the appeal of the assessee Tribunal held that Charan Singh Haryana
Agricultural University (CCSU) which was established by an Act of Parliament and
entirely funded by State Government would be treated as State, therefore entire amount
of gratuity received therefrom would be exempt from tax. (AY. 2010-2011)
Ram Kanwar Rana v. ITO (2016) 159 ITD 431 (Delhi)(Trib.)
205 S. 10(10D) : Life insurance policy – Keyman insurance policy – Amounts received
under Keyman insurance policy prior to assessment year 2014-15 was held to be not
taxable.
Dismissing the appeal of revenue, the Court held that amendment in Explanation I
to section 10(10D) has specifically came into force only from 1-4-2014; it would not
govern/apply to amounts received under Keyman insurance policy prior to assessment
year 2014-15 so as to make receipts taxable. Circulars and Notifications: Circular No.
762, dated 18-2-1998. (AY. 2010-11)
CIT v. Prashant J. Agarwal (2016) 243 Taxman 119 (Bom.)(HC)
206 S. 10(10D) : Life insurance policy – Insurer – Foreign Insurgency – Amount received
amount on account of maturity of life insurance policy taken by her husband from
American Insurance Company in Abu Dubai,was entitled to exemption. [S2(28BB)]
The AO disallowed claim of assessee on ground that insurance policy was not taken
from Indian insurance company and, therefore, provisions of S. 10(10D) were not
applicable. Allowing the appeal of the assesse, Tribunal held that when no such
condition had been specified in S. 10(10D) that insurance policy be taken from Indian
insurance company, assessee was entitled for exemption u/s. 10(10D) on sum received.
Taragauri T. Doshi v. ITO (2016) 160 ITD 343 (Mum.)(Trib.)
72
S. 10(19A) Palace
S. 10(14) : Special allowance or benefit – Deduction at source – Amounts paid to meet 207
expenses wholly and exclusively for discharging duties of employment – Payments
need not be verified – Tax not deductible at source on such payments. [S.17(2), 192]
Dismissing the appeal of revenue the Court held that A perusal of section 10(14) of the
Income-tax Act, 1961, shows that if any allowance or benefit not being in the nature of
perquisite is granted to meet the expenses wholly, necessarily or exclusively incurred
in performance of duties, to the extent to which such expenses are actually incurred
they would be exempt. Circulars No. Q/FD/695/1/90 and Q/FD/695/2/2000 have been
issued by the Ministry of External Affairs, Government of India, instructing that if
the amount which is stated to have been paid as per diem allowance was not highly
disproportionate or not unreasonable, the further verification of the actual expenditure
is not to be considered. The resultant effect is that the amount is to be treated as by
way of reimbursement of expenses. When the payment is made to meet the expenses
incurred and when it is not taxable under section 10(14), merely because the actual
expenses were not verified, the character or nature of the payment would not change
so as to fall under section 17(2) of the Act. Held accordingly, that the Commissioner
(Appeals) and the Tribunal came to the conclusion that the per diem allowance of $ 50
to $ 75 paid by the assessee to its employees on official trips to the USA and Europe
to be reasonable and that it would be covered as exempt under section 10(14). The
Tribunal was correct in holding that tax was not deductible on such payment. (AY.
2009-10, 2010-11, 2011-12)
CIT v. Symphony Marketing Solutions India P. Ltd. (2016) 388 ITR 457 / (2017) 150 DTR
172 (Karn.)(HC)
S. 10(14) : Special allowance or benefit – Where no uniform for employees was 208
prescribed by company, payment made to employees in name of uniform allowance
could not be said to be exempt, hence liable to deduct tax at source. [S. 17, 192, rule
2BB]
Dismissing the appeals of the assessee the Court held that assessee’s submission that
dress code at work place would qualify as uniform was unacceptable because term
‘uniform’ in context of dressing carries a vastly different connotation and would
necessarily include precise instructions as to dress, design, and also colours which
will achieve a uniformity in dressing at a work place or at place of study or some
such collection of group of persons belonging to by and large a common class and was
entirely different from a far more broader concept of a general dress code.(AY. 2010-11)
Oil & Natural Gas Corporation Ltd. v. ACIT (2016) 243 Taxman 105 / 289 CTR 403 / 142
DTR 57 (Guj.)(HC)
S. 10(19A) : Palace – Annual value – Occupation of a Ruler – Rental income was held 209
to be exempt – Though principles of res judicata do not apply, the Department should
not endlessly pursue matters which have attained finality in earlier years. [S.23,
Wealth-tax Act, 1957 S. 5(iii)]
Allowing the appeal the Court held that (i) No reliance could be placed on section
5(iii) of the Wealth-tax Act while construing Section 10(19A) of the I.T. Act. It is due
to marked difference in the language employed in both sections. In Section 10(19A)
73
Medical institution S. 10(22A)
of the I.T. Act, the Legislature has used the expression “palace” for considering the
grant of exemption to the Ruler whereas on the same subject, the Legislature has used
different expression namely “any one building” in Section 5 (iii) of the Wealth-tax Act.
We cannot ignore this distinction while interpreting Section 10(19A) which, in our view,
is significant.
(ii) If the Legislature intended to spilt the palace in part(s), alike houses for taxing the
subject, it would have said so by employing appropriate language in Section 10(19A)
of the I.T. Act. We, however, do not find such language employed in Section 10(19A).
Section 23(2) and (3), uses the expression “house or part of a house”. Such expression
does not find place in Section 10(19A) of the I.T. Act. Likewise, we do not find any
such expression in Section 23, specifically dealing with the 24 cases relating to “palace”.
This significant departure of the words in Section 10(19A) of the I.T. Act and Section
23 also suggest that the Legislature did not intend to tax portion of the “palace” by
splitting it in parts.
(iii) It is a settled rule of interpretation that if two Statutes dealing with the same
subject use different language then it is not permissible to apply the language of one
Statute to other while interpreting such Statutes. Similarly, once the assessee is able to
fulfill the conditions specified in section for claiming exemption under the Act then
provisions dealing with grant of exemption should be construed liberally because the
exemptions are for the benefit of the assessee.
(iv) The question involved in this case had also arisen in previous Assessment Years’
(1973-74 till 1977-78) and was decided in appellant’s favour when Special Leave
Petition(c) No. 3764 of 2007 filed by the Revenue was dismissed by this Court on
25.08.2010 by affirming the order of the Rajasthan High Court referred supra. In such
a factual situation where the Revenue consistently lost the matter on the issue then,
in our view, there was no reason much less justifiable reason for the Revenue to have
pursued the same issue any more in higher Courts.
(v) Though principle of res judicata does not apply to income-tax proceedings and each
assessment year is an independent year in itself, yet, in our view, in the absence of any
valid and convincing reason, there was no justification on the part of the Revenue to
have pursued the same issue again to higher Courts. There should be a finality attached
to the issue once it stands decided by the higher Courts on merits. This principle, in
our view, applies to this case on all forces against the revenue. (AY. 1978-79)
Maharao Bhim Singh of Kota v. CIT (2016) 290 CTR 601 / 144 DTR 249 / (2017) 390 ITR
532 / 244 Taxman 139 (SC)
210 S. 10(22A) : Medical institution – Private limited company could register under section
25 of the Companies Act and therefore such company was an eligible institution for
claiming exemption. [Companies Act, 1956, S. 25]
The Tribunal directed grant of exemption and rejected the reference application of the
Department. On a reference :
Held, (i) that the finding of the Tribunal that the objects of the assessee as found in its
Memorandum of Association were solely for philanthropic purposes and not for profit
and the objects were not violated was one of the facts which had not been challenged.
The Court therefore would not answer the question whether the Tribunal was justified
in directing the grant of exemption under section 10(22A) to the assessee.
74
S. 10(23C) Educational institution
(ii) That under section 25 of the Companies Act, 1956 a charitable or other company
could have the word “limited” or “private limited” dispensed with in its name. On that
basis it could not be said that a private limited company was not within the purview of
the word “institution” used in section 10(22A) of the Income-tax Act, 1961. When the
Legislature did not restrict the meaning of the word “institution” there was no reason
for the Court to restrict it. (AY. 1986-87, 1987-88)
CIT v. Apeejay Medical Ltd. (2016) 383 ITR 297 / 68 taxmann.com 10 (Cal.)(HC)
S. 10(22A) : Medical institution – Interest – Interest utilised to reimburse medical 211
expenses of three companies in group – Amount not exempt.
The Assessing Officer rejected the claim of exemption in respect of interest income, but
the Tribunal allowed it. On appeal to the High Court:
Held, that the assessee had not undertaken any of the five activities. The claim for
exemption was based on (a) the objects contained in the Memorandum of Association
and (b) the reimbursement of medical expenses to three companies incurred by them
in advancing medical facilities to their employees. The income did not arise from any
of the five activities. The income arose out of interest. The predominant object of the
activity in the relevant year was not to carry out any act of charity or goodwill or
benevolence. It was on the contrary to earn interest. The income admittedly had no
nexus with any one of the five activities. Therefore the income was not an income
of any hospital or an institution engaged in any one of the five activities. It was not
entitled to exemption. (AY. 1988-89)
CIT v. Apeejay Medical Research and Welfare Association (P) Ltd. (2016) 383 ITR 79 / 239
Taxman 266 / 286 CTR 182 / 135 DTR 145 (Cal.)(HC)
S. 10(23C) : Educational institution – University – Condition that university must be 212
wholly or substantially financed by Government – Review petition was dismissed.
From the decision of the Supreme Court affirming the Dharwad Bench of the Karnataka
High Court (see [2016] 384 ITR 37 (SC)) holding that the assessee did not satisfy
the second requirement spelt out by section 10(23C)(iiiab) and that the assessee was
neither directly nor even substantially financed by the Government so as to be entitled
to exemption from payment of tax under the Act, the assessee filed a review petition:
The Supreme Court rejected the prayer for oral hearing and dismissed the review
petition holding that no case for review was made out. Decision of the Supreme Court
in Visvesvaraya Technological University v. Asst. CIT (2016) 384 ITR 37 (SC) reaffirmed.
(AY. 2004-05 to 2009-10)
Visvesaraya Technological University v. ACIT (2016) 389 ITR 10 / 242 Taxman 247 (SC)
S. 10(23C) : Educational institution – That institution makes profit does not necessarily 213
mean it exists for profit – Exemption cannot be denied.
Dismissing the appeal of revenue the Court held that where an educational institution
carries on the activity of education primarily for educating persons, the fact that
it makes a surplus does not lead to the conclusion that it ceases to exist solely for
educational purposes and becomes an institution for the purpose of making profit.
The predominant object test must be applied. The purpose of education should not be
submerged by a profit making motive. A distinction must be drawn between the making
75
Educational institution S. 10(23C)
of a surplus and an institution being carried on “for profit”. No inference arises that
merely because imparting education results in making a profit, it becomes an activity
for profit. If after meeting expenditure, a surplus arises incidentally from the activity
carried on by the educational institution, it will not be cease to be one existing solely
for educational purposes. The ultimate test is whether on an overall view of the matter
in the concerned assessment year the object is to make profit as opposed to educating
persons. Considering the overall facts and circumstances of the case, the object of the
petitioner institution, we are of the opinion that the petitioner institution is established
for the sole purpose of imparting education in a specialised field.
CCIT v. St. Peter’s Educational Society (2016) 385 ITR 66 / 240 Taxman 392 / 287 CTR
132 / 137 DTR 37 (SC)
214 S. 10(23C) : Educational institution – To consider a university as wholly or
substantiallay financed by Government as contemplated under section 10(23C)(iiiab),
funds received from Government must be direct grants/contributions from Government
source and not fees collected from students under statute. University existing solely
for the purpose of education and without any profit motive, though huge surplus is
entitled to exemption. [S. 10(23C(iiiab)]
Court held that there was huge surplus (in excess of 6 to 15%) and minimal expenditure
implies profit motive. Court also held that ,therefore, be more appropriate to hold that
funds received from the Government contemplated under Section 10(23c)(iiiab) of
the Act must be direct grants/contributions from Governmental sources and not fees
collected under the statute. The view of the Delhi High Court in Mother Dairy Fruit
& Vegetable Private Limited v. Hatim Ali & Anr [(2015) 217 DLT 470] which had been
brought to the notice of the Court has to be understood in the context of the definition
of ‘public authority’ as specified in Section 2(h)(d)(ii) of the Right to Information Act,
2005. Reliance has been placed on the judgment of the High Court of Karnataka in
Commissioner of Income-tax, Bangalore v. Indian Institute of Management (2014) 49
Taxmann.com 136 (Karnataka). The situation before us, on facts, is different leading to
the irresistible conclusion that the University does not satisfy the second requirement
spelt out by Section 10(23c)(iiiab) of the Act. The appellant University is neither directly
nor even substantially financed by the Government so as to be entitled to exemption
from payment of tax under the Act. (AY. 2004-05 to 2009-10)
Visvesvaraya Technological university v. ACIT (2016) 384 ITR 37 / 239 Taxman 395 / 286
CTR 1 / 134 DTR 215 (SC)
Editorial: Decision in Visvesvaraya Tecnological University v. ACIT (2014) 362 ITR 279
(Karn)(HC) is affirmed.
215 S. 10(23C) : Educational institution – Charging of high fees cannot be a ground to
reject the application as the institution exists solely for educational purpose. [S.
10(23C)(vi)]
The High Court held that it is a settled law that earning of profits/surplus or charging
of high fees cannot be a ground to deny the claim of exemption under section 10(23C)
(vi) and consequently, reject the application as long as the university exists solely for
educational purpose. Further, it was held that the requirement of filing audit report
76
S. 10(23C) Educational institution
obviously would arise at the time of filing of the return and not at the time of filing
of application for approval and was therefore the 10th proviso to Section 10(23C) was
wrongly invoked by the Commissioner for rejecting the application.
Ganpat University v. Arvind Shankar (2016) 242 Taxman 496 / (2017) 293 CTR 113 / 147
DTR 335 (Guj.)(HC)
S. 10(23C) : Educational institution – No revenue authority has power to condone 216
delay in filing exemption application – Writ petition was dismissed. [S. 10(23C)(vi),
Constitution of India, Art. 226]
On a writ petition, the Court held that the Chief Commissioner was right in holding that
the assessee’s application could not be considered as it was time barred. However the
finding with regard to the objectives of the society by the Department holding that the
society could not be said to be solely for education purpose was to be set aside. Since
there was no power to condone the delay in filing an application under section 10(23C)
of the Act, the Court would not exercise its extraordinary jurisdiction to condone the
delay. Since the assessee could not have made an application for the Assessment
Year 2013-14 since its application for the Assessment Year 2012-13 was still pending
consideration the matter was remanded to the Department to consider the application for
exemption for the Assessment Year 2013-14 taking into consideration the amendments
made to the objectives of the assessee.(AY. 2012-13)
All Angels Educational Society v. CCIT (2016) 388 ITR 475 / 241 Taxman 421 / 289 CTR
637 (Mad.)(HC)
S. 10(23C) : Educational institution – Filing of application prematurely – In terms of 217
14th proviso to section 10(23C), application for exemption of income can be filed even
prior to 1st April of relevant assessment year, from which exemption is sought.
The assessee trust was constituted with the purpose of facilitating the charitable, social,
cultural, educational, vocational and economic development of the society. It was
registered under the provisions of Societies Registration Act, 1860. Since in the relevant
assessment year, its receipts exceeded ` 1 crore, it applied to the Chief Commissioner
seeking exemption under section 10(23C)(vi). As required, Form No. 56-D, prescribed
under rule 2CA of the Income-tax Rules, 1962, was also filed.
In pursuance to the said application, the department sought from the assessee certain
information including its accounts for the year ending 31-3-2014, objects of the trust
and returns of income filed earlier which were duly submitted.
During the course of the hearing it was pointed out that the assessee had prematurely filed
the application on 24-3-2014 and that the same could only have been filed after the expiry of
financial year 2013-14 and before 30-9-2014. Accordingly, assessee’s application was rejected
On writ: allowing the petition the Court held that In terms of 14th proviso to section
10(23C), application for exemption of income can be filed even prior to 1st April of
relevant assessment year, from which exemption is sought. In view of the above, the
impugned order passed by the Chief Commissioner is set aside with a direction to
the Chief Commissioner to consider the application filed by the assessee for grant of
exemption under section 10(23C), on merits. (AY. 2014-15)
Shri Guru Ram Dass Ji Educational Trust v. CCIT (2016) 389 ITR 423 / 243 Taxman 94 /
(2017) 147 DTR 108 / 293 CTR 144 (P&H)(HC)
77
Educational institution S. 10(23C)
218 S. 10(23C) : Educational institution – Chief CIT has no power to condone the delay in
filing the application for approval of exemption u/s. 10(23C)(iv) except in exceptional
circumstances – Delay of one day was directed to be condoned. [S. 10(23C)(iv), Art.
226]
A writ was filed before the HC challenging the powers of CIT to condone the delay in
filing the application for approval of exemption u/s. 10(23C)(iv). The single bench of
HC, relying on various judicial decisions, held that the Chief CIT has inherent power
to condone the delay in filing the application.
However, the Division Bench of HC held that the Chief CIT had no power to condone
the delay in filing the said application. Further, the HC observed that as there was a
delay of only one day in presenting the application, the said delay could be condoned
by the this Court, exercising extraordinary jurisdiction under Article 226 of the
Constitution and therefore, the matter was remanded back to Chief CIT for consideration
of application on merits.
CCIT v. Shri Anand Rishi Jain Society (2016) 141 DTR 58 (Mad.)(HC)
219 S. 10(23C) : Educational institution – An Educational Charitable Institution had
multiple objectives for the impugned assessment year and did not exist solely for
educational purpose would not qualify for exemption benefit under section 10(23C)
(vi) [S.10(23C)(vi), 11, 12AA]
Rejecting the petition the Court held that; an Educational Charitable Institution had
multiple objectives for the impugned assessment year and did not exist solely for
educational purpose would not qualify for exemption benefit under section 10(23C)(vi).
(AY. 2014-15)
B. S. Abdur Rahman Institute of Science & Technology v. CCIT (2016) 141 DTR 60 / 289
CTR 631 / 78 taxmann.com 336 (Mad.)(HC)
220 S. 10(23C) : Educational institution – Application for exemption can be made by the
Registered Society running the Educational Institution and not necessarily to be made
by the Educational Institution itself. While disposing the application for exemption
ancilliary objects are not to be considered separately. [S. 2(15), 10(23)(vi), 12A]
Assessee, a registered society, was running an Educational Institution in the name
and style of Doon College of Agriculture Science and Technology. It was registered
as a charitable society u/s. 12A of the Act. It made an application for exemption u/s.
10(23C)(vi) which was rejected by the Commissioner of Income-tax on the ground that
Object No.3,4 and 5 are not “solely for education purposes”. On Writ Petition, the Single
Judge held that Object No.3, 4, and 5 are ancilliary to the main object of running and
Educational Institution and directed the authority to decide the application in light of
the above observation. The revenue filed an appeal to the Division Bench and contended
that the application u/s 10(23C) is to be filed by the Education Institution itself and
object No.3,4, and 5 are not ancilliary. The High Court held that Form 56D prescribed
for the purpose of section 10(23C)(vi) requires the person running the institution to
certify the facts which in the instant case is the registered society. Further, the society is
making the application for and on behalf of the Institution and in case benefit of section
10(23C)(vi) is denied it is the society which will be assessed to tax under the Act,
78
S. 10(23C) Educational institution
therefore, the contention of the revenue is to be rejected. With regard to Object No.3,4
and 5, it is held that they are ancilliary to the main object of running the Educational
Institution.
CCIT v. Maharani Luxmi Bai Memorial Education Society (2015) 235 Taxman 556 / (2016)
287 CTR 109 / (Uttarakhand) (HC)
S. 10(23C) : Educational institution – Institution getting 45 percent aid from 221
Government – Entitled to exemption. [S.10(23C)(iiiab)]
A plain reading of section 10(23C)(iiiab) of the Income-tax Act, 1961, shows that any
university or other educational institution existing for educational purposes and not
for profit and wholly or substantially financed by the Government is entitled to claim
exemption from income-tax under the Act.
Held accordingly, dismissing the appeals, that there had been financing by the
Government when examined on individual institution basis ranging from 41 percent to
82 percent whereas when the percentage was taken for the society as a whole it came
to 44.52 percent and 45.15 percent for two years. The Tribunal after appreciation of
evidence held that the Government was substantially financing and interested in the
management of the assessee and, therefore, the assessee was eligible for exemption
under section 10(23C)(iiiab). The Tribunal was right in holding that the aid given by the
Government to the assessee constituted substantial finance by the Government which
had entitled the assessee to claim exemption under section 10(23C)(iiiab). (AY.2007-08)
CIT v. Jat Education Society (2015) 64 taxmann.com 312 / (2016) 383 ITR 355 (P&H)(HC)
S. 10(23C) : Educational institution – Exemption granted u/s. 10(23C)(vi) for AY 2007-08 222
– CCIT dismissed the application seeking exemption of income for next year as barred
by limitation – Held, order not valid as being contrary to clause (4) of Circular No. 7
dated 27-10-2010 which provides that approval granted u/s. 10(23C)(vi) after 1-12-2006
shall be valid till they are withdrawn. [Circular No. 7 dated 27-10-2010]
Assessee-society was granted exemption u/s. 10(23C)(vi) for AY 2007-08. Assessee-society
filed an application on 30-03-2008 seeking exemption for AY 2008-09 but instead of
receiving a decision in that regard the assessee-society was served with a notice u/s. 147
of the Act, seeking to assess the assessee-society to tax for AY 2008-09, on the premise
that no order has been passed u/s. 10(23C)(vi). The AO, however, dropped assessment
proceedings, when it was brought to his notice that the CBDT has issued Circular No.7/10,
dated 27-10-2010 clarifying that approval issued under section 10(23C)(vi) shall be a
onetime approval valid till it is withdrawn, provided it is granted on or after 1-12-2006.
The assessee-society filed an application to withdraw applications seeking exemption
dated 30-03-2009 and 11/06/2010, but the CCIT ignored the circular and dismissed the
applications as barred by time and held that the assessee-society was not entitled to
exemption for AY 2008-09 and 2009-10. High Court held that, the case of the assessee-
society was covered by clause (4) of the said circular and not clause (5) and, accordingly
the High Court quashed the order of the CCIT being contrary to clause (4) which provides
that approval granted u/s. 10(23C)(vi) after 1-12-2006 shall be valid till they are withdrawn
and directed him to pass an order in accordance with the Circular. (AY. 2008-09, 2009-10)
Param Hans Swami Uma Bharti Mission v. CCIT (2016) 238 Taxman 538 / 138 DTR 102
/ 287 CTR 350 / (2017) 391 ITR 131 (P&H)(HC)
79
Educational institution S. 10(23C)
223 S. 10(23C) : Educational institution – At the stage of registering the assessee society, the
prescribed authority is only required to examine the nature, activity and genuineness
of the institution and nothing more – Conditions set out in the third proviso to section
10(23C) were to be seen at the time of assessment and not at the stage of approval.
Assessee, a Society registered under the Societies Registration Act had one of the
objects of establishing an educational institution. Assessee’s application for registration
under section 10(23C)(vi) was denied on the ground that the assessee did not exist
solely for educational purpose, it generated profits over the years which established
the profit motive, it incurred huge expenditure on advertisement like a commercial
activity to promote the business activities and that it had given huge loans to interested
persons. High Court held that the prescribed authority, at the stage of registration, is
only required to examine the nature, activity and genuineness of the institution. Mere
existence of some profit does not disqualify the assessee if the sole purpose of existence
is not profit making but educational activities. The authority has to find out the
predominant object of the activity and determine whether the institution exists solely
for education and not to earn profit. Further, High Court held that the conditions set out
in the third proviso to section 10(23C) were to be seen at the time of assessment and
not at the stage of approval. (AY. 2008-09, 2010-11, 2011-12)
Manas Sewa Samiti v. CCIT (2016) 282 CTR 302 / 236 Taxman 546 (All.)(HC)
224 S. 10(23C) : Educational institution – Approval from Scientific and Industrial Research
Organisation which function under Department of Science & Industrial Research is not
necessary for claiming exemption.[S. 10(23C)(iiiab), 35(1)(ii)]
Dismissing the appeal of the Revenue, the Tribunal held that an educational institution
established for purpose of managing science museums and drawing funds from
Government of India and Government of West Bengal for maintenance and to achieve
its objects, was entitled to exemption u/s.10(23C)(iiiab) and it was not required to take
approval u/s.35(1)(ii) for claiming such exemption. (AY. 2009-10)
ITO v. National Council of Science Museum (2016) 159 ITD 180 (Kol.)(Trib.)
225 S. 10(23C) : Educational institution – Rejection of application on the ground that it
was empowered to collect funds and accept funds was held to be not valid. [S.12A,
10(23(vi)]
Assessee was formed with an object to carry out various activities in field of education.
It was registered u/s. 12A. During relevant year, assessee filed an application seeking
issuance of exemption certificate u/s. 10(23C)(vi). CIT rejected application on ground
that it was empowered to collect funds and accept funds and it could also manage other
institutions. The honourable ITAT held that since assessee had not taken up any other
object mentioned in trust deed, and exclusively carried out activities of education, then
approval u/s.10 (23C) could not be denied. Accordingly order passed by Commissioner
was not sustainable. (AY. 2013-14)
Dharmaj Kelvani Mandal v. CCIT (2016) 161 ITD 841 (Ahd.)(Trib.)
80
S. 10(23C) Educational institution
S. 10(23C) : Educational institution – Trust running two colleges – Annual receipt of 226
each college had to be considered for purpose of exemption. [S. 10(23C)(iiiad), 11, 12]
Assessee an educational trust was running two colleges, annual receipt of each college
which was a separate educational institution, had to be considered for purpose of
exemption u/s. 10(23C). (AY. 2004-05 to 2007-08)
ACIT v. Shushrutha Educational Trust (2016) 161 ITD 565 (Bang.)(Trib.)
S. 10(23C) : Educational institution – Assessee, a school, managed by educational 227
board and filing returns in the name of association of persons – ‘Institution’ includes
school – Qualified for exemption
The assessee-school submitted an application for the grant of exemption under section
10(23C)(vi) of the Act. Director of School Education, Chennai, granted permission to
run the school, i.e. to open a matriculation school. The assessee was filing the return
of income under the status ‘association of persons’. The Revenue objected that assessee
was not having independent existence with clear cut objectives. On appeal to Tribunal,
it was held that the primary condition under Section 10(23C)(vi), the assessee shall
exist solely for educational purpose and not for purposes of profit. The CCIT went on
proposition that the assessee was not having Memorandum of Association or trust deed
so as to carry function of the assessee. The assessee was an ‘association of persons’
managed by an educational board which was a registered body under the Societies
Registration Act, 1860. And it was managing the assessee school with the committee
members of the board and constituted the office bearers of the institution and duly
filing return of income. There is no express definition for ‘institution’ under the
Income-tax Act. The word ‘institution’ is wide enough to include a school, which has
been established for imparting education. The assessee was an ‘institution’ qualified for
exemption under Section 10(23C)(vi) of the Act. (AY. 2014-15)
Sengunthar Matriculation Higher Secondary School v. CCIT (2016) 47 ITR 107 (Chennai)
(Trib.)
S. 10(23C) : Educational institution – Assessee has not received approval from the 228
prescribed authority – It cannot be said that non-disposal of an application u/s.
10(23C)(vi) would result in deemed grant of approval.
Assessee had not received the approval from the prescribed authority under section
10(23C)(vi) of the Act. It could not be said that non-disposal of an application under
section 10(23C)(vi) of the Act would result in deemed grant of approval to the assessee,
enabling it to claim deduction under section 10(23C)(vi) of the Act. Reliance placed on
the ratio laid down by Larger Bench of Hon’ble Allahabad High Court CIT v. Muzafar
Nagar Development Authority [2015] 57 taxmann.com 8 (All.). The assessee is not
entitled to the aforesaid deduction under section 10(23C)(vi) of the Act, in the absence
of approval being granted by the prescribed authority.
Mercedes Benz Education Academy v. ITO (2016) 156 ITD 488 / 176 TTJ 365 / 131 DTR
302 (Pune)(Trib.)
81
Educational institution S. 10(23C)
229 S. 10(23C) : Educational institution – Notification of the Government of Himachal
Pradesh has been violated – Not entitled for exemption.
Assessee has been incorporated with the purpose of publication of books, prescribing
syllabus and conducting examination upto secondary level. Secretary of the board
admitted that assessee has not received any financial support from State Government
other than funds for distribution of free textbooks to the students. Secretary admitted
to have sold the textbooks and also admitted to the fact that board has earned surplus
over the expenditure from the activities of printing, publishing and sale of books also,
it was admitted that assessee is not imparting any education. Funds given by the State
Government has been violated by the assessee. Notification of the Government of
Himachal Pradesh has been violated. Himachal Pradesh Board of School Education Act
does not authorize the assessee to earn profit in violation of notification. Assessee’s
contention that assessee can print and publish the textbooks for other students out of
the same amount received for a specific purpose has to be rejected. Requirements of
Sec. 10(23C)(iiiab) not fulfilled and assessee not entitled for exemption. (AY. 2011-12)
Himachal Pradesh Board of School Education Act v. DCIT (2016) 176 TTJ 580 / 138 DTR
105 (Chd.)(Trib.)
230 S.10(23C) : Educational institution – Advance to sister Trust for educational purposes
– Rejection of exemption was held to be not justified. [S. 11, 12AA]
Allowing the appeal of assessee, the Tribunal held that where the assessee-society
which was running a school, advanced an amount to its sister-trust for construction of
building for educational purpose and Assessing Officer could not prove that said amount
advanced was for non-charitable purpose, rejection of exemption under section 10(23C)
(iiiad) was not justified (AY.2010-11).
Vairams Kindergarten Society v. ITO (2015) 40 ITR 694 / (2016) 156 ITD 381 (Chennai)(Trib.)
231 S. 10(23C) : Educational institution – Receipts being less than one crore – Mentioning
other objects – Exemption cannot be denied – There is no need to file Form No. 10BB.
Dismissing the appeal of revenue the Tribunal held that; where assessee-trust was carrying
out sole activity of education during relevant year and its receipt from said activity was
less than Rs. one crore, assessee’s claim for exemption under section 10(23C) (iiiad) could
not be rejected on ground that it had mentioned other objects also in trust deed. Section
10(23C)(iiiad) cases, there is no need to file Form 10BB. (AY. 2009-10, 2010-11)
ITO v. Shri Balaji Prem Ashram & Nikhil Vidyalaya (2016) 156 ITD 479 (Chd.)(Trib.)
232 S. 10(23FB) : Venture capital – Exemption – In terms of SEBI (Alternative Investment
Funds) Regulation, 2012, ‘corpus’ means amount committed by investors and, thus, where
assessee fund did not invest more than 25 per cent of amount so committed by investors
in only one venture capital undertaking, its claim for exemption under section 10(23FB)
was to be allowed – Interest income earned by assessee fund from deposits kept with
banks would be eligible for exemption under section 10 (23FB). Interest income earned
by assessee fund from deposits kept with banks would be eligible for exemption under
section 10 (23FB). [SEBI (Alternative Investment Funds) Regulation, 2012]
Assessee, a venture capital fund, claimed exemption under section 10 (23FB). Assessing
Officer held that since assessee had invested more than 25 per cent of contributions in
82
S. 10(23G) Infrastructure undertaking
one venture capital undertaking, it had violated provisions of Regulation 12(b) of SEBI
Guidelines (Venture Capital Fund) Regulations, 1996 hence rejected assessee’s claim.
According to Assessing Officer, ‘corpus’ literally meant collection and in financial terms,
it meant actual collection of funds. On appeal Tribunal held that in terms of SEBI
(Alternative Investment Funds) Regulations, 2012, assessee was justified in contending
that total amount of funds committed by investors would be taken as ‘corpus’ for
purpose of Regulation 12(b) of SEBI (Venture Capital Funds) Regulation, 1996. Even
otherwise, since there was no material to show that SEBI alleged or stated that assessee
had not fulfilled any of prescribed conditions, Assessing Officer could not make his
own interpretation of term ‘corpus’. Therefore the assessee’s claim for exemption under
section 10(23FB) was to be allowed. Tribunal also held that interest income earned by
assessee fund from deposits kept with banks would be eligible for exemption under
section 10 (23FB) (AY. 2007-08)
DHFL Venture Capital Fund v. ITO (2016) 157 ITD 60 (Mum.)(Trib.)
S. 10(23G) : Infrastructure undertaking – definition of expression interest under section 233
2(28A) is exhaustive – liquidated damages/debt syndication fees/debenture trusteeship
fees can be included in the definition. [S. 2(28A)]
The assessee claimed exemption under section 10(23G) in respect of liquidated damages
payable by a borrower to the assessee in the event of a borrower committing default
in repayment of the loan advanced by the assessee. The AO, held that the liquidated
damages were a sort of compensation in nature received from defaulters and hence
could not be treated like income arising from the activities of the assessee in respect
of infrastructure financing. The Tribunal and CIT(A) affirmed the decision of the AO.
The High Court held that under the terms of a loan agreement, a borrower was imposed
with a primary obligation to repay the principal together with interest. An additional
obligation was cast upon a borrower to pay interest on interest or penal interest, in
the event of borrower committing a default upto a particular level. Irrespective of what
the finance company itself may choose to term it, such liquidated damages cannot
be excluded from the definition of the expression ‘interest’ under section 2(28A), as
the definition is so exhaustive. The definition is so exhaustive as to include even
any service fee or other charge that is levied in respect of the monies that remain
unutilised. In certain cases, the lenders imposed an obligation on the borrowers to pay
the commitment charges, if after the sanction of the loan, the borrower could not make
use of the funds upto a particular point of time. The definition of the word ‘interest’
under section 2(28A) includes even such commitment charges. Therefore all the three
authorities committed a mistake in understanding the scope of the expression ‘liquidated
damages’ and in coming to a conclusion that the same would not come within the
purview of the word ‘interest’ under section 2(28A).
The AO held that the debt syndication fee is a fee charged by the assessee from the
borrower, when the assessee funded the project not only from out of their own monies,
but also by arranging finance from others. Therefore, in his order, the AO held that
though what was charged as debt syndication fee may be a service fee, the same would
not come within the purview of section 10(23G), on account of the fact that the said fee
is not charged for the money that was lent by the assessee themselves. The same was
upheld by the CIT(A) and Tribunal. The High Court held that if the second part of the
83
Scheduled Tribes/Castes S. 10(26B)
definition in section 2(28A) was carefully looked into, it could be seen that what was
included therein is ‘any service fee’. By itself, section 2(28A) does not make a distinction
between a service fee charged in respect of the loans advanced by the assessee and
those in respect of the loans organised from other financial institutions. In the absence
of any indication either in section 2(28A) or in 10(23G), the distinction made out by
the revenue could not be approved.
The next issue was whether debenture trusteeship fee would be included in the meaning
of the term interest under section 2(28A) of the Act. The AO held that the income
derived was not primary business but was derived from ancillary services. The CIT(A)
held that this service would come under the definition but from AY 2002-03 and not
prior to it. The Tribunal upheld the findings of AO and CIT(A). High Court held that
the findings of CIT(A) that the fees would be included in one assessment year and not
for other was not proper and hence was ruled in favour of the Assessee. (AY. 2001-02,
2001-02)
Infrastructure Development Finance Co. Ltd. v. ACIT (2016) 238 Taxman 212 (Mad.)(HC)
234 S. 10(26B) : Scheduled Tribes/Castes – Central/State financial bodies for promoting
interest of Sweepers – State corporation established and formed ‘for promoting interest
of Safai Kamadar’ is eligible exemption as beneficiaries of this State Scheme were
members of Scheduled Castes or Scheduled Tribes or Backward Classes.
State corporation established and formed ‘for promoting interest of Safai Kamdar’
is eligible for benefits of section 10(26B) as beneficiaries of this State Scheme were
members of Scheduled Castes or Scheduled Tribes or Backward Classes. (AY. 2008-09)
Gujarat Safai Kamdar Vikas Nigam Ltd. v. Dy. CIT (2016) 158 ITD 900 (Ahd.)(Trib.)
235 S. 10(34) : Dividend – Company with which venture capital fund (VCF) had been
invested, had already paid additional income-tax, again at time of distribution of said
income as dividend, VCF was not required to pay additional tax.[S. 115O, 115R, 115U]
Assessee a Japanese Government Financial Institution made investment in a SEBI
registered Venture Capital Fund (VCF). VCF had object to provide equity assistance to
venture capital undertakings in India. Said fund was invested in a company. Dividend
income received from VCF was claimed as exempt u/s. 10(34). The A.O. held that
assessee could not grow tax-free income u/s. 10(34) unless additional tax had been
paid as per provisions of S. 115O and 115R. The ITAT held that conditions laid down
u/s. 115O to avail exemption under section 10(34) are to be complied with by venture
capital undertakings and not by investor at time of receiving dividend from company
in which VCF was invested. Further held that since company with which VCF was
invested, had already paid additional income-tax u/s. 115U, VCF itself was not required
to pay additional tax second time on same income at time of distribution of dividend.
Therefore, claim of exemption u/s. 10(34) on its share of dividend income out of
dividend income received by VCF was to be allowed. (AY. 2006-07 and 2007-08)
Japan International Cooperation Agency v. DDIT (2016) 158 ITD 62 / 139 DTR 185 / 180
TTJ 152 (Delhi)(Trib.)
84
S. 10A Free trade zone
S. 10(37) : Capital gains – Agricultural land – Land not used for agricultural purposes 236
during two years immediately preceding the date of transfer, would disentitle the
Appellant claim benefit of exemption u/s. 10(37).
The assessee, an individual, purchased certain land in a village in the year 2006. The
said land was notified for compulsory acquisition under the provisions of Karnataka
Industrial Development Act, 1956. The final agreement for sale was entered into in
2008 in pursuance of the final notification published in 2007. While filing the return
of income for the AY 2009-10, the assessee claimed the compensation received thereon
as exempt u/s. 10(37) of the Act.
The AO denied the exemption on the ground that such land was not used for
agricultural purposes during two years immediately preceding the date of transfer and
accordingly, the compensation received by the assessee was taxed as short-term capital
gains. On appeal, the CIT(A) and Tribunal confirmed the action of the AO.
On further appeal, the assessee argued that there were Eucalyptus trees grown on
the said land and that Eucalyptus trees would be crop and would be included for
agricultural purposes. In this regard, the HC held that plantation of Eucalyptus would
be plantation for trees which would not be for agricultural purpose as it does not give
any agricultural produce. Further, the HC also observed that, the assessee was not able
to produce any evidence such as expenditure incurred and revenue generated from
agricultural produce which indicated the fact that the assessee did not carry on any
agricultural activity on the land in question. The HC further observed that, there was
a clear finding of fact recorded by all the three lower authorities that the assessee did
not carry out any agricultural activity on the plot. Therefore, the assessee would not be
entitled to the benefit of S. 10(37) of the Act. (AY. 2009-10)
B. M. Maniraju v. CIT (2015) 126 DTR 348 / (2016) 282 CTR 108 / (Karn.)(HC)
S. 10(38) : Long term capital gains from equities – Loss on sale of equity shares – 237
cannot be allowed as deduction.
In view of S. 10(38) any income arising from transfer of a the long term capital asset
being equity share is exempt from tax and, therefore, loss incurred on sale of long term
capital asset being equity shares cannot be allowed as deduction. (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
S.10A. Special provisions in respect of newly established undertakings in free trade
zone, etc.
S. 10A : Free trade zone – The deduction of the profits and gains of the business of 238
an eligible undertaking has to be made independently and before giving effect to the
provisions for set off and carry forward contained in Sections 70, 72, and 74 [S.10B,
70, 72, 74]
Dismissing the appeal of revenue the Court held that; Section 10A/10B were amended by FA
2000 w.e.f. 01.04.2001 to change “exemption” to “deduction”, the “deduction” contemplated
therein is qua the eligible undertaking of an assessee standing on its own and without
reference to the other eligible or non-eligible units or undertakings of the assessee. The
benefit of deduction is given by the Act to the individual undertaking and resultantly
85
Free trade zone S. 10A
flows to the assessee. The deduction of the profits and gains of the business of an eligible
undertaking has to be made independently and before giving effect to the provisions for set
off and carry forward contained in s. 70, 72 and 74. The deductions u/s 10A/10B are prior to
the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving
at the total income of the assessee from the gross total income. (AY. 2001-02 to 2006-07)
CIT v. Yokogawa India Limited (2017) 391 ITR 274 / 145 DTR 1 / 291 CTR 1 / 244 Taxman
273 (SC)
Editorial: Decision of Karnata High Court in CIT v. Yokogawa India Limited (2012) 341
ITR 385 (Karn)(HC) is affirmed.
239 S. 10A : Free trade zone – Hundred per cent export oriented unit – Electronic
transmission of software developed from branch office to head office outside India-
Entitled to exemption.[S. 10A(7), 80HHC, 80IA(8)]
The absence of a “deemed export” provision in section 10A similar to the one in section
80HHC did not logically undercut the amplitude of the expression “transfer of goods”
under section 80IA(8) which was part of section 10A. Such an interpretation would
defeat section 10A(7). The transfer of computer software by the Indian branch to the
head office was a sale to the head office out of India and the assessee was entitled to
claim benefit of section 10A.(AY. 2002-03)
Dy. DIT v. Virage Logic International (2016) 389 ITR 142 / 143 DTR 385 (Delhi)(HC)
Editorial : Order of Tribunal in Virage Logic International v. Dy.CIT (2007) 13 SOT 270
(Delhi)(Trib.) is affirmed.
240 S. 10A : Free trade zone – Total turnover – Sale proceeds not realised within six
months granted by Reserve Bank of India without any extension – Cannot be excluded
from total turnover while computing deduction.
Court held that the appellate authorities were correct in holding that the sale proceeds
not realised within the period of six months granted by the Reserve Bank of India
without there being any extension could not be excluded from the total turnover when
computation of deduction under section 10A of the Act was made. (AY. 2002-03)
CIT v. Wipro GE Medical System Ltd. (2016) 387 ITR 77 (Karn.)(HC)
241 S. 10A : Free trade zone – Provision permitting assessee to opt out of exemption for
any year or years – Loss or unabsorbed depreciation of those years available for future
set off. [S. 10A(7), 72]
The amended provisions of section 10A(8) provide for an assessee opting out of the
provisions under section 10A for any of the relevant AYs. The provisions of section 10A
would not apply to him for these years. In the year of opting out, the entire section 10A
which inter alia includes the provisions of sub-section (6) would not apply to the assessee.
If in any year of loss, the assessee opts out of section 10A, the prohibition contained in
sub-section (6) in respect of carry forward of such loss would not apply. In other words,
the loss suffered by such assessee in such year of opting out would be available to him
for further set off as per the normal provisions of the Act like section 32(2) in respect of
depreciation and section 72(1) in respect of business loss. (AY. 1998-99, 2000-01)
Max Healthscribe Ltd. v. ITO (2016) 386 ITR 479 (Karn.)(HC)
Editorial : SLP is granted CIT v. Max Healthscribe Ltd. (2016) 380 ITR (St.) 6]
86
S. 10A Free trade zone
S. 10A : Free trade zone – Delay in receiving foreign remittances – Application to 242
condone delay pending before Reserve Bank of India – Entitled to benefit in respect
of such remittance. [S. 80HHC]
The assessee was an exporter. The export had been done strictly in accordance with
law. Foreign exchange remittances, which should have been received within six months
from the end of the financial year, had not been received. Therefore, an application
was filed seeking extension of time to the Reserve Bank of India. Even to this day the
Reserve Bank of India had not rejected the said request. On the contrary, after the period
of 6 months, foreign exchange remittances were received and credited to the assessee’s
account. Hence the assessee was entitled to the exemption under section 10A. (AY.
2001-02 to 2004-05)
Dy.CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
Editorial: SLP is granted, CIT v. Wipro Ltd. (2016) 240 Taxman 299 (SC)
S. 10A : Free trade zone – Expansion of units with STP approval and commencing 243
production before 1-4-1993 – Entitled to exemption – Export – Loss in undertaking can
be carried forward and adjusted against other income – Income from sale of scrap,
export incentives, interest income and gains on exchange rate fluctuation is includible
in profits – Value added tax and goods and services tax payable in foreign country
is includible – Gains from sale of STP units in India is includible – Allocation of
expenses among various units accepted by income-tax authorities for long period is
held to be justified.
Dismissing the appeal of revenue, the Court held that ;
(i) That units which had got approval from STPI as expansion of old undertakings
commenced operations prior to April 1, 1993 would also be entitled to claim under
section 10A of the Act as new industrial undertakings.
(ii) That in view of the amendment to section 10A(6)(ii) with effect from April 1, 2001
the loss of the STP units should be carried forward at the end of the 10 years, tax
holiday period under section 10A of the Act and should be set off against profits
in respect of other units.
(iii) That income from sale of scrap, export incentive, rent received, interest income and
gain on exchange rate fluctuation should be treated as profits and gains derived
from export and exempted under section 10A.
(iv) That computer software sales made to STP units in India was includible in “export
turnover” for the purposes of section 10A.
(v) That the assessee had allocated the corporate expenses on the basis of the
actual expenditure incurred by the units. The assessing authority taking into
consideration that in the earlier year 57% expenditure was allocated to the section
10A units, was not willing to accept the case of the assessee. Therefore, the
assessee by a letter dated March 4, 2004 agreed to allocation of only a part of the
expenditure relating to salary, wages and allowances and directors’ fee at 20% to W,
a section 10A unit and which had generated 57% of the revenue of the assessee.
The assessing authority did not agree with the assessee’s submission and allocated
expenses of the corporate division in the ratio of revenue of the section 10A units.
When the Department did not accede to the allocation of the actual expenditure,
the assessee had come forward to distribute the entire expenditure equally to all
87
Free trade zone S. 10A
the units and the procedure was followed consistently by the assessee for more
than a decade. This had to be followed in the relevant years.(AY. 2001-02 to 2004-
05)
Dy.CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
244 S. 10A : Free trade zone – Export turnover – Expenses incurred in foreign currency
not to be excluded from export turnover.
The expenses of the assessee incurred in foreign currency are not to be excluded from
the export turnover for the purpose of computation of deduction under section 10A of
the Act. (AY. 2006-07 to 2008-09)
CIT v. Tata Elxi Ltd. (2016) 382 ITR 654 (Karn.)(HC)
245 S. 10A : Free trade zone – Computation of deduction – Services relating to development
of computer software – Deemed to be part of export turnover of computer software
outside India – Expenses incurred in foreign currency for providing software
development services outside India cannot be excluded from export turnover.
Held, (i) that the services rendered by the assessee relating to the development of
computer software were deemed to be part of export turnover of computer software
outside India. Therefore, the expenses incurred in foreign currency for providing
software development services outside India could not be excluded from the export
turnover while computing deduction under section 10A. CIT v. Motor Industries Co. Ltd.
[2016] 6 ITR-OL 84 (Karn.) applied.
(ii) That the exchange fluctuation loss was to be reduced from the total turnover while
computing the deduction under section 10A. (AY.2004-05)
CIT v. Kshema Technologies Ltd. (2016) 381 ITR 435 / 66 taxmann.com 165 (Karn.)(HC)
246 S. 10A : Free trade zone – Subsidy received from parent company to be excluded from
total turnover.
On a question raised by the Department whether the subsidy received from the parent
company of the assessee was to be included in the total turnover for the purposes of
computation of deduction under section 10A of the Tribunal held that the subsidy could
not be included in the total turnover for the reason that the amount had nothing to do
with the rendering of services or export of services of the software. Held, dismissing
the appeal, that there was nothing to indicate that the finding of fact by the authorities
below was perverse and therefore no substantial question of law arose for consideration.
(AY 2007-08)
CIT v. Sun Life India Service P. Ltd. (2016) 381 ITR 516 (P&H)(HC)
247 S. 10A : Free trade zone – Export of computer software – Matter remanded.
Held, that the Assessing Officer had no occasion to go into the claim of the assessee that
the services rendered related to the development or production of computer software
since the assessee on its own had reduced expenses in foreign currency from the export
turnover and the total turnover and thereafter had taken a different stand before the
appellate authority, that the services were an integral part of development of computer
software. The Tribunal’s finding was not based on examination of available and relevant
material to come to a conclusion whether the activity related to the computer software
88
S. 10A Free trade zone
as defined under Explanation 2 to section 10A or involving technical services which was
to be excluded from the export turnover in accordance with Explanation 4 to section
10A. Therefore, the Tribunal was to examine the material on record and to record a
finding as to the nature of the activity. What was required to be excluded in the export
turnover were only freight, telecommunication charges or insurance attributable to the
delivery of computer software outside India or expenses, incurred in foreign exchange
in providing the technical services outside India which could not be confused with the
services rendered for the development of computer software, an integral part of export
turnover of computer software. Matter remanded. (AY. 2002-03)
CIT v. Hewlett Packard Global Soft Ltd. (2016) 381 ITR 99 / 283 CTR 410 / 66 taxmann.
com 152 / 130 DTR 362 (Karn.)(HC)
S. 10A : Free trade zone – Main activity was providing IT enabled services and not 248
marketing of products of parent company hence distribution was held to be eligible
deduction.
The assessee had two units eligible for deduction u/s. 10A. Unit 1 had already exhausted
the period of deduction and during the year, deduction was claimed for the profit of
Unit 2. The DRP alleged that excess deduction was claimed by the assessee since 46%
of its income was derived from distribution income, which was earned for marketing
and distribution of products owned by Amadeus Spain, and consequently, no software
was being exported to claim deduction u/s. 10A. The ITAT held that the primary activity
of the assessee was provision of IT enabled services which was approved by the STPI
authorities. Accordingly, it was held that the Assessee was eligible for deduction u/s
10A. (AY. 2009-10)
Amadeus India P. Ltd. v. ACIT (2016) 52 ITR 83 (Delhi)(Trib.)
S. 10A : Free trade zone – Profits from undertaking – Interest on deposits 249
The Assessing Officer treated the interest earned on deposits with banks, as chargeable
to tax under the head “Income from other sources” as against the assessee’s claim that
such interest income was chargeable to tax under the head “Profits and gains of business
or profession”. The authorities held that such interest was not “derived from” the eligible
undertakings under section 10A and, thus, not eligible for deduction under section 10A.
The Tribunal held that the orders of the Tribunal for the Assessment Years 2004-05 and
2005-06 showed that interest was assessed as income from business in the earlier years.
There was no change in facts in the present year as nothing could be brought on record
by the Department to show that there was any change in facts in this year. Therefore,
the interest would be assessable under the head “Income from business”. Since the
income from interest was treated as part of the business income, it shall be included for
determining the total turnover of the business and, accordingly, the benefit of deduction
under section 10A shall be provided on the amount of interest proportionately, in terms
of the mechanism provided in sub-section (4). In other words, the profits eligible for
deduction under section 10A shall be the amount which bears to the profits of the
business of the undertaking, the same proportion as the export turnover bears to the
total turnover of the business of the undertaking of the assessee. The Assessing Officer
was directed to grant the benefit of deduction under section 10A by recomputing the
89
Free trade zone S. 10A
income. In case, the clear mandate of sub-section (4) is not followed and full deduction
is allowed under section 10A on the interest, then it may yield absurd results and also
provide benefits to assessees which were not intended to have been provided by the
Legislature, keeping in view the objective of the enactment of section 10A. At times,
there may be situations where interest would be of sizeable amount, sometimes even
more than amount of profits, and in such a situation, if 100 per cent deduction is
granted to the assessee, on the interest or any other similar income, without following
the mandate of sub-section (4), it may frustrate the objective of section 10A. Therefore,
to avoid any such situation, a clear mechanism has been provided under subsection (4)
for computation purposes. (AY. 2006-07, 2007-08)
J.P. Morgan Services Pvt. Ltd. v. DCIT (2016) 46 ITR 561 / 70 taxmann.com 228 (Mum.)
(Trib.)
250 S. 10A : Free trade zone – Deduction before brought forward unabsorbed depreciation.
The lower authorities held that the unabsorbed depreciation had emanated from
the exempt unit and accordingly exemption under section 10A should be computed
after setting off the unabsorbed depreciation. Tribunal held that the Assessing Officer
was to allow the deduction under section 10A before setting off the brought forward
unabsorbed depreciation.(AY. 2006-07, 2007-08)
J.P. Morgan Services Pvt. Ltd. v. DCIT (2016) 46 ITR 561 70 taxmann.com 228 (Mum.)
(Trib.)
251 S. 10A : Free trade zone – For the purpose of claiming exemption the assessee had to
necessarily file the return of income within the time prescribed under section 139(1)
of the Act.[S. 139(1), 139(4)]
The Tribunal held that for the purpose of claiming exemption under section 10A of the
Act, the assessee had to necessarily file the return of income within the time prescribed
under section 139(1) of the Act. Where the assessee filed the return of income within
the extended period under section 139(4) of the Act it would not be eligible to claim
exemption under section 10A of the Act. The Commissioner (Appeals) was not justified
in allowing the exemption under section 10A of the Act on the ground that the assessee
had filed the return of income within the period specified under section 139(4) of the
Act. Since it was not clear from the orders of the authorities whether the assessee had
filed the return within the due date for filing the return of income under section 139(1)
of the Act, the matter was remanded to the Assessing Officer for verification. (AY .2006-
07, 2008-09, 2009-10, 2010-11)
DCIT v. Helios and Matheson Information Technology Ltd. (2016) 46 ITR 172 (Chennai)
(Trib.)
252 S. 10A : Free trade zone – Foreign currency expenses excluded from export turnover
– Should be excluded from total turnover also
The Tribunal held that in respect of the foreign currency expenses, what was excluded
in the export turnover was also to be excluded from the total turnover. Since the
Assessing Officer had excluded the foreign expenses from the export turnover, it had
to be excluded from the total turnover too. (AY. 2006-07, 2008-09, 2009-10, 2010-11)
DCIT v. Helios and Matheson Information Technology Ltd. (2016) 46 ITR 172 (Chennai) (Trib.)
90
S. 10A Free trade zone
S. 10A : Free trade zone – Profits & gains derived from export – Interest on short term 253
deposit is eligible for benefits. [S. 10B]
Tribunal held that interest on short term deposit is profit of business eligible for benefits
of sections 10A & 10B. (AY. 2006-07)
American Express (I) (P) Ltd. v. Dy. CIT (2016) 177 TTJ 33 (UO) (Delhi) (Trib.)
S. 10A : Free trade zone – Addition on account of suppression of stock and difference 254
in books of accounts – Exemption is allowable. [S. 133A]
Assessee is a manufacturer & Exporter of Gold Jewellery. Survey u/s. 133A was carried
out on assessee’s premises. Assessee surrendered certain sum on account of various
discrepancies. AO made addition of sum surrendered. CIT(A) sustained addition. On
appeal Tribunal held that assessee is entitled to deduction. (AY. 2007-08)
Bridal Jewellery Manufacturing Co. v. ITO (2016) 45 ITR 119 / 175 TTJ 257 (Delhi)(Trib.)
S.10A : Free trade zone – Only condition for software exported from India to be 255
considered in an year is receipt of consideration of sale proceed within six months
from end of previous year (or within period extended by RBI) in convertible foreign
exchange and importing of any other condition such as furnishing of SOFTEX Form
or obtaining of STPI clearance is completely unwarranted
Assessee carried on its business through a unit in Software Technology Park (‘STP’)
which was entitled for claim of tax holiday under section 10A. While computing
exemption under section 10A, Assessing Officer excluded an invoice raised by assessee
on 31-3-2010 on ground that said invoice was cleared by STPI authority on 6-5-2010,
i.e. in financial year 2010-11. Tribunal held that; for purpose of section 10A only
condition for software exported from India to be considered in an year is receipt of
consideration of sale proceed within six months from end of previous year (or within
period extended by RBI) in convertible foreign exchange and furnishing of SOFTEX
Form and certification of said form by STPI is only a post facto procedure prescribed by
Reserve Bank of India to ensure timely and appropriate collection of export proceeds.
Therefore, procedural non-compliance in course of collection of such export proceeds,
i.e., furnishing of SOFTEX Form and certification by STPI authority within stipulated
period six months from end of financial year, should not result in revenue from
export of software made in financial year 2009-10 to be treated as ‘export turnover’ of
subsequent year. (AY. 2010-11)
Microsemi India (P.) Ltd. v. Dy.CIT (2016) 157 ITD 220 (Hyd.)(Trib.)
S. 10A : Free trade zone – Computer software – Assessee earlier claiming deduction 256
u/s. 80HHE was entitled to claim deduction u/s. 10A – Deduction to be computed after
reducing expenditure already reduced from export turnover, from total turnover. [S.
80HHE]
The AO did not allow the assessee the deduction u/s. 10A of the Act on the ground that
section 80HHC(5) of the Act prohibited the claim under any other section of the Act,
once deduction was claimed under this section. The Commissioner (Appeals) allowed
the claim. On appeal, the Tribunal held that there was no justification to hold that the
assessee being an old unit and having once claimed deduction u/s. 80HHE, was not
91
Free trade zone S. 10A
entitled to claim deduction u/s. 10A on the profits of its units. The claim of deduction
u/s. 10A was supported by requisite audit certificate. There was no error in the order
of the CIT(A).(AY. 2005-06)
Dy. CIT v. Tata Consultancy Services Ltd. (2016) 46 ITR 394 / (2015) 174 TTJ 570 (Mum.)(Trib.)
257 S. 10A : Free trade zone – Disallowed expenditure – Eligible deduction on enhanced
income – Application under Rule 27 of the ITAT Rules was permitted. [S. 40(a)(ia)],
ITATR, 27]
Held that it would be unnecessary to go into the question whether the payment in
question is reimbursement of expenses or in the nature of FTS or the question whether
the services rendered made available technology because even assuming the sum in
question is to be disallowed u/s. 40(a)(ia), disallowance will only go to enhance the
profits derived by the assessee from the business of export of computer software and on
such enhanced profits deduction u/s. 10A has to be allowed. Further, application under
rule 27 of ITAT Rules was permitted to take the above plea. (AY. 2007-08)
ITO v. Cerner Healthcare Solutions (P) Ltd. (2016) 176 TTJ 63 / 140 DTR 191 (Bang.)(Trib.)
258 S. 10A : Free trade zone – Expenses reduced from the export turnover should be
reduced from the total turnover also.
The Assessee had incurred expenses in foreign currency towards data communication
and travelling. The AO reduced them from export turnover for the purpose of deduction
under s. 10A, but did not reduce the same from total turnover. The ITAT held that if
any item was to be reduced from export turnover, then it had to be reduced from the
total turnover also. The ITAT observed that merely because the Department had filed an
appeal against the jurisdictional High Court judgment, it would not lose its precedential
value. (AY. 2008-09)
ITO v. Cerner Health Care Solutions P. Ltd. (2016) 45 ITR 207 (Bang.)(Trib.)
259 S. 10A : Free trade zone – Total turnover – Telecommunication charges and Insurance
charges have been excluded from export turnover – Also to be excluded from total
turnover
Following the decision rendered by Karnataka High Court in case of Tata Elxsi Ltd. 349
ITR 98, AO is directed to exclude telecommunication charges and insurance charges
incurred be excluded both from export turnover and total turnover. (AY. 2006-07)
FCG Software Services (India) (P) Ltd. v. ITO (2016) 176 TTJ 145 / 66 taxmann.com 296
(Bang.)(Trib.)
260 S. 10A : Free trade zone – Enhancement of Income by transfer pricing addition
– Eligibility to claim deduction under section 10A does not operate as a bar for
determining ALP of international transaction undertaken – No benefit of deduction on
transfer pricing adjustment. [S. 10B, 92C]
Having heard no exception has carved out by the statute for non-determination of
the ALP of an international transaction of an assessee who is eligible for the benefit
of deduction section 10A/10B or any other section of Chapter VIA of the Act. S.92(1)
clearly provides that any income arising from an international transaction is required to
be computed having regard to its arm’s length price. There is no provision exempting
92
S. 10AA Special Economic Zones
the computation of total income arising from an international transaction having regard
to its ALP, in the case of an assessee entitled to deduction u/s. 10A or 10B or any other
relevant provision. A circumspect perusal of this proviso read along with sub-section (4)
of section 92C divulges that when the total income of an assessee from an international
transaction is computed having regard to its ALP, then, no deduction u/s 10A or any
other section including those covered under Chapter VIA of the Act shall be allowed
in respect of the amount of income by which the total income of the assessee has
been enhanced after computation of income determined on the basis of the ALP of an
international transaction. The legislature has unconditionally provided for not allowing
the benefit of deduction under any section in respect of the addition made on account
of transfer pricing adjustment. Not allowing of any benefit u/s 10A in respect of an
addition on account of transfer pricing adjustment pre-supposes the existence of transfer
pricing addition in the first instance to an assessee who is otherwise eligible to the
benefit of deduction under this section. If one was to presume that no addition towards
transfer pricing adjustment is comprehensible in the case of an assessee enjoying the
benefit of deduction u/s. 10A, then there was no need to enshrine an express provision
forbidding the grant of deduction under this section in respect of enhancement of
income due to transfer pricing adjustment. Once the legislature has engrafted an
unambiguous provision explicitly spelling out the non-granting of deduction u/s 10A
on the enhanced income due to transfer pricing addition, we are afraid to accept the
assessee’s contention, which runs diagonally opposite to the unequivocal language
of proviso to section 92C(4). Our view is fortified by the Special Bench order in the
case of Aztec Software & Technology Services Ltd. v. Asstt. CIT [2007] 107 ITD 141/162
Taxman 119 (Bang.) in which similar issue has been decided by the Special Bench by
holding that availability of exemption u/s 10A to the assessee is no bar to applicability
of sections 92C and 92CA. Fact that there is already a Special Bench decision in the
case of Aztec Software & Technology Services Ltd. (supra) which supports the making
of transfer pricing adjustment notwithstanding the eligibility of deduction u/s 10A to
the assessee, apart from clear statutory mandate contained in proviso to section 92C(4),
we are more inclined to go with the view of the Special Bench. Therefore, held that
the eligibility of the assessee to deduction u/s. 10A of the Act does not operate as a bar
for determining the ALP of international transaction undertaken by it and further the
enhancement of income due to such transfer pricing addition cannot be considered for
allowing the benefit of deduction under this section. (AY. 2008-09)
Headstrong Services India (P) Ltd. v. DCIT (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR
73 (Delhi)(Trib.)
S.10AA. Special provisions in respect of newly established Units in Special Economic
Zones
S. 10AA : Special Economic Zones – Newly established units – Trading activity carried 261
by SEZ was to be considered ‘service’ eligible exemption is a question of law – Matter
remanded to High Court to decide the question of law. [S.260A]
The High Court affirmed the finding of the Tribunal that the trading activity carried on
by the special economic zone unit of the assessee was “service” eligible for exemption
under section 10AA, without considering the submission of the Department that for
93
Special Economic Zones S. 10AA
this purpose, the Tribunal could not have relied upon the definition of “services” in the
Special Economic Zones Rules, 2006, when there was no such provision under section
10AA, on appeal :
Held, that the High Court did not consider this aspect and brushed it aside saying that
the Tribunal had held it to be a “service” and that it was a question of fact. While the
factual aspects of activity carried on by the assessee were not in dispute, whether that
would constitute “service” within the meaning of section 10AA would be a question
of law and not a question of fact. The High Court was, therefore, in error in not
entertaining the plea. (AY. 2004-05)
CIT v. Bommidala Enterprises P. Ltd. (2016) 389 ITR 1 / 242 Taxman 248 (SC)
Editorial : Decision of the Andhra Pradesh High Court CIT v. Bommidala Enterprises P.
Ltd. ITA No. 461 of 2013 dt 1-10-2013 was set aside and matter remanded to High Court.
262 S. 10AA : Special Economic Zones – Amendment to claim deduction based on the
proportion of export turnover to the total turnover the undertaking and not total
undertaking of the assessee, is retrospective in nature and is applicable for AY. 2007-
08.
The assessee claimed deduction u/s. 10AA in its original return of income, which was
enhanced vide a revised return of income, based on the amendment as per Finance
(No. 2) Act, 2009. As per the amendment deduction u/s. 10AA was allowable in
the proportion of the export turnover of the undertaking to the total turnover of the
undertaking, instead of total turnover of an assessee. This beneficial amendment was
made applicable from 1st April, 2006. The AO did not allow the increased claim of
deduction since the amendment came into effect on 1st April, 2010. The CIT(A) allowed
the appeal of the assessee, and held that the amendment was retrospective in nature. On
appeal by the Department, it was held by the ITAT that the retrospective amendment
was applicable to the assessee since it was made applicable from 1st April, 2006 and
shall apply for AY 2007-08. (AY. 2007-08)
DCIT v. AVTIEC Ltd. (2016) 52 ITR 270 (Delhi)(Trib.)
263 S. 10AA : Special Economic Zones – Words ‘pendant’ and ‘medallion’ have same
meaning and usage in common parlance and, therefore, merely because product
manufactured by assessee was described as medallion, it could not be said that
there was any violation of approval granted by Development Commissioner, Special
Economic Zone for manufacturing gold pendants.
Assessee was engaged in business of manufacturing gold jewellery. It claimed
deduction u/s. 10AA on basis of approval granted by MEPZ Special Economic Zone for
manufacturing gold bangles and gold pendants. The A.O. disallowed assessee’s claim on
ground that it was manufacturing medallions and, thus, had violated approval granted
by Special Economic Zone for manufacturing gold bangles and pendants. The ITAT held
that the words ‘pendant’ and ‘medallion’ have same meaning and usage in common
parlance and, therefore, merely because product manufactured by assessee was described
as medallion, it could not be said that there was any violation of approval granted
by Development Commissioner, Special Economic Zone. Purity of gold in pendant/
medallion would depend upon design and stones implanted on pendant or medallion
and, therefore, merely because pendant/medallion was of 99.5 per cent purity, it would
94
S. 10B Export oriented undertakings
not lose its character as pendant. Assessee entitled to claim deduction u/s. 10AA. (AY.
2011-12, 2012-13)
Jewels Magnum v. ACIT (2016) 158 ITD 185 / 181 TTJ 137 (Chennai)(Trib.)
S.10B. Special provisions in respect of newly established hundred per cent export
oriented undertakings.
S. 10B : Export oriented undertakings – Computation of deduction – Deduction to be 264
given before setting off losses and unabsorbed depreciation. [S.32, 41, 72]
Deduction under section 10B had to be given at the stage when the profits and gains of
business were computed in the first instance before setting off losses and unabsorbed
depreciation of earlier years. CIT v. Black and Veatch Consulting Pvt. Ltd. (2012) 348 ITR
72 (Bom.) followed. (AY. 2005-06)
CIT v. BEHR India Ltd. (No.1)(2016) 389 ITR 419 (Bom.)(HC)
CIT v. BEHR India Ltd. (No.2)(2016) 389 ITR 459 / 74 taxmann.com 170 (Bom.)(HC)
Editorial: SLP is granted to the revnue; lCIT v. BEHR India Ltd. (2016) 242 Taxman 506
(SC)
S. 10B : Export oriented undertakings – Interest earned on surplus business funds 265
deposited with banks for short periods is assessable as business income hence
allowable deduction.
Dismissing the appeal of the Revenue, the Court held that; the entire business income
of the 100 per cent EOU including the interest earned on temporarily surplus business
funds will be the ‘profits of the business of the undertaking’. Accordingly, it was held
that the ITAT was correct in allowing deduction u/s. 10B on such interest income.
(AY.2003-04)
CIT v. Hindustan Gum & Chemicals Ltd. (2016) 241 Taxman 401 / (2017) 152 DTR 84
(Cal.)(HC)
S. 10B : Export oriented undertakings – Inclusion of customer claim, freight subsidy 266
and interest on FDRs in the profits of the undertaking. [S.10B(4)]
It is held by the High Court that the customer claim, freight subsidy and interest on
FDRs are to be included in the profits of the undertaking for the purpose of computation
of deduction under section 10B of the Act as they are directly related to the business of
the undertaking. Insofar as the interest on FDRs is concerned, it is held that the deposits
are under lien with Bank of India for facilitating the letter of credit and bank guarantee
facilities and therefore, the interest earned on such FDR ought to qualify for deduction
under S. 10B of the Act. (AY. 2008-09)
Rivera Home Furnishing v. ACIT (2016) 237 Taxman 520 / 138 DTR 149 (Delhi)(HC)
S. 10B : Export oriented undertakings – Export of Legal Services by a law firm to 267
its overseas clients by transfer of customized electronic data constitutes export of
“computer software” as per Explanation 2 to s. 10B and is eligible for deduction.
Dismissing the appeal of revenue the Tribunal held that; Export of Legal Services by
a law firm to its overseas clients by transfer of customized electronic data constitutes
export of “computer software” as per Explanation 2 to s. 10B and is eligible for
95
Export oriented undertakings S. 10B
deduction. Tribunal also held that; the customs bonding which was never mentioned by
the authorities as a condition for grant of registration can never be made a pre-condition
for registration after 3 years. (AY. 2004-05 to 2008-09)
ACIT v. Majmudar & Co. (2016) 181 TTJ 577 / 52 ITR 54 / 73 taxman.com 77 (Mum.)
(Trib.)
268 S. 10B : Export oriented undertakings – Deduction to be computed before adjusting
brought forward losses.
The Assessing Officer held that the brought forward losses and unabsorbed depreciation
were required to be set off against the total income of the assessee first and thereafter,
deduction under section 10B of the Act should be allowed. The Commissioner (Appeals)
confirmed this. The Tribunal held that deduction under section 10B of the Act was to
be computed before adjusting brought forward unabsorbed losses or depreciation. [CIT
v. Black and Veatch Consulting P. Ltd. (2012) 348 ITR 72 (Bom.) followed] (AY. 2005-06)
Vishay Components India P. Ltd. v. Addl. CIT (2015) 174 TTJ 354 / 128 DTR 178 / (2016)
45 ITR 471 (Pune)(Trib.)
269 S. 10B : Export oriented undertakings – Weighted deduction – Expenditure on research
and development – Failure to prove that no part of knowledge gained out of research
and development activity useful to section 10B units – Matter remanded
The assessee claimed exemption under section 10B of the Act on two Export Oriented
Units and weighted deduction under section 35(2AB), section 35AC and 35(1)(ii) of
the Act. Since the assessee had not allotted the research and development expenditure
to the Export Oriented Units, the research and development expenditure claimed
under section 35AC and section 35(1)(ii) in respect of donations paid was allotted
proportionately on the basis of the turnover of the undertaking. The Commissioner
(Appeals) remanded the matter to the Assessing Officer holding that the knowledge
gained out of research and development was equally useful for all the units of the
assessee unless the research and development activity was exclusively related to the
components manufactured by the non-section 10B units alone and it was not proved
substantively that no part of the knowledge gained out of research and development
activity was useful to the section 10B units and hence the Assessing Officer to find out
the tangible benefits which the section 10B units had derived from the research and
development activities carried out by the assessee and to decide the disallowance. The
Tribunal held that the Commissioner (Appeals) was justified in remanding the matter
to the Assessing Officer to find out the tangible benefits which the section 10B units
derived from the research and development activities carried out by the assessee and to
decide the disallowance. (AY. 2005-06, 2008-09 and 2009-10)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.)
270 S. 10B : Export oriented undertakings – Apportionment of expenses on the basis of
turnover proper.
The Assessing Officer, for the assessment years 2007-08 and 2008-09, held that the
assessee had apportioned the common expenses to its unit in a software technology
park, which worked out to 1.56 per cent (` 3,30,747). However, the Assessing Officer
following the directions of the Additional Commissioner to rework the apportionment
96
S. 10B Export oriented undertakings
of common expenses considering one-third of the audit fees and directors’ remuneration
towards the unit in the software technology park, recomputed the allocation of common
expenses at ` 39,39,208. The Commissioner (Appeals) confirmed the AO order. The ITAT
held that the CIT(A) had given a finding that apportionment of expenses was to be done
on the basis of turnover of the software technology parks of India unit and non-software
technology parks of India unit. This was fair and appropriate. (AY. 2007-08, 2008-09)
Accel Frontline Ltd. v. DCIT (2016) 46 ITR 138 (Chennai)(Trib.)
S. 10B : Export oriented undertakings – Research documents and speciality compound 271
produced while providing ‘contract research’ service in chemistry would be used
only in later stages of development of industrially useful chemicals Amounts to
manufacturing – Entitle to exemption.
Assessee-company was engaged in business of providing contract research services in
field of molecular biology and synthetic chemistry - Assessee had categorised its receipts
under two heads, namely, contract research fee and sale of compounds. Assessee filed
its return claiming exemption under section 10B. According to Assessing Officer, since
assessee’s earnings were not from exports of compounds, but from entire research work
including intellectual property embedded therein, claim raised by assessee could not
be allowed. CIT(A) allowed the claim. On appeal Tribunal held that mere fact that end
product was either research documents in nature of experimental records or speciality
compound which would find use only in later stages of development of industrially
useful chemicals and formulations, it could not be concluded that assessee was not
manufacturing an article or thing. Therefore, assessee’s claim for exemption was to be
allowed. (AY. 2005-06,1006- 07)
Dy. CIT v. Syngene International Ltd. (2016) 157 ITD 542 (Bang.)(Trib.)
S. 10B : Export oriented undertakings – Deduction u/s. 10B is allowable if necessary 272
approvals are obtained, even though earlier deduction was claimed u/s. 80IC. [S. 80IC]
The Assessee was earlier claiming deduction u/s. 80IC and during the impugned AY it
switched over to claiming deduction u/s. 10B. The AO did not allow the same on the
ground that a switch over to S.10B was not allowed from S. 80-IC. On appeal, the ITAT
allowed the deduction u/s. 10B since it had received all the necessary approvals for
registering its unit and it had forgone its earlier claim of deduction u/s. 80IC. (AY 2009-10)
ACIT v. Windlass Steel Craft (2016) 45 ITR 259 / 175 TTJ 1 (UO) (Delhi)(Trib.)
S. 10B : Export oriented undertakings – Gherkins pickles – Processes undertaken 273
by the assessee had significant effect on the raw nature, converting it to a material
capable of withstanding decay for a considerable period of time, amounts to
manufacture – Entitle to deduction.[S.10A]
Allowing the appeal of assessee the Tribunal held that; once such raw gherkins are put
into some process which increases its shelf life to six months or more, there indeed
happen some irreversible change. Raw gherkins are changed from its original state to
a state where it remains good for human consumption even after six months. Thus the
steps as undertaken by the assessee which included fermentation and which extended
the shelf life of raw gherkins, even if we construe as not ‘manufacture’, as commonly
understood, it cannot be denied that it resulted in a product which cannot be equated
97
Property held for charitable purposes S. 11
with raw gherkins. The processes undertaken by the assessee had significant effect
on the raw nature, converting it to a material capable of withstanding decay for a
considerable period of time. In our opinion, in such a situation, it is difficult to say
that what was packed by the assessee after the various process was very same as the
raw gherkins which it got from its contract farmers.(ITA No. 1292/Bang/2010 & ITA No.
287/Bang/2013, dt. 18.03.2016)(AY. 2006-07, 2007-08)
Intergarden India Pvt. Ltd. v. ACIT (Bag.)(Trib.); www.itatonline.org
S. 11. Income from property held for charitable or religious purposes.
274 S. 11 : Property held for charitable purposes – Excess of expenditure over current
years income – Excess expenditure incurred out of accumulated charity fund – Trust
is entitled to exemption.
The assessee, an agriculture produce market committee, filed return of income claiming
the status as Charitable Trust. Expenditure incurred by the assessee towards the
charitable aims and objects, was found to be in excess of the income earned in the
relevant assessment year. AO held that since the excess of expenditure over the income
of the relevant assessment year was incurred out of the accumulated charity fund,
therefore no exemption u/s 11 can be allowed in respect of the income of the assessment
year. The High Court held that, it was an undisputed fact, that the assessee had incurred
expenditure out of the income of the year under consideration and only the excess of
expenditure was out of the accumulated charity fund. In such a case, the Court held
that the deduction u/s 11 cannot be denied to the assessee. (AY 2008-09)
CIT v. Krishi Upaj Mandi Samiti, Raisinghnagar (2016) 240 Taxman 527 / (2017) 390 ITR
59 / 293 CTR 348 (Raj.)(HC)
Editorial: SLP is granted to the revenue; CIT v. Krishi Upaj Mandi Samiti, Raisinghnagar
(2017) 244 Taxman 187 (SC)
275 S. 11 : Property held for charitable purposes – Held, depreciation allowable even
if entire cost claimed as an application of income for charitable activities – Held,
amendment made in section 11(6) prospective in nature. [S.32]
The High Court, following the judgment of the same court in case of DIT v. Al-Ameen
Charitable Fund Trust [2016] 383 ITR 517/238 Taxman 148/67 taxmann.com 160 (Kar),
held that assessee can claim depreciation inspite of the fact that it has already claimed
the entire cost of the asset as application of income for charitable activities. Further, it also
held that the amendment made in section 11(6) w.e.f. 1.4.2015 to negate the allowability
of depreciation if the entire cost is already claimed as application of income was
prospective in nature and therefore, not applicable to years prior to 1.4.2015.(AY. 2010-11)
CIT v. Bangalore Baptist Hospital Society (2016) 240 Taxman 567 (Karn.)(HC)
Editorial: SLP is granted to the revenue, CIT v. Bangalore Baptist Hospital Society (2017)
244 Taxman 216 (SC)
276 S. 11 : Property held for charitable purposes – Depreciation – Application of income
– Depreciation is allowable. [S. 32]
On appeal by revenue; dismissing the appeal, that application of income for acquiring
an asset was different from claim for depreciation in relation to the use or application
98
S. 11 Property held for charitable purposes
of the asset for achieving the stated object or purpose of a charitable trust. Therefore,
the depreciation in respect of capital expenditure is allowable and no question of double
deduction arose. (AY. 2008-09)
DIT(E) v. Gem and Jewellery Export Promotion Council (2016) 384 ITR 412 (Bom.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment, DIT(E) v. Gem and Jewellery Export Promotion Council [2016] 380
ITR 4. (St.)
S. 11 : Property held for charitable purposes – Depreciation – Amount spent on 277
purchase of capital assets claimed exempt as application of income to objects –
Depreciation allowable on such capital assets.[S. 32]
The assessee claimed depreciation in respect of fixed assets. In the year of purchase
of the fixed assets, the entire amount attributable to their purchase was shown as
application of income for the objects of the assessee and thus exempt in terms of
section 11 of the Income-tax Act, 1961. The Assessing Officer disallowed the claim for
depreciation on the ground that it would amount to double deduction. On appeal, the
Commissioner (Appeals) upheld the decision of the Assessing Officer. The Tribunal held
that the assessee was entitled to the depreciation. On appeal :
Held, that the deduction on account of depreciation would not amount to double
deduction. It was allowable. (AY. 2006-07, 2007-08)
CIT v. Jawaharlal Nehru Port Trust (2016) 383 ITR 339 (Bom.)(HC)
Editorial: The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. Jawaharlal Nehru Port Trust [2016] 382 ITR (St.) 33]
S. 11 : Property held for charitable purposes – Amendment by Finance (No. 2) Act, 2014 278
denying depreciation is prospective – Effect from 1-4-2015 [S. 10(23C), S. 12AA, S. 32]
Dismissing the appeal of revenue, the Court held that Amendment by Finance (No. 2)
Act, 2014 denying depreciation is prospective and is effect from 1-4-2015, hence for the
relevant years depreciation was rightly allowed as application of income. (AY. 2005-06,
2009-10)
DIT(E) v. Al-Ameen Charitable Fund Trust (2016) 383 ITR 517 / 238 Taxman 148 / 133
DTR 72 (Karn.)(HC)
Editorial: SLP is granted to the revenue, DIT v. Al-Ameen Charitable Trust (2016) 242
Taxman 4 (SC)
S. 11 : Property held for charitable purposes – Profit from sale of land owned by 279
assessee, an educational trust, could not be treated as business income and was
eligible for exemption. [S.2(15)]
Dismissing the appeal of the revenue, the Court held that; Profit from sale of land
owned by assessee, an educational trust, could not be treated as business income and
was eligible for exemption. as activity of sale of land was incidental to objects of trust
and said profit had been applied for objects of trust. (AY. 2011-12)
CIT v. Sri Magunta Raghava Reddy Charitable Trust. (2016) 242 Taxman 18 / (2017) 292
CTR 464 (Mad.)(HC)
99
Property held for charitable purposes S. 11
280 S. 11 : Property held for charitable purposes – Club – Mutuality Deposit of money in
scheduled banks and receipt of interest thereon is not an activity in nature of trade,
commerce or business, withdrawal of registration was held to be not justified. [S.2(15),
4, 12A]
Allowing the appeal of the assessee the Tribunal held that the act of deposit of money
in scheduled bank account complying with provision of s. 11(5) and receipt of interest
thereon was not an activity in nature of trade, commerce or business hence addition
cannot be made on account of interest which was exempt u/s. 11(5). (AY. 2009-10)
Bombay Presidency Golf Club Ltd. v. ITO (2016) 159 ITD 1050 / (2017) 147 DTR 304
(Mum.)(Trib.)
281 S. 11 : Property held for charitable purposes – Depreciation – Cost of asset already
allowed as application of income for charitable purposes – Depreciation on asset is
allowable.
Even if amount spent on acquiring depreciable asset was treated as application
of income of trust in year of acquisition, depreciation would still be allowable in
subsequent years.
ACIT v. Shreyash Pratisthan (2016) 51 ITR 134 (Pune)(Trib.)
282 S. 11 : Property held for charitable purposes – Micro finance business in commercial
manner so as to earn profit and there was no iota of charity carried on by Assessee
– Not entitled to exemption. [S. 2(15)]
Allowing the appeal of the revenue the Tribunal held that; the assessee carried on,
Micro finance business in commercial manner so as to earn profit and there was no
iota of charity carried on by Assessee hence not entitled to exemption.(AY. 2009-10,
2010-11, 2011-12)
ACIT v. Grama Vidiyal Trust (2016) 180 TTJ 579 / 71 taxman.com 88 (Chennai)(Trib.)
283 S. 11 : Property held for charitable purposes – Carry forward of deficit was allowed
to set off against the current years income.
Dismissing the appeal of the revenue, the Tribunal held that; Carry forward of deficit
was allowed to set off against the current years income. (AY. 2008-09)
ACIT (E) v. K. J. Somaiya Trust (2016) 158 ITD 57 (Mum.)(Trib.)
284 S. 11 : Property held for charitable purposes – Education – Denial of exemption was
not justified merely on the ground that receipt from education constituted a small
proportion of total receipts of society. [S. 2(15), 12A]
Allowing the appeal of the assessee; Assessee worked with community organizers, adult
educator, health care workers, social workers etc. in training them to use participatory
research methodology in their work. Assessee also produced own educational materials
for use in educational programmes and for wider dissemination. Therefore denial of
exemption was not justified merely on the ground that receipt from education constituted
a small proportion of total receipts of society. (AY. 2007-08, 2009-10, 2010-11)
Society For Participatory Research in Asia v. ITO (2016) 159 ITD 887 / 180 TTJ 596 (Delhi)
(Trib.)
100
S. 11 Property held for charitable purposes
S. 11 : Property held for charitable purposes – Organising seminars/conferences and 285
Auto Expo were performed with prior object of promotion of growth of automobile
industry in India which is an object of general public utility, such activities would
not come within ambit of proviso to S. 2(15) even if some income was generated from
such activities. [S.2(15), 12]
AO denied benefit of S. 11 and 12 on ground that in view of amended provisions of
S. 2(15) receipts from seminars, statistical information and Auto Expo 2008 were not
charitable activities. Allowing the appeal the Tribunal held that activities of assessee
in organizing seminars, conferences and Auto Expo and publications in relation to
automobile industry were performed with prior object of promotion of growth of
automobile industry in India, which is an object of general public utility, and, therefore,
proviso to S. 2(15) would not apply.
Society of Indian Automobile Manufacturers v. ITO (2016) 159 ITD 659 (Delhi)(Trib.)
S. 11 : Property held for charitable purposes – Auditorium – Whole or some part 286
of income from running of auditorium hall was used for charitable purposes would
not render business itself being considered as incidental to attainment of objects of
assessee-trust. [S. 2(15), 12]
Dismissing the appeal of the assessee the Tribunal held that Whole or some part of
income from running of auditorium hall was used for charitable purposes would not
render business itself being considered as incidental to attainment of objects of assessee-
trust. Assessee was not entitled to any exemption u/s. 11. (AY. 2010-11)
Suguna Charitable Trust v. ITO (2016) 159 ITD 838 (Chennai)(Trib.)
S. 11 : Property held for charitable purposes – Pharmacy shop was an integral part of 287
hospital, same would not be hit adversely by conditions specified in provisions of S.
11(4A) and, thus, would be eligible for exemption. [S. 10(23C), 11(4A)]
Assessee is a registered charitable Trust which is engaged in running schools and hospitals
.Assessing Officer invoking the provisions of section 11(4A) held that as no separate books
are maintained for pharmacy there is violation of provision hence not eligible exemption.
On appeal the Tribunal held that; Since pharmacy shop was an integral part of hospital,
same would not be hit adversely by conditions specified in provisions of S. 11(4A) and,
thus, would be eligible for exemption. (AY. 2006-07 to 2009-10)
Hiranandani Foundation v. ADIT (E) (2016) 159 ITD 278 / 181 TTJ 471 (Mum.)(Trib.)
S. 11 : Property held for charitable purposes – Development authority – Since its 288
activity as town planner was part of its object, denial of exemption was not justified.
[S. 12AA]
Dismissing the appeal of the Revenue, the Tribunal held that activity of the assessee was
part of development only, which was object of assessee since beginning and there was
no change in charitable purpose while doing activity of development, its income would
be eligible for exemption. (AY.2009-10)
ITO v. Moradabad Development Authority (2016) 159 ITD 971 / 49 ITR 270 / (2017) 183
TTJ 278 (Delhi)(Trib.)
101
Property held for charitable purposes S. 11
289 S. 11 : Property held for charitable purposes – Conducting fairs outside India was part
of objects of the assessee and hence eligible for exemption, revision was held to be
not valid. [S. 2(15), 12AA, 263]
The assessee, engaged in promoting commerce and industry relating to building
construction, among other conducted fairs and seminars. The CIT, under proceedings
u/s. 263, alleged that the assessee was not eligible to exemption u/s. 11 since its main
activity was holding fairs in and outside India, which was commercial in nature. Further,
the CIT alleged that the fairs conducted outside India violated the provisions of s. 11(1)
(a), which prohibited the application of money in the form of expenses outside India.
The ITAT held that since the inception the main as well as incidental objects remained
the same, which was accepted by the Department, hence the exemption was available to
the assessee. Further, the ITAT held that there was no evidence to prove that income was
applied outside India. The fair abroad was conducted for the advancement of business of
realty business in India and all expenses were incurred in India. (AY. 2011-12)
CREDAI Bengal v. CIT(E) (2016) 52 ITR 161 (Kol.)(Trib.)
290 S. 11 : Property held for charitable purposes – One of objects of charitable society was
sale and purchase as required by Government, while ultimate object was not profit is
eligible for exemption. [S. 2(15), 12]
Assessee was a registered society working under Government of India for advancement
of object of general public utility. Even though object of society contained sale and
purchase as one of its objects, still ultimate object was not profit-making. Assessee was
not driven by profit motive, not hit by proviso to S. 2(15). Eligible for exemption u/s.
11. (AY. 2010-11, 2011-12)
DCIT v. Semi-Conductor Laboratory, Deptt. of Space, Govt. of India (2016) 161 ITD 584
(Chd.)(Trib.)
291 S. 11 : Property held for charitable purposes – Since Assessing Officer neither doubted
genuineness of activities of assessee nor pointed out any violation, hence order passed
by AO was not sustainable [S. 11, 12A, 13(1)(c), 13(1)(d)]
Assessing Officer denied exemption on basis that though objects were charitable in
nature and activities were genuine, still activities carried out by assessee were akin to
any commercial activity because assessee’s gross receipts had increased over a period of
time. Tribunal held that since Assessing Officer neither doubted genuineness of activities
of assessee nor pointed out any violation referred to in section 13(1)(c) or 13(1)(d), order
passed by AO was not sustainable. (AY. 2009-10)
ITO v. Mother Theresa Educational Society (2016) 158 ITD 473 (Visakha)(Trib.)
292 S. 11 : Property held for charitable purposes – Merely because surplus was generated from
hospital activities could not be ground to deny exemption – Payment made to trustees for
services rendered being reasonable, there is no violation. [S. 2(15), 12, 13(1)(c)]
Dismissing the appeal of the revenue, the Tribunal held that; merely because surplus was
generated from hospital activities could not be ground to deny exemption. Payment made
to trustees for services rendered being reasonable, there is no violation. (AY. 2008-09)
ITO v. Noble Medical Foundation & Research Centre (2015) 68 SOT 343 (URO)(Pune)
(Trib.)
102
S. 11 Property held for charitable purposes
S. 11 : Property held for charitable purposes – Receipts from letting out of community 293
hall and marriage hall – Business carried on subsequent to formation of trust does
not constitute property held under trust and, thus, income from such business is not
exempt from tax. [S. 2(15), 12AA]
The assessee was a society registered under Section 12AA of the Act. It ran a
community and marriage hall and claimed the income from those properties as income
from house property. The AO denied the claim of the assessee holding that the business
of running community hall, marriage hall and funeral ceremonies could not be treated
as incidental business eligible for exemption under Section 11(4A) of the Act and was
hit by proviso to Section 2(15). On appeal to Tribunal, it was held that the running
of community hall, marriage hall and funeral ceremonies constituted business of
the assessee and could not be held to constitute property held under the trust. Only
business held under the trust would enjoy exemption under Section 11(4) and there
was distinction between the objects of the trust and the powers given to the trustees to
effectuate the purpose of the trust. There was no nexus between the activities carried
on and the objects of the assessee that could constitute an activity incidental to the
attainment of objects. The assessee was not entitled to exemption under Section 11
of the Act. If a property is held under trust, and such property is a business, the case
would fall under section 11(4) of the Income-tax Act, 1961, and not under section
11(4A). Section 11(4A) would apply only to a case where the business is not held under
trust. Thus, there is a difference between property or business held under trust and
business carried on by or on behalf of the trust. (AY. 2010-11, 2011-12)
Sri Ram Samaj v. JDIT (E) (2016) 158 ITD 676 / 47 ITR 629 / 181 TTJ 837 (Chennai)(Trib.)
S. 11 : Property held for charitable purposes – Application of income depreciation cannot 294
be allowed on fixed asset which was earlier claimed as application of income. [S. 32]
The ITAT held that if the cost of fixed assets had been claimed as application of income
while claiming exemption under section 11 of the Act in earlier assessment years, the
assessee could not claim depreciation on the same asset under section 32 of the Act as
its cost had already became nil. (AY. 2009-10)
Information Systems Audit and Control Association v. DDIT (E) (2016) 157 ITD 815 / 46
ITR 665 / 179 TTJ 99 (Chennai)(Trib.)
S. 11 : Property held for charitable purposes – Donation given by one public charitable 295
trust to another public charitable trust is permissible as application of income and
said payment is not in violation of section 13(1)(c) because payment is not made for
benefit of any person either directly or indirectly referred to in section 13(3). [S.13(3)]
Donation given by one public charitable trust to another public charitable trust is
permissible in S. 11 as application of income and said payment is not in violation of
section 13(1)(c) because payment is not made for benefit of any person either directly
or indirectly referred to in section 13(3). (AY. 2009-10)
St. Joseph’s Convent Chandannagar Educational Society v. Jt. CIT (2016) 158 ITD 1022
(Kol.)(Trib.)
103
Property held for charitable purposes S. 11
296 S. 11 : Property held for charitable purposes – Application of income – Mere deposit
of surplus funds in FDRs cannot be treated as application of fund there has to be
nexus between investment in FDRs and achievement of charitable objects of assessee
– Matter remanded. [S. 12A]
Mere deposit of surplus funds in FDRs cannot be treated as application of fund there
has to be nexus between investment in FDRs and achievement of charitable objects of
assessee. Matter remanded. (AY. 2011-12)
ITO v. S. D. Public School (2016) 157 ITD 521 (Chd.)(Trib.)
297 S. 11 : Property held for charitable purposes – Advance to sister concern was out of
surplus accumulated – No violation exemption was to be allowed.
Where assessee-trust spent 85 per cent of its income for construction of building to
be used for educational purpose, mere fact that it advanced certain amount to its
sister concern out of surplus accumulated which remained at its disposal, there was
no violation of provisions of section 11(2) and, thus, assessee’s claim for exemption of
income was to be allowed. (AY. 2004-05)
Chawara Educational Trust v. ITO (2016) 157 ITD 281 (Pune)(Trib.)
298 S. 11 : Property held for charitable purposes – Publishing newspaper – Not entitled
to exemption. [S. 2(15)]
Dismissing the appeal of assessee the Tribunal held that; Where assessee-trust having
object to improve and spread language, was publishing newspaper following commercial
activity, it could not be considered as charitable activity. Denial of exemption was held
to be justified. (AY. 2009-10, 2010-11)
Murasoli Trust v. ADIT (E) (2016) 156 ITD 761 / 48 ITR 472 / 139 DTR 320 / 179 TTJ 378
(Chennai)(Trib.)
299 S. 11 : Property held for charitable purposes – Advance of money to managing trustee
for purchase of land – No violation – Entitled to exemption. [S. 13(1)(c)]
Assessee trust advanced money to its managing trustee for purchase of land belonging
to the latter and the said trustee returned the entire money along with interest after
cancellation of agreement. It cannot be said that the transaction between the assessee
trust and the managing trustee was one without adequate security or adequate interest or
that the money was diverted for the benefit of the managing trustee and, therefore, there
is no violation of S. 13. There was no violation of any other provision of the IT Act on
transfer of three institutions and its infrastructure by another trust to the assessee trust
by way of donation. Assessee was entitled for exemption u/s. 11.(AY. 2010-11)
Dy. DIT (E) v. Vels Institute of Science, Technology & Advanced Studies (2016) 157 ITD
237 / 130 DTR 331 / 175 TTJ 593 (Chennai)(Trib.)
300 S. 11 : Property held for charitable purposes – Education of fathers serving in schools
– Exemption could not be denied. [S. 2(15), 12A]
Dismissing the appeal of revenue the Tribunal held that; where assessee, a charitable
trust, spent certain amount towards education of Fathers serving in schools run by it
as teachers, supervisers etc., it was to be regarded as charitable purpose and, thus,
104
S. 11 Property held for charitable purposes
assessee’s claim for exemption of income under section 11 could not be rejected. (AY.
2003-04)
ACIT v. Carmelite Charitable Society (2016) 157 ITD 78 (SMC) (Amritsar)(Trib.)
S. 11 : Property held for charitable purposes – Receipts from non-members by allowing 301
them to have their stalls in trade fair being negligible – Denial of exemption was held
to be not justified. [S. 2(15)]
Dismissing the appeal of revenue the Tribunal held that; where assessee-association was
formed with an object to promote leather trade, in view of fact that assessee’s receipt of
rent from non-members by allowing them to keep their stalls in trade fairs organised by
assessee was negligible in comparison to total trade receipts, assessee’s case could not
be said to be covered under proviso to section 2(15) (AY. 2009-10)
ITO v. Indian Leather Products Association (2016) 156 ITD 393 (Kol.)(Trib.)
S. 11 : Property held for charitable purposes – Micro finance business in commercial 302
manner – Not eligible exemption. [S. 2(15)]
Where assessee was carrying on micro finance business in a commercial manner, its
activities fell under category of ‘advancement of any other object of general public
utility’ and thereby hit by proviso to section 2(15) disentitling it from exemption. (AY.
2009-10)
ITO v. Kalanjiam Development Financial Services (2016) 156 ITD 213 (Chennai)(Trib.)
S. 11 : Property held for charitable purposes – Exemption allowed if the accumulated 303
funds were utilized in the subsequent year for the valid objects of the trust, though
there was a technical error in the Form 10 that was filed.
The assessee Trust filed in its Form 10 that the accumulated sum would be used for
social-economic programmes. The AO treated it as income since the Assessee was not
specific in how the funds were going to be utilized. The ITAT allowed the exemption
for the trust since the funds were utilized in the subsequent year for its objects and the
technical lapse in filling up of Form 10 could be condoned. (AY. 2011-12)
Presentation Social Service Centre v. DDIT (2016) 45 ITR 23 (Hyd.)(Trib.)
S. 11 : Property held for charitable purposes – Excess application of funds not 304
permissible to be carried forward to subsequent years. [S. 32]
Tribunal held that the; claim of the assessee for carry forward of excess application
of fund to subsequent years was not permissible under the Act. Purchase cost of the
assets would have been already allowed as application of funds in the year of purchase.
Therefore, loss on sale of these assets could not be treated as application of funds once
again. Claim of depreciation made by the assessee could not be entertained as per the
provisions of the Act. If the receivables on which claim of bad debts was made were
earlier treated as income of the assessee-trust, they should be allowed as application of
funds when such receivables had become bad and written off in the books of account,
following the mercantile system of accounting. (AY 2010-11)
Sundaram Medical Foundation v. Dy. CIT (E) (2016) 45 ITR 500 (Chennai)(Trib.)
105
Voluntary contributionss S. 12
S. 12. Income of trust or institutions from contributions
305 S. 12 : Voluntary contributions – Corpus donations received by the trust cannot
be brought to tax despite the fact that the assessee – Trust was not registered
u/s.12A/12AA of the Act. [S. 2(24)(iia), 12A, 12AA]
Allowing the appeal of the assesse the Tribunal held that corpus donations received by
the assessee trust cannot be brought to tax despite the fact that the assessee-trust was
not registered u/s 12A/12AA of the Act. (AY. 2011-12)
Chandraprabhu Jain Swetamber Mandir v. ACIT (2016) 50 ITR 355 (Mum.)(Trib.)
S. 12A. Conditions for applicability of sections 11 and 12.
306 S. 12A : Registration – Trust or institution – Maintaining separate books of account
for research activity and for running hospital – Fulfilment of requirement of section
11(4A) of Act – Appellate Tribunal holding that activities incidental to main activity
of hospital itself and not undertaken with profit motive. [S.11(4A)]
The assessee-company was running a hospital which had been approved as a charitable
institution under section 12A. It maintained separate books of account for the research
activity and for running the hospital and filed its return of income showing nil income.
Held that the activities were incidental to the main activity of the hospital itself and
were not undertaken with a profit earning motive and noticed that for the AYs earlier
and later to the present AYs the AO had allowed its claim for exemption. Maintenance
of separate ledgers for each of the sources of income fulfilled the requirement of section
11(4A) of the Act. (AY. 2008-09)
CIT v. Pushpawati Singhania Research Institute for Liver, Renal and Digestive Diseases
(2016) 386 ITR 43 (Delhi)(HC)
307 S. 12A : Registration – Trust or institution – Some of the activities undertaken by
it, which are ancillary or incidental to the main object of general public utility, it
does not cease to be charitable in character so as to render it ineligible to claim
registration. [S. 2(15), 12AA]
Dismissing the appeal of the Revenue, Court held that predominant object of TDA/VIT
was to secure integrated development and /or improvement of city/region, which falls
within the express advancement of any other object of general public utility and on
account of profit being earned by it through some of the activities undertaken by it,
which are ancillary or incidental to the main object of JDA/VIT was to secure integrated
development and /or improvement of city/ region which falls within the express
advancement of any other object of general public utility and on account of profit being
earned by it through some of the activities undertaken by it, which are ancillary or
incidental to the main object of general public utility, it does not cease to be charitable
in character so is to render it ineligible to claim registration u/s. 12A r.w.s 12AA. (AY.
2004-05 to 2006-07, 2010-11)
CIT v. Jodhpur Development Authority (2016) 139 DTR 1 / 287 CTR 473 (Raj.)(HC)
106
S. 12A Registration
S. 12A : Registration – Trust or institution – Grant of registration was held to be 308
justified. [S. 12AA]
CIT held that the objects and the activities of the trust were not genuine and rejected
the registration. Tribunal held that, CIT cannot find out whether trust applied its income
for its object while granting registration and CIT should consider the report of the JCIT
before giving registration. On appeal dismissing the appeal of the revenue the Court held
that; the ITAT being satisfied after considering the material on record granted registration
,order of ITAT upheld.
CIT v. Gopi Ram Goyal Charitable Trust (2016) 240 Taxman 749 (Raj.)(HC)
S. 12A : Registration – Trust or institution – While granting registration to a trust, 309
Commissioner is empowered to examine only genuineness of trust. [S. 2(15)]
While granting registration to a trust, Commissioner is empowered to examine only
genuineness of trust. He cannot examine the application of funds or ethical background
of settlors called for at that stage. That unethical methods used for collection of funds
and no charitable activities carried out cannot be the grounds on which registration can
be refused.
Sree Anjaneya Medical Trust v. CIT (2016) 382 ITR 399 / 239 Taxman 229 / 135 DTR 199
(Ker.)(HC)
Editorial: Special Leave Petition against impugned order was granted, CIT v. Sree
Anjaneya Medical (2016) 243 Taxman 142 (SC)
S. 12A : Registration – Trust or institution – Charitable purposes – Objectives of trust 310
to be considered as a whole, and not in isolation – Matter remanded. [S. 80G(5)(vi)].
Allowing the appeal the Court held that objectives of trust to be considered as a whole,
and not in isolation. Intention of settler or executor cannot decide nature of trust. Tribunal
to consider purpose and objectives of trust in light of trust deed and other documents.
Bangalore Urban & Rural District Co-op Milk Producers Societies Members and Employees
Welfare Trust Bangalore Milk Union Ltd. v. DIT (E) (2016) 382 ITR 528 (Karn.)(HC)
S. 12A : Registration – Trust or institution – No obligation to maintain separate books 311
of account – First proviso applies to the advancement of any other object of general
nature – Withdrawal of registration was held to be not justifies. [S.2(15), 11(4A)]
Dismissing the appeal of revenue the Court held that if the predominant purpose is
charitable, the earning of profit from an incidental activity like letting of property does
not affect the charitable status. As the letting is a part of the educational activities, there
is no obligation to maintain separate books u/s. 11(4A). As per CBDT Circular No. 11
of 2008, the first proviso to s. 2(15) applies to the ‘advancement of any other object of
general public utility’.” (AY.2009-10)
DIT (E) v. Lala Lajpatrai Memorial Trust (2016) 383 ITR 345 / 136 DTR 233 / 240 Taxman
557 (Bom.)(HC)
S. 12A : Registration – Trust or institution – For granting registration enquiry into 312
objects of trust is relevant and not the application of income.[S.12AA]
Dismissing the appeal of the revenue, the Court held that, having been satisfied about
the genuineness of the objects and activities of the assessee-trust, the Appellate Tribunal
107
Registration S. 12A
had committed no error in granting the application for registration preferred by the
assessee under section 12A of the Act. For granting registration enquiry into objects of
trust is relevant and not the application of income.
CIT v. Gopi Ram Goyal Charitable Trust (2016) 240 Taxman 749 / (2017) 392 ITR 285
(Raj.)(HC)
313 S. 12A : Registration – Trust or institution – Religious objects – Tribunal was correct
in allowing registration to assessee as the Trust had large number of other objects,
which were for benefit of general public. [S.(2(15), 13]
Dismissing the appeal of revenue the Court held that since apart from objects which
were for benefit of a religious community, assessee-trust had large number of other
objects, which were for benefit of general public, Tribunal was correct in allowing
registration to assessee.
CIT v. Bayath Kutchhi Dasha Oswal Jain Mahajan Trust (2016) 243 Taxman 60 (Guj.)(HC)
314 S. 12A : Registration – Trust or institution – Restriction imposed under first proviso to
section 2(15) would be relevant only for purpose of grant of exemption under section
11 and not for cancellation of registration. [S. 2(15), 12AA]
Allowing the appeal of the assessee, the Tribunal held that merely because income of
assessee during relevant previous year exceeded prescribed limit, that, by itself, could
not be a ground for considering assessee as non-charitable and for cancellation of its
registration more so when DIT(E) failed to establish that either there was change in
objects of institution on basis of which registration was granted earlier or activities of
institution were not in accordance with its stated objects. (AY. 2009-10)
Bombay Chamber of Commerce & Industry v. ITO (2016) 157 ITD 861 (Mum.)(Trib.)
315 S. 12A : Registration – Trust or institution – Pre-schooling is very much integral part
of term ‘education’, rejection of application was held to be not justified. [S. 2(15), 11]
The Commissioner rejected application for grant of registration on two reasons i.e.
assessee was running pre-school which was stage prior to normal schooling, and
therefore, its activities could not be treated as falling within gamut of ‘education’ as per
S. 2(15) and second one, assessee trust was charging fees for issue of prospects, supply
of school kit, admission fees etc., thus, it was engaged in business of commercial activity
while running pre-school. Allowing the appeal the Tribunal held that pre-schooling is
very much integral part of term ‘education’ as has been envisaged u/s. 2(15). As regards
second objection, at stage of granting registration u/s. 12A, Commissioner was required
to examine only genuineness of activities of trust and not commercial nature of those
activities. Therefore, rejection of registration was not sustainable.(AY. 2013-14)
Green Acres Educational Trust v. Dy. CIT (2016) 159 ITD 671 / 182 TTJ 537 / 49 ITR 533
(Mum.)(Trib.)
316 S. 12A : Registration – Trust or institution – Relief u/s 11 cannot be denied if
registration was granted when an appeal was pending before CIT(A). [S.11, 12AA]
During the pendency of appeal the assessee applied for registration and was accordingly
granted registration under section 12AA. Those appeals were the continuation of the
original proceedings. In view of the principle of purposive interpretation of statutes, an
108
S. 12A Registration
assessment proceeding which is pending in appeal before the appellate authority should
be deemed to be ‘assessment proceedings pending before the Assessing Officer’ within
the meaning of that term as envisaged under the proviso. It follows therefrom that the
assessee, which obtained registration under section 12AA during the pendency of appeal,
was entitled for exemption claimed under section 11 even for the earlier assessment
years pending.(AY. 2009-10, 2011-12)
SNDP Yogam v. ADIT (2016) 161 ITD 1 / (2017) 152 DTR 137 (Cochin)(Trib.)
S. 12A : Registration – Trust or institution – Corporation was for purpose of 317
development of infrastructure of a specified industrial area with a predominant
purpose of creating and developing facility for development of industries in state,
hence entitle for registration.[S. 2(15), 12, U.P. Industrial Area Development Act, 1976]
Assessee, corporation was for purpose of development of infrastructure of a specified
industrial area with a predominant purpose of creating and developing facility for
development of industries in State, Allowing the appeal of the assessee the Tribunal
held that There is no prime object or element of earning profit as private developer
or builder and activities of acquiring of land and selling developed property is an
incidental activity and profit earned therefrom has to be used towards objects of the
appellant which are of charitable purposes and thus newly inserted proviso to section
2(15), cannot be pressed into service for denial of registration under section 12A.
New Okhla Industrial Development Authority v. CIT (2016) 161 ITD 105 / 181 TTJ 289
(Delhi)(Trib.)
S. 12A : Registration – Trust or institution – Charitable purpose – ICAI is an 318
educational institute and hence its income would be exempt, as education falls within
meaning of charitable purpose. [S. 2(15), 10(23C) 11]
Dismissing the appeal of the revenue the Tribunal held that; ICAI is an educational
institute and hence its income would be exempt, as education falls within meaning of
charitable purpose. (AY. 2010-11)
Dy. DIT v. Institute of Chartered Accountants of India (2016) 159 ITD 573 (Delhi)(Trib.)
S. 12A : Registration – Trust or institution – Imparting training in field of travel and 319
tourism in aviation – Obtained approval/recognition of DGCA, IATA at global level –
Activity would fall under purview of charitable purpose u/s. 2(15), hence the assessee
is eligible for exemption. [S. (2(15), 11, 12]
Assessee was a society registered u/s. 12A, imparting training in field of travel and
tourism in aviation as well as in other professional courses. Approval/recognition of
sector specific competent authority like DGCA at national level and IATA at global
level were obtained who gave approvals as per industry standard requirements by way
of their agreements/approvals etc. on a year to year basis after due care and diligence
and considering adherence of standards and requirements to be met in industry specific
skill/qualification requirements. Assessee was entitled to avail exemption u/s. 11 and
12.(AY. 2008-09)
ADIT v. Bird Education Society for Travel & Tourism (2016) 160 ITD 18 / 181 TTJ 782 /
(2017) 147 DTR 169 (Delhi.)(Trib.)
109
Registration S. 12A
320 S. 12A : Registration – Trust or institution – It was not necessary that institution
should be established under an instrument and in instant case institution was
established by an order of a Bishop, Commissioner was not correct to deny
registration. [ITR, 1962, 17A]
Registration u/s.2A it is not necessary that institution/trust should be established under
an instrument; what is required is only a document evidencing creation of trust or
establishment of institution together with a copy thereof. Assessee, a religious trust
(Parish) created under conventional way by issuing a ‘decree’ under Cannon law by
concerned Bishop, filed an application in prescribed Form No. 10A requesting for
registration u/s.12A. Commissioner rejected application and denied registration on
ground that assessee had not filed copy of instrument in support of creation of trust.
Since creation of institution in question was evidenced by decree issued by Bishop,
Commissioner was not correct to deny registration.
Merciful Jesus Church v. CIT (2016) 160 ITD 42 (Cochin)(Trib.)
321 S. 12A : Registration – Trust or institution – Assessee building up its assets and
receipts to use for educational purpose – Not profit motive – Registration to be
granted. [S. 2(15)]
The assessee was incorporated with the main object of providing education. The
Commissioner refused to grant registration under Section 12 A of the Act on the ground
that education was to be given free of cost to needy students and the assessee was
expanding and increasing its receipts. On appeal to Tribunal it was held that the reasons
recorded by the Commissioner that education was to be given free of cost to needy
students and the assessee was expanding and increasing its receipts was not a criteria
or relevant fact for gathering satisfaction as required under the Act. Merely because the
assessee was increasing its assets and receipts that would not ipso facto establish that
the assessee exists for the purpose of profit and carried out educational activities with a
profit motive in the nature of trade, commerce or business as provided in the amended
provision of Section 2(15). The Commissioner had not brought out any allegation to
show that the receipts of the assessee’s trust were not used for educational purposes
and the receipt was used for other purposes beyond the objectives of the assessee. The
assessee was eligible for registration under Section 12A of the Act.
Shree Balaji Educational Trust v. CIT (2016) 47 ITR 595 (Delhi)(Trib.)
322 S. 12A : Registration – Trust or institution – Objects of the Trust cannot be regarded
as non-charitable merely because one of the objects is related to conduct of coaching
classes – Refusal of registration was held to be not justified [S. 2(15)]
The Tribunal held that the objects of the Trust cannot be regarded as non-charitable
merely because one of the objects is related to conduct of coaching classes which in
fact, has not been pursued so far, fact that the assessee has been earning huge profits
year after year does not justify refusal of registration, assessee is entitled to registration.
CIT is directed to grant registration. (AY. 2013-14)
Bhai Gurudas Educational Trust v. CIT (2016) 177 TTJ 25 (UO) (Chd.)(Trib.)
110
S. 12A Registration
S. 12A : Registration – Trust or institution – Running of school – Refusal of registration 323
was held to be not justified. [S.11, 12AA]
Tribunal held that where assessee-educational trust undertook only one activity
of running of school out of 21 objects for charitable purposes and it was charging
reasonable fees from students and it also gave concession to poor and deserving
students, registration of trust under section 12AA was to be granted.
Swami Dayanand Educational Trust v. CIT (2016) 157 ITD 564 (Delhi)(Trib.)
S. 12A : Registration – Trust or institution – Proviso to section 2(15) cannot be basis 324
for cancellation of registration under section 12A [S. (2(15), 11]
Assessee was a golf club registered under section 12A. Commissioner cancelled its
registration on ground that it was indulged in certain commercial activities, e.g., running
bar and restaurant. On appeal Tribunal held that; since activities carried out by assessee
were incidental to main object of club and Commissioner failed to prove that activities
were not genuine, his order cancelling registration of assessee was bad in law. Whether
issue as to whether activities of assessee are commercial in nature has to be considered
by Assessing Officer while giving exemption under section 11 and not by Commissioner
for cancellation of registration.
Chandigarh Golf Club v. CIT (2016) 156 ITD 264 / 177 TTJ 47 (UO) (Chd.)(Trib.)
S. 12A : Registration – Trust or institution – Commissioner is empowered to cancel 325
registration granted to a society under section 12A from assessment year 2011-12
onwards, he cannot assume such power for earlier assessment years – Consideration of
first proviso to section 2(15) has no role to play in matters relating to registration of a
trust or institution under section 12A in respect of granting or declining or cancelling
registration.[S. 2(15), 12AA]
Amendment to section 12AA(3) giving power to Commissioner to cancel registration
granted under section 12A has been conferred by Finance Act, 2010, which explicitly
provides that said powers are available to Commissioner with effect from 1-6-2010
and same accordingly can be applied for assessment year 2011-12 and subsequent
assessment years and, in view of this, Commissioner, could not assume jurisdiction to
cancel registration of assessee society from assessment year 2009-10 onwards. Tribunal
also held that consideration of first proviso to section 2(15) has no role to play in
matters relating to registration of a trust or institution under section 12A in respect
of granting or declining of registration or in respect of cancellation. Amendment to
proviso to section 2(15) brought by Finance Act, 2008 cannot be basis for cancellation
of registration already granted in earlier year under section 12A. Commissioner had not
given findings that activities of assessee were not genuine or not being carried out in
consonance with objects of assessee, action of Commissioner in cancelling registration
was not as per law.
Punjab Cricket Association v. CIT (2016) 157 ITD 227 (Chd.)(Trib.)
111
Procedure for registration S. 12AA
S. 12AA. Procedure for registration
326 S. 12AA : Procedure for registration – Trust or institution – Non disposal of an
application for registration before the expiry of six months as provided u/s. 12AA(2)
results in deemed grant of registration. [S. 2(15)]
In Society for the Promotion of Education, Adventure Sport & Conservation of
Environment v. Commissioner of Income Tax (2008) 216 CTR (All) 167, the Allahabad
High Court held that non disposal of an application for registration before the expiry
of six months as provided u/s 12AA (2) would result in deemed grant of registration.
However, this was reversed by the Full Bench of the Allahabad High Court in CIT v.
Muzafar Nagar Development Authority (2015) 372 ITR 209. The appeal filed by the
department in the case of Society for the Promotion of Education came up before the
Supreme Court. HELD by the Supreme Court disposing of the appeal:
(i) The short issue is with regard to the deemed registration of an application under
Section 12AA of the Income Tax Act. The High Court has taken the view that
once an application is made under the said provision and in case the same is not
responded to within six months, it would be taken that the application is registered
under the provision.
(ii) The learned Additional Solicitor General appearing for the appellants, has raised
an apprehension that in the case of the respondent, since the date of application
was of 24.02.2003, at the worst, the same would operate only after six months from
the date of the application.
(iii) We see no basis for such an apprehension since that is the only logical sense in
which the Judgment could be understood. Therefore, in order to disabuse any
apprehension, we make it clear that the registration of the application under
Section 12AA of the Income Tax Act in the case of the respondent shall take effect
from 24.08.2003.
(iv) Subject to the above clarification and leaving all other questions of law open, the
appeal is disposed of with no order as to costs. (AY. 1998-99)
CIT v. Society for the Promotion of Education, adventure sport & Conservation of
Environment (2016) 382 ITR 6 / 133 DTR 1 / 284 CTR 207 / 238 Taxman 330 (SC)
Editorial : From the judgment of Allahabad High Court in, Society for the Promotion of
Education, adventure sport & Conservation of Environment v. CIT (2008) 216 CTR 167 / 5
DTR 329 (All)(HC). Though the Supreme Court left “all other questions of law open”, the
impact of the verdict is that the law laid down in Society for the Promotion of Education,
Adventure Sport & Conservation of Environment vs. Commissioner of Income Tax (2008)
216 CTR (All) 167 that there is a deemed registration is approved and the law laid down
by the Full Bench in CIT v. Muzafar Nagar Development Authority (2015) 372 ITR 209 is
no longer good law.
327 S. 12AA : Procedure for registration – Trust or institution – If proviso to section 2(15)
becomes applicable, it cannot be a valid ground for cancellation of registration. [S.
2(15)]
The High Court after following the judgment in case of DIT (E) v. Karnataka Badminton
Association (2015) 378 ITR 700 (Karn.)(HC) held that merely because the provision
112
S. 12AA Procedure for registration
to section 2(15) becomes applicable, cannot be a ground to cancel registration u/s.
12AA(3), as it is not the condition stipulated under the said section for cancellation of
registration.
DIT v. Sri Kuthethur Gururajachar Charities (2016) 242 Taxman 292 (Karn.)(HC)
Editorial: SLP is granted to the revenue; DIT v. Sri Kuthethur Gururajachar Charities
(2016) 242 Taxman 254 (SC).
S. 12AA : Procedure for registration – Trust or institution – Fresh deed was not 328
required to be made and assessee was free to alter or correct mistakes in Trust Deed
and, thereafter, comply with procedure prescribed in relevant clause.
The assessee filed an application for availing benefits under Income-tax Act. The
Commissioner the scrutinized documents and intimated the assessee that there were
certain defects in the Trust Deed. He called upon the assessee to correct the mistakes in
the trust deed by preparing a fresh deed. On writ allowing the petition, the Court held
that fresh deed was not required to be made and assessee was free to alter or correct
mistakes in Trust Deed and, thereafter, comply with procedure prescribed in relevant
clause.
Yogakshemam Loans Ltd. v. ITO (2016) 243 Taxman 102 (Ker.)(HC)
S. 12AA : Procedure for registration – Trust or institution – Company – Charitable 329
activity – Commissioner was directed to grant the registration [S. 11, 12A, 80G,
Companies Act, S. 25]
Dismissing the appeal of revenue, the Court held that; a perusal of order of
Commissioner showed that he declined to grant registration to assessee company by
reading its ancillary objects as its main objects as also on basis that in future company
may, under its ancillary/incidental objects, indulge in activities, which would be of non-
charitable character. There was nothing on record to show that company was indulging
in any activity which was not in nature of charity. Further there was also nothing on
record to show that company did not meet any conditions prescribed under Act for
grant of registration to make it eligible for grant of exemption under section 11 and,
consequently, under section 80G. Company had been granted registration under section
25 of Companies Act which as per Tribunal was a recognition of fact that company was
essentially established for purpose of education which was its main object. Tribunal was
right in directing the Commissioner to grant the registration; however, while granting
registration, it would be open to the Registering Authority to grant the same by imposing
any condition, which would bind the Company to indulge in only charitable activities.
It will also be subject to an affidavit or undertaking to be filed by the Company that it
would not breach any of the imposed conditions and further that surplus funds would
be utilized only for educational purposes and would not be diverted to any other non-
educational objectives.
CIT v. IILM Foundation Academy (2016) 389 ITR 148 / 243 Taxman 285 (P&H)(HC)
113
Procedure for registration S. 12AA
330 S. 12AA : Procedure for registration – Trust or institution – Submission of audited
accounts along with application – Directory and not mandatory – Application for
registration submitted without audited accounts – Application not to be treated as
defective – Registration to be allowed from date of filing application not date on which
defects in application cured.
Held, application under section 12AA was filed without any defect and the audited
accounts were submitted later on because submission of audited accounts along with the
application was not mandatory. There was no error in the order of the Tribunal which
allowed the registration from the date of submission of the application by the assessee.
The Tribunal and the Department had not pointed out any defect in the application
other than the non-filing of the audited accounts with the application, which was not
mandatory.
CIT v. Garment Exporters Association of Rajasthan (2016) 386 ITR 20 / 138 DTR 214 /
289 CTR 652 (Raj.)(HC)
331 S. 12AA : Procedure for registration – Trust or institution – The DIT has no jurisdiction
to cancel registration of a charitable institution on the ground that it is carrying on
commercial activities which are in breach of the amended definition of “charitable
purpose”. [S.(2(15), 11]
Dismissing the appeal of revenue, the Court held that it is evident from Circular No.21
of 2016 dated 27th May, 2016 that the amendment to the definition of charitable
purpose by adding of the proviso, would not ipso facto give jurisdiction to the
Commissioner of Income Tax to cancel the Registration under Section 12AA(3) of the
Act. The jurisdiction to cancel the Registration would only arise if there is any change
in the nature of activities of the institution. The above Circular clearly directs the
authorities not to cancel the Registration of the charitable institution just because the
proviso to section 2(15) of the Act comes into play as receipts are in excess of ` 25
lakhs in a year. It also refers to Section 13(8) of the Act which provides that where
the receipts on account of commercial activities is in excess of the limit of ` 25 lacs
provided in second proviso to section 2(15) of the Act, then the Assessing Officer
would deny the benefit of registration as a Trust for the subject Assessment Year while
framing the Assessment. The Court also held that the submission made on behalf of
the Revenue that the Circular No.21 of 2016 would have only prospective effect in
respect of Assessment made subsequent to the amendment under Section 2(15) of the
Act w.e.f. 1st April, 2016 is also not sustainable. The amendment in Section 2(15) of
the Act brought about by Finance Act, 2016 w.e.f. 1st April, 2016, is essentially that
where earlier the receipts in excess of ` 25 lakhs on commercial activities would
exclude it from the definition of ‘charitable purpose’ is now substituted by receipts from
commercial activities in excess 20% of the total receipts of the institution. In the above
view, Circular No.21 of 2016 directs the Officer of the Revenue not to cancel Registration
only because the receipts on account of business are in excess of the limits in the
proviso to Section 2(15) of the Act would also apply in the present case. The impugned
order has held that cancellation of a Registration under Section 12AA(3) of the Act, can
only take place in case where the activities of trust or institution are not genuine and/or
not carried on in accordance with its objects. The aforesaid Circular No.21 of 2016 is in
114
S. 12AA Procedure for registration
line of the finding of the Tribunal in the impugned order. The submission on behalf of
the Revenue that the Trust is not genuine because it is hit by proviso to Section 2(15)
of the Act, is in fact, negatived by Circular No.21 of 2016. In fact, the above Circular
No.21 of 2016 clearly provides that mere receipts on account of business being in excess
of the limits in the proviso would not result in cancellation of Registration granted
under Section 12AA of the Act unless there is a change in nature of activities of the
institution. Admittedly, there is no change in nature of activities of the institution during
the subject Assessment Year. The further submission on behalf of the Revenue is that,
looking at the quantum of receipts on account of commercial activities, it is unlikely/
improbable that in the subsequent Assessment Years, the receipts would fall below
` 25 lakhs and therefore, the Commissioner is entitled to cancel the Registration. The
aforesaid submission made on behalf of the Revenue is based not on facts as existing
but on probability of future events. We are unable to accept the submission based on
clairvoyance. Further, we are unable to understand what prejudice is caused to the
Revenue since whenever the receipts on account of commercial activities is in excess
of the limits provided in proviso to Section 2(15) of the Act, the Assessing Officer is
mandated/ required to deny exemption under Section 11 of the Act as provided in
Circular No.21 of 2016 dated 27th May, 2016. Accordingly, the issue stands covered in
favour of the assessee by virtue of Circular No.21 of 2016. (AY. 2009-10)
DIT (E) v. Khar Gyamkhana (2016) 385 ITR 162 / 137 DTR 249 / 240 Taxman 407 / 287
CTR 303 (Bom.)(HC)
S. 12AA : Procedure for registration – Trust or institution – Institution carrying out 332
charitable or religious activities outside India, would also be entitle to registration.
[S. 2(15), 11, 12]
Allowing the appeal of the assessee the Tribunal held that merely because assessee trust
intended to carry out its activities outside India, it could not be denied registration, if
the Trust is genuine. (AY. 2013-14, 2014-15)
Foundation for Indo-German Studies v. DIT (2016) 161 ITD 226 (Hyd.)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Commissioner was not 333
justified in cancelling registration granted to assessee – Revenue has not placed
any material on record to demonstrate that the Trust was either not genuine or its
activities were not as professed in the Trust Deed. [S. 2(15), 11, 12A]
On perusing the objectives of the Trust as detailed above, it is seen that the objects
of the assessee are inter alia to promote and advance Medical and Allied Sciences in
different branches and to promote improvement in Public Health and Medical Education.
Thus the objects of the Trust, prima facie, appears to be of charitable in nature. Further,
we are of the view that in order to ascertain the true nature and purpose of the Trust,
the objectives are to be considered as a whole and not in isolation. Another aspect of
issue is the introduction of first proviso of section (15) holding that activities of the
trust was commercial in nature. In this connection, we find that the Amritsar Bench of
Tribunal in the case Kapurthala Improvement Trust v. CIT [2015] 154 ITD 637 has held
that first proviso to section 2(15) have no role in matters relating to registration of a
trust or institution under section 12A or 12AA for granting or declining registration or in
115
Procedure for registration S. 12AA
respect of cancellation of registration. Further, the Revenue has not placed any material
on record to demonstrate that the Trust was either not genuine or its activities were not
as professed in the Trust Deed.
Indian Medical Association v. Addl. DIT(E) (2016) 49 ITR 7 (Delhi)(Trib.)
334 S. 12AA : Procedure for registration – Trust or institution – Commissioner was not
justified in cancelling registration granted to assessee on the ground that some of the
activities of the trust were not charitable in nature. [S. 2(15), 11, 12A]
The status of registration under section 12A or 12AA has no bearing, as recognized in
Section 13(8), on the availability of exemption under section 11. To the extent income
of the assessee arises from the activities hit by the first proviso to Section 2(15) in
any assessment year, the assessee will be disentitled for exemption under section 11
to that extent. The disentitlement for exemption under section 11, as a result of the
activities of an assessee being held to be not for charitable purposes under section
2(15) read with proviso thereto, is in respect of entire income of the assessee trust or
institution but only for the assessment year in respect of which the first proviso to
Section 2(15) is triggered. If the status of registration is to be declined to an assessee
only on the ground that some of the objects may be hit by the first proviso to Section
2(15) but the assessee’s receipts from such activities do not exceed specified threshold
in a particular assessment year, the assessee will be subjected to undue hardship in the
sense that while the assessee will be disentitled to exemption under section 11 due to
denial of registration under section 12A or 12AA which is sine qua non for admissibility
of exemption under section 11. On the other hand, if the status of registration is
granted to the assessee even when some of the objects may be hit by the first proviso
to Section 2(15) and the assessee’s receipts from such activities do exceed specified
threshold, no prejudice will be caused to the legitimate interests of the revenue because,
notwithstanding the status of registration and by the virtue of section 13(8), the assessee
will not be eligible for exemption under section 11 in respect of such income. It is
only elementary that a statutory provision is to be interpreted ut res magis valeat quam
pereat, i.e. to make it workable rather than redundant.
Improvement Trust Bathinda v. CIT (2015) 70 SOT 345 (Amritsar)(Trib.)
335 S. 12AA : Procedure for registration – Trust or institution – Refusal of registration was
held to be justified as the Commissioner of Income Tax has not found the object of the
society and genuineness of its activities as satisfactory. [S. 2(15), 12]
Assessee, a registered society was running an educational institution. Assessee applied
for to CIT, Haldwani for granting registration under section 12AA of the ACT. CIT
rejected the application on the ground that the members of the Management Committee
has siphoned off or misappropriated the income of the Society and thus the activity of
the Society, cannot be termed as genuine. On appeal dismissing the appeal the Tribunal
held that it is evident that the Commissioner of Income Tax has not found the object
of the society and genuineness of its activities as satisfactory, and refusal of registration
was held to be valid.
Corbett Educational Society v. CIT (2016) 48 ITR 743 / 181 TTJ 315 / 142 DTR 335 (Delhi)
(Trib.)
116
S. 12AA Procedure for registration
S. 12AA : Procedure for registration – Trust or institution – Bar Council and Advocates’ 336
welfare fund are two separate legal entities; they require separate registration for
claiming income-tax exemption.
Bar Council is constituted under Advocate Act, 1961 while Advocates’ Welfare Fund is
constituted under Advocates’ Welfare Fund Act, 2002. Hence, these are separate legal
entities and, thus, registration is to be obtained separately by them, for claiming income
tax exemption under section 11. (AY. 2003-04 to 2010-11)
Advocates Welfares Fund of The Bar Council of Tamil Nadu v. DDIT (E) (2016) 50 ITR
209 (Chennai)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Ancient temple – Certificate 337
of registration with Endowments Department would be a document evidencing creation
of trust for purpose of registration. [S. 12]
Assessee is an ancient temple registered with Endowments Department, Andhra
Pradesh. CIT(E) rejected application on ground that trust deed was not produced along
with application. On appeal allowing the appeal, the Tribunal held that; Registration
certificate issued by Endowments Department established that temple was a religious
and charitable institution and thus, evidenced creation of trust. Therefore, eligible for
registration. (AY. 2015-16)
Sri Seetharamachandra Swamy Temple v. CIT (E) (2016) 159 ITD 655 (Hyd.)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Execution of a formal deed 338
of trust is not necessary for grant of registration, Trust can be created orally. [S.12A,
13]
Allowing the appeal of the assessee the Tribunal held that (a) Execution of a formal
deed of trust is not necessary for grant of registration, Trust can be created orally (b).
Environmental protection is held to be charitable in nature (c) Expenditure is not
relevant for registration (d) Activities of Trust to benefit of particular community would
not debar the institution for claiming exemption (e) Supreme head of the Trust taking
food and clothes etc. from trust funds is not violate the provision of section 13 (AY.
2011-12)
Tsurphu Labrang v. DIT (E) (2016) 159 ITD 848 / 182 TTJ 176 / (2017) 148 DTR 246
(Delhi)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Registration has to be 339
granted from first day of relevant financial year. Delay of 1875 days in filing the
appeal was condoned. [S. 254(1)]
Assessee was an authority constituted under the U. P. Urban Planning and Development
Act, 1973. It was initially denied registration u/s. 12AA by the Commissioner. Tribunal
directed the Commissioner to grant registration, however while granting the registration
the Commissioner granted the registration with effect from 31-3-2003 and not from
1-4-2002. Assessee filed rectification application which was rejected. On appeal the
Tribunal held the registration has to be granted from first day of relevant year. Delay of
1875 days in filing the appeal was condoned. ITAT held that in terms of scheme of Act,
registration had to be granted from first day of relevant financial year.
Ghaziabad Development Authority v. CIT (2016) 161 ITD 637 (Delhi)(Trib.)
117
Procedure for registration S. 12AA
340 S. 12AA : Procedure for registration – Trust or institution – Advocate’s Welfare Fund –
Bar Council and Advocates’ Welfare Fund are two separate legal entities; they require
separate registration for claiming income-tax exemption [S. 2(15), 11]
Bar Council is constituted under Advocate Act, 1961 while Advocate Welfare Fund is
constituted under Advocates’ Welfare Fund Act, 2002; these are separate legal entities
and, thus, for claiming income tax exemption u/s. 11, registration is to be obtained
separately.(AY. 2003-04 to 2010-11)
Advocates Welfare Fund of Bar Council of Tamil Nadu v. DIT (2016) 160 ITD 66 / 50 ITR
209/ 182 TTJ 922 (Chennai)(Trib.)
341 S. 12AA : Procedure for registration – Trust or institution – Religious trust – Denial of
registration was held to be not justified. [S.2(15), 12A]
Allowing the appeal the Tribunal held that; registration cannot be rejected only on the
ground that the Trust is religious Trust.
Sri Guru Har Rai ji Religious & Charitable Trust v. CIT (2016) 179 TTJ 46 (UO) (Chd.)
(Trib.)
342 S. 12AA : Procedure for registration – Trust or institution – Cancellation of
registration – No satisfaction that the activities are not as per the objects of the trust
– Cancellation order quashed
The assessee was an association of builders registered under section 12A of the Income-
tax Act, 1961. The registration was cancelled by the Director of Income-tax (Exemption)
under section 12AA(3) on the ground that the activities of the assessee were in the
nature of trade, commerce or business in violation of the proviso to section 2(15).
The Tribunal held that under the provisions of section 12AA(3), registration granted
under section 12A or section 12AA could be cancelled only if the Commissioner or
Director was satisfied that, firstly, the activities of such trust or institution were not
genuine or, secondly, were not being carried out in accordance with the objects of
the trust or institution. The Director of Income-tax had not recorded any satisfaction
that the activities of the assessee was either not genuine or not being carried out in
accordance with the objects for which it was granted registration under section 12A.
From the nature of receipts such as membership subscription, contribution by members
for holding exhibition and conference contribution for programmes it was seen that
the assessee had carried out activities in terms of its objects only. It was not the case
of the Director of Income tax that the activities were carried out for outsiders or for
commercial purposes solely to earn business receipts. To be hit by the proviso to section
2(15), the dominant object of general public utility was to be in the nature of trade,
commerce or business. But none of the activities like holding conferences, seminars,
publishing journals for its members could be held to be in the nature of business, trade
or commerce. Since there was no material on record to show that the assessee was
carrying out activities on business or commercial principles or outside of its objects, it
could not be held that the assessee’s case was hit by the proviso to section 2(15) and
the registration granted earlier could not be cancelled under section 12AA(3) of the Act.
Builders Association of India v. DCIT (2016) 46 ITR 295 (Mum.)(Trib.)
118
S. 13 Denial of exemption
S. 12AA : Procedure for registration – Trust or institution – Contribution of corpus 343
fund was not by settlor – Registration cannot be refused.
Assessee-trust was running an educational institution. It filed an application seeking
registration u/s. 12AA. Commissioner did not dispute objects of trust as charitable
in nature. He, however, refused to grant registration on ground that entire amount of
initial corpus fund had not been brought in by settlors and, thus, trust could not be
said to have come into existence. At time of granting registration by Commissioner
what is relevant is, whether objects of trust are charitable and activities carried out
are genuine in nature, therefore, merely because a part of initial corpus fund had not
been brought in by settlors at time of execution of trust deed, could not be a ground to
decline registration to assessee-trust. Even otherwise, since Commissioner had passed
an order refusing registration to assessee-trust beyond stipulated period of six months
u/s. 12AA(2), impugned order passed by him was not sustainable.
Broadway Charitable Trust v. CIT (2016) 158 ITD 886 (Kol.)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Registration of a society can 344
be cancelled only in those cases where registration has been granted u/s. 12AA(1)(b).
Under section 12AA(3) registration of society can be cancelled only in those cases where
registration has been granted u/s. 12AA(1)(b) but this section nowhere empowers DIT to
cancel or withdraw registration granted u/s. 12AA.
Technological Institute of Textile & Science v. DIT (2016) 158 ITD 808 (Kol.)(Trib.)
S. 12AA : Procedure for registration – Trust or institution – Provisions of section 13(1) 345
(b) cannot be invoked at time of granting registration. [S. 13(1)(b)]
Assessee-society was formed to provide medical aid, educational institutions,
scholarships, sports, blood donation camps, other facilities and activities on teachings
of Bhai Mansa Singh Ji. It filed an application for registration under section 12AA.
Commissioner rejected the application on the ground of genuineness of the Trust. On
appeal the Tribunal held that the Commissioner has not questioned the charitable object
of the Trust and also nor he had been able to bring on record any material to prove
that activities of assessee were not genuine, impugned order passed by him was to be
set aside.
Bhai Mansa Singh Ji Welfare Society (Regd.) v. CIT (2016) 156 ITD 117 (Chd)(Trib.)
S. 13. Section 11 not to apply in certain cases.
S. 13 : Denial of exemption – Trust or institution – Payment of lease rent or interest 346
on borrowed funds to trustees – Exemption cannot be denied if the payment being
excessive or unreasonable. [S.11, 12A]
Allowing the appeal of assessee the Court held that, mere payment of lease rent
or interest on borrowed funds to trustees without there being any element of such
payments being excessive or unreasonable, would not fall within mischief of section
13(1)(c). Since there was no excessive or unreasonable payments to trustees, exemption
could not be denied to assessee-trust.(AY. 2003-04)
Shree Kamdar Education Trust v. ITO (2016) 243 Taxman 76 (Guj.)(HC)
119
Denial of exemption S. 13
347 S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Exemption
allowed if documentary evidence were submitted to prove that the donation was
used for education and health purposes – Extract from foreign agency website is not
evidence that donation was not used for charitable purposes.
Pursuant to an agreement, the assessee trust had received donations from a Canadian
donor, wherein one part of the agreement related to construction of a temple and the
other part related to utilisation of funds for the charitable activities. Based on the
information of Form FC-3 under Foreign Contribution (Regulation) Act available on
the Canadian resource agency website, the AO alleged that the donations received by
the Assessee were not utilised as per the directions of the donor and consequently, he
assessed the difference as income. The ITAT held apart from the extract of the website
which was not an admissible evidence either as a primary evidence or secondary
evidence, no other evidence was available on the file of the Assessing Officer. The
donations were used completely for charitable activities since the Assessee had
submitted the necessary agreement along with documentary evidences and photographs
to prove that the same was utilised as per the mandate of the Canadian donor. (AY.
2006-07)
DCIT v. Om Sakthi Narayani Siddar Peedam Charitable Trust (2016) 47 ITR 787
(Chennai)(Trib.)
348 S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Loans
were given out of funds borrowed from founder members of society, order denying
exemption was to be set aside. [S. 11, 12]
Allowing the appeal of the assessee, the Tribunal held that loans were given out of
funds borrowed from founder members of society, Assessing Officer was not correct in
holding that assessee had diverted funds in violation of provisions of section 13(1)(d).
Even otherwise, Assessing Officer could not borrow findings of Chief Commissioner in
order to deny benefit of exemption under section 11, unless he had specifically pointed
out any violations referred to in any of provisions of section 13. Accordingly order
denying exemption under section 11, was to be set aside. (AY. 2008-09)
Sri Koundinya Educational Society v. ACIT (2016) 159 ITD 416 / 181 TTJ 677 (Visakha)
(Trib.)
349 S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Advanced
money to an entity where president and his wife were directors – Not approved
investment – Maximum marginal rate applicable [S. 11, 12AA, 164(2)]
The assessee sold a piece of land for an amount and advanced the amount to Anna
Investments and claimed exemption of the capital gains. The Assessing Officer treated
the income from the sale of land as income of the assessee and denied the exemption
under section 11 of the Income-tax Act, 1961, as the amount advanced to Anna
Investments was not an approved investment under section 11(5). The Commissioner
(Appeals) held that the assessee advanced the money out of sale of land to Anna
Investments where the president and his wife of the assessee trust were directors, that
the view of the Assessing Officer that there was violation of section 13 was incorrect,
that the Assessing Officer had given a finding that there was a valid registration under
120
S. 13 Denial of exemption
section 12AA and this was not cancelled or withdrawn by the Commissioner and that
exemption under section 11 could not be denied. He directed the Assessing Officer to
allow the exemption under section 11. Regarding investment of sale proceeds of land in
Anna Investments he observed that making mere advance to third parties could not be
treated as utilisation for investment in capital asset within the meaning of section 11(5).
Accordingly, he rejected the argument of the assessee that making advance out of sale
proceeds of capital asset for purchase of another asset was investment in new capital
asset. Further, he observed that the capital gain arising out of transfer of capital asset to
be assessed under section 48 and the rate was to be applied under section 112 and not
at the maximum marginal rate suggested by the Assessing Officer. The Tribunal held
that (i) that the assessee advanced the amount on June 30, 2006, to Anna Investments
and the capital gain arose on sale of land during the financial year on March 31, 2007.
Anna Investments returned the money on March 31, 2009, and the amount was not
invested in a new asset within the previous year. Therefore, the exemption under section
11(1)(a) was not available to the assessee. (ii) That the requirements of section 13(1)(c)
(ii) were that the trust should apply the funds in a concern in which they themselves
are interested, if there was a mandatory provision in the trust deed for such a purpose.
Such a mandate in the trust deed should have existed and could not have been brought
in by amending the trust deed at a later stage after that crucial date, even if the
trust deed authorised the trustees to amend the trust deed to bring in the mandatory
condition or requirement for them to invest funds of the trust in a concern in which
they might be interested. As the assessee invested funds in a limited company where
the trustee was the managing director and his wife was a director, the Assessing Officer
was correct in invoking the provisions of section 13(1)(c) and denying exemption to the
assessee under section 11. (iii) That the proviso to section 164(2) inserted with effect
from April 1, 1985, enjoins that where the non-exempt portion of the relevant income
arises as a consequence of the contravention of the provisions of section 13(1)(c) or (d),
the income would be subject to tax at the maximum marginal rate. Therefore, the benefit
of section 112 so as to assess the gain from the transfer of the capital asset could not
be given to the deemed association of persons. (AY. 2007-08)
DDIT (E) v. India Cements Educational Society (2016) 157 ITD 1008 / 46 ITR 80 (Chennai)
(Trib.)
S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Funds 350
utilised for purchase of car in the name of Trustee – Denial of exemption should be
limited to amount which was diverted. [S. 11]
Tribunal held that where funds of assessee-trust were utilized for purchase of car in
name of its trustee, there was violation of section 13(2)(b), read with section 13(3);
denial of exemption under section 11 should be limited to amount which was diverted
in violation of section 13(2)(b). (AY. 2004-05)
Audyogik Shikshan Mandal v. ITO (2016) 156 ITD 1 / 176 TTJ 202 (TM)(Pune)(Trib.)
121
Denial of exemption S. 13
351 S. 13 : Denial of exemption – Trust or institution – Investment restrictions – Salary to
executive director – Salary being reasonable there is no violation, exemption cannot
be denied. [S. 11, 12AA]
Dismissing the appeal of revenue the Tribunal held that where there was failure by
Assessing Officer to indicate in assessment order that salary paid by assessee-society to
executive director was unreasonable, no violation of provision of section 13(1)(c) could
be alleged and exemption could not be denied. (AY. 2011-12)
Dy. CIT v. Gideons International in India (2016) 156 ITD 666 (Hyd.)(Trib.)
S. 13A : Special provision relating to incomes of political parties
352 S. 13A : Political parties – Requirement of maintaining audited accounts and
furnishing those accounts in terms of the proviso to S. 13A was mandatory – Interest
was liable to be charged on the tax amount due.[S. 2(24)(iia), 4, 56, 57(iii), 139(4B),
234A, 234B, Rule 46A]
Allowing the Revenue’s appeal, Hon’ble HC held that 13A is not a computational
section. While income by way of voluntary contributions u/s. 13A, mere fact that income
by way of voluntary contribution of a Political Party was not deemed to be income
u/s. 2(24)(iia) does not place it outside the purview of ‘Income from other sources”.
Requirement of maintaining audited accounts and furnishing those accounts in terms of
the proviso to S. 13A was mandatory. Further the court also held that notwithstanding
that the AO may not have separately dealt with the issue of interest in the Assessment
order, interest was liable to be charged on the tax amount due u/s. 234A & 234B of the
IT Act. (AY. 1994-95)
CIT v. Indian National Congress (I) (2016) 383 ITR 99 / 239 Taxman 72 / 285 CTR 97 /
134 DTR 1 (Delhi)(HC)
353 S. 13A : Political parties – Exemption cannot possibly be granted from payment of
income tax for that financial year. Therefore assessee was not entitled to any benefit.
[S. 139(4B)]
The issue before the Hon’ble HC was whether assessee was entitled for benefit u/s.
13A of the IT Act as the return was filed only pursuant to notice u/s. 142(1) that too
containing incomplete details. Only after the Chennai Bank Account of the assessee was
detected that the assessee came forward to make a disclosure of the Bank Accounts of
its Mumbai & Bangalore units. Either the President of party did not disclose the full
facts to the auditor or the auditor gave an incorrect report without qualifying the report.
The Hon’ble HC allowed appeal of the Revenue and held that Tribunal’s findings of
granting exemption u/s. 13A was nothing short of perverse as it was wholly contrary to
and unsupported by the documents on record. When in any particular financial year, a
political party was unable to maintain its accounts for any reason whatsoever or satisfy
the pre conditions set out in the proviso to S. 13A, an exemption cannot possibly be
granted from payment of income tax for that financial year. Therefore assessee was not
entitled to any benefit u/s. 13A of IT Act. (AY. 1995-96)
CIT v. Janata Party (2016) 383 ITR 146 / 239 Taxman 194 / 285 CTR 194 / 134 DTR 49
(Delhi)(HC)
122
CHAPTER IV
COMPUTATION OF TOTAL INCOME
S. 14A. Expenditure incurred in relation to income not includible in total income
S. 14A : Disallowance of expenditure – Exempt income – Interest – Sufficient interest 354
free funds to invest in tax free investments – Disallowance cannot be made. [R.8D]
Dismissing the appeal of the revenue the Court held that, the assessee had sufficient
interest free funds to invest in tax free investments hence disallowance cannot be made
PCIT v. Adani Enterprises Ltd. (2016) 241 Taxman 542 / (2017) 152 DTR 102 (Guj.)(HC)
S. 14A : Disallowance of expenditure – Exempt income – Finding that no expenditure 355
had been incurred in earning exempt income – Disallowance is not justified [R.8D]
Dismissing the appeal of revenue the Court held that the assessee had sufficient funds
available to it on which no interest was payable. The Appellate Tribunal was justified
in holding that no expense was attributable to the exempted income.(AY. 2002-03)
CIT v. Max India Ltd. (No. 2) (2016) 388 ITR 81 / 75 taxmann.com 268 (P&H)(HC)
S. 14A : Disallowance of expenditure – Exempt income – Non-maintenance of separate 356
accounts for investments from borrowed funds and from circulating capital of
business – Disallowance on basis of percentage of dividend to income and reducing
disallowance was held to be proper.
Tribunal held that due to non-maintenance of separate accounts for investments from
borrowed funds and from circulating capital of business, disallowance on basis of
percentage of dividend to income and reducing disallowance was held to be proper.
Dismissing the appeal the Court held that the Department was unable to point out any
mistake or infirmity in the reasonings advanced by the Commissioner (Appeals) and
affirmed by the Tribunal. (AY. 2004-05)
CIT v. Shreekant Phumbhra (2016) 387 ITR 523 (Cal.)(HC)
S. 14A : Disallowance of expenditure – Exempt income – Disallowance was held to be 357
justified, assessee failed to prove interest free fund exceeded the value of investment. [R. 8D]
Dismissing the appeal of the assessee the Court held that the assessee failed to prove
that interest free fund exceeded value of investment made and thereafter failed to justify
the quantification of disallowance made on its own for exempted income, the AO was
justified in making disallowance by applying Rule 8D. (AY. 2010-11)
Bharath Beedi Works (P.) Ltd. v. ACIT (2016) 242 Taxman 492 (Karn.)(HC)
S. 14A : Disallowance of expenditure – Exempt income – The fact that the AO did 358
not expressly record his dissatisfaction with the assessee’s working does not mean
that he cannot make the disallowance. The AO need not pay lip service and formally
record dissatisfaction. It is sufficient if the order shows due application of mind to
all aspects. [R. 8D]
Dismissing the appeal of assessee the Court held that (i) This Court in CIT v.
Consolidated Photo & Finvest Ltd. (2012) 25 Taxman.com 371 (Delhi). following the
judgment of the Bombay High Court in Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT (2010)
123
Disallowance of expenditure S. 14A
194 Taxman 203, held that the AO has to take an overall view and not a “piecemeal
decision” regarding merits of the disallowance. A close analysis of that judgment would
show the AO’s view was reversed by the CIT(A) in that case which was ultimately
affirmed by the ITAT. This factor significantly dissuaded the Court from exercising its
jurisdiction under Section 260A of the Act.
(ii) Undoubtedly, the language of Section 14A presupposes that the AO has to adduce
some reasons if he is not satisfied with the amount offered by way of disallowance
by the assessee. At the same time Section 14A(2) as indeed Rule 8D(i) leaves the AO
equally with no choice in the matter inasmuch as the statute in both these provisions
mandates that the particular methodology enacted should be followed. In other words,
the AO is under a mandate to apply the formulae as it were under Rule 8D because of
Section 14A(2). If in a given case, therefore, the AO is confronted with a figure which,
prima facie, is not in accord with what should approximately be the figure on a fair
working out of the provisions, he is but bound to reject it. In such circumstances the
AO ordinarily would express his opinion by rejecting the disallowance offered and then
proceed to work out the methodology enacted.
(iii) In this instance the elaborate analysis carried out by the AO – as indeed the three
important steps indicated by him in the order, shows that all these elements were present
in his mind, that he did not expressly record his dissatisfaction in these circumstances,
would not per se justify this Court in concluding that he was not satisfied or did not
record cogent reasons for his dissatisfaction to reject the AO’s conclusion. To insist that
the AO should pay such lip service regardless of the substantial compliance with the
provisions would, in fact, destroy the mandate of Section 14A.
(iv) Having regard to these facts, this Court is satisfied that the disallowance which is
otherwise in accord with Rule 8D(c) was justified. No substantial question of law arises.
The appeal is dismissed. (ITA No. 470/2016, dt. 21.11.2016)(AY. 2009-10)
IndiaBulls Financial Service Ltd. v. DCIT (Delhi) (HC); www.itatonline.org
359 S. 14A : Disallowance of expenditure – Exempt income – If the investments in tax free
bonds were made out of assessee’s own funds, no disallowance could be made. [R.8D]
Assessee made investment in shares, mutual funds and tax free bonds out of its
own funds. However, the AO disallowed proportionate interest expenditure incurred on
its borrowed funds. On assessee’s appeal, the CIT(A) deleted the disallowance, as the
investments were made out of assessee’s own funds and not made out of borrowed funds.
On Revenue’s appeal, the Tribunal upheld the order of the CIT(A). On Revenue’s further
appeal, the High Court held that the Revenue has not been able to show that the CIT(A)’s
and Tribunal’s findings were perverse and therefore, no question of law arose. (AY. 1998-99)
CIT v. Nicholas Piramal (India) Ltd. (2016) 239 Taxman 470 (Bom.)(HC)
360 S. 14A : Disallowance of expenditure – Exempt income – Held, Rule 8D is prospective
in nature and applicable from AY 2008-09 – Held, disallowance of 5% of exempt
income proper. [R. 8D]
High Court followed the judgment in case of Godrej & Boyce Mfg. Co. Ltd. v. Dy. CIT
[2010] 328 ITR 81 / 194 Taxman 203 (Bom)(HC) and distinguished the judgment of the
Kerala High Court in case of CIT v. Dhanalakshmy Bank Ltd. (2012) 344 ITR 259 / 200
Taxman 29 (Mag.) / 10 taxmann.com 213 (Ker.) to rule that Rule 8D would apply from
124
S. 14A Disallowance of expenditure
AY 2008-09 and not from AY. 2007-08. It held that, action of the Revenue to disallow
5% of the exempt income was proper. (AY. 2007-08)
CIT v. HimatsingkaSeide Ltd. (2016) 388 ITR 463 / 240 Taxman 753 (Karn.)(HC)
S. 14A : Disallowance of expenditure – Exempt income – If the tax exempted income 361
was earned without the interference of any employee the question of attributing any
expenditure cannot arise at all. [R. 8D]
Allowing the appeal the Court held that; In the present case, the AO has not analysed
objectively in terms of the decision in Shah. It was firstly incumbent upon him to
in fact examine the accounts closely and determine if at all any expenditure could
be ascribed to the tax exempt dividend/interest earned by the assessee. If indeed the
tax exempted income was earned without the interference of any employee but rather
through the solicitation and advertisement of the bank, the question of attributing any
expenditure cannot arise at all Referred, CIT v. Taikisha Engineering Private Limited 370
ITR 338 (Delhi)(HC)).(ITA No. 953 of 2015, dt. 11.08.2016)
Pradeep Khanna v. ACIT (Delhi)(HC), www.itatonline.org
S. 14A : Disallowance of expenditure – Exempt income – Provision is applicable 362
even where the motive of the assessee in acquiring the shares is to obtain controlling
interest in a company and not to earn dividends – Matter was set aside by Tribunal,
hence the Court held that no question of law arise from the order of Tribunal. [R. 8D]
Dismissing the appeal the Court held that; The Tribunal after holding in principle the
applicability of Sec. 14A, has further directed the Assessing Officer to ascertain from the facts
of the case as to how much interest bearing borrowings were utilized to acquire shares in the
companies and the matter is relegated to the Assessing Officer. As per the language in Sec.14A,
the enquiry has to be undertaken by the Assessing Officer which has been so ordered by the
Tribunal. Hence, it can be said that the Tribunal has exercised the discretion where rights of
both sides are kept open for admissible deduction under Sec.14A. When such a discretion is
exercised and the rights of the assessee are also kept open to satisfy the Assessing Officer, it
cannot be said that any substantial questions of law would arise for consideration, as sought
to be canvassed. At the stage of enquiry under S.14A, it is open to the Assessing Officer to
independently consider the matter for admissibility of the interest on borrowings and if yes to
what extent. Hence, when the question at large is further to be considered by the Assessing
Officer, we do not find that any further observations are required to be made in this regard.
In any case, the question of law as sought to be canvassed would not arise for consideration
at this stage on the said aspects as sought to be canvassed.(ITA No. 419/2009) (AY. 2004-05)
United Breweries Limited v. DCIT (Karn.)(HC), www.itatonline.org
S. 14A : Disallowance of expenditure – Exempt income – Interest – Non-interest bearing 363
funds more than investment in tax-free securities – No disallowance can be made.[R.8D]
When investments are made out of a common pool of funds and non-interest bearing
funds were more than the investments in tax free securities, no disallowance of interest
expenditure can be made. (AY. 2009-10)
CIT v. Microlabs Ltd. (2016) 383 ITR 490 (Karn.)(HC)
Editorial: Order of Tribunal in Dy.CIT v. Microlabs Ltd. (2015) 39 ITR 585 (Bang.)(Trib),
is confirmed
125
Disallowance of expenditure S. 14A
364 S. 14A : Disallowance of expenditure – Exempt income – Provision is applicable to
income claimed as deduction u/s. 80P(2)(d). [S. 80P]
The assessee, a co-operative society was engaged in marketing of milk products of the
member societies. One of the activity of the assessee was to provide funds for working
capital to the member societies and it earned interest income. AO while computing
the deduction under section 80P(2)(d) in respect of the interest income received from
the member co-operative societies, applied provisions of section 14A and disallowed
expenses claimed by the assessee. High Court relying upon the judgment in case of
Punjab State Co-operative Milk Producers Federation Ltd. v. CIT [2011] 336 ITR 495
(Punj. & Har.)(HC) held that provision of section 14A shall apply to income claimed as
deduction u/s. 80P(2)(d). (AY. 2011-12)
Punjab State Co-operative Milk Producers Federation Ltd. v. CIT (2016) 238 Taxman 207
(P&H)(HC)
365 S. 14A : Disallowance of expenditure – Exempt income – Common interest expense
which is attributable to exempt income is to be excluded for the purpose of allocation
of interest expenditure under Rule 8D(2)(ii) [R. 8D(2)(iii)]
The High Court has held that the variable A in Rule 8D(2)(ii) would include only those
common interest expenditure which are not directly attributable to any income or
receipt and therefore, this would mean that any interest expenditure, which is directly
attributable to taxable income has to be excluded and the balance common interest
expenditure is what should be a subject matter of allocation under the said rule. (AY
2008-09)
PCIT v. Bharti Overseas Pvt. Ltd. (2016) 237 Taxman 417 (Delhi)(HC)
366 S. 14A : Disallowance of expenditure – Exempt income – The disallowance of
expenditure cannot exceed the amount of tax-free dividend. [R.8D]
Dismissing the appeal of revenue the Court held that; in the present case, when the
assessee claimed that it had not made any expenditure on earning exempt income, the
Assessing Officer in terms of sub-section (2) of Section 14A of the Act was required to
collect such material evidence to determine expenditure if any incurred by the assessee
in relation to earning of exempt income. The income from dividend had been shown at
` 1,11,564/- whereas disallowance under Section 14A read with Rule 8D of the Rules
worked out by the Assessing Officer came to ` 4,09,675/-. Thus, the Assessing Officer
disallowed the entire tax exempt income which is not permissible as per settled position
of law. The window for disallowance is indicated in section 14A, and is only to the
extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt
income”. The disallowance under section 14A read with Rule 8D as worked out by the
Assessing officer is not in accordance with law and as such working is not sustainable.
The view adopted by the Tribunal being a plausible view based on factual position and
the relevant case law on the point, does not warrant any interference by this Court.
(AY. 2009-10)
PCIT v. Empire Package Pvt. Ltd. (2016) 136 DTR 342 / 286 CTR 457 (P&H)(HC)
126
S. 14A Disallowance of expenditure
S. 14A : Disallowance of expenditure – Exempt income – More interest free funds than 367
interest bering funds – Presumption is that investment in tax free securities has been
made from interest free funds – No disallowance is permissible – ITAT’s order reversed
on the ground that it is “Judicial Indiscipline” leading to complete chaos and anarchy
in the administration of law. [S. 254(1), Constitution of India, Art, 226, 227]
The ITAT passed an order in HDFC Bank Limited v. DCIT (2015) 155 ITD 765 (Mum.)
(Trib.) in which it held that the presumption laid down in CIT v. HDFC Bank Ltd. (2014)
366 ITR 505 (Bom.) and CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340
(Bom.) that investments in tax-free securities must be deemed to have come out of own
funds and (ii) Law laid down in CIT v. India Advantage Securities Ltd. (2016) 380 ITR
471 (Bom.) that s. 14A and Rule 8D does not apply to securities held as stock-in-trade
cannot be applied as both (2015) propositions are contrary to Godrej & Boyce Mfg .Co
Ltd. v. Dy. CIT (2010) 328 ITR 81 (Bom.). On a Writ Petition filed by the assesse the court
held reversed the ITAT’s order on the ground that it is “Judicial Indiscipline” leading
to complete chaos and anarchy in the administration of law. The Court also held that,
Tribunal to decide it afresh on its own merits and in accordance with law. However the
Tribunal would scrupulously follow the decisions rendered by this Court wherein a view
a has been taken on identical issues arising before it. It is not open to the Tribunal to
disregard the binding decisions of this Court, the grounds indicated in the impugned
order which are not at all sustainable. Unless the Tribunal follows this discipline, it
would result in uncertainty of the law and confusion among the tax paying public
as to what are their obligations under the Act. Besides opening the gates for arbitrary
action in the administration of law, as each authority would then decide disregarding
the binding precedents leading to complete chaos and anarchy in the administration
of law. When the assessee have more interest free funds than interest bearing funds,
presumption is that investment in tax free securities has been made from interest free
funds hence no disallowance is permissible. (AY. 2008-09)
HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529 / 132 DTR 89 / 284 CTR 414 (Bom.)(HC)
Editorial: Order of Tribunal in HDFC Bank v. Dy CIT (2015) 155 ITD 765 / 173 TTJ 810 /
130 DTR 21 (Mum.)(Trib.) is set aside.
S. 14A : Disallowance of expenditure – Exempt income – Disallowance of interest 368
expenditure would not be tenable where AO failed to establish a nexus between
interest bearing funds and investment made. [R.8D]
Assessee was a State Government undertaking engaged in financing industrial units. It
had made investment in securities on which it earned tax-free dividend income. The
AO observed that though 75 per cent of investments were made through funds given
by State Government, 25 per cent of investments were made out of mixed pool of funds
and, therefore, 25 per cent of interest expenditure was taken as indirect expenditure
liable for disallowance under section 14A, r.w. Rule 8D. As amount of disallowance
exceeded amount of exempt income itself, AO adopted a sum of 5 per cent of indirect
expenditure together with 0.5 per cent of average investments under Rule 8D(2)(iii) as
disallowance under section 14A, read with Rule 8D.
On appeal, the CIT(A) deleted the additions made by the AO on the ground that the AO
failed to establish direct nexus between borrowed funds and tax-free investments. The
Tribunal affirmed the order of the CIT(A).
127
Disallowance of expenditure S. 14A
The High Court held that as the disallowance was made on an ad hoc percentage
without any basis or assigning any reason whatsoever, the disallowance was rightly set
aside by the appellate authorities. The Court observed that the AO had been unable
to establish a nexus between the interest bearing funds and the investments made.
Accordingly, the High Court dismissed the Revenue’s appeal. (AY. 2009-10)
CIT v. Karnataka State Industrial & Infrastructure Development Corpn. Ltd. (2016) 237
Taxman 240 / 143 DTR 67 (Karn.)(HC)
369 S. 14A : Disallowance of expenditure – Exempt income – Investments in mutual funds
and equity funds – Not recording any finding – Disallowance was held to be not
justified. [R.8D]
Assessee claiming investments to be old made out of capital and outstanding reserves of
company and no separate amount borrowed for making such investments. Disallowance
only after recording satisfaction that claim not correct. Assessing Officer not recording
any reasons for rejecting claim of assessee. Finding of fact recorded by Commissioner
(Appeals) and Appellate Tribunal not perverse. No substantial question of law arose for
consideration.(AY. 2008-09)
CIT v. Kapsons Associates (2016) 381 ITR 204 (P&H)(HC)
370 S. 14A : Disallowance of expenditure – Exempt income – Appellate authorities finding
ten per cent of income earned could be apportioned towards expenses for earning
dividend – Finding not perverse. [S. 260A]
The Commissioner (Appeals) took into account the words of Rule 8D and found that
the figures as derived by the Assessing Officer could not be taken into consideration.
Disallowance of expenses can be made which are incurred for earning dividend. For
that purpose, the figures under the head “Investment” could be taken and some charges
apportioned for the purpose of computing the expenses. The Commissioner (Appeals)
found from such figures, that only 10% of the income earned could be apportioned
towards expenses for earning the dividend. Held, Rule had been applied correctly.
(AY.2008-09)
CIT v. India Advantage Securities Ltd. (2016) 380 ITR 471 (Bom.)(HC)
371 S. 14A : Disallowance of expenditure – Exempt income – Disallowance applies also to
dividends received from strategic investments in subsidiaries.
Tribunal held that strategic investment made by the assessee in its subsidiary Saraswat
Infotech Limited as well in the other securities which are capable of yielding exempt
income i.e.. by way of dividend etc. which are exempt from tax shall be included while
computing disallowance u/s. 14A of the Act as per the scheme of the Act as contained
in provisions of Section 14A of the Act as the statute does not grant any exemption to
the strategic investments which are capable of yielding exempt income to be excluded
while computing disallowance u/s. 14A of the Act and hence the investment made
by the assessee in subsidiary company M/s. Saraswat Infotech Limited and all other
securities which are capable of yielding exempt income by way of dividend etc. shall
be included for the purposes of disallowance of expenditure incurred in relation to
the earning of exempt income, as stipulated u/s. 14A of the Act. (ITA 8622 & 7738/
128
S. 14A Disallowance of expenditure
Mum/2010, ITA 1140 & 694/Mum/2012 , ITA 5627/Mum/2013 & ITA 1/Mum/2014, dt.
31.10.2016)(AY. 2007-08 to 2010-11)
DCIT v. The Saraswat Co-operative Bank Limited (Mum.)(Trib); www.itatonline.org
S. 14A : Disallowance of expenditure – Exempt income – Interest paid by assessee firm 372
on its partner’s capital cannot be disallowed.[R.8D]
Interest paid by the firm to its partner’s capital account, cannot be disallowed applying
the provisions of section 14A. Referred CIT v. R. M. Chidambaram Pillai (1977) 166 ITR
292 (SC) (AY. 2010-11)
Quality Industries v. JCIT (2016) 161 ITD 217 / (2017) 183 TTJ 350 / 145 DTR 215 (Pune)
(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Interest paid to partners on 373
capital contribution is not a statutory allowance hence disallowable. [S. 36(1)(iii),
40(b), R.8D]
Interest paid to partners on capital contribution is not a statutory allowance under
section 40(b) but is an expenditure under section 36(1)(iii) and, hence, liable for
disallowance under section 14A is incurred in relation to exempt income as envisaged
under section 14A, same shall only be allowed as deduction only against exempt
income. (AY. 2010-11)
ACIT v. Pahilajrai Jaikishin (2016) 157 ITD 1187 / 179 TTJ 148 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Dealing in shares, held as 374
stock-in-trade no disallowance can be made. [R.8D]
The Tribunal held that as the assessee was a dealer in shares and held shares as stock-
in-trade, section 14A r/w Rule 8D would not apply and no disallowance was warranted.
(AY. 2009-10)
UCO Bank v. Dy.CIT (2016) 49 ITR 34 (Kol.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – AO to restrict disallowance 375
to 1% of exempt income for A.Y. 2007-08, for AY.2008-09 remanded to AO for fresh
verification.[R.8D]
The CIT(A) affirmed disallowance of expenditure relating to exempt income earned by
assessee u/s. 14A for AY. 2008-09, but for AY. 2007-08 held that disallowance was to be
worked out under Rule 8D on reasonable basis. The Tribunal held that Rule 8D was not
applicable to AY.s prior to 2008-09 therefore, the AO was to restrict disallowance to 1%
of exempt income. In respect of AY. 2008-09, since the assessee raised new contentions
that it held the shares as stock-in-trade and further interest-free funds were available far
in excess of the investment, such facts have to be verified by the AO before adjudication
and hence Tribunal remanded back for fresh verification. (AY. 2007-08, 2008-09)
Bank of India v. ACIT (2016) 49 ITR 62 (Mum.)(Trib.)
129
Disallowance of expenditure S. 14A
376 S. 14A : Disallowance of expenditure – Exempt income – No disallowance can be made
where no exempt income has been earned by assessee during year. [R.8D]
Dismissing the appeal of the revenue, the Tribunal held that, No disallowance can be
made where no exempt income has been earned by assessee during year. (AY. 2011-12)
ACIT v. Pardeep Kumar Aggarwal (2016) 159 ITD 54 (Chd.)(Trib.)
377 S. 14A : Disallowance of expenditure – Exempt income – No expenditure had
been incurred for purpose of earning dividend income from mutual funds hence
no disallowance can be made, matter was remitted to the Assessing Officer for
adjudication. [R.8D]
Allowing the appeal of the assessee the Tribunal held that assessee claimed that no
expenditure had been incurred for purpose of earning dividend income of mutual fund.
Since AO had not rendered any finding that claim of assessee was incorrect, matter was
set aside to the file of the Assessing Officer. (AY. 2008-09)
Cyber Park Development & Construction Ltd. v. Dy. CIT (2016) 159 ITD 648 / 181 TTJ
556 (Bang.)(Trib.)
378 S. 14A : Disallowance of expenditure – Exempt income – Stock-in-trade – Disallowance
can be made only in respect of shares in which dividend was received. [R.8D]
Tribunal held that provisions of S. 14A, read with Rule 8D could be invoked in case
of exempt dividend income earned by assessee from shares held as stock-in-trade and
expenses incurred in relation to such income could be disallowed by applying said
provision. Disallowance under Rule 8D with respect to income not includible in total
income has to be computed by taking into consideration only those shares, which has
yielded dividend income in year under consideration. (AY. 2009-10)
Dy.CIT v. Teenlok Advisory Services (P.) Ltd. (2016) 159 ITD 991 (Kol.)(Trib.)
379 S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot be made
in respect of shares held as stock-in-trade. [R.8D]
Allowing the appeal of the assessee, Tribunal held that disallowance cannot be made in
respect of shares held as stock-in-trade. (AY 2009-10)
Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554 / 181 TTJ 750 (Mum.)(Trib.)
380 S. 14A : Disallowance of expenditure – Exempt income – Recording of satisfaction by
Commissioner of Income tax (Appeals) – Matter was set aside to the Assessing Officer
to decide the issue for de novo determination of the issue on merits. [R. 8D]
The assessee challenged the order of the Assessing officer disallowing the expenses on
the ground that no satisfaction was recorded. In appeal Commissioner of Income tax
(Appeals) recoded the satisfaction and confirmed the addition made by the Assessing
officer. The Tribunal, after examining various aspects, concluded that the matter needs
to be set aside and restored to the file of the AO for de novo determination of the issue
on merits after considering the submissions of the assessee having regard to the accounts
of the assessee as to the quantum of disallowance to be made u/s. 14A of the Act. The
order of the ld. CIT(A) was set aside and the issue is remitted back to the file of the
A.O. for de novo determination of the issue on merits. (AY. 2008-09)
Abbot India Limited v. ACIT (2016) 50 ITR 369 (Mum.)(Trib.)
130
S. 14A Disallowance of expenditure
S. 14A : Disallowance of expenditure – Exempt income – When the assessee has 381
surplus funds it could be presumed that investments had been made from surplus
funds, hence no disallowance can be made.[R.8D]
Tribunal held that; it was apparent from record that assessee had surplus funds, it could
be safely presumed that investments had been made from surplus funds, therefore, no
disallowance of interest u/s. 14A r.w. Rule 8D(2)(ii) could be made. (AY. 2008-09)
DCIT v. Mahendra Brothers Exports (P.) Ltd. (2016) 161 ITD 772 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – No evidence to relate 382
expenditure incurred with exempt income and relate exempt income to investment
yielding exempt income – Disallowance not justified – Restored back to AO to re-
calculate disallowance.
The assessee had disallowed a sum of ` 31,544/- under Section 14A of the Act in its
computation of income. The AO however applied Rule 8D and made total disallowance
of ` 4,90,274. On appeal to Tribunal, it was held that the AO had adopted the
formula for estimating expenditure on the basis of investments but the justification for
calculating the average investment was missing. The disallowance under Section 14A
was made without due deliberation and analysis by the AO. The issue was restored to
the file of AO for calculating the quantum of disallowance afresh after considering all
the aspects. (AY. 2008-09)
Yama Finance Limited v. ITO (2016) 47 ITR 642 (Delhi)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – No borrowed funds utilized 383
to earn exempt income – Disallowance should not exceed exempt income
The assessee, for the assessment year 2009-10, credited the dividend income of
` 1,82,262 in its profit and loss account. The Assessing Officer applied section 14A
of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962, and
disallowed ` 14,58,412. This was confirmed by the Commissioner (Appeals). The
Tribunal held that the facts indicate that no borrowed funds were utilised for earning
the exempt income by the assessee and further the dividend was directly credited in
the bank account of the assessee and no expenditure was claimed. The assessee only
received ` 1,82,362 as dividend income, therefore, there was no question of disallowance
of ` 14,58,412 invoking section 14A read with rule 8D. On identical facts in earlier
years, no disallowance was made. In the assessment year 2009-10 also, no borrowed
funds were invested by the assessee for making investment in shares or for earning the
dividend income. If any disallowance could be made that could be restricted to the sum
of ` 1,485 claimed as demat charges. Disallowance under section 14A read with rule 8D
cannot exceed the exempt income. (AY.2009-10)
Daga Global Chemicals Pvt. Ltd. v. ACIT (2016) 46 ITR 70 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Rule 8D does not have 384
retrospective application – AO directed to disallow 2% of exempt income – For AY
2008-09 and AY 2009-10 disallowance should not exceed exempt income
The Tribunal held that Rule 8D had no application since it was inserted with effect
from March 24, 2008. Since Rule 8D had no retrospective effect, it could not be
131
Disallowance of expenditure S. 14A
applied for the assessment year 2007-08. Accordingly, for the assessment year 2007-08,
the Assessing Officer was directed to disallow 2 percent of exempted income. For the
assessment years 2008-09 and 2009-10, the disallowance under section 14A read with
rule 8D should not exceed the exempt income. The alternative claim of the assessee was
that disallowance if at all made, should be restricted to the exempt income earned and
not beyond that. Accordingly, the Assessing Officer was directed to look at this issue
on this angle and decide it afresh.(AY. 2007-08, 2008-09, 2009-10)
Accel Frontline Ltd. v. DCIT (2016) 46 ITR 138 (Chennai)(Trib.)
385 S. 14A : Disallowance of expenditure – Exempt income – No Rule 8D in case of
assessment year preceding AY. 2008-09.
The Assessee earned dividend income and claimed exemption of long term capital gain.
The AO made an addition u/s. 14A. The ITAT remitted the matter to the AO for de novo
consideration since Rule 8D was not applicable to the impugned year and directed the
Assessee to file evidence to prove that interest-free funds were deployed for making
tax-free investments. (AY. 2006-07)
Casby Logistics P. Ltd. v. DCIT (2016) 47 ITR 230 (Mum.)(Trib.)
386 S. 14A : Disallowance of expenditure – Exempt income – Disallowance to be restricted
to the amount of dividend income received.
The Assessee had received dividend income during the year from investments in its
subsidiaries. The AO applied Rule 8D and disallowed certain amount u/s. 14A. The
ITAT held that the disallowance u/s. 14A was to be restricted to the amount of dividend
received by the assessee and also observed that the investments in subsidiaries were
strategic investments. (AY. 2009-10)
Nimbus Communications Ltd. v. ACIT (2016) 47 ITR 496 (Mum.)(Trib.)
387 S. 14A : Disallowance of expenditure – Exempt income – investment in foreign
subsidiary – Provisions would not be applicable.
The Tribunal held that the investments were made in 100 per cent foreign subsidiary
companies for the assessment years 2006-07 and 2008-09. No fresh investment had
been made in the financial years 2008-09 and 2009-10. Since the investment was
made in the subsidiary companies in the form of equity, the Commissioner (Appeals)
found that such investment was outside the scope of section 14A of the Act. When
the funds were invested in subsidiary companies, admittedly, the intention of the
assessee was not to earn exempt income but because of commercial expediency. The
Commissioner (Appeals) was right in holding that the provisions of section 14A would
not be applicable for the assessment years 2006-07 and 2008-09. (AY. 2006-07, 2008-09,
2009-10, 2010-11)
DCIT v. Helios and Matheson Information Technology Ltd. (2016) 46 ITR 172 (Chennai)
(Trib)
388 S. 14A : Disallowance of expenditure – Exempt income – Shares held from 1992-93 –
Disallowance at 0.5 per cent was held to be justified.
The assessee had brought forward the investment that was originally made in the year
1992-93 and earlier years. Thus, there was no change in the investment portfolio of the
132
S. 14A Disallowance of expenditure
assessee during the years 2004-05 to 2007-08 either by purchase of new shares or by
disposal of the existing shares. The assessee had held the shares in only one company
and had, thus, received dividend from one company only. For the assessment years
under consideration, 2004-05 and 2007-08, the provisions of Rule 8D of the Income tax
Rules, 1962, were not be applicable. The disallowance computed at 0.5 per cent of the
investment value of shares was reasonable. The Assessing Officer was to compute the
disallowance at 0.5 per cent of the value of investment in these two years under section
14A. (AY. 2004-05, 2007-08)
Mazgaon Dock Ltd. v. ITO (2016) 46 ITR 162 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Addition on account of disallowance under S. 389
14A read with Rule 8D being expenditure in relation to earning of exempt income to
book profit under S. 115JB justified.[S. 115JB]
Section 115JB of the Act starts with non-obstante clause ‘Notwithstanding anything
contained in any other provision in this act…” meaning thereby that the Section 115JB
shall be applicable notwithstanding anything contained in any other provision of the
Act and shall have over-riding effect upon other provisions of the Act. Hence, A.O. has
rightly disallowed the expenditure by invoking the provisions of Section 14A of the Act
read with Rule 8D of Income Tax Rules, 1962 for computing book profit u/s 115JB(2) of
the Act read with clause (f) to explanation 1 to clause 115JB(2) of the Act. (AY. 2008-09)
Dy. CIT v. Viraj Profiles Ltd. (2016) 156 ITD 72 / 46 ITR 626 / 177 TTJ 466 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Disallowance of 5% 390
expenditure on manpower was held to be justified.
The assessee had made an investment in shares and mutual funds on which it has earned
a dividend income which was claimed as exempt. In response to the show cause notice,
the assessee submitted that no direct or indirect expenditures have been incurred for
earning of such dividend income because the entire investment was made out of its own
funds and dividend earned have been directly credited to the bank account. In another
assessment year, the Tribunal had deleted the similar disallowance. The DRP noted that
the interest component cannot be disallowed because no borrowed funds have been
utilized. However, for indirect expenses, the DRP has directed the AO to disallow 5%
of expenditure incurred on manpower cost of the person directly concerned with the
decision making on investment. Tribunal held that Rule 8D is not applicable, there is no
interest expenditure attributable for the earning of exempt income and for the purpose
of indirect expenses, findings by AO on direction of DRP for indirect expenses cannot be
faulted with in absence of any proper rebuttal. (AY. 2007-08, 2008-09)
NYK Line India Ltd. v. ACIT (2016) 175 TTJ 180 / 132 DTR 7 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Interest on borrowed funds 391
that had been subject-matter of disallowance under section 36(1)(iii), could not be
considered again for purpose of disallowance under section 14A. [S.36(1)(iii)]
During relevant year, assessee earned certain exempt dividend income. Assessing
Officer applied provisions of section 14A, read with Rule 8D and disallowed certain
amount. Commissioner (Appeals) held that interest on borrowed funds that had been
subject-matter of disallowance under section 36(1)(iii), could not be considered again
133
Disallowance of expenditure S. 14A
for purpose of disallowance under section 14A. Tribunal held that payment of interest
which was already disallowed under section 36(1)(iii), could not be considered again for
section 14A disallowance as it would result in double addition - Therefore, impugned
order of Commissioner (Appeals) did not require any interference. (AY. 2008-09)
ITO v. Snowtex Investment Ltd. (2015) 174 TTJ 875 / (2016) 129 DTR 203 (Kol.)(Trib.)
392 S. 14A : Disallowance of expenditure – Exempt income – No disallowance can be made
on shares held as stock-in-trade. [R.8D]
Assessee, engaged in the business of share trading earned ` 12.04 lacs as exempt
dividend income. The AO made a disallowance of ` 46,89,748/- u/s. 14A r.w Rule 8D.
Before the CIT (A), the assessee stated that the Tribunal in assessee’s own case for AY
2010-11 has held that no disallowance u/s. 14A r.w. Rule 8D can be made on dividend
income from shares held as stock-in-trade. However, the CIT(A), disregarding the order
of Tribunal passed in assessee’s own case, followed the decision of Mumbai Bench of
the Tribunal in the case of HDFC Bank Ltd. v. DCIT in ITA No. 374/Mum/2012 decided
on 23-9-2015 and rejected the appeal.
Before the Tribunal, submitted that the order of the Tribunal in the case of HDFC Bank Ltd.
(supra) on which the CIT had placed reliance had been reversed by the Hon’ble Bombay
High Court in Writ Petition No. 1753 of 2016 decided on 25-2-2016. Held, CIT (A) erred in
not following the order of Tribunal in asessee’s own case. The Bombay High Court in the
case of CIT v. India Advantage Securities Ltd. (supra) has confirmed the order of Tribunal
wherein it was held that no disallowance u/s. 14A r.w. Rule 8D can be made on shares held
as stock-in-trade. The Tribunal further observed that the CIT (A) should have maintained
‘Judicial Propriety’ in following the order of Appellate Authority. However, it restrained
from commenting on the judicial indiscipline committed by the CIT (A) and expected that
the CIT(A) concerned shall be more careful in future in honouring the orders of the higher
Appellate Authorities. (ITA No. 1715/PN/2015, dt. 18.03.2016)(AY.2012-13)
Paresh Pritamlal Mehta v. ITO (Pune)(Trib.); www.itatonline.org
393 S. 14A : Disallowance of expenditure – Exempt income – 2 per cent of exempt income
was directed to be disallowed.
Tribunal held that where assessee earned dividend income but did not claim any
expenditure towards same, Rule 8D provisions being prospective in operation could not
be applied during year, but since incurring of certain administrative expenses cannot be
ruled out, Assessing Officer was directed to disallow 2 per cent of exempt income as
expenditure towards earning that income. (AY.2008-09)
Super Auto Forge (P.) Ltd. v. ACIT (2016) 156 ITD 467 (Chennai)(Trib.)
394 S. 14A : Disallowance of expenditure – Exempt income – Recording of satisfaction is
mandatory – No disallowance can be made.
In respect of tax free interest income earned on RBI bonds by assessee, Assessing Officer
made disallowance under section 14A by invoking provisions of Rule 8D(2) without
recording his satisfaction under Rule 8D(1), impugned disallowance was not sustainable.
(AY. 2008-09, 2009-10)
Damodar Valley Corporation v. Add.CIT (2016) 157 ITD 415 / 139 DTR 201 / 180 TTJ 82
(Kol.)(Trib.)
134
S. 14A Disallowance of expenditure
S. 14A : Disallowance of expenditure – Exempt income – Share application money 395
cannot be included while working average value of investment. [R. 8D]
It was held that share application money cannot be included while working out the
average value of the investments under Rule 8D(2)(iii). (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Disallowance can not exceed 396
exempt dividend income.
The assessee was in the business of trading of shares, cloth, commission and real estate
rent, and maintained the same books of account for all the businesses. Due to the
exempt divided income and interest expenses incurred, the AO made disallowance u/s.
14A. The ITAT observed that the dividend was earned in the normal course of business,
and if one assumed that some expenditure was incurred to earn the exempt income,
then the disallowance could not exceed the amount of exempt income. (AY 2008-09)
K. Ratanchand and Co. v. ITO (2016) 45 ITR 608 (Ahd.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Preference shares to be 397
included while computing the disallowance u/s. 14A, though exempt income was
received from another investment source. Disallowance u/s. 14A should not exceed
exempt income.
The assessee, a Government company, earned exempt income from Mutual Funds.
Further, it had also given loans to another company which was a Government JV.
Under the directions of the State Government, this loan was converted into cumulative
preference shares. The AO included this preference shares while computing the
disallowance u/s. 14A. On appeal, the ITAT held that preference shares should be
considered for computing the disallowance u/s. 14A since the dividend from it would
be exempt from tax. Further, the ITAT also held that though exempt income, during the
year, was not earned from preference shares, it would still be included for computing
the disallowance u/s. 14A. However, the ITAT held that the disallowance u/s. 14A could
not exceed the amount of exempt income. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – Disallowance of interest – 398
Borrowed money was not utilized – No disallowance can be made – Disallowance
under Rule 8D is restricted to 0.5% of average value of investments resulting in tax
exempt income.
Tribunal held that the borrowed money was not utilsed for investment in shares hence
disallowance of Interest borrowed money was not justified and disallowance under Rule
8D is restricted to 0.5% of average value of investments resulting in tax exempt income.
(AY. 2008-09)
UFO Movies India Ltd. v. ACIT (2016) 175 TTJ 633 / 131 DTR 81 (Delhi)(Trib.)
135
Disallowance of expenditure S. 14A
399 S. 14A : Disallowance of expenditure – Exempt income – Interest bearing funds were
not used for investment in shares – No disallowance can be made in respect of interest.
The Tribunal held that the assessee has not used interest bearing funds for the purpose
of making investment in shares, therefore no disallowance can be made under section
14A on account of interest expenditure. As regards administrative expenses, AO is
directed to make disallowance as per Rule 8D after setting off the suo motu disallowance
made by assessee. (AY. 2009-10)
GlaxoSmithKline Consumer Healthcare Ltd. v. JCIT (2016) 175 TTJ 552 / 143 DTR 57
(Chd.)(Trib.)
400 S. 14A : Disallowance of expenditure – Exempt income – Non interest bearing
funds are more than the amount invested which generated exempt income – Matter
remanded.
Non-interest bearing funds available with assessee more than the amount of investment
which generated exempt income. Matter remanded to AO to examine fund position of
assessee and decide accordingly. (AY. 2008-09)
Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.)(Trib.)
Dy. CIT v. Yes Bank Ltd. (2016) 46 ITR 317 (Mum.)(Trib.)
401 S. 14A : Disallowance of expenditure – Exempt income – No exempt income received
during the previous year – No disallowance made – Portion of administrative expenses
to be disallowed – Rule 8D(2)(iii) cannot be applied when securities were held as stock
in trade. [R. 8D]
Tribunal held that since the assessee did not receive exempt income during the previous
year, there was no requirement to make disallowance under Rule 8D(2)(iii) of the Rules.
However, a portion of the administrative expenses were required to be disallowed, even
if no dividend was received since the assessee would have spent some portion of the
expenses for purchase, sale and maintenance of investment. Since the object of the
assessee in making investment was to hold them as stock in trade the AO was to restrict
the disallowance under Rule 8D(2)(iii) of the rules. (AY. 2008-09)
Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.)(Trib.)
Dy. CIT v. Yes Bank Ltd. (2016) 46 ITR 317 (Mum.)(Trib.)
402 S. 14A : Disallowance of expenditure – Exempt income – No interest expenditure was
incurred – Disallowance was not justified.
No interest expenditure was incurred for earning any exempt income hence disallowance
made was not justified. (AY. 2006-07 and 2007-08)
Yes Bank Ltd. v. Dy. CIT (2015) 68 SOT 291 (URO) / (2016) 46 ITR 121 (Mum.)(Trib.)
403 S. 14A : Disallowance of expenses – Exempt income – Assessing Officer straight away
computed disallowance without recording his satisfaction, action of Assessing Officer
was not in accordance with law. [R.8D]
Since Assessing Officer had not considered claim of assessee at all and he had straight away
embarked upon computing disallowance without recording his satisfaction, action of Assessing
Officer in making disallowance was not in accordance with law. (AY. 2006-07, 2007-08)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
136
S. 17 Salary
S.14A : Disallowance of expenditure – Exempt income – Provision for computing 404
disallowance at 0.5 per cent justified in the absence of Rule 8D.
Investment originally made in year 1992-93 and earlier years. No change was made in
the investment portfolio during years 2004-05 to 2007-08 either by purchase of new
shares or by disposal of existing shares. Provision for computing disallowance at 0.5
percent justified in the absence of Rule 8D. (AY. 2004-05, 2007-08)
Mazgaon Dock Ltd. v. ITO (2016) 46 ITR 162 (Mum.)(Trib.)
S. 14A : Disallowance of expenditure – Exempt income – No disallowance was made 405
by the assessee – Invoking the provision read with rule 8D(2)(iii) was held to be
justified. [R.8D]
Undisputedly, the assessee did not make any suo motu disallowance. Therefore, it was
to be presumed that the assessee claimed that no expenditure was incurred by him
in relation to income which would not form part of the total income under the Act.
Therefore, the AO rightly disallowed the dividend by invoking the provisions of section
14A read with Rule 8D(2)(iii) of the rules. (AY. 2009-10)
Vipin Malik v. ACIT (2016) 45 ITR 589 (Delhi)(Trib.)
S. 17. “Salary”, “perquisite” and “profits in lieu of salary” defined
S. 17 : Salary – Profits in lieu of salary – Tips received by employees is not salary 406
hence not liable to deduct tax at source. [S. 15, 17(3), 192, 201(1), 201(IA)]
Held that as “tips” are paid to employees of the assessee from an outsider on a voluntary
basis and the employees have no vested right to receive the same, the same is not
“salary” and the assessee has no obligation to deduct TDS. (AY. 2003-04, 2004-05, 2005-
06)
ITC Limited v. CIT (2016) 384 ITR 14 / 286 CTR 126 / 134 DTR 273 / 239 Taxman 372
(SC)
CJ International Hotels Ltd. v. CIT (2016) 286 CTR 126 / 134 DTR 273 (SC)
American Express Banking Corporation v. CIT (2016) 286 CTR 126 / 134 DTR 273 (SC)
Standard Chartered Bank Ltd. v. CIT (2016) 286 CTR 222 / 134 DTR 273 (SC)
S. 17 : Salary – Perquisite – Uniform allowance – Fringe benefits – Benefit could not be 407
included in income of employee treating it as a perquisite – Not liable to be deducted
tax at source.[S. 115WA]
ONGC reimbursed conveyance, maintenance and repair expenditure and uniform
allowance to assessee employee. Assessing Officer found that ONGC had not deducted
tax at source. He made addition in income of assessee. Court held that, the impugned
benefits were held to be fringe benefits and employer taxed accordingly under Chapter
XII-H, therefore the said benefit could not be included in income of employee treating
it as a perquisite. (AY. 2007-08)
Kamlesh K. Singhal General Manager (MM) v. CIT (2016) 389 ITR 247 / 243 Taxman 250
(Guj.)(HC)
137
Salary S. 17
408 S. 17 : Salary – Perquisite Constitutional validity of provision – Fringe benefit or
amenity – Method of valuing concessional loan from employer – Provision is valid.
[S.17(2), R. 3(7)(i), Constitution of India, Art. 14]
The rule making authority prescribed under Rule 3(7)(i) a definite indicia for finding
out the value of the fringe benefit.
The attack on this rule the basis that the rule did not stipulate different methods of
valuation of the perquisite or seek to apply a uniform rate for different categories of
persons irrespective of the huge difference in their pay packets was meaningless. Section
17(2)(viii) and Rule 3(7)(i) are valid.
All India Union Bank Officers Federation v. UOI (2016) 385 ITR 114 / 240 Taxman 92 /
141 DTR 101 / 289 CTR 61 (Mad.)(HC)
409 S. 17 : Salary – Profits in lieu of salary – Amount paid by employer to employee
in order to put an end to litigation which was related to employee’s termination of
service was not in nature of “profit in lieu of salary”. [S.15, 17(3)]
Assessee, an individual, was an employee of company ‘G’. He was discharged from
service under the relevant Service Rules after giving three month’s pay. Further, the
assessee was also paid certain amount as ex-gratia compensation on premature cessation
of his services. The assessee treated the said ex-gratia payment as a capital receipt and
consequently did not offer it to tax. The AO took a view that compensation so received
was to be taxed u/s. 17(3) as ‘profits in lieu of salary’. The Tribunal confirmed the order
passed by AO.
On appeal, the HC held that the assessee’s services came to be terminated under
the relevant service rules after giving three months’ pay. Therefore, in so far as the
obligation of the employer to pay any amount to the assessee in relation to the
termination of his services, the same came to an end in view of the discharge of his
services under relevant rule. The amount in question was paid only in terms of the
settlement, without there being any obligation on the part of the employer to pay any
further amount to the assessee in terms of the services rules. The employer, voluntarily
at its discretion, agreed to pay the amount in question to the assessee with a view to
bring an end to the litigation. There was no obligation cast upon the employer to make
such payment and, therefore, the same would not be taxable as ‘profits in lieu of salary’
as envisaged u/s. 17(3)(i).(AY. 1994-95)
Arunbhai R. Naik v. ITO (2016) 131 DTR 402 / 284 CTR 284 (Guj.)(HC)
410 S. 17 : Salary – Profits in lieu of salary – Amount received from his employer on
retirement is profits in lieu of salary and not non-compete fees – Liable to tax. [S. 4,
15, 17(3)]
At the time of retirement, the assessee received various retirement benefits from the
company. Further, the assessee was also paid certain amount as compensation which
was claimed as non-compete fees, not chargeable to taxable. However, the AO re-
characterized the nature of payment to be ‘profits in lieu of salary’ as the assessee
failed to provide explanation the manner in which the compensation was computed
and negotiated with the company. The CIT(A) and Tribunal upheld the order of the AO.
On appeal, the HC held that the assessee has worked with the company for more than
138
S. 17 Salary
33 years and received handsome retirement package and would not compete with his
former employer. Hence, the payment shown as non-compete fees is a camouflage
transaction to reduce tax implication. (AY. 2003-04)
B. L. Shah v. ACIT (2016) 131 DTR 265 / 284 CTR 165 (Bom.)HC)
S. 17 : Salary – Profits in lieu of salary – Amount received by an assessee, acting as 411
a Managing Director of a Company, at the time of termination of his relation with
the Company in consideration of him not providing benefit of his knowledge to any
other person carrying on similar activity was not taxable either u/s. 17(3) or 28(va).
[S. 17(3), (28(va)]
On appeal, the Tribunal held:
The role assigned to the assessee clearly shows that he was not subject to the direct
control or supervision of Suzuki India, but was managing all affairs of the company,
evolving business strategies and advising the company. His role was clearly that of
a joint venture partner in Suzuki India and not that of an employee of the company
and hence the assessee was not an employee of Suzuki India, and thereby the amount
received by him from the company could not be taxed as ‘profits in lieu of salary’
under section 17(3). Further the amount was paid by Suzuki India to the assessee
in consideration of not providing ‘the benefit of his knowledge of regulatory matters,
negotiating skills and strategic planning expertise to any other person in India in the
two wheeler segment’ it cannot be regarded as non-competition fee because it has not
been paid for not competing with the payer, but for not providing the benefit of his
knowledge, expertise, skills etc. to any other person in the two wheeler segment. The
contention of assessee that section 28(va) taxes a sum received for a restrictive covenant
in relation to a business, but not a profession is supported by the observations in
paragraph 28 on page 692 of Kanga and Palkhivala’s ‘Law and Practice of Income-tax’
that clause (va) of section 28 ‘taxes a sum received for a restrictive covenant in relation
to a business, but not a profession’; and, therefore, does not fall within the ambit of
section 28(va). The Supreme Court in the case of Guffic Chem. (P.) Ltd. v. CIT (2011)
332 ITR 602 held that compensation attributable to a negative/restrictive covenant is a
capital receipt. Hence, the sum received by the assessee did not fall within the ambit
of section 28(va), and it was not chargeable to tax as it constituted a capital receipt.
In view of the above, the claim of the assessee that the sum received by him from
Suzuki India is not taxable under section 17(3)(b) and also, said sum does not fall
within the ambit of section 28(va), being a capital receipt is not taxable under the Act,
is upheld (AY. 2010-11)
Satya Kant Khosla v. ITO (2015) 174 TTJ 825 / 63 taxmann.com 293 / (2016) 129 DTR
19 (Delhi)(Trib.)
S. 17 : Salary – Perquisite – An incentive plan was promoted by holding company 412
of Indian employer company – Assessee employees were residents in India at time
of exercise of Stock Appreciation Rights, they were liable to tax in India on same
irrespective of fact that they were non-residents during vesting period. [S.15]
Tribunal held that an incentive plan which was promoted by holding company of Indian
employer company. Assessee employees were residents in India at time of exercise of
139
Salary S. 17
Stock Appreciation Rights, they were liable to tax in India on same irrespective of fact
that they were non-residents during vesting period. Assessees claim that value of SARs
was subjected to taxation in USA, it had to be examined in light of India-USA tax treaty,
matter was remanded back to AO for examining whether assessees have paid tax in USA
on same Stock Appreciation Rights. (AY. 2011-12, 2012-13)
Soundarrajan Parthasarathy v. Dy. CIT (2016) 159 ITD 21 (Chennai)(Trib.)
413 S. 17 : Salary – Perquisite – Rent free accommodation – Addition cannot be made on
notional interest on deposit made for rent-free accommodation in income of assessee.
[S. 17(2), R. 3]
Tribunal held that ;notional interest on deposit paid by employer to landlord for
securing accommodation, while computing perquisite value of the residential
accommodation included the same in income of the assessee is not sustainable in
view of express words used in Rule 3 of the Income-tax Rules, 1962 as amended w.e.f.
01.04.2001. Therefore, the same is required to be deleted.
Vikas Chimakurty v. Dy. CIT (2016) 159 ITD 413 (Mum.)(Trib.)
S. 22. Income from house property
414 S. 22 : Income from house property – Gross rent received was less than from the let
out property – Tax effect was below limit prescribed in CBDT circular – Appeal was
dismissed leaving question of law open.
High Court held that the Tribunal was right in law on directing the Assessing Officer
to adopt the gross rent received by the assessee being lessor from the let out property
for the purpose of computation of income from house property in place of much
higher fetched by the lessee by sub letting the same property. On appeal by revenue,
Apex Court dismissed the appeal as the tax effect was below limit prescribed in CBDT
circular, leaving the question of law open. (AY. 1991-92)
CIT v. Hemraj Mahabir Prasad Ltd. (2016) 382 ITR 170 / 237 taxman 379 / 286 CTR 112
(SC)
415 S. 22 : Income from house property – Annual letting value – Held to be liable to pay
tax on annual value of unsold property. [S. 23]
Assessee was engaged in business of construction of house property. Many flats were
lying unsold - High Court by impugned order held that provisions of sections 22 and
23 would be applicable and assessee would be liable to pay tax on annual letting value
of unsold flats as income from house property. Chennai Properties and Investments Ltd.
v. CIT (2015) 373 ITR 673 (SC) distinguished. (AY. 1994-95)
CIT v. Ansal Housing & Construction Ltd. (2016) 389 ITR 373 / 241 Taxman 418 (Delhi)
(HC)
Editorial: Special Leave Petition filed against impugned order was granted.) Ansal Housing
& Construction Ltd. v. CIT (2016) 389 ITR 5(St), 243 Taxman 144 (SC)
140
S. 22 Income from house property
S. 22 : Income from house property – Business income-Assessee leasing out property to 416
restaurant for 12 years renewable for further period of 12 years – Intention of assessee
to enjoy rental income – Assessable as income from house property. [S. 28(i)]
Dismissing the appeal of assessee the Court held that the Tribunal categorically recorded
that upon perusal of the memorandum of understanding between the assessee and the
lessee, it showed that the property was given for use for a period of 12 years which was
renewable for a further period of 12 years and nowhere was it shown that the intention
was to let it out was only for a temporary period. This showed the intention of the
assessee to enjoy rental income, which was rightly treated as income from house property
by the Assessing officer. The view adopted by the Tribunal was a plausible view and the
assessee failed to show any illegality or perversity in that order. (AY. 2005-06)
Batra Palace P. Ltd. v. CIT (2016) 385 ITR 144 (P&H)(HC)
S. 22 : Income from House Property – Income From other sources – Receipt from 417
licensing of terrace floor for antenna was assessable, as income from house property
and is neither assesses business income nor income from other sources.[S. 28(i), 56]
Issue was whether receipt from licensing of terrace floor for antenna was assessable as
under the head ‘Income from other sources’ as opposed to ‘Income from House Property’
returned by the appellant?”. Allowing the appeal of the assessee, Hon’ble HC held that
assessee giving its terrace space to licence for raising telecom antenna, constructing a
room for its personnel and storage, receipts are income from House Property. Same was
neither business income nor income from other sources. Fact that assessee has shown
the terrace as stock in trade was of no consequence. Assessee continued to be the owner
of the terrace floor. Licence was virtually given for exclusivity in utilizing the terrace
floor for achieving the objectives set out in the agreement.
Niagam Hotels & Builders (P) Ltd. v. CIT (2016) 134 DTR 158 (Delhi)(HC)
S. 22 : Income from house property – Income from letting out of office premises to be 418
decided based on the judgment of Chennai Properties and Investments Ltd. – Matter
remanded.
The assessee, engaged in the business of property leasing, had earned rental income
from letting out of office premises which it had disclosed as income from business
profits. The AO treated it as Income from House Property. The ITAT remanded the
matter to be decided afresh in light of the decision of the Hon’ble Supreme Court in the
case of Chennai Properties and Investment Ltd. (AY. 2008-09, 2009-10)
Damsak Projects P. Ltd. v. DCIT (2016) 45 ITR 278 (Mum.)(Trib.)
S. 22 : Income from house property – Notional rent – Additional evidence – Matter 419
remanded to AO to determine afresh income from house properties. [S. 23]
The AO while computing the income from house property did not make enquiry with
respect to the properties in accordance with the Act and failed to follow the principles
laid down by the Court to determine the prevailing market rent of these properties and
rather computed the annual letting value based on notional rent on cost of properties.
The department failed to consider the additional evidence produced by the assessee thus
vitiating the principles of natural justice. Matter remanded. (AY. 2007-08)
Vishwanath Acharya v. ACIT (2016) 157 ITD 1032 / 45 ITR 554 (Mum.)(Trib.)
141
Income from house property S. 23
S. 23. Annual value how determined
420 S. 23 : Income from house property – Annual value – Maintenance charges, etc., which
is stipulated to be payable by licensee or lessor, must form a part of rent for purpose
of computing annual value of property. [S. 22, 24]
Assessee was a sub-licensee of a builder in a rented property. Assessee entered into
sub-sub-licence agreement with one RSM. On appeal by the assessee, dismissing the
appeal Court held that; Maintenance charges paid by sub-sub-licencee RSM directly to
builder would also be chargeable under head ‘income from house property’ and assessee
would get benefit of deduction under section 24 and under proviso to section 23. In the
circumstances, the questions of law are answered in favour of the revenue and against
the assessee. (AY. 2002-03)
Sunil Kumar Gupta v. ACIT (2016) 389 ITR 38 / 243 Taxman 65 (P&H)(HC)
421 S. 23 : Income from house property – Annual value – Failed to let out the property –
Annual value to be treated as nil [S. 23(ia), 23(1)(c)]
ALV of property remaining vacant for whole year has to be computed with reference
to S. 23(1)(c). Therefore, where assessee intended to let property and took appropriate
efforts in letting property but ultimately failed to let same, in terms of s. 23(1)(c) its
ALV had to be treated as nil being less than sum referred to in s. 23(1)(a).(AY.2009-10)
Vikas Keshav Garud v. ITO (2016) 160 ITD 7 (Pune)(Trib.)
422 S. 23 : Income from house property – House Property inherited under will which is
not yet probated, no notional rent can be assessed. [S. 22]
It was held that Assessee having inherited the house property from his mother through
her will which has not yet been probated, he is not the owner of the said property and,
therefore, no notional rent can be assessed in the hands of the assessee while computing
his income under the head income from house property. (AY. 2005-06)
Dilip Loyalka v. ACIT (2016) 130 DTR 73 / 175 TTJ 334 (Kol.)(Trib.)
423 S. 23 : Income from house property – Annual value – Estimation of notional rent
without any basis was held to be not justified. [S. 22]
Allowing the appeal of assessee the Tribunal held that; where Assessing Officer
estimated notional rent of house property without giving any basis, same was to be
rejected. (AY. 2006-07)
Sunil Kumar Saha v. ITO (2016) 156 ITD 1 (Kol.)(Trib.)
424 S. 23 : Income from house property – Annual value – Vacancy period – Estimation of
annual value being highest rent received in last three years was held to be justified.
[S. 22]
Where assessee utilized property for personal purposes and let out property occasionally
but did not give any details for rent received and vacancy period of property, there was
no illegality in annual value taken by Assessing Officer being highest of rent received
in last three years. (AY. 2006-07)
Sunil Kumar Saha v. ITO ( 2016) 156 ITD 1 (Kol.)(Trib.)
142
S. 24 Income from house property
S. 23 : Income from house property – Notional income in respect of unsold shops 425
cannot be charged to tax under the head income from house property. [S.22]
Allowing the appeal of assessee the Tribunal held that notional income in respect of
unsold shops cannot be charged to tax under the head income from house property. (ITA
No 4277/ Mum/ 2012 dated 13-05-2015 Bench ‘C’) (AY. 2009-10)
C. R. Developments Pvt. Ltd. v. JCIT (2016) BCAJ - February-P. 34 (Mum.)(Trib.)
S. 23 : Income from house property – Annual value – Brokerage paid to give out 426
premises on rent and to earn lease rent is not deductible in computing the Income
from house property. [S. 22, 24]
Brokerage paid to give out premises on rent and to earn lease rent is not deductible in
computing the Income from house property. (ITA No. 5494/Mum/2013, dt. 05.06.2015)
(AY. 2010-11)
Radiant Premises Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 24. Deductions from income from house property
S. 24 : Income from house property – Deductions – Deduction for interest paid on loan 427
is not available when loan was taken after acquisition of the house property. [S. 22]
Assessee, an individual, filed return of income claiming deduction for interest paid on
loan under section 24(b) of the Act. The Assessing Officer denied the deduction on the
ground that the property was purchased in November 2005 and loan was taken only in
December 2005. The CIT(A) and Tribunal upheld the order of the Assessing Officer. On
appeal, the High Court held that deduction under section 24(b) is available only if loan
was utilized for acquisition of the property therefore, assessee was not entitled to claim
the deduction under section 24(b). (AY. 2007-08)
Vijay Aggarwal v. CIT (2016) 236 Taxman 542 / 135 DTR 276 / 286 CTR 452 (P&H)(HC)
S. 24 : Income from house property – Deduction – Interest paid on loan taken over 428
while acquiring mortgaged property would be deductible under section 24(1)(vi)
against rental income from said property. [S. 22]
The assessee was having rental income and claimed deduction of interest from the said
income under section 24(1)(vi). The Assessing Officer disallowed the said deduction as
the assessee had not purchased/constructed any building from the funds on which the
interest was paid. On appeal, the Commissioner (Appeals) upheld the disallowance. On
second appeal, the Tribunal allowed deduction under section 24(1)(vi) to assessee by
recording finding that said loan liability was undertaken by assessee for acquiring its
mortgaged property.
The High Court held that Section 24(1)(vi) of the Act at the relevant time provided that
where the property had been acquired, constructed, repaired, renewed or re-constructed
with borrowed capital, the amount of interest payable on such capital was a permissible
deduction from income from house property. Thus, it would be required to be seen in
the present case whether the deduction of interest paid by the assessee on the borrowed
funds satisfied the requirements of clause (vi) of sub-section (1) of Section 24 of the
Act. The Court further observed that the tribunal had come to a finding that there was
143
Income from house property S. 23
a nexus between the loan taken and the acquisition of the property. The Revenue was
unable to show any perversity in the findings of the Tribunal and accordingly the High
Court dismissed the Revenues appeal. (AY. 1997-98)
CIT v. Harayana Television Ltd. (2016) 237 Taxman 247 (P&H)(HC)
429 S. 24 : Income from house property – Deductions – Interest paid – No condition that
property must both be acquired and constructed with borrowed capital. [S. 22, 24(b),
80C]
Assessee was joint owner of farm land that was acquired by raising a house loan from
a bank. The owners entered into a development agreement for construction of farm
house on property. The developer was entitled to 70% of the rent and joint owners
were entitled to 30% of the rent received from the farm house. AO rejected deduction
claimed u/s. 24(b) on the ground that loan amount was not spend on construction of
farm house. CIT(A) upheld order of AO. On Appeal, the Tribunal held that explanation
to the proviso to section 24 clarifies that the property can either be acquired or
constructed with borrowed capital, no requirement/condition that property must be
acquired as well as constructed with borrowed capital. Assessee borrowed the amount
for acquiring the property, income from which was assessed under the head “Income
from house property” and made the repayment of the loan. Hence deduction u/s. 24(b)
allowed. (AY. 2010-11)
Samiksha Mahajan (Mrs.) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.)
Anita Rani (Mrs.) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.)
430 S. 24 : Income from house property – Interest on borrowed capital – Until house
property is self-occupied, interest expenditure would not be allowed. [S 23,24(b)]
Assessee claimed to have purchased a residential property Bungalow DM by taking loan
and claimed deduction of interest paid to bank on borrowed amount. Bungalow DM
was not ready for self-occupation, assessee was not entitled for deduction of interest
expenditure u/s. 24(b). (AY.2008-09)
Madanlal F. Jain v. DCIT (2016) 160 ITD 1 / 143 DTR 150 / 181 TTJ 948 (Ahd.)(Trib.)
431 S. 24 : Income from house property – Deductions – Society maintenance and other
charges is held to be allowable [S. 23]
The assessee declared income from house property. She claimed a deduction of an
amount of ` 1,17,825 on account of society maintenance and other charges and declared
the net annual value. The Assessing Officer held that according to the proviso to section
23 for the purpose of computation of annual value, the assessee was allowed deduction
only for the payment of taxes levied by the local authority in respect of the property.
Hence, he made an addition of ` 1,17,825 to the income of the assessee under the
head “Income from house property”. However, he allowed the standard deduction to
the assessee as provided under section 24(a). The Tribunal held that the assessee paid
the society maintenance charges of ` 1,17,825 which was stated to be the obligation
of the lessee and the charges was duly included in the rent received by the assessee.
Therefore, the assessee was entitled to deduction of ` 1,17,825 under section 23 apart
from the standard deduction under section 24(a). The Assessing Officer was directed
144
28(i) Business income
to verify the claim of deduction of the assessee of the society maintenance charges of
` 1,17,825 paid by the assessee but stated to be obligation of the lessee and stated to
be duly included in the gross rent received by the assessee before allowing the claim
of the assessee. (AY. 2006-07)
Asha Ashar v. ITO (2016) 46 ITR 492 (Mum.)(Trib.)
S. 24 : Income from house property – Deductions – Interest – Borrowed capital could 432
be used towards acquisition of property or construction of property – Non cumulative
condition – Interest is deductible [S.24(b)]
The assessee was the co-owner of farm land with A, acquired by taking loan from
bank, both having equal shares and entered into an agreement with a developer for
constructing a farm house on the land who was supposed to bear all the expenses
incurred on the development and construction of farm house. The AO observed
that the assessee had claimed deduction of interest under Section 24(a) of the Act.
The AO disallowed the interest on the ground that the assessee had not spent any
amount on construction of the farm house. On appeal to Tribunal, it was held that
from the Explanation appended to the proviso to Section 24, the property could either
be acquired or constructed with borrowed capital. Nowhere was it mentioned that
the property must be acquired as well as constructed with borrowed capital. The
assessee raised loan from a bank and acquired the property, income from which was
assessed under the head, ‘Income from house property’. Therefore the interest paid was
deductible under Section 24(b). (AY 2010-11)
Samiksha Mahajan (Mrs) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.)
S. 28. Profits and gains of business or profession
S. 28(i) : Business income – Mutuality – Company formed to deal in real estate – 433
Shareholders allotted floor area with absolute right against share capital – Occupants
given absolute right to occupy, alienate or sell property – Profit motive involved –
Principle of mutuality not applicable – Maintenance deposit to be treated as business
income – Review petition was dismissed. [S. 4]
Company formed to deal in real estate. Shareholders allotted floor area with absolute
right against share capital. Occupants given absolute right to occupy, alienate or sell
property. Profit motive involved, therefore principle of mutuality is not applicable.
That on the issue of short-term capital gains with respect to property T1 and T2 and
maintenance deposit there was no infirmity in the order of the High Court so as to
require any modification. On a petition for review: The Supreme Court dismissed the
petition holding that no grounds were made out for review. Decision of the Supreme
Court in G. S. Homes and Hotels P. Ltd. v. Deputy CIT (2016) 387 ITR 126 (SC)
reaffirmed. (AY. 1996-97)
G. S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 389 ITR 78 (SC)
Editorial: Review petition was dismissed; decision of the Supreme Court in G. S. Homes
and Hotels P. Ltd. v. Dy. CIT (2016) 387 ITR 126 (SC) reaffirmed.
145
Business income 28(i)
434 S. 28(i) : Business income – Mutuality – Company formed to deal in real estate –
Shareholders allotted floor area with absolute right against share capital – Occupants
given absolute right to occupy, alienate or sell property – Profit motive involved –
Principle of mutuality not applicable – Maintenance deposit to be treated as business
income. [S. 4]
Company formed to deal in real estate. Shareholders allotted floor area with absolute
right against share capital. Occupants given absolute right to occupy, alienate or sell
property. Profit motive involved, therefore principle of mutuality is not applicable.
That on the issue of short-term capital gains with respect to property T1 and T2 and
maintenance deposit there was no infirmity in the order of the High Court so as to
require any modification. (AY. 1996-97)
G.S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 387 ITR 126 / 242 Taxman 58 / 289 CTR
105 / 141 DTR 201 (SC)
Editorial: Decision in G.S. Homes and Hotels P. Ltd. v. Dy. CIT, ITA No 16 of 2003 dt.
16-09-2011 is partly affirmed.
435 S. 28(i) : Business income – Income from house property – Rent received from property
– Finding that assessee had discontinued all other business activities and only carried
on leasing of property – Business of assessee to lease property and earn rent – Rent
taxable as income from business, not house property. [S. 22]
Assessee had only one business and that was of leasing its property and earning rent
therefrom. The business of the company was to lease its property and to earn rent and
therefore, the income so earned should be treated as its business income. The income
of the assessee was to be subject to tax under the head “Profits and gains of business
or profession”. (AY. 2003-04 to 2008-09)
Rayala Corporation P. Ltd. (2016) 386 ITR 500 / 243 Taxman 360 / 139 DTR 265 / 288
CTR 121 (SC)
436 S. 28(1) : Business income – Refundable deposits received by a housing company for
allotment of flats and future maintenance is business income. [S.4, 45]
The Karnataka High Court held, following Shree Nirmal Commercial Ltd. v. CIT (1992)
193 ITR 694 (Bom.)(HC), and CIT v. Shree Nirmal Commercial Ltd v. CIT (1995) 213 ITR
361 (FB)(Bom.)(HC) that the refundable deposits received by a housing company from
its shareholders in consideration of allotting area to them is assessable as business
profits. It was also held that the principles of mutuality are not applicable. It was also
held that deposits received from the shareholders for future maintenance is assessable
as business income. On appeal to the Supreme Court Held: After hearing the learned
counsels for the parties and perusing the relevant material, in so far as the issue of
short term capital gains with respect to property T1 and T2 and maintenance deposit is
concerned, we do not find any infirmity in the order of the High Court so as to require
any modification. (AY.1996-97)
G. S. Homes & Hotels P. Ltd. v. CIT (2016) 141 DTR 201 / 289 CTR 106 (SC)
Editorial: Review petition was dismissed, G. S. Homes & Hotels P. Ltd. v. Dy. CIT (2017)
291 CTR 240 (SC)
146
28(i) Business income
S. 28(i) : Business income – Accrual of income – Differential amount of interest will 437
be taxable in the year in which the same had accrued to the assessee. [S.4, 5]
Dismissing the appeal of the revenue, the Court held that the differential amount would
accrue to the assessee only as and when such interest amount in excess of the agreed
amount was recovered by it. Such amount would, therefore, be taxable in the year in
which the same had accrued to the assessee. Further, the assessee had already paid tax
on the said income in the subsequent years. Accordingly, the appeal of Revenue was
dismissed. (AY. 2001-02 to 2003-04).
PCIT v. Gruh Finance Ltd. (2016) 242 Taxman 444 (Guj.)(HC)
S. 28(i) : Business income – Income from other sources – leasing of manufacturing 438
facility for ten years was held to be assessable as business income. [S. 22]
Assessee-company was engaged in manufacturing malt. It leased out its entire malting
facility to another company for a period of ten years. Authorities below opined that
rental income earned by assessee was taxable as income from other source. On appeal
allowing the appeal Court held that it was apparent that in terms of lease agreement,
assessee retained its interest in plant and machinery and only minor repairs were to
be carried out by lessee. Moreover, lessee had to continue its business operations with
employees of assessee - Whether on facts, it was clear that assessee wanted to resume
its business operations after expiry of period of lease and, therefore, income arising from
leasing out of business assets was to be regarded as business income. (AY. 2004-05)
Maltex Malsters Ltd. v. CIT (2016) 243 Taxman 581 (P&H)(HC)
S. 28(i) : Business income – Compensation received from insurance company for loss 439
of stocks-in-trade and other goods due to fire is assessable as business income.
On reference the Court held that the Appellate Tribunal was justified in treating the
insurance claim received by the assessee from the insurance company on account of
loss of stocks-in-trade and other goods due to fire as business income of the assessee.
(AY. 1980-81)
Somaiya Organo Chemicals Ltd. v. CIT (2016) 388 ITR 423 / 290 CTR 30 / 142 DTR 361
(Bom.)(HC)
S. 28(i) : Business income – Income from house property – Hotel – Rent from 440
transmission tower of mobile telecommunications company installed in terrace –
Assessable as business income.[S.22]
Court held that the terrace of that hotel was utilised for the purpose of installing a tower
and the income arose out of the rental of the terrace. The business of the assessee was,
in a sense, to let out the rooms to the guests for consideration, though strictly speaking
in law it was not a case of letting out. It may be a case of licensing. The Tribunal was
justified in holding that the rental income from the tower was assessable as business
income. (AY. 2003-04)
New Kenilworth Hotel P. Ltd. v. CIT (2016) 387 ITR 201 / (2017) 292 CTR 336 (Cal.)(HC)
147
Business income 28(i)
441 S. 28(i) : Business income – Income is taxable in the year when the possession of land
was given. [S.4]
On appeal, the Tribunal held that in terms of the agreement, the licence to enter
upon Assessee’s land was to be given within 90 days of SMPL obtaining all requisite
permissions to develop the property. This licence was given on 25-4-2011 and thus, the
business income, if any arose in the AY 2012-13 when possession of land was given.
The Tribunal also recorded that this part of its income had been offered to tax for
Assessment Year 2012-13. The High Court held that the view taken by the Tribunal on
the basis of a factual finding that no income accrued to the Assessee before 25-4-2011
when necessary licence was granted to SMPL to enter upon its plot of land for the
purpose of construction activities is a possible view and not shown to be arbitrary and/
or perverse. In view of the above findings of fact, no substantial question of law arose
from the Tribunal’s order. (AY. 2009-10)
CIT v. Skyline Great Hills (2016) 238 Taxman 675 (Bom.)(HC)
442 S. 28(i) : Business income – Capital gains – Mere non-introduction of interest-bearing
funds is not sufficient to conclude that gains from sale of shares are not business
income. [S.45]
The Tribunal, by the impugned order dated 30th August 2013, after considering the
Circular No.4 of 2007 dated 15th June 2007 issued by the Central Board of Direct Taxes,
observed that there are various factors such as frequency, volume, entry in the books of
account, nature of funds used, holding period etc. which are relevant in deciding the true
nature of transactions and no single factor is conclusive. Thus, mere non-introduction
of interest bearing funds will not alone determine the nature of the transactions. The
impugned order, after analyzing the statement of capital gains which were available before
it, came to the conclusion that most of the shares have been sold within 30 days of its
purchase and upheld the order of the CIT(A)… In view of the above, we see no reason to
interfere with the above concurrent findings of fact which has not been shown to perverse
or arbitrary. (ITA No. 2242 of 2013, dt 22.02.2016) (AY. 2008-09)
Pine Tree Finserve Pvt. Ltd. v. CIT (Bom.)(HC); www.itatonline.org
443 S. 28(i) : Business income – Individual engaged in manufacture and sale of
pharmaceutical products – Income earned from sale of undivided share of land and
construction of flats on said land - treated as business income.
The assessee was originally a partnership-firm engaged in the business of manufacturing
and selling pharmaceutical items, it purchased land which was depicted as the business
asset of the partnership firm. After retirement of two partners, the firm became a sole
proprietary concern and the assessee became the sole proprietor. In AY 1999-2000,
assessee sold the said land by registered sale deeds conveying undivided shares. The
Department was of the view that sale of properties was not part of the business of the
assessee, hence, the income cannot be treated as business income. However, CIT(A) did
not concur with the Department’s view and ruled in favour of Assessee.
On appeal, the High Court held that department’s contention is fallacious. As the
assessee is an individual, he need not necessarily confine his activity to a particular
line of business. High Court noted that Assessee, was a partnership firm, which
purchased the property only as a part of its business assets. Therefore there cannot
148
28(i) Business income
be a presumption that the Assessee cannot carry on any activity other than that of
manufacture and sale of pharmaceutical products. Hence High Court upheld Tribunal
decision that sale of undivided shares of land and the construction of flats cannot be
subject to computation of capital gains and that the same would be treated as business
income. (AY. 2000-01 to 2005-06)
CIT v. R. Sethuraman (2016) 237 Taxman 581 (Mad.)(HC)
S. 28(i) : Business income – Interest income – Fixed deposit was kept as margin money 444
– Interest income earned was attributable to and incidental to business carried on
by assessee it would be assessable as business income and not as income from other
sources. [S. 56]
Dismissing the appeal of the Revenue, the Tribunal held that the assessee earned interest
income on Fixed Deposits kept by it as margin money with NSE through its broker
in order to enable it to trade in Future & Options. Since interest income earned on
said Fixed Deposits was directly attributable to business of assessee, treating same as
business income of assessee instead of income from other sources is correct.
Dy. CIT v. Teenlok Advisory Services (P.) Ltd. (2016) 159 ITD 991 (Kol.)(Trib.)
S. 28(i) : Business income – Income from house property – Sub-license of property 445
along with other facilities was held to be assessable as business income and not as
income from house property.[S. 22, 27]
Allowing the appeal of the assessee, the Tribunal held that The consideration received
by the assessee as licensor from the sub-licensee, comprised of licence fees and service
fee and air condition fees. Keeping in mind the objects of the assessee and keeping
in mind the facts and circumstances of the present case, it can be safely concluded
that the assessee carried on a systematic and regular activity in the nature of business
and therefore the income earned from granting the premises on sub-license was to be
assessed as income from business. (AY. 2006-07, 2007-08)
Bombay Plaza (P.) Ltd. v. ACIT (2016) 161 ITD 552 / (2017) 184 TTJ 412 / 148 DTR 11
(Kol.)(Trib.)
S. 28(i) : Business income – Interest – When Memorandum and Articles of Association 446
permits the assessee to lend money and also to receive the money on interest the said
interest income is assessable as business income. [S. 56]
The Tribunal held that Memorandum and Articles of Association permits the assessee
to lend money and also to receive the money on interest. Therefore, interest income
constituted business income of the assessee. (AY. 2010-11)
ACIT v. Rama Panels P. Ltd. (2016) 181 TTJ 698 (Jab.)(Trib.)
S. 28(i) : Business income – Income from house property – Receiving rent and facility 447
service charges, since facility service charges were being received by assessee in return
of providing specific services like housekeeping, security, etc., same was liable to be
assessed as business income. [S. 22]
The AO held that facility service charges were also received from person from whom
rental income was received and, therefore, same was also taxable under head ‘Income
149
Business income 28(i)
from house property’ as a part and parcel of rental income. Allowing the appeal of the
assessee, the Tribunal held that since facility service charges were being received by
assessee in return of providing specific services like housekeeping, security, etc., same
was liable to be assessed as business income. (AY. 2009-10)
Kavita Marketing (P.) Ltd. v. ITO (2016) 159 ITD 547 (Mum.)(Trib.)
448 S. 28(i) : Business income – Share holder agreement – Accrual – Yearly increase in
option price would be business income. [S.5, 145A]
Under a shareholder agreement, 74 per cent of equity shares in AT&T-India, was to
be held by US company AT&T-Global. 26 per cent by assessee and AT&T-Global had
an irrevocable call option to increase its holding in AT&T-India. Assessee had to sell
shares only to AT&T-Global making holding highly illiquid and share/option price would
increase at fixed rate annually irrespective if performance of AT&T-India. Tribunal held
that yearly increase in option price would be business income of assessee. (AY. 2008-09)
Mahindra Telecommunications Investment (P.) Ltd. v. ITO (2016) 159 ITD 600 / 180 TTJ
434 (Mum.)(Trib.)
449 S. 28(i) : Business income – Purchase of agricultural land on borrowed money and
sale with in one and half months is assessable as business income. [S. 2(13), 2(14), 45]
The assessee is an advocate by profession sold immovable property (land) on which
gains arising therefrom were claimed to be exempt from tax being Agricultural lands,
taking shelter of section 2(14) read with section 45. Assessing Officer treated the
transaction as business income. Which was confirmed by CIT(A). Dismissing the
appeal the Tribunal held that; assessee purchased large tracts of land from borrowed
funds. Entire money towards purchase of land had been financed by persons to whom
land was ultimately sold within a marginal time gap of about one and half months of
its acquisition without putting purported agricultural land for its use at any point of
time. Clearly demonstrates implicit intention of assessee that transaction entered was
nothing but an adventure in nature of trade, i.e., a business transaction under extended
definition of S. 2(13).(AY. 2009-10).
Dilip Battu Karanjule v. ITO (2016) 161 ITD 172 (Pune)(Trib.)
450 S. 28(i) : Business income – Income from house property – Property was sub-leased
along with amenities such as use of lifts, water supply, watch and ward facilities etc.
– Income from such activity was to be assessed as income from business. [S.22, 32]
Main objects as per Memorandum and Articles does not specify that the assessee would
take any premises on lease and would in turn sub-lease the same on leave and license
basis, but the intention to exploit the asset leased by it is clear from activities carried on
by the assessee. Income generated from such activities was to be assessed to tax in the
hands of the assessee as income from business and entitled for expenditure including
depreciation of assets but not on the building. (AY. 2008-09)
Soham Trading & Investments (P.) Ltd. v. (2016) 161 ITD 761 (Mum.)(Trib.)
150
S. 28(1) Business income
S. 28(i) : Business income – Receipt on sale of film scripts was to be taxed as ‘Income 451
from Other Sources’ in the absence of the said activity being a part of the objects of
the assessee company. [S.56]
The assessee company was engaged in provision of technical services in connection
with cine equipment. During the year it had received an amount on sale of film scripts,
which was considered to be a part of its business profits. The AO treated the same
as ‘Income from other sources’ and disallowed the expenses claimed by the Assessee.
On appeal, the ITAT held that script writing was not a part of the main, ancillary or
incidental objects of the assessee and the assessee never intended to do the business
of script writing. Thus, the said receipt was rightly taxed under ‘Income from Other
Sources’ since no evidence was submitted by the assessee to prove that the said receipt
was a part of its business. (AY. 2009-10)
Film Logic India P. Ltd. v. ACIT (2016) 47 ITR 769 (Mum.)(Trib.)
S. 28(i) : Business income – Capital gains – Sale of shares – Holding period less than 452
one month, business income. [S.45]
The Assessing Officer, for the Assessment Year 2006-07, found that the assessee had
entered into over 200 transactions of purchase and sale of shares each which was
offered by the assessee as short term capital gains. The assessee dealt in over 100
different scrips during the assessment year. Out of the total transactions, the period
of holding in over 100 instances was less than three months, out of which in 65
instances the holding period was less than one month. On this finding, he held that
buying and selling of shares was done by the assessee with a motive to maximise
profits and that there was no intention to derive income by way of dividend from the
shares. The Assessing Officer concluded that income declared by the assessee under
the head “Capital gains” on account of the buying and selling of shares was assessable
as ‘business income’. The Commissioner (Appeals) confirmed AO order. The Tribunal
in view of the peculiar facts held that the gains arising from sale of shares held by the
assessee up to one month were to be classified as income from business despite being
delivery based transactions, while the gains arising from sale of shares held for more
than one month and up to twelve months should be classified as short term capital
gains. The prime objective of such transactions which were concluded within one
month was to earn and maximise profits in the shortest period of time which was akin
to intention of doing business by maximising profits while dealing in sale and purchase
of shares rather to hold shares as investment with a vision to earn dividend and other
benefits attached to holding of shares such as entitlement to rights shares or bonus
shares. (AY. 2006-07)
Asha Ashar v. ITO (2016) 46 ITR 492 (Mum.)(Trib.)
S. 28(1) : Business income – Foreign Exchange fluctuation gain as part or operating 453
revenue.
The Tribunal held that in view of the decision of Bangalore Bench of Tribunal in the
case of Sap Labs India (P) Ltd. v. ACIT (2011) 44 SOT 156 (Bang.), the foreign exchange
fluctuation gains are required to be added to operating revenue. (AY. 2010-11)
Obopay Mobile Technology India (P) Ltd. v. Dy. CIT (2016) 157 ITD 982 / 177 TTJ 191 /
46 ITR 42 (Bang.)(Trib.)
151
Business income 28(i)
454 S. 28(i) : Business income – Income from house property income – Business of hotels
– Rental income assessable as business income.[S. 22]
In Memorandum of Association, main object of assessee was to carry on business of
hotels, resorts, boarding, lodges, guest houses, etc., Assessee earned only rentals for
occupation of premises on daily basis, said income would be taxed as business income
and not as income from house property. (AY.2007-08)
Heritage Hospitality Ltd. v. Dy. CIT (2016) 158 ITD 179 (Hyd.)(Trib.)
455 S. 28(i) : Business income – Accrual – Non-refundable upfront premium from various
parties for permitting them to develop various facilities such as docking of ships,
loading and unloading of containers on land provided by it for a period of 30 years,
entire amount of premium was to be brought to tax in assessment year in question
itself. [S. 145]
Assessee was carrying on business of providing port, berthing and docking facilities
at New Mangalore Port. It had control and domain over vast tracks of land known
as ‘designated port area’. Assessee provided various facilities for docking of ships,
loading and unloading of container on ships and warehousing within designated port
area. Assessee formulated a scheme of BOT Model under which it permitted some of
companies to develop aforesaid facilities on land provided by assessee. In terms of
BOT scheme, assessee received from Concessionaires upfront lump sum premium for
allowing those companies to develop facilities and use same for a period of 30 years. In
computation of income, assessee offered 1/30th of upfront premium as income for year
under consideration and showed balance received as liability being in nature of pre-
paid income. Assessing Officer treated entire amount of upfront premium received by
assessee from three companies/concessionaires as income for year under consideration.
CIT(A) up held the order of AO. On appeal Tribunal held that from records that assessee
had completed and discharged all its obligation by executing agreement and no further
liability was to be discharged by assessee for next 30 years under concession agreement.
It was also undisputed that upfront premium amount was admittedly non-refundable
amount irrespective of premature termination of concession/lease agreement therefore
on facts, there would be no question of accrual of income in future years and, therefore,
impugned order passed by Assessing Officer was to be upheld. (AY. 2009-10)
New Mangalore Port Trust v. ACIT (2016) 157 ITD 399 (Bang.)(Trib.)
456 S. 28(i) : Business income – Commission income to be treated as business income and
not as income from other sources. [S. 14, 56]
The assessee earned commission income along with income from management of
hotels. As per the objects clause in its MOA and AOA, it could carry on the business of
hotels as well as work as a consultant commission agent in India and abroad. The AO
treated the commission income as income from other sources. The ITAT held that the
commission income would be chargeable under the head of Business Profits since it is
covered in the objects clause of the assessee. (AY. 2008-09, 2009-10)
Mahagun Hotels P. Ltd. v. DCIT (2016) 45 ITR 347 (Delhi)(Trib.)
152
S. 28(i) Business loss
S. 28(i) : Business income – Interest income from fixed deposit and short-term parking 457
of surplus funds to be treated as business income.[S. 14, 56]
The assessee earned interest income on fixed deposits maintained for the purpose of
obtaining a performance guarantee from the bank. The furnishing a bank guarantee was
a mandatory condition to start construction of the hotel, which was the business of the
assessee. The assessee also earned interest income on loan funds disbursed which was
parked for a short duration. The AO treated both the interest income as income from
other sources. The ITAT held that the interest income on fixed deposit was inextricably
linked to the business of the assessee and hence was to be treated as business income.
Further, the interest income from short-term parking was also business income since
it was an act of prudency to earn interest income for 9 days before the loan could be
utilised, so as to reduce the interest cost. (AY. 2008-09, 2009-10)
Mahagun Hotels P. Ltd. v. DCIT (2016) 45 ITR 347 (Delhi)(Trib.)
S. 28(i) : Business income – Income from house property – Lease of hotel premises 458
along with facilities like restaurant, crockery, etc. will be business income. [S.22]
The assessee offered to tax rental income from lease of two hotels as Income from
Business Profits. The AO treated the same as Income from House Property. The ITAT
held that it would be business income on the ground that the Assessee had given the
premises on rent along with facilities like restaurant, crockery, electronic appliances, etc.
so as to make the premises known as a hotel. (AY. 2007-08)
Enn Zen Enterprises (P) Ltd. v. ACIT (2016) 45 ITR 382 (Chd.)(Trib.)
S. 28(i) : Business income – Income from house property – Rental income from 459
commercial complex assessable as business income. [S. 22]
The Tribunal held that the assessee’s objects are not in respect of letting of any
particular property, the very object is the commercial exploitation of the properties.
The assessee is providing hosts of amenities and facilities which amounts to composite
business activity. The income from the multiplex is liable to be assessed as business
income and not as income from house property. (AY. 2007-08 to 2009-10)
Dy. CIT v. M. S. Luvish Projects (P) Ltd. (2016) 175 TTJ 153 (Mum.)(Trib.)
S. 28(i) : Business loss – Forfeiture of licence fees paid on cancellation of excise licence 460
– Transfer of licence by assessee prior to forfeiture – Assessee was not entitled to set
off loss.
Supreme Court in CIT v. Preetam Singh Luthra (2016) 386 ITR 408 (SC) has held that
where assessee had transferred his excise licence before forfeiture of same, loss if any,
on account of forfeiture was not by assesse but by transferee and thus, assessee was
not entitle to claim said loss as business loss. Review petition against said order was
dismissed. (AY. 2006-07)
Preetam Singh Luthra v. CIT (2016) 389 ITR 447 (2017) 291 CTR 595 / 77 taxmann.com
222 / 145 DTR 440 (SC)
Editorial: Review petition was dismissed, decision of the Supreme Court in CIT v. Preetam
Singh Luthra (2016) 386 ITR 408 (SC) reaffirmed
153
Business loss 28(i)
461 S. 28(i) : Business loss – Set off – Forfeiture of licence fees paid on cancellation of
excise licence – Transfer of licence by assessee prior to forfeiture – Assessee not
entitled to set off loss.
Forfeiture of license fees by the Excise Department deposited by the assessee was
entitled to set off. (AY.2006-07)
CIT v. Preetam Singh Luthra (2016) 386 ITR 408 / 289 CTR 476 (SC)
462 S. 28(i) : Business loss – Partial transfer of business – Business continued – Expenses
is allowable. [S. 37(1), 71]
Dismissing the appeal of the revenue, the Court held that the assessee has transferred
only partial business and continued with other business hence expenses are to be
allowed. (AY 2008-09)
CIT v. ISC Investments & Finance (P) Ltd. (2016) 242 Taxman 218 / (2017) 393 ITR 195
(Mad.)(HC)
463 S. 28(i) : Business loss – Mark to market loss – Loss suffered in foreign exchange
transactions entered into for hedging business transactions cannot be disallowed as
being “notional” or “speculative” in nature. [S. 43(5), 73]
Dismissing the appeal of revenue the Court held that; Loss suffered in foreign exchange
transactions entered into for hedging business transactions cannot be disallowed as
being “notional” or “speculative” in nature. The Court also observed that, the judgment
of S. Vinodkumar Diamonds Pvt. Ltd. v. Addl (2013) 89 DTR 129 (Mum.)(Trib.), has been
referred and held that, however, it appears that the decision of this court in CIT v.
Badridas Gauridas (P) Ltd. (2004) 261 ITR 256 (Bom.)(HC) was not brought to the notice
of the Tribunal. (AY.2009-10)
CIT v. D. Chetan & Co (2016) 243 Taxman 356 / (2017) 390 ITR 36 / 151 DTR 277 (Bom.)
(HC)
464 S. 28(i) : Business loss – Division of subsidiary company demerged and credit facility
enjoyed by it transferred by bank to new company – Amount paid by the assessee
to the bank in settlement of the debt owed by the new company was not loss of the
assessee – Not allowable.
Allowing the appeal of revenue the Court held that Amount paid by the assessee to
the bank in settlement of the debt owed by the new company was not loss of the
assessee. The money paid by the assessee in discharging the new company’s debts, even
assuming that the assessee was interested to pay, was recoverable and payable by that
new company. The suit filed by the creditor bank was against the new company and not
against the assessee. The assessee was neither a party to the suit nor a guarantor. The
Tribunal was wrong in proceeding on the basis that it was due to the pressure exerted by
the Reserve Bank of India that the assessee was made to pay the debts due by the group
company to the bank. Even assuming that a caution notice was published it had already
been withdrawn by the Reserve Bank of India. There was nothing before the Tribunal to
show that the bank would not have advanced further money to the assessee except upon
payment by the assessee of the dues owed by the group company to it. (AY. 1998-99)
CIT v. Duncan Industries Ltd. (2016) 385 ITR 150 / 138 DTR 241 / 288 CTR 107 (Cal.)
(HC)
154
S. 28(i) Business loss
S. 28(i) : Business loss – Accommodation entries – Not discharging onus – Department’s 465
failure to summon witnesses immaterial – Disallowance of loss held to be justified.
[S. 131]
Dismissing the appeal of assessee the Tribunal held that the Appellate authorities were
justified in maintaining the additions of the sums claimed by the assessee on account
of loss. The onus was on the assessee to prove the genuineness of the transactions
by producing the relevant evidence and material on record which he had failed to
do. The assessee was unable to produce the witnesses for cross examination from the
broker firm of which he claimed to be a client. Further, the evidence collected from
the stock exchange and confronted to the assessee had proved that the commodity
transactions had not been actually carried out but were mere accommodation entries.
The assessee having failed to discharge the primary onus of proving the genuineness of
the transactions, no right accrued in his favour on account of non-summoning of the
witnesses by the AO under section 131. The assessee had been unable to show any
material to controvert the findings recorded by the authorities below. (AY. 2006-07)
Sham Sunder Khanna v. CIT (2016) 386 ITR 461 (P&H)(HC)
S. 28(i) : Business loss – Write-off of dues from government authorities – Held to be 466
allowable as business loss.
It was held that the write off of deposit with Government bodies, refund from excise
authorities, advances to various employees etc were allowable as there was a finding
of fact by appellate authorities that the same were incidental to the carrying on of
business. (AY. 2002-03)
CIT v. ITC Ltd. (2016) 237 Taxman 533 / 134 DTR 293 (Cal.)(HC)
S. 28(1) : Business loss – Foreign exchange forward contracts – Hedging loss was held 467
to be allowable as business loss. [S.43(5)]
Tribunal held that Assessee engaged in manufacture and export of processed food
products, in order to safeguard itself against fluctuations in exchange rates of foreign
currency, entered into foreign exchange forward contracts with banks against confirmed
export order, hedging loss suffered by assessee in respect of said forward contracts was
to be allowed as business loss. (AY. 2010-11)
Foods and Inns Ltd. v. ACIT (2016) 159 ITD 1007 (Mum.)(Trib.)
S. 28(i) : Business loss – Allocation of administrative expenses was held to be justified. 468
The Tribunal held that allocation of common expenses on the basis of turnover is one
of the recognized methods. Therefore, CIT(A), was justified in allowing the claim by
loss from the trading activities worked out after allocating the administrative expenses
between the trading activities and manufacturing activities of the assessee. (AY. 2010-11)
ACIT v. Rama Panels P. Ltd. (2016) 181 TTJ 698 (Jab.)(Trib.)
S.28(i) : Business loss – Hedging contract loss – Part of hedging loss could not be 469
considered as speculation loss only on ground that exposure did not tally with month
wise transaction. [S.43(5)]
Assessee was engaged in business of purchase of rough diamonds through import
from various countries and sale of manufactured polished diamonds by way of export
155
Business loss 28(i)
to various countries. During the year he claimed loss incurred on account of foreign
currency forward/option hedging contract as business loss. The AO having noticed that
the loss was actually suffered on account of its forward and option contract any foreign
currency which were not deliverables at first place and no break-up of currency forward/
option contract was given, but it admitted that majority of the contracts on which the
loss was suffered was of forward and option contracts considered the loss in question as
speculation loss u/s. 43(5).Since all receipts, payments, receivables and payables were in
foreign currency which was inseparable and inextricably linked with diamond business,
loss was nothing but business loss. Said loss could not be considered as speculation loss
simply on ground that exposure did not tally with month wise transaction. (AY.2008-09)
DCIT v. Mahendra Brothers Exports (P.) Ltd. (2016) 161 ITD 772 (Mum.)(Trib.)
470 S. 28(i) : Business loss – Open derivative contracts – Loss in open derivative contracts
due to valuation on basis of marked-to-market values was to be allowed. [S. 145]
Assessee Company is share broking, trading and investment in shares and securities
booked losses on open derivative contracts by marking them to market value as at
year end. Said ‘loss’ was to be allowed in current year while AO would be at liberty to
withdraw said loss on settlement date(s); likewise, brought forward ‘gain’ from contracts
would stand to be taxed in its entirety on settlement. (AY.2008-09)
Mili Consultants & Investment (P.) Ltd. v. DCIT (2016) 160 ITD 72 (Mum.)(Trib.)
471 S. 28(i) : Business loss – Speculative – Derivative loss on reinstatement of foreign
currency forward contracts is not speculative and is an ascertained liability. [S.43(5)]
The Assessee incurred a derivative loss arising out of reinstatement of foreign currency
forward contracts entered into to hedge against the forex risk on account of receivables.
The AO held that it was speculative loss and that it was notional in nature. The ITAT
held that derivative transactions on foreign exchange were exempt from the purview of
speculative transactions since they were settled by actual delivery. Further, the ITAT also
held that the marked-to-market loss on reinstatement of the derivative is not a notional
or contingent loss, but an ascertained liability which had crystallized on the date of
balance sheet. (AY. 2009-10)
Inventurus Knowledge Services P. Ltd. v. ITO (2016) 156 ITD 727 / 45 ITR 57 / 177 TTJ
269 / 143 DTR 113 (Mum.)(Trib.)
472 S. 28(i) : Business loss – Forfeited advance money – Held to be allowable as business
loss.
Assessee builder paid advance money to buy a land for construction of residential flats
thereupon and said money was forfeited, such loss was to be treated as revenue loss as
it was incurred to acquire stock-in-trade i.e. land. (AY. 2010-11)
Vijayashanthi Builders Ltd. v. Jt.CIT (2016) 158 ITD 635 / 48 ITR 310 (Chennai)(Trib.)
473 S. 28(i) : Business loss – Valuation of stock – Loss arising on revaluation of securities
– Allowable.
Loss arising on re-valuation of securities was required to be allowed. (AY. 2008-09)
Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.)(Trib.)
Dy. CIT v. Yes Bank Ltd. (2016) 46 ITR 317 (Mum.)(Trib.)
156
S. 28(iv) Business income
S. 28(i) : Business loss – Banks – Valuation of stock – Provision made for revaluation 474
in respect of securities transferred from Held to Maturity’ to ‘Available for Sale’ was
deductible
Since the profits on sale of investments and income from investments were always
treated as business income, it was to be implied that the investments were treated as
stock-in-trade and not as capital asset. The classification of security made and the loss
arose on account of revaluation of securities were required to be allowed. The provision
for revaluation in respect of securities transferred from held to maturity category to
available for sale category was to be allowed as a deduction. Depreciation in respect of
HDFC Bonds and debentures which were held to be ‘held for trading’ was allowable.
(AY. 2006-07 and 2007-08)
Yes Bank Ltd. v. Dy. CIT (2015) 68 SOT 291 (URO) / (2016) 46 ITR 121 (Mum.)(Trib.)
S. 28(1) : Business loss – Dealing in land – Advance given in the course of business – 475
Non-refund of advance is a business loss allowable as deduction.
On appeal, the Tribunal held that the assessee could not establish that the advance
amount of ` 31 lakhs was returned to it but the transaction in land was part of the
business of the assessee and non-refund of the advance amount to the assessee was a
business loss incidental to the business of the assessee. Thus, the loss was an allowable
deduction u/s. 28 of the Act. (AY. 2006-07)
Today Homes and Infrastructure Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 586 (Delhi)(Trib.)
S. 28(iv) : Business income – Value of any benefit or perquisites – Converted in to 476
money or not – If transfer was conditional and if assessee failed to comply with
condition and, thus, shares could not be transferred in his name, then provisions of
section 28(iv) would not be applicable. [S. 2(24)]
Appeal by the revenue dismissing the appeal the Court held that The ITAT held that
if the transfer was conditional and if the assessee failed to comply with condition
and, therefore, the shares could not be transferred in his name, then the provisions of
section 28(iv) would not be applicable. It relied upon the decision of the coordinate
bench of ITAT in the case of CIT v. Kaizen Commercial (P.) Ltd. High Court held that
the said judgment of the Tribunal was confirmed by the same court in IT Appeal No.
94/2012 by an order dated 24-3-2014. It also held that, the finding of facts by the lower
authorities were that the assessee failed to abide by the condition and therefore, no
benefit or perquisite arose to the asssessee. Accordingly, it held that nothing more need
be investigated or probed further and did not admit the question of law.
CIT v. Ashish P. Deora (2016) 242 Taxman 214 (Bom.)(HC)
Editorial : The SLP of the revenue is dismissed; CIT v. Ashish P. Deora (2016) 242 Taxman
172 (SC).
S. 28(iv) : Business income – Waiver of loan by Bank assessable as business income. 477
[S.28(i)]
The waiver by the lender of even the principal amount of loan constitutes a “benefit”
arising from business and is assessable to tax as income. (AY. 2006-07)
CIT v. Ramaniyam Homes P. Ltd( 2016) 384 ITR 530/ 239 Taxman 486 / 137 DTR 319 /
287 CTR 200 (Mad.)(HC)
157
Business income S. 28(iv)
478 S. 28(iv) : Business income – Value of any benefit or perquisite, arising from business
or exercise of profession – Assessee could not furnish details regarding advance
received from parties against supplies hence addition was sustained. [S.28(i)]
Assessee could not furnish details with regard to advance received from various parties
against supplies. Further not produce any material regarding expenditure incurred in
executing orders. Addition is correctly upheld. (AY. 2008-09)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 161 ITD 457 (Chennai)(Trib.)
479 S. 28(va) : Business income – Compensation received towards negative covenant of
non-compete agreement being capital receipt, is not liable to tax position prior to
1-4-2003 [S. 4]
The amount equivalent to 4,99,000 pounds paid by the LI group was liable to be treated
as a measure of compensation towards the negative covenant of non-compete agreement
entered into by and between TTKMB and LI group. It was not necessary that the
assessee shelves all its other sources of income as well, for the receipt of compensation
to amount to a capital receipt. (AY. 2000-01)
CIT v. TTK Healthcare Ltd. (2016) 385 ITR 326 / 70 taxmann.com 263 (Mad.)(HC)
Editorial : Order in T TK Healthcare Ltd. v. ACIT (2008) 306 ITR (AT) 19 (Chennai)
affirmed.
S. 30. Rent, rates, taxes, repairs and insurance for buildings.
480 S. 30 : Repairs – Capital or revenue – Depreciation to extent apportioned as capital
expenditure – Renovation resulting in extra accommodation – Enduring benefit to
assessee-Capital expenditure. [S. 32, 37(1)]
Held, there was a concurrent finding of fact by the appellate authorities that the
expenditure incurred by the assessee claimed to be on account of repairs and
maintenance was in fact on account of renovation of the premises. It led to a benefit of
enduring nature to the assessee enabling it to accommodate more employees facilitating
its trading activities. The benefit was available to the assessee over a long period of
time and therefore the expenditure was capital in nature and eligible for depreciation as
granted by the Tribunal to the extent the claim as revenue expenditure was disallowed.
The assessee had failed to establish that the apportionment of expenditure by the
Department, in the ratio of 75% and 25% between capital expenditure and revenue
expenditure, on estimation based on facts, was arbitrary or perverse. The expense of
renovation was capital expenditure. (AY. 1996-97)
RPG Enterprises Ltd v. Dy. CIT (2016) 386 ITR 401 / 240 Taxman 614 (Bom.)(HC)
481 S. 30 : Repairs – Capital or revenue – Lease premises – Repairs would render premises
fit for business – Held to be allowable.
Dismissing the appeal of revenue the Court held that expenses were incurred towards
repair of the premises taken on lease so as to make them fit for its business activity;
Hence such expenditure would fall within the expression as repairs as appearing in
section 30(a)(i) of the Act. (AY. 2005-06, 2006-07)
CIT v. U.G. Hospitals P. Ltd. (2016) 386 ITR 520 (P&H)(HC)
158
S. 32 Depreciation
S. 30 : Repairs – Leasehold premises – Expenditure on interior designing of leasehold 482
premises, said expenditure was to be allowed as revenue expenditure. [S. 32, 37(1)]
Allowing the appeal of the assessee, the Tribunal held that ;expenditure on interior
designing of leasehold premises, said expenditure was to be allowed as revenue
expenditure. (AY. 2009-10)
Peri (India) (P.) Ltd. v. JCIT (2016) 159 ITD 541 (Mum.)(Trib.)
S. 32 : Depreciation.
S. 32 : Depreciation – Carry forward and set off – Amendment in 1996 – Effect – 483
Unabsorbed depreciation as on 1-4-1997 can be set off against income from any head
for AY immediately following 1-4-1997 and thereafter unabsorbed depreciation if any
to be set off only against business income for a period of eight assessment years. [S.
32(2)]
The depreciation, unabsorbed or otherwise or current, would be set off against the
income arising from business or profession or any other income but the left over portion
thereof could not be set off in the AY 1998-99 except against the income arising from
business or profession. SLP of assessee was dismissed. (AY. 1998-99)
Peerless General Finance and Investment Co. Ltd. v. CIT (2016) 380 ITR 165 / 242 Taxman
173 (SC)
Editorial: Order in Peerless General Finance and Investment Co. Ltd. v. CIT (2016) 242
Taxman 209 (Cal.)(HC) is affirmed.
S. 32 : Depreciation – Charitable Trust – Capital asset was allowed as deduction – 484
Depreciation was held to be allowable. [S.11, 12]
Assessee, a charitable trust, claimed depreciation in respect of its assets and Tribunal
allowed claim of depreciation. On appeal by revenue, dismissing the appeal of Revenue,
the Court held that Tribunal was right in allowing deprecation, as proposed for
consideration of High Court, stood concluded by two decisions of Bombay High Court in
favour of assessee and, therefore, it did not give rise to any substantial question of law.
Followed, CIT v. Institute of Banking Personnel Selection (IBPS), DIT(E) v. G.K.R. Charities
(2013) 214 Taxman 555 (Bom)(HC) (AY. 2007-08, 2008-09)
DIT v. G.D. Birla Medical Research & Educational Foundation (2016) 243 Taxman 209
(Bom.)(HC)
Editorial: SLP was granted to the revenue, DIT v. G.D. Birla Medical Research & Education
Foundation (2016) 243 Taxman 145 (SC)
S. 32 : Depreciation – Charitable Trust – Capital asset was allowed as deduction – 485
Depreciation was held to be allowable. [S.11, 12]
Assessee, an educational trust, claimed depreciation on capital assets for which capital
expenditure had already been allowed in relevant assessment year. Tribunal allowed
depreciation claimed by assessee. On appeal by revenue, dismissing the appeal of
revenue the Court held that, in view of judgment of Division Bench of Rajasthan High
Court in case of CIT v. Krishi Upaj Mandi Samiti [2015] 229 Taxman 524, issue involved
159
Depreciation S. 32
in instant appeal was no more res integra and, therefore, appeal preferred by revenue
was liable to be dismissed.
PCIT v. Vijay Shanti Educational Trust (2016) 243 Taxman 212 (Raj.)(HC)
Editorial : SLP was granted to the revenue, CIT v. Vijaya Shanti Educational Trust (2016)
243 Taxman 175 (SC)
486 S. 32 : Depreciation – Property held for charitable purposes – Assets whose cost
allowed as application of income to charitable purposes – Entitle to depreciation
– Section 11(6) denying depreciation on such assets inserted w.e.f. 1-4-2015 –
Amendment is not retrospective.
For assessment years prior to the introduction of section 11(6), i.e., prior to April 1,
2015, depreciation is allowable on assets, where cost of such assets has already been
allowed as application of income in the year of acquisition/purchase of asset. (AY. 2009-
10)
CIT v. Karnataka Reddy Janasangha (2016) 389 ITR 229 / 241 Taxman 147 (Karn.)(HC)
Editorial: SLP is granted to the revenue, CIT v. Karnataka Reddy Janasangha (2017) 247
Taxman 9 (SC)
487 S. 32 : Depreciation – Tribunal was not right in its view to direct Assessing Officer to
grant depreciation on assets not owned by assessee and treat toll roads as plant and
machinery.
The High Court following the order passed in ITA. No.2357 of 201 dt 21-3-2013,
disposed of the above substantial questions of law raised by answering them in the
negative i.e. in favour of the Appellant-Department and against the Respondent-Assessee.
(AY. 2008-09)
CIT v. West Gujarat Expressway Ltd. (No.2) (2016) 242 Taxman 127 / (2017) 390 ITR 400
(Bom.)(HC)
Editorial: SLP was granted to the assessee West Gujarat Expressway Ltd. (No.2)(2016) 242
Taxman 115 (SC)
488 S. 32 : Depreciation – Shuttering material and tabular scaffolding – 100% depreciation
allowable was held to be proper.
That the Appellate Tribunal was correct in allowing depreciation at the rate of 100% on
shuttering material and tabular scaffolding. (AY. 1994-95)
CIT v. Ansal Housing & Construction (2016) 389 ITR 373 / 241 Taxman 418 (Delhi)(HC)
489 S. 32 : Depreciation – Counting and stacking machines, etc,cannot be considered to be
computer peripherals – Not entitled to higher rate of depreciation.
Dismissing the appeal of the assessee the Court held that; The Tribunal was right in
granting depreciation at the rate of 80% for instrumentation and monitoring systems.
Only computer peripherals could be at the most considered as computers for the
purpose of claiming depreciation at the rate prescribed in item III(5) of Appendix I to
the 1962 Rules. All other items would fall in the category mentioned in item III(1) of
Appendix I to the 1962 Rules. The disallowance of depreciation at a higher rate was
160
S. 32 Depreciation
justified Assessee could not have invented its own nomenclature and added computer
which was not there in invoice and proceed to claim depreciation at 60%. (AY. 2011-12)
Dinamalar v. ITO (2016) 389 ITR 94 / 242 Taxman 437 (Mad.)(HC)
S. 32 : Depreciation – Wind mill had been acquired and installed in relevant previous 490
year – Entitled to depreciation.
Dismissing the appeal of revenue, the Court held that on the facts and circumstances of
the case, the Tribunal was right in holding that the assessee was entitled to depreciation,
as the assessee had taken possession of the wind mill, and it was put to use and started
generating electricity before March 31, 2008, during the financial year relevant to the
assessment year 2008-09.
CIT v. Sangu Chakra Hotels P. Ltd. (2016) 389 ITR 117 / 74 taxmann.com 76 / (2017) 150
DTR 259 (Mad.)(HC)
S. 32 : Depreciation – Written down value calculated for assessment year 1998-99 to 491
be taken into account while computing depreciation for assessment year 1999-2000.
Dismissing the appeal of revenue the Court held that since the order of the
Commissioner (Appeals) in the case of the assessee for the assessment year 1998-99
had resulted in higher written down value of the asset, and that order had been affirmed
by the Tribunal in appeal, the depreciation for the assessment year 1999-2000 had been
rightly directed to be worked out with reference to the written down value computed
as a result of the order passed under section 250(6) of the Act for the assessment year
1998-99.
CIT v. Max India Ltd. (No. 1) (2016) 388 ITR 74 / 243 Taxman 40 (P&H)(HC)
S. 32 : Depreciation – Plant and machinery – Wind mill – Rate of depreciation on civil 492
foundation and electric turbine generator for wind mill – Rate applicable to wind mill
applies.
Dismissing the appeal of revenue the Court held that when the civil work and electric
generator were a part of the wind mill, the rate as applicable to the wind mill would
apply. (AY. 2008-09)
CIT v. Mehru Electricals and Mechanical Engineers Pvt. Ltd. (2016) 388 ITR 169 (Raj.)(HC)
S. 32 : Depreciation – Assets which are necessary for setting up and running of a 493
windmill would be eligible for depreciation at the rate of 100%.
The Assessee, running windmill, claimed 100% depreciation on assets like temporary
approach road, central control room, 33 KV Transformer Yard, 33 KV Grid Line,
Metering Yard, Vacuum Circuit Breakers, additional meeting yard and earth pit. The
Assessing Officer allowed the depreciation at the rate of 25%. On assessee’s appeal, the
CIT(A) confirmed the order of the Assessing Officer.
On further appeal, the Tribunal relied on its co-ordinate bench decision in the case of
MET Developers & Builders, which involved identical facts and therefore, allowed the
entire claim of depreciation at the rate of 100%.
On Revenue’s further appeal, the High Court held that full amount of depreciation would
be allowed, as the assets would be necessary for setting up of a windmill. (AY. 1997-98)
CIT v. Infrastructure Leasing & Financial Services Ltd. (2016) 239 Taxman 464 (Bom.)(HC)
161
Depreciation S. 32
494 S. 32 : Depreciation – Dyes and moulds used for manufacture of switches are entitled
to depreciation at the rate of 30%.
The High Court held that the dyes and moulds used in manufacture of switches are
entitled to a depreciation at the rate of 30% under sub-clause (vii) of clause (3) of Entry
III in Part-A in the New Appendix I as the assessee is involved in manufacture of plastic
goods (Switches). (AY. 2006-07)
PCIT v. L.K. India Pvt. Ltd. (2016) 240 Taxman 627 / 290 CTR 118 / 143 DTR 38 (Guj.)
(HC)
495 S. 32 : Depreciation – Goodwill – Retirement – Amount paid to retiring partner as
compensation on retirement is to be treated as Goodwill and therefore, depreciation
is to be allowed.
The High Court held that the amount paid to retiring partner as compensation on
retirement is to be treated as goodwill and following the decision of the Supreme Court
of CIT v. SMIFS Securities Ltd. (2012) 348 ITR 302 (SC), held that the same has to be
treated as “business or commercial right of similar nature” and therefore, depreciation
is to be allowed.(AY. 2003-04 to 2006-07, 2008-09)
PCIT v. Swastik Industries (2016) 240 Taxman 510 (Guj.)(HC)
496 S. 32 : Depreciation – Property given under lease – Lessee paying rent and charges
for facilities such as elevators – Income is assessable as Income from other sources –
Depreciation allowable on facilities. [S. 56]
Charges received towards provision and maintenance of facilities and services could not
be construed to be income from house property. The income had to be considered as
income from business and therefore, the claim for depreciation was to be allowed. (AY.
2004-05 to 2008-09)
CIT v. IBC Knowledge Park P. Ltd. (2016) 385 ITR 346 / 287 CTR 261 / 69 taxmann.com
108 / 136 DTR 65 (Karn.)(HC)
497 S. 32 : Depreciation – Depreciation should be allowed even if the entire capital
expenditure has been allowed as application of income in earlier years. [S.11]
The assessee was availing exemption under sections 11 to 13. It also claimed
depreciation on assets. AO disallowed depreciation on the ground that the amounts
expended on acquisition of depreciable capital assets were treated as application of
income in earlier years and, therefore, any further claim of depreciation on assets will
amount to claim for double deduction. High Court held that the amount of depreciation
debited to the account of a charitable institution is to be deducted to arrive at the
income available for application to charitable and religious purposes. (AY. 2006-07)
CIT v. Market Committee, Shahabad (2016) 240 Taxman 535 (P&H)(HC)
498 S. 32 : Depreciation – Foreign exchange – Depreciation is not admissible on loss
arising out of cancellation/booking of foreign exchange covers capitalized under section
43A. [S. 43A]
The assessee incurred loss due to foreign exchange fluctuation. It was the contention of
the Department that the said loss is intermittent and therefore, depreciation cannot be
162
S. 32 Depreciation
allowed. It is held by the High Court that depreciation could not be allowed as there is
no loss incurred by the assessee. (AY. 2002-03)
CIT v. ITC Ltd. (2016) 237 Taxman 533 / 134 DTR 293 (Cal.)(HC)
S. 32 : Depreciation – Benefit of unabsorbed depreciation and investment allowance 499
is available even if return of income is filed belatedly. [S. 32A, 139(3)]
Assessee carried on the business of dealing in lint, cotton and cotton seeds. The return
of income was filed claiming set off depreciation against the current years’ income
and carrying forward the unabsorbed depreciation and investment allowance. The AO
disallowed the set off and carrying forward of depreciation in the assessment. An appeal
was filed on several ground including the ground of carry forward of depreciation
and investment allowance. The CIT(A) partly allowed the appeal and remanded many
issues back to AO. However, the ground of set off and carry forward was untouched
by CIT(A). While passing order giving effect to CIT(A)’s order, the AO did not allow
the set off and carry forward of depreciation and investment allowance. Assessee filed
an application under section 154 against the order which was rejected on the ground
that CIT(A) had not given any relief in its order in respect of set off and carry forward
of depreciation and investment allowance. Against this order, assessee preferred an
appeal which was dismissed on the ground that return of income for earlier year was
not filed in accordance with section 139(3) therefore, set off and carry forward of
depreciation cannot be allowed. The order of CIT(A) was upheld by the Tribunal. On
appeal, the High Court held that the benefit of set off and carry forward of depreciation
and investment allowance is available even if return of income is filed after due date.
Also held that unabsorbed depreciation and investment allowance stands on a different
footing than business loss therefore, benefit of set off and carry forward has to be
allowed. (AY. 1987-88 to 1989-90)
Rajeshwari Cotton Ginning & Pressing Industries v. ACIT (2016) 94 CCH 208 / 130 DTR
274 / 284 CTR 300 (Karn.)(HC)
S. 32 : Depreciation – Sale and lease back – Lessee not claiming depreciation – 500
Entitled depreciation.
The assessee claimed 100 per cent depreciation on energy measuring devices purchased
from Haryana State Electricity Board. After purchase they were leased back to the
Board under a lease agreement. The Assessing Officer held that purchase and lease
back transaction was in fact and in substance a finance lease agreement. He disallowed
the depreciation relying on Circular No. 2 of 2001 dt 9th February 2001. CIT(A) and
Tribunal allowed the claim of depreciation. On appeal by revenue, dismissing the
appeal the Court held that the Transaction was genuine and the assessee is entitled to
depreciation. Relied on I.C.D.S. Ltd v. CIT (2013) 350 ITR 527 (SC) & West Cost Paper
Mills Ltd. (2010) 322 ITR 9 (SC)(St.)(AY. 1996-97)
CIT v. Apollo Fine Vest (I) Ltd. (2016) 382 ITR 33 (Bom.)(HC)
S. 32 : Depreciation – Additional depreciation allowed on manufacture/production of 501
‘article or thing’ – Depreciation is allowable on assets kept ready for use
Assessee was engaged in the business of FM Radio Broadcasting and was granted
permission for operating FM Radio Broadcasting channels. In its return if income,
163
Depreciation S. 32
assessee claimed additional depreciation under section 32(1)(iia) of the Act, on new
plant and machinery acquired for production of radio programmes. Assessing Officer
did not concur with the assessee and did not consider production of radio programmes
as production of article or thing. On appeal the Tribunal held that assessee was eligible
for claiming additional depreciation under section 32(1)(iia) of the Act. Aggrieved by the
Tribunal judgment, Revenue preferred an appeal before the High Court.
The High Court observed that production of radio programmes involved process of
recording, editing and making copies prior to broadcasting, there comes into existence a
‘thing’ which is tangible and which can be transmitted and even sold by making copies.
High Court placed reliance on Gramophone Co India Ltd. v. Collector of Customs (1 SCC
549)(SC) and Collector of Central excise v. Rajasthan State Chemical Works (4 SCC 473)
(SC). Thus it was held that Assessee had acquired and installed plant and machinery
for manufacture of ‘article or thing’ and it is entitled to claim additional depreciation
under section 32(1)(iia) of the Act.
For the year under consideration Assessing Officer had disallowed Assessee claim for
depreciation on licence fee for radio station as the same were not used during the year.
Contrary to the Assessing Officer’s claim, radio stations were ready-to-use and had
started trial runs. High Court placed relied upon Refrigeration & Allied Ind. Ltd (247
ITR 12)(Del) where it was held that an asset can be said to be ‘used’ when it is kept
‘ready to use’ and Capital Bus Service Pvt. Ltd. (123 ITR 404)(Del.) where similar view
was taken. As a result it was held that assessee would be entitled to claim depreciation
on licence fee as the same were kept ready-to-use for the year under consideration. (AY
2008-09)
CIT v. Radio Today Broadcasting Ltd. (2016) 382 ITR 42 / 237 Taxman 126 / 282 CTR 272
/ 129 DTR 1 (Delhi)(HC)
502 S. 32 : Depreciation – Electrically operated vehicles including battery power or fuel
cell powered vehicles are entitled to 100 per cent depreciation under Appendix I,
Part-A, Item III(3)(xiii)(o) of Income-tax Rules, 1962.
The assessee claimed 100 per cent depreciation on battery power or fuel cell powered
vehicles. The revenue authorities rejected assessee’s claim, which was reversed by the
Tribunal.
On appeal, the High Court held that electrically operated vehicles including battery
power or fuel cell powered vehicles are entitled to 100 per cent depreciation under
Appendix I, Part-A, Item III(3)(xiii)(o) of Income-tax Rules, 1962. (AY. 2002-03)
CIT v. ITC Ltd. (2016) 237 Taxman 533 / 134 DTR 293 (Cal.)(HC)
503 S. 32 : Depreciation – Business purchased as a going concern – Goodwill to be
valued at excess of amount paid over net value of assets as per AS 10 – Depreciation
allowable on goodwill.
The assessee purchased business of another company as going concern in slump sale.
The amount paid over and above net value of assets was capitalized as goodwill. The
valuation report trifurcated value of goodwill into (a) technical knowhow; (b) valuation
for business on hand and (c) non-compete fees. The assessee claimed depreciation
on above items. AO disallowed the depreciation claim. The ITAT accepted assessee’s
contention that entire sum paid towards intangibles could be considered as goodwill
164
S. 32 Depreciation
on which depreciation must be allowed. It, however, remitted matter to the AO
to determine whether valuation of goodwill was appropriate. High Court held that
consideration paid by the assessee in excess of value of tangible assets was to be
classified as goodwill especially in the case where the transaction in question was a
slump sale which did not contemplate separate values to be ascribed to various assets
(tangible and intangible). (AY. 2007-08)
Triune Energy Services (P.) Ltd. v. Dy. CIT (2016) 237 Taxman 230 / 129 DTR 422 (Delhi)
(HC)
S. 32 : Depreciation – Fees paid to Registrar of Companies for increase in share 504
capital, which was used for acquisition of Plant & Machinery, is eligible for
depreciation @15% – Alternatively as amortization of expenses. [S. 35D(2)(c)]
Assessee company was carrying on the business of manufacturing yarn. During the year,
the assessee had paid fees of ` 10 lakhs to Registrar of Companies for increasing the
share capital. The money raised by the assessee was used for expansion of business and
was capitalized as a part of Plant & Machinery and depreciation @15% was claimed.
The Assessing Officer disallowed the depreciation claimed by the Assessee. The CIT(A)
allowed the depreciation on the ground that fees paid to Registrar in view of the
decision of Supreme Court in Punjab State Industrial Development Corporation Limited
v. CIT (225 ITR 792). The Tribunal reversed the decision of CIT(A) and disallowed the
claim of depreciation. On appeal, the High Court held that assessee was entitled to
depreciation as fees paid were capitalized as a part of Plant & Machinery. It was also
held that if assessee was not eligible for depreciation under section 32 then, it would
be entitled to amortization of expenses under section 35(2)(c)(iv). (AY. 2006-07)
Rana Polycot Ltd. v. CIT (2016) 236 Taxman 567 (P&H)(HC)
S. 32 : Depreciation – Additional depreciation – Half of twenty per cent allowable 505
where plant and machinery put to use after October 31, 2006 and before March 31,
2007 – No restriction in claiming balance 50 per cent in next assessment year. [S.
32(1)(iia)].
Additional depreciation allowable u/s 32(1)(iia) is a one-time benefit to encourage
industrialisation and the relevant provisions have to be construed reasonably and
purposively. The additional depreciation is allowed in the year of purchase and if in the
year of purchase the assessee is eligible only for 50 per cent depreciation, the balance
50 per cent can be carried forward for the subsequent year. (AY. 2010-11)
CIT (LTU) v. Rittal India P. Ltd. (No.2) (2016) 380 ITR 423 / 282 CTR 431 / 129 DTR 153
(Karn.)(HC)
S. 32 : Depreciation – Meaning of “owner” – Lease of land for ninety-nine years – 506
Lessee constructing buildings on land and in full control of such buildings – Entitled
to depreciation on buildings and on sanitary fittings installed in them.
During the previous years relevant to the AYs in question the assessee was indeed in
full control of the three buildings, viz., the hotel building, the World Trade Tower and
the World Trade Centre and in any event, notwithstanding the clarificatory amendment
inserted as Explanation 1 in section 32 with effect from April 1, 1988, the assessee
165
Depreciation S. 32
would be entitled to claim depreciation in respect thereof, including depreciation on the
plumbing and sanitary ware installed therein. (AY.1989-90 to 1993-94)
CIT v. Bharat Hotels Ltd. (2016) 380 ITR 552 / 65 taxmann.com 39 (Delhi)(HC)
507 S. 32 : Depreciation – Additional depreciation –Doing embroidery work on grey
synthetic cloth, i.e. sari, it amounted to manufacturing activity hence entitled to
additional depreciation.
Assessee was engaged in doing embroidery work on grey synthetic cloth, i.e. sari, it
amounted to manufacturing activity and, thus, assessee was entitled to get additional
depreciation on machinery used for aforesaid activity. (AY. 2008-09)
ITO v. Yash Creation (2015) 70 SOT 130 (Ahd.)(Trib.)
508 S. 32 : Depreciation – Transportation of goods – Higher rate of depreciation would be
allowed on pay loaders, dozers and water tankers.
Dismissing the appeal of the revenue, the Tribunal held that vehicles used in business of
transportation of goods on hire would be entitled for higher rate of depreciation; benefit of
higher depreciation would be allowed on pay loaders, dozers and water tankers. (AY. 2010-11)
DCIT v. Suthanther Assumtha (2016) 161 ITD 546 / 51 ITR 154 (Chennai)(Trib.)
509 S. 32 : Depreciation – Truck registered in name of assessee – Wrong name of seller
clerical error – Entitled to depreciation.
Assessee claimed depreciation on a truck, which was disallowed due to absence of any
documentary evidence to support the purchase of the truck. The Tribunal observed that
the CIT(A) had categorically held that truck was registered in name of the assessee, and
mention of incorrect name of the seller was held to be a mere clerical error. Therefore,
the deduction on depreciation was allowed. (AY. 2010-11)
ACIT v. Modern Motors (2016) 48 ITR 579 / 142 DTR 0145 / 181 TTJ 813 (Jaipur)(Trib.)
510 S. 32 : Depreciation – Additional depreciation – Manufacturing greetings cards,
magazines, envelopes, printing on paper amounts to production hence eligible for
additional depreciation.
Allowing the appeal of the assessee, the Tribunal held that printing of greetings cards on
paper amounted to manufacturing of new and marketable article, as a distinct product
comes into existence. It was not necessary for an industrial undertaking to undertake
manufacturing of a commercially new product, such activity as in the present case
amounts to “production” as mentioned under S.32. Therefore, the assessee was eligible
to claim depreciation on such activity. (AY. 2006-07)
Genius Printers P. Ltd. v. ACIT (2016) 48 ITR 588 (Mum.)(Trib.)
511 S. 32 : Depreciation – Leasehold rights on land do not fall in category of intangible asset
as defined u/s. 32(1)(ii), hence do not qualify for allowance of depreciation. [S. 32(1)(ii)]
Tribunal held that the leasehold rights on land do not fall in category of intangible asset
as defined u/s. 32(1)(ii). By virtue of lease only an interest in land is created which does
not qualify for allowance of depreciation. (AY. 2008-09)
Cyber Park Development & Construction Ltd. v. Dy. CIT (2016) 159 ITD 648 / 181 TTJ
556 (Bang.)(Trib.)
166
S. 32 Depreciation
S. 32 : Depreciation – Even if the income is assessed by applying net profit rate, 512
depreciation is held to be allowable.
The Tribunal held that depreciation is allowable from net profit even if the total income
is computed by applying net profit rate. (AY. 2011-12)
ACIT v. J. S. Grover Constructions (2016) 181 TTJ 23 (UO) (Asr.)(Trib.)
S. 32 : Depreciation – Charitable Trust – Depreciation on capital assets was held to 513
be allowable.
Dismissing the appeal of the revenue, the Tribunal held that, depreciation on capital
assets was held to be allowable. (AY. 2009-10)
ACIT (E) v. Vishwachetan Foundation IBMR (2016) 48 ITR 481 (Bang.)(Trib.)
S. 32 : Depreciation – Bogus purchase bills – Disallowance of depreciation was held 514
to be not justified.
Allowing the appeal of the assessee, Tribunal held that, the assessee submitted copies
of all bills and vouchers of Plant & Machinery and of Building material etc. together
with copies of transport receipts before Authorities below which were available in
assessee’s paper book. Considering materials and documents available on record, it
appeared that nobody visited site where factory of assessee was situated which indicated
that AO merely proceeded on suspicion. The AO failed to bring contrary evidence on
record, after lapse of considerable period and after installation and commencement of
production, AO made enquiry in subjected year and merely proceeding on suspicion,
disallowed claim of depreciation made by assessee. Claim of depreciation disallowed by
AO and confirmed by CIT(A) was without any basis and deserved to be deleted, claim
of depreciation was allowed. (AY. 2007-08)
Bina Malpani v. ITO (2016) 180 TTJ 1 (UO) / 50 ITR 48 (Jaipur)(Trib.)
S. 32 : Depreciation – Unabsorbed depreciation of AY. 1997-98 could be allowed to 515
be carried forward and set off after a period of 8 years, in view of amended S. 32(2)
w.e.f. 1-4-2002 [S.32(2)]
Allowing the appeal of the assessee the Tribunal held that Unabsorbed depreciation of
AY. 1997-98 could be allowed to be carried forward and set off after a period of 8 years,
in view of amended s. 32(2) w.e.f. 1-4-2002. (AY.2008-09)
JCT Ltd. v. CIT (2016) 159 ITD 983 (Kol.)(Trib.)
S. 32 : Depreciation – Charitable Trust – Assets purchased earlier years cost was 516
allowed as deduction in earlier years, depreciation is not allowable.[S. 2(15), 11]
Dismissing the appeal of the assessee, the Tribunal held that; Assessee would not be
entitled for depreciation on opening balance of written down value of assets, which were
purchased in earlier years and their cost had already been considered as application of
income in earlier assessment year while granting exemption u/s. 11. (AY. 2010-11)
Suguna Charitable Trust v. ITO (2016) 159 ITD 838 (Chennai)(Trib.)
167
Depreciation S. 32
517 S. 32 : Depreciation – Depreciation on capitalized professional and legal charges
incurred on acquisition of business is allowable.
The assessee had made payment for professional and legal charges in relation to taking
over the business of another entity, which was claimed as a revenue expenditure. The AO
treated it as capital expense since it was incurred for the purpose of acquiring a capital
asset. The CIT(A) allowed the claim of depreciation on the said expense. On appeal, the
ITAT, following its own order for the earlier year, allowed the claim of depreciation since
the said expense formed a part of the cost of acquisition. (AY. 2007-08)
DCIT v. AVTEC Ltd. (2016) 52 ITR 270 (Delhi)(Trib.)
518 S. 32 : Depreciation – Discontinued business – Depreciation is allowable in the year
in which business was recommenced.
Depreciation is allowable in the year in which business was recommenced.(AY.2008-09
2009-10)
Triumph International Finance India Ltd. v. ACIT (2016) 161 ITD 464 (Mum.)(Trib.)
519 S. 32 : Depreciation – Motor vehicle – Depreciation at higher rate of 50% would be
admissible on new induction of motor car engaged in business of giving vehicles on
hire but not used for public transportation. [S.2(11)]
Assessee engaged in business of giving car on hiring, claimed higher rate of
depreciation. The AO granted depreciation at rate of 15 per cent. ITAT held that
depreciation claimed by assessee could be admissible on new induction of motor car in
block of assets. (AY. 2010-11)
Shree Balaji Products v. ITO (2016) 161 ITD 598 (Ahd.)(Trib.)
520 S. 32 : Depreciation – Computer software – Expenditure for software licence valid
for long-term was a part and parcel of computer system is eligible for depreciation
at higher.
Expenditure on software licence valid for long term was a part and parcel of computer
system therefore it was eligible for depreciation at higher rate of 60 per cent. (AY.2009-
10)
ACIT v. Zydus Infrastructure (P.) Ltd. (2016) 161 ITD 611 (Ahd.)(Trib.)
521 S. 32 : Depreciation – Additional depreciation – Electricity Manufacturing and
production – Generation of electricity amounted to manufacturing/production of article
or thing, assessee who had set up hydel power and thermal power plants would be
entitled to additional depreciation.
Assessee, a public sector undertaking was engaged in business of generation and
distribution of electricity. Assessee established hydel power and thermal power plant,
wherein water and coal were converted into electricity during manufacturing process.
Generation of electricity amounted to manufacturing and production of article or thing
and, thus, assessee was entitled for claiming additional depreciation. (AY. 2011-12)
Damodar Valley Corporation v. DCIT (2016) 160 ITD 78 / 50 ITR 583 / 182 TTJ 765 /
(2017) 148 DTR 285 (Kol.)(Trib.)
168
S. 32 Depreciation
S. 32 : Depreciation – Goodwill – Goodwill acquired by assessee on acquisition of 522
a proprietary concern as a going concern is an asset hence eligible for depreciation
Assessee-company acquired a sole proprietary concern as a going concern with all assets
and liabilities including goodwill. It claimed depreciation on such goodwill. ITAT held
that goodwill is an asset within meaning of section 32 and assessee was entitled for
depreciation on goodwill. (AY. 2008-09, 2009-10)
Fibres & Fabrics International (P.) Ltd. v. DCIT (2016) 160 ITD 102 / 182 TTJ 374 (Bang.)
(Trib.)
S. 32 : Depreciation – Goodwill – Depreciation is allowable 523
Depreciation is allowable at the applicable rate on the payment relatable to goodwill.
(AY. 2006-07, 2007-08, 2009-10, 2010-11)
Hinduja Foundries Ltd. v. ACIT (2016) 178 TTJ 88 (Chennai)(Trib.)
S. 32 : Depreciation – Amenities for which payment was made are not tools for 524
carrying out the business, hence depreciation is not allowable.
The amenities for which the payment is made by the assessee are not the tools
for carrying out the business of assessee, therefore, the assessee is not eligible for
depreciation on the amount paid by the assessee. (AY. 2006-07, 2007-08, 2009-10, 2010-
11)
Hinduja Foundries Ltd. v. ACIT (2016) 178 TTJ 88 (Chennai)(Trib.)
S. 32 : Depreciation – Additional depreciation – Carried forward not allowed. [S.32(1) 525
(iia)]
The assessee made additions to fixed assets in the second half of the preceding and
claimed additional depreciation under section 32(1)(iia) in the preceding assessment
year at the rate of 10 per cent (50 per cent of 20 per cent) The assessee claimed the
balance 50 per cent of the additional depreciation under section 32(1)(iia) of the Act in
the assessment year in question. The Assessing Officer rejected the claim of the assessee
on the ground that the additional depreciation was available only for new assets added
during the year. The Commissioner (Appeals) confirmed the order of the Assessing
Officer. The Tribunal held that in terms of section 32 of the Act, the additional
depreciation was allowable on the plant and machinery only for the year in which the
capacity expansion had taken place which had resulted in the substantial increase in the
installed capacity. Each assessment year was separate and independent assessment year.
The provisions of section 32 of the Act did not provide for carry forward of the residual
additional depreciation. Thus, the assessee was not entitled to additional depreciation.
(AY. 2005-06, 2008-09, 2009-10)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.)
S. 32 : Depreciation – Automated teller machine – Computer – Higher rate of 526
depreciation
The assessee claimed depreciation on the automated teller machine at 60 per cent the
rate applicable to “Computers including computer software” as given in the Income
Tax Rules, 1962. The Assessing Officer classified the automated teller machine as
169
Depreciation S. 32
other office machines and applied the depreciation rate of 25 per cent being the rate
of depreciation on plant and machinery. The Commissioner (Appeals) upheld this.
The automated teller machine carried out logical, arithmetic and memory functions by
manipulations of electronic magnetic or optical impulses giving debit or credit cash and,
thereafter, dispensed cash and gave printed receipts. The computer is an integral part
of the automated teller machine and it was on the basis of the information processed
by the computer in the automated teller machine that the mechanical functions of
dispensation of cash or deposit of cash was carried out. Therefore, the Assessing Officer
was directed to allow depreciation at the rate of 60 per cent. (AY. 2005-06, 2008-09)
Royal Bank of Scotland N.V v. DDIT (2016) 47 ITR 513 (Kol.)(Trib.)
527 S. 32 : Depreciation – Lull in business – Dealing in wholesale trade of liquor – Not
carry on its business during relevant year due to non-availability of licence under
UP Excise Act, it could not be a temporary lull in business – Legal bar and, thus,
assessee’s claim for depreciation and deduction of other expenses was to be rejected.
[S. 37(1)]
Assessee was dealing in wholesale trade of liquor in State of Uttar Pradesh. It was not
granted licence for trading in liquor for assessment year under appeal. Assessee, however
filed its return claiming depreciation and deduction of other expenses. A.O. took a view
that assessee was not carrying on any business and thus, it could not be said that assets
for which expenses were claimed, were relatable to any business activity of assessee. He
rejected assessee’s claim. It was undisputed that s. 60 of Uttar Pradesh Excise Act, which
was attracted to facts of present case, outlawed any business activity in liquor without
licence, making it punishable with imprisonment. In view of statutory prohibition imposed
by Uttar Pradesh Excise Act, it could not be said that there was a temporary lull in business
of assessee but that there was a legal bar. Therefore, assessee was not entitled to deduction
on account of depreciation and other expenses as claimed when no business of wholesale
liquor trade was carried on by assessee in assessment year in appeal(AY. 2009-10)
Royal Beverages (P.) Ltd. v. Dy. CIT (2016)158 ITD 125 / 140 DTR 52 / 180 TTJ 521 (TM)
(Chd.)(Trib.)
528 S. 32 : Depreciation – Unabsorbed depreciation – Carry forward and set-off – Belated
return – Unabsorbed depreciation carried forward was allowed to be set off. [S. 32(2)]
Assessee was engaged in business of manufacturing of computers stationary, ATM cards,
ITC cards etc. Assessee filed its return after due date claiming carry forward and set-off
of unabsorbed depreciation. AO rejected assessee’s claim on the plea that S. 80 restricted
the same. CIT(A) allowed assessee’s claim. ITAT held that even though S. 80 requires
that return be filed as per section 139(3) to carry forward losses within due date, as
envisaged under section 139(1), yet, within ambit of section 80 for carry forward losses,
section 32(2) is not included. (AY. 2009-10)
ACIT v. Anil Printers Ltd. (2016) 158 ITD 665 / 143 DTR 295 / 182 TTJ 112 (Mum.)(Trib.)
529 S. 32 : Depreciation – Hoarding structure cannot be considered as plant hence
depreciation is allowable as building at 10%. [S 43(3)]
Assessee firm was carrying on business of outdoor publicity through use of hoardings,
during the year. Assessee claimed depreciation at rate of 15 per cent on hoarding
170
S. 32 Depreciation
structure owned by it under category of ‘plant and machinery’. The A.O. opined
that hoarding structures were to be treated as ‘building’ and therefore he allowed
depreciation at rate of 10 per cent. The Hon’ble ITAT had taken a view that hoarding
structures did not play any operative role as apparatus or tool in carrying on trade
by assessee firm or in functioning of assessee firm’s business rather those hoarding
structures were merely embedded in building and erected for entities to put their
advertisements. Assessee failed to satisfy functional test of ‘plant’ as given in section
43(3) and therefore order of the AO was upheld.(AY. 2007-08)
Asian Advertising v. ITO (2016) 158 ITD 145 (Mum.)(Trib.)
S. 32 : Depreciation – Trademark not registered in its name – Depreciation is 530
allowable.
The assessee claimed the depreciation on Trademark. The AO disallowed the
depreciation on the ground that it is not the registered owner of the Trademark yet.
Allowing the appeal the Tribunal held that for allowing depreciation it is not contingent
upon its registration. (AY. 2007-08)
Trio Elevators Company (India) Ltd. v. ACIT (2016) 157 ITD 1170 / 178 TTJ 258 / 134
DTR 201 (Ahd.)(Trib.)
S. 32 : Depreciation – Work-over Rigs – Rig was inseparable/integral part of motor 531
lorry hence higher depreciation at rate of 40 per cent is allowable.
Where assessee-company was engaged in business of oil and gas exploration like drilling
of wells, oil fields, etc., claimed higher rate of depreciation on ‘work-over rig’, since said
rig was inseparable/integral part of motor lorry which was used for rectifying defect, etc.
in different wells and was moving from one well to another, assessee’s claim for higher
depreciation at rate of 40 per cent was allowable. (AY. 2002-03 to 2004-05)
John Energy Ltd. v. Dy. CIT (2015) 154 ITD 451 / 173 TTJ 713 / 130 DTR 348 (Ahd.)(Trib.)
S. 32 : Depreciation – Integral part of computer systems – Eligible to depreciation at 532
60%.
Printers, switches, net working equipments, UPS and pen drives, are integral part of
computer system hence eligible depreciation at 60%. (ITA No.2806/ Del/ dt. 16-10-2015)
(AY. 2007-08)
GE Capital Business Process Management Services (P) Ltd. (2016) Chamber’s Journal-
January–P. 95 (Delhi)(Trib.)
S. 32 : Depreciation – Routers and switches being input/output devices, are integral 533
part of computer and, hence, entitled to higher rate of depreciation at 60 per cent.
CPU alone cannot be described as computer; routers and switches being input/output
devices, are integral part of computer and, hence, entitled to higher rate of depreciation
at 60 per cent. (AY. 2011-12)
IBAHN India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 382 (Mum.)(Trib.)
171
Depreciation S. 32
534 S. 32 : Depreciation – Unabsorbed depreciation allowance has not only to be set
off against other heads of income in relevant previous year but where it is carried
forward, it stands on exactly same footing as current depreciation. [S.71]
Allowing the appeal of assessee the Tribunal held that unabsorbed depreciation
allowance has not only to be set off against other heads of income in relevant previous
year but where it is carried forward, it stands on exactly same footing as current
depreciation. (AY. 2007-08)
Sunshield Chemicals (P.) Ltd. v. ITO (2016) 156 ITD 452 / 175 TTJ 129 / 129 DTR 113
(Mum.)(Trib.)
535 S. 32 : Depreciation – Drilling rigs – Registered as heavy goods vehicle – Eligible
depreciation @ 40%.
It was held that workover mobile rigs owned by the assessee which are registered
under category of heavy goods vehicle by the State Transport Authority are eligible for
depreciation @ 40 per cent. (AY. 2002-03 to 2008-09)
John Energy Ltd. v. Dy. CIT (2016) 130 DTR 348 (Ahd.)(Trib.)
536 S. 32 : Depreciation – Depreciation not allowed on tools and machinery used in
construction of hotel building since the assessee was in the hotel business.
The assessee, engaged in the business of hotels, claimed depreciation on tools/machines
used for construction of its hotel. The AO did not allow the same since it was not in
the business of construction. The CIT(A) upheld the disallowance and also rejected the
alternative claim of accumulating the depreciation towards the cost of construction. The
CIT(A) did not allow the alternative claim on the basis that if the cost of depreciation
was allowed to be accumulated, then the same would be allowable to depreciation when
the hotel was completed. The ITAT upheld the disallowance and held that the Assessee
was not eligible for depreciation on tools and machinery purchased since they were a
cost of construction of the hotel building. (AY. 2008-09, 2009-10)
Mahagun Hotels P. Ltd. v. DCIT (2016) 45 ITR 347 (Delhi)(Trib.)
537 S. 32 : Depreciation – Claim for higher depreciation on windmill is allowable if it is
made in the return of income filed u/s. 139(1). [S. 139(1)]
The assessee made a claim for depreciation at the rate of 80% on windmills in its
return of income for the impugned year instead of filing a claim as per the procedure
mentioned in rule 5(1A). The AO disallowed the claim of additional depreciation at
the rate of 80% on wind mills holding that the assessee did not exercise the option for
claiming higher depreciation. The assessee submitted before the ITAT that it had filed
the requisite form in the previous AY and there was no need to exercise the claim again.
The ITAT allowed the claim of depreciation at higher rate and held that the claim would
be allowable if it was made in the return filed in accordance with s. 139(1) in the form
prescribed therein, and no separate procedure of filing a letter of request or intimation
with regard to the exercise of option would be required to be followed. (AY. 2010-11)
DCIT v. Power Soaps P. Ltd. (2016) 45 ITR 250 (Chennai)(Trib.)
172
S. 32A Investment allowance
S. 32 : Depreciation – Plant – Building constructed with a specific design – Necessary 538
for the assessee’s business – Provides strong foundation and structure to existing
factory building – To be treated as ‘plant’.
The assessee was engaged in the business of manufacturing intermediaries and bulk
drugs, which was undertaken at the manufacturing facility of the assessee. One of the
grounds related to capitalization of civil construction expenses under the head plant and
machinery. The assessee claimed depreciation @ 15%. On appeal to the Tribunal, it held
that the civil construction expenses incurred were for building strong foundation and
structure for existing factory building. Where a building was constructed with a specific
design keeping in view specified technical requirements without which the assessee’s
business could not be carried on, it quailed to be treated as plant. Any reinforcement to
civil construction to be treated as installation cost of plant and machinery and qualifies
for depreciation as plant and machinery. (AY. 2010-11)
DSM Sinochem Pharmaceuticals India P. Ltd. v. DCIT (2016) 176 TTJ 322 (Chd.)(Trib.)
S. 32 : Depreciation – Charitable trust – Not entitled depreciation. [S. 11] 539
The Tribunal held that the assessee charitable institution claiming exemption under
section 11 not being engaged in any business, is not entitled for any depreciation. (AY.
2010-11)
Dy. DIT (E) v. Vels Institute of Science, Technology & Advanced Studies (2016) 157 ITD
237 / 130 DTR 331 / 175 TTJ 593 (Chennai)(Trib.)
S. 32 : Depreciation – Additional depreciation – Production of fabricated piles for 540
construction business, it did not involve production or manufacture of an article or
thing hence not eligible for additional depreciation.
Tribunal held that the; production of prefabricated piles which were going to be used by
assessee in its business of piling, would form part of construction activity irrespective
of fact whether such piles were constructed at project site or at some other place with
help of machinery; it did not involve production or manufacture of an article or thing
entitling assessee to additional depreciation on said machinery.(AY. 2008-09)
Stefon Constructions (P.) Ltd v. CIT (2016) 156 ITD 615 (Mum.)(Trib.)
S. 32A. Investment allowance
S. 32A : Investment allowance – Effluent treatment plant – Exclusion does not apply 541
– Allowance available.
Where the High Court granted the benefit of investment allowance under section 32A
on the investment made by the assessee in respect of an effluent treatment plant in its
unit for manufacture of alcoholic liquor, held, affirming the decision of the High Court,
that keeping in view the specific provisions contained in sub-section (2C) of section
32A of the Act, there was no error in the view taken by the High Court in this behalf.
(AY. 1989-90)
CIT v. United Spirits Ltd. (2016) 386 ITR 718 / 242 Taxman 98 / 289 CTR 655 (SC)
Editorial : Decision in McDowell and Co. v. ACIT (2007) 291 ITR 439 (Karn.)(HC) is
affirmed.
173
Investment allowance S. 32A
542 S. 32A : Investment allowance – As the plant and machinery were not in a state to use
prior to 31st March, 1987 the Investment allowance could not be granted.
The High Court held that there was no dispute between parties with respect to the
interpretation of expression ‘installed’. The Plant and machinery may not have been
used for production was not relevant provided that plant and machinery was in a state
where it could be brought to use. As the plant and machinery were not in a state to
use prior to 31st March 1987 the Investment allowance could not be granted to the
Assessee. Accordingly, the second question is answered in favour of the Department
and against the Assessee.
Dayawanati (Smt.) Through LH Smt. Sunita Gupta v. CIT (2016) 143 DTR 209 (Delhi)(HC)
543 S. 32A : Investment allowance – Unabsorbed investment allowance – Deduction to be
allowed before set-off under section 72 and before deducting unabsorbed investment
allowance of earlier years. [S. 32AB, 72]
Allowing the appeal the Court held that; Sections 28 to 44DB of the Income-tax
Act, 1961 are grouped together under the heading “D-Profits and gains of business
or profession” under Chapter IV which deals with “Computation of total income”. A
close look at sections 28 and 29 of the Act would show that all types of income need
not necessarily be chargeable to tax under the head “Profits and gains of business
or profession”. Issues relating to set-off or carry forward and set-off are dealt with
in Chapter VI. Sub-section (2) of section 72 states that where any allowance is to be
carried forward in terms of section 32(2) or section 35(4), effect should first be given
to the provisions of section 72. Section 32AB was amended by the Finance Act, 1987.
The words inserted in section 32AB(1), by the Finance Act, 1987 were “such deduction
being allowed before the loss, if any, brought forward from earlier years is set-off under
section 72”. Therefore, it is clear that any deduction under section 32AB has to be
allowed before a set-off is made under section 72 in respect of the loss brought forward
from the earlier years. Hence unabsorbed investment allowance has to be deducted
from profits for the purpose of computing and allowing deduction under section 32AB.
Deduction under section 32AB has to be allowed before set-off under section 72 and
hence before deducting unabsorbed investment allowance from the earlier years. (AY.
1988-89)
Sundaram Finance Ltd v. Dy. CIT (2016) 387 ITR 155 (Mad.)(HC)
S. 32AB : Investment deposit account
544 S. 32AB : Investment deposit account – Deduction is to be allowed from total
composite income derived from growing and manufacturing tea and only thereafter
rule 8 should be applied to apportion resultant income into 60 per cent agricultural
income not taxable under Act and balance 40 per cent which is taxable under Act.
[Rule, 8]
The assessee-company was engaged in the business of growing, manufacturing and
selling of tea in India and abroad. It claimed a deduction at the rate of 20 per cent on
the composite income. AO held that deduction u/s. 33AB had to be allowed only from
the non-agricultural component of the composite income determined under rule 8.
High Court, relying upon the judgment in case of CIT v. Williamson Financial Services
174
S. 35 Expenditure on scientific research
[2008] 297 ITR 17 / 165 Taxman 638 (SC), held that apportionment prescribed by rule
8(1) can be applied only after deducting the allowance u/s. 33AB. It was also held that
the expression ‘profits of such business’ in clause (b) of section 33AB relates to the
expression ‘business of growing and manufacturing tea’ as appearing in the beginning
of sub-section (1) of section 33AB. (AY. 2000-01)
Singlo (India) Tea Ltd. v. CIT (2016) 382 ITR 537 / 238 Taxman 666 / 286 CTR 242 / 135
DTR 31 (Cal.)(HC)
S. 35. Expenditure on scientific research.
S. 35 : Expenditure on scientific research – Initial grant of approval was ordered by 545
Finance Minister and the refusal for extension was conveyed by Director – Order of
High Court striking down/refusing the extension was held to be not proper. [S.35(1)
(ii) – Government of India (Transaction of Business) Rules, 1961, r. 3]
Assessee-company filed an application for extension of approval of deductions on
scientific research expenditure. Initial grant of approval was ordered by Finance Minister
and same was conveyed by Director. Extension was rejected on the ground that the same
was conveyed by the Director and not by the Competent authority. On writ the refusal
of extension was set aside. On appeal by revenue, allowing the appeal the Court held
that, As per rule 3 of Government of India (Transaction of Business) Rules, 1961 such
decisions were required to go to CBDT and thereafter to Minister, which requirement
was complied with, therefore the High Court was not justified in striking down/refusing
extension of approval on ground that same was passed by Director and not by Finance
Minister. (AY. 2008-09)
UOI v. Central India Institute of Medical Sciences (2016) 243 Taxman 151 / 389 ITR 4 /
144 DTR 370 / (2017) 291 CTR 19 (SC)
Editorial: Decision of Bombay High Court in Institute of Medical Sciences v .UOI WP No
5956 of 2010 dt 17-11-2011 was reversed.
S. 35 : Expenditure on scientific research – Certain cost were reduced from claim of 546
deduction u/s. 35(2AB) – No opportunity given to assessee – Violation of principle of
natural justice – Secretary was directed to reconsider the claim of deduction.[S. 352AB]
Assessee applied to Dept. of Scientific & Industrial Research for approval of expenditure
incurred by it on research and development (‘R&D’) work for the claim of weighted
deduction u/s. 35(2AB). The total R&D expenditure was reduced by the cost of motor
vehicles purchased for testing the parts and the salary and wages paid to trainees and
apprentices. The said reduction in R&D expenditure was made without giving any
opportunity of hearing to the assessee.
On filing of writ petition to High Court, it was held that non-granting of opportunity
to assessee to present its case is clear violation of principle of natural justice. Thus,
High Court instead of going into the merits of the claim of deduction directed that the
Secretary should reconsider the case of claim of deduction u/s. 35(2AB) by providing
reasonable opportunity of hearing to the assessee. (AY. 2011-12, 2012-13)
Bosch Ltd. v. Secretary, Dept. of Scientific & Industrial Research Ministry of Science &
Technology, Government of India (2016) 239 Taxman 480 / (2017) 147 DTR 115 / 293
CTR 355 (Karn.)(HC)
175
Expenditure on scientific research S. 35
547 S. 35 : Expenditure on scientific research – Weighted deduction – Realisation on sale of
assets used in scientific research must be deducted – Realisation from sale of products
of scientific research not deductible. [S. 35(2AB)]
Dismissing the appeal of revenue the Court held that, only realisation on sale of assets
used in scientific research must be deducted. Realisation from sale of products of
scientific research not deductible. (AY. 2009-10)
CIT v. Microlabs Ltd. (2016) 383 ITR 490 (Karn.)(HC)
Editorial : Order of Tribunal in Dy. CIT v. Microlabs Ltd. (2015) 39 ITR 585 (Bang.)(Trib.)
548 S. 35 : Expenditure on scientific research – Expenditure could not be disallowed only
on ground that benefit of research were not shown in relevant year.[S. 37(1)]
Allowing the appeal of the assessee, the Tribunal held that; Expenditure could not be
disallowed only on ground that benefit of research were not shown in relevant year.
(AY. 2001-02)
FFC Aromas (P.) Ltd. v. ITO (2016) 161 ITD 539 (Mum.)(Trib.)
549 S. 35 : Expenditure on scientific research – The AO is bound to grant deduction if the
R&D facility is approved by the competent authority. He has no jurisdiction in situ
in judgment over the approval. The fact that the competent authority did not file the
report with the department as prescribed is a technical lapse for which the assessee
is not liable. [S. 35(2AB)]
Allowing the appeal the Tribunal held that; The AO is bound to grant deduction if
the R&D facility is approved by the competent authority. He has no jurisdiction in situ
in judgment over the approval. The fact that the competent authority did not file the
report with the department as prescribed is a technical lapse for which the assessee is
not liable. (ITA No. 188/Vizag/2015, dt. 21.10.2016)(AY. 2011-12)
Effronics Systems Pvt. Ltd. v. ACIT (Vizag)(Trib.), www.itatonline.org
S. 35B : Export markets development allowance.
550 S. 35B : Export markets development allowance – Packing expenses of goods exported
is not eligible for allowance. [S. 256(1)]
That the packing expenses incurred on account of exported goods did not qualify for
the export markets development allowance under section 35B.(AY. 1976-77, 1977-78)
Bajaj Auto Ltd. v. CIT (2016) 389 ITR 259 / (2017) 244 Taxman 31 / 146 DTR 210 (Bom.)(HC)
551 S. 35B : Export markets development allowance – Sub-contractor and not providing
technical know-how to person outside India, was held to be not entitled to claim
waited deduction. [S.35B(IA)]
Answering the reference against the assessee, the Court held that assessee must be
exporter of goods or technical know-how and expenditure should be incurred by him
in connection with that business. Assessee sub-contractor and not providing technical
know-how to person outside India therefore the assessee was not entitled to claim
deduction. (AY. 1979-80)
Bombay Suburban Electric Supply Ltd v. CIT (2016) 389 ITR 273 / 75 taxmann.com 264
(Bom.)(HC)
176
S. 35D Amortisation of preliminary expenses
S.35D. Amortisation of certain preliminary expenses
S. 35D : Amortisation of preliminary expenses – Expenses relating to issue of shares 552
to public – Allowed in earlier years – Benefit to continue for ten years – Amortisation
cannot be refused for subsequent year. [S.37(1)]
Allowing the appeal the Court held that the Assessing Officer had allowed the claim
of the assessee in respect of the expenses on the public issue for the assessment years
1994-95 and 1996-97. Section 35D provides for amortisation of such expenses for a
period of 10 years at one-tenth each year for ten years. When it was again claimed for
the assessment year 1996-97, though it was disallowed and on directions of the appellate
authority, the Assessing Officer made physical verification of the factory premises. He
was satisfied that there was expansion of the facilities to the industrial undertaking
of the assessee. It was on this satisfaction that for the assessment year 1996-97 also
the expenses were allowed. Once this position was accepted and the clock had started
running in favour of the assessee, it had to complete the entire period of 10 years and
the benefit granted in the first two years could not have been denied in the subsequent
years. The decision in Brooke Bond was rendered when section 35D was not on the
statute book. The assessee was entitled to the benefit of section 35D for the assessment
years in question. (AY. 1999-2000, 2001-02)
Shasun Chemicals and Drugs Ltd v. CIT (2016) 388 ITR 1 / 243 Taxman 47 / 289 CTR
97 / 141 DTR 161 (SC)
Editorial : Decision of the Madras High Court in CIT v. Shasun Chemicals and Drugs Ltd.
[2012] 347 ITR 532 (Mad) reversed on this point.
S. 35D : Amortisation of preliminary expenses – Write off in the sixth year of 553
incorporation was held to be justified. [S.37(1)]
The assessee company was incorporated om 19-6-1998. It had debited part of
preliminary expenses in the financial year 1998-99. The Tribunal held that the
deduction was to be allowed for a period of five years begin with the previous year in
which the business was commenced. The Court held that the Tribunal was justified
in allowing the claim even though the year under appeal was the sixth year since
incorporation. (AY. 2004-05)
CIT v. J. M. Financial Securities (P) Ltd. (2016) 241 Taxman 551 (Bom.)(HC)
S. 35D : Amortisation of preliminary expenses – Preliminary expenses incurred by 554
assessee-company in connection with issue of right shares qualify for benefit of
section. [S. 35D(2)(c)(iv), Companies Act, S. 61, 81]
Allowing the appeal of assessee the Court held that Preliminary expenses incurred by
assessee-company in connection with issue of right shares qualify for benefit of section.
(AY. 1999-2000 & 2003-04)
Nitta Gelatine India Ltd. v. ACIT (2016) 243 Taxman 245 (Ker.)(HC)
177
Amortisation of preliminary expenses S. 35D
555 S. 35D : Amortisation of preliminary expenses – Claim for amortization of expenses
disallowed when there was no material on record to prove that the issue of GDR was
for capital expansion.
The assessee made a claim for amortization of expenses incurred towards issue of Global
Depository Receipts. The same was disallowed by the Assessing Officer and upheld by
the High Court for the reason that the finding that the issue of GDR was not for capital
expansion was not controverted by the assessee. (AY. 1997-98)
Tube Investments of India Ltd. v. JCIT (2016) 240 Taxman 543 (Mad.)(HC)
556 S. 35D : Amortisation of preliminary expenses – Debenture issue expenses –
Expenditure on issue of convertible debenture is to be treated as capital expenditure
hence not eligible for deduction.
Expenditure on issue of convertible debenture, which is directly related to expansion of
capital base of company, is to be treated as capital expenditure not eligible for deduction
u/s. 35D.
Gruh Finance Ltd. v. ACIT (2016) 160 ITD 89 (Ahd.)(Trib.)
557 S. 35D : Amortisation of preliminary expenses – Initial public offer – The expenditure
incurred for issue of shares to and raise share capital for working capital
requirements could not be allowed as revenue expenditure. [S.144A]
The assessee claimed certain amount as deduction under section 35D for the assessment
year 2006-07 as expenses incurred in connection with the initial public offer. The
Assessing Officer disallowed the sum claimed by the assessee following the directions
given by the Additional Commissioner in his order under section 144A to disallow
the expenditure claimed by the assessee since the expenditure was not related to
the extension of its own undertaking or for setting up of a new unit as stated under
section 35D(1)(ii). The Commissioner (Appeals) held that the expenses permissible
for amortisation were (i) underwriting commission, (ii) brokerage, and (iii) charges for
drafting, typing, printing and advertisement of the prospectus. On appeal, the ITAT
held, (i) that the expenses were not incurred before the commencement of the business.
Therefore, the first condition was not complied with. The second condition was that
the expenses incurred after commencement of the business should be incurred in
connection with extension of its business or in connection with setting up of a new
unit. There was no case of setting up of a new unit. Business expansion and market
expansion of an existing business would not amount to extension of the undertaking.
The expression “undertaking” denotes visible expenditure on physical facilities for
manufacture and production. The expansion made by the assessee was acquisition of the
existing undertaking. Therefore, the expenditure incurred by the assessee in connection
with the issue of shares did not qualify to be amortised under section 35D.
(ii) That the funds raised by the assessee through issue of shares automatically increased
the capital volume of the company. The funds raised by increasing the capital in that
manner may be used by the company for various purposes. The capital funds may be
used to set up the business to purchase capital assets - or to pay off liabilities - or to
augment its working capital, etc. The scope of expenditure incurred for raising the share
capital by issuing shares must also stop at that point and should not be enlarged further.
178
S. 36(1)(ii) Bonus or commission
Raising the capital and utilising the funds are different. Application of funds did not
decide the character of the money collected against the issue of shares. Money collected
against the issue of shares always remains capital. Therefore, the expenditure incurred
for issue of shares to and raise share capital for working capital requirements could not
be allowed as revenue expenditure. (AY. 2007-08, 2008-09, 2009-10)
Accel Frontline Ltd. v. DCIT (2016) 46 ITR 138 (Chennai)(Trib.)
S. 35D : Amortization of preliminary expenses – Shares acquired cannot be treated as 558
land or building, plant or machinery etc., but only as ‘cost of project’ for purpose of
allowing deduction. [S. 263]
Allowing the appeal of assessee the Tribunal held that shares acquired cannot be treated
by any stretch of imagination as land or building, plant or machinery etc., and treated
as ‘cost of project’ for purpose of allowing deduction under section 35D. Share premium
cannot be considered as part of ‘issued share capital’ while allowing deduction under
section 35D. FCCBs can be considered as ‘debentures’ and taken as part of capital
employed for allowing deduction under section 35D. (AY. 2008-09)
Subex Ltd. v. CIT (2016) 156 ITD 938 / 182 TTJ 846 (Bang.)(Trib.)
S. 35D : Amortization of preliminary expenses – Claim for deduction cannot be 559
disallowed when it was allowed in earlier AYs.
The assessee incurred registration fees for amending the objects clause of its
memorandum of association. 10% of the amortised fees was claimed as deduction u/s.
35D during the said year. The claim was disallowed by the AO, though it was allowed
in previous AYs. The ITAT allowed the claim of the AO and held that AO could not
disturb the claim deduction in the impugned AY, which was accepted in earlier years.
(AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 35D : Amortisation of preliminary expenses – Assessee a banking company – 560
Deduction is not allowable.
The claim of deduction u/s. 35D of the Act was not allowable to the assessee, a banking
company. (AY. 2008-09)
Yes Bank Ltd. v. ACIT (2016) 46 ITR 317 (Mum.)(Trib.)
Dy. CIT v. Yes Bank Ltd. (2016) 46 ITR 317 (Mum.)(Trib.)
S. 36. Other deductions
S. 36(1)(ii) : Bonus or commission – Dispute settled and payment of bonus made to 561
workers before due date – Deduction to be allowed. [S. 40A(9), 43B]
Allowing the appeal the court held that there was no dispute that the amount
representing bonus was paid by the assessee to its employees within the stipulated time.
The embargo specified under section 43B or section 40A(9) of the Act would not come
179
Bonus or commission S. 36(1)(ii)
in the way of the assessee. Therefore, the High Court was wrong in disallowing this
expenditure as deduction while computing the business income of the assessee and the
decision of the Tribunal was correct. (AY.1999-2000, 2001-02)
Shasun Chemicals and Drugs Ltd v. CIT (2016) 388 ITR 1 / 243 Taxman 47 / 289 CTR
97 / 141 DTR 161 (SC)
Editorial : Decision of the Madras High Court in CIT v. Shasun Chemicals and Drugs Ltd.
[2012] 347 ITR 532 (Mad.) reversed on this point.
562 S. 36(1)(ii) : Bonus or commission – Sum paid as bonus or commission to employee
– Commission paid in recognition of services provided by director – Payment cannot
be questioned on mere speculation by revenue that same was to avoid payment of
dividend tax – Disallowance was deleted.
The assessee company had paid commission to Directors for their hard work and extra
efforts for procuring the contract and its subsequent execution. The CIT(A) disallowed
the same holding that the commission was paid to directors who had substantial
shareholding in the assessee. Further it stated that assessee-company had earned
substantial profits, and the same could have been distributed as dividend. On appeal to
ITAT, it held that merely because the assessee was a private limited company and had
agreed to pay the commission to the directors by passing resolution in this regard before
the close of year, the same could not be disallowed in the hands of assessee on mere
surmises. It further held that where the directors had given services and in recognition
thereof, there was payment of commission to the said directors, then the same could
not be questioned merely on the basis of speculation by the revenue on the ground that
it was to avoid payment of dividend tax. It should be noted that the directors had paid
taxes on its income. (AY. 2007-08, 2009-10, 2010-11)
Arihantam Infraprojects (P.) Ltd. v. JCIT (2016) 156 ITD 425 / 176 TTJ 202 / 132 DTR 105
(Pune)(Trib.)
563 S. 36(1)(iii) : Interest on borrowed capital – Capital borrowed for acquisition of asset
– Asset not put to use in relevant accounting year, interest was not deductible.
Dismissing the appeal of the assessee, the Court held that; asset not put to use in
relevant accounting year, interest was not deductible. Insertion of proviso to section
36(1)(iii), w.e.f 1-4-2004. (AY. 2009-10)
Thukral Regal Shoes v. CIT (2016) 241 Taxman 361 / 290 CTR 596 / (2017) 391 ITR 119
(P&H)(HC)
564 S. 36(1)(iii) : Interest on borrowed capital – Interest-free advances to group company
– Where both interest bearing funds and interest fee funds are available then a
presumption would arise that investments to sister companies would be out of its
interest free funds, disallowance cannot be made.
Dismissing the appeal of the Revenue, the Court held that where both interest bearing
funds and interest fee funds are available then a presumption would arise that
investments to sister companies would be out of its interest free funds. Reliance in this
regards was placed on the judgment of the same court in case of CIT v. Reliance Utilities
180
S. 36(1)(iii) Interest on borrowed capital
& Power Ltd. (2009) 313 ITR 340 (Bom.). Accordingly, it was held that disallowance u/s.
36(1)(iii) cannot be sustained. (AY. 2007-08, 2008-09)
CIT v. Gujarat Reclaim & Rubber Products Ltd. (2016) 383 ITR 236 / 136 DTR 138 / 287
CTR 83 (Bom.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Advance of loans at lower rate of interest 565
to subsidiary concerns in financial difficulty for business purposes – Commercial
expediency – Assessee is entitled to deduction.
Allowing the reference of the assessee, the Court held, that financial condition of the
assessee’s sister concerns was not good and to help them run smoothly, the assessee
advanced them loans at a lower rate of interest. Both sister concerns were subsidiaries
of the assessee and there was nothing per se adverse. For the welfare and proper
functioning of the sister concerns, the assessee had decided to advance loans so that
ultimately they could function properly, and the assessee being the holding company
would also benefit. Therefore, the loans advanced to its sister concerns were for
commercial expediency and the assessee was entitled to the deduction of interest under
section 36(1)(iii).(AY 1989-90)
Hindalco Industries Co. v. CIT (2016) 389 ITR 430 (All.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Film production – No evidence was 566
furnished to demonstrate that the expenditure was incurred for depositing the security
deposit hence disallowance was held to be justified.
Assessee was engaged in business of film production, distribution and exhibition.
It stated that business premises was taken on rent from landlord after making a
security deposit and accordingly claimed deduction under section 36(1)(iii) of interest
expenditure incurred in connection with security deposit. Assessing Officer disallowed
interest expenditure. Tribunal upheld disallowance made by Assessing Officer holding
that assessee could not submit any evidence to prove that said premises was used for
its business purpose. On appeal dismissing the appeal the Court held that as facts were
dealt with in detail by Tribunal and no cogent evidence could be adduced by assessee in
support of its claim, in view of order of Tribunal deserved to be upheld. (AY. 1998-99)
Jalan Distributors (P.) Ltd. v. CIT (2016) 243 Taxman 205 (Cal.)(HC)
Editorial : SLP filed against order of High Court is dismissed, Jalan Distributors (P.) Ltd.
v. CIT (2016) 243 Taxman 146 (SC)
S. 36(1)(iii) : Interest on borrowed capital – Advance to group concern – Sufficient 567
fund in balance sheet – Disallowance of interest was not justified.
Dismissing the appeal the Court held that it was after considering the facts that the
Tribunal concluded that the assessee had interest-free capital from which he was
entitled to make interest-free advances to his sister concerns. It had not been established
that the assessee did not have sufficient interest-free capital. No material was produced
to indicate that it was the interest-bearing loans which were in turn advanced free of
interest to the assessee’s sister concerns. The Commissioner (Appeals) had observed
that the assessee had not rebutted the Assessing Officer’s contention that he had also
made investment out of his capital during the year which had exceeded the capital
181
Interest on borrowed capital S. 36(1)(iii)
of the assessee. No part of the record established the assertion. Further the nature of
the investment was also not indicated. Nor was there anything to indicate that such
investment was made out of the capital. There was no co-relation of the investment
made and the interest-bearing loan and the capital available to the assessee. The
Tribunal’s appreciation of the facts to the contrary was not absurd or perverse. No
question of law arose. (AY. 2006-07)
CIT v. Satish Bala Malhotra (Smt.) (No.1) (2016) 387 ITR 403 (P&H)(HC)
568 S. 36(1)(iii) : Interest on borrowed capital – Failure by authorities to apply test of
commercial expediency laid down by Supreme Court regarding benefit – AO to
reconsider issue by applying rule laid down by Supreme Court.
The AO disallowed interest expenses relatable to interest-free advances in terms of the
provisions contained in section 36(1)(iii). The Commissioner (Appeals) allowed the
deduction. The Tribunal confirmed this. On appeal:
Held, that all the three orders, i.e. the orders by the AO, Commissioner (Appeals) and
the Tribunal were totally unsustainable for the reason that the test for extending the
benefit of section 36(1)(iii) laid down by the High Court and the Supreme Court were
not applied to the facts of the case. Therefore, the matter was to be remitted to the
AO to reconsider the case of the assessee, after issuing notice to the parties. Matter
remanded. (AY. 2004-05)
CIT v. Alapatt Jewellery (2016) 386 ITR 338 / 242 Taxman 129 (Ker.)(HC)
569 S. 36(1)(iii) : Interest on borrowed capital – Advances to sister concern – Disallowance
was held to be justified.
The disallowance of the interest expenditure incurred was a question of fact. The
assessee had advanced interest-free loans or advances to its sister concerns whereas
the assessee had borrowed money in respect whereof it was liable to pay interest. The
concurrent findings of fact by the authorities below could not be interfered with and the
additions of interest expenditure was justified. No question of law arose. (AY. 2003-04)
DPIL Ltd. v. CIT (2016) 386 ITR 539 / 241 Taxman 66 (Cal.)(HC)
570 S. 36(1)(iii) : Interest on borrowed capital – Interest would be deductible if borrowed
capital were used for purposes of business – Matter remanded.
With regard to interest on borrowed capital once it was established that there was
nexus between the expenditure and purpose of business it would be deductible. Matter
remanded. (AY. 2005-06, 2006-07)
CIT v. U.G. Hospitals P. Ltd. (2016) 386 ITR 520 (P&H)(HC)
571 S. 36(1)(iii) : Interest on borrowed capital – Advance of loans to sister concern –
Disallowance of interest was not justified.
Allowing the appeal of assessee the court held that where both assessee and its sister
concern to whom loans were advanced were in the same business without indicating
difference in nature of their business activities, revenue could not disallow interest on
borrowed capital on the ground that loan was advanced for non-business purpose.(AY.
1991-92)
Industrial Feeders v. ACIT (2016) 240 Taxman 506 (Mad.)(HC)
182
S. 36(1)(iii) Interest on borrowed capital
S. 36(1)(iii) : Interest on borrowed capital – Where the assessee company borrowed 572
certain amount to set up a new plant for expanding its business, interest paid on
amount borrowed was to be allowed as deduction. [S.43(1)]
On Revenue’s further appeal, the High Court held that the CIT(A)’s and Tribunal’s
findings of glass manufacturing being an existing business and commonality of
management and funds have not been perverse and therefore, no question of law
arose. Where the assessee company borrowed certain amount to set up a new plant
for expanding its business, interest paid on amount borrowed was to be allowed as
deduction. (AY. 1998-99)
CIT v. Nicholas Piramal (India) Ltd. (2016) 239 Taxman 470 (Bom.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Prior to insertion of proviso to S. 36(1) 573
(iii) by Finance Act, 2003, w.e.f. 1-4-2004, there was no prohibition in claiming interest
paid in respect of borrowings for the acquisition of capital assets till such time it is
first put to use.
Assessee, a company, claimed interest expenditure on acquisition/purchase of capital
assets as a deduction u/s. 36(1). The AO disallowed the interest expenditure as
according to him, the interest paid went into the computation of cost of capital asset.
On appeal of the assessee, the CIT(A) allowed the assessee’s deduction.
On appeal, the Tribunal dismissed the revenue’s appeal relying on its orders for AY
1993-94 and AY 1994-95.
On further appeal, the High Court held that the proviso to S. 36(1)(iii) which prohibits
claiming interest expenditure in respect of amounts borrowed for acquisition of capital
assets till such time it is first put to use has to be capitalized was introduced by Finance
Act 2003, w.e.f 1-4-2004. The impugned assessment year was i.e. AY 1997-98, thus, there
was no prohibition in claiming interest paid on funds borrowed for the acquisition /
purchase of capital asset till such time it is first put to use. (AY. 1997-98)
CIT v. Infrastructure Leasing & Financial Services Ltd. (2016) 239 Taxman 464 (Bom.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Borrowed capital should be used wholly 574
and exclusively for purposes of business or for earning income – Borrowed capital
utilised to purchase shares in loss-making companies – Interest not deductible [S.
57(iii)]
Loans were taken by the assessee on interest and invested in loss making companies of
the same group. Thus, the transactions were not exclusively and wholly for the purpose
of business. The interest was not deductible. (AY. 1995-96, 1996-97, 1997-98, 1998-99)
CIT v. O.P. Srivastava (2013) 219 Taxman 133 / (2014) 265 CTR 481 / (2016) 385 ITR
547 (All.)(HC)
CIT v. Subrata Roy (2013) 219 Taxman 133 / (2014) 265 CTR 481 / (2016) 385 ITR 547
(All.)(HC)
Editorial: The decision was recalled by order dt 21st February, 2014. The Supreme Court
set-aside the order of recall. (CIT v. Subrata Roy (2016) 385 ITR 570 (SC)
183
Interest on borrowed capital S. 36(1)(iii)
575 S. 36(1)(iii) : Interest on borrowed capital – Disallowance of discount and interest on
borrowing through commercial papers and non-convertible debentures was held to
be not proper.
Held, the Commissioner (Appeals) and the Tribunal had concluded correctly that the
discount and interest on borrowing through commercial papers and non-convertible
debentures were allowable. There was no re-structuring and purchase of shares in the
year under consideration as these events had taken place in the preceding year. As on
the first day of the year under consideration, the companies stood merged and all the
funds available at that time were, in the course of the year, deployed in the business of
the assessee. Therefore, the Assessing Officer could not have disallowed the discount
and interest on borrowing through commercial papers and non-convertible debentures.
(AY. 2008-09)
CIT v. Amar Ujala Publication Ltd. (2016) 385 ITR 54 / 72 taxmann.com 159 (Delhi )(HC)
576 S. 36(1)(iii) : Interest on borrowed capital – Interest-free advance to sister concern of
assessee – Necessary to consider whether nexus between expenditure and purpose of
business and whether particular interest-bearing borrowing in turn advanced interest-
free – Matter remanded to Tribunal.
The Assessing Officer made a proportionate disallowance of the interest on borrowed
funds claimed under section 36(1)(iii) of the Act on the ground that the assessee had
given interest-free advances to its sister concern. The assessee filed an appeal before the
Commissioner (Appeals) contending that the advances made to the sister concern were
not made out of interest-bearing borrowed funds and could not be disallowed. Both the
Commissioner (Appeals) and the Tribunal dismissed the appeals of the assessee. On
appeal held, remanding the matter to the Tribunal, that the issue had to be decided
afresh in the light of the decisions of the Supreme Court in Hero Cycles (P.) Ltd. v. CIT
[2015] 379 ITR 347 (SC) and the High Court in CIT v. Kapsons Associates (2016) 381 ITR
204 (P&H) after hearing the parties. (AY. 2004-05)
Trident Infotech Corporation Ltd. v. CIT (2016) 385 ITR 335 (P&H)(HC)
577 S. 36(1)(iii) : Interest on borrowed capital – Borrowed capital used for purposes of
business – Sale of flats not necessary – Interest deductible – Balance sheet not showing
accrual of interest – Not relevant.
Sale of constructed properties was not a sine qua non for commencement of business.
The assessee’s business commenced when it had purchased land, obtained plan sanction
and put up construction. Thus, when the business of the assessee had commenced
during the financial year 2003-04, interest paid by the assessee on borrowed capital was
deductible. (AY. 2004-05 to 2008-09)
CIT v. IBC Knowledge Park P. Ltd. (2016) 385 ITR 346 / 287 CTR 261 / 69 taxmann.com
108 (Karn.)(HC)
578 S. 36(1)(iii) : Interest on borrowed capital – Interest free loan to subsidiary company
– Disallowance of interest was held to be not justified.
Dismissing the appeal of revenue the Court held that Term loan taken for acquisition of
fixed assets for new unit, balance loan for working capital requirement of existing units.
184
S. 36(1)(iii) Interest on borrowed capital
Tribunal held that the loan not used for advancing to subsidiary companies and the AO
has not established his case with any material hence, interest cannot be disallowed.
High Court also held that by now it is well settled that the business wisdom of the
assessee cannot be substituted by the AO. (AY. 2007-08)
CIT v. Himatsingka Seide Ltd. (2016) 388 ITR 463 / 240 Taxman 753 (Karn.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Where action of assessee to make 579
advances to group companies at a lower rate of interest – Assessee borrowed funds at
higher rate – There cannot be any business expenditure – Disallowance of differential
interest was justified. [S. 40A(2)]
The Assessee had borrowed huge amount from various group companies and had, in
turn, advanced large amount to certain companies at interest rate much lower than the
interest rate at which it had borrowed funds. The AO concluded that the assessee had
merely acted as conduit and there was no business expediency on part of the assessee
and disallowed the differential portion of interest.
The High Court held that Tribunal committed two errors in reversing the decisions
of the revenue authorities - the first was of applying the principles ‘for the purpose
of business’ being wider than ‘for the purpose of earning income’ in abstract. Such
principles had to be applied in the context of business expediency which was
demonstrated in the present case. The second error committed by the Tribunal was to
hold that the AO had applied the principles of S.40A(2) of the Act which, according
to the Tribunal, was not permissible. In other words, view of the Tribunal was that the
AO could have either allowed or disallowed the entire interest component relatable
to a particular borrowing of the Assessee. However, once the AO decided to grant
deduction of interest on a particular loan, it was not open for the AO to disallow the
portion of interest component. In fact the AO applied the deduction to the extent the
rate of interest at which the advances were made by the Assessee. However, the action
of the Assessee to make advances at a lower rate of interest than the interest liability
discharged by the Assessee in borrowing such funds was not shown to be in any
manner actuated by business expediency. The Assessing Officer was perfectly justified
in disallowing such component of interest. The Tribunal’s decision was reversed and
Revenue’s appeal was allowed. (AY. 1995-96)
CIT v. Cornerstone Exports (P.) Ltd. (2016) 238 Taxman 465 (Guj.)(HC)
S. 36(1)(iii) : Interest on borrowed capital – Interest had been charged on advances 580
given by assessee but by mistake interest was shown as loans and advances –
Disallowance was held to be not justified.
Dismissing the appeal of the Revenue, the Tribunal held that assessee explained that,
interest had been charged on those advances during year, but, on account of a clerical
mistake, interest was shown as ‘loans and advances.(AY. 2011-12)
ACIT v. Pardeep Kumar Aggarwal (2016) 159 ITD 54 (Chd.)(Trib.)
185
Interest on borrowed capital S. 36(1)(iii)
581 S. 36(1)(iii) : Interest on borrowed capital -Amount of loan was given by assessee was
less than interest free funds available with it, disallowance of interest was unjustified
Dismissing the appeal of the revenue, the Tribunal held that the amount of loans given
by assessee was less than interest free funds available with it, disallowance of interest
was not warranted. (AY. 2008-09)
Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)
582 S. 36(1)(iii) : Interest on borrowed capital – Fund flow statement was not filed –
Disallowance of interest was held to be justified.
Tribunal held that, the assessee has not filed fund flow statement was not filed-
Disallowance of interest was held to be justified. (AY. 2001-02)
ACIT v. Autolite (India) Ltd. (2016) 143 DTR 98 / 180 TTJ 223 (Jaipur)(Trib.)
583 S. 36(1)(iii) : Interest on borrowed capital – Assessee had given interest-free loans
and advances for business purposes out of its own funds – Matter to be considered
denovo in case
The Assessee claimed interest expenses, while it had given interest-free loans and
advances to various parties. The AO disallowed the claim of the Assessee of interest
expenses on account of the fact that it had not charged interest on loans and advances.
The Assessee claimed that the advances were trade advances and the ITAT in the
preceding years had deleted similar disallowances in case of advances to 16 parties.
Further, it was also claimed that it had adequate interest-free funds. The ITAT remanded
the matter to the AO to consider the earlier year order with respect to the said 16
parties and directed the assessee to file cogent evidences to prove that the advances
were for prudent business purposes. (AY. 2006-07)
Casby Logistics P. Ltd. v. DCIT (2016) 47 ITR 230 (Mum.)(Trib.)
584 S. 36(1)(iii) : Interest on borrowed capital – Fresh loans were only utilized for purpose
of repaying old loans – Interest on new loans should be allowed as deduction as used
only for business purpose
Fresh loans were utilized only for purpose of repaying old loans which in earlier assessment
years had been held to have been utilised only for business purpose, interest on new loans
should be allowed as deduction as used only for business purpose. (AY. 2009-10)
Senate v. Dy. CIT (2016) 158 ITD 315 (Bang.(Trib.)
585 S. 36(1)(iii) : Interest on borrowed capital – Construction business – New project was
not commenced – Interest was held to be allowable as deduction.
Interest on funds borrowed for a new project, same was to be allowed as revenue
expenditure even though said new project was not commenced as there was no
restriction for assessee to use borrowed funds for other projects. (AY. 2010-11)
Vijayashanthi Builders Ltd. v. JCIT (2016) 158 ITD 635 / 48 ITR 310 (Chennai)(Trib.)
586 S. 36(1)(iii) : Interest on borrowed capital – Interest free loans – No disallowance can
be made to the extent of availability of own funds.
During course of assessment proceedings Assessing Officer found that assessee on one
hand had made borrowings and suffered interest thereon, whereas on the other hand
186
S. 36(1)(iii) Interest on borrowed capital
it had advanced monies to parties free of interest. He thus disallowed entire interest
payment as not being incidental to assessee’s business activity. Commissioner (Appeals)
granted relief to assessee to extent of availability of own funds used for giving interest
free loans. On facts, impugned order passed by Commissioner (Appeals) did not require
any interference. (AY. 2008-09)
ITO v. Snowtex Investment Ltd. (2015) 174 TTJ 875 (Kol.)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital – No disallowance in case there are 587
sufficient shareholder’s funds without interest burden and borrowing had been used
for the purpose of business only.
The AO disallowed the interest debited to the P&L A/c for the reason that the Assessee
had given share application money to another company which was not yielding any
interest income and that there was no surplus funds with the Assessee. On appeal,
the ITAT deleted the disallowance and held that the Assessee had proved that it had
sufficient shareholder’s funds without interest burden and the borrowing had been used
for business purpose. (AY. 2008-09)
DCIT v. Sindhu Realtors Pvt. Ltd. (2016) 45 ITR 448 (Delhi)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital – No material proving that it was for non- 588
business exigencies brought on record by the AO – Interest on unsecured loan allowed.
The Assessee paid interest at the rate of 15% on unsecured loan. The Assessee had also
paid interest on advances and loans from its Director, while it had advanced interest-
free loan to the same director. The AO restricted the claim to 8%. On appeal, the ITAT
allowed the interest expense at the rate of 15% and held that the AO had not brought
on record any material to prove that the interest was not for business exigencies and
that the loan was used for purpose other than its business. (AY. 2009-10)
ACIT v. Windlass Steel Craft (2016) 45 ITR 259 (Delhi)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital – Payment of interest on unsecured loans 589
at higher rate – No justification in restricting the deduction at 8% as against 15%
claimed by the assessee.
The Tribunal held that the AO has not brought any material on record to substantiate
that the interest paid by the assessee to the creditor was not for the business exigencies
or the loans were utilized by the assessee elsewhere and not for business purposes.
Therefore, there was no justification in restricting the deduction of interest at 8 per cent
instead of the actual rate of interest at 15%. (AY. 2009-10)
ACIT v. Windlass Steel Craft (2016) 175 TTJ 1 (UO)(Delhi)(Trib.)
S. 36(1)(iii) : Interest on borrowed capital – Extension of existing business – Interest 590
is not allowable till capital asset acquired was put to use.
Assessee paid interest on borrowed capital which was used for acquisition of wind mill
for extension of existing business of generation of electricity through windmill, interest
could not be allowed till capital asset acquired by assessee was put to use.(AY. 2011-12)
Narasu’s Spinning Mills v. ACIT (2016) 157 ITD 512 (Chennai)(Trib.)
187
Interest on borrowed capital S. 36(1)(iii)
591 S. 36(1)(iii) : Interest on borrowed capital – Sufficient interest free funds – Presumption
is advances were from interest free funds – No disallowance can be made.
Dismissing the appeal of revenue the Tribunal held that where assessee had enough
interest-free funds to advance interest-free sums to its sister concern, presumption would
be that advances were out of interest-free funds and, therefore, interest expenses could
not be disallowed under section 36(1)(iii) (AY. 2008-09)
ACIT v. Omax Bikes Ltd. (2016) 156 ITD 566 (Chd.)(Trib.)
592 S. 36(1)(iii) : Interest on borrowed capital – Interest free advances provided to
subsidiary – No interest burden could be attributed in hands of assessee by virtue of
loan advanced to its subsidiary.
On appeal, the Tribunal held that the nexus between the interest-free loans and the
interest-free advance had been established by the assessee and when there was no
interest burden on the assessee by virtue of the loan advanced to its subsidiary, no such
interest could be attributable in the hands of assessee. (AY. 2006-07, 2007-08)
Rain Commodities Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
Rain Cements Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
593 S. 36(1)(v) : Contribution approved gratuity fund – Application by assessee for
approval of scheme neither approved nor rejected by competent authority – Entitled
to allowance. [S.40A(9)]
Dismissing the appeal of revenue the Court held that the assessee could not be made
to suffer for the inaction of the authorities and the Assessing Officer ought not to
have disallowed the claims of contribution to gratuity scheme merely because the
Commissioner had not granted the approval to the gratuity scheme. The assessee was
sponsored by the UCO bank, a Government of India undertaking and had duly complied
with the conditions laid down for approval under section 36(1)(a) of the Income-tax
Act, 1961. Both the appellate authorities had found the expenses allowable based on
material and evidence on record. The assessee had fulfilled the condition laid down for
approval having created a trust with the Life Insurance Corporation of India and had
deposited the amount. The Tribunal was justified in holding that the claims were proper
and allowable. No question of law arose. (AY. 2007-08, 2008-09, 2009-10)
CIT v. Jaipur Thar Gramin Bank. (2016) 388 ITR 228 (Raj.)(HC)
594 S. 36(1)(v) : Contribution to approved gratuity fund – Actual payment towards gratuity
fund was made hence claim was allowable. [S. 43B]
Assessee had made provision and had also made actual payment towards gratuity fund,
hence claim for deduction is respect of same was allowed. (AY. 2009-10, 2010-11)
CIT v. Shri Siddeshwar Co-operative Bank Ltd. (2016) 240 Taxman 588 (Karn.)(HC)
595 S. 36(1)(v) : Contribution to approved gratuity fund – Group gratuity scheme –
Application filed by assessee for approval pending with Commissioner for almost 25
years – Application for approval not having been rejected, deduction cannot be denied.
The assessee had applied in the year 1981 for approval for the group gratuity scheme.
Once an application had been moved for approval and had not been rejected, the
188
S. 36(1)(vii) Bad debt
claim on the sum of contribution could not have been disallowed merely because the
Commissioner had not accorded approval. (AY. 2009-10)
PCIT v. Rajasthan State Seed Corporation Ltd. (2016) 386 ITR 267 (Raj.)(HC)
S. 36(1)(v) : Contribution approved gratuity fund – Employees Group Gratuity Fund to 596
LIC – Approval is pending – Eligible deduction.
Tribunal held that; where assessee paid amount towards Employees Group Gratuity
Fund to LIC and application made by assessee was still pending before Commissioner
for approval and assessee had no control over Fund created by LIC for benefit of its
employees, disallowance under section 36(1)(v) was not to be made. (AY. 2011-12)
Narasu’s Spinning Mills v. ACIT (2016) 157 ITD 512 (Chennai)(Trib.)
S. 36(1)(vii) : Bad debt – Claim for write off of bad debts disallowed as it does not 597
pertain to stock-in-trade or purchase or sale of goods.
The assessee advanced a sum of money on interest for a short period. A part of it was
received and the assessee had written off the balance and a claim was made under
section 36(1)(vii). It was held that ‘Bad debts’ is a commercial name for trade debts
and it cannot include loans made to one’s own employee or moneys overdrawn by an
employee on commission account, which are entirely private matters independent of
the business and that the expression ‘bad debts’ also includes doubtful debts. Applying
the correct legal position, it was held that the Assessing Officer has given a finding that
the alleged debt was not part of the assessee’s stock-in-trade and that as it has not been
incurred while purchasing or selling the goods, in which the company was dealing with
and, therefore, the expenditure involved cannot be treated as a debt and therefore, it is
not an admissible deduction. (AY. 1997-98)
Tube Investments of India Ltd v. JCIT (2016) 240 Taxman 543 (Mad.)(HC)
S. 36(1)(vii) : Bad debt – Write-off of bad debts were held to be allowable as the 598
pending cases against the debtors cannot deter an assessee from making a claim in
respect of write off.
The assessee made a claim of write-off of losses which were partly allowed by the
Assessing Officer. The Tribunal allowed the entire claim by finding that the same were
incidental to the business of the assessee and that pending cases against the debtors
before the Courts cannot deter an assessee from writing off the losses and claim the
same under section 36(1)(vii) as it is a forseeable business loss. The said finding was
upheld by the High Court. (AY .2008-09)
PCIT v. RJD Impex (P) Ltd. (2016) 240 Taxman 502 (Guj.)(HC)
S. 36(1)(vii) : Bad debt – Assessee writing off sum in accounts. Conditions for 599
allowance satisfied. [S.36(2)]
On appeal by the Department: Held, dismissing the appeal, that the assessee was
entitled not to treat the debt as bad so long as it believed that the money could be
recovered. Law did not require the assessee to treat any amount as bad debt if recovery
thereof was apprehended. The Tribunal as the last fact finding authority had concluded
that 50 per cent of the capital of the assessee was deployed in money lending and
189
Bad debt or part thereof S. 36(1)(vii)
hence the fact that the assessee was in money lending business could not be doubted.
Therefore, the Tribunal was right in affirming the allowance.
CIT v. Vivek Engineering and Casting Ltd. (2016) 383 ITR 480 (Cal.)(HC)
600 S. 36(1)(vii) : Bad debt or part thereof – Claim of bad debts on write off of loans given
against the security of stolen property, is allowable. [S.36(2)]
The assessee had claimed bad debts of loans which had become bad during the year.
The said loans were advanced against the security of stolen gold pledged by thieves,
who had cheated the assessee, and was later on seized by the police, being property
of crime. The AO did not allow the claim of bad debts. Following the guidelines of the
RBI, the ITAT allowed the claim of bad debts. (AY. 2010-11)
Muthoot Finance Ltd. v. Addl. CIT (2016) 52 ITR 241 (Cochin)(Trib.)
601 S. 36(1)(vii) : Bad debt – Investment by assessee in joint venture distribution business
– Not able to recover the amount invested inspite of various efforts – Conditions laid
down in section 36(1)(vii) read with Section 36(2) are satisfied – No addition can be
made.
Once Assessee fully satisfied conditions laid down in S. 36(1)(vii) read with S.36(2)
and impugned amount written off by assessee is irrevocable being bad debt, shall be
allowable as revenue expenditure and same could not be added to income of Assessee.
(AY. 2008-09)
Satish B. Kaushik v. ACIT (2016) 47 ITR 739 (Mum.)(Trib.)
602 S. 36(1)(vii) : Bad debt – Advances given in ordinary course of business not adjusted
due to absconding of supplier – Assessee entitled to write off advances as business
loss.
The Appellate Tribunal has held that the advances were given in the ordinary course
of business and when the advances made remained unadjusted due to absconding of
suppliers from the open market, the assessee had no other alternative but to write off
the advances as business loss. (AY. 2006-07)
Admire Sign and Display P. Ltd. v. ITO (2016) 51 ITR 81 (Mum.)(Trib.)
603 S. 36(1)(vii) : Bad debt – It was enough if bad debt was written off as irrecoverable in
accounts of assessee. [S. 36(2)]
Dismissing the appeal of the revenue the Tribunal held that; It was enough if bad debt
was written off as irrecoverable in accounts of assessee. (AY. 2008-09)
ACIT v. Living Media India Ltd. (2015) 70 SOT 536 / 40 ITR 610 (Delhi)(Trib.)
604 S. 36(1)(vii) : Bad debt – Bad debts claimed by assessee in year under consideration
has to be allowed though recovered in subsequent assessment year and offered for
taxation proved the genuineness of the debtors.
Dismissing the appeal of the Revenue, the Tribunal held that bad debts claimed by
assessee in year under consideration has to be allowed though recovered in subsequent
assessment year and offered for taxation proved the genuineness of the debtors. (AY.
2005-06)
DCIT v. Xpro India Ltd. (2016) 161 ITD 93 (Kol.)(Trib.)
190
S. 36(1)(vii) Bad debt
S. 36(1)(vii) : Bad debt – Bad debts allowed if written off in the books of account – 605
Merely because the claim was not made in the return of income, cannot be a reason
to deny the same.
The assessee had written off bad debts in the impugned year. However, during the
course of assessment, it realised that a lower amount was claimed inadvertently in its
return of income. The AO did not allow the claim of the assessee. On appeal, the ITAT
allowed the entire bad debts to the assessee. The ITAT held that there was no estoppel
on legal issues to prevent the assessee from making a lawful claim, and a claim not
made in the return of income, can be made subsequently before an authority who is
competent to grant relief. It was held that what was granted by substantive law cannot
be taken away by the adjudicating authorities on mere technicalities. (AY. 2009-10)
DCIT v. CMS Securities Ltd. (2016) 47 ITR 378 (Mum.) (Trib)
S. 36(1)(vii) : Bad debt – Cash system of accounting – Amount advanced for 606
distribution of films – Non realization – Allowable as revenue expenditure. [S. 36(2)]
Assessee, a film actor and director, made investment with Prachi Narmada Films Pvt.
Ltd. (‘PNF’) of ` 10 lacs in 2001 for distribution of film Nayak. The Assessee had 25%
share in distribution the film. The total cost of the film was ` 36,53,525/- whereas the
business done was of ` 14,07,090/-. Thus loss of ` 22,26,020 was incurred in which
assessee’s share was ` 5,61,605/-. After providing for the loss ` 4,38,395/- was receivable
from PNF. Despite several reminders the amount was not received and the amount was
written off as bad debts. Inadvertently the advance given was shown in balance sheet
as ‘investment’ instead of ‘loans and advances’. The Assessing Officer disallowed on
the ground that Assessee followed cash system of accounting and the said amounts
were reflected as advances and not debtors. It was in the nature of capital advance
and non-recovery can be capital loss and not revenue loss. CIT(A) confirmed the same.
On appeal the Tribunal held that income from the film Nayak was offered for taxation
in AY 2002-03 although it was loss and it is well established and settled proposition
that income include losses and hence the negative income, i.e. loss is also an income
which was offered to taxation in AY 2002-03. The assessee filly satisfied the conditions
of 36(1)(vii) r.w.s. 36(2) and the amount of ` 4,38,395/- were written off as bad debts is
allowable as revenue expenditure. (AY. 2008-09)
Satish B. Kaushik v. ACIT (2016) 47 ITR 739 (Mum.)(Trib.)
S. 36(1)(vii) : Bad debt – Write off of interest income on non-preforming assets will 607
be allowed as bad debts since a reduction from interest income will have the effect
of debit to P&L A/c.
The assessee, an NBFC, reversed interest income accounted for in the earlier years
since the assets concerned had become non-performing assets. The interest income
treated as irrecoverable and deduction was claimed u/s. 36(1)(vii). However, in the
books of account, it was reduced from the interest income, instead of a debit to the
P&L A/c. The claim was not allowed by the Revenue authorities on the ground that it
was not debited to the P&L A/c. The ITAT allowed the claim and held that a reduction
from the credit side of the P&L A/c would have the effect of a debit to the P&L A/c
191
Bad debt S. 36(1)(viia)
and hence the write off should be allowed a bad debts u/s. 36(1)(vii). (AY. 2001-02,
2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
608 S. 36(1)(viia) : Bad debt – Provision for bad and doubtful debts – Schedule bank –
Deduction allowed only to extent of provision made in books of account.
The Tribunal held that assessee cannot claim deduction over and above the provision
created in its books of account. It is mandatory that the assessee should make provisions
equal to the amount claimed as deduction. (AY. 2009-10)
UCO Bank v. Dy. CIT (2016) 49 ITR 34 (Kol.)(Trib.)
609 S. 36(1)(viia) : Bad debt – Provision for bad and doubtful debts – Schedule bank –
Deduction allowable for a Government company engaged in the eligible business of
financing infrastructural facilities.
The assessee was a Government owned NBFC and claimed deduction u/s. 36(1)(viia)
which was deduction of 5% allowable to public financial institutions or State Financial
Corporation. The AO held that it was not a notified entity u/s. 4A(2) of Companies
Act, 1956. The ITAT allowed the claim of the Assessee on the ground that it was a
Government company and engaged in the eligible business of financing infrastructural
facilities. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
610 S. 36(1)(viia) : Bad debt – Provision for bad and doubtful debts – Schedule bank –
provision made against advances of rural branches only.
Provision for doubtful debts as allowable under section 36(1)(viia) is in respect of
provision made against advances of rural branches only; bad debts in respect of
advances of non-rural branches is to be allowed fully and is not required to be set off
against provision for bad debts claimed.(AY. 2003-04, 2004-05)
Allahabad Bank v. ACIT (2016) 157 ITD 693 / 46 ITR 678 (Kol.)(Trib.)
611 S. 36(1)(viii) : Eligible business – Special reserve – Each clause of section 36 was
independent from other in its operation – Deduction under section 36(1)(viii) and
36(1)(viia) would be granted independently without reducing/restricting the amount
of deduction granted in either of two. [S. 36(1)(viia)]
The AO had held that the deduction claimed by the assessee under section 36(1)(viia)
(c) of the Act would be granted after reducing from the total income the deduction
claimed under section 36(1)(viii) of the Act. The CIT(A) and Tribunal had upheld the
decision of the AO that the deduction under clause (viii) of section 36(1) would have to
be computed first before applying the deduction under clause (viia)(c) of section 36(1).
192
S. 36(1)(viii) Financial corporation
On appeal by assessee, the High Court held that it was clear that sub-section (1) of
section 36 lists out the matters in respect of which deductions that can be allowed
while computing the income referred to in section 28. Clauses (i) to (xi) of sub-section
(1) of section 36 did not make any of those matters dependent upon one another. If
an Assessee was entitled to the benefit under one clause of sub-section (1) of section
36, the Assessee was not deprived of the benefit of the other clause. This is how
several clauses in sub-section (1) have been arranged. Thus if each of the clauses
under sub-section (1) of section 36 are independent in its operation and if each one of
them does not depend upon the other clause for the extension of the benefit, then the
interpretation given by the Revenue could not be accepted. Thus the High Court ruled
all the above issues in favour of the Assessee. (AY. 2000-01, 2001-02)
Infrastructure Development Finance Co. Ltd. v. ACIT (2016) 238 Taxman 212 (Mad.)(HC)
S. 36(1)(viii) : Financial corporation – Assignment of loan – Interest income from those 612
accounts upto date of assignment would qualify for deduction.
Where assessee assigns loan portfolio in respect of certain finance accounts to other
company and by such assignment there is no change in character of loan accounts,
i.e., their lifespan is more than five years, which continues even after assignment,
then interest income from those accounts up to date of assignment would qualify for
deduction u/s. 36(1)(viii) in hands of assessee.
Gruh Finance Ltd. v. ACIT (2016) 160 ITD 89 (Ahd)(Trib.)
S. 36(1)(viii) : Financial corporation – Amount of bad debt recovered during year, 613
which had been reduced from eligible profits derived from long-term housing finance
in earlier year, would be considered for calculating claim.
Assessee was deriving interest income from long-term finance which was eligible for
deduction u/s. 36(1)(viii). In earlier year as certain loans had gone bad and assessee had
written off them, eligible profit derived from long-term housing finance was reduced by
amount written off by assessee as bad debt - In relevant assessment year, assessee had
recovered said bad debt. Amount of bad debts recovered by assessee would be included
for calculating claim u/s. 36(1)(viii).
Gruh Finance Ltd. v. ACIT (2016) 160 ITD 89 (Ahd.)(Trib.)
S. 36(1)(viii) : Financial corporation – EMI from various customers on loan portfolios, 614
which had already been sold/transferred by assessee to HDFC, could not be considered
as income derived from long-term housing finance business for claiming deduction.
Assessee, a non-banking finance company, had sold loan portfolio of individual home
loans to HDFC but it was obliged to act as receiving and paying agent for effecting
recoveries from individual borrowers until point of time when all these loans were
fully recovered - Under this arrangement, assessee was entitled to retain interest in
excess of agreed rate of interest recovered from borrowers. In this backdrop, assessee
computed certain surplus being difference between EMI recoverable from borrowers
during remaining loan tenure, and amount payable by assessee to HDFC and included
such amount for calculating deduction under section 36(1)(viii). Income from EMI
residual represented difference of interest charged by assessee for services rendered by
193
Financial corporation S. 36(1)(viii)
it for collecting EMI, etc., on behalf of HDFC and it being not linked with long-term
finance would not form part of eligible profit derived from long-term finance for purpose
of calculating 40 per cent of amount to claim deduction u/s. 36(1)(viii). (A.Y. 2001-02)
Gruh Finance Ltd. v. ACIT (2016) 160 ITD 89 (Ahd.)(Trib.)
615 S. 36(1)(viii) : Financial corporation – Eligible business – Special reserve – Banking
company entitle to deduction.
Banking company has been duly included in ‘specified entity’ to which provisions of
section 36(1)(viii) are applicable. Therefore, deduction has to be allowed to assessee-
bank which is engaged in business of providing long-term finance for industrial,
agriculture and infrastructure development in India and is a Govt. company; however
said deduction will be restricted to amount transferred to special reserve subject to
limit of prescribed percentage of profits derived from providing long-term finance for
approved purposes mentioned in section 36(1)(viii). (AY. 2003-04-, 2004-05)
Allahabad Bank v. ACIT (2016) 157 ITD 693 / 46 ITR 678 (Kol.)(Trib.)
S. 37. General
616 S. 37(1) : Business expenditure – Accrued or contingent liability – Provision for interest
for default in payment of instalments in terms of compromise agreement with bank –
Ascertained liability hence deductible.
The assessee obtained a loan from a bank which it was unable to repay. It entered into
a compromise with the bank by which the total liability was reduced and the reduced
sum was payable in a phased manner with interest on the reducing balance and in case
of delay by a period of one year in payment of respective instalments, interest was to be
charged. The assessee made a provision for interest at ten % as a default of compromise.
For the AY. 1995-96, the Assessing Officer disallowed the provision and the disallowance
was confirmed by the Commissioner (Appeals). However, the Tribunal allowed the
interest amount and on appeal by the Department, the High Court held, dismissing it,
that even if the amount of loan was not paid by the assessee as per the agreement, the
liability could not cease to exist, that the bilateral consented action on behalf of the
parties was binding in terms of the agreement, and that therefore, the interest liability
was not a contingent liability, but an ascertained liability. On appeal to the Supreme
Court: The Supreme Court dismissed the appeal holding that the matter was covered
against the Department by the decision in Taparia Tools Limited v. Joint CIT [2015] 372
ITR 605 (SC). (AY. 1995-96)
CIT v. Modern Spinners Ltd. (2016) 382 ITR 472 / 243 Taxman 437 (SC)
Editorial : Decision in CIT v. Modern Spinners Ltd. [2006] 284 ITR 308 (Delhi) is affirmed.
617 S. 37(1) : Business expenditure – Enhanced rent paid under agreement was held to
be allowable.
Dismissing the appeal of revenue the Court held that in view of the revamp of the
machinery a fresh agreement had been entered in to, warranting the payment of higher
rent and that agreement was not a sham transaction, and the High Court affirmed the
findings of the Tribunal. (AY. 1988-89, 1989-90, 1990-91)
CIT v. Khoday Breweries Ltd. (2016) 382 ITR 1 / 243 Taxman 229 (SC)
194
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Interest paid for broken period should not 618
be considered as part of the purchase price, but should be allowed as revenue
expenditure in the year of purchase of securities.
Interest paid for broken period should not be considered as part of the purchase price,
but should be allowed as revenue expenditure in the year of purchase of securities.
(CANo. 1549 of 2006, dt. 12-8-2008)(AY.1978-79)
CIT v. Citi Bank N.A. (SC); www.itatonline.org
Editorial: American Express International Banking Corporation v. CIT (2002) 258 ITR 601
(Bom.)(HC) is affirmed. Vijay Bank Ltd v. CIT (1991) 187 ITR 541 (SC) is distinguished.
S. 37(1) : Business expenditure – Amount payable to the purchasers of the plot of land 619
equal to the cost of plot after a period of 5 years under “Money back Novel scheme”
is allowable in the year in which the liability is crystallised. [S. 145]
The High Court held that the amount payable to the purchasers of the plot of land
equal to the cost of plot after a period of 5 years under “Money back Novel scheme”
is allowable in the year in which the liability is crystallised but only the payment is
postponed. It cannot be deferred over a period of 5 years, which is the contention of
the Assessing Officer. (AY. 1994-95)
Macro Marvel Projects Ltd. v. ACIT (2016) 142 DTR 358 (Mad.)(HC)
S. 37(1) : Business expenditure – Capital or revenue – Abandoned project – No new 620
business – Expenditure was held to be allowable as business expenditure
The assessee cellular company claimed the expenditure as revenue expenditure being
the amount written off by the assessee in respect of expenses incurred on projects
originally set up to put cell sites, but later abandoned. The AO disallowed the expenses
as capital in nature to bring in to existence of new asset. On appeal Tribunal allowed
the claim of the assessee holding that cellur towers were set up for purpose of assesse’s
’own business of providing cellular services to customers more efficiently conveniently
and profitably. Towers were not to be set up for leasing out to third party and, thus it
could not be said that towers were new source of income hence the said expenditure
was revenue in nature. On appeal by the revenue, dismissing the appeal of the revenue,
the Court held that, since no new business was set up, expenditure was held to be
allowable as business expenditure. (AY. 2001-02)
CIT v. Idea Cellur Ltd. (2016) 76 taxmann.com 77 (Bom.)(HC)
Editorial : SLP of revenue is accepted, CIT v. Idea Cellur Ltd. (2017) 247 Taxman 313 (SC)
S. 37(1) : Business expenditure – Gratuity – Scheme of voluntary retirement – 621
Commercial obligation – Payment made by assessee to its subsidiary is amount
expended for purpose of business of assessee, and is, thus, admissible deduction.
Payment made to subsidiary under commercial obligation was held to be allowable as
business expenditure.
Wallace Flour Mills Co. Ltd. v. CIT (2016) 142 DTR 1 / 289 CTR 444 (Bom.)(HC)
195
Business expenditure S. 37(1)
622 S. 37(1) : Business expenditure – Stay by supreme Court – Deduction on account of
‘Cess’ and ‘Cess Surcharge’ subsequently held as invalid and admissibility of deduction
claim made in the computation of income, entries in the books of account is not
relevant for claiming deduction [S. 145]
Assessee was a public company having its registered office at Dalmiapuram in State
of Tamil Nadu. During the year, it had claimed a deduction on account of accrued
liability of ‘cess’ and ‘cess surcharge’ levied under the Madras Panchayats Act, 1958 as
amended by Madras Act No. 18 of 1964, even though such amount was not debited by
the assessee in the profit and loss account and claimed as deduction in the computation
of income filed along with return of income.
AO rejected aforesaid claim of assessee holding that liability had not accrued in view
of stay granted by Supreme Court of India on levy of the ‘cess’ and ‘cess surcharge’
subsequently and also same was not debited in the books of account by the assessee.
CIT(A) also held that no deduction was permissible since levy of cess and cess
surcharge had been held to be unconstitutional, no liability as claimed by Assessee was
in existence at time of making assessment. Tribunal upheld the action of AO/CIT(A).
On appeal, the High Court held that the computation of income chargeable to tax in a
given assessment year is not dependent on the date on which the assessment for that
year is completed. The events having a bearing on the income of Assessee have to be
accounted for in the year in which the events occur. Thus, the effect of cessation of
liability by virtue of the decision of the Supreme Court would have to be assessed
year in which Supreme Court decision is delivered and hence, the claim of expense
on account Cess and Cess Surcharge is to be allowed in the year under consideration.
Further, the High Court placing reliance on the decision CIT v. Kedarnath Jute Mfg. Co.
Ltd( 1971) 82 ITR 363 (SC) has held that AO was required to assess income of assessee
based on accounting system followed as well as provisions of the Act and if assessee
under some misapprehension or mistake failed to make an entry in books of account
and although under the law, a deduction must be allowed by Income Tax Officer. Thus
the question was answered in favour of assessee and against Revenue.
Dalmia Cement (Bharat) Ltd. v. CIT (2016) 137 DTR 217 (Delhi)(HC)
623 S. 37(1) : Business expenditure – SEBI registration fee – Held to be allowable
expenditure. [S. 145]
AO disallowed the claim on the ground that there was no supporting documents . The
Tribunal allowed the claim on the ground that the payment was made by account payee
cheque. Dismissing the appeal of the revenue the Court held that the payment was made
along with the interest by cheque hence the order of Tribunal was upheld. (AY. 2004-05)
CIT v J. M. Financial Securities (P) Ltd. (2016) 241 Taxman 551 (Bom.)(HC)
624 S. 37(1) : Business expenditure – Capital or revenue- Expansion of business – Expenses
credited to capital account – Not conclusive – Expenses is deductible
In a case of a new unit being merely an expansion of the existing business of the
assessee and not setting up of a new business the expenses incurred in that regard
would be allowable as revenue expenses under section 36(1)(iii) or section 37. The mere
fact that the expenses have been capitalised in the books of account is not conclusive.
196
S. 37(1) Business expenditure
Held that there seemed to be an expansion in the existing unit of business. The
expenses incurred in relation with it were deductible. (AY. 1996-97, 1997-98)
CIT v. Kayal Syntex Ltd. (2016) 389 ITR 84 (Guj.)(HC)
S. 37(1) : Business expenditure – Commission to third parties – Disallowance was held 625
to be justified – Proceedings before settlement commission was held to be independent
proceedings [S. 28(i), 245D]
Dismissing the appeal of the assessee the Court held that disallowance of commission
was held to be justified and proceedings before settlement commission was independent
proceedings. (AY. 2000-01, to 2003-04)
D. Srinivas Vyas v. ITO (2016) 73 taxmann.com 4 (Mad.)(HC)
Editorial : SLP of the assessee is dismissed as withdrawn, permission to file review
petition before the Settlement Commission was granted. D. Srinivas Vyas v. ITO (2016)
242 Taxman 171 (SC)
S. 37(1) : Business expenditure – Expenditure incurred by – Corporation on 626
maintenance of Thiruvalluvar statue at Kanyakumari was allowable as deduction
Dismissing the appeal of the revenue, the Court held that; the expenditure incurred
by assessee-corporation on maintenance of Thiruvalluvar statue at Kanyakumari was
allowable as deduction. (AY. 2005-06, 2006-07)
CIT v. Tamil Nadu Tourism Development Corporation Ltd. (2016) 241 Taxman 441 / 288
CTR 444 (Mad.)(HC)
S. 37(1) : Business expenditure – Job work charges – Contribution for effluent 627
treatment plant was held to be deductible. Amount paid to farmers on account of
penalty was held to be deductible if compensatory and not penal
Dismissing the appeal of revenue the Court held that job work charges was held to be
deductible. Contribution for effluent treatment plant was held to be deductible. Whenever
any statutory impost paid by an assessee by way of damage or penalty or interest, is
claimed as an allowable expenditure under section 37(1) the assessing authority is
required to examine the scheme of the provisions of the relevant statute providing for
payment of such impost notwithstanding the nomenclature of the impost as given by the
statute, to find whether it is compensatory or penal in nature. The authority has to allow
deduction under section 37(1) wherever such examination reveals the concerned impost
to be purely compensatory in nature. (AY. 1994-95, 1996-97, 1997-98)
CIT v. Metrochem Industries Ltd. (2016) 389 ITR 181 (Guj.)(HC)
S. 37(1) : Business expenditure – Capital or revenue – Professional fees for enhancing 628
efficiency of assessee’s organization was held to be revenue expenditure
Dismissing the appeals of revenue, the Court held that Professional fees paid for
implementation of SAP software programme for enhancing efficiency of assessee’s
organisation which did not have any enduring benefits, was not an amount for purchase
of technology; hence, same was not in nature of capital expenditure but revenue
expenditure. (AY. 2006-07, 2007-08)
CIT v. KSB Pumps Ltd. (2016) 243 Taxman 240 (Bom.)(HC)
197
Business expenditure S. 37(1)
629 S. 37(1) : Business expenditure – Travelling expenses of Director’s wife was held to be
not allowable as deduction.
Assessee-company claimed travelling expenses in respect of its Director’s wives who
travelled with Directors while they were on business tours. Assessing Officer rejected
expenditure as being unsatisfactory. Tribunal allowed the claim of assessee. On appeal
by revenue, allowing the appeal the Court held that whether Director’s spouse travelled
with him for business purpose or not was essentially a question of fact not only
in respect of each year but in respect of each tour, burden of proving same was on
assessee; since, assessee did not prove issue, case would be in favour of revenue. (AY.
1991-92)
CIT v. Hero Cycles Ltd. (No 2) (2016) 243 Taxman 28 / (2017) 393 ITR 164 / 293 CTR
23 / 147 DTR 265 (P&H)(HC)
630 S. 37(1) : Business expenditure – Capital or revenue – Corporate brand building –
Expenditure incurred by assessee – company on corporate advertisement to maintain
its corporate image which resulted in increased sale of products, was to be allowed
as revenue expenditure
Dismissing the appeal of revenue, the Court held that Expenditure incurred by assessee-
company on corporate advertisement to maintain its corporate image which resulted
in increased sale of products, was to be allowed as revenue expenditure. (AY. 2006-07)
CIT v. Asian Paints (India) Ltd. (2016) 243 Taxman 348 (Bom.)(HC)
631 S. 37(1) : Business expenditure – Capital or revenue – Techno Commercial Agreement’
and ‘Brand Licensing Agreement’ – Held to be revenue in nature
Dismissing the appeal of revenue, the Court held that amount paid under head ‘Techno
Commercial Agreement’ and ‘Brand Licensing Agreement’ was held to be revenue in
nature. (AY. 2005-06 to 2009-10)
PCIT v. Nitrex Chemicals India Ltd. (2016) 243 Taxman 371 (Delhi)(HC)
632 S. 37(1) : Business expenditure – Bogus purchases – Paid by account payee cheques –
Sales was accepted – GP was normal – Deletion of addition by the Tribunal was held
to be justified. [S. 69C, 260A]
The Assessing Officer made additions on account of certain purchases made by the
assessee holding them as bogus and that the assessee failed to prove the genuineness
of such purchases in spite of opportunities being granted. The Commissioner (Appeals)
found that the books of account of the assessee were duly audited and that they were
not considered by the Assessing Officer. The Tribunal found that for all the disallowed
purchases, payments were made through account payee cheques and that the assessee
had fully co-operated in the proceedings and furnished the necessary particulars.
On appeal : Held, dismissing the appeal, that the Commissioner (Appeals) and the
Tribunal had concurrently upheld the assessee’s contentions after appreciating the rival
contentions. Their decisions essentially determined the questions of fact. No question
of law arose. (AY. 2007-08)
CIT v. Anju Jindal (Smt.) (2016) 387 ITR 418 (P&H)(HC)
198
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Entertainment expenditure – Disallowance of 25% of 633
expenses was held to be reasonable [S. 37(2)]
Dismissing the appeal of the assessee the Court held that Staff welfare expenses and
expenses incurred on outsiders not shown separately in accounts of assessee, hence
estimation of entertainment expenditure for disallowance at 25 per cent of total
expenditure by Assessing Officer reasonable. (AY. 1995-96)
Cebon India Ltd. v. CIT (2016) 387 ITR 502 (P&H)(HC)
S. 37(1) : Business expenditure – Guarantee commission paid to State Government for 634
guarantee issued at assessee’s request to Housing Urban Development Corporation –
Held allowable as revenue expenditure
Allowing the appeal of assessee the Court held that deduction on the expense incurred
on account of payment of guarantee commission was allowable. CIT v. Sivakami Mills
Ltd. (1997) 227 ITR 465 (SC) followed. (AY. 2010-11)
Haryana State Road and Bridges Development Corporation Ltd. v. CIT (2016) 388 ITR 253
/ 243 Taxman 187 (P&H)(HC)
S. 37(1) : Business expenditure – Amount transferred out of profit and loss account to 635
storage fund for molasses and alcohol account – Admissible deduction. [Ethyl Alcohol
(Price Control) Amendment Order, 1971
On reference the Court held that the amount of ` 28,983 transferred out of the profit
and loss account to storage fund for molasses and alcohol account to meet the statutory
requirements of Ethyl Alcohol (Price Control) Amendment Order, 1971, was an
admissible deduction in working out the business income. (AY. 1980-81)
Somaiya Organo Chemicals Ltd. v. CIT (2016) 388 ITR 423 / 290 CTR 30 / 142 DTR 361
(Bom.)(HC)
S. 37(1) : Business expenditure – Sub-contractors – Trough banking channel – Held to 636
be allowable
Dismissing the appeal of revenue the Court held that The assessee producing necessary
material relating to sub-contracting a part of his work before the Commissioner
(Appeals). There was nothing to doubt the genuineness of payments effected through
banking channels in favour of the two sub-contracting agencies. The conclusions drawn
by the Commissioner (Appeals) and the Appellate Tribunal were sustainable. (AY.
2010-11)
CIT v. SVE Engineers P. Ltd. (2016) 388 ITR 11 / 243 Taxman 193 (Mad.)(HC)
Editorial : Refer AIT v. SVE Engineers P. Ltd. (2015) 63 taxmann.com 86 (Chennai)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure incurred in setting 637
up new line of same business is held to be deductible
Dismissing the appeal of revenue the Court held that the Commissioner (Appeals) after
appreciating the evidence produced on record had observed that various businesses
carried on by the assessee including health care constituted the same business of the
assessee. The Appellate Tribunal was right in law in allowing the expenses for setting
up new business and fee paid treating them as revenue in nature. (AY. 1999-2000)
CIT v. Max India Ltd. (No. 1) (2016) 388 ITR 74 / 243 Taxman 40 (P&H)(HC)
199
Business expenditure S. 37(1)
638 S. 37(1) : Business expenditure – Legal and professional fees – Transfer pricing – Held
to be deductible [S. 92C]
Dismissing the appeal of revenue the Court held that The Tribunal found that the nature
of the services rendered by M was supported by an invoice. It was further found that
the nature of the services provided by M were such that it was difficult to provide
evidence of the services having actually been rendered. Further, the Tribunal accepted as
relevant the assessee’s contention that it was in fact able to achieve an export turnover
of ` 29 crores and that this demonstrated prima facie that the services were rendered by
M. It was not possible to say that the conclusion arrived at by the Tribunal was absurd
or perverse. It was a possible view. On the facts of the case the Appellate Tribunal was
right in holding that the legal and professional expenses were allowable. (AY. 2002-03)
CIT v. Max India Ltd. (No. 2) (2016) 388 ITR 81 / 75 taxmann.com 268 (P&H)(HC)
Editorial: SLP is granted to the revenue, CIT v. Max India Ltd. (2017) 246 Taxman 308 (SC)
639 S. 37(1) : Business expenditure – Capital or revenue – Current repairs – Amount paid
to extend life of machinery after expiry of its life span, was held to be allowable as
revenue expenditure [S. 31]
Dismissing the appeal, the Court held that Amount paid to extend life of machinery after
expiry of its life span, was held to be allowable as revenue expenditure. (AY. 1993-94
to 1999-2000)
CIT v. Neyveli Lignite Corporation Ltd. (2016) 388 ITR 172 (Mad.)(HC)
640 S. 37(1) : Business expenditure – Contribution to recognized provident fund – Gratuity
actually paid was held to be deductible [S. 36(1)(iv)]
Dismissing the appeal of revenue the Court held that the mere fact that the contribution
would not come within the ambit of the provisions of section 36(1)(iv) would not
disentitle the assessee to claim the benefit under section 37(1) if the requirements
thereunder were satisfied. The assessee had not merely made a provision but payment
was actually made and therefore, was entitled to deduction. (AY. 2009-10)
CIT v. Shri Siddeshwar Co-Operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588 (Karn.)(HC)
CIT v. Sindagi Urban Co-operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588
(Karn.)(HC)
641 S. 37(1) : Business expenditure – Capital or revenue – Expenses on dry docking of rigs
and vessels on maintenance of assets allowable as revenue expenditure
Dismissing the appeal of revenue, the Court held that the expenditure on dry docking
was revenue expenditure and hence deductible. (AY. 2005-06)
CIT v. Oil and Natural Gas Corporation Ltd. (2016) 387 ITR 710 (Uttarakhand)(HC)
642 S. 37(1) : Business expenditure – Provision in respect of concluded transaction is
provision hence deductible
Court held that the assessee had made provision in respect of a percentage of sales to
account for various expenses transferred to a separate account. This had been claimed.
The claim of expenditure being consistent with the method of accounting followed and
the provision having been made on concluded transactions, it was allowable. (AY. 2002-03)
CIT v. Wipro GE Medical System Ltd. (2016) 387 ITR 77 (Karn.)(HC)
200
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Difference between direct sales and sales through 643
franchisee hence difference must be taken into account
Court held that what the Assessing Officer had done was to delete the value of franchise
sales from the total expenses. No method of accountancy adopted by the assessee was
disturbed. This was justified. (AY. 2002-03)
CIT v. Wipro GE Medical System Ltd. (2016) 387 ITR 77 (Karn.)(HC)
S. 37(1) : Business expenditure – Entries allowed in earlier and subsequent years 644
hence deduction cannot be denied
That the assessee had cured the defects pointed out by the Assessing Officer, by filing
the necessary auditor’s report before the Commissioner which was properly considered
and it was held that it was a genuine error in the book entry and this was confirmed by
the Tribunal. The error occurred in the book entries for the assessment years 2002-03
and 2003-04, and the Revenue had not raised this question in appeal for the assessment
year 2003-04. In such circumstances, the Revenue challenging this issue only in this
appeal relating to Assessment Year 2002-03, without just cause was not sustainable.
(AY. 2002-03)
CIT v. Wipro GE Medical System Ltd. (2016) 387 ITR 77 (Karn.)(HC)
S. 37(1) : Business expenditure – Secret commission “mehta sukhadi” paid to 645
employees of client – Failure by assessee to establish payment of secret commission
– Disallowance was held to be proper-Inflation of labour charges and wrong billing
– Disallowance based on facts and statement made during search, disallowance was
held to be justified [S. 132(4)]
Dismissing the appeal the Court held that; the Appellate Tribunal was right in sustaining
the addition of ` 1,37,375 being payment made on account of secret commission “mehta
sukhadi”.
That during the course of search the senior partner had made a statement under
section 132 of the Act that labour expenses were inflated. The Commissioner (Appeals)
who partly deleted the additions made on account of labour charges and restricted
them to 10 per cent of ` 10.97 lakhs, had himself rendered a finding that there was a
shortcoming in the accounts of the labour charges till the date of search. The Appellate
Tribunal found that the Assessing Officer had rendered a finding that the assessee had
not entered bills for hiring charges in its books of account in the day-to-day running of
the business and hence the contention that in the absence of any error or discrepancy
being noted in the accounts, no amount could be added on account of non-billing was
not acceptable. Therefore, reliance by the Tribunal upon the statement made under
section 132(4) of the Act after considering the retracted statement, could not be faulted.
The view taken by the Tribunal was a possible view. (AY. 1990-91)
T. Lakhamshi Ladha & Co. v. CIT (No. 2) (2016) 386 ITR 245 / 242 Taxman 325 / 288
CTR 330 (Bom.)(HC)
S. 37(1) : Business expenditure – Trial run expenditure incurred for expansion of 646
existing manufacturing facilities was to be allowed as revenue expenditure
Allowing the appeal of the assessee, the Court held that there was only one company
which managed the business of both the units and supplied the required staff to both
201
Business expenditure S. 37(1)
the units. Therefore, the Bangalore unit could not be treated as a new business but was
only an establishment of the existing business and therefore, the expenditure incurred
was allowable as a revenue expenditure.
Bell Ceramics Ltd. v. Dy. CIT (2016) 242 Taxman 134 (Guj.)(HC)
647 S. 37(1) : Business expenditure – Travelling expenses of head office personnel on
business to its branches incurred in India was held to be allowable [S. 44C]
Travelling expenses incurred in India by the head office personnel of a foreign bank on
behalf of the Indian branch is deductible in its hands and section 44C would not be
applicable. (AY. 1998-99, 1999-2000)
DIT (IT) v. Oman International Bank S.A.O.G. (2016) 386 ITR 151 (Bom.)(HC)
Editorial: SLP was granted, CIT v. Oman International Bank S.A.O.G. (2016) 382 ITR (St.)
35]
648 S. 37(1) : Business expenditure – Mercantile system of accounting – Customs duty
– Assessee challenging increase in payment of customs duty before Supreme Court –
Mere challenge to demand would not by itself lead to cessation of liability – Assessee
cannot be denied deduction of amounts paid for purchase of goods [S. 43B, 145]
Dismissing the appeal of revenue, the Court held that the agreements between the
parties provided that the consideration payable for the purchase of goods included
within it, the duty of customs payable on the imported goods as a part of the cost
incurred by the seller. Therefore, the cost of purchase of goods was not only the
expenses incurred by the seller from the opening of the letter of credit but continued
to run till the execution of the contract. The mere fact that the seller of the goods had
obtained a stay, would not by itself result in an unascertained and unqualified liability.
Moreover, since the assessee was following the mercantile system of accounting, mere
challenge to the demand by the seller might not by itself lead to the liability ceasing.
Although, the seller of the goods might not be able to claim deduction since it was paid
in terms of section 43B of the Act, this would not deprive the assessee of the deduction
of the amounts paid by it for purchase of goods. Thus, the assessee would be entitled
to deduct the amount of ` 1.78 crores as consideration paid for the goods in the AY.
(AY. 1985-86)
CIT v. Monica India (No.1) (2016) 386 ITR 608 / 240 Taxman 60 / 286 CTR 426 / 135
DTR 281 (Bom.)(HC)
649 S. 37(1) : Business expenditure – Capital or revenue – Current repairs – Replacing of
parts was held to be revenue expenditure [S. 31]
Dismissing the appeal of revenue, the Court held that expenditure on replacement of
various components in boilers and BWE was only to preserve and maintain existing
assets without any enduring advantage hence expenditure was revenue in nature (AY.
1993-94 to 1999-2000)
CIT v. Neyveli Lignite Corporation Ltd. (2016) 388 ITR 172 / 240 Taxman 473 (Mad.)(HC)
202
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Contribution to State Renewal Fund, for safety and 650
welfare benefit of employees – Held to be allowable as business expediency
Any expenditure for the welfare and benefit of the employees was allowable expenditure
under section 37(1). It had been found that it was a legal obligation of the assessee
to contribute to the State welfare fund. It was for the assessee to decide whether any
expenditure had to be incurred in the course of business and the contribution to the
State welfare fund expenditure being in the nature of business expediency was allowable
expenditure. (AY. 2009-10)
PCIT v. Rajasthan State Seed Corporation Ltd. (2016) 386 ITR 267 (Raj.)(HC)
S. 37(1) : Business expenditure – Accrual – Liability crystallising during relevant 651
assessment year on approval, held to be allowable as deduction [S. 145]
Since a finding of fact had been recorded by the appellate authorities that the approval
for payment of the expenses had been given during the year under appeal and therefore,
the liability crystallised during the year and not prior to that, amount was allowable as
deduction. (AY. 2009-10)
PCIT v. Rajasthan State Seed Corporation Ltd. (2016) 386 ITR 267 (Raj.)(HC)
S. 37(1) : Business expenditure – Fines and penalties – Penalty charges paid to 652
Pollution control Board was held to be allowable
The payment made by the assessee to Pollution Control Board was for the purpose of
compensating the damage to the environment and this compensation was recovered
on the “polluter pays” principle. It was not the case that the business pursued by the
assessee was illegal. Hence, the amount was allowed as deduction. (AY. 2003-04)
Shyam Sel Ltd. v. Dy. CIT (2016) 386 ITR 492 / 72 taxmann.com 105 / (2017) 148 DTR
167 / 293 CTR 316 (Cal.)(HC)
S. 37(1) : Business expenditure – Exporting herbal products – Expenditure incurred in 653
cultivating rare herb – Deductible
Coleus was a rare herbal plant. The assessee had been in the business of manufacture
and export of herbal extracts including cultivation of coleus. To maximize the
production and sale of herbal extract, the assessee incurred expenditure on cultivation
activities for the development of coleus. The expenditure incurred on cultivation of the
herb was deductible. (AY. 2006-07)
PCIT v. Sami Labs Ltd. (2016) 386 ITR 81 / 241 Taxman 102 (Karn.)(HC)
S. 37(1) : Business expenditure – Current repairs – Onus is on the assessee – 654
Disallowance of expenses was held to be justified
On appeal, the HC dismissing the appeal, held that the remaining expense cannot
be allowed as the assessee failed to establish that the expenses are not unreasonable
and excessive. For allowability of an expense, the onus is on the assessee to prove the
genuineness of the expenditure as to not being excessive. (AY. 1989-90)
Famous Sand Dredging Co. v. CIT (2016) 386 ITR 450/ 239 Taxman 551 / 139 DTR 50
(Bom.)(HC)
203
Business expenditure S. 37(1)
655 S. 37(1) : Business expenditure – Deduction of entire expense in the year of making
fixed deposit receipt itself [S. 145]
Where the assessee company launched a scheme in terms of which any person who
bought a plot of land from assessee was assured a return of entire land cost upon expiry
of 5 years from date of completion of sale and for the said purpose, created a fixed
deposit with bank. Since liability arose on date of contract and what was postponed
was only payment. Assessee can claim the deduction of entire expense in the year of
making fixed deposit receipt itself. (AY. 1994-95)
Macro Marvel Projects Ltd. v. ACIT (2016) 239 Taxman 189 (Mad.)(HC)
656 S. 37(1) : Business expenditure – Club membership fee was held to be allowable as
revenue expenditure
In view of Otis Elevator Co (India) Ltd. v. CIT (1992) 195 ITR 682 (Bom.)(HC), the Court
held that, club membership fee was held to be allowable as revenue expenditure. (AY.
1997-98)
CIT v. Infrastructure Leasing & Financial Services Ltd. (2016) 239 Taxman 464 (Bom.)(HC)
657 S. 37(1) : Business expenditure – Where the assessee had to close down one of its unit
on account of statutory compulsion, expenditure incurred on shifting of manufacturing
activity of the said unit to other units was to be allowed as a deduction
Where the assessee had to close down one of its unit on account of statutory
compulsion, expenditure incurred on shifting of manufacturing activity of the said unit
to other units was to be allowed as a deduction. High Court held that, the findings were
not shown to be perverse and therefore, revenue’s appeal was held to be dismissed. (AY.
1998-99)
CIT v. Nicholas Piramal (India) Ltd. (2016) 239 Taxman 470 (Bom.)(HC)
658 S. 37(1) : Business expenditure – Capital or revenue – Expenditure incurred on
renovation of rented premises is capital in nature and therefore, depreciation is to be
allowed [S. 30, 32]
The assessee made a claim of expenses incurred on repairs and maintenance of the
premises which also included rented premises. The Assessing Officer found that under
the garb of repairs and maintenance, the assessee had carried out major renovation
and after perusal of the nature of expenses incurred, held that 25% of the expenses is
to be treated as revenue in nature and the balance is to be treated as capital in nature
and thereby, allowing depreciation on the same, which action was upheld both by
CIT(A) and by Tribunal. On appeal, the High Court held that the expenses incurred
provided long term enduring benefit to the assessee and therefore, is to be treated as
capital expenditure. It was also held that the claim is not under section 30 as well as it
excludes expenses in the nature of capital expenditure. (AY. 1996-97)
RPG Enterprises Ltd v. DCIT (2016) 386 ITR 401 / 240 Taxman 614 / 138 taxman 49
(Bom.)(HC)
204
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Bogus purchases – Disallowance of 25% of expenses 659
was held to be not justified [S. 40(A)(3)]
The Assessing Officer disallowed 25% of the payments for purchases incurred by the
assessee on the ground that the payments were actually not made by the assessee for
the purchases made. Tribunal has upheld the order of Assessing Officer. On appeal
allowing the appeal of assessee the Court held that; the purchases were genuine and
are allowable as the Assessing Officer has accepted the corresponding sales and that
it is not established by the Assessing Officer that the payments made by the assessee
for purchases by crossed cheque was ultimately encashed either by or on behalf of the
assessee. Order of Tribunal was set side. (AY. 2003-04)
Yunus Haji Ibrahim Fazalwala v. ITO (2016) 240 Taxman 198 (Guj.)(HC)
S. 37(1) : Business expenditure – Stamp duty expenses incurred in relation to contract 660
executed with Maharashtra State Road Transport Corporation is to be allowed as
revenue expenditure entirely in the year it was incurred [S. 145]
The assessee incurred stamp duty expenses in relation to contract executed with
Maharashtra State Road Transport Corporation. The Assessing Officer disallowed the
same and amortised the same which was reversed by the CIT(A). the Tribunal held that
the same has to be amortised. Reversing the order of the Tribunal, it is held by the High
Court that the stamp duty is in the nature of compulsory levy under a statute and not
an expenditure arising out of business expediency and therefore, has to be allowed in
the year in which it is incurred following the decision of the Honourable Apex Court
in the case of Taparia Tools Ltd v. JCIT [2015] 372 ITR 605 (SC) and that the accounting
practices cannot override the provisions of the Act. (AY. 2003-04)
Prithvi Associates v. ACIT (2016) 240 Taxman 621 (Guj)(HC)
S. 37(1) : Business expenditure – Secret commission – Tribunal was justified in 661
restricting deduction to the extent of one per cent of total sales
Dismissing the appeal of assessee the Court held that where assessee claimed deduction
of secret commission paid to employees of different companies, who had given business
to assessee, since assessee had not kept any accounts as to where and to whom such
commission was paid, Tribunal was justified in restricting deduction to the extent of
one per cent of total sales. (AY. 1997-98)
Patel Brothers v. DCIT (2016) 240 Taxman 487 (Guj.)(HC)
S. 37(1) : Business expenditure – Secret commission paid to employees of customers 662
are to be disallowed as it cannot be proved that such payments are common in the
business of the assessee
Secret commission paid by the assessee to the employees of the customers to secure
contracts, expedite payments etc. are to be disallowed as the assessee did not disclose
the names of the recipients of such commission and that the assessee cannot prove that
such commission was common in the assessee’s line of business. (AY. 1991-92, 1992-93,
1993-94)
T. Lakamshi Ladha and Co. v. CIT (2016) 386 ITR 233 / 240 Taxman 49 / 286 CTR 494
(Bom.)(HC)
205
Business expenditure S. 37(1)
663 S. 37(1) : Business expenditure – Search and seizure – Inflation of labour charges
and wrong billing – Statement of senior partner and retraction by another partner –
Disallowance was held to be justified [S. 132(4)]
Statement made by senior partner of assessee firm at the time of search could not be retracted
by other partner in absence of any allegation of any pressure and coercion by revenue and
there being no evidence to establish that original statement was incorrect. Disallowance based
on facts and statement made during search was held to be justified. (AY. 1990-91)
T. Lakhamshi Ladha & Co. v. CIT (No. 2) (2016) 386 ITR 245 / 242 Taxman 325 / 288
CTR 330 (Bom.)(HC)
664 S. 37(1) : Business expenditure – Gold coins – Natural justice – Disallowance of
expenses was held to be justified – Assessee cannot urge a question on section 69C of
the Act if it did not arise from the order of the Tribunal for the first time before the
High Court [S. 69C, 260A]
Dismissing the appeal of assessee the Court held that the assessee cannot urge a
question on section 69C of the Act if it did not arise from the order of the Tribunal for
the first time before the High Court. The assessee had not sought cross-examination
of the proprietor of O from whom he claimed to purchase gold coins before the
Commissioner (Appeals), but before the Tribunal, a fresh affidavit of the proprietor of
O was filed on which it rested its case. This affidavit did not seek to explain or point
out circumstances under which the statement made earlier on oath by the deponent of
the affidavit was incorrect. The Tribunal independently applied its mind to the affidavit
filed by the assessee and on examination, found it to be unbelievable. So there was
no violation of the principles of natural justice. With regard to the reimbursement,
the authorities came to a finding of fact that no expenditure as claimed in respect
of purchase of gold coins was incurred. Consequently, there could be no question
of reimbursement of an expenditure not incurred. On findings of the facts by the
authorities that no expenditure on purchase of gold coins was incurred, the expenditure
could not be allowed under section 37(1) of the Act. (AY. 2006-07)
Cenzer Industries Ltd v. ITO (2016) 385 ITR 582 / 239 Taxman 543 / 287 CTR 219 / 138
DTR 37 (Bom.)(HC)
Editorial: SLP of assesse was dismissed Cenzer Industries Ltd v. ITO (2016) 242 Taxman
175(SC)
665 S. 37(1) : Business expenditure – Club subscriptions paid by assessee for its executives
– Allowable deductions
Club subscriptions paid by the assessee for its executives in terms of contracts for
employment were allowable deductions. (AY. 1998-99)
CIT v. Duncan Industries Ltd. (2016) 385 ITR 150 /138 DTR 241 / 288 CTR 107 (Cal.)(HC)
666 S. 37(1) : Business expenditure – Capital or revenue – Set up of business-Bank charges
relating to new project of hotel under construction – Capital expenditure – Not
deductible
Dismissing the appeal of assessee the Court held that the The fact that the assessee
had already been in the business or that it had gone in for expansion of the business
by diversifying, did not alter the situation that the hotel business was a new business
206
S. 37(1) Business expenditure
undertaken by it. During the construction of the hotel it could not have been said that
the acquisition of the hotel had been completed. Any expenditure incurred on account
of the new business had to be allowed only when the business had actually been set
up. The order of the Tribunal upholding the disallowance need not be interfered with.
No question of law arose. (AY. 2006-07, 2016)
Video Plaza v. ITO (2016) 385 ITR 404 (Cal.)(HC)
S. 37(1) : Business expenditure – Capital or revenue – Guarantee commission to 667
acquire the asset on installment terms is revenue expenditure
Expenditure incurred for the purchase of the machinery was undoutedly capital
expenditure; for it brought in an asset of enduring advantage. But the guarantee
commission stands on a different footing. By itself, it does not bring into existence any
asset of an enduring nature; nor did it bring in any other advantage of an enduring
benefit. The acquisition of the machinery on installment terms was only a business
exigency. If interest paid on a credit purchase of machinery could be held to be revenue
expenditure, we fail to see how guarantee commission paid to a bank for obtaining easy
terms for acquisition of the machinery could be regarded as capital payments (ITA No.
85/2016, dt. 29.09.2016) (AY. 2010-11)
Haryana State Road & Bridge Development Corporation Ltd. v. CIT (P&H)(HC); www.
itatonline.org
S. 37(1) : Business expenditure – Ad-hoc disallowance of 50% of miscellaneous 668
expenditure – Held, no finding by the AO that either the expenditure was not genuine
or that books have been rejected – Held, disallowance is not justified
The assessee claimed deduction of a certain amount as miscellaneous expenditure. The
AO disallowed 50 per cent of the expenditure on the basis that the assessee was not
doing any business activity but acting as a real estate developer and that the expenditure
claimed was not related to day to day business activities. The CIT(A) held that the
assessee reasonably established that the expenditure was necessary for running any
business establishment and that AO had not held the expenditure to be non-genuine
or disallowance was not based on any scientific method or any specific defects were
pointed out in the books of account. High Court held that CIT(A) had examined the
record and the accounts produced by the assessee and after scrutiny of the same
returned findings of fact that the expenditure was justified. Further it was held that no
rationale was given by the AO for disallowing 50 per cent of the expenditure incurred.
Neither was there a finding that the expenditure was not genuine nor were the books
of account been rejected by the AO. (AY. 2008-09)
CIT v. DLF Hilton Hotels (2016) 240 Taxman 495 (Delhi)(HC)
S. 37(1) : Business expenditure – Expenses incurred on telephone, tea, tiffin and 669
general expenses-Expenses supported by debit vouchers – Ad hoc disallowance of 20%
of expenditure was held to be not justified
Assessing Officer disallowing 20 percent of expenses on ground that sums not verifiable.
Allowing the appeal the Court held that the Assessing Officer has no power to disallow
expenditure when appropriate evidence was adduced. (AY. 2001-02)
Ashok Surana v. CIT (2016) 384 ITR 267 (Cal.)(HC)
207
Business expenditure S. 37(1)
670 S. 37(1) : Business expenditure – Premium on Keyman insurance – Held to be
allowable
Held, dismissing the appeal, that the premium paid on the Keyman insurance policy
taken by the assessee on the life of the partners of the firm was wholly and exclusively
for the purposes of business and was allowable as business expenditure under section
37(1) of the Income-tax Act, 1961. (AY. 2008-09)
PCIT v. Ramesh Steel (2016) 384 ITR 437/ 290 CTR 93 (P&H)(HC)
671 S. 37(1) : Business expenditure – Foreign exchange loss is not a “notional” or
“speculation” loss and is allowable as a deduction [S. 28(i)]
Dismissing the appeal of revenue, the Court held that derivative transactions (forward
contracts) is not applicable to cases of losses in dealings with foreign exchange. Foreign
exchange loss is not a “notional” or “speculation” loss and is allowable as a deduction.
CBDT’s Instruction No. 3 of 2010 which deals with foreign exchange derivative
transactions (forward contracts) is not applicable to cases of losses in dealings with
foreign exchange. (ITA No. 376 of 2014, dt. 11.08.2016) (AY. 2009-10)
CIT v. Vinergy International Pvt. Ltd. (Bom.)(HC); www.itatonline.org
672 S. 37(1) : Business expenditure – Capital or revenue – renovation of leased office
premises – Revenue neutral – Bifurcation of renovation expenses by 70 percent as
revenue and 30 percent as capital justified [S. 32(1), Expln. 1]
On appeal by revenue; dismissing the appeals the Court held that; the Department failed
to show that the findings recorded by the Tribunal were erroneous or perverse in any
manner. The view adopted by the Tribunal in the given facts and circumstances was a
plausible view. Moreover, the case related to the assessment years 2000-01 and 2001-02,
where the allowability of the expenditure was not in dispute but the issue was whether
it had to be allowed in one year as revenue expenditure or by way of depreciation under
Explanation 1 to section 32 of the Act by spreading it over the years. More than thirteen
years from the initial year had passed and the Department was not able to demonstrate
that there was any change in the rate of taxation during these years. Thus, even if a
substantial portion of the expenditure had been capitalised and depreciation allowed
under Explanation 1 to section 32 of the Act, at the prevalent rate admissible under the
Act and the Income-tax Rules, 1962, the entire amount would have been allowed as
deduction on account of depreciation by now and the case would be revenue neutral.
(AY. 2000-01, 2001-02)
CIT v. GlaxoSmithkline Consumer Health Care Ltd. (2016) 383 ITR 290 (P&H)(HC)
673 S. 37(1) : Business expenditure – Capital or revenue – Depreciation – After the
introduction of Expln. 1 to S. 32(1), by a legal fiction, the assessee is treated as the
owner of the building for the period of his occupation – Accordingly, by refurbishing/
decorating or doing interior work, the assessee derives an enduring benefit for the
period of occupation therefore, the expenditure is capital in nature [S. 32]
The assessee incurred certain expenditure on repairs, refurbishing and improvements of
buildings taken on lease and claimed it as revenue expenditure.
The AO treated the said expenditure to be capital in nature and accordingly, rejected
the claim of assessee. However, the CIT(A) reversed the action of AO. Aggrieved by the
208
S. 37(1) Business expenditure
said order, the Revenue preferred appeals before the Tribunal and these appeals were
allowed holding that the expenditure incurred by the assessee can only be treated as
capital expenditure.
On further appeal, the HC held that by virtue of legal fiction created under Explanation
1 to S. 32(1) the assessee is treated as owner of leasehold building. Thus, by
refurbishing, decorating or by doing interior work in the building an enduring benefit
was derived by the assessee for the period of occupation and therefore, such expenditure
incurred by the Assessee was capital expenditure. (AY. 2009-10)
Indus Motor Company (P) Ltd. v. Dy. CIT (2016) 282 CTR 540 (Ker.)(HC)
S. 37(1) : Business expenditure – Revenue expenditure incurred in particular year 674
had to be allowed in the year of expenditure – Irrespective of whether the same
is amortised in the books of account – Revenue could not deny claim of the entire
expenditure as deduction.
Assessee had amortised the amount of 14.87 crores incurred for payment to sub-
arrangers in the books of account for 5 years and thereby debiting only 99.16 lakhs to
its profit and loss account. The AO held that the assessee had amortised the amount
over five years and hence a deduction only to the extent of 99.16 lakhs was allowable
in the subject year of assessment. The CIT(A) upheld the findings of the AO. On appeal
the Tribunal relied on decision of Apex Court in case of Madras Industrial Investment
Corp. Ltd v. CIT (1997) 255 ITR 802 (SC) and India Cements Ltd v. CIT (1966) 60 ITR 52
(SC) and held that the expenditure incurred was deductible in the year of expenditure.
Aggrieved Revenue filed an appeal before the High Court.
The High Court after relying on the decision of the Apex Court in case of Taparia Tools
Ltd v. JCIT (2015) 372 ITR 605 (SC) wherein it has been held that once the assessee had
filed the return making a particular claim the AO was bound to carry out assessment by
applying provisions of the Act and could not go beyond the return. Since the assessee
had claimed the entire expenditure of ` 14.87 crores in the subject assessment year,
the High Court ruled in favour of the Assessee. Accordingly appeal of the Revenue was
dismissed. (AY. 2009-10)
DIT(IT) v. Credit Lyonnais (2016) 238 Taxman 157 (Bom.)(HC)
S. 37(1) : Business expenditure – Commission – Natural justice – Assessee refusing to 675
cross examine witness despite being granted opportunity – No violation of principles
of natural justice – Disallowance of commission was held to be justified [S. 69C]
Every effort was made by the Department to locate M. The failure to produce M for
cross-examination was deliberate. The witness made incriminating statements against the
assessee and the assessee chose not to counter them. Despite opportunities, the assessee
declined to cross-examine him. There was no violation of principles of natural justice
and the uncontroverted statements of the witness were sufficient to substantiate the case
of the revenue against the assessee. The Tribunal was right in upholding the concurrent
findings of the Assessing Officer and the Commissioner (Appeals) regarding disallowance
of the commission payments claimed by the assessee. (AY. 1981-82 to 1983-84)
Roger Enterprises P. Ltd. v. CIT (2016) 382 ITR 639 / 238 Taxman 434 (Delhi)(HC)
209
Business expenditure S. 37(1)
676 S. 37(1) : Business expenditure – Capital or revenue – Superstructure – Matter required
reconsideration [S. 37(1)]
Question of law involved in this case was whether for construction of superstructure
and refurbishing of leasehold building, the expenses involved is capital or revenue
expenditure. The Hon’ble HC referred the matter to the larger Bench to decide this
issue as they viewed that after the introduction of Expl. 1 to 32(1), by a legal fiction,
the assesee is treated as the owner of the building an enduring benefit was derived
by the assessee for the period of occupation and therefore the expenditure was capital
expenditure and not revenue expenditure. Law laid down by the Division Bench in Joy
Alukkas India (P) Ltd v. ACIT (2016) 282 CTR (Ker) 551 required reconsideration. (AY.
2007-08 to 2009-10)
Indus Motor Co. (P) Ltd. v. Dy. CIT (2016) 134 DTR 94 (Ker.)(HC)
677 S. 37(1) : Business expenditure – Capital or revenue – Leasehold premises –
Expenditure incurred for construction of superstructures and setting up of workshop
facilities on leasehold premises – Whether expenditure capital or revenue to be
decided on facts of each case by applying relevant tests – Explanation 1 to section
32(1)(i) [S. 32]
A Division Bench entertained doubt regarding the correctness of an earlier Division
Bench judgment in Joy Alukkas India P. Ltd. v. Asst. CIT (2015) 5 ITR-OL 340 (Ker). On
a reference to the Full Bench of the question whether the judgment in Joy Alukkas case
required reconsideration:
Held, that the Division Bench in its reference order was not correct in its assumption
that by Explanation 1 to section 32(1), Parliament manifested its legislative intention to
treat expenditure incurred by the assessee on leasehold building as capital expenditure.
Had the Legislature intended to provide that all such expenditure incurred by the
assessee as referred to in Explanation 1 shall be treated as capital expenditure,
the Explanation would have used different phraseology. It was a settled principle
of statutory interpretation that the language of the statute was to be read as it is.
Explanation 1 was to be read as it is. Thus whether a particular expenditure was capital
expenditure or revenue expenditure was to be found out from the facts of each case and
by applying the relevant tests in each case and when it was found that the nature of
such expenditure was capital expenditure, Explanation 1 would automatically come into
operation. It could not be said that the ratio laid down in Joy Alukkas’ case was not in
accordance with the ambit and scope of Explanation 1 to section 32. The ratio expressed
therein at paragraph 28 laid down the correct law and needed no reconsideration. The
observations and opinion expressed in paragraphs 29 and 30 of Joy Alukkas’ case for
holding that the expenditure incurred by the assessee was not a capital expenditure
but revenue expenditure were observations based on the facts of that case and relevant
test applied by the Division Bench. The observations made by the Division Bench
in paragraphs 29 and 30 were to be confined to the facts of that case. Whether an
expenditure incurred by the assessee was a capital expenditure or revenue expenditure
was to be decided on the facts of each case applying the relevant tests. (AY. 2007-08,
2008-09, 2009-10)
Indus Motors Co. P. Ltd. v. Dy. CIT (2016) 382 ITR 503 / 134 DTR 73 / 285 CTR 209 (FB)
(Ker.)(HC)
210
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Failure to produce bills and not maintaining of stock 678
register – Disallowance of 5% of expenses was held to be proper
Allowing the appeal of revenue the Court held that failure by assessee to produce bills,
vouchers and other supporting documents in relation to various expenses and as no
stock register was maintained, disallowance of 5% of expenses was held to be proper.
(AY. 2004-05)
CIT v. Rimjhim Ispat Ltd. (2016) 382 ITR 152 (All.)(HC)
S. 37(1) : Business expenditure – Company – Expenses incurred on conveyance and 679
telephone charges of directors – Expenditure incurred in providing benefit free of
charge under Companies Act cannot be disallowed [Companies Act, 1856]
Dismissing the appeal of revenue the Court held that the expenditure incurred in
providing benefit free of charge under the Companies Act, 1956 could not be disallowed.
Therefore, expenses incurred on maintenance of vehicle or conveyance and telephone
of directors of the assessee was allowable. Sayaji Iron and Engg. Co. v. CIT (2002) 253
ITR 749 (Guj.) applied. (AY. 2004-05)
CIT v. Rimjhim Ispat Ltd. (2016) 382 ITR 152 (All.)(HC)
S. 37(1) : Business expenditure – Provision for warranty – Held to be allowable – 680
Commission paid to directors allocated among units – Allocation was held to be
justified [S. 15, 17]
Dismissing the appeal of revenue the Court held that Provision for warranty claims is
allowable. Court held that just as the payment of salary is not dependent on the profit
earned by any unit, the basis of commission payable by the assessee to its directors also
could not be made subject to the profit making ability of a unit. Therefore Commission
payable at the end of the year when the company makes profit is nothing but a part of
the salary. Therefore, it also has to be allocated to the unit which he is heading as a
full time director. (AY. 2001-02 to 2004-05)
Dy. CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
S. 37(1) : Business expenditure – Accrued or contingent liability – Provision for 681
warranty claims – Deduction permissible if requirements fulfilled – Matter remanded
The High Court held that the provision for warranty could be made permissible if the
requirements were fulfilled and remanded the matter to the Tribunal. The Tribunal after
reconsidering the matter, remanded it to the Assessing Officer for a limited purpose of
verification whether the assessee’s provision for warranty was based on past history or
actual expenditure incurred by the assessee on account of such warranty. On appeal by
the assessee. (AY. 2002-03, 2003-04)
Dell International Services India P. Ltd. v. ACIT (2016) 382 ITR 37 (Karn.)(HC)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure in respect of a 682
project which did not materialize has to be treated as revenue expenditure as no
capital asset comes into existence
On the question was to whether if the project does not materialize and an asset is not
created, expenditure on steps in that direction must be treated as capital expenditure or
211
Business expenditure S. 37(1)
revenue expenditure, the Supreme Court in Commissioner of Income Tax v. Madras Auto
Service (P) Ltd., reported at (1998) 233 ITR 468 clinches the controversy. There while
considering the issue, the Court finds that the assessee could not have claimed it as
capital expenditure, as there was no capital asset generated by spending said amount.
The expenditure has been held rightly classified as revenue expenditure.
CIT v. Manganese Ore India Ltd. (2016) 384 ITR 413 / 238 Taxman 315 / 138 DTR 364
(Bom.)(HC)
683 S. 37(1) : Business expenditure – Capital or revenue – Expenditure on “application
software” is revenue expenditure
Allowing the appeal of assessee the Court held that;Expenditure on “application
software” is revenue as it allows efficient carrying on of business and requires to be
constantly updated due to rapid advancements in technology and increasing complexity
of the features. (AY. 1997-98)
Indian Aluminum Co. v. CIT (2016) 384 ITR 386 / 135 DTR 305 / 239 Taxman 51 / (2017)
291 CTR 196 (Cal.)(HC)
684 S. 37(1) : Business expenditure – Capital or revenue – Royalty – Cannot be treated as
job worker or contractor – Held to be allowable
The Assessing Officer disallowed 25 percent of the expenses on account of royalty
as being capital in nature. CIT(A) has allowed the claim which was upheld by the
Tribunal. On appeal dismissing the appeal of revenue, the High Court held that since
the assessee had acted like any other original equipment manufacturer, it could not be
treated as a job worker or a contractor. (AY. 2004-05, 2005-06)
CIT v. Kethin Panalfa Ltd. (2016) 381 ITR 407 / 286 CTR 107 / 133 DTR 261 (Delhi)(HC)
685 S. 37(1) : Business expenditure – Interest on borrowed capital – Interest free advances
– Sufficient interest free advance – No disallowance can be made
Assessee having sufficient interest-free advances from its directors, shareholders and
members of their families to cover interest-free advances made by company .Interest on
borrowings not to be disallowed. (AY. 2008-09)
CIT v. Kapsons Associates (2016) 381 ITR 204 (P&H)(HC)
686 S. 37(1) : Business expenditure – Investments in shops and penthouses – Merely
because some properties were rented it cannot be inferred that investments in other
properties not for business purpose
That the assessee was in the business, inter alia, of making investments in shares and
property. Merely because the assessee had rented out some of its properties, it could
not be inferred that investments in other properties were not for business purposes.
The assessee could always give out its properties on rent and acquire further properties
towards investment. (AY. 2008-09)
CIT v. Kapsons Associates (2016) 381 ITR 204 (P&H)(HC)
212
S. 37(1) Business expenditure
S. 37(1) : Business Expenditure – Commission – PAN to be used by Income Tax 687
Authorities – To track the transactions of commission agents – Matter remitted to
Assessing Officer to conduct further inquiry
Assessee is a business concern dealing in chemicals. It had claimed deduction for
the commission paid to three companies. Assessing Officer held that in absence of
details of services rendered, identification of persons who rendered such services
and justification of the expenditure it was difficult to come to a conclusion that the
expenditure was wholly and exclusively for the business purpose and hence disallowed
the same. The CIT(A) also upheld the views of the Assessing Officer and dismissed the
assessee’s appeal. In appeal to the Tribunal, the Tribunal held the commission paid to
the corporate entities, through banking channel whose PAN have been furnished to the
Assessing Officer cannot be doubted and disallowed without proper enquires. Hence
the Tribunal ruled in favour of the assessee. Aggrieved Revenue filed an appeal before
the High Court. The Revenue contended that the Department had taken all the possible
steps to find about the whereabouts of the concern and it was a duty of the assessee
to prove the claim of deduction. The Revenue stated that the Commission agents were
not traceable and therefore it was for the assessee to produce those commission agents.
Relying on the various judicial precedents High Court held that the onus of proof was
on assessee in cases where there was a proof of payment of commission, and to show
that the payment was exclusively for the business. The High Court observed the powers
of the Income Tax Authorities and laid down the importance and utility of the PAN. The
High Court held that the Income Tax Authorities had power to track the transactions of
the Commission Agents using the PAN. In this result the High Court had set aside and
remitted the matter back to the Assessing Officer with a direction to conduct further
enquiry with regard to the claim of deduction on commission payments. (AY. 2003-04)
CIT v. Textile Dye Chem Corporation (2015) 237 Taxman 354 (Mad.)(HC)
S. 37(1) : Business expenditure – Allowability of travel expenditure – Where foreign 688
buyer of assessee was situated in Singapore, expenditure incurred for travel to
meet buyer in Singapore could only be allowed; and expenses incurred on travel to
countries other than Singapore were to be disallowed
The assessee, an export oriented unit, claimed deduction of foreign travel expenditure
of its president and directors for purpose of marketing and selling its goods. Assessing
Officer found that president and directors of company had not only travelled to
Singapore where associated enterprise was situated but also to other countries and
therefore, disallowed expenses incurred by assessee on travel to countries other than
Singapore. The CIT(A) and Tribunal confirmed order of Assessing Officer. In appeal, the
High Court held that the view taken by Tribunal to restrict the expenses of travel only
to Singapore visit where the foreign buyer of the appellant was situated, could not be
said to be perverse. (AY. 2003-04)
Advance Power Display Systems Ltd. v. CIT (2016) 382 ITR 607 / 237 Taxman 16 / 138
DTR 282 / 290 CTR 330 (Bom.)(HC)
213
Business expenditure S. 37(1)
689 S. 37(1) : Business expenditure – Deferred revenue expenditure – Decision to abandon
project, balance deferred revenue expenditure relating to said project would be
deemed to arise in relevant year.
The assessee was running a project which was not making profits. Therefore, it was
abandoned and entire expenses, including balance deferred revenue expenditure were
written off during the year. The Assessing Officer disallowed the balance deferred
revenue expenditure as it was not related to current year’s income. The CIT(A) allowed
the claim of assessee, which was affirmed by the Tribunal. On appeal, the High Court
held that since the project was abandoned in the assessment year 1995-96 and the entire
expenses was written off during the said assessment year. It can be safely concluded
that the expenditure arose in the relevant year. (AY. 1995-96, 1996-97)
CIT v. Alcove Industries Ltd. (2016) 237 Taxman 226 (Cal.)(HC)
690 S. 37(1) : Business expenditure – Royalty paid to director for use IPR of the director
– Held, assessee company is a separate juristic entity – Payment made as royalty is
an allowable expenditure.
Director of the assessee company, had invented the technology through which ringtones
could be created. He carried on the business in the name and style of ‘phoneytunes.com’
as a sole proprietor. Assessee company entered into an agreement with the director for
using the brand name in lieu of payment of royalty. The AO and CIT(A) held that the
director cannot enter into an agreement with the company as they are the same person.
High Court held that, assessee company is a separate juristic entity and therefore,
can enter into the said agreement. Further, it was held that the director had obtained
copyright in the artistic work comprised in the name ‘phoneytunes.com’ and registration
thereof was not compulsory. Further, it constituted the trademark of the director. Held,
therefore, the assessee was entitled to use the trademark as a licensee and the payment
of royalty made was allowable as a deduction. (AY. 2006-07 to 2008-09)
CIT v. Mobisoft Tele Solutions (P.) Ltd. (2016) 237 Taxman 221 (P&H)(HC)
691 S. 37(1) : Business expenditure – Rule 9B – Cost of preparing positive prints of the
film cannot be treated as a part of the cost of acquisition of distribution rights of films
and the same cannot be carried forward for amortization in terms of Rule 9B [R. 9B]
Assessee, a partnership firm, was engaged in the business of distribution of Hindi
motion picture/films. During the year, assessee claimed set off of expenses pertaining to
the earlier year which related to feature films released during that earlier year but did
not complete a commercial run of 180 days as on 31st March of that year. According
to the assessee, business expenses were to be reduced from the gross realizations and
thereafter the cost of acquisition was to be reduced from the surplus and if the surplus
was not enough to absorb the entire cost, the balance cost was to be carried forward to
the subsequent year. AO held that the cost of feature films (without taking into account
expenses such as cost of prints) was to be reduced from the gross realizations and the
balance was to be carried forward. High Court held that in view of the clear language
of Rule 9B, the cost of preparing positive prints cannot be treated as a part of the cost
of acquisition of distribution rights of films and the same cannot be carried forward for
amortization in terms of Rule 9B. High Court further observed that the assessee was
214
S. 37(1) Business expenditure
entitled to a deduction to the extent the cost of acquisition of the films did not exceed
the amount realized by the assessee from exhibiting the film and the balance cost was
to be carried forward. High Court held that in view of the plain language of Rule 9B(3),
“amount realized” must be given its plain meaning and would mean the amount realized
without accounting for any expenditure incurred by the assessee in its business. (AY.
1992-93, 1993-94)
Honey Enterprises v. CIT (2016) 381 ITR 258 / 236 Taxman 519 / 132 DTR 36 / 289 CTR
262 (Delhi)(HC)
S. 37(1) : Business expenditure – Interest on borrowed capital – Effect of Explanation 8 692
to section 43(1) – Borrowed capital used for construction of hotels as part of expansion
of business – Interest deductible [S. 43(1)]
The construction of three hotels had been undertaken by the assessee in Srinagar, Goa
and Mumbai. The assessee had borrowed loans for the projects. The Assessing Officer
noted that 75% of the total interest of ` 1.54 crores paid on the term loan obtained from
the Jammu and Kashmir Bank amounting to ` 1,15,77,137/- was capitalised. The balance
of ` 38,59,046 was charged to the profit and loss account as revenue expenditure.
According to the Assessing Officer, the assessee did not provide any justification how
25% of the total interest paid could be claimed as revenue expenditure. This was
accordingly added back. The Commissioner (Appeals) deleted the addition and this
was upheld by the Tribunal. On appeal by the Department: Held, that the assessee was
entitled to claim the payment of interest on the borrowings made in relation to the hotel
projects at Srinagar, Goa and Mumbai, which were in the nature of expansion of the
business of the assessee, as revenue expenditure. (AY. 2000-01)
CIT v. Bharat Hotels Ltd. (2015) 64 taxmann.com 14 / (2016) 381 ITR 222 (Delhi) (HC)
S. 37(1) : Business expenditure – Where an assessee follows the mercantile system 693
of accounting, it is not necessary that the liability must have actually been incurred
during the relevant year. If the amount is ascertainable with a reasonable certainty
the assessee can claim it as an expense or deduction. [S. 145]
Assessee is engaged in the business of running cinema hall. It entered into a Licence
Agreement with New Delhi Municipal Council (NDMC) for running the cinema hall for a
period of ten years. The agreement also gave an option to the assessee to get its licence
renewed for a further period of ten years. On completion of term, assessee applied for
renewal of the licence and a fresh licence agreement was entered into between the
assessee and the NDMC wherein the annual license fee was increased by the NDMC.
The assessee paid the increased licence fee for certain period under protest and filed a
suit challenging the enhancement of the said licence fee. This was followed by various
rounds of further litigation and the legal proceedings between the assessee and the
NDMC which are still pending adjudication.
The assessee followed the mercantile system of accounting and in the returns filed for
the assessment years 1982-83 to 2008-09, it claimed deduction towards enhanced licence
fee payable and interest on arrears of licence fee payable to NDMC.
The AO disallowed the claim of licence fees to the extent not paid to NDMC and
interest amount claimed in relation to certain the assessment years. On appeal, CIT(A)
215
Business expenditure S. 37(1)
deleted the addition made by AO. However, the Tribunal upheld the observation of the
AO.
On appeal, the HC held that where an assessee follows the mercantile system of
accounting, it is not necessary that the liability must have actually been incurred
during the assessment year in question to enable the assessee to claim it as an expense
or deduction. If the liability can be ascertained with reasonable certainty, it had to be
allowed as a deduction. (AY. 1987-88 to 2003-04)
Aggarwal and Modi Enterprises (Cinema Project) Co. (P.) Ltd. v. CIT (2016) 381 ITR
469 / 238 Taxman 17 / 131 DTR 289 / 284 CTR 211 (Delhi)(HC)
694 S. 37(1) : Business expenditure – Payment of damages to compensate the loss suffered
by other, is compensatory in nature and hence, allowable.
The assessee had taken on lease a plot of land from the Calcutta Port Trust. It had
encroached some land belonging to the trust, for which the trust asked the assessee to
pay damages before proposal of the assessee for grant of a long-term lease in respect of
the encroached land. The assessee made the said payment and claimed it as revenue
expenditure u/s. 37(1).
The AO treated the impugned payment as capital in nature on the ground that it was
expended to obtain a long-term lease. He also held that the encroachment amounted
to an infraction of law. The CIT(A) and Tribunal concurred with the view of the AO.
On appeal, the HC held that the impugned payment was made to compensate the loss
suffered by the Trust and for benefit already received by the assessee as a user of land.
Therefore, payment is not in the nature of penalty. Further, the impugned payment was
also held to be not a capital expenditure as prayer for lease of encroached land could
not have been examined before payment of the compensation. (AY. 2001-02)
Mundial Export Import Finance (P) Ltd. v. CIT (2016) 131 DTR 195 / 284 CTR 87 / 238
Taxman 34 (Cal.)(HC)
695 S. 37(1) : Business expenditure – Repayment of sales-tax deferral loan – Finance
charges – Held to be allowable as business expenditure. [S. 145]
The assessee-company was engaged in business of financial intermediary agents and
earned income by way of commission and professional fees.
The Assessing Officer was of view that amount debited was not a revenue expenditure
as liability did not exist in praesenti but was a contingent liability. He thus, disallowed
the claim of finance charges, which was up held by the CIT(A). On appeal the Tribunal
held that; finanace charges was to be allowed as business expenditure. (AY. 2007-08)
Knox Investments (P.) Ltd. v. ITO (2016) 161 ITD 527 (Pune)(Trib.)
696 S. 37(1) : Business expenditure – Expenses incurred by pharmaceutical company on
overseas tours of doctors to increase their sales and profitability is held to be not an
allowable expenditure. [Indian Medical Council (Professional Conduct, Etiquette and
Ethics) Regulations, 2002].
Assessee a pharmaceutical company incurred expenditure for sponsoring Doctors
overseas tour and claimed it as business expenditure u/s. 37(1). The AO while
completing the assessment held that assessee had not been able to prove that these
sponsorships of doctors of overseas tours was incurred wholly and exclusively for
216
S. 37(1) Business expenditure
purposes of business. Further observed that spouses of doctors also accompanied to
overseas trips and arrangements which included cruise travel to island, gala dinners,
cocktails, entertainment etc. rather than seminar for product information dissemination
as no details of seminar and its course content were brought on record. Tribunal upheld
the order of the AO stating that these overseas trips were merely to entertain doctors
abroad and lure doctors to solicit business for assessee by illegal means. Expenses
incurred by assessee could not be allowed as business expenditure u/s. 37(1) as they
were clearly hit by Explanation to s. 37 being against public policy as unethical,
prohibited by law and by Regulation 6.4.1 of IMC regulations, 2002 which created bar
on physicians on receiving gifts, gratuities, commissions or bonus in consideration of or
return for referring, recommending or procuring of any patients for medical, surgical or
other treatment. Therefore deduction u/s. 37(1) for expenses incurred towards doctors’
foreign tours was not allowable as per the law. (AY. 2009-10)
ACIT v. Liva Healthcare Ltd. (2016) 161 ITD 63 / 181 TTJ 433 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Expenses incurred towards free samples distributed 697
to physicians allowable only if free samples distributed to physicians/doctors at
initial stage of introduction to test efficacy of products. Matter was set aside de novo
determination. [Indian Medical Council (Professional Conduct, Etiquette and Ethics)
Regulations, 2002]
The assessee company engaged in the manufacturing of drugs and pharmaceuticals
claimed expenses towards free samples distributed to the physicians under the pretext
that it was necessity of business requirement of the assessee. It was contended that the
twin purpose of distributing free samples was to test the efficacy of the products as
well as advertisement, publicity or sales promotion. The AO held that the genuineness
of these expenses as well that these expenses were incurred wholly and exclusively for
the purposes of its business was not proved by the assessee therefore he disallowed 25
per cent of the total expenditure.
The ITAT held that Explanation to s. 37 and Regulation 6.4.1 of IMC Regulations, 2002
made it clear that if free samples were granted post-introduction of pharmaceutical
products in market when its end-use stood established, it would be hit by Explanation
to s. 37 and shall not be allowable as deduction. Further assessee could not provide
details as to date of introduction of products to established whether same were provided
to test efficacy of pharmaceutical products, therefore matter was remanded back for
if free samples of pharmaceutical products are distributed to physicians/doctors at
initial stage of introduction to test efficacy of products. Matter was set a side denovo
determination. (AY. 2009-10)
ACIT v. Liva Healthcare Ltd. (2016) 161 ITD 63 / 181 TTJ 433 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Payment to tenants – Payment 698
made to tenants to vacate hotel premises to convert it in a shopping complex –
expenditure incurred was in respect of making asset fit for utilization for new business
– expenditure would be capital expenditure.
As a part of disinvestment of ITDC, assessee bought hotel run by ITDC. For getting
vacant possession of hotel building the assessee has paid to tenants occupying premises.
217
Business expenditure S. 37(1)
After that Hotel was demolished for conversion of said premises into shopping complex.
Since no business was in existence during the same period. Therefore, the expenditure
claimed by the Assessee as revenue expenditure is not allowable. The Tribunal held that
since expenditure incurred by assessee was not in respect of continuing business but
in respect of making asset in a condition to be fit to be utilized for new business, such
expenditure would be as capital expenditure. (AY. 2003-04)
Hotel Steelwell (P.) Ltd. v. DCIT (2016) 161 ITD 767 (Delhi)(Trib.)
699 S. 37(1) : Business expenditure – Sales promotion expenses – pharmaceutical company
– Sale promotion expenses by applying Circular No. 5/2012 dated 1-8-2012, since said
circular was not in existence during assessment years, disallowance was deleted
Assessee engaged in business of manufacturing and dealing in pharmaceutical products,
incurred expenditure on sale promotion such as payments made for promotional
items, freebies given to medical practitioners etc. The AO applying CBDT Circular No.
5/2012 dated 1-8-2012 disallowed a part of said expenditure. Tribunal held that from
records that expenditure incurred was wholly and exclusively for purpose of business.
Further the said AY in question, circular relied upon by AO was not even in existence.
Disallowance was deleted. (AY. 2010-11, 2011-12)
Macleods Pharmaceuticals Ltd. v. ACIT (2016) 161 ITD 291 (Mum.)(Trib.)
700 S. 37(1) : Business expenditure – Travelling expenses – Foreign agent not being an
employee, deduction is not allowable.
Comprehensive payment made to a foreign agent as a commission, which also included
travelling expenditure. As the foreign agent not being an employee of assessee,
deduction towards travelling expenditure of foreign agent not to be allowed as
deductions. (AY. 2008-09, 2009-10)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 161 ITD 457 / 52 ITR 252 (Chennai)
(Trib.)
701 S. 37(1) : Business expenditure – Capital or revenue – Interest capitalised in the books
– There is no estoppel against a statute – An expenditure allowable as revenue cannot
be denied deduction on the basis of the assessee’s accounting treatment. [S. 143(1)]
Allowing the appeal the Tribunal held that; It is established principle that entries in
the books of account are not decisive of the nature and character of expenses. It is not
material and relevant how the assessee treated these expenses in its books of account
but what is material and relevant is the allowability of these expenses as revenue
expenses as per provisions of the Act. The Hon’ble Bombay High Court in Nirmala L.
Mehta v. CIT (2004) 269 ITR 1 (Bom.) held that there cannot be any estoppel against the
statute. Article 265 of the Constitution of India in unmistakable terms provides that no
tax shall be levied or collected except by authority of law. Acquiescence cannot take
away from a party the relief that he is entitled to where the tax is levied or collected
without authority of law. Referring the Circular No. 14(XL-35) of 1955, dated 11.4.1955,
issued by the Central Board of Direct Taxes reads as under the Tribunal held that,
reading of the circular shows that a duty is cast upon the assessing officer to assist
and aid the assessee in the matter of taxation. They are obliged to advise the assessee
218
S. 37(1) Business expenditure
and guide them and not to take advantage of any error or mistake committed by the
assessee or of their ignorance. The function of the Assessing Officer is to administer
the statute with solicitude for public exchequer with an inbuilt idea of fairness to
taxpayers. ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd’s. (2007) 291 ITR 500 (SC). Once
the expenditure is found to be allowable as revenue expenditure as per provisions of the
Act, the same are to be allowed as revenue expenditure under the Act while computing
income chargeable to tax even if the taxpayer has given different treatment in its books
of account by capitalizing the same in its books of account instead of debiting it to the
Profit and Loss Account. This is the mandate of the Act which has to be followed as
the taxes can only be collected by the authority of law. (ITA 8622 & 7738/Mum/2010,
ITA 1140 & 694/Mum/2012, ITA 5627/Mum/2013 & ITA 1/Mum/2014, dt. 31.10.2016)
(AY. 2007-08 to 2010-11)
DCIT v. The Saraswat Co-operative Bank Ltd. (Mum.)(Trib.); www.itatonline.org
S. 37(1) : Business expenditure – Capital or revenue – Maintenance of highway on BOT 702
basis – Expenditure incurred on repairs on both sides of highway and on fencing was
held to be revenue expenditure [S. 31(1)]
The normal repair expenditure on earthen shoulder road on both sides of highway with
normal tear wear on fencing claimed by the assessee is allowable under S. 31(i) of the
Act. This expenditure is also allowable under S. 37 of the Act as it is not a capital
expenditure, not personal expenditure and is wholly and exclusively incurred for the
purpose of business. These expenditures were not capital expenditure as no new assets
has been created. (AY. 2008-09)
GVK Jaipur-Kishangarh Expressway (P.) Ltd. v. Addl. CIT (2014) 166 TTJ 11 (UO) / (2015)
68 SOT 205 (Jaipur)(Trib.)
S. 37(1) : Business expenditure – Assessee made comprehensive payment of 703
commission to a foreign agent which included travelling expenditure also – Travelling
expenditure of that agent could not be claimed as deduction.
Assessee made comprehensive payment of commission to an agent which included
travelling expenditure. AO disallowed the claim of assessee on the ground that the
agreement between the parties did not permit the payment of travelling expenditure.
Commissioner (Appeals) found that the foreign agent was not an employee of the
assessee but he worked for Commission and when assessee paid Commission to him,
his travelling expenditure could not be claimed as deduction. On appeal, Tribunal held
the assessee has made comprehensive payment of commission, which included travelling
expenditure and hence travelling expenditure was not allowable. Further, agent was not
an employee of assessee but works for commission. (AY. 2008-09, 2009-10)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 52 ITR 252 / 161 ITD 457 (Chennai)
(Trib.)
S. 37(1) : Business expenditure – Radio License fee allowable as business expenditure, 704
if the corresponding income pertaining to the pre-demerger period is also offered to
tax
The assessee had written off F.M. Radio licence fee amortized in the earlier year. The
amount pertained to a period of 9 months, during which the assessee had exploited
219
Business expenditure S. 37(1)
the radio licence. The AO alleged that the radio business was demerged into another
company, and hence that company ought to have claimed the same. The ITAT held
that the licence was exploited for a period of 9 months, and the income was accounted
for, and hence there the corresponding expense, being the amortized licence fee, was
allowable to the assessee. (AY. 2010-11)
Muthoot Finance Ltd. v. Addl. CIT (2016) 52 ITR 241 (Cochin)(Trib.)
705 S. 37(1) : Business expenditure – Purchase of software, not used by assessee but sold
to customers is in nature of business expenditure – Expenditure is allowable.
Assessee sold software after customization and installed it on customer’s system.
Assessing Officer observed that for expenses arising from purchase of software there
was no co-relation between the purchase and sale of software because the software
purchased did not tally with the software sold out. He held that it was not a trading
transaction and disallowed the said expenses treating them as capital in nature.
CIT(A) considered the fact that assessee sold software after customization according
to requirements of customer and once installed on the customer’s system, it was no
longer available for use by assessee, and deleted disallowance. ITAT upheld deletion of
disallowance made by CIT(A). (AY. 2006-07)
Dy.CIT v. E-enable Technologies P. Ltd. (2016) 46 ITR 546 (Delhi)(Trib.)
706 S. 37(1) : Business expenditure – Provision for sale & maintenance of software in
accordance with annual maintenance contract – Assessee following Accounting
Standard consistently, expenditure is held to be allowable. [S. 145]
The assessee entered into annual maintenance contract (AMC) for one year and debited
an amount as provision for sale and maintenance of software. The AMC which was
bifurcated on time basis, into amount for the financial year and amount received for
services to be provided in the next year. The assessee followed the mercantile system of
accounting as prescribed by the accounting standard AS-9 and made provision for sale
and maintenance representing the unexecuted portion of the AMC income received in
advance. The AO disallowed the same as an unascertained liability. ITAT confirmed the
order of the CIT(A) allowing the assessee’s claim as the assessee consistently followed
the mercantile system of accounting and provision made by assessee in current financial
year is reversal of income for unexecuted portion of the contract which is charged as
income in the next financial year. (AY. 2006-07)
Dy.CIT v. E-enable Technologies P. Ltd. (2016) 46 ITR 546 (Delhi)(Trib.)
707 S. 37(1) : Business expenditure Penalty – Amount paid to Electricity Board for excess
usage of electricity is an expenditure not in nature of penalty hence allowable as
deduction.
Allowing the appeal of the assessee, the Tribunal held that payment was for electricity
consumed for manufacturing activities of assessee and not for any infraction of law. It
had direct nexus with manufacturing activities of assessee. Therefore, the expenditure
so incurred was allowed. (AY. 2007-08)
Moonlight Tools (P) Ltd. v. DCIT (2016) 49 ITR 39 (Chd.)(Trib.)
220
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Capital or revenue – Expenditure incurred for 708
expanding capital base is capital expenditure, disallowance was affirmed.
The CIT(A) confirmed order of disallowance of expenditure incurred in order to increase
share capital by way of fee for merchant bankers, legal fees, stamp duty and registration
charges as expenditure incurred on capital account. The Tribunal noted that funds raised
by issuing capital increases capital base of the assessee, the ultimate aim of raising more
funds was to increase the volume of business and its profit, thus, expenses incurred in
increasing capital base were capital expenditure. (AY. 2007-08, 2008-09)
Bank of India v. ACIT (2016) 49 ITR 62 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Penalty – Compounding fee paid by assessee as per 709
direction of RBI for some technical violations without committing any offence is an
allowable business expenditure. [Foreign Exchange Management Act, 1999, S. 131]
Allowing the appeal of the assessee, the Tribunal held that since compounding fee was
not in nature of penalty but compensatory in nature, assessee was eligible for deduction
u/s. 37(1). Since said fee had not been paid for contravention of provisions of law,
Explanation to s. 37(1) was not attracted. (AY. 2009-10)
EON Hadapsar Infrastructure (P.) Ltd. v. ACIT (2016) 159 ITD 532 (Pune)(Trib.)
S. 37(1) : Business expenditure – Foreign exchange fluctuation loss being on revenue 710
account was an allowable expenditure. [S. 43A]
Allowing the appeal of the assessee, the Tribunal held that; Loss recognized on account
of foreign exchange fluctuation as per notified accounting standard AS 11 is an accrued
and subsisting liability and not merely a contingent or a hypothetical liability. S. 43A
would not be applicable to the case inasmuch as treatment of unrealised exchange gain/
loss is not covered under scope of S. 43A. Since conversion in foreign currency loans
which led to impugned loss, was dictated by revenue considerations towards saving
interest costs, etc., loss being on revenue account was an allowable expenditure. (AY.
2008-09)
Cooper Corporation (P.) Ltd. v. Dy. CIT (2016) 159 ITD 165 / 180 TTJ 727 (Pune)(Trib.)
S. 37(1) : Business expenditure – Club membership fees for employees was admissible 711
business expenditure.
Tribunal held that the expenditure incurred by assessee on club membership fees for
employees was admissible business expenditure. (AY. 2010-11)
Foods and Inns Ltd. v. ACIT (2016) 159 ITD 1007 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenses incurred on 712
development of commercial space was held to be capital in nature
The Tribunal held that cost incurred on development of commercial space being
expenditure incurred for acquiring interest in the land i.e. a capital asset, same cannot
be allowed even as revenue expenditure. (AY. 2008-09)
Cyber Park Development & Construction Ltd. v. Dy. CIT (2016) 159 ITD 648 / 181 TTJ
556 (Bang.)(Trib.)
221
Business expenditure S. 37(1)
713 S. 37(1) : Business expenditure – Capital or revenue – Royalty, airfare of
technicians,entry tax and software expenses was held to be revenue in nature.
The Department filed appeal before the Tribunal against the order of CIT(A) on
following additions: Royalty and lumpsum fee, Airfare of technicians, Entry tax and
Software expenses. The Tribunal held that ground nos. 1 to 4 of the revenue’s appeal are
covered by the order of the Tribunal for the assessment year 2008-09 in the assessee’s
own case are held in favour of assessee by the Hon’ble High Court in its order dated
18th April, 2015. (AY. 2009-10)
Dy.CIT v. Honda Cars India India Ltd. (2016) 181 TTJ 36 / 161 ITD 655 (Delhi)(Trib.)
714 S. 37(1) : Business expenditure – Expenses incurred on physicians samples – Matter
was set aside to the Assessing Officer.
The Tribunal sent the matter back to the file of AO de novo determination of the
issue on merits and held that proper and adequate opportunity of being heard shall be
provided to the assessee by the AO in accordance with principles of natural justice in
accordance with law. (AY. 2009-10)
ACIT v. Liva Healthcare Ltd. (2016) 181 TTJ 433 / 161 ITD 63 (Mum.)(Trib.)
715 S. 37(1) : Business expenditure – accrued or contingent liability – contractual
obligation of assessee to provide for facilities within a reasonable time – liability
accrued but discharged in future – allowable.
Where the registered sale deed created acontractual obligation on the assessee, requiring
it to provide for the facilities mentioned therein, it cannot be said that the agreement
would be an open-ended agreement. The contractual obligation of the assessee, would,
without doubt, be to provide for the facilities within a reasonable time. Hence, the
liability accruing on the assessee is an ascertained liability allowable under section 37
of the Act. (AY. 2010-11)
Spytech Buildcon v. ACIT (2016) 51 ITR 40 (Jaipur)(Trib.)
716 S. 37(1) : Business expenditure – Premium expenses in purchase of government
securities – Ex gratia payment to staff – payments to members from members welfare
fund – allowable.
The Appellate Tribunal held that the assessee had to maintain good relations with the
member and, thus, the assessee had incurred the expenditure towards the welfare of the
members. Such expenditure was incurred for the purpose of business allowable under
section 37 of the Act. (AY. 2010-11)
ACIT v. Surat National Co-operative Bank Ltd. (2016) 51 ITR 136 (Ahd.)(Trib.)
717 S. 37(1) : Business expenditure – Capital or revenue – Expenditure – Software expenses
was held to be revenue in nature.
Tribunal held that the expenditure of ` 1,82,300/- incurred on software expenditure
was having enduring benefit of not more than year and expenditure hence allowable as
revenue expenditure. (AY. 2008-09)
Aiswarya Prints Dyeing & Printings Mills Pvt. Ltd. v. Addl. CIT (2016) 48 ITR 810 (Ahd.)
(Trib.)
222
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Premium paid on ‘Keyman Insurance Policy’ taken 718
for benefit of directors and senior staff is allowable expenditure.
Dismissing the appeal of the revenue, the Tribunal held that; payment towards insurance
premium under keyman policy was for protection of assessee’s company from any risk
that it may sustain by losing valuable services of their directors and its senior staff from
any eventuality by any accident or death, it was an expenditure which was incurred
wholly and exclusively for purposes of business, hence allowable. (AY. 2009-10)
ITO v. Marcopolo Products (P.) Ltd. (2016) 159 ITD 266 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Club expense was held to be allowable as revenue 719
expenditure
Dismissing the appeal of the Revenue, the Tribunal held that expenditure incurred
towards club-memberships, facilitated smooth and efficient running of business and did
not add to profit earning apparatus, said expenditure would be business expenditure.
(AY. 2009-10)
ITO v. Marcopolo Products (P.) Ltd. (2016) 159 ITD 266 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Corporate entity – Certain bare minimum expenses 720
were liable to be incurred by assessee in order to maintain its status of a corporate
body, matter required to be decided afresh
Assessee claimed deduction of certain expenditure as business expenditure. The AO
disallowed expenditure on ground that there was no business achieved during year.
Tribunal held that since certain bare minimum expenses were liable to be incurred by
assessee in order to maintain its status of a corporate body, matter was set side to decide
afresh. (AY. 2009-10)
Kavita Marketing (P.) Ltd. v. ITO (2016) 159 ITD 547 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Prior period expenses was held to be not allowable as 721
the assessee failed to substantiate its claim of corresponding liability being crystallized
during said year – Invoices received subsequent to close of accounting year can be
allowed as deduction though not claimed in the books of account. [S. 5, 145]
Dismissing the appeal of the assessee the Tribunal held that prior period expenses was
held to be not allowable as the assessee failed to substantiate its claim of corresponding
liability being crystallized during said year. As regard invoices received subsequent to
close of accounting year can be allowed as deduction though not claimed in the books
of account. (AY. 2007-08)
Lupin Ltd. v. ACIT (2016) 159 ITD 10 (Mum)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Setting up a project – Expenditure 722
incurred by it on setting up project for production of medium and heavy commercial
vehicles would be capital expenditure, however depreciation is allowable. [S. 32]
Tribunal held that; expenditure incurred by it on setting up project for production
of medium and heavy commercial vehicles would be capital expenditure, however
depreciation is allowable (AY. 2007-08, 2008-09)
Mahindra Navistar Automotives Ltd. v. Dy. CIT (2016) 159 ITD 123 / 181 TTJ 271 (Mum.)
(Trib.)
223
Business expenditure S. 37(1)
723 S. 37(1) : Business expenditure – Capital or revenue – Interest incurred on loan
taken for advancing security deposit for taking a shop on leave and licence basis for
expanding existing business of assessee is allowable as revenue expenditure. [S. 36(1)
(iii)]
Allowing the appeal of the assessee the Tribunal held that Interest incurred on loan
taken for advancing security deposit for taking a shop on leave and licence basis for
expanding existing business of assessee is allowable as revenue expenditure. (AY. 2005-
06)
Ramesh D. Murpana v. ACIT (2016) 159 ITD 1019 (Mum.)(Trib.)
724 S. 37(1) : Business expenditure – Interest paid on share application money pending
allotment of shares is allowable as revenue expenditure. [S. 36(1)(iii)]
Allowing the appeal of the assessee the Tribunal held that Interest on share application
money Share application money cannot be equated with share capital as obligation to
return money is always implicit in event of non-allotment of shares; hence, interest paid
on share application money pending allotment of shares would be allowable as revenue
expenditure. (AY. 2004-05 to 2009-10)
S. R. Thorat Milk Products (P.) Ltd. v. ACIT (2016) 159 ITD 255 (Pune)(Trib.)
725 S. 37(1) : Business expenditure – Ad hoc disallowance – Matter was sent back for de
novo determination of issues on merits after considering details and evidences.
Allowing the appeal of the assessee, the Tribunal held that it was incumbent on part
of AO to have scrutinized claim of assessee to identify and disallow specific expenses
which are found to have not been proved and substantiated by assessee to have been
incurred wholly and exclusively for purposes of business in accordance with mandate
of section 37(1) instead of resorting to ad hoc disallowances, matter sent back to AO
for de novo determination of issues on merits after considering details and evidences
submitted by assessee. (AY. 2007-08)
Shivender Singh v. ACIT (2016) 159 ITD 977 (Mum.)(Trib.)
726 S. 37 (1) : Business expenditure – Lease of lands – Expenses – Deduction towards land
reclamation expenses is allowable on accrual basis, whether or not, said expenditure
was paid during financial year. [S. 145]
Allowing the appeal of the assessee the Tribunal held that when an assessee following
mercantile system of accounting, had taken on lease land for mining and as per
agreement she required to refill land after using assessee was eligible for deduction
towards land reclamation expenses on accrual basis, whether or not, said expenditure
was paid during financial year. (AY. 2010-11)
K. Suryakumari Venu (Smt.) v. ACIT (2016) 159 ITD 1034 (Visakh)(Trib.)
727 S. 37(1) : Business expenditure – Capital or revenue – Legal expenses incurred certain legal
expenditure in relation to buy back of share, said expenditure was a capital expenditure.
Dismissing the appeal of the assessee, the Tribunal held that Legal expenses incurred
certain legal expenditure in relation to buy back of share, said expenditure was a capital
expenditure. (AY. 2005-06)
Cornell Overseas (P.) Ltd. v. Dy. CIT (2016) 160 ITD 373 (Delhi)(Trib.)
224
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Capital or revenue – Renovation for a rented 728
premises – Expenses incurred for renovation of a rented premises, said expenditure
was a capital expenditure, however, assessee was entitled to depreciation [S. 32]
Tribunal held that expenditure incurred by assessee in respect of rented premises was a
capital and not revenue expenditure. Provisions of Explanation 1 to section 32, assessee
was entitled to depreciation on such expenditure. (AY. 2005-06)
Cornell Overseas (P.) Ltd. v. Dy. CIT (2016) 160 ITD 373 (Delhi)(Trib.)
S. 37(1) : Business expenditure – Setting up of business, for NBFC, date of set up of 729
business shall be date on which it receives registration certificate from RBI. [S. 2(13),
28(i)]
Tribunal held that business may be commenced subsequently, but for purpose of
allowing expenses, it has to be seen when business can be said to be ‘set-up’. Where
assessee incorporated with an object to make investment in other companies had
received funds in form of share capital or other sources before 11-10-2006 when it
got NBFC registration certificate and thereafter it had started making due diligence for
potential investee companies, it could be said that assessee was ready to commence its
business and, thus, its business was set-up on 11-10-2006. (AY. 2007-08)
Pinebridge Investments Capital India (P.) Ltd. v. ITO (2016) 160 ITD 566 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Telephone and car – Personal use by partners and 730
their family members could not be ruled out, one-tenth of total expenses were liable
to be disallowed.
Assessee claimed deduction of telephone expenses and car expenses. The Tribunal held
that on the facts and circumstances of case, disallowance equal to one-tenth of total
telephone expenses and car expenses for personal use by partners and family members
was a reasonable disallowance. (AY. 2008-09)
Rattan Brothers v. ACIT (2016) 160 ITD 365 (Amritsar)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Mercantile system of 731
accounting – Treatment of emergency spares in accordance with revised AS 2 and
AS 10 consonance with mercantile system was held to be expenditure incurred on
replacement of tools was revenue expenditure [S. 145]
Tribunal held that the Accounting Standards are mandatory in nature and applied
to accounts prepared after 1-4-1999 hence entire cost of spares in consonance with
mandatory provisions of (AS) 2 and (AS) 10 is accepted. Maintaining mercantile system
of accounting and treatment of emergency spares is in consonance with mercantile
system of accounting which under Act. Therefore, expenditure incurred on replacement
of tools is revenue expenditure. (AY. 2008-09, 2009-10)
Ucal Machine Tools (P.) Ltd. v. ITO (2016) 159 ITD 1061 (Chennai)(Trib.)
S. 37(1) : Business expenditure – License fee – Payment made for use of goodwill was 732
held to be allowable as business expenditure
The assessee, a partnership firm, was providing legal services specializing in intellectual
property and corporate laws. The AO disallowed licence fee paid by the assessee to
225
Business expenditure S. 37(1)
RSCPL for the use of goodwill on the ground that the entire transaction was colourable
device adopted to transfer profits of the assessee-firm to the family members who held
majority shares in RSCPL and to evade tax. Allowing the appeal the Tribunal held that
licence fee paid by a law firm to, a partnership firm (RSCPL) for use of goodwill of
RSCPL in law firm, being incurred wholly or exclusively for business of assessee and
same was allowable. (AY. 2003-04 to 2010-11)
Remfry & Sagar v. JCIT (2016) 182 TTJ 744 / (2017) 162 ITD 324 (Delhi)(Trib.)
733 S. 37(1) : Business expenditure – Pharmaceutical company – Expenses on overseas
trip of doctors with family was held to be not allowable as illegal and against public
policy.
Allowing the appeal of the revenue the Tribunal held that expenditure by a
pharmaceutical company on overseas trip of doctors with family was held to be not
allowable as no details of seminar and its course content were brought on record and
also overseas trips were merely to entertain doctors abroad and lure doctors to solicit
business for assessee which is illegal according to the Explanation to section 37 being
against public policy as unethical. (AY. 2009-10)
ACIT v. Liva Healthcare Ltd. (2016) 161 ITD 63 (Mum.)(Trib.)
734 S. 37(1) : Business expenditure – Capital or revenue – Store Relocation expenses are
incurred in the normal course of carrying on business therefore cannot be considered
as Capital in nature.
The assessee was engaged in the business of manufacture and sale of pizzas. For
the assessment year 2004-05, the Assessing Officer completed the assessment under
section 147 read with section 143(3) making the additions of store relocation expenses
` 12,44,678. The Commissioner (Appeals) deleted the additions. On appeal by the
Department it was held that that the store relocation expenses were in the nature of rent
of godown, security guard expenses, transportation charges for shifting of materials from
one place to another, loading and unloading charges, dismantling charges and routine
repair and maintenance charges and other expenses of similar nature. From the very
nature of these expenses, they were found to have been incurred by the assessee in
the normal course of carrying on in its business activities and were revenue in nature.
Further, the Assessing Officer in the assessee’s case for the earlier assessment year
2003-04 allowed the store relocation expenses of ` 20,33,590 treating the expenses as
revenue in nature. The Department consistently taken the view that the store location
expense were in the nature of revenue expenditure. In view of the above, the store
relocation expenses were allowable for the assessment year 2004-05. (AY. 2004-05)
DCIT v. Jubilant Foodworks Ltd. (Delhi) (2016) 48 ITR 302 (Delhi)(Trib.)
735 S. 37(1) : Business expenditure – Free samples were granted post-introduction of
pharmaceutical products in market when its end – Use stood established, it would be
hit by Explanation to section 37 and shall not be allowable as deduction, matter was
set aside.
Allowing the appeal of the Revenue, the Tribunal held that; samples of pharmaceutical
products are distributed to physicians/doctors at the initial stage of introduction to
test the efficacy of the products, the same are incurred wholly and exclusively for the
226
S. 37(1) Business expenditure
purposes of the business of the assessee. But if the free samples of pharmaceutical
products are distributed to doctors/physicians after the products are introduced in the
market and its uses are established, giving of free samples will be a measure of sales
promotion which will be hit as being in infringement to regulations of The Indian
Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002. It is
clear that such free samples granted post-introduction of pharmaceutical products in
market when its end-use stood established will be hit by Explanation to section 37 and
shall not be allowable as deduction. Matter was set aside. (AY. 2009-10)
ACIT v. Liva Healthcare Ltd. (2016) 161 ITD 63 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Failed to produce the evidence disallowance was 736
held to be justified
Dismissing the appeal of the assessee, the Tribunal held that assessee failed to produce
necessary evidence in support of expenditure claimed to have been incurred, such
expenditure was to be disallowed.(AY. 2009-10)
PBS Developers v. ITO (2016) 161 ITD 27 (Hyd.)(Trib.)
S. 37(1) : Business expenditure – Lease rent paid was held to be allowable deduction 737
though capitalised in the books of account of assessee. [S. 145]
The Tribunal held that assessee has secured certain assets on lease from IBM under
an agreement whereby for all practical purposes IBM was exercising all the ownership
rights and was liable for their maintenance, insurance, etc., the beneficial ownership
remained with IBM and therefore, assessee is entitled to deduction of entire lease rent
paid to IBM, notwithstanding that the assessee has capitalized such assets and charged
depreciation thereon in its books of account in order to comply the mandate of AS 19.
(AY. 2006-07, 2008-09)
Bharti Hexacom Ltd. v. ACT (2016) 179 TTJ 25 (Delhi)(Trib.)
S. 37(1) : Business expenditure – Mine development expenses – Removal of overburden 738
expenses in case of mining of coal by open cast mines, had to be allowed as revenue
expenditure.
The assessee-company engaged in the business of generation of thermal power and
it had also taken the coal mines on lease from the State Government. The assessee
extracted coal from the mines, and the process used in the extraction of coal mines
was open cast coal mines. The A.O. noticed that the assessee had claimed deduction
on account of mine development expenses. The said expenses represented expenditure
incurred on removal of overburden to mine the coal from mines. Aforesaid expenditure
was in nature of capital expenditure, rejected assessee’s claim. CIT(A) allowed the claim
of the assessee. The ITAT by following the Northern Coalfield Ltd. v. ACIT (2015) 69 SOT
637 (Jabalpur) (Trib) held that Removal of overburden expenses in case of mining of coal
by open cast mines had to be allowed as revenue expenditure. (AY. 2008-09)
ACIT v. Jindal Power Ltd. (2016) 179 TTJ 736 / 70 taxmann.com 389 / 138 DTR 313
(Raipur)(Trib.)
227
Business expenditure S. 37(1)
739 S. 37(1) : Business expenditure – Corporate social responsibility – School building –
Allowable as business expenditure. [Companies Act, 2013, S. 135]
The AO noticed that the assessee had claimed deduction on account of expenses
incurred on discharging corporate social responsibility. The assessee explained that this
expenditure mainly related to expenses incurred on construction of school building,
drainage, etc. voluntarily. The AO. taking a view that expenditure was not mandatory
for business purpose, rejected assessee’s claim. The CIT(A) allowed assessee’s claim.
ITAT held that expenditure incurred by assessee on corporate social responsibility on
voluntary basis such as construction of school building, drainage, barbed wire fencing
etc., was to be allowed as deduction. (AY. 2008-09)
ACIT v. Jindal Power Ltd. (2016) 179 TTJ 736 / 70 taxmann.com 389 / 138 DTR 313
(Raipur)(Trib.)
740 S. 37(1) : Business expenditure – Car expenses – Ad hoc disallowance of 20 per cent
expenditure was justified.
Assessee claimed car expenditure against commission income. A.O. observed that
assessee was not maintaining any log book, disallowed claim made by assessee. CIT(A)
concurred with view of A.O., but scaled down expenditure to 20 per cent as against 33
per cent made by A.O. Assessee had failed to establish that expenditure was exclusively
incurred for purpose of business or profession, Possibility of user of car for personal
purpose could not be ruled out, therefore, ad hoc disallowance made by CIT(A) was
justified.
Madanlal F. Jain v. DCIT (2016) 160 ITD 1 / 143 DTR 150 / 181 TTJ 948 (Ahd.)(Trib.)
741 S. 37(1) : Business expenditure – Capital or revenue – Setting up of new units on
similar business was held to be allowable as revenue expenditure.
The assessee was manufacturing iron castings new units established by the assessee
are also admittedly manufacturing iron castings. Therefore, expenditure incurred by the
assessee in connection with setting up of new units is allowable as revenue expenditure.
(AY. 2006-07, 2007-08, 2009-10, 2010-11)
Hinduja Foundries Ltd. ACIT (2016) 178 TTJ 88 / (2017) 148 DTR 158 (Chennai)(Trib.)
742 S. 37(1) : Business expenditure – Staff welfare expenses – Disallowance was held to
be not justified.
The assessee had provided uniforms and shoes as per the terms of the agreement
with the workers. Assessee has produced all the bills and vouchers. The impugned
disallowance was not justified. (AY. 2009-10)
JLC Electromet P. Ltd. v. Addl. CIT (2016) 178 TTJ 28 (UO) (Jaipur)(Trib.)
743 S. 37(1) : Business expenditure – Expenditure incurred by a director in engaging
lawyers to defend himself against cases filed for violation of the law by the Company
of which he is a director is not personal expenditure but is allowable as business
expenditure.
Expenditure incurred by a director in engaging lawyers to defend himself against cases
filed for violation of the law by the Company of which he is a director is not personal
228
S. 37(1) Business expenditure
expenditure but is allowable as business expenditure. (ITA No. 3316/Mum/2013,
dt. 16.06.2016) (AY. 2009-10)
Nimesh N. Kampani v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 37(1) : Business expenditure – Foreign exchange fluctuation loss arising consequent 744
to restatement of current liabilities as per the year end rates in accordance with
Accounting Standard-11 (AS-11) is allowable as a deduction.
Allowing the appeal of assessee the Tribunal held that Foreign exchange fluctuation
loss arising consequent to restatement of current liabilities as per the year end rates in
accordance with Accounting Standard-11 (AS-11) is allowable as a deduction. (ITA No.
2976/Del./2013, dt. 24.08.2016) (AY. 2009-10)
Silicon Graphics Systems (India) Pvt. Ltd. v. DCIT (Delhi)(Trib.); www.itatonline.org
S. 37(1) : Business expenditure – Fine and penalties – Stock broker – Expenditure for 745
purpose prohibited by law – Compensatory in nature – No disallowance can be made.
The assessee was a closely held company engaged in the business of share and stock
broking. The Assessing Officer, for the assessment year 2006-07, made disallowance
of ` 9,08,193/- being the amount of fine paid by the assessee to the Securities and
Exchange Board of India and Stock Exchange, inter alia, for non-maintenance of “know
your customer” forms and short collection of margin money, on the ground that such
payments were incurred in relation to an offence which is prohibited by the law. This
was confirmed by the Commissioner (Appeals). The Tribunal held that the payments
were made on account of routine fines for minor procedural irregularities, in the day
to day working of the assessee. The assessee was engaged in stock broking activities
and also in financial services which involved substantial compliance requirements
with various regulatory authorities. In the regular course of the business of the
assessee, certain procedural non compliances were not unusual, for which the assessee
was required to pay some fines or penalties. These routine fines or penalties are
compensatory in nature — these are not punitive. These fines are generally levied to
ensure procedural compliances by the concerned persons. Therefore, the disallowance
under section 37(1), to be deleted. (AY. 2006-07)
Mangal Keshav Securities Ltd. v. ACIT (2016) 46 ITR 458 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure on interiors and 746
maintenance on lease premises – Matter was remitted to Assessing Officer.
The assessee incurred expenditure for showroom maintenance and interior furnishing
on leased premises. It included wood panelling of the interiors including temporary
sheds for workers, new showcases and false ceilings since a new branch was started.
The Assessing Officer treated the expenditure as capital in nature. This was confirmed
by the Commissioner (Appeals). The Tribunal held that expenditure incurred for civil
work by a lessee in respect of the leased premises without any further proof cannot be
said to be capital expenditure or revenue expenditure. In order to find out the nature of
expenditure, it is necessary to find out the nature of construction put up, the purpose
of construction/renovation and the use to which the construction put up and also if it
is a case of repair, replacement, addition or improvement has to be gone into. It is only
229
Business expenditure S. 37(1)
on the material, one has to determine whether the expenditure is revenue expenditure
or capital expenditure. For the expenditure to be considered as capital, it is essential
that the expenditure incurred on the construction of any structure on leased premises
should result in enduring benefit. What would apply to civil work equally applies to
electrical work or interior decoration. The assessee had not stated the nature of civil
works constructed, the nature of interior decoration of the leasehold premises and
the nature of electrical work undertaken. In the absence of that material and without
proper application of mind, the assessing authority proceeded on the footing that the
expenditure constituted capital expenditure. Therefore, the matter was remitted to the
Assessing Officer to consider whether the expenditure was revenue or capital in nature
and decide afresh. (AY. 2009-10)
K. R. Bakes Pvt. Ltd. v. ACIT (2016) 46 ITR 73 (Chennai)(Trib.)
747 S. 37(1) : Business expenditure – Prior period expenses – Disallowance of prior period
expenses while separately taxing prior period income not justified – netting to be
allowed.
The Tribunal held that the income relating to one year cannot be assessed in any other
year. Likewise, the expenditure relating to one year cannot be claimed in any other
year. Both principles shall have exception, if it is expressly provided in the Act. Hence,
the entire amount of the prior period expenses, while assessing the entire amount of
the prior period income, could not be disallowed for the assessment years 2004-05 and
2007-08 without bringing support of any of the provisions of the Act. Therefore, the
assessee was justified in computing the disallowance by netting off the prior period
income against the prior period expenditure. The assessee had offered the net income
in the assessment year 2007-08, i.e., the prior period income was more than the period
expenditure. (AY. 2004-05, 2007-08)
Mazgaon Dock Ltd. v. ITO (2016) 46 ITR 162 (Mum.)(Trib.)
748 S. 37(1) : Business expenditure – Employees stock option plan – excess public price
over price charged from employees treated as discount – Deduction is allowed.
The assessee’s claim to amortisation of expenses on its employee stock options plan was
disallowed on the ground of the expenditure being a notional and, in any case, capital
expenditure. The Commissioner (Appeals) confirmed the disallowance. The Tribunal
held that the discounted sum, which could be realised by the company on shares issued
under the employee stock options plan, was forgone by it only with a view to retain
the employees, allowed by way of compensating them for their services. However, since
the assessee bank had issued shares to the public at large as well, the employee stock
options plan shares being in fact a mere fraction of the total shares issued during the
year, the difference between the issue price of the shares to the two segments, i.e., to
the public and its employees, would mark or signify the extent of the value forgone or
the discount allowed by the assessee on the latter issue. The assessee was to be allowed
the discount on the shares issued to the employees subject to its being reckoned with
reference to issue price of the shares issued to the public during the relevant year. (AY.
2008-09)
HDFC Bank Ltd. v. DCIT (2015) 155 ITD 765 / 173 TTJ 810 / (2016) 45 ITR 529 / 130
DTR 219 (Mum.)(Trib.)
230
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Staff welfare expenses and repair and maintenance 749
expenses – No expense incurred for personal benefit – Authorities to consider claim
in reasonable and practical manner
The assessee was engaged in the business of execution of loading and transportation
contract works. The AO disallowed the staff welfare expenses and repair and
maintenance expenses on the ground that the assessee had failed to produce original
bills and vouchers. On appeal to Tribunal, it was held that none of the expenses were
incurred for personal benefit of the assessee and there was no direct evidence to show
that the expenses were incurred for the personal benefit of the assessee. There was no
adverse inference drawn by the auditor. The tax authorities must consider the claims
in reasonable and practical manner. The additions were to be deleted. (AY. 2009-10)
Mahendra Kumar Saha v. ACIT (2016) 47 ITR 590 (Cuttack)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Lease rentals – Right to use 750
assets for which lease rentals paid – Treatment of lease rentals in books of account is
of no relevance – Deductible
The assessee obtained vehicles on lease and paid lease rental. Out of the total amount
of lease rentals, lease rentals amounting to ` 46,28,067/- were already charged to the
profit and loss account as they pertained to the period prior to the introduction of
Accounting Standard 19. However, lease rentals amounting to ` 3,27,25,577/- were
separately claimed as deduction in the computation of income as the fair value of
vehicles for such lease were capitalized in the books in terms of Accounting Standard
19. For income tax purposes, the assessee had not capitalized the fair value of the
leased vehicles in the additions to the block of assets and, thus, no depreciation was
claimed thereon. Instead, the entire lease rentals were claimed as a revenue deduction
in view of the Central Board of Direct Taxes Circular No. 2, dated February 9, 2001
([2001] 247 ITR (St.) 53). The Assessing Officer held that the principal component of
lease was capital in nature and could not be allowed as deduction. He also observed
that the vehicles were registered in the name of the assessee through which ownership
rights were bestowed on the assessee. According to him, the assessee remained both
the legal and the beneficial owner of the leased vehicles regardless of whatever clauses
to the contrary were contained in the lease agreement. This was confirmed by the
Commissioner (Appeals). The Tribunal held that the assessee got only a right to use the
assets for which lease rentals were paid. The fact of registration of vehicles in the name
of the assessee under the Motor Vehicles Act was only relevant for the purpose of that
Act and not otherwise. Under the general law, the ownership of the vehicles vests only
with the lessor. How the assessee treated the cost of vehicles in its books of account was
not material. The assessee had been treating the lease rentals as revenue expenditure for
tax purposes. The Central Board of Direct Taxes Circular No. 2 of 2001, dated February
9, 2001, had clarified that the Accounting Standard 19 would have no implication on
the allowance of depreciation on assets under the provisions of the Act. Hence, the same
analogy could be applied for lease rentals also. Hence, the treatment given in the books
to comply with Accounting Standard 19 was of no relevance. Circular No. 2 of 2001,
dated February 9, 2001, stipulates that in a lease transaction, the owner of the assets is
entitled to depreciation. The lessor being the owner had the right to claim depreciation
231
Business expenditure S. 37(1)
and the assessee had not claimed any depreciation on the same for tax purposes. The
assessee had claimed the entire lease rent as deductible expenditure. Therefore, the
assessee was entitled to deduction towards lease rentals. (AY. 2005-06, 2008-09)
Royal Bank of Scotland N.V v. DDIT (2016) 47 ITR 513 (Kol.)(Trib.)
751 S. 37(1) : Business expenditure – Commission paid, on behalf of clients, and billed as
reimbursements is not an expenditure of the assessee.
The assessee, a clearing and forwarding agent, claimed commission expenses, being in
the nature of payments made to dock workers for speedy loading and unloading. The
expense was disallowed by the AO on the basis that it was in the nature of bribes. The
ITAT allowed by the expense since it was paid on behalf of the assessee’s clients and
was not its own expenditure. Merely because the assessee had routed its reimbursements
through the P&L A/c it could not be said that the item was its expenditure and hence,
books of account cannot be the sole determinative factor. The payment was made to
workers as an incentive which was not prohibited by any law. (AY. 2009-10)
D. H. Patkar and Co. v. ITO (2016) 47 ITR 82 (Mum.)(Trib.)
752 S. 37(1) : Business expenditure – Rent allowed based on the order of earlier year,
though it was paid to shareholder based on an unregistered agreement.
The assessee claimed rent expense during the year, which was disallowed by the AO,
who claimed that the transaction was a sham. The AO was of the belief that the rent
agreement with the shareholder (alleged owner of the premises) was unregistered and
the assessee was actually the owner of the premises. The Assessee claimed that the
premises was given earlier with only a right use by way of a refundable deposit for a
period of 9 years. Subsequently, rent was paid based on an annual agreement. The ITAT,
followed its earlier years’ orders and allowed the expense. (AY. 2009-10)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.)
753 S. 37(1) : Business expenditure – No disallowance of salary and consultancy fees in
case the same was allowed by the AO in earlier as well as subsequent assessment
years.
The Assessee salary and consultancy fees to persons who were also its shareholders.
The AO disallowed the same alleging that no evidence was submitted to prove that the
said persons rendered any services to the assessee. The Assessee claimed that the said
expenses were allowed by the AO in the earlier as well as subsequent years. The ITAT
remanded the matter and directed the AO to consider the history of disallowances. (AY.
2009-10)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.)
754 S. 37(1) : Business expenditure – Mobilization expenses incurred for installation of rigs
at client’s place is revenue in nature.
The assessee, being in the business of giving rigs on hire for drilling oil, imported four
new rigs. The rigs were taken to the site of the client, installed, commissioned and made
operational. The assessee earned charter hiring charges for the same. The mobilization
expenses incurred by the assessee to make the rigs operational were claimed as revenue
232
S. 37(1) Business expenditure
expenditure. The AO treated same as capital expenditure and allowed depreciation on
the same. The ITAT deleted the addition and since the Assessee had merely expanded
its capacity by importing the new rigs and there was no new source of income. The rigs
were ready to use upon purchase and the mobilization expense was incurred to merely
install the same at the client’s place. (AY. 2009-10)
Dewanchand Ramsaran Industries (P.) Ltd. v. ACIT (2016) 158 ITD 645 / 47 ITR 687 / 179
TTJ 557 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Interest expense on debentures issued for acquisition 755
of rigs to be given on hire is revenue in nature.
The assessee was in the business of giving rigs on hire for drilling oil. It issued
debentures in the earlier year to acquire new rigs. Interest expense pertaining to the
period prior to the acquisition of the rigs was capitalized by the assessee. However, the
AO held that the entire interest expenses was to be capitalized. The ITAT allowed the
interest expense pertaining to both before and after the acquisition of rigs, since the
same was incurred for the business of the assessee, which was giving rigs on hire. The
rigs were ready to use upon acquisition and hence the interest cost after the acquisition
of the rigs was revenue in nature. (AY. 2009-10)
Dewanchand Ramsaran Industries (P.) Ltd. v. ACIT (2016) 158 ITD 645 / 47 ITR 687 / 179
TTJ 557 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Labour charges – Self made voucher – Disallowance 756
was held to be not justified.
Assessee builder made payment to labourers for construction activity on basis of self-
made vouchers obtaining proper voucher from such kind of unorganized labourers was
beyond control of assessee, action of AO to disallow said payment without showing that
assessee had inflated expenditure was not justified. (AY. 2010-11)
Vijayashanthi Builders Ltd. v. JCIT (2016) 158 ITD 635 / 48 ITR 310 (Chennai) (Trib.)
S. 37(1) : Business expenditure – Professional fees – Service rendered was not proved, 757
hence expenditure was held to be not allowable.
Company paid certain amount to a Switzerland based company as professional fees and
claimed deduction of same, since there were no independent services rendered by and
de facto services had been rendered by one, who was a director in assessee company
as well as in Switzerland based company wearing hat of Company, impugned payment
was not allowable expenditure. (AY. 1995-96 to 1997-98)
Stock Traders (P.) Ltd. v. ACIT (2016) 158 ITD 620 / 178 TTJ 265 / 135 DTR 41 (Mum.)
(Trib.)
S. 37(1) : Business expenditure – Travelling expenses of wife of Director – Held to be 758
not allowable.
Company incurred travelling expenses in respect of wife of director, as there was no
evidence that travel by director’s wife was wholly and exclusively for purposes of
business, travelling expenses was not allowable. (AY. 1995-96 to 1997-98)
Stock Traders (P.) Ltd. v. ACIT (2016) 158 ITD 620 / 178 TTJ 265 / 135 DTR 41 (Mum)
(Trib.)
233
Business expenditure S. 37(1)
759 S. 37(1) : Business expenditure – Interest on debentures – New rigs were ready to be
to used, hence interest was held to be allowable as deduction.
Assessee incurred interest on debentures which were raised to acquire new rigs to be
given on hire for oil drilling, said interest was allowable as revenue expense as rigs
were ready to be put to use from time these were acquired by assessee. (AY. 2009-10)
Dewanchand Ramsaran Industries (P.) Ltd. v. ACIT (2016) 158 ITD 645 / 47 ITR 687 / 179
TTJ 557 (Mum.)(Trib.)
760 S. 37(1) : Business expenditure – Licence fee paid was held to be allowable as business
expenditure.
Tribunal held that the licence fee paid to NDMC as per licence deed was a confirmed
liability. Therefore, assessee is entitled to deduction of amount paid to NDMC as licence
fee under the licence deed. (AY. 2003-04, 2008-09, 2009-10)
CJ. International Hotels Ltd. v. Dy. CIT (2016) 177 TTJ 124 (Delhi)(Trib.)
761 S. 37(1) : Business expenditure – Payment made to holding company towards ESOP –
Held to be allowable as revenue expenditure.
Dismissing the appeal of revenue, the Tribunal held that discount on ESOP is nothing
but a part of remuneration packages and it is neither a short receipt of capital nor a
capital expenditure. The discount on ESOP is not contingent expenditure hence the
same is allowable as business expenditure. (AY. 2010-11) (ITA No. 2096/Mum/2014
dt. 11-3-2016)
DCIT v. Kotak Securities Ltd. (2016) Chamber’s Journal-2016 - April-P. 86 (Mum.)(Trib.)
762 S. 37(1) : Business expenditure – On same facts the AO had accepted payment of
royalty as genuine and not sham transaction in previous assessment year, disallowance
of such payment on ground of non-genuineness was held to be not justified.
The AO. disallowed royalty payment made by assessee Company to its associated
enterprise abroad on ground that assessee had not proved necessity of payment of
royalty and also benefits accrued to it by using brand name of AE. In view of facts
that payment was made through banking channel which was supported by bills and
agreements and TPO as well as A.O. on same facts had accepted payment of royalty as
genuine and not sham transaction in previous assessment year, AO was unjustified in
disallowing royalty payment. (AY. 2007-08, 2008-09)
ACIT v. L. G. Polymers India (P.) Ltd. (2016)157 ITD 1113 (Visakha)(Trib.)
763 S. 37(1) : Business expenditure – Encashment of bank guarantee – Held to be allowable
as deduction. [S. 28(i)]
Where in respect of contract for providing coverage of Commonwealth Games, assessee
had to pay certain amount to Prasar Bharati as performance bank guarantee on account
of inadequate performance of said contract, it was to be allowed as deduction. (AY.
2011-12)
SIS Live v. ACIT (2016) 175 TTJ 643 / 131 DTR 221 (Delhi)(Trib.)
234
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Expenditure on Corporate Social Responsibility (CSR), 764
though voluntary, is allowable as business expenditure.
Expenditure on Corporate Social Responsibility (CSR), though voluntary, is allowable
as business expenditure. Explanation 2 to s. 37(1) inserted w.e.f. 01.04.2015 is not
retrospective. It applies only to CSR expenditure referred to in s. 135 of the Companies
Act and not to voluntary CSR expenditure. (AY. 2008-09)
ACIT v. Jindal Power Limited (2016) 179 TTJ 736 / 70 taxmann.com 389 / 138 DTR 313
(Raipur)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Repair of rented premises – Held 765
to be allowable. [S. 30, 31]
Expenditure on repairs of rented premises, even if huge and accumulated, are allowable
as revenue expenditure. Fact that CIT(A) admitted additional evidence is no justification
for seeking a set aside to the AO if the CIT(A) called for a remand report from the AO:
Ratio in CIT v. Savarana Spinning Mills Limited (2007) 293 ITR 201 (SC) is held to be
not applicable. (ITA No. 5393/Del/2010, dt. 02.06.2016) (AY. 2005-06)
DCIT v. Ikea Trading (India) P. Ltd. (Delhi)(Trib.); www.itatonline.org
S. 37(1) : Business expenditure – Capital or revenue – Leased premises – Set-up cost 766
– Held to be capital in nature. [S. 32]
Assessee company engaged in business of development of software products. Assessee
acquired leased premises in a semi-finished state which could not be used for its
purposes, i.e., development of software, expenditure incurred by assessee for first
time for installing work stations, electric cables, proper flooring, furniture and fixture,
computers, etc. in said premises to achieve its functional utility would be regarded as
part of set-up cost and as capital expenditure. (AY. 2011-12)
Alpha Plus Technologies (P.) Ltd. v. ITO (2016) 158 ITD 136 (SMC) (Mum.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Repairs – Expenditure incurred 767
on repairs and painting of hoarding structures is held to be revenue expenditure.
The assessee firm has incurred expenditure for the purpose of its business of outdoor
advertising business. The repairs to the permanent structure have been undertaken and
it was not extensive repair of permanent structure. The A.O. treated the expenses as
capital expenditure while the CIT(A) granted relief to the tune of 50%. The Hon’ble
ITAT held that repairs of the hoarding structures with respect to the existing structure,
therefore assessee is entitled for deduction on account of hoarding expenditure is
revenue expenditure. (AY. 2007-08)
Asian Advertising v. ITO (2016) 158 ITD 145 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Product Trial expenses of a new 768
product is revenue in nature as it does not provide the assessee with any enduring
benefit – Compensation paid to supplier to ensure goodwill and continued relationship
is revenue expenditure.
Product Trial expenses of a new product is revenue in nature, does not provide
Assessee any enduring benefit. Compensation to paid to supplier to ensure goodwill and
235
Business expenditure S. 37(1)
continued relationship is revenue expenditure. (ITA No. 7978/Mum/2010, dt. 25.05.2016)
(AY. 2006-07)
Bayer Crop Science Limited v. ACIT (Mum.)(Trib.), www.itatonline.org
769 S. 37(1) : Business expenditure – Audit fee – Prior period expenses – Method of
accounting – Matter remanded. [S. 145]
Assessee made certain provision in its profit and loss account in respect of accounting
and auditing charges. On appeal Tribunal held that matter was to be remanded back
to Assessing Officer with direction to verify whether assessee was following practice
of recognizing expenditure of audit fee pertaining to each year irrespective of actual
payment and, if yes, then, it should not be disallowed for year under consideration. As
regards prior period expenses also matter was remanded to the AO. (AY. 2009-10)
New Mangalore Port Trust v. ACIT (2016) 157 ITD 399 (Bang.)(Trib.)
770 S. 37(1) : Business expenditure – Disallowance of expenses on account of personal
element was made on estimation and revenue had not challenged issue before Tribunal
for earlier assessment years, disallowance had to be restricted in line with previous
assessment years.
Assessing Officer disallowed certain percentage of expenditures ranging from 10-15
per cent on account of personal usage. Commissioner (Appeals) restricted disallowance
to 10 per cent. Since revenue had not challenged issue before Tribunal against orders
of Commissioner (Appeals) for earlier assessment years and it was only an estimated
disallowance, Assessing Officer was directed to restrict disallowance at 5 per cent as
restricted in earlier years. (AY. 2005-06, 2007-08)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
771 S. 37(1) : Business expenditure – Genuineness of commission payments – ad hoc
disallowance
It was held that AO having not controverted the assessee’s claim and not brought any
material on record to show that the commission expenditure was either bogus or was
not allowable deduction, disallowance made by him solely on ad hoc basis cannot be
sustained. (AY. 2008-09)
Dy. CIT v. Vodafone Mobile Services Ltd. (2016) 130 DTR 195 / 176 TTJ 430 (Delhi)(Trib.)
772 S. 37(1) : Business expenditure – Commission payments – No disallowance can be
made only on the ground that copy of assessee’s account did not indicate in the
account of payee, when tax was deducted
It was held that commission by cheques after deducting TDS could not be disallowed
on the basis that the copy of the assessee’s account in the payees books of account did
not indicate any payment received by him from the assessee. (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
773 S. 37(1) : Business expenditure – Penal interest paid to bank – Compensatory in nature
– Not an offence prohibited by any law – Allowable.
The assessee had paid penal interest for not fulfilling a stipulated condition in the
loan agreement which was compensatory in nature. The banks were entitled to charge
236
S. 37(1) Business expenditure
extra rate of interest which was reimbursed to the assessee on fulfillment of condition.
On appeal to Tribunal, it was held that the assessee has not committed any offence
prohibited under any law and hence doesn’t come under the ambit of Explanation to
Section 37. The expenditure was allowable. (AY. 2008-09)
ACIT v. Bharat Hi-Tech (Cement) P. Ltd. (2016) 176 TTJ 166 (Kol.)(Trib.)
S. 37(1) : Business Expenditure – Capital or Revenue – Expenditure incurred for 774
undertaking expansion of existing business – To be treated as revenue expenditure.
The assessee was engaged in the business of manufacturing intermediaries and bulk
drugs, which was undertaken at the manufacturing facility of the assessee. During the
year under consideration, the assessee had undertaken expansion of its existing business
for which it had incurred both direct and indirect expenses. The direct expenses were
capitalized to the fixed assets whereas the indirect ones, other than the ones which
increased the value of assets, were claimed as revenue expenditure. The AO disallowed
the indirect expenses since the bifurcation of expenses incurred on new project were
not provided. On appeal to the Tribunal, it held that any expenditure incurred for the
purpose of running the business or working it with a view to produce the profits were
revenue expenditure and would not become capital expenditure merely for the reason
that such expansion was termed as new project. (AY. 2010-11)
DSM Sinochem Pharmaceuticals India P.Ltd v. DCIT (2016) 176 TTJ 322 (Chd.)(Trib.)
S. 37(1) : Business expenditure – Repairs and maintenance expenses to be disallowed 775
if original vouchers were not produced and genuineness of expense has been doubted
by lower authorities.
The assessee claimed repairs and maintenance expense being in the nature of revenue
expenditure. Since it was related to the installation of new cooler and duct, the AO
treated the same as capital in nature and allowed depreciation on it. The assessee
repeatedly changed stands on whether it was incurred towards air cooler or purchase
of CCTV and did not submit vouchers in support of the claim. Thus, the CIT(A)
upheld the disallowance made by the AO. The ITAT upheld the disallowance since the
genuineness of the expense has been doubted by the AO and original vouchers were
not submitted by the assessee. (AY. 2008-09)
Brothers Pharma P. Ltd. v. ITO (2016) 45 ITR 154 (Jaipur)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure incurred for use 776
of technical know-how for improving the manufacturing process would be revenue
in nature.
The assessee entered into a technical assistance agreement by virtue of which it was
granted a licence to use technical know-how in its manufacturing operations. The
expenditure was claimed to be revenue in nature by the assessee, while the AO held
that that it was capital in nature. The CIT(A) ruled in favour of the assessee. On appeal,
the ITAT held that expense was incurred only for improvement of technology used in
its manufacturing process and would be revenue in nature. Further, no new asset with
enduring benefit was acquired by the Assessee as it was only given a right to use the
technical information. (AY. 2005-06)
DCIT v. I.F.G.L. Refractories Ltd. (2016) 45 ITR 1 (Kol.)(Trib.)
237
Business expenditure S. 37(1)
777 S. 37(1) : Business Expenditure – Capital or revenue – Advertisement expenditure
– Display of granty signs and product launching expenses – No asset of permanent
nature comes into existence – Expenditure allowed as revenue.
Assessee Company was engaged in the business of providing cellular mobile
telephony network. During the year under consideration, the AO made disallowance of
Advertisement expenses. The Tribunal held that the expenditure incurred on display
of granty signs and on product launches were allowable as revenue since no asset of
permanent nature comes into existence. (AY. 2008-09)
DDIT v. Vodafone Mobile Services Ltd. (2016) 130 DTR 195 / 176 TTJ 430 (Delhi)(Trib.)
778 S. 37(1) : Business expenditure – Capital or revenue – Royalty paid to DOT –
Necessary to run the business – Amount allowed as Revenue expenditure
Assessee Company was engaged in the business of providing cellular mobile telephony
network. During the year under consideration, the AO made disallowances of Royalty
paid to DOT. On appeal to Tribunal, it was held that the royalty pertaining to spectrum
charges was paid to DOT on a quarterly basis as a percentage of revenue. The assessee
could not run the business without making such payments and hence the same were
allowable as revenue expenditure. (AY. 2008-09)
DDIT v. Vodafone Mobile Services Ltd. (2016) 130 DTR 195 / 176 TTJ 430 (Delhi)(Trib.)
779 S. 37(1) : Business expenditure – Advertisement expenses incurred after the issuance
certificate by the Censor Board is allowable.
The assessee incurred advertisement expenses after the obtaining the certificate from the
Censor Board, which was disallowed by the AO based on the provisions of rules 9A and
9B. The ITAT held that advertisement and publicity expenses incurred after obtaining
the certificate from the Censor Board would be allowable to the assessee u/s. 37 based
on the earlier decisions of the Tribunal. (AY. 2009-10)
Dharma Productions P. Ltd. v. ACIT (2016) 45 ITR 102 (Mum.)(Trib.)
780 S. 37(1) : Business expenditure – Ad hoc disallowance not allowed in case primary
documents have not been doubted and has it not been alleged that bogus expenses or
inflated expenses have been booked.
The AO disallowed ad hoc 25% of certain expenses claimed by the assessee due to want
of evidence. The ITAT followed earlier year and deleted the disallowance and held that
the AO had not doubted the primary documents, but had made bald observations. (AY.
2009-10)
Dharma Productions P. Ltd. v. ACIT (2016) 45 ITR 102 (Mum.)(Trib.)
781 S. 37(1) : Business expenditure – Marker research expenses – Order of CIT(A) was
accepted in earlier year – Appeal of revenue was dismissed.
The Tribunal allowed the expenditure on the ground that for earlier years. The
department has not filed the appeal before Tribunal and accepted the order of CIT(A).
the facts and circumstances being same the Tribunal held that department cannot agitate
the issue in this year. (AY. 2003-04)
Dy. CIT v. Pfizer Ltd. (2015) 64 taxmann.com 465 (2016) 175 TTJ 92 / 139 DTR 81 /
(Mum.)(Trib.)
238
S. 37(1) Business expenditure
S. 37(1) : Business expenditure – Provision for liability under long-term incentive plan 782
for employees – Held to be allowable.
The Tribunal held that provision on account of incentive plan made by the assessee
during the year is an ascertained liability. The AO has nowhere objected to the method
of quantifying the said provision by the assessee. Therefore, the same is allowable as
deduction. (AY. 2009-10)
GlaxoSmithKline Consumer Healthcare Ltd. v. Jt. CIT (2016) 175 TTJ 552 / 143 DTR 57
(Chd.)(Trib.)
S. 37(1) : Business expenditure – Interest for late deposit of service tax – Cannot be 783
termed as penalty – Allowable as deduction.
The Tribunal held that interest paid on delayed payment of service tax cannot be termed
as penalty for infringement of any law and, therefore the same cannot be disallowed.
(AY. 2012-13)
Gillco Developers & Builders (P) Ltd. v. Dy. CIT (2016) 175 TTJ 81 (UO)(Chd.)(Trib.)
S. 37(1) : Business expenditure – Provision for liability on account of leave encashment 784
– Allowable as deduction.
The Tribunal held that provision for liability on account of leave encashment is
allowable as deduction. (AY. 1996-97 to 1998-99)
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Liability under VRS is allowable as deduction. 785
The Tribunal held that provision for liability under VRS is allowable as deduction. (AY.
1996-97 to 1998-99)
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure to make computer 786
system Y2K compliant was held to be revenue expenditure.
The Tribunal held that the expenses incurred to make computer system Y2K compliant
is revenue expenditure. (AY. 1996-97 to 1998-99)
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Expenditure in shifting corporate 787
office was held to be revenue expenditure.
The Tribunal held that the expenditure in shifting corporate office constituted revenue
expenditure. (AY. 2007-08)
Gillette India Ltd. v. ACIT (2015) 70 SOT 289 / (2016) 175 TTJ 35 (UO)(Jaipur)(Trib.)
S. 37(1) : Business expenditure – Real estate development – Commission and Brokerage 788
paid to brokers or agents – Quantum of expenses cannot be examined by AO.
On appeal, the Tribunal held that merely because any income had not been earned
during the year directly from any activity, it could not be said that the related expenses
was not expense for the business of the assessee. Whether the income has been earned
or not and whether the ultimate benefit had accrued immediately or not, the expenses
239
Business expenditure S. 37(1)
incurred shall be allowable if these have been incurred for business or for commercial
expediency. Further, once the expenses had been found to be genuine and to have
been incurred for the purpose of the business, the quantum of the expenses could
not be examined by the AO to adjudicate how much of the expenses were justifiable
and whether the expenses claimed were proportionate or disproportionate vis-a-vis the
requirement of the business. (AY. 2006-07)
Today Homes and Infrastructure Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 586 (Delhi)(Trib.)
789 S. 37(1) : Business expenditure – Bribe for awarding of contract – Sum deleted in case
of recipient and deletion affirmed by High Court – No disallowance can be made.
The AO added ` 21.62 crores on the ground that the assessee paid a sum in the form
of bribe for awarding of contract. The Commissioner (Appeals) deleted the addition.
On appeal the Tribunal held that, the entire addition made by the AO was solely based
on suspicion and surmises. The addition was deleted by the CIT(A) in the hands of
the alleged recipient of the bribe which was upheld by the Tribunal and ultimately
approved by the jurisdictional High Court. Therefore, the addition was rightly deleted
by the CIT(A) in the assessee’s case. (AY. 2006-07)
Today Homes and Infrastructure Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 586 (Delhi)(Trib.)
790 S. 37(1) : Business expenditure – Commercial expediency – Safeguard interest –
Allowable as business expenditure.
On appeal, the Tribunal held that the purpose of taking over the loan was to improve
the financial viability of the subsidiary company to facilitate a one-time settlement of
certain loans in the subsidiary company and to complete subscription of non-convertible
debentures in the subsidiary company. Therefore, it was an expenditure to safeguard its
interest or investment in subsidiary company. Therefore, it was for the business purpose
of the assessee and hence revenue in nature. (AY. 2006-07, 2007-08)
Rain Commodities Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
Rain Cements Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
791 S. 37(1) : Business expenditure – Co-operative Bank – Expenditure on various welfare
funds – Statutory obligation, hence allowable expenditure.
The funds contributed neither remained with the apex co-operative bank nor came
back to the assessee in another form and the amounts were spent only out of statutory
obligation. Further, one of the objects of the assessee was to develop or assist and
co-operate the members of district central co-operative banks and other co-operative
societies and hence the contribution was only made in further pursuance of the objects
of the bank for which it was established and there was no business interest in incurring
the expenditure. The amount spent could not be disallowed. (AY. 2007-08)
Karnataka State Co-operative Apex Bank Ltd. v. Dy. CIT (2016) 46 ITR 728 (Bang.)(Trib.)
792 S. 37(1) : Business expenditure – Disallowance by netting off prior period income
against prior period expenditure was held to be Justified. [S. 4]
The entire amount of the prior period expenses, while assessing the entire amount of
prior period income, could not be disallowed for the AY 2004-05 and 2007-08, without
240
S. 37(1) Business expenditure
bringing support of any of the provisions of the Act. Therefore, held that the assessee
was justified in computing the disallowance netting the prior period income against the
prior period expenditure. The assessee had offered the net income in the AY 2007-08.
Netting was held to be justified. (AY. 2004-05, 2007-08 to 2010-11)
Mazgaon Dock Ltd. v. ITO (2016)46 ITR 162 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Advertisement expenses – No discrepancy was 793
pointed on ledgers and bills produced before authorities disallowance was held to be
not justified.
On appeal, the Tribunal held that the AO had not pointed out any discrepancy or any
reason explained inadmissible in the nature in terms of section 37 of the Act. Just
because the assessee had not offered the sum for tax in the previous years, it could not
be a ground for disallowing the expenses. The addition was to be deleted. (AY. 2007-08)
Sahil Study Circle Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 182 (Delhi)(Trib.)
S. 37(1) : Business expenditure – Capital or revenue – Stamp duty or fees paid for 794
increase in authorised capital is capital in nature.
Tribunal held that; Stamp duty or fees paid to Ministry of Corporate Affairs towards
increase in authorised capital of company would be considered as capital expenditure.
(AY. 2009-10)
Inventurus Knowledge Services (P.) Ltd v. ITO (2016) 156 ITD 727 / 45 ITR 57 / 177 TTJ
269 / 143 DTR 113 (Mum.)(Trib.)
S. 37(1) : Business expenditure – Licence fee – Limited right to use software – 795
Allowable as business expenditure.
Amount paid as licence fee in order to get limited right to use software programme
belonging to other company, held to be allowable as business expenditure. (ITA No
2806/Del/dt. 16-10-2015) (AY. 2007-08)
GE Capital Business Process Management Services (P) Ltd. (2016) Chamber’s Journal-
January–P. 95 (Delhi)(Trib.)
S. 37(1) : Business expenditure – Sales promotion expenses – Gift to doctors bearing 796
logo of company – Allowable expenditure – CBDT Circular dated 01.08.2012 is
prospective.
Receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by
manufacturer is not prohibited under any law for the time being in force. Giving small
gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but
it is regarded as advertising expenses. As regards sponsoring doctors for conferences
and extending hospitality, pharmaceutical companies have been sponsoring practicing
doctors to attend prestigious conferences so that they gather contemporary knowledge
about management of certain illness/disease and learn about newer therapies. We found
that the disallowance was made by the AO by relying on the CBDT Circular dated
01.08.2012 onwards. However, the Circular was not applicable because it was introduced
w.e.f. 01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment
year under consideration is 2010-2011 and 2011-2012. Accordingly, we do not find
241
Business expenditure S. 37(1)
any merit in the disallowance so made by the AO in both the assessment years under
consideration. (ITA No. 6429 & 6428/Mum/2013 & ITA No.11/Mum/2014, dt. 23.12.2015)
(AY. 2010-11, 2011-12)
DCIT v. Syncom Formulation (I) Ltd. (Mum.)(Trib.); www.itatonline.org
797 S. 37(1) : Business expenditure – Payment of speed money to dock workers are not
bribes or prohibited under the law hence cannot be disallowed.
Allowing the appeal of assessee the Tribunal held that Payment of speed money to dock
workers are not bribes or prohibited under the law hence cannot be disallowed. (AY.
2009-10) (ITA No. 4524/Mum/2013 dt 18-03-2016, Bench ‘D’)
D. H. Patkar & Co. v. ITO (2016) BCAJ-April-P. 32 (Mum.)(Trib.)
798 S. 37(1) : Business expenditure – There is a distinction between “setting up” and
“commencement” of a business. A business is “set up” and expenditure is deductible
even if assessee has no customers and no income. [S. 3, 71]
The assessee has already purchased residential flat for the purpose of resale/lease, and
therefore assessee was apparently ready to do its business. Under these circumstances,
it can be said that the business is set up by the assessee during the year under
consideration. For the deductibility of expenses incurred after this stage, earning of the
business income is not a mandatory condition under the law. The assessee may not have
been successful in getting customers or earning the business income, but if the assessee
has done requisite preparations and if the assessee can be said to be in a position to
cater to its customers, then it can be said that business is set up and it would amount
to carrying on the business and accordingly the expenses would stand allowable to the
assessee, irrespective of the fact whether actually assessee got any customer and earned
any business income during the year or not. (AY 2008-09)
Multi Act Realty Enterprises Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org
799 S. 37(1) : Business expenditure – Fees for technical services – Payment to group
company – Administrative support – Held to be allowable – Obligation to price
reduction is not penalty allowable as deduction – Non-resident – India – United
Kingdom. [S. 9(1)(vii), Art. 13(4)
AAR has held that Contract for construction support and supervision, procurement and
engineering design in Paradip refinery. Payments to group company for time charge of
staff working on bid, travel expenses and printing cost pertaining to applicant’s contract
charged to applicant under agreement. Incurred for business purposes and to be allowed
in year in which incurred. Services rendered by third parties and group companies in
connection with expatriate movement to India in relation to project office. Payments
not technical services but administrative support services. – Allowable in year in which
incurred. Provision made in books year to year for obligation for price reduction for
not meeting project schedule. Price reduction incurred in terms of agreement is not a
penalty, to be allowed in year in which such invoices actually raised.
Foster Wheeler G. B. Ltd., In re (2016) 389 ITR 509 / 290 CTR 1 (2017) 77 taxmann.com
205 / 142 DTR 345 (AAR)
242
S. 40(a)(i) Amounts not deductible
S. 37(3A) : Business expenditure – Previous year – Expenditure on advertising and 800
sales promotion – Ceiling of expenditure – Change in previous year – Period of
seventeen months treated as previous year – Ceiling to be increased proportionately.
[S. 3]
On reference the Court held that the limit laid down in section 37(3A) could be
proportionately increased because the previous year relevant for the assessment year
was seventeen months instead of twelve months. Reference was answered in favour of
assessee. (AY. 1980-81)
Somaiya Organo Chemicals Ltd v. CIT (2016) 388 ITR 423 / 290 CTR 30 / 142 DTR 361
(Bom.)(HC)
S. 37(4) : Business expenditure – Guesthouse – Expenditure incurred on rent, 801
maintenance and depreciation on guest house is to be disallowed.
The assessee made a claim of expenses incurred on rent, maintenance and depreciation
on guest house which was disallowed by the Assessing Officer and upheld by CIT(A)
and Tribunal. On appeal, it was held that there is no need to interfere with the findings
of the Tribunal as it decided the issue following the decision of the Supreme Court in
the case of Britannia Industries Ltd. v. CIT (2005) 278 ITR 546 / 148 Taxman 468. (AY.
1997-98)
Tube Investments of India Ltd. v. JCIT (2016) 240 Taxman 543 (Mad.)(HC)
S. 40. Amounts not deductible.
S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – 802
Commission to non-resident agent in respect of sales made outside India was held not
liable to deduct tax at source. [S. 5(2), 9(i), 195]
Dismissing the appeal of the Revenue, the Court held that payment to non-resident
agent being commission for selling Indian goods outside India could not be said to have
deemed to accrue or arise in income. It relied upon the judgment in CIT v. Toshoku Ltd.
(1980) 125 ITR 525 (SC) and CBDT Circular No. 23 of 1969. The Court also held that
the said circular was in force in the relevant assessment year and that it was withdrawn
only on 22nd October, 2009 and that the said withdrawal did not have any retrospective
effect. (AY. 2007-08, 2008-09).
CIT v. Gujarat Reclaim & Rubber Products Ltd. (2016) 383 ITR 236 / 136 DTR 138 / 287
CTR 83 (Bom.)(HC)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Fees for technical services 803
– Failure to deduct TDS on payment to a non-resident will result in a disallowance.
Violates the non-discrimination clause in Article 26 of the India-USA DTAA because
a similar disallowance is not made on payments to residents – DTAA-India-USA
[S. 9(1)(vii), 195 Art. 12, 26]
Dismissing the appeal of revenue the Court held that Section 40(a)(i) of the Act is
discriminatory and therefore, not applicable as per provisions of Article 26(3) of the
Indo-US DTAA. Affirmed the view of Tribunal in in Herbalife International India (P.)
243
Amounts not deductible S. 40(a)(i)
Ltd. v. ACIT (2006) 101 ITD 450 (Delhi)(Trib), wherein Tribunal held that the AO cannot
invoke provision of section 40(a)(i) to disallow the claim even on assumption that um
in question was chargeable to tax in India. (AY. 2001-02)
CIT v. Herbalife International India Pvt. Ltd. (2016) 384 ITR 276 / 136 DTR 33 / 286 DTR
372 / 240 Taxman 21 (Delhi)(HC)
804 S. 40(a)(i) : Amounts not deductible – Deduction at source – Commission – Rendering
of services abroad – Not liable to deduct tax at source – OECD Model Conventions.
[S. 9(1)(i), 9(1)(vii), 195, Art. 5, 11, 12]
Dismissing the appeal of the revenue, the Tribunal held that Export commission
payments to foreign brokers for rendering services abroad was not liable to deduct tax
at source. (AY. 2010-11)
ACIT v. Pahilajrai Jaikishin (2016) 157 ITD 1187 / 179 TTJ 148 (Mum.)(Trib.)
805 S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Remittance
to French resident on payment made much earlier in period relevant to year 1-4-2008
to 31-3-2009, was not liable to deduct tax at source – DTAA-India-French [S. 195,
Art. 15]
Allowing the appeal of the assessee the Tribunal held that retrospective amendment
made by Finance Act, 2010 with effect from 1-6-1976 in Explanation 2 to section 9(2),
effective from 8-5-2010, does not create any liability upon assessee, an Indian company,
for deduction of tax under section 195 on remittance to French resident on payment
made much earlier in period relevant to year 1-4-2008 to 31-3-2009 (AY. 2009-10)
Ashok Piramal Management Corpn. Ltd. v. ACIT (2016) 161 ITD 234 (Mum.)(Trib.)
806 S. 40(a)(i) : Amounts not deductible – Deduction at source – Service rendered outside
India – Not liable to deduct tax at source – OECD Model convention. [S. 9(1)(vii), 195,
Art. 7, 12]
Assessee made payment of communication charges, commission charges, legal and
professional charges, marketing and selling charges and business development charges
to non residents. Non-residents had no business connection with India, no services were
rendered in India and there was no finding that services rendered were in nature of
technical services hence the assessee was not liable to deduct tax source. (AY. 2009-10)
IDS Infotech Ltd. v. DY. CIT (2016) 181 TTJ 217 (Chd.)(Trib.)
807 S. 40(a)(i) : Amounts not deductible – Deduction at source – Professional services
rendered to Indian company by overseas companies outside India was held to be not
liable to deduct tax at source – DTAA-India-UK-USA [S. 9(1)(i), 195, Art. 14]
Dismissing the appeal of the revenue, the Tribunal held that Professional services
rendered to Indian company by overseas companies outside India in relation to audit
and taxation would be independent professional services; and in absence of any PE in
India of these companies, payment made to them would not be chargeable to tax in
India, hence not liable to deduct tax at source. (AY. 2008-09)
ACIT v. BSR & Company (2016) 159 ITD 1068 / 182 TTJ 544 (Mum.)(Trib.)
244
S. 40(a)(i) Amounts not deductible
S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Interest – 808
Royalty – Fees for technical services – UK company not only made available of design
and drawings to assessee-company but also erected project in India under its own
supervision – Since said services were rendered in India, payment made by assessee to
UK company would be taxable in India, hence liable to deduct tax at source – DTAA-
India-UK [S. 9(1)(vii), 195, Art. 13]
Assessee engaged services of a UK company for design, manufacturing and start up
of paper machines. Designs and drawing were made in UK, therefore payment made
without deduction of tax at source. AO held that the agreement between the parties was
a composite one. Accordingly, the company in UK had to implement by way of erection
in India and unless drawings and designs were prepared in India, the agreement could
not be concluded. Since UK Company rendered taxable services in India therefore, the
assessee had to deduct tax under section 195. The Commissioner (Appeals) observed
that engineering services by the UK Company were rendered in India and the amount
paid for said services fell within the definition of fee for technical services under
Article 13 of DTAA with UK thus, said fees was liable to be taxed in India. On appeal the
Tribunal held that erection of the machine was done by the engineers of UK Company
in India wherein the engineers came down to India to the site to supervise the erection
personally. Even though the design and drawings were said to be prepared in UK, mere
preparing design and drawings would not complete the service rendered by UK Company.
The UK Company has to necessarily execute the project and supervise the same in India.
Therefore, the UK Company not only made available of design and drawings to the assessee-
company but also erected the entire project in India under the personal supervision.
Therefore, the services taxable in India. Disallowance was upheld. (AY. 2008-09, 2009-10)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 52 ITR 252 / 161 ITD 457 (Chennai) (Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Not liable 809
to deduct tax at source on branding expenses paid to overseas entity.
The assessee had paid branding expenses to overseas entities to promote its money transfer
business. A certain amount was created as a provision at the end of the year, which was
paid subsequently. The AO disallowed the same on the ground that tax was not deducted by
the assessee. Further, the AO disallowed the provision since the liability has not crystallized
in the impugned year. Following the order in the case of another group company, the ITAT
held that tax ought not be deducted on branding expenses incurred by the assessee and that
provision of branding expense was also allowable since the assessee had been consistently
following mercantile system of accounting. (AY. 2010-11)
Muthoot Finance Ltd. v. Addl. CIT (2016) 52 ITR 241 (Cochin)(Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Fees for technical services 810
– Subsequent retrospective amendment would not expose payer to an impossible
situation of requiring deduction of tax at source on date of payment – Not liable to
deduct tax at source – DTAA-India-UK-USA [S. 9(1)(vii), 40(a)(1), 195, Art. 14]
Dismissing the appeal of the revenue the Tribunal held that subsequent retrospective
amendment would not expose payer to an impossible situation of requiring deduction of
tax at source on date of payment, hence not liable to deduct tax at source. (AY. 2008-09)
ACIT v. BSR & Company (2016) 159 ITD 1068 / 182 TTJ 544 (Mum.)(Trib.)
245
Amounts not deductible S. 40(a)(i)
811 S. 40(a)(i) : Amounts not deductible – Deduction at source – Permanent establishment
– Logistic services from overseas Associated enterprises outside India on principal-to-
principal basis, the assessee was not liable to deduct tax at source – DTAA-India-UAE
[S. 9(1)(i), 195, 195A, 201, Art. 5]
Dismissing the appeal of the revenue, the Tribunal held that, assessee company which
is engaged in business of providing logistics services worldwide, which has availed
logistics services from overseas associated enterprises exclusively outside India on
principal to principal basis and there was no agency, merely because word ‘agency’ was
used in relevant agreement, it did not mean that there existed relationship of agency
therefore tax was not required to be deducted at source on payment (AY. 2012-13)
Balmer Lawrie & Co. Ltd. v. ITO (2016) 159 ITD 73 (Kol.)(Trib.)
812 S. 40(a)(i) : Amounts not deductible – Deduction at source – Royalties and fees for
technical services – Marketing services was held to be not liable to deduct tax at
source – DTAA-India-UK-Singapore. [S. 9(1)(vii), 195, Art. 12, 13]
Allowing the appeal of the assessee, the Tribunal held that assessee which is in the
business of stock broker to foreign subsidiaries rendered services which were in nature
of simple marketing services of introducing foreign institutional investors to invest in
capital markets in India and no technical service was being made available, payments
made to subsidiaries for aforesaid services would not fall within definition of ‘fees for
technical services’ hence not liable to deduct tax at source. (AY. 2008-09, 2009-10)
Batlivala & Karani Securities (India) (P.) Ltd. v. Dy. CIT (2016) 159 ITD 924 / 180 TTJ
558 (Kol.)(Trib.)
813 S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident –
Consideration paid for purchase of software and seller is not having any permanent
establishment in India, the assessee was not liable to deduct tax at source – DTAA-
India-USA. [S. 9(1)(vi), 195, Art. 12]
Dismissing the appeal of the revenue, the Tribunal held that Assessee-company purchased
different types of software from non-residents which were used in its business of oil and
gas exploration. Software purchased by assessee was a standardized software for use in
own business of assessee only. Assessee had not been given any commercial right to
reproduce and sell copies of software and party from whom assessee acquired software
was not having any permanent establishment in India and there was no time limit of
expiry of said software. Consideration paid by assessee as per clauses of DTAA could
not be said to be royalty and same would be outside scope of definition of ‘royalty’ as
provided in DTAA and would be taxable as business income of recipient but in absence
of permanent establishment could not be taxed in India. (AY. 2006-07 and 2007-08)
Dy. CIT v. Reliance Industries Ltd. (2016) 159 ITD 208) / 180 TTJ 22 (Mum.)(Trib.)
814 S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident–
Reimbursement of expenses – Agreements were not available before DRP, matter was
seta side. [S. 9(1)(vii)]
Tribunal held that since relevant agreement regarding reimbursement of expenses was
not available on record, matter was to be re-adjudicated. (AY. 2007-08)
CISCO Systems Services v. JCIT (2016) 161 ITD 12 (Bang.)(Trib.)
246
S. 40(a)(i) Amounts not deductible
S. 40(a)(i) : Amounts not deductible – Deduction at source – Payment to non-resident 815
agent for rendering services outside India is not liable to deduct tax at source – Article
7 of OECD Model Tax Convention. [S. 9(1)(i), 195]
Payment to non-resident agent for rendering services outside India and said agent did
not have any PE in India, said payment was not liable to tax in India hence not liable
to deduct tax at source. (AY. 2011-12)
DCIT v. S.R.M. Agro Foods. (2016) 161 ITD 786 (Mum.)(Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Payment to AE for raw 816
material, spare parts and capital goods fall under section 24(3) of Article of India-
Japan DTAA hence not liable to deduct tax at source. [S. 9(1)(i), 195, Art. 24(3)]
Payment to AE for raw material, spare parts and capital goods fall under section 24(3)
of article of India-Japan DTAA hence not liable to deduct tax at source
Honda Cars India Ltd. v. DCIT (2016) 161 ITD 655 / 181 TTJ 36 (Delhi)(Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Commission – 817
Disallowance was confirmed since assessee except making a claim that it was
director’s salary, could not furnish any other evidence to substantiate same. [S. 9(1)
(i), 195]
Disallowance was confirmed; since assessee except making a claim that it was director’s
salary, could not furnish any other evidence to substantiate same. (AY. 2008-09)
DCIT v. Neuland Laboratories Ltd. (2016) 161 ITD 422 (Hyd.) (Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Fees for technical services 818
– AO assessed consultancy services as technical services, matter was remanded –
Article 5 and 12 of OECD Model tax convention. [S. 9(1)(i), 195]
Assessee had entered into an agreement with a company for availing certain consultancy
services. The AO held same to be ‘technical services’. CIT(A) without giving any reason
as to why not accepting assessee’s contentions, confirmed order. ITAT held that If
consultancy charges are in nature of ‘fees for technical services’ or ‘royalty’, then it
would be taxable in India irrespective of situs of services but if it is business income
of recipient, then even if it is earned in India, it would be taxable only if recipient has
a PE in India. Matter was remanded to AO for de novo consideration. (AY. 2008-09,
2009-10)
DCIT v. Neuland Laboratories Ltd. (2016) 161 ITD 422 (Hyd.)(Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Royalties and fee for 819
technical services – transponder fee to US based company for rendering services
through satellite located outside India, payment was not for right to use any industrial,
commercial or scientific equipment, did not fall within ambit of term ‘royalty’ – DTAA-
India-USA. [S. 9(1)(vii), 195, Art. 12]
Assessee had made payments for transponder fee to PanAmSat, USA for rendering
services through satellite located outside India in telecasting sports channel ‘Ten sports’
to various countries including India. The AO took a view payment was in nature of
‘royalty’ and fell under clause (iva) of Explanation 2 to s. 9(1)(vi). CIT(A) held that
payment not for use of any equipment, did not amount to ‘Royalty’. The payment was
247
Amounts not deductible S. 40(a)(i)
for use of services. On appeal by the revenue dismissing the appeal, the Tribunal held
that transponder fee paid to US based company for rendering services through satellite
located outside India, payment was not for right to use any industrial, commercial or
scientific equipment, did not fall within ambit of term ‘royalty’. (AY. 2003-04 to 2005-06)
ADDIT v. Taj TV Ltd. (2016) 161 ITD 339 / (2017) 184 TTJ 202 / 147 DTR 30 (Mum.)(Trib.)
820 S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Interest
paid to banks in India for amount borrowed from foreign banks and payment
not made in foreign currency payment – exempted from tax deduction at source –
disallowance deleted. [S. 194A(3)]
The assessee paid interest to banks located within India on amounts borrowed from
foreign banks and the payment was not made in foreign currency. The Commissioner
(Appeals) held that the interest paid to banks in India was exempt from tax deduction at
source in terms of section 194A(3)(iii)(a) of the Act. The Tribunal held that the interest
was paid to the banks located in India and not outside India and the payment was
not made in foreign currency on amounts borrowed from foreign banks. Therefore, the
disallowance under section 40(a)(i) was not warranted. (AY. 2005-06, 2008-09, 2009-10)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.)
821 S. 40(a)(i) : Amounts not deductible – Deduction at source – Fees for technical services
– Services in nature of recruitment or placement agency do not come under purview
of ‘fees for included services’ – Not liable to deduct tax at source – DTAA – India-USA.
[S. 9(1)(vii), 195, Art. 12(4)(b)]
Services in nature of recruitment or placement agency do not come under purview of
‘fees for included services’ within meaning of Article 12(4)(b) of DTAA. Retrospective
amendment to section 9 cannot change tax withholding liability with retrospective
effect. Assessee company made certain payments to its overseas group companies as
reimbursement of expenses incurred by them for recruitment of employees on behalf
of assesse. The assessee had furnished all necessary details about said expenditure.
However, the AO made disallowance u/s. 40(a)(i) by treating said expenditure as FTS
as per provisions of s. 9(1)(vii). Since payments were pure and simple reimbursement
of recruitment expenses, section 195 was not attracted and, consequently, disallowance
u/s. 40(a)(i) was not called. (AY. 2007-08)
ACIT v. Lehman Brothers & Advisors (P.) Ltd. (2016) 157 ITD 1003 (Mum.)(Trib.)
822 S. 40(a)(i) : Amounts not deductible – Deduction at source – Late deposit of tax
– Assessee deducted tax at source from royalty paid to its foreign associate in
subsequent year and failed to deposit same within due date specified u/s. 200(1),
disallowance was held to be justified. [S. 200(1)]
Assessee Company deducted TDS from royalty paid to its foreign associated enterprise
in subsequent year and also failed to deposit same within due date specified u/s. 200(1),
it was rightly disallowed by revenue u/s. 40(a)(i). However in view of proviso to s. 40(a)
(i) assessee would be eligible for deduction towards royalty payment, in year in which
TDS was deducted and remitted into Government account, i.e., for assessment year
2008-09. (AY. 2007-08, 2008-09)
ACIT v. L.G. Polymers India (P.) Ltd. (2016) 157 ITD 1113 (Visakhapatnam)(Trib.)
248
S. 40(a)(i) Amounts not deductible
S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – Retro 823
amendments – Disallowance was not justified as assessee could not have visualized
to deduct TDS in absence of any provision at time of making payment and since there
was already a prevailing law laid down by Supreme Court that in such a case no TDS
was to be deducted – DTAA-India-Swiss Confederation [S. 9(1), Art. 12]
Assessee made payment to a non-resident company for training programmes conducted
by said company outside India in which assessee sent its delegates. Assessee did
not deduct TDS on said payments in view of ratio laid down by supreme court in
Ishikawajma-Harima Heavy Industries Ltd. v. DIT (2007) 288 ITR 408 (SC) wherein it was
held that services rendered outside India would be taxable in India only if such services
had been utilized in India. The A.O. disallowed payment for want of deduction of TDS
holding that decision of Supreme Court would not be applicable in view of Explanation
inserted with retrospective effect from 1-6-1976 which provided that fees for technical
services received by a non-resident would be deemed to accrue in India whether or not
it had rendered services in India. At time of making payment assessee could not have
visualized to deduct TDS when there was no provision in this regard and there was
already prevailing law laid down by Supreme Court that in such a case no TDS was to
be deducted; therefore, disallowance for want of TDS was not justified. (AY. 2010-11)
Holcim Services South Asia Ltd. v. Dy. CIT (2016) 157 ITD 892 (Mum.)(Trib.)
S. 40(a)(i) : Amounts not deductible – Deduction at source – Fees for professional 824
services outside India without deduction of tax at source – Payment made outside
India was not sum chargeable to tax in India – Hence, provisions of S. 195 are not
applicable [S. 195]
The Assessee is engaged in business of rendering taxation, business advisory, audit
related services and other consultancy services. During course of assessment proceedings
it was observed by AO that Assessee had paid fees for professional services outside
India without deduction of tax at source. The assessee in reply to the AO’s query
explained that the payment made outside India is not sum chargeable to tax in India.
Hence, provisions of section 195 were not applicable, consequently no disallowance
could be made under S. 40(a)(i) of the Act. The AO however, made disallowance under
Section 40(a)(i) by observing that services rendered by non-residents were in areas of
application of high level of skills as well as technical and industrial know-how. Hence,
assessee is required to deduct tax at source while making the payment. On appeal the
First Appellate Authority deleted the disallowance made by A.O. on the ground that
assessee did not have any liability under S. 195 r.w.s. 9(1)(vii) to deduct tax at source
from those payments. The department being aggrieved by the order of the Ld. CIT(A)
preferred an appeal before the Appellate Tribunal. The Tribunal dismissed the appeal
of the department by observing that provision of S. 195(1) uses expression “chargeable”
under the provisions of the Act. As the payment made by assessee is not chargeable to
tax in India, TDS is not required to be deduction under S. 195 of the Act. (AY. 2008-09)
KPMG v. ACIT (2016) 177 TTJ 708 / 137 DTR 1 (Mum.)(Trib.)
249
Amounts not deductible S. 40(a)(i)
825 S. 40(a)(i) : Amounts not deductible – Deduction at source – Non-resident – TDS is not
required to be deducted on payment by foreign bank’s Indian branch to its overseas
head office and, therefore, disallowance of such payment is not valid – Model OECD
convention. [S. 9(1)(i), Art. 11]
TDS is not required to be deducted from payments made by a foreign bank’s Indian
branch to its overseas head office, since in such a situation, payment is made by non-
resident to himself and, therefore, disallowance of said payment is not valid. (AY. 2009-10)
DBS Bank Ltd. v. Dy. IT(IT) (2016) 157 ITD 476 / 176 TTJ 293 / 131 DTR 121 (Mum.)(Trib.)
826 S. 40(a)(i) : Amounts not deductible – Deduction at source – Commission – Rendering
market service abroad – Matter remanded [S. 9(1)(i), 195]
Tribunal held that assessee did not bring material on record showing that non-resident
agents had rendered marketing services abroad and there was no business connection
in India, question as to whether commission paid to them was taxable in India, was to
be remanded back for disposal afresh. (AY. 2010-11)
Chenitan Color Chem (P.) Ltd v. ACIT (2015) 43 ITR 181 / (2016) 156 ITD 509 (Chennai)(Trib.)
827 S. 40(a)(i) : Amounts not deductible – Deduction at source – Sales commission – Non-
resident – Matter remanded. [S. 9(1)(i), 195]
Assessee had made payment of sales commission to non-resident agents. Since assessee
did not deduct tax at source while making said payments, Assessing Officer disallowed
same by invoking provisions of section 40(a)(i). Commissioner (Appeals) deleted said
disallowance. On appeal Tribunal held that since assessee had not established that non-
resident had rendered services abroad and there was no business connection in India
by producing relevant records, nature of services rendered by non-resident agents could
not be determined. Matter remanded. (AY. 2011-12)
ACIT v. Euro Leder Fashions Ltd. (2016) 156 ITD 208 (Chennai)(Trib.)
828 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Fees for technical
services – Fee paid to Bombay Stock Exchange as Transaction charges is not fees for
technical services – Not liable to deduct tax at source. [S. 9(1)(vii), 194J]
The High Court of Bombay (CIT v. Kotak Securities Ltd. (2012) 340 ITR 333) held that the
transaction charges paid by a member of the Bombay Stock Exchange to transact business
of sale and purchase of shares amounts to payment of a fee for ‘technical services’
rendered by the Bombay Stock Exchange. Therefore under the provisions of Section 194J
of the Income-tax Act, 1961 (for short “the Act”), on such payments TDS was deductible
at source. The said deductions not having been made by the appellant – assessee, the
entire amount paid to the Bombay Stock Exchange on account of transaction charges was
not deducted in computing the income chargeable under the head “profits and gains of
business or profession” of the appellant. On appeal reversing the judgment, the Court held
that Fee paid to Bombay Stock Exchange as transaction charges is not fees for technical
services hence not liable to deduct tax at source. (AY. 2005-06)
CIT v. Kotak Securities Ltd. (2016) 383 ITR 1 / 285 CTR 63 / 239 Taxman 139 / 133 DTR
151 (SC)
Editorial: Bombay High Court Judgment in CIT v. Kotak Securities Ltd. (2012) 340 ITR
333 (Bom.)(HC) is reversed.
250
S. 40(a)(ia) Amounts not deductible
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – Provision 829
attracting disallowance introduced “with effect from 1-4-2005” – Refers to financial
year not AY – No disallowance of payments made without deduction of tax in
financial year ending 31-3-2005. [S. 194C]
Allowing the appeal of assessee the Court held that Section 11 of the Finance (No. 2)
Act, 2004 by which sub-clause (ia) had been added to section 40 did not provide that it
was to become effective from the AY. 2005-06. It had merely said that it was to become
effective on April 1, 2005, which should have been meant to refer to the financial year.
There was no scope for ambiguity or confusion. The Tribunal had erred in applying the
provision of section 40(a)(ia) in disallowing the payment made to a contractor without
deducting tax at source during the financial year 2004-05, corresponding to AY. 2005-
06. (AY. 2005-06)
Piu Ghosh v. Dy. CIT (2016) 386 ITR 322 / 73 taxmann.com 226 (Cal.)(HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source disallowance was held 830
to be justified even if no payment remained payable on last day of financial year
[S. 194C]
Allowing the appeal of the revenue, the Court held that Payments made by assessee
without deduction of TDS would be disallowed under section 40(a)(ia) even if no
payment remained payable on last day of financial year. Matter remanded. (AY. 2006-07)
CIT v. T. Kurvilla (2016) 242 Taxman 139 (Ker.)(HC)
Editorial: T. Kurvilla v. Dy. CIT (2013) 33 taxmann.com 640 (Cochin)(Trib.) is set aside.
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Amendment by Finance 831
Act, 2010 relaxing time limit for payment of tax deducted at source in first eleven
months of year till due date for filing return, amendment is retrospective.
Dismissing the appeal of revenue the court held that; Amendment by Finance Act, 2010
relaxing time limit for payment of tax deducted at source in first eleven months of year
till due date for filing return, amendment is retrospective. CIT v. Santhosh Kumar Shetty
(2014) 3 ITR-OL 306 (Karn) followed.
CIT v. Sri Scorpio Engineering P. Ltd. (2016) 388 ITR 266 (Karn.)(HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Shortfall in deduction of 832
tax due to bona fide mistake disallowance was held to be not justified.
The assessee had made deduction of tax at source at 1 per cent instead of 2 per cent on
certain payments and failed to remit the tax deducted at source within the due date for
filing the return of income for the assessment year 2010-11 under section 139(1) of the
Act. On examination by the Assessing Officer, the assessee explained that subsequently,
on realisation that the tax deducted at source on the said payments were to be made at
2 per cent thereon, instead of 1 per cent as had been done by the assessee, the balance
tax deducted at source was paid on January 31, 2011 along with interest. The amount
was disallowed by the Assessing Officer but the Tribunal set aside the disallowance. On
appeal, dismissing the appeal of Revenue the Court held that in view of the contention
of the assessee that in the middle of the year, there was a change of law about the
deduction, the Tribunal was justified in deleting the disallowance. (AY. 2010-11)
CIT v. Kishore Rao (HUF) (2016) 387 ITR 196 (Karn.)(HC)
251
Amounts not deductible S. 40(a)(ia)
833 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Subscription to
e-magazines is not rendering of professional services hence tax is not deductible at
source as subscription.
Dismissing the appeal of revenue the Court held that the Commissioner (Appeals) and
the Tribunal had reached a concurrent finding of fact that payments made to B were for
subscription to e-magazines and therefore, there was no occasion to deduct tax under
the Act. Thus section 40(a)(ia) could not have been invoked. The submission on behalf
of the Revenue that B’s magazines/information was backed by solid research carried
out by its employees and made available on the website would not by itself result in
B rendering any consultative services. It was not the case of the revenue that specific
queries raised by the assessee were answered by B as a part of the consideration of
` 4.34 lakhs. The information was made available to all subscribers to e-magazines/
journal of B. Therefore, in no way could the payments made to B be considered to be
in the nature of any consultative/professional services rendered by B to the respondents.
The Tribunal was justified in deleting the disallowance made by the Assessing Officer
under section 40(a)(ia) of expenditure incurred by the assessee-company towards
payment of data charges to B even though the assessee-company had not deducted tax
at source on such payment made to avail of professional services. (AY. 2006-07)
CIT v. India Capital Markets P. Ltd. (2016) 387 ITR 510 (Bom.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment, CIT v. India Capital Markets P. Ltd. (2016) 384 ITR 122 (St.)
834 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Sub-contractor – Failure
by assessee to make deduction disallowance of payment was justified. [S. 194C, 260A]
Dismissing the appeal the Court held that the Tribunal arrived at the finding of fact
that the person to whom the payment was made was a sub-contractor. The finding of
the Tribunal was not perverse to be interfered in an appeal under section 260A of the
Act. Once the status of the person as a sub-contractor was accepted, the liability under
section 194C was automatically attracted. Since, the assessee did not effect deduction
under section 194C of the Act, the payment was to be disallowed under section 40(a)
(ia) of the Act. (AY. 2009-10)
Prasanna Radha Krishnan (Smt.) v. ITO (2016) 387 ITR 162 / 73 taxmann.com 72 (Ker)
(HC)
835 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payment of wages
through agents – No work contracts – Persons to whom payments made neither
contractors nor sub-contractors – No liability to deduct tax at source – Disallowance
unsustainable. [S. 194C]
Allowing the appeal of assessee the Court held that the persons to whom the payments
had been made had been working on behalf of the assessee and not as sub-contractors
and there was nothing on record to show that any work had been assigned to them by
the assessee. The payment made to workers through the hands of the four persons was a
payment made directly by the assessee to those persons. On the basis of the letters that
had been received by the Assessing Officer from the four persons, it could neither be
held that they were sub-contractors nor that the assessee had assigned to them the work
that had been entrusted with him. Unless these factors were proved, the question of
252
S. 40(a)(ia) Amounts not deductible
applicability of section 194C(2) did not arise and that there was no liability of deduction
of tax at source. The order of the Tribunal upholding the addition of labour charges was
perverse. (AY. 2006-07)
Jiauddin Mollah v. CIT (2016) 385 ITR 394 (Cal.)(HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Freight charges – 836
Assessee, buyer, reimbursing transportation expense – Liability to deduct tax at source
on supplier under agreement – No liability on assessee to deduct tax. [S. 194C]
Allowing the appeal of assessee the Court held that under the contract of sale, the
seller was bound to send the goods to the buyer and showed that the seller was bound
to pay the transportation charges to the transport agency and was entitled to recover it
from the buyer. The assessee had merely reimbursed the cost of transportation incurred
by the seller. Section 40(a)(ia) might be applied to the seller but not to the case of the
assessee who was the buyer. The agent being the supplier had admittedly paid to the
transporters and had also deducted the tax at source. When the agent had complied
with the provision, the principal could not have been visited with penal consequences.
For one payment there could not have been two deductions. Moreover, when a person
acted through another, in law, he acted himself. The Tribunal was wrong in holding
that the assessee was liable to deduct tax at source in respect of the freight component.
(AY. 2006-07)
Hightension Switchgears P. Ltd. v. CIT (2016) 385 ITR 575 / 240 Taxman 582 / 290 CTR
97 / 143 DTR 228 (Cal.)(HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Failure to deduct tax 837
at source on payments made to contractors, towards rent and professional charges –
Disallowance was held to be justified. [S. 194C, 194I, 194J]
Assessee running sugar factory. Agreements entered into with harvesters and transporters
of sugarcane. Tax was not deducted at source on payments to contractors, towards rents
and professional charges. On appeal by revenue, allowing the appeal the Court held
that the disallowance of expenditures was held to be justified. (AY. 2005-06 to 2011-12)
ACIT v. Ryatar Sahakari Sakkare Karkhane Niyamit (2016) 383 ITR 561 / 67 taxmann.
com 283 / 137 DTR 383 / 287 CTR 649 (Karn.)(HC)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Non-resident – 838
Commission – Services rendered outside India – Order of Tribunal was set aside for
reconsideration. [S. 195]
The Tribunal took the view (Sesa Resources v. ACIT) that in view of the retrospective
amendment to s. 195 to provide that s. 195 applies whether or not the non-resident
person has a residence or place of business or business connection in India, commission
to non-resident agents for services rendered outside India is liable for TDS u/s. 195
and has to suffer disallowance u/s 40(a)(ia). In appeal High Court, setaside the order of
Tribunal. (AY. 2009-10)
Sesa Resoureces Ltd. v. DCIT (2016) 136 DTR 169 / 287 CTR 89 (Bom.)(HC)
Editorial : After setaside, Tribunal decided in favour of assessee. ITA No 267/Pan/2015
dated 27-04-2016 DCIT v. Sesa Resoureces Ltd. www.itatonline.org
253
Amounts not deductible S. 40(a)(ia)
839 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Commission – Services
were rendered outside India – Not liable to deduct tax at source. [S. 9(1)(i), 9(1)(vii),
195]
Commission paid to a non-resident for services rendered outside India is not chargeable
to tax in India and is not liable for TDS. Insertion of Explanation 4 to s. 9(1)(i) and
Explanation 2 to s. 195(1) by FA 2012 w.r.e.f. 01.04.1962 and insertion of Explanation
below s. 9(2) by FA 2010, w.r.e.f. 01.06.1976 makes no difference to the law. (AY. 2010-11)
CIT v. Farida Leather Company (2016) 238 Taxman 473 / 135 DTR 268 / 287 CTR 565
(Mad.)(HC)
840 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payments made for
purchase of software as product and for resale in Indian market – Not “royalty” –
Assessee not liable to deduct tax at source. [S. 9(1)(vi), 195]
Held, that the agreement indicated that the assessee was appointed for the purposes of
reselling the software and payments made were on account of purchases made by the
assessee. Payments made by a reseller for the purchase of software for sale in the Indian
market could not be considered royalty. It was not disputed that in the preceding year,
the Assessing Officer had accepted the transactions to be of purchase of software. The
assessee was not liable to deduct tax at source. Deletion of addition was proper. (AY.
2008-09)
Pr.CIT v. M. Tech India P. Ltd. (2016) 381 ITR 31 / 238 Taxman 178 / 132 DTR 57 / 287
CTR 213 (Delhi)(HC)
841 S. 40(a)(ia) : Amount not deductible – Deduction at source – When income is computed
under section 11, no disallowance can be made for failure to deduct tax at source.
[S. 10(23C), 11]
Allowing the appeal of the assessee, the Tribunal held that when the income is
computed u/s. 11, provisions of section 40(a)(ia) cannot be applied. (AY. 2008-09)
Sri Koundinya Educational Society v. ACIT (2016) 159 ITD 416 / 181 TTJ 677 (Visakha)
(Trib.)
842 S. 40(a)(ia) : Amount not deductible – Deduction at source – Non-resident – Ownership
on drawings, specifications and documents not passed on to assessee and remaining
property of payee, not liable to deduct tax at source – DTAA – India-USA [S. 195, 201,
Art. 12]
Non-resident Payee Company rendering architectural services from its office outside
India. Payee not transferring any technology or technical knowhow or copyrighted
scientific work designs, drawings and layouts project specific ownership on drawings,
specifications and documents not passed on to assessee and remaining property of
payee. Payments by assessee to non-resident not in nature of “royalty” or “fees for
technical services”. Hence the assessee is not liable to deduct tax at source. (AY. 2008-
09, 2009-10)
Gera Developments P. Ltd. v. Dy. CIT (2016) 52 ITR 1 / 160 ITD 439 / 181 TTJ 510 (Pune)
(Trib.)
254
S. 40(a)(ia) Amounts not deductible
S. 40(a)(ia) : Amounts not deductible – Deduction at source – No liability of TDS on 843
reimbursement of expenditure for common services.
Dismissing the appeal of the revenue, The Tribunal held that the expenditure is
primarily incurred in the first instance by these companies. The assessee only borne
its share of expenses by making the reimbursement to these two companies. The
responsibility of TDS would be on those two companies when they actually incurred
the expenditure. The assessee has only reimbursed the expenditure which belonged to
the assessee share. On such reimbursement of expenditure, there is no liability of TDS.
(AY. 2010-11)
ITO v. Escorts Asset Management Limited, (2016) 49 ITR 37 (Delhi)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Reimbursement of 844
expenditure i.e., management fee of Asset Management Company in excess of SEBI
prescribed limit – Pimary obligation to deduct TDS not on assessee.
Dismissing the appeal of the revenue, the Tribunal held that in this case also, the
expenditure is primarily incurred and paid for by the mutual fund and thereafter to
the extent it exceeds the limit prescribed by SEBI, it is recovered by mutual fund from
the Asset Management Company. Thus, the primary obligation to deduct TDS is on the
mutual fund at the time of payment for the expenditure. The assessee only reimbursed
the expenditure to the mutual fund which is in excess of the limit prescribed by SEBI.
On such reimbursement of expenditure, there is no liability of TDS. (AY. 2010-11)
ITO v. Escorts Asset Management Limited, (2016) 49 ITR 37 (Delhi)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Company provided 845
designs, drawing and further erected project in India, payment to UK Company is
liable to taxed in India – DTAA – India-UK. [S. 195, Art. 13]
UK-Company made available to the assessee company design and drawings and also
erected project in India under its own supervision. Said services were rendered in India,
payment made by assessee to UK-company taxable in India. (AY. 2008-09)
Servall Engineering Works (P.) Ltd. v. DCIT (2016) 161 ITD 457 / 52 ITR 252 (Chennai)
(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Provision cannot be 846
invoked to disallow expenditure which has been actually paid within same year,
without deduction of TDS.
The Assessee had paid to a resident without deducting TDS at the tme of deposit of
tax. Provisions of s. 40(a)(ia) cannot be invoked to disallow expenditure which has been
actually paid within same financial year, without deduction of TDS. (AY. 2011-12)
Efftronics Systems (P.) Ltd. v. (2016) 161 ITD 688 / 52 ITR 497 (Visakha(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Once Form No. 15G/ 847
Form 15H were received by persons responsible, no liability to deduct TDS. [S. 194A]
Assessee paid interest to a resident without deduction TDS. Held that once Form No.
15G/Form 15H were received for deducting tax, there was no liability to deduct TDS in
255
Amounts not deductible S. 40(a)(ia)
view of S. 194A even said documents were not filed before proper authority S. 40(a)(ia)
cannot be invoked in such case. (AY. 2007-08, 2010-11)
ACIT v. Chittoor Dist. Co-operative Central Bank Ltd. (2016) 161 ITD 282 / 50 ITR 303
(Hyd.)(Trib.)
848 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payment was made
before due date of filing of return, Amendment to S. 40(a)(ia) by Finance Act, 2010
w.e.f. 1-4-2010 is retrospective, no disallowance can be made.
Tribunal held that the Amendment to S. 40(a)(ia) by Finance Act, 2010 w.e.f. 1-4-2010
is retrospective and, therefore, TDS has to be paid on or before due date specified for
filing return of income u/s. 139(1). In view of same Assessee made payments of TDS
in next financial year but before due date for filing return of income u/s. 139(1), said
payments could not be disallowed u/s. 40(a)(ia). (AY. 2010-11)
Foods and Inns Ltd. v. ACIT (2016) 159 ITD 1007 (Mum.)(Trib.)
849 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Once income is assessed
by applying net profit rate disallowances cannot be made, and also income has been
shown in hands of the recipient and has suffered tax.
The Tribunal held that once the income is assessed by applying net profit rate, no
disallowance under section 40(a)(ia) can be made and the section is not applicable as
the impugned amount has been shown in the hands of recipient and has suffered tax.
(AY. 2011-12)
ACIT v. J. S. Grover Constructions (2016) 181 TTJ 23 (UO) (Asr.)(Trib.)
850 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Amounts payable – No
disallowance can be made if no amount was payable at the end of the accounting year.
Dismissing the appeal of the revenue, the Tribunal held that no disallowance can be
made if the amount was paid before the end of the financial year and no amount was
payable at the . (AY. 2008-09)
ACIT v. Red Brick Realtors P. Ltd. (2015) 38 ITR 749 / 70 SOT 592 (Chennai)(Trib.)
851 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payment of product
designing charges outside India for services rendered outside India – Not liable to
deduct tax at source. [S. 195, 201(1), 201(1A)]
Dismissing the appeal of the revenue the Tribunal held that; the commission amount
which was earned by a non-resident for services rendered outside India would not be
deemed to be income which is either accrued or arisen in India. As it was not disputed
that payment in foreign currency was made to non-resident outside India for services
rendered outside India, decision of the Apex Court in the case Toshoku Ltd., was found
to be applicable to the facts of the case of the assessee. The tribunal concluded stating
that payment made to non-resident for service rendered outside India is not liable for
TDS under the provisions of the Act and therefore, disallowance of the same invoking
the provisions of section 40(a)(ia) of the Act would not arise. (AY. 2008-09)
ACIT v. Amarvathy Textiles (2015) 125 DTR 321 / 70 SOT 648 / 173 TTJ 641 (Chennai)
(Trib.)
256
S. 40(a)(ia) Amounts not deductible
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Liaisoning charges and 852
purchase of catalogue and brochure, payment was not required to be deducted. [S.
194C, 194J]
Allowing the appeal of the revenue, the Tribunal held that liaisoning charges and
purchase of catalogue and brochure, payment was not required to be deducted under
section 194C and 194J of the Income-tax Act. (AY. 2008-09)
Rattan Brothers v. ACIT (2016) 160 ITD 365 (Amritsar)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Interest – Co-operative 853
bank – No outstanding balance as on year end hence TDS provision would not get
attracted [S. 194A]
Dismissing the appeal of the revenue, the Tribunal held that where payment was already
made to non-members and there was no outstanding balance as on year end, TDS
provision of section 40(a)(ia) would not get attracted. (AY. 2012-13)
ACIT v. Warangal Urban Co-operative Bank Ltd. (2016) 161 ITD 56 (Hyd.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Where income is 854
computed under S. 11, provisions of S. 40(a)(ia) and 43B are not applicable. [S.11,
12A, 43B]
The legislature in its wisdom has kept separate provisions which are independent from
any other provisions of the Act for computation of income of trusts claiming exemption
under section 11. Therefore, when income is computed under section 11, the provisions
of sections 40(a)(ia) and 43B are not applicable. Hence, the Assessing Officer was not
correct in disallowing the amounts by invoking the provisions of sections 40(a)(ia) and
43B for failure to deduct TDS and failure to remit the unpaid liabilities. (AY 2009-10)
ITO v. Mother Theresa Educational Society (2016) 158 ITD 473 (Visakha)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Salaries reimbursed of 855
the employees deputed by the AE of the assessee cannot be disallowed if the tax was
deducted at source u/s. 192 while making the payment by the AE. [S. 192]
The assessee was engaged in the business of manufacture of medicines. The marketing
activity of the products was carried out by its associate companies. It incurred a sum
of ` 8.73 crores towards sales promotion expenses reimbursed to its group companies.
Since the assessee did not deduct tax at source from these reimbursements, the
Assessing Officer disallowed the expenses under section 40(a)(ia) of the Income-tax
Act, 1961. The Commissioner (Appeals) held that the reimbursement of expenses did
not contain any income element and, hence, there was no liability on the part of the
assessee to deduct tax at source from those payments. On appeal, it was held that there
was an agreement between the assessee and the marketing companies. The marketing
companies were entitled to commission for the sales generated by them. Under the
agreement, the marketing companies required sufficient number of employees for
effectively marketing the products. The salary expenses, travelling and conveyance
expenses, etc., incurred by the marketing companies were required to be reimbursed
by the assessee. Thus, the reason why the expenses were reimbursed by the assessee
to the marketing companies was sufficiently explained. The marketing companies had
deducted tax at source from the salary payments. Thus, the expenses reimbursed by
257
Amounts not deductible S. 40(a)(ia)
the assessee had already suffered tax deduction at source at the end of the marketing
companies. Accordingly, there was no requirement of invoking the provisions of section
40(a)(ia) in the hands of the assessee. It was not the case of the Assessing Officer that
other expenses incurred by the marketing companies required tax deduction. (AY. 2008-
09, 2009-10)
DCIT v. Martin & Harris Laboratories Ltd. (2016) 48 ITR 641 (Mum.)(Trib.)
856 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Income was not
computed under head of business income, provision of section 40(a)(ia) could not be
invoked. [S. 10(23C(iv)]
Assessee was a Charitable Trust registered u/s. 10(23C)(iv). The AO noted that there
were certain expenses incurred by assessee but it did not deduct TDS on these
payments, He therefore disallowed these expenses invoking provisions of s..40(a)(ia).
The ITAT held that since assessee was a trust which was claiming exemption u/s. 10
or 11 and assessee was not carrying on any business or profession, its income was not
to be computed under head of business income, and since income was not computed
under head of ‘business income’, provisions of section 40(a)(ia) could not be invoked.
(AY. 2008-2009 to 2011-12)
ITO v. Haryana State Counseling Society (2016) 159 ITD 816 / 179 TTJ 660 (Chd.)(Trib.)
857 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Discount on prepaid
charges, held the tax was not deductible at source. [S. 194H]
The Tribunal while holding in favour of assessee concluded that in view of the findings
of the Guwahati and Jaipur Benches of the Tribunal in assessee’s own case that the
provisions of S. 194H is not applicable to the discount allowed to the distributors in
respect of prepaid cards, there was no amount on which TDS was deductible and,
therefore S. 40(a)(ia) cannot come into play. (AY. 2006-07, 2008-09)
Bharti Hexacom Ltd. v. ACIT (2016) 179 TTJ 25 (Delhi)(Trib.)
858 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Royalty – Rent –
Professional fees – No scope for assessee to deduct tax for payments made before
amendment came into force – Only amounts payable as on 31, March disallowable.
[S. 194I, 194J]
Assessee incurred expenditure on payment to pay channels, royalties, commission,
programme and new expenses, advertisement and rent without deducting tax at source.
The Assessing officer disallowed the expenses u/s. 40(a)(ia) of the Act. On appeal the
Tribunal held that
(i) With regard to pay channel charges the term ‘royalty’ appeared for the first time
in Section 194J of the Act in the year 2007 and therefore there was no scope for
the assessee to deduct tax at source in respect of payments made for obtaining the
signals from the signal provider.
(ii) With regard to payment to cable operators, legal and professional charges,
consumables and cable laying charges and advertisement was not disallowable u/s
40(a)(ia), if entire amount was paid before 31st March, 2007. The disallowance
could only be restricted to the amount outstanding at the end of the year. Issue
remanded to verify the amount outstanding at the end of the year.
258
S. 40(a)(ia) Amounts not deductible
(iii) With regard to expenditure towards hire charges for machinery and up-linking
charges for live telecast of programmes in nature of royalty was to be allowable
since the term ‘machine hire charges’ was also inserted in Section 194J by an
amendment in the year 2006.
(iv) With regard to rent u/s. 194I, disallowance restricted to amount outstanding at the
end of the year. Issue remanded for verification. (AY 2007-08)
Incable Net (Andhra) Ltd v. ITO (2016) 47 ITR 356 (Hyd.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Advertising revenue – 859
Commission paid to advertising agency – No disallowance in case tax has been paid
by the payee. [S. 194H]
The assessee was engaged in the business of broadcasting and during the year under
consideration, it has received the net revenue from the advertising agency towards
advertising. The said revenue was accounted in the books of account after deducting
tax at 15 per cent on the gross receipts. The Assessing Officer noted that the assessee
had earned gross revenue and had not granted income and expenses of 15 per cent.
This difference of 15 per cent has been treated as commission paid by the assessee
to the advertising agency. Since no TDS has been deducted, which, according to him,
should have deducted under section 194H, therefore, he disallowed the amount under
section 40(a)(ia). The ITAT deleted the disallowance by the AO since it was proved that
the payees have paid tax on the same. It was held that second proviso to s. 40(a)(ia)
was directory and curative and had retrospective effect from 1-04-2015 and hence the
Assessee was not in default of s. 201(1) as well as 40(a)(ia). (AY. 2009-10)
Nimbus Communications Ltd. v. ACIT (2016) 47 ITR 496 (Mum.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Commission – 860
Disallowance in case tax was not deducted on part of the amount.
The AO disallowed commission expenses claimed by the assessee on the basis that tax
was not deduction on the same. Part relief was granted by the CIT(A) since tax was
deducted by the Assessee on part of the amount. The ITAT upheld the order of the
CIT(A) and the disallowance u/s 40(a)(ia) of the amount on which no tax was deducted.
(AY. 2009-10)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Income computed under 861
section 11 – No disallowance can be made. [S. 11]
Where income of the assessee has to be computed under section 11, no disallowance
can be made under section 40(a)(ia) by applying commercial principles. (AY. 2009-10,
2010-11)
ITO v. Kalinga Cultural Trust (2015)155 ITD 291 / 41 ITR 147 / 177 TTJ 233 / 137 DTR
103 (Hyd.)(Trib.)
259
Amounts not deductible S. 40(a)(ia)
862 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Second proviso to S.
40(a)(ia) inserted by FA 2013 should be treated as retrospectively applicable from 1st
April 2005 – When there are conflicting judgements of non-jurisdiction High Courts,
it has to follow the view which is in favour of the assessee even if it believes that this
view is not the correct law.
When there are conflicting judgments of non-jurisdiction High Courts, the Tribunal is
not permitted to choose based on its perception of what the correct law is because it will
amount to sitting in judgment over the High Courts’ views. Instead, it has to follow the
view which is in favour of the assessee even if it believes that this view is not the correct
law. Second proviso to S. 40(a)(ia) inserted by FA 2013 should be treated as retrospectively
applicable from 1st April 2005. (ITA No. 106/RPR/2016, dt. 24.06.20166)(AY. 2010-11)
R K P Company v. ITO (Raipur)(Trib.); www.itatonline.org
863 S. 40(a)(ia) : Amounts not deductible – Payments by a CA firm to foreign professional
entities for services rendered abroad is not taxable. The retrospective amendment to
S. 9(1)(vii) to tax services rendered outside India does not apply in the context of a
disallowance u/s. 40(a)(ia) in the hands of the payer – DTAA – India-USA. [S. 9(1)(vii),
195, Art, 12, 15]
(i) The issue revolves around the payments made by the assessee to certain non-
resident entities for professional services rendered by them outside India. It has
been consistently explained by the assessee that the services of such entities
were availed during the course of the execution of engagements of assessee firm.
The assessee firm did not deduct the tax at source and, therefore, the Assessing
Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such
expenditure. The payments have been made to 12 different professional entities
based in 10 different countries. In so far as the payments that are made to KPMG
LLP, USA and KPMG LLP, Canada are concerned, the same has been made on
account of professional services rendered in relation to taxation and transfer
pricing. Undisputedly, the professional services have been rendered by the
aforesaid entities outside India. The stand of the Revenue is that such services
are in the nature of ‘fee for technical services’ and, therefore, tax was liable to
be deducted at source in India. Factually speaking, the aforesaid stand of the
Revenue is devoid of any support because there is no material to establish that
any technical knowledge, skill, etc. has been made available to the assessee so
as to consider it as falling within the purview of Article-12 of Indo-US Double
Taxation Avoidance Agreement. It is also an established fact that such non-resident
recipients do not have permanent establishment in India and, therefore, in the
said background the same can, at best, be treated as independent personal services
covered by Article 15 of the Indo-US Double Taxation Avoidance Agreement. As
a consequence and in the absence of any fixed base in India, such income cannot
be held chargeable to tax in India so as to require deduction of tax at source.
Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is
not tenable.
(ii) Apart therefrom, even if we were to accept, for the sake of argument, that the
services by the aforesaid entities are in the nature of technical services and are
rendered and utilized in India so as to be taxable in terms of section 9(1)(vii) of
260
S. 40(a)(ia) Amounts not deductible
the Act, even then the disallowance is not warranted as the following discussion
would show. Ostensibly, the requirement of rendering services in India in order
to attract section 9(1)(vii) of the Act was removed by insertion of Explanation
by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been
understood by the Revenue to say that in spite of the services having been
rendered by the recipients outside India, the same is taxable in India by applying
the aforesaid amendment. In our view, such retrospective amendment would be
determinative of the tax liability in the hands of the recipients of income. So
however, in the present case, what is held against the assessee is the failure to
deduct tax at source at the time of payment of such income. Ostensibly, de hors
the aforesaid amendment, the impugned income was not subject to tax deduction
at source in India as per the prevailing legal position. Taxability of a sum in the
hands of recipient, on account of a subsequent retrospective amendment would
not expose the assessee-payer to an impossible situation of requiring deduction of
tax at source on the date of payment. Therefore, on this count also the assessee
cannot be held to be in default in not deducting tax at source so as to trigger the
disallowance under section 40(a)(i) of the Act (ITA No. 1917/Mum/2013, dated
06.05.2016) (AY. 2009-10)
ACIT v. BSR & Co. (Mum.)(Trib.), www.itatonline.org
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Form 15H was filed – No 864
requirement of deduction at source – No disallowance can be made [S. 194A]
Tribunal held that where the assessee credited interest in recipient account without
deducting TDS at time of payment, in view of filing of Form 15H by recipient there was
no requirement for deduction of tax and, accordingly, disallowance was not justified.
(AY. 2011-12)
Narasu’s Spinning Mills v. ACIT (2016) 157 ITD 512 (Chennai)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payments towards deficit 865
registration charges as directed by High Court, no tax needed to be deducted at source.
[S. 194J]
As directed by Calcutta High Court, assessee paid a sum towards deficit registration
charges by way of bank-draft in favour of Additional Registrar of Assurances being share
of client’s fee of assessee. No tax needed to be deducted at source on this sum, and
hence, no disallowance could be made. (AY. 2005-06)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Lawyer shared client’s 866
fee with other lawyers without deducting TDS, no disallowance could be made if there
was no profit element in sum paid and was mere reimbursement of expenses. [S. 194J]
Assessee-lawyer paid remuneration to other lawyers. It was not clear from records
whether assessee claimed any deduction on such payments. It was also not clear
whether said payments were reimbursed to assessee by his clients – Whether if there
was no profit element in sum paid and was mere reimbursement of expenses, then no
disallowance could operate. Matter remanded. (AY. 2005-06)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
261
Amounts not deductible S. 40(a)(ia)
867 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Audit fee, bank charges,
salary, depreciation – Additional evidence was filed – Matter remanded. [S. 194J]
On appeal before Tribunal, assessee submitted documents by way of additional evidence
to indicate that expenditure incurred towards audit fee and salary were genuine and
contended that payment of professional fee would not attract provisions of section 194J
in view of second proviso to sub-section (1) of section 194J. Considering submissions
made by assessee on applicability of section 194J as well as additional evidence
produced, issue relating to claim of salary and audit fee required examination afresh.
Matter remanded. (AY. 2009-10)
Girish M. Kothari v. JCIT (2016) 157 ITD 451 (Mum.)(Trib.)
868 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Contractor – Even if no
written contract the assessee is liable to deduct tax at source. [S. 194C]
Allowing the appeal of revenue the Tribunal held that assessee would be liable to
deduct tax at source under section 194C on payments made as transportation charges to
intermediate parties who arranged actual transporters from open market for carriage of
goods by transport for assessee, even if there was no written contract between assessee
and intermediary party. (AY. 2007-08)
ITO v. Gopal S. Rajput (2016) 156 ITD 827 (Mum)(Trib.)
869 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Commission – Service
rendered outside India – Not liable to deduct tax at source – Retrospective amendment
does not make any difference to the legal position. [S. 195]
Commission paid to non-resident agents for services rendered outside India is not liable
for TDS u/s. 195. The retrospective amendment to s. 195 to provide that s. 195 applies
whether or not the non-resident person has a residence or place of business or business
connection in India makes no difference to the legal position. (ITA No. 267/PAN/2015,
dt. 27.04.2016) (AY. 2009-10)
DCIT v. Sesa Resources Ltd. (Panji)(Trib.); www.itatonline.org
870 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Interest other than
interest on securities – Nodal agency – No liability to deduct tax at source. [S. 192A,
194A]
AO disallowed the interest on the ground that the assessee has failed to deduct tax at
source. On appeal CIT(A) has taken note of amendment to section 2101 and section
40(a)(ia) made by the Finance Act of 2012, with effect from 1-4-2013 to the effect that
the said provision would not apply,if the payee had taken the amount in computing its
income and paid tax thereon. CIT(A) held that proviso was inserted with effect from
1-4-2013 were to remedy consequences and therefore, the same were treated as
clarificatory in nature and retrospective in operation and granted relief to the assessee.
On appeal Tribunal held that where assessee infrastructure corporation acted as a Nodal
agency for loan taken by Government organisations from other Government organisations,
if payee had taken amount of interest received by it in computing its income and paid tax
thereon, assessee would have no TDS obligation. (AY. 2009-10, 2010-11)
Dy. CIT v. A.P. Industrial Infrastructure Corporation Ltd. (2016) 156 ITD 410 (Hyd.)(Trib.)
262
S. 40(a)(ia) Amounts not deductible
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Last month deduction 871
was deposited before due date of filing of return – No disallowance can be made. [S.
139(1)]
Tribunal held that where assessee had deducted tax in last month of previous year
and deposited same before due date of filing of return under section 139(1), Assessing
Officer could not disallow said payment under section 40(a)(ia) (AY. 2007-08)
Furniture Concepts (I) Ltd. v. ACIT (2016) 156 ITD 233 (Mum.)(Trib.)
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Payee has paid the tax 872
– Amendment is retrospective – No disallowance can be made.
Tribunal held that the amendment inserted w.e.f. 01.04.2013, is retrospective in
operation because it is curative and intended to remedy an unintended consequence.
Accordingly, if the payee has paid the tax, the payer will not suffer a disallowance. (ITA
No. 888/JP/2014, dated 4.11.2015) (AY. 2009-10)
Rakesh Tak v. ITO (Jai.)(Trib.); www.itatonline.org
S. 40(a)(ia) : Amounts not deductible – Deduction at source – Salary – Employees 873
deputed pursuant to a secondment agreement are not “employees” of the assessee and
so the amounts paid by way of reimbursement of their salary is not subject to TDS in
the assessee’s hands. [S. 192]
The employees are not the employees of assessee Mahanagar Gas Ltd. but employees of
British Gas and they are working with assessee only in view of secondment agreement.
As per joint venture agreement GAIL and British Gas have agreed to second, therefore,
employees to the joint venture company i.e. Mahanagar Gas Ltd. on secondment
basis and under secondment agreement certain employees have been seconded to
the assessee. Since the employers were seconded for limited time of 2 to 3 years, the
remuneration payable to these seconded employees were being paid by British Gas
or GAIL recoverable from assessee on cost-to-cost basis. The nature of secondment
agreement make clear the duties of second employees, their liabilities towards assessee
and reimbursement of actual cost of remuneration, benefits and disbursement by
assessee to the joint venture partners. These are reimbursements. Also the employee’s
remuneration was allowable to tax in India then there would be tax deduction obligation
on the employer who was responsible for making payment to the employees. In the
present case, there was subsisting employer-employee relation between British Gas and
expatriate. British Gas was also person responsible for making payment to expatriate and
application for deducting tax at source from salary was on British Gas. British Gas has
deducted TDS on these remunerations paid to seconded employees and also deposited
in the treasury of the Govt. of India. The TDS on salary payment to expatriate seconded
employees to assessee have been given certificate to assessee stating the above fact
which is available in the paper book of the assessee. All taxes have been paid by British
Gas and second time TDS cannot be deducted on the same amount. CBDT Circular No.
720 dated 30.08.1995 clarifies that any sum payable shall be liable for deduction of tax
only under one section. (AY. 2009-10)
DCIT v. Mahanagar Gas Ltd. (Mum.)(Trib.); www.itatonline.org
263
Amounts not deductible S. 40(a)(ia)
874 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Fees for technical
services – Expense incurred by the Foreign Branch Office for conducting its business
abroad, could not be treated as fees for technical services incurred by the Assessee –
Disallowance was held to be not justified. [S. 9(1)(vii)]
Assessee undertook business outside India through its branch office in Japan. The
software development work was outsourced by the Japan Branch Office to another
Japanese Company. The AO held that payments made by the Branch Office were fees
for technical services paid by the Assessee and were to be disallowed u/s. 40(a)(i) since
no tax was deducted at source. The ITAT deleted the disallowance and held that merely
because the financial statements of the Branch Office was included in the assessee’s
financial statements, it could not be said that the expense was of the assessee. (AY.
2008-09)
NEC HCL System Technologies Ltd. v. ACIT (2016) 176 TTJ 436 (Delhi)(Trib.)
875 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Non-resident –
Reimbursement of expenses is not income in hands of the recipient and deduction of
tax at source is not required.
The AO disallowed the reimbursement of expenses made by the Assessee to its foreign
associate company on the basis that tax was not deducted at source on the same. The
ITAT decided in favour of the assessee and held that reimbursement of expenses was
not income in hands of the non-resident and hence tax was not to be deducted on the
same. (AY. 2008-09)
ITO v. Cerner Health Care Solutions P. Ltd. (2016) 45 ITR 207 (Bang.)(Trib.)
876 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Advertisement contract
on which VAT was paid – Not liable to deduct tax at source. [S. 194C]
The Tribunal held that purchase of articles relating to advertisement on which VAT is
paid does not attract TDS liability, hence, disallowance under section 40(a)(ia) is not
sustainable. (AY. 2007-08)
Gillette India Ltd. v. ACIT (2015) 70 SOT 289 / (2016) 175 TTJ 35 (UO)(Jaipur)(Trib.)
877 S. 40(a)(ia) : Amounts not deductible – Deduction at source – No disallowance was
made for short deduction of tax at source. [S. 194C, 194J]
The Tribunal held that when the assessee has made deduction of tax at source under
section 194C instead of section 194J, disallowance cannot be made under section 40(a)
(ia) for short deduction of tax at source.
Cross object filed by assessee dismissed. (AY. 2009-10)
Dy. CIT v. Parryware Roca (P) Ltd. (2016) 175 TTJ 450 (Chennai)(Trib.)
Roca Bathroom Products (P.) Ltd. v. Jt. CIT (2016) 175 TTJ 450 (Chennai)(Trib.)
878 S. 40(a)(ia) : Amounts not deductible – Deduction at source – Capital or revenue –
Import of software products for own use as well as for trading was capital in nature
on which depreciation was allowable. [S. 32, 37(1), 195]
The assessee imported certain software products for its business as well as for the
purpose of trading. The AO disallowed the expenditure, applying the provision of sec.
264
S. 40(a)(iib) Amounts not deductible
40(a)(i) of the Act on the ground that the tax was required to be deducted at source u/s.
195 of the Act. The CIT(A) allowed the claim in respect of import of software observing
that the payment was towards copyrighted articles and only represented the purchase
price of an article and could not be considered as royalty and therefore, no obligation
of the assessee to deduct tax at source u/s.195 of the Act and no disallowance could
be made u/s. 40(a)(i) of the Act. On appeal by department in which the assessee raised
an alternative contention that it had incurred expenses on account of software acquired
within India and the AO treated it as a capital expenditure and allowed depreciation
thereon and the expenditure on imported software may be treated similarly. On appeal,
the Tribunal held that expenses on imported software were also in the nature of capital
expenditure and depreciation was allowed thereon. The AO was to allow depreciation
on the imported software purchased by the assessee. (AY. 2005-06)
Dy. CIT v. Tata Consultancy Services Ltd. (2015) 174 TTJ 570 / (2016) 46 ITR 394 (Mum.)
(Trib.)
S. 40(a)(ii) : Amounts not deductible – Deduction at source – Rates or tax – Foreign 879
taxes – Amounts not eligible for DTA relief are deductible – Tax paid in Saudi Arabia
attributable to income arising or accruing in India is not eligible for relief under
section 91, hence disallowance is not attracted – The Explanation-1, is declaratory
and has retrospective effect. [S. 2(43), 35D, 80HHB, 90, 91]
Allowing the appeal the Court held that; Foreign taxes are not hit by the bar in s. 40(a)
(ii) and are deductible on the real income theory. After the insertion of the Explanation
to s. 40(a)(ii) by the FA 2006, foreign taxes are not deductible only to the extent they
are eligible for relief u/s. 90 & 91. Amounts not eligible for DTA relief are deductible.
The Explanation is declaratory and has retrospective effect. Tax paid in Saudi Arabia
attributable to income arising or accruing in India is not eligible for relief under section
91, hence disallowance is not attracted. (AY. 1983-84)
Reliance Infrastructure Ltd. v. CIT (2016) 76 taxmann.com 257 / (2017) 390 ITR 271 /
145 DTR 233 (Bom.)(HC)
S. 40(a)(ii) : Amounts not deductible – Deduction at source – Overseas taxes paid by 880
the assessee not allowable. [S. 37(1)]
The AO disallowed the deduction of overseas tax paid by the assessee holding that
such taxes were covered by the provisions of section 40(a)(ii) of the Act. The CIT(A)
allowed the deduction. On appeal, the Tribunal held that the disallowance was proper.
(AY. 2005-06)
Dy. CIT v. Tata Consultancy Services Ltd. (2015) 174 TTJ 570 / (2016) 46 ITR 394 (Mum.)
(Trib.)
S. 40(a)(iib) : Amounts not deductible – Royalty/Privilege fee levied exclusively on 881
State Government – The insertion of sub-clause (iib) of clause (a) of section 40 will
not have retrospective effect.
On Writ, the High Court observed that the Revenue had drawn inspiration from the
2013 amendment, whereby clause (iib) of sub-clause (a) of section 40 was inserted by
265
Amounts not deductible S. 40(a)(iii)
the Finance Act, 2013, with effect from 1-4-2014. This apparently was treated by the
AO, as being clarificatory in nature and had sought to apply it with retrospective effect.
Therefore, the primary reasoning of the AO was that the privilege fee imposed was
unreasonable and does not take on the characteristic of a privilege fee and it could not
be construed as a fee at all and it is merely a device to evade tax.
The High Court held that the attempt to disallow the privilege fee in respect of the AY
prior to 2014-15 was clearly without reference to any legal provision. The High Court
held that as pointed out by assessee, a plain reading of the provision would not indicate
that it is to be applied with retrospective effect. There were other provisions which were
also amended, and wherever the Legislature intended that certain provisions would have
retrospective effect, it was expressly indicated therein and therefore, there being no
such express indication insofar as the present provision with which one is concerned,
it cannot be said to be applicable with retrospective effect. The learned Counsel had
further relied on the Memorandum explaining the Finance Bill, 2013 and decision of the
Supreme Court in case of CIT v. Vatika Township (P) Ltd. (2014) 367 ITR 466 (SC) which
stated that from the plain reading of the section, it was clearly prospective in nature.
The High Court held that therefore, it could safely be said that the privilege fee payable
by the assessee to the State Government would be taxable with effect from 1-4-2014
and not prior thereto. The unreasonableness of the privilege fee payable is also not a
ground to hold that it is a device by which the assessee and the State Government are
avoiding payment of tax.
It is settled law that there is no illegality committed by the Assessee in paying such
privilege fee on the State Government having fixed such privilege fee. There is no legal
prohibition in this regard and therefore, it cannot be said that the same could have been
disallowed by the AO. Thus the petition filed by the assessee was allowed. (AY. 2010-11)
Karnataka State Beverages Corpn. Ltd. v. CIT (2016) 238 Taxman 299 / 137 DTR 45 /
(2017) 391 ITR 185 / 294 CTR 155 (Karn.)(HC)
882 S. 40(a)(iii) : Amounts not deductible – Deduction at source – Salaries paid to
expatriate employees overseas on which tax was paid in accordance with CBDT
Circular – Allowable as deduction though tax was not deducted at source – Entries in
books of account not decisive of entitlement to claim of deduction – DTAA – India-UK.
[S. 192, Art. 7]
Allowing the appeal of assessee the Court held that Salaries paid to expatriate employees
overseas on which tax was paid in accordance with CBDT Circular No. 685 dated
17/20.06.1994 and Circular 686 dated 12.8.94 is permissible as a deduction even though
the tax is not paid within the time limit but is paid subsequently – Entries in books
of account not decisive of entitlement to claim of deduction – DTAA-India-UK. (AY.
1991-92)
ANZ Grindlays Bank v. DCIT (2016) 382 ITR 156 / 133 DTR 90 / 238 Taxman 128 / 290
CTR 188 (Delhi)(HC)
266
S. 40A(2) Expenses or payments not deductible
S. 40(b) : Amounts not deductible – Partner – Remuneration – partnership deed 883
mentioned remuneration as function of annual book profit and to be equally shared
by partners, was held to be allowable.
Dismissing the appeal of the revenue, the Tribunal held that partnership deed mentioned
remuneration as function of annual book profit and to be equally shared by partners,
was held to be allowable. (AY. 2010-11)
ACIT v. Modern Motors (2016) 48 ITR 579 / 142 DTR 145 / 181 TTJ 813 (Jaipur)(Trib.)
S.40A. Expenses or payments not deductible in certain circumstances.
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Foreign 884
travelling expenses, pilgrimage expenses of directors and employees was not allowed
as failed to produce the evidence. [S. 37(1)]
Dismissing the appeal of the assessee, the Court held that since assessee failed to satisfy
requirements for claiming deductions, disallowance was held to be justified. (AY. 2011-
12)
Rifah Shoes (P.) Ltd. v. ACIT (2016) 241 Taxman 345 (Mad.)(HC)
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – 885
Disallowance cannot be made in respect of interest payment made to related parties as
interest rate is not in excess of the prevailing interest rate in the market. [S. 40A(2)(b)]
The Assessing Officer disallowed the excess interest paid to the associate concerns in
respect of loan borrowed from them as, according to the Assessing Officer, the bank
rate is 12% whereas, the assessee had borrowed at the rate of 15-16%. It was held that
the Tribunal had found that the payment of interest at excess rate was justified as, the
loans are unsecured and the assessee need not have to under the formalities as against
obtaining a bank loan and therefore, interest rate is commensurate with the prevailing
market rate. Therefore, the High Court refused to interfere with the finding.
PCIT v. Cama Hotels Ltd (2016) 240 Taxman 770 (Guj.)(HC)
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – 886
disallowance is not applicable to co-operative societies – No disallowance should be
made if the tax effect is neutral i.e., the recipient is paying tax at the same rate as
the payer.
The assessee is a co-operative society and has made payment for availing back end
services for managing its IT infrastructure from its subsidiary company SIL. The
assessee’s payment were held to be excessive and unreasonable as being payment made
to related parties u/s. 40A(2) of the Act and to the extent considered excessive and
unreasonable, disallowances of the expenditure considered unreasonable and excessive
were made by the AO, which disallowance was partly confirmed by learned CIT(A).
We have considered and perused the provisions of Section 40A(2)(a) and 40A(2))b)
of the Act and have observed that ‘co-operative society’ are not covered under the
said provisions, while ‘association of person’ is covered under the said provision. It
is also observed that while defining person u/s 2(31) of the Act, the law makers have
267
Expenses or payments not deductible S. 40A(2)
not included ‘co-operative society’ while ‘association of person’ is included while the
‘co-operative society’ is defined u/s. 2(19) of the Act. Section 40A(2) of the Act applies
to the person specifically named therein and since co-operative society does not
found mention in Section 40A(2)(b) of the Act, the said section would not apply to
co-operative society. Appeal of assessee was allowed. (ITA 8622 & 7738/Mum/2010, ITA
1140 & 694/Mum/2012, ITA 5627/Mum/2013 & ITA 1/Mum/2014, dt. 31.10.2016) (AY.
2007-08 to 2010-11)
DCIT v. The Saraswat Co-operative Bank Limited (Mum.)(Trib.); www.itatonline.org
887 S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – In view
of fair market value of services rendered by the director, the remuneration paid to him
could not be considered as excessive or unreasonable.
Dismissing the appeal of the revenue, the Tribunal held that in view of fair market value
of services rendered by the director and fact that payment was made for legitimate needs
of business or profession of assessee-company, remuneration paid to him could not be
considered as excessive or unreasonable. (AY. 2009-10)
ITO v. Marcopolo Products (P.) Ltd. (2016) 159 ITD 266 (Kol.)(Trib.)
888 S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable –
Disallowance of expenses cannot be made if the related had paid the tax on the
amount received from the assessee.
The assessee was engaged in the business of manufacture of expanded poly foam
and articles of plastic. The assessee claimed deduction of commission payments and
transportation charges paid to DI for composite services rendered to the assessee. The
Assessing Officer disallowed the payments under section 40A(2)(b) of the Income-tax
Act, 1961, on the ground that the assessee had failed to explain the basis for making
such commission payment and the transportation charges and that they were actually
made wholly and exclusively for the purpose of business. The Commissioner (Appeals)
confirmed the order of the Assessing Officer. On appeal it was held that the Assessing
Officer had not brought on record any material to establish any colourable device in
such payments or that the payment was against public policy or that such payment
was routed back to the assessee in any manner. Admittedly, the assessee had paid the
amount after deducting tax at source and the recipient had paid taxes on that amount.
Therefore, the disallowance was not proper.
Shroff Textiles Ltd. v. DCIT (2016) 49 ITR 20 (Mum.)(Trib.)
889 S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable –
Processing of material and handling charges – payment to sister concerns not more
than fair market value – Recipient paying maximum marginal rate of tax – subsequent
year also similar claim allowed – Held expenses were allowable
The assessee claimed deduction of expenses on account of processing of material and
handling charges. The AO held that the expenses claimed were in excess of the actual
increase in the production and sales ratio over the previous year. The AO further
held that the payments were made to sister concerns under Section 40A(2)(b) and no
comparable case had been quoted to justify the payment so made to these concerns.
268
S. 40A(3) Expenses or payments not deductible
On appeal to Tribunal, it was held that the assessee did not have sufficient capacity
for drawing, annealing and spooling, and had outsourced this work. The assessee’s
manufacturing activities were under the supervision of the Excise Department. The
AO had not brought on record any evidence that the payments made were more than
fair market value. The recipient company also paid the maximum marginal rate of tax
and there was no revenue loss. A similar claim was allowed in the subsequent years.
Therefore the expenses were allowable. (AY. 2009-10)
JLC Electronet P Ltd v. ACIT (2016) 47 ITR 85/178 TTJ 28 (UO) (Jaipur)(Trib.)
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Sub- 890
brokerage paid to holding company being more than 50 percent was not excessive or
unreasonable.
Allowing the appeal of assessee the Tribunal held that it was not necessary for the
assessee company to prove beyond doubt that payment made for sub-brokerage
constituted fair market value of services received and since the assessee company had
given instances in which sub-brokerage was paid ranging in ratio of 60:40 and 80:20
depending on market conditions and same was not disproved by department, hence 50
percentage sub-brokerage payment could not be disallowed by invoking provisions of
section 40A(2) of the Act. (AY. 2011-12)
SHCIL Services Ltd. v. Dy. CIT (2016) 158 ITD 1006 / 181 TTJ 408 (Mum.)(Trib.)
S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – No 891
disallowance u/s. 40A(2) in case of Trade discounts as it was not an expenditure and
actual payments were not made for such discounts.
The Assessee allowed trade discount of around 7.29% to its sister concerns. The AO
alleged that the sister concerns were enjoying deduction u/s. 80-IB which led to shifting
of profits and therefore there was a violation of s. 40A(2). The ITAT upheld the order
of the CIT(A) who held that trade discounts were not expenditure incurred and actual
payments were not made and hence, provisions of s. 40A(2) would not be applicable.
(AY. 2010-11)
DCIT v. Power Soaps P. Ltd. (2016) 45 ITR 250 (Chennai)(Trib.)
S. 40A(3) : Expenses or payments not deductible – Payments exceeding prescribed 892
limit otherwise than by crossed cheque or crossed bank draft – Agents appointed by
assessee for locations to enable dealers of petrol pump to buy diesel and petrol – No
cash payments made directly to agents but cash deposited in respective bank accounts
of agents – No disallowance can be made. [R. 6DD(k)]
Dismissing the appeal of revenue the Court held that the findings of the Commissioner
(Appeals) and the Tribunal that the assessee had appointed various representatives
and agents for 110 locations wherein diesel and petrol were purchased by dealers
of the petrol pumps, that no cash payment was made directly to the agents but was
deposited in their respective bank accounts, and that the case of the assessee fell
under the exception clause of Rule 6DD(k) of the Income-tax Rules, 1962 as the
assessee had made the payment to the bank account of the agents who were required
to make payment in cash for buying petrol and diesel at different locations, were
findings of fact. The Assessing Officer did not find any discrepancy in the copies of
269
Expenses or payments not deductible S. 40A(3)
the ledger accounts produced and no unaccounted transaction had been reported or
noticed by him. The finding arrived at by the Tribunal based on the material was
essentially a finding of fact. No substantial question of law arose for consideration.
(AY. 2008-09)
CIT v. The Solution (2016) 382 ITR 337 / 136 DTR 388 (Raj.)(HC)
Editorial : MRS Roadways v. CIT [2014] 367 ITR 62 (Ker)(HC) is distinguished.
893 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Block assessment – Purchase of gold – Disallowance was held to be justified.
[S. 158BC]
Dismissing the appeal of assessee the Court held that the case of assessee would
not fall within the exceptions provided in the proviso to the section. The purchase
of gold jewellery had exceeded ` 20,000 as found from the loose sheets discovered
during the search and seizure operations. There was no error in the order passed
by the Appellate Tribunal. The disallowance of deduction by the Assessing Officer
invoking section 40A(3) of the Act resulting in assessment of undisclosed income
in spite of assessment purchases on an estimated basis was proper. There was no
reason to interfere with the order passed by the Appellate Tribunal. (BP 1-4-1997
to 25-5-2003)
K. R. Ganesh Kumar v. ACIT (2016) 383 ITR 165 (Mad.)(HC)
894 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Payment for purchase of fire crackers made in cash – Disallowance sustained.
Assessee claimed that the fire crackers were not purchased from the companies
themselves but from the agents and retailers in villages. Held, in absence of even
names of such agents or retailers, vague statement of the assessee cannot be accepted.
Disallowance sustained. (AY. 2000-01, 2001-02)
N. Mohammed Ali v. ITO (2016) 237 Taxman 211 (Mad.)(HC)
895 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Deletion of disallowance made under section 40A(3) by the Tribunal on the
ground that cash payments were made on account of business exigencies is a finding
of fact and cannot be held to be perverse
AO disallowed certain expenses exceeding ` 10,000 under section 40A(3) for which the
payments were made in cash. ITAT accepted the contention of the assessee that cash
payments were made on account of business exigencies. High Court observed that there
was no dispute about the genuineness of the payment or regarding the identity of the
payee. High Court held that the question whether the assessee’s business exigencies
required payments to be made in cash was a question of fact and such finding could
not be held to be perverse. (AY. 1992-93, 1993-94)
Honey Enterprises v. CIT (2016) 381 ITR 258 / 236 Taxman 519 / 289 CTR 262 (Delhi)
(HC)
270
S. 40A(3) Expenses or payments not deductible
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed 896
limits – Payments made to credit of an agent of State Government, disallowance was
held to be not justified. [R. 6DD]
Allowing the appeal the Tribunal held that; payment made by retail vendor of country
made liquor in cash in bank account of wholesale licensee of State government cannot
be disallowed as the payment to agent of State Government. (AY. 2010-11)
Ashok Kumar Mondal v. ITO (2016) 161 ITD 521 (Kol.)(Trib.)
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed 897
limits – Payments made to seller in cash by agent – Genuineness of transaction and
purchase not disputed – Cash payments covered by exception. [R. 6DD(k)]
Assessee purchased goods through agent. AO made inquiries under section 133(6) and
examined the statement of accounts as well as the copy of ledger and cash book from
seller which revealed that the cash payments were made through the assessee’s agent
only. The genuineness of the transaction and the purchases were not doubted. The
agent procured the goods from seller, who doubted the credibility of the assessee and
insisted on cash payment. The agent made the payment in cash to the seller and it was
nowhere established that the assessee directly made the cash payment. Even in response
to the notice under section 133(6), seller itself confirmed this fact to the AO that the
payments were made through the agent only. Therefore, the cash payments covered by
the exception laid down in clause (k) of Rule 6DD. (AY. 2010-11)
ITO v. Pranay Towers (2016) 52 ITR 258 (Delhi)(Trib.)
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed 898
limits – Assessee could not produce any cogent evidence to support bona fides of
claim hence, disallowance of payment was justified. [S. 194C]
Dismissing the appeal of the assessee the Tribunal held that since assessee could not
discharge primary onus which lay upon it by adducing any cogent evidence to support
bona fides of claim, disallowance of payment in question was justified. (AY. 2009-10)
Pawar Patkar Construction (P.) Ltd. v. JCIT (2016) 159 ITD 406 (Pune)(Trib.)
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed 899
limits – Purchase of land – No bank account where the land was situated – No
disllowance can be made. [R. 6DD]
Purchase of agricultural land through cash payments of ` 4.8 lakhs, as assessee had no
bank account where said land was situated, disallowance cannot be made. (AY. 2008-
09, 2009-10)
Jiya Devi Sharma (SMt.) v. ACIT (2014) 165 TTJ 20 (URO) (2016) 68 SOT 57 (Jodh.)(Trib.)
S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed 900
limits – Maharashtra State Road Corporation being “State”, no disallowance can be
made. [R. 6DD(b), Constitution of India, Art. 12]
Allowing the appeal of the assessee the Tribunal held that; MSRTC is “State” within
meaning of Article 12 of the Constitution of India, it was providing vital function of
public importance. Once it was held that MSRTC was “State” within meaning of Article
271
Expenses or payments not deductible S. 40A(3)
12 of the Constitution of India, payments could not be disallowed u/s. 40A(3). (AY.
2006-07 to 2008-09)
Sapna Sanjay Raisoni v. ITO (2016) 159 ITD 1 / 179 TTJ 34 (UO) (Pune)(Trib.)
901 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Payments through agents – Since assessee had no direct dealings with land
owners, payments in question were to be regarded as covered under Rule 6DD(k)
which could not be disallowed.
Assessee Company was engaged in business of land aggregation. Nature of assessee’s
business was to identify big parcels of lands and buy said land from different small
landowners. The AO noted that assessee had made cash payments in excess of
` 20,000 for purchase of land. He thus invoked provisions of section 40A(3) to disallow
said payments. It was noted that assessee had appointed agents who in turn selected
land, negotiated price with land owners and purchased lands. Since assessee had no
direct dealings with landowners and payments were made to them through agents,
said payments were to be regarded as covered under provisions of Rule 6DD(k) of 1962
Rules, which could not be disallowed by invoking provisions of section 40A(3). (AY.
2005-06 to 2011-12)
Om Shakthy Agencies (Madras) (P.) Ltd. v. Dy. CIT (2016) 157 ITD 1062 / 177 TTJ 419 /
136 DTR 181 (Chennai)(Trib.)
902 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Agent – Agricultural produce – Disallowance was held to be not justified.
Assessee purchased agricultural produce from farmers through some parties who charged
their commission for facilitating said transaction of sale and purchase, payments made
to those parties could not be disallowed by invoking provisions of section 40A(3). (AY.
2008-09)
Anurag Radhesham Attal v. ITO (2016) 158 ITD 867 / (2017) 183 TTJ 423 / 147 DTR 207
(Pune)(Trib.)
903 S. 40A(3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Payment of salary to various employees on various dates in cash does not
violate 40A(3) though there may be an error in accounting entries.
Payment of salary to various employees was made in cash and accordingly the AO
disallowed the same u/s. 40A(3). The assessee submitted that the payments were made
to various employees on different dates but the accountant had inadvertently posted
those entries on a single day. Vouchers of different dates were submitted by the Assessee
which was rejected by the AO. An affidavit of the accountant that he was not well
versed with operating computers was also submitted. The ITAT deleted the disallowance
and held that the genuineness of the payment was not doubted by the AO and cash
payments were made to maintain good relations with the employees who insisted on
cash payment only. (AY. 2008-09)
Brothers Pharma P. Ltd. v. ITO (2015) 174 TTJ 773 / (2016) 45 ITR 154 (Jaipur)(Trib.)
272
S. 41(1) Profits chargeable to tax
S. 40A(7) : Expenses or payments not deductible – Gratuity provision was held to be 904
not deductible – Plea that provision has been made for the purpose of payment to an
approved Gratuity Fund i.e. The LIC group Scheme raised for the first time before the
HC was not permitted to be raised. [S. 260A]
Question of law before the HC was regarding the disallowance of provision for gratuity
as the assessee failed to explain the disallowance amount on account of provision of
gratuity should be disallowed but the assessee failed to file any reply till the date of
passing of the AO. In absence of such a reply, it was not open to the assessee to claim
that the provision had been made towards an approved gratuity fund. HC held in favour
of the Revenue and held that Tribunal recorded that it was not a case of that it has
made the provision for the purpose of Gratuity by way of any contribution towards
approved Gratuity Fund or for the purpose of any gratuity that has been become payable
during the financial year under consideration. Assessee was not entitled for deduction.
Plea that provision has been made for the purpose of payment to an approved gratuity
Fund i.e. The LIC group scheme raised for the first time before the HC was not
permitted to be raised. (AY. 2003-04)
Bihar State Warehousing Corporation Ltd. v. CIT (2016) 139 DTR 16 (Patna)(HC)
S. 40A(8) : Disallowance of interest – Interest paid to current account of director – 905
Disallowance is held to be justified [S. 37(1)]
On reference the Court held that the disallowance of interest paid to the current account
of the director under section 40A(8) of the Act was justified. (AY. 1980-81)
Somaiya Organo Chemicals Ltd. v. CIT (2016) 388 ITR 423 / 290 CTR 30 / 142 DTR 361
(Bom.)(HC)
S. 41. Profits chargeable to tax.
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – 906
Prepayment of deferred sales tax liability.
Dismissing the appeal of the Revenue the Court held that the issue of restoration of the
appeal to the AO by the Appellate Tribunal in respect of the applicability of section
41(1) on account of prepayment of deferred sales tax liability stood concluded by the
decision of the High Court. No question of law, arose.
CIT v. Sulzer India Ltd. (2014) 369 ITR 717 (Bom.)(HC)
CIT v. BEHR India Ltd. (No.1) 389 ITR 419 (Bom.)(HC)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – 907
Merely because creditor could not be traced cannot lead to cessation of liability.
Dismissing the appeal the Court held that just because creditor of assessee is not
traceable it cannot satisfy the requirement of cessation of liability. High Court held that
even if creditor has expired, the legal heirs has the right to claim the debt from the
assessee. Thus, upholding the view of Tribunal, High Court held that conditions for
invoking S. 41(1) were not satisfied. (AY. 2009-10)
CIT v. Alvares & Thomas (2016) 239 Taxman 456 (Karn.)(HC)
273
Profits chargeable to tax S. 41(1)
908 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability –
Provision for expenses likely to be incurred on re-delivery of aircrafts taken on lease
– Lease extended for further period along with liability – Liability could not be said
to have ceased for purpose of invocation of section 41(1)
The assessee had made a provision in earlier years in respect of expenses likely to be
incurred on redelivery of aircrafts taken on lease. The lease period was due to expire
during the year. However, the lease was extended/renewed for a further period.
The Assessing Officer invoked section 41(1) and held that there was cessation of
liability and sought to bring the entire amount to tax. The CIT(A) held that there was
no cessation of liability as the lease had been extended and therefore, the provision for
expenses which were likely to be incurred at the time of redelivery of the four aircrafts
continued. The Tribunal upheld the CIT(A)’s order.
On appeal, the High Court observed that there was a concurrent finding of the lower
appellate authorities that the liability for expenses had not ceased, but deferred as
the lease had been extended. The expenses were likely to be incurred when the lease
expired and air crafts redelivered. Therefore, the same would have to be provided for.
The High Court held that section 41(1) was application only when there was cessation
and/or remission of liability incurred (which had been duly paid and/or provided for)
in subsequent years, consequent to which some benefit was obtained by the assessee.
There was neither the cessation/remission of liability nor any benefit obtained by the
assessee for the purposes of section 41(1). (AY. 2006-07)
CIT v. Jet Airways (India) Ltd. (2016) 237 Taxman 572 / (2017) 292 CTR 7 (Bom.)(HC)
909 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability –
Best judgment assessment – Where the books of account is rejected and net profit
is assessed, there cannot be separate addition in respect of creditors appear in such
books on the basis that they ceased to exist. [S. 144]
Dismissing the appeal of the Revenue, the Tribunal held that; when an assessment was
completed u/s. 144 applying net profit rate on turnover, addition u/s. 41(1) could not be
made; when books of account as such were rejected question whether creditors appearing
in such books were there or ceased to exist, would become irrelevant. (AY. 2008-09)
Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)
910 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability –
Advance received against booking of plots outstanding for several years – Assessee
established that part of the advances adjusted in succeeding years – provision of
section 41(1) cannot be invoked.
The AO observed that there were long standing advances against the booking of plots
and some of the advances were standing on the liabilities side of the balance sheet for
over 20 years and no plots had been registered against these advances despite various
efforts by the assessee and legal notices issued to them, these persons did not come
forward to take back these advances. Therefore, AO held that these advances lying
with the assessee shown as outstanding on the liabilities side of the balance sheet
deserved to be forfeited and treated as income of the assessee under section 41(1).
Further, he determined the real value of the advances applying the cost inflation index.
274
S. 41(1) Profits chargeable to tax
Commissioner (Appeals) allowed the appeal of the Assessee. The Tribunal dismissed
the appeal of the Department and held that complete names of the persons in favour of
whom the plots were registered in the succeeding year were provided. The declaration
of such advances in the balance sheet for the year under consideration itself proved
that the assessee had not forfeited the advances and had adjusted a part of them in the
succeeding year against the sale deeds of plots. Therefore, the provisions of section 41(1)
were not applicable, as the assessee had not written back these advances in its books
of account. Further, the action of the Assessing Officer increasing the value of these
advances by applying the cost inflation index was not justified, as the cost inflation
index is never applied on the amount of advances lying with a person. (AY. 2012-13)
DCIT v. Sadguru Land Finance (2016) 52 ITR 182 (Amritsar)(Trib.)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – 911
Closing balance of unsecured loan – No evidence to suggest that liability squared up
or paid or any cessation of liabilities, addition is to be deleted.
Allowing the appeal of the assessee the Tribunal held that the assessee has shown the
closing balance of unsecured loan and there is no evidence to suggest that liability
squared up or paid or any cessation of liabilities, addition is to be deleted. (AY. 2008-09)
Samwon Precision Mould Mfg. (India) P. Ltd. v. ITO (2016) 48 ITR 630 (Delhi)(Trib.)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – 912
Sundry creditors shown as liability cannot be added as income of the assessee.
Dismissing the appeal of the Revenue, the Tribunal held that; there are two conditions
to be fulfilled in order to attract provisions of S. 41(1), firstly, there should be cessation
or remission of liability and, secondly, it should be ceased to be so during previous
year. Even where an amount remained unclaimed by sundry creditors for a considerable
period of time, and said liability was carried forward for many years and, there was no
cessation or remission during previous year, same could not be added to income. (AY.
2009-10)
ITO v. Marcopolo Products (P.) Ltd. (2016) 159 ITD 266 (Kol.)(Trib.)
S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – 913
Advances received for sale of its property that was standing as liability in balance
sheet would not be taxable on writing off of corresponding amount by concerned
party; said amount would be deducted from cost of acquisition in computing capital
gain in case of sale of land. [S. 28(i), 51]
Dismissing the appeal of the Revenue, the Tribunal held that; Advances received for sale
of its property that was standing as liability in balance sheet would not be taxable on
writing off of corresponding amount by concerned party either u/s. 41(1) or u/s. 28(i);
said amount would be deducted from cost of acquisition in computing capital gain in
case of sale of land, u/s 51. (AY. 2010-11)
ITO v. Fiesta Properties (P.) Ltd. (2016) 160 ITD 426 / (2017) 53 ITR 614 (Mum.)(Trib.)
275
Profits chargeable to tax S. 41(1)
914 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability –
Payments were made in subsequent years hence no addition could be made.
No addition can be made u/s. 41(1) when creditors in question were having regular
business transactions in subsequent years and actual payments were made to those
parties in subsequent years also, matter set as side for verification. (AY. 2009-10)
ACIT v. Zydus Infrastructure (P.) Ltd. (2016) 161 ITD 611 (Ahd.)(Trib.)
915 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability –
Amounts shown as liabilities in the Balance Sheet cannot be deemed to be cases of
"cessation of liability" only because the liabilities are outstanding for several years.
The AO has to establish with evidence that there has been a cessation of liability with
regard to the outstanding creditors.
Dismissing the appeal the Tribunal held that amounts shown as liabilities in the Balance
Sheet cannot be deemed to be cases of "cessation of liability" only because the liabilities
are outstanding for several years. The AO has to establish with evidence that there has
been a cessation of liability with regard to the outstanding creditors. (ITA No. 2212/
Mum/2012, dt. 24.08.2016) (AY. 2008-09)
ITO v. Vikram A. Pradhan (Mum.)(Trib.); www.itatonline.org
916 S. 41(1) : Profits chargeable to tax – Remission or cessation of trading liability – Credit
balances cannot be treated as income without a bilateral waiver especially when the
balances were paid off in subsequent years.
The AO had directed the Assessee to file confirmations of parties whose balances were
shown as outstanding. The creditors whose confirmations were not submitted and were
very old balances were treated as income by the AO. The ITAT held that the burden was
on the Revenue to prove that the there was a bilateral write-off of outstanding amounts.
In case of the Assessee, evidences of repayment in subsequent years were filed which
proved that the liabilities were in existence. (AY. 2008-09)
Brothers Pharma P. Ltd. v. ITO (2016) 45 ITR 154 (Jaipur)(Trib.)
S. 43. Definitions of certain terms relevant to income from profits and gains of
business or profession.
917 S. 43(1) : Actual cost – Depreciation – Technical know how – Sale of capital goods to
sister concern [S. 32, 43(1), Expl. 3]
Dismissing the appeal of assessee the Tribunal held that the assessee has earned
substantial commercial profits by use of second-hand assets purchased from its sister
concerns. Thus, AO was not justified in declining depreciation on the ground that WDV
(Written Down Value) of assets in the books of sellers was nil, when the assessee had
produced valuation by registered valuer.
Dy.CIT v. Jaya Hind Sciaky Ltd. (2016) 156 ITD 547 / 137 DTR 329 / 179 TTJ 112 (Pune)
(Trib.)
276
S. 43(1) Actual cost
S. 43(1) : Actual cost – Written down Value – Investment subsidy to start industries in 918
backward areas – not a payment directly or indirectly to meet any portion of actual
cost – not deductible
The assessee received investment subsidy from the Government. The AO reduced this
from the actual cost of the cost of the capital asset in terms of Explanation 10 to Section
43(1) of the Act. On appeal to Tribunal, it was held that there was no material to show
that the assessee had received monetary compensation which would actually reduce
the cost directly or indirectly. The Government subsidy was intended as an incentive
to encourage entrepreneurs to move to backward areas and establish industries. The
specified percentage of the fixed capital cost, which was the basis of determining the
subsidy was only a measure adopted under the scheme to quantify the financial aid and
it was not a payment directly or indirectly to meet any portion of the actual cost. (AY.
2004-05, 2005-06, 2007-08)
Mangalam Timber Products Ltd v. ITO (2016) 47 ITR 758 (Cuttack)(Trib.)
S. 43(1) : Actual cost – Subsidy granted to set up a wind Mill project is capital receipt, 919
it cannot be reduced from the cost, nor the subsidy is assessable either under section
41(1) or section 50. [S. 4, 41(1), 50]
Subsidy granted to set up a wind project is a capital receipt. the subsidy cannot be
reduced under Explanation 10 to S. 43(1) from the cost of the assets acquired though
100% depreciation is allowed on the cost of the assets. The subsidy is also not
assessable either u/s. 41(1) or u/s. 50. (ITA No. 3473/M/2013, dt. 26.11.2015) (AY. 2008-
09)
Uni Deritend limited v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 43(1) : Actual cost – Acquisition of second hand machinery from sister concern 920
– Assessing Officer has not discharged the onus of proving that main object was
reduction in tax liability.
Dismissing the appeal of revenue the Tribunal held that Explanation 3 to section 43(1)
could not be applied in respect of acquisition of second hand plant and machinery by
assessee from its sister concerns where firstly, Assessing Officer could not discharge its
onus that main objective of transfer of assets was reduction of tax liability and secondly
revenue did not discharge its obligation to determine fair value of assets and replace it
with cost of acquisition of assessee (AY. 2005-06)
CIT v. Jaya Hind Sciaky Ltd. (2016) 156 ITD 547 / 137 DTR 329 / 179 TTJ 112 (Pune)(Trib.)
S. 43(1) : Actual cost – Subsidy – Capital or Revenue – Backward area subsidy 921
received towards incentive on building and pollution control devices for setting up
manufacturing unit – Not meant for working capital purposes – Held capital in nature
The assessee had set up a cement manufacturing unit in a backward district for which it
was entitled to State Capital Incentive subsidy @ 25% of fixed capital investment. The
assessee treated the said subsidy received towards incentive on building and pollution
control devices as capital in nature. The AO treated the same as revenue subsidy for
want of details. On appeal to Tribunal, it was held that the subsidy was received only as
an incentive on building and pollution control devices for setting a manufacturing unit
277
Speculative transaction S. 43(5)
in backward district and it was not meant for working capital purposes or for running
the cement manufacturing unit. The subsidy received has gone to reduce the capital cost
of the assessee in view of Explanation 10 to Section 43(1). The subsidy received by the
assessee was capital in nature. (AY. 2008-09)
ACIT v. Bharat Hi-Tech (Cement) P. Ltd. (2016) 176 TTJ 166 (Kol.)(Trib.)
922 S. 43(5) : Speculative transaction – Forward foreign exchange contracts – Derivatives
in foreign currency are commodity – Loss incurred is not speculative in nature –
Allowable as business loss.
Assessee-company was a domestic company registered as an approved SEZ and was a
KPO primarily involved in revenue cycle management for clients across America and
was billing its overseas clients in foreign currency. It had entered into forward foreign
exchange contracts and had booked marked-to-market loss on unexpired contracts as on
date of balance sheet based on adverse movement of value of United States Dollar vis-a-vis
in relation to Indian rupees based on prevailing rate at year end. The Assessing Officer
held these transactions of foreign exchange as speculative in nature and disallowed the
set off of same against the income from business other than speculation business. The
Assessing Officer also held the said marked to market loss on the forward contracts of
foreign exchange as contingent and notional loss and, hence, disallowable under the Act.
On appeal CIT(A) affirmed the order of AO. On appeal, allowing the appeal Tribunal held
that; since assessee-company had entered into derivative transactions in foreign currency
through a recognised stock exchange and those transactions were backed by time stamped
contract notes carrying unique client identity number and PAN allotted under Act, those
derivative transactions duly fulfilled all conditions as specified under section 43(5) and,
hence, were not speculative transactions as defined under section 43(5) and loss incurred
on such transactions was not speculative loss under section 43(5). Further said loss was
not a notional or contingent loss rather it was ascertained liability which had crystallised
on date of balance sheet and could be computed with reasonable certainty and accuracy
and, hence, allowable as non-speculation loss. (AY. 2009-10)
Inventurus Knowledge Services (P.) Ltd v. ITO (2016) 156 ITD 727 / 45 ITR 57 / 177 TTJ
269 / 143 DTR 113 (Mum.)(Trib).
Editorial : Araska Diamond (P.) Ltd. v. A CIT / (2015) 152 ITD 203 (Mum.) was
distinguished and Instruction No. 3 of 2010 dt 23-03-2010 is also considered.
923 S. 43(5) : Speculative transaction – Business loss – Hedging – Loss on account of forex
forward contracts consequent to cancellation of export orders not speculation loss
allowable as business loss. [S. 28(i)]
It was held that forward contracts in question being purely hedging transactions
entered into by the assessee to safeguard against loss arising out of fluctuation in
foreign currency are not speculative transactions falling within the ambit of S. 43(5)
and, therefore, loss incurred on account of such forex forward contracts consequent to
cancellation of export orders is not speculative loss. (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
278
S. 43B Deduction on actual payment
S. 43A : Rate of exchange – Foreign currency – Expenditure incurred to get rid of 924
forward contracts which assessee had entered into for purpose of hedging against
fluctuations of foreign exchange, could not come within four corners of section 43A
The assessee incurred expenditure for of cancellation of foreign exchange covers. The
assessee capitalised the same under section 43A and accordingly claimed depreciation.
The revenue authorities rejected assessee's claim, which was reversed by the Tribunal.
On appeal, the High Court held that from the submissions advanced by the assessee
himself it would appear that the claim could not have come within the four corners
of section 43A. The assessee did not incur any loss arising out of fluctuations in the
exchange price. The Court further observed that the assessee might have claimed it as
an expenditure which could have been considered in accordance with law, but there
was no case for any claim being put forward on account of depreciation. (AY. 2002-03)
CIT v. ITC Ltd. (2016) 237 Taxman 533 / 134 DTR 293 (Cal.)(HC)
S. 43B : Certain deductions to be only on actual payment.
S. 43B : Deductions on actual payment – Service tax – Same footing as excise duty or 925
sale tax, hence allowable only on actual payment basis. [S. 37(1)]
Dismissing the appeal of the revenue, the Court held that; Service tax is to be treated as
same footing as excise duty or sale tax, hence allowable only on actual payment basis.
(AY. 2007-08, 2008-09)
CIT v. Knight Frank (India) (P) Ltd. (2016) 143 DTR 32 / 242 Taxman 313 / 290 CTR 25
(Bom.)(HC)
S. 43B : Deduction on actual payment – Rebate on interest – Liability neither payable 926
nor arising in assessment year in question – Disallowance proper.
Dismissing the appeal of assessee the Court held that Rebate on interest due to IFCI and
sales tax transferred to recoverable account in earlier years. Aggregate of sums charged
to profit and loss account in year in question and written off and claimed as deduction.
Liability neither payable nor arising in assessment year in question. Disallowance was
held to be proper. (AY. 1995-96)
Cebon India Ltd. v. CIT (2016) 387 ITR 502 (P&H)(HC)
S. 43B : Deduction on actual payment – Bank interest – Overdraft account – Interest 927
not to be disallowed. [S. 43B(e), Explan. 3D]
On appeal, the Commissioner (Appeals) held that where there was no schedule of
repayment, the exact amount of interest not being known, the amount of interest and
what amount of principal were comprised in a deposit made in the overdraft account
could not be found out. He also held that there was no material which proved that there
was outstanding interest as on March 31, 2004 in the overdraft account and that the
interest accrued on month to month basis and that it was paid on month-to-month basis
as the deposit of each month was much more than the corresponding interest deposited
in the respective month and as such no part of such interest remained which could be
said to have been converted into any loan or advance as on the close of the previous
279
Deductions on actual payment S. 43B
year so as to be deemed as not actually paid. The Commissioner (Appeals) deleted the
addition and his order was upheld by the Tribunal. High Court affirmed the order of
the Tribunal. (AY. 2004-05)
CIT v. Shreekant Phumbhra (2016) 387 ITR 523 (Cal.)(HC)
928 S. 43B : Deductions on actual payment – Excise duty on closing stock – Allowed in the
year even though the assessment of the closing stock would be made in the subsequent
assessment year [S. 145A, 263]
Dismissing the appeal of revenue the Court held that since the excise duty on the
closing stock was paid upto the due date of filing the return of income, the deduction
of the same should be allowed in the year even though the assessment of the closing
stock would be made in the subsequent assessment year. Section 145A would have no
effect on section 43B in view of the non-obstante clause in section 43B. (AY. 2004-05)
CIT v. NCR Corporation India (P.) Ltd. (2016) 387 ITR 725 / 240 Taxman 598 / 293 CTR
225 (Karn.)(HC)
929 S. 43B : Deductions on actual payment – Payment before due date for filing return
– Benefit available both in respect of employer's contribution and employee's
contribution. [S. 2(24)(ix), 36(1)(va)]
By the amendment made with effect from April 1, 2004 it was made clear that the
benefit of deduction would be applicable, provided the payments were made before the
due date for filing of the return. Both the employees' and employer's contributions are
covered by the amendment of section 43B of the Act. (AY. 2003-04)
Bihar State Warehousing Corporation Ltd. v. CIT (2016) 386 ITR 410 / 242 Taxman 142 /
287 CTR 556 / 139 DTR 16 (Patna)(HC)
930 S. 43B : Deductions on actual payment – Explanation 3C to section 43B retrospectively
applicable – Issue of debenture for interest payable not actual payment – Not entitled
to deduction. [S. 43C]
Allowing the appeal of revenue, the Court held that the Explanation 3C to section 43B
was inserted with retrospective effect and operated for the period in question and the
assessee did not dispute that. The actual payment was essential for applicability of
section 43B of the Act. (AY. 1996-97)
CIT v. M. M. Aqua Technologies Ltd. (2016) 386 ITR 441 / 242 Taxman 153 / 288 CTR
372 / 139 DTR 315 (Delhi)(HC)
931 S. 43B : Deductions on actual payment – Service tax – Service-tax billed on rendering
of services is not includible as trading receipts. No disallowance can be made for the
unpaid service tax liability which is not claimed as a deduction [S. 145A]
Dismissing the appeal of revenue the Court held that Service tax billed on rendering
of services is not includible as trading receipts. No disallowance can be made for the
unpaid service tax liability which is not claimed as a deduction. (ITA No. 247 and 255
of 2014, dt. 16.08.2016) (AY. 2007-08, 2008-09)
CIT v. Knight Frank (India) Pvt. Ltd. (Bom.)(HC); www.itatonline.org
280
S. 43B Deduction on actual payment
S. 43B : Deductions on actual payment – Sales tax deferred loan incentive scheme – 932
Amount of sales tax collected deemed paid and cannot be taxed.
The amount representing sales tax deferred under the sales tax deferred loan incentive
scheme was to be deemed as paid and, therefore, not taxable. The provisions of section
43B of the would not be applicable. Since the assessee was succeeding on the merits,
the question of reassessment had become purely academic. The Tribunal remanded the
matter to the Assessing Officer for fresh consideration. (AY. 2003-04)
CIT v. McDowell and Co. Ltd. (2016) 380 ITR 80 (Karn.)(HC)
S. 43B : Deductions on actual payment – Provision of entry tax made on account of 933
pending litigation – Amount neither collected not charged to profit and loss account,
no disallowance can be made.
Dismissing the appeal of the revenue, the Tribunal held that the assessee neither amount
was collected nor charged to profit & loss account and only accounting entry was passed
hence provision of section 43B is not applicable. (AY. 2010-11)
ACIT v. Modern Motors (2016) 48 ITR 579 / 142 DTR 145 / 181 TTJ 813 (Jaipur)(Trib.)
S. 43B : Deductions on actual payment – Purchase of raw material – There is no 934
obligation whether statutory or otherwise on the part of the purchaser to pay the VAT
to the government, the amount represented purchase price of raw materials, hence,
amount cannot be disallowed.
Dismissing the appeal of the Revenue, the Tribunal held that when an assessee Company
purchased raw materials at Bangalore and Hyderabad Branches, sales tax (VAT) was
charged by sellers. Assessee company debited VAT component to “sales tax payable
account” for claiming it as “Input Credit” and purchase cost of raw materials (excluding
VAT paid) was included in the cost of materials. Since assessee company was making
stock transfer of finished goods, it could not claim input credit in respect of VAT paid
on purchase of raw materials. This VAT paid on purchase of raw materials was hence
transferred from VAT payable account to other expenses. In respect of this “VAT paid”,
the tribunal observed that there is no obligation whether statutory or otherwise on the
part of the purchaser to pay the VAT to the Government. Thus, the assessing officer was
factually incorrect in arriving at the conclusion that the amount disallowed u/s. 43B is
‘sales tax payable’. (AY. 2007-08)
ACIT v. Plant Lipids (P) Ltd. (2016) 157 ITD 811 (Cochin)(Trib.)
S. 43B : Deductions on actual payment – Provision for leave encashment – Deduction 935
was not allowed however the direction was given to give effect to the order of
Supreme Court on merit on receipt of the order. [S. 43B(f)]
Assessee claimed deduction in respect of provision of expenditure on leave encashment
on ground that Calcutta High Court in Exide Industries Ltd. v. UOI (2003) 292 ITR
470 has held provision of s. 43B(f) as ultra-vires Constitution. Apex Court had while
admitting SLP against High Court's decision, stayed its operation holding that during
pendency of appeal assessee would pay tax on impugned sum as if s. 43B(f) was on
statute. Tribunal held that matter need not be restored back to file of AO and revenue
would give effect to decision by Apex Court on merits of case and would modify instant
281
Deductions on actual payment S. 43B
assessment accordingly and thus, claim of deduction on amount of provision for leave
encashment was to be disallowed. (AY. 2007-08)
Lupin Ltd. v. ACIT (2016) 159 ITD 10 (Mum.)(Trib.)
936 S. 43B : Deductions on actual payment – Employees or employers' contribution made
to PF after due date prescribed under PF Act, but before due date prescribed for filing
of income-tax return is deductible. [S. 139(1)]
Dismissing the appeal of the revenue the Tribunal held that there is no difference
between employees and employer's contribution to PF and if such contribution is made
on or before due date of furnishing return of income u/s. 139(1), then deduction is to
be allowed under provisions of s. 43B. (AY. 2011-12)
Dy. CIT v. Eastern Power Distribution Company of A. P. Ltd. (2016) 160 ITD 432 (Visakh)
Trib.)
937 S. 43B : Deductions on actual payment – Employee's contribution – Amount received
from his employees as their contribution towards PF to be allowed to him as business
expenditure, If he deposits same before due date. [S. 139(1)]
Tribunal held that employees' contribution to PF paid by the assessee before the due
date of filing ROI is an allowable expenditure. In case there is default on the part of an
employer to deposit the employees' contribution to such fund, the same is deposited
after the due date as provided under their respective statutes, there are consequences
provided in those respective statutes. (AY. 2007-08, 2008-09)
Vaneet Sood v. ACIT (2016) 159 ITD 320 (Chd.)(Trib.)
938 S. 43B : Deductions on actual payment – Employee's contribution to PF/ESI) –
Payments were made before due date of filing of return no disallowance can be made.
Dismissing the appeal of the Revenue the Tribunal held that if assessee made payments
of employee contribution to PF and ESI authorities before due date of filing return u/s.
139(1), AO was not justified in disallowing same by invoking provisions of section 43B.
(AY. 2005-06)
DCIT v. Xpro India Ltd. (2016) 161 ITD 93 (Kol.)(Trib.)
939 S. 43B : Deductions on actual payment – Employees’ contribution to PF and ESIC
allowable if made before the due date of filing return. [S. 36(1)(va), 139(1)]
The Assessee had made delayed payments of employees’ contribution towards PF and
ESIC. The AO disallowed the same since delayed payment was not allowable u/s. 36(1)
(va). The ITAT deleted the addition since the payments, though delayed as per the
respective acts, were made before the date of filing of return u/s. 139(1). (AY. 2006-07)
Casby Logistics P. Ltd. v. DCIT (2016) 47 ITR 230 (Mum.)(Trib.)
940 S. 43B : Deductions on actual payment – Provision for lease transfer fees, which is
disputed in High Court was held to be not allowable.
Where assessee created provision for lease transfer fee, levy of which was already
subject matter of dispute in High Court, disallowance for said provision was justified.
(AY. 2007-08)
Vasant J. Khetani v. JCIT (2016) 158 ITD 339 / 179 TTJ 475 / 138 DTR 265 (Mum.)(Trib.)
282
S. 43B Deduction on actual payment
S. 43B : Deductions on actual payment – Delayed payment of employees’ contribution 941
to state insurance fund would be allowed if it is made within the due date of filing
return.
The Assessee deposited the employees’ contributions to the state insurance fund after
the due date and the AO disallowed the same u/s. 36(1)(x). The CIT(A) upheld the
same and held that provisions of section 43B would be applicable only on employer’s
contribution and not on employees’ contribution. The ITAT held that the contributions
to employees’ state insurance fund were made within the due date of filing return and
hence the addition was to be deleted. (AY. 2008-09)
Brothers Pharma P. Ltd. v. ITO (2016) 45 ITR 154 (Jaipur)(Trib.)
S. 43B : Deductions on actual payment – Interest on sales tax deferment – Matter 942
remanded to AO to verify difference in liability recorded in books and actual liability
of sales tax.
On appeal, the Tribunal held that the fact that there was a difference in liability
recorded in the books of the subsidiary and the actual liability of sales tax needed
verification by the AO. Therefore, the issue was remitted to the file of the AO for
verification in accordance with the law. (AY. 2006-07 and 2007-08)
Rain Commodities Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
Rain Cements Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
S. 43B : Deductions on actual payment – Deduction of service tax only on actual 943
payment – Assessee precluded from claiming amount again in subsequent assessment
year.
According to the terms of agreement, the liability to pay service tax was placed upon
the assessee as service receiver. The AO noticed that during the AY 2007-08 that the
assessee had provided service-tax liability of ` 104.45 crores in its books of account but
it had actually paid a sum of ` 101.21 crores only. Hence, he disallowed the difference
of the amount of ` 2.93 crores u/s. 43B of the Act. Moreover, assessee had paid service
tax of ` 22.91 crores in advance in the AY 2006-07 which was claimed as deduction by
the assessee and disallowed by the AO on the view that assessee cannot claim deduction
on the advance payment of service tax. Since the disallowance made in AY 2006-07 was
disputed by the assessee by filing an appeal, the AO, as a protective measure, added
the amount in the AY 2007-08 also. The CIT(A) deleted the addition. On appeal by the
department, held that the assessee claimed a sum of ` 22.91 crores on payment basis
in the AY 2006-07 and the same was allowed by the CIT(A) in that year. Hence, the
assessee was precluded from claiming the amount again in the AY. 2007-08. (AY. 2004-
05, 2007-08 to 2010-11)
Mazgaon Dock Ltd. v. ITO (2016)46 ITR 162 (Mum.)(Trib.)
283
Public financial institutions S. 43D
S. 43D. Special provision in case of income of public financial institutions, public
companies, etc.
944 S. 43D : Public financial institutions – Interest on non-performing assets would be
chargeable to tax in the year in which it is actually received.
The Assessee, a Government owned NBFC, did not recognize interest income on loans
lent since they were categorized as non-performing assets. AO sought to tax the same
on the ground that RBI norms were not binding under Income-tax Act. The ITAT held
that as per s. 43D, interest on non-performing assets were chargeable to tax in the year
in which it is credited to the P&L a/c or in the year in which it is actually received,
whichever is earlier. The assessee, being a State Industrial Investment Corporation,
is eligible for the same as per Explanation (f) though it was not a public financial
institution within the meaning of Explanation (c). Further, the ITAT observed that having
regard to the real income theory and RBI’s prudential norms, interest on NPAs would be
recognized only at the time receipt due to the uncertainty in its receipt. (AY. 2001-02,
2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 44: Insurance business
945 S. 44 : Insurance business – Income from shareholders account was to be taxed as a
part of life insurance business and not as income from other sources. [S. 56]
Dismissing the appeal of the revenue, the Court held that Income from shareholders
account was to be taxed as a part of life insurance business and not as income from
other sources. (AY. 2006-07 and 2008-09)
CIT v. ICICI Prudential Insurance Co. Ltd. (2016) 242 Taxman 159 (Bom.)(HC)
Editorial : SLP is granted to the revenue; CIT v. ICICI Prudential Life Insurance Co. Ltd.
(2016) 242 Taxman 97 (SC)
S. 44AD. Special provision for computing profits and gains of business on presumptive
basis.
946 S. 44AD : Civil construction – Computation – Depreciation – Income exceeding limit
of ` 40 lakhs – Bar does not apply. [S. 32]
On appeal against the decision of the High Court upholding the order of the
Commissioner in revision affirming the order of the Assessing Officer calculating
the assessee's profit at a flat rate of 8 per cent. on the gross receipts and disallowing
depreciation claimed by the assessee: Held, that admittedly, the proviso to section 44AD
of the Income-tax Act, 1961, was applicable to the assessee in view of the fact that its
income for the assessment year in question, i.e., 2009-10, was above ` 40 lakhs and
therefore, the bar to the entitlement for depreciation under section 44A(2) of the Act
would not apply. Grant of depreciation under section 32 of the Act would, therefore,
284
S. 44BB Mineral oils
become mandatory. However, if on verification, it was found that the income of the
assessee was less than ` 40 lakhs and, therefore, the proviso to section 44AD of the
Act had application, the Department may seek modification of the court's order. (AY.
2009-10)
Awasthi Traders v. CIT (2016) 388 ITR 185 (SC)
S. 44AD : Civil construction – Best judgement assessment – Estimation of net profit 947
– In preceding two years, assessee had shown net profit at 1.7 per cent and 2.21 per
cent and same had been accepted by Authority, estimation of net profit at 8 per cent
by AO was not justified. [S. 144]
Dismissing the appeal of the Revenue the Tribunal held that; in preceding two
assessment years, assessee had shown net profit of 1.7 per cent and 2.21 per cent which
were accepted by AO. Estimation of net profit of 8 per cent was not justified average of
preceding two years was to be taken as GP rate. (AY. 2008-09)
Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)
S. 44AD : Civil construction – When profit declared under presumptive taxation is 948
accepted, AO could not make separate addition by invoking provisions of S. 69C.
[S. 69C]
Allowing the appeal of the assessee the Tribunal held that when, profit declared by
assessee under presumptive taxation as provided u/s. 44AD was accepted, AO could not
make separate addition by invoking provisions of section 69C. (AY. 2007-08, 2009-10)
Nand Lal Popli v. Dy. CIT (2016) 160 ITD 413 (Chd.)(Trib.)
S. 44BB. Special provision for computing profits and gains in connection with the
business of exploration, etc., of mineral oils.
S. 44BB : Mineral oils – Computation-Presumptive tax – Services provided in 949
connection with prospecting for mineral oils – Matter remanded to consider whether
the assessee had permanent establishment in India and whether the consideration
received by it was connected with that of permanent establishment. [S. 44DA, 115A]
Held that; since the Assessment Year 2008-09 fell within the period from April 1, 2004
to April 1, 2011, the income of the assessee to the extent it fell within the scope of
section 44DA(1) of the Act and stood excluded from section 115A(1)(b) of the Act,
would be computed in accordance with section 44BB(1) of the Act. The contention
of the assessee that since it was engaged in the business of providing services in
connection with prospecting for mineral oils, its income fell within the ambit of section
44DA(1) of the Act and it would be taxable under section 44BB(1) was to be accepted.
If the consideration received by the assessee for services rendered was found to be
fees for technical services, the Assessing Officer would specifically have to determine
(a) whether the assessee had a permanent establishment during the relevant period
and (b) if so, whether the contracts entered into by the assessee with BG and RIL were
effectively connected with the assessee's permanent establishment in India. It was only
if the Assessing Officer found that the two conditions were satisfied, that the income
of the assessee would be computed under section 44BB(1) of the Act. However, if such
285
Mineral oils S. 44BB
conditions were not satisfied the income-tax payable by the assessee would have to be
computed in accordance with section 115A(1)(b) of the Act. The Tribunal's decision
to remit the matter to the Assessing Officer for determining whether the assessee had
a permanent establishment in India and whether the consideration received by it was
connected with that permanent establishment, was to be sustained. (AY. 2008-09)
PGS Exploration (Norway) AS v. Addl. DIT (2016) 383 ITR 178 / 239 Taxman 333 / (2017)
291 CTR 146 (Delhi)(HC)
950 S. 44BB : Mineral oils – Non-resident – Prospecting for, or extraction or production
of mineral oils – Service tax collected by assessee on amount paid to it for rendering
services – Service tax not an amount paid or payable or received or deemed to be
received by assessee for services rendered by it – Assessee only collecting service tax
for passing it on to Government – Not includible in gross receipt.
The assessee provided equipment on hire and manpower for exploration and production
of mineral oil and natural gas. For the AY 2008-09, it declared an income of ` 49,31,260
according to the provisions of section 44BB(3). In computing the gross receipts for the
purposes of determining the taxable income, the assessee did not include a sum of
` 2,09,24,553 being the service tax received from its customers. The Assessing Officer
included ` 2,09,24,553 in the gross receipts for computing the taxable income u/s 44BB.
The appellate authorities allowed the claim of the assessee. On appeals:
Held, dismissing the appeals, (i) that for the purposes of computing the presumptive
income of the assessee for the purposes of section 44BB the service tax collected by the
assessee on the amount paid to it for rendering services was not to be included in the
gross receipts in terms of section 44BB(2) read with section 44BB(1). The service tax is
not an amount paid or payable, or received or deemed to be received by the assessee
for the services rendered by it. The assessee only collected the service tax for passing
it on to the Government.
(ii) That Circular No. 4 of 2008, dated April 28, 2008*, clarified that service tax paid by
the tenant does not partake of the nature of income of the landlord. The landlord only
acts as a collecting agency for Government for collection of service tax. Circular No. 1
of 2014, dated January 13, 2014**, also clarified that service tax is not to be included
in the fees for professional services or technical services. (AY. 2008-09)
PCIT v. Mitchell Drilling International P. Ltd. (2015) 234 Taxman 818 / (2016) 380 ITR
130 (Delhi)(HC)
951 S. 44BB : Mineral oils – Computation – providing various services in connection with
prospecting, extraction or production of mineral oil, would be assessed. [S. 4DA]
Dismissing the appeal of the revenue, the Tribunal held that Payment received by
assessee from a non-resident company for providing operations of highly specialized
offshore personnel being an integral part of prospecting, extraction or production of
mineral oil, would be assessed u/s. 44BB, and not u/s. 44DA. (AY. 2009-10)
ADIT v. International Technical Services LLC (2016) 159 ITD 958 (Delhi)(Trib.)
286
S. 44BB Mineral oils
S. 44BB : Mineral oils – Insurance claim for recovery of cost of installation of off-shore 952
platform, even if received outside India, would be a business receipt taxable in India
only on existence of Permanent establishment in India – DTAA – India-Mauritius. [Art. 7]
Assessee a Mauritius based company was engaged in execution of installation of offshore
platform for oil exploration. Assessee received certain amount of insurance claim. Claim
was received outside India and was towards reimbursement of cost incurred, therefore,
it was not offered to tax in India. It was held that amount was recovery of expenses/
cost incurred with respect to operations carried out in impugned projects in India, these
receipts were part and parcel of business operations in India. Taxability of impugned
receipts had to be examined as per section 44BB as well as Article 7 of Indo-Mauritius
Treaty. As per article 7 said amounts could be brought to tax only if assessee had a
PE in India for concerned project. Matter remanded. (AY. 1998-99, 2000-01, 2004-05,
2008-09)
ADIT (IT) v. J. Ray McDermott Eastern Hemisphere Ltd. (2016) 158 ITD 923 / 49 ITR
300 / 180 TTJ 660 (Mum.)(Trib.)
S. 44BB : Mineral oils – Income received by a non-resident under a time charter 953
agreement accrues and arises in India even when the vessel and crew are outside the
territorial waters of India. Such income is assessable on a presumptive basis. [S. 9(1)
(vii), 44DA]
Income received by a non-resident under a time charter agreement accrues and arises
in India even when the vessel and crew are outside the territorial waters of India. Such
income is assessable on a presumptive basis. (ITA No. 4542/del/2013, dt. 11.03.2016)
(AY. 2008-09)
Siemoffshore Crewing AS v. ADIT (Delhi)(Trib.); www.itatonline.org
S. 44BB : Mineral oils – Computation – When income was computed at 10 per cent 954
of gross receipts separate deduction of fuel cost cannot be claimed – Demobilisation
revenue of entire transit period had to be included in gross receipts.
Dismissing the appeal of assessee the Tribunal held that where profits and gains of
business carried out by assessee-company were to be computed at 10 per cent of
gross receipts as per deeming provisions of section 44BB, it could not claim separate
deduction of fuel cost incurred in respect of contract undertaken for construction
of offshore facilities for development of certain gas fields. In terms of section 44BB,
demobilisation revenue of entire transit period had to be included in gross receipts.
(AY. 2010-11)
Fugro Rovtech Ltd. v. ACIT (IT) (2016) 157 ITD 250 / 175 TTJ 41 (UO) (Mum.)(Trib.)
S. 44BB : Mineral oils – Consideration receivable by applicant is taxable in accordance 955
with section 44BB
Applicant, UK based company, has entered into a contract with ONGC for hiring
of services for acquisition, processing & integration of long offset of 2D Seismic,
gravity, magnetic sea bed based reflection-refraction survey in block Offshore India,
consideration receivable by applicant is taxable in accordance with section 44BB.
Marine Geology Services LLP U. K., In re (2016) 242 Taxman 491 (AAR)
287
Mineral oils S. 44BB
956 S. 44BB : Mineral oils – Coring service/sample analysis service for examination
of presence of petroleum in block is a service in connection with the business of
exploration of mineral oils. Hence, would be taxable u/s. 44BB – DTAA – India-UK [S.
9, 44D, 44DA, Art. 12]
Coring service/sample analysis service for examination of presence of petroleum in
block is a service in connection with the business of exploration of mineral oils. Hence,
consideration received for rendition of such services would be taxable u/s. 44BB.
Corpo Systems Ltd., In re (2016) 389 ITR 29 / 239 Taxman 185 / 289 CTR 306 (AAR)
957 S. 44BB : Mineral oils – Extracting, prospecting or production of mineral oil – Entire
consideration received for scope of work was taxable in India.
Assessee entered into a contract with RIL to provide facilities in connection with
extracting, prospecting or production of mineral oil. Assessee signed a change order
with RIL to facilitate certain amendments in scope of work of original contract. Original
contract and 'change order' were inextricably linked with each other. Entire consideration
received for scope of work was taxable in India under section 44BB.
Aker Contracting FP ASA, In re (2016) 381 ITR 489 / 237 Taxman 427 / 283 CTR 250/
130 DTR 321 (AAR)
S. 44BBA: Special provision for computing profits and gains of the business of
operation of aircraft in the case of non-residents.
958 S. 44BBA : Aircraft – Non-residents – In the absence of any income, section 44BBA
cannot be applied to bring to tax the presumptive income constituting 5% of the gross
receipts in terms of section 44BBA(2) – Not assessable on deemed income. [S. 147]
Assessee was established by the Ministry of Transport of the Kingdom of Jordon to
carry passengers and cargo on international flights to and from Jordan. Assessee did
not file its return of income in India as it was incurring losses since commencement
of its operations in India. AO held that 5% of the gross receipts earned by the assessee
were deemed to be taxable income on a presumptive basis as per section 44BBA.
High Court held that section 44BBA is not a charging provision but only a machinery
provision and it cannot preclude an assessee from producing books of account to show
that in any particular AY there is no taxable income. High Court held that where there
is no income, section 44BBA cannot be applied to bring to tax the presumptive income
constituting 5% of the gross receipts in terms of section 44BBA(2). (AY. 1989-90 to
1993-94)
DIT v. Royal Jordanian Airlines (2016) 383 ITR 465 / 236 Taxman 10 / 287 CTR 407
(Delhi)(HC)
288
S. 45 Capital gains
S. 44C. Deduction of head office expenditure in the case of non-residents.
S. 44C : Non-residents – Head office expenditure – to be allowed fully in view of 959
Article 7(3) of the treaty prior to 1 April 2008 – Amendment brought by way of
protocol which mandates applicability of domestic laws – Prospective in nature –
DTAA – India-UAE [Art. 7(3)]
The assessee was a banking company incorporated in UAE and has 2 branches in India.
The income from banking operations in India was offered for tax in India in view of
India-UAE DTAA. The business profit of the bank related to its Indian operations was
required to be computed in accordance with the provisions of Art. 7 of the DTAA which
allowed the deduction of all expenses wherever incurred and reasonably allocable to
the PE. During the year under consideration, the assessee had incurred head office
expenses. There were administrative expenses which were allocated by head office to
its branches. In the first round of proceedings, the Tribunal had set aside the claim to
AO in view of amendment to Section 44C. In the second round of proceedings, the AO
restricted the expenses in view of Section 44C. On appeal to Tribunal, it was held that
in view of provisions contained in Article 7(3) of Indo-UAE DTAA prior to 1st April
2008, the income of the PE of the assessee was to be computed as business income after
allowing all the expenses attributable to its business in India including the head office
expenses without invoking the provisions of Section 44C. The amendment brought by
way of Protocol by which Article 7(3) has been amended and limitation clause has been
brought in, which mandates applicability of domestic law, would apply from 1st April
2008 and has no retrospective effect. (AY. 1995-96 to 2000-01)
Abu Dhabi Commercial Bank Limited v. ADIT (2016) 176 TTJ 115 (Mum.)(Trib.)
S. 45. Capital gains.
S. 45 : Capital gains – Share capital not to be treated as business income – Two units 960
separately leased to directors – Not on par with other properties – Income therefrom
to be treated as capital gains with deduction for cost. [S. 28(i)]
Court held that the amount of ` 45,84,000 on account of share capital received from
the various shareholders ought not to have been treated as business income. Two units
separately leased to directors is not on par with other properties. Income therefrom to
be treated as capital gains with deduction for cost. (AY. 1996-97)
G.S. Homes and Hotels P. Ltd. v. Dy. CIT (2016) 387 ITR 126 / 242 Taxman 58 / 289 CTR
105 (SC)
Editorial : Decision in G.S. Homes and Hotels P. Ltd. v. Dy. CIT, ITA No. 16 of 2003 dated
16-09-2011 is partly affirmed.
S. 45 : Capital gains – Transfer – Surrender of Floor Area Ratio (‘FAR’) would amount 961
to transfer, thus, consideration received would be taxable as capital gains. [S. 2(47)]
Assessee was in business of real estate and owned acres of land. Out of total land
area, major portion was used for business and was subjected to joint development
agreement. The remaining land area was kept for personal use. During the course of
search, documents were seized which depicted that assessee received consideration
289
Capital gains S. 45
for surrendering the FAR in respect of land area kept for personal use. The AO treated
surrender of FAR as transfer u/s. 2(47) and taxed the consideration as capital gains
which was confirmed by CIT(A). The Tribunal, however, set aside the order on the
ground that the land retained by assessee was not a capital asset and there was no
transfer of immovable property as defined u/s. 2(47) of the Act. On appeal, the High
Court held that surrender of FAR is relinquishment of rights amounting to ‘transfer’ as
defined u/s. 2(47). The view of High Court was upheld by Supreme Court. (AY. 1999-
2000)
Dinesh D. Rankha v. CIT (2016) 239 Taxman 262 (SC)
962 S. 45 : Capital gains – Business income – Shares were held as investment hence gains
from sale of shares assessable as capital gains. [S. 28(i)]
Dismissing the appeal of the revenue the Court held that the peculiar facts were that
the investment made was shown as investment and the cost was reflected throughout
in the balance-sheet and it was never treated as stock-in-trade. The profit derived from
sale of shares was assessable as capital gains. (AY. 1997-98)
PCIT v. Telestar Investments P. Ltd. (2016) 387 ITR 248 (Karn.)(HC)
963 S. 45 : Capital gains – Capital loss – Transfer of shares while company under
liquidation proceedings without permission of court was held to be void – No capital
gains or loss can be said to arise – Shares under pledge at time of transfer – Transfer
if at all of residuary rights whose value not ascertainable – No question of setting off
loss accruing on sale thereof. [S. 2(47), Companies Act, 1956, S. 536(2)]
During the previous year relevant to the assessment year 1995-96, the assessee had
pledged with a bank shares in a company R, which had gone in liquidation. The
assessee claimed long-term capital loss on sale of such shares to its sister concern.
The Assessing Officer noted that the shares which the assessee sold were pledged with
the bank and treated the transfer as invalid and disallowed the long-term capital loss
claimed by the assessee on account of the sale. The Commissioner (Appeals) upheld
the assessee's claim and directed the allowance of the long-term capital loss claimed.
The Appellate Tribunal allowed the Department's appeal reversing the order of the
Commissioner (Appeals). On appeal:
Held, dismissing the appeal, that the transfer of shares by the assessee by way of deed
of assignment was void and did not fall under section 2(47) of the Income-tax Act,
1961 with no consequences as to the claim for long term capital loss. Under section
536(2) of the Companies Act, 1956 any transfer of shares after commencement of
winding up proceedings was void unless the High Court otherwise ordered in respect
of particular transactions and hence the transfer of shares by the assessee during
the liquidation proceedings was void. The transfer of shares included the transfer of
rights in shares which was declared void under section 536(2) of the Companies Act,
1956 and therefore, it was not a transfer. It was borne out from the record, that the
assessee had not taken permission of the relevant statutory authority in respect of the
sale of shares. It was found by the Appellate Tribunal that the assigned shares being
encumbered to the extent of the liability guaranteed by the assessee company to the
bank, what could have been assigned was only the residuary rights in the shares, the
290
S. 45 Capital gains
cost of which was not ascertainable with reference to the provisions of the Income-tax
Act, 1961. (AY. 1995-96)
Bijal Investment Co. P. Ltd. v. ITO (2016) 389 ITR 53 / 241 Taxman 435 / (2017) 147 DTR
404 (Guj.)(HC)
Editorial : Order of the Income-tax Appellate Tribunal in Dy. CIT v. Bijal Investment Co.
P. Ltd. (2008) 303 ITR (AT) 350 (Ahd.) affirmed.
S. 45 : Capital gains – Business income – Sale of plot of land assessable as capital 964
gains and not as business income. [S. 28(i)]
Allowing the appeal of the assessee, the Court held that the plot of land was purchased
in 1971 and thereafter, prior to its sale in parts, no transfer of rights in favour of any
third party ever took place, therefore the sale of such land could not be termed as
“business adventure”. (AY. 2002-03)
Arjundev K. Khanna (HUF) v. ITO (2016) 241 Taxman 380 (Guj.)(HC)
S. 45: Capital gains – Failure of vendor to show the receipts in their account cannot 965
be the ground to reject the claim of assessee as long term capital gains. [S. 2(29B)]
Dismissing the appeal of the revenue, the Court held that merely because vendor of
shares failed to disclose receipt of consideration in their returns of income and had not
offered same for tax, STCG could not be presumed instead of LTCG, where assessee
had paid purchase consideration of shares by account payee cheques and vendors had
issued confirmation. (AY. 2005-06)
CIT v. Sadanand B. Sule. (2016) 242 Taxman 116 (Bom.)(HC)
S. 45 : Capital gains – Compensation relating to standing trees in the agricultural 966
land – since acquisition was of the entire land on ‘as is where is’ basis, question
of payment of capital gains only on the compensation for standing trees cannot be
justified in law. [S. 2(IA)]
While calculating the valuation of trees, which was done by the Land Acquisition
Officer of the Board, part relief had been granted by the authorities with regard to
certain kind of trees and also the building and the borewell. But mango trees, which
were approximately 12 years of age, were valued separately, and compensation on the
same was treated as a separate transaction and was held as taxable.
Overruling the decision of the Tribunal, the High Court held that even though while
computing the compensation in relation to such acquisition, the land and trees growth
were valued separately, it does not mean that there were two transactions. Thus, the
High Court held that splitting one transaction into two for the purpose of taxation would
be against law and hence since acquisition was of the entire land on ‘as is where is’
basis, question of payment of capital gains only on the compensation for standing trees
cannot be justified in law.
Shivanna, M. v. ACIT (2016) 142 DTR 319 (Karn.)(HC)
291
Capital gains S. 45
967 S. 45: Capital gains – Transfer of capital asset to firm – Firm being held to be
non- genuine, profit on sale of land was held to be assessable in the assessment of
individual partner. Reassessment was also up held. [S. 45(3) 147, 148, 184]
On appeal, High Court concurred with the observation of the AO, that the partnership
firm was not genuine in nature, as the assessee did not place the original partnership
deed on record and registered the firm after a lapse of 15 years in 2003, just a year
before executing the retirement-cum-reconstitution deed in 2004. Thus, the claim of
the assessee that the consideration received on retirement was not in relation to his
transfer of land but by way of retirement of partners in the firm was rightly rejected by
the Tribunal. On this basis, the HC upheld the order of the Tribunal that, the amount
received on retirement was to be treated as capital gains on sale of land. Reassessment
was done after recording reasons and basis of information hence the reassessment was
held to be valid (AY. 2005-06)
V.S. Balasubramanyam v. ITO (2014) 47 taxmann.com 282 / (2017) 393 ITR 486 (Karn.)
(HC)
Kalavathi v. ITO (2014) 47 taxmann.com 282 / (2017) 393 ITR 486 (Karn.)(HC)
Editorial : SLP of the assessee was dismissed, V. S. Balasubramanyam v. ITO (2016) 242
Taxman 255 / 389 ITR 2 (St.) (SC)
968 S. 45 : Capital gains – Principle of mutuality – Right to occupancy of flats attached
to shares – Shareholder selling shares to third party – Capital gains taxed in hands
of shareholder – No transfer of land or any asset by assessee giving rise to capital
gains. [S. 27(iii)]
The assessee was a non-profit making company working on the principle of mutuality.
It constructed a building on land owned by it and entitled its shareholders to occupy
flats in the building recovering only the cost of construction. During the year one of its
shareholders sold its shares to a third party. The shareholder was subjected to tax on
the capital gains arising on the transfer. The AO held that as the land was owned by
the assessee and its floor space index was utilised, the land was impaired and the profit
on the sale of flats was compensation for the impairment and computed the gains after
reducing the cost of construction of the flats from the consideration for the transfer.
Tribunal deleted the addition. On appeal by revenue, dismissing the appeal the Court
held that the only sale which took place was the assessee's shares, which carried the
right to occupy the flats, which were held by its shareholder and the consideration had
already been subjected to tax in the hands of the shareholder. The assessee had not sold
any asset including any flat. (AY. 2006-07)
CIT v. Calico Dyeing and Printing Mills P. Ltd. (2016) 386 ITR 132 (Bom.)(HC)
Editorial : Order in ITO v. Calico Dyeing and Printing Mills P. Ltd. (2016) 7 ITR (Trib.)-OL
140 (Mum.)(Trib.) is affirmed.
969 S. 45 : Capital gains – Joint development agreement – Possession delivered as licensee
and not as transferee for development – No capital gains arise in respect of remaining
land for which no consideration received – Matter remanded. [S. 2(47)(v), Transfer of
Property Act, 1882, S 53A]
Allowing the appeal of assessee the Court held that no possession had been given by the
assessee to the transferee of the entire land in part performance of the joint development
292
S. 45 Capital gains
agreement. In the absence of registration of the joint development agreement, it did not
fall under section 53A of the Transfer of Property Act, 1882 and consequently section
2(47)(v) did not apply. It was urged by the assessee that as and when any amount was
received, capital gains tax would be discharged thereupon. The assessee should remain
bound by its stand. When there was no exigibility to tax on capital gains there was no
question of exemption under section 54. The authorities below were not right in holding
that the assessee was liable to capital gains tax in respect of the remaining land for
which no consideration had been received when the agreement had stood cancelled
and was incapable of performance due to various orders passed by the Supreme Court
and the High Court in public interest litigations. Matter was remanded to Tribunal.]
(AY. 2007-08)
Punjabi Co-op House Building Society v. CIT (2016) 386 ITR 116 (P&H)(HC)
Editorial : SLP is granted to revenue; CIT v. Punjabi Co-op House Building Society (2016)
383 ITR 1 (St.)
S. 45 : Capital gains – Capital receipt – Amount received upon termination of joint 970
venture agreement not taxable. No provision to bring capital gains from transfer of
trade – marks or brand name or non-compete covenant to tax prior to 1-4-2003 –
Amendment is prospective in nature. [S. 2(47)(ii), 55(2)(a)]
Dismissing the appeal of revenue the Court held that as a result of the termination of
the joint venture agreement, a bundle of rights of the assessee would stand extinguished,
which included the right to manufacture computers using HP know-how and HP
labels, trade-marks and patents. At the same time, the assessee's right to manufacture
its own computers was not taken away by the termination and that stood revived.
The assessee's income earning apparatus was impaired and its source of income got
sterilised. Therefore, the amount received by the assessee upon termination of the joint
venture agreement was in the nature of a capital receipt. Till April 1, 2003, there was
no provision under which the capital gains arising from the transfer of a trade-mark or
brand name associated with a business could be brought to tax. Similarly, the capital
gains arising from the transfer of a right to carry on business or negative non-compete
right also could not be brought to tax at the relevant time. The amendments were
prospective in nature. (AY. 1998-99)
CIT v. HCL Infosystems Ltd. (2016) 385 ITR 35 / 136 DTR 194 (Delhi)(HC)
S. 45 : Capital gains – International transaction – Chapter X deals primarily with 971
evasion of tax – No income chargeable to tax. [S. 2(47), 92B, 92C]
Held, that the conclusions of the Tribunal did not in any manner indicate that the
essential ingredients of amended section 2(47) were satisfied. If the transaction was
indirect, circuitous and to take place in future, then, on the basis thereof the Tribunal
could not have concluded that the amended definition of the term "transfer" was
attracted, that the matter must be viewed differently and distinctly and not in the
manner noted by the Supreme Court in Vodafone International Holdings B. V. v. Union
of India [2012] 341 ITR 1 (SC). A holistic view and approach ought to be adopted in
considering such intricate deals and complex transactions. One transaction cannot be
picked up in isolation so as to hold that it was a deliberate and intentional act of the
293
Capital gains S. 45
parties to circumvent Indian tax structure. Capital asset means property and throughout
there was only a transfer of a share. Further, the overseas transaction and thereafter
all the agreements or arrangements evinced an intention of the assessee to control the
telecommunication business of HEL in India through TII and downstream companies.
On the same transactions and same set of facts reaching a different conclusion than
that reached by the Supreme Court was not possible and was impermissible. The
Tribunal's order was vitiated by serious errors of law apparent on the face of the record.
It was also perverse for it ignored vital materials which had been noted extensively
in the judgment of the Supreme Court. None of the amendments post the Supreme
Court judgment would enable the Department to urge that the position as noted in
the Supreme Court judgment no longer subsisted. There were no capital gains. Since
there was no income the provisions of section 92B read with section 92F(v) were not
applicable. (AY. 2008-09)
Vodafone India Services P. Ltd. v. CIT (2016) 385 ITR 169 / 284 CTR 441 / 69 taxmann.
com 283 / 132 DTR 121 (Bom.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment; CIT v. Vodafone India Services P. Ltd. (2016) 384 ITR 182 (St.) 240
Taxman 347)]
972 S. 45 : Capital gains – Transfer – Distribution of capital asset – Where AOP could not
be taxed at the time of distribution of capital assets, it is not open to department to
tax the members of AOP. [S. 2(47), 4, 45(4)].
Dismissing the appeal of revenue the Court held that when the AOP was dissolved and
assets were distributed among the members of AOP, at that time, the department ought
to have taxed the AOP u/s. 45(4) of the Act. Having failed to do so, it is not now open
to the department, to tax the erstwhile members of AOP on the distributed amounts.
Merely because the right person could not be taxed, it is not open to department to tax
wrong person.
PCIT v. Ind Sing Developers (P.) Ltd. (2016) 239 Taxman 350 / 288 CTR 154 / 139 DTR
237 (Karn.)(HC)
Editorial : Order of Tribunal in Ind Sing Developers (P.) Ltd v. ACIT (2015) 155 ITD 543
(Bng.)(Trib.) is affirmed
973 S. 45 : Capital gains – Income from other sources – Casual and non-recurring receipts
– Auction sale of property mortgaged with bank set aside by Supreme Court – Auction
purchasers and judgment debtors compromising in execution proceedings – Amount
received by auction purchaser not casual and non-recurring receipt – Capital receipt
not taxable. [S. 10(3), 56]
The Appellate Tribunal upheld the order of the Commissioner (Appeals). In the appeals
filed by the assessees, the Department sought consideration of the amount received by
the assessees as revenue receipt, held, allowing the appeals, (i) that the Department
could not be permitted to shift its stand from one forum to another. The consistent
case of the Department was to be tested at various levels for its correctness. It was
possible that in the interregnum there might be decisions of the Supreme Court which
might support or negate the case of the Department. That would then have to be taken
294
S. 45 Capital gains
to its logical end. Under these circumstances, the court was not prepared to permit the
Department to urge a new plea for the first time in the High Court.
(ii) That the Assessing Officer was in error in proceeding on the basis that a sum of ` 10
lakhs received by each of the assessees was in the nature of a casual and non-recurring
receipt which could be brought to tax under section 10(3) of the Act. The Assessing
Officer having held that it could not be in the nature of capital gains it was not open to
the Department to seek to bring it to tax under the heading revenue receipt. What was
in the nature of a capital receipt could not be sought to be brought to tax resorting to
section 10(3) read with section 56 of the Act. (AY. 1993-94, 1994-95)
Gynendra Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
S. 45 : Capital gains – Transfer of a “trademark” related to some products cannot 974
be considered as transfer of “goodwill” of the business – In the absence of any cost
of acquisition of such a “trademark”, it cannot be taxed as capital gain – Prior to
amendment of section 55(2)(a) w.e.f. 1-4-2002 [S. 45, 48, 55(2)(a)].
Assessee was carrying on the business of manufacturing electronic appliances. Some of
the products manufactured by the assessee were sold under the name “Sharp”. During
the year, assessee transferred the trademark “Sharp” along with goodwill and common
law rights related to the trademark to a Japanese company for ` 3,99,75,000. The AO
taxed it as capital gain resulting from transfer of goodwill of the business. The tribunal
reversing the order of the CIT(A) held that assessee had transferred a “trademark” and
not goodwill, and in the absence of any cost of acquisition of such a “trademark”, it
cannot be taxed as capital gain u/s 45. On appeal by the Revenue, the High Court held
that the various clauses of the agreement clearly suggest that assessee had transferred
the trademark “Sharp” to the Japanese company. Further, transfer of a “trademark”
related to business cannot be considered as “goodwill” of the business as variety of
factors go into making of the goodwill of the business. Also held that if contention of
revenue is accepted then the amendment made by the Finance Act, 2001 to section 55(2)
of the Act was not required at all. (AY. 1996-97)
CIT v. Associated Electronics & Electrical Industries (Bangalore)(P.) Ltd. (2016) 65
taxmann.com 253 / 130 DTR 222 (Karn.)(HC)
S. 45 : Capital gains – Business income – Profit from sale of flats is to be assessed as 975
Capital gains and not as business income. [S. 2(45), 28(i)]
The assessee was the owner of a house property. The assessee approached a builder
for the purpose of construction of additional flats in the extra space available and
the assessee received a flat on the rear side as consideration. The assessee was also
entitled to the profit on sale of flats. It was held by the high court that the profits is to
be assessed as capital gains and cannot be said to be adventure in the nature of trade
for the profits to be assessed as business income as assessee never had the intention to
exploit the flat as commercial venture. (AY. 1990-91)
Raj Dhulari Bhasin v. CIT (2016) 236 Taxman 573 (Delhi)(HC)
295
Capital gains S. 45
976 S. 45 : Capital gains – Immovable property converted into stock-in-trade in 1995
– Transfer to Power of Attorney agent in accounting year relevant to AY. 2001-02 –
Sale of property in accounting years relevant to AYs. 2004-05 and 2005-06 – Gains
assessable in AYs. 2004-05 and 2005-06. [S. 2(47)(vi), 45(2), Transfer of Property Act,
1882 S. 53A]
Sub-section (1) of section 45 deals with profits and gains arising from the transfer of
a capital asset. Sub-section (2) of section 45 contains a non obstante clause saying
notwithstanding anything contained in sub-section (1), the profits or gains arising from
the transfer by way of conversion by the owner of a capital asset into or its treatment
by him as stock-in-trade of business carried on by him shall be chargeable to income-
tax as his income of the previous year in which such stock-in-trade is sold or otherwise
transferred by him. Therefore, in so far as stock-in-trade is concerned, the relevant year
in which the capital gains tax is leviable is the previous year in which such stock-in-
trade is sold. The word "used" is sold or otherwise transferred by him. In view of the
express words used in section 45(2), it is clear that section 45(1) deals with capital
gains on transfer of a capital asset, section 45(2) deals with payment of capital gains in
a transaction where stock-in-trade is sold or otherwise transferred by him. Having regard
to the scheme of the entire section and the express words used in sub-section (2) of
section 45, the case of considering stock-in-trade otherwise transferred, would arise only
if stock-in-trade is not sold. If stock-in-trade is sold, the question of considering whether
the stock-in-trade is otherwise transferred would not arise for consideration. The object
of using the words "otherwise transferred" as it is in the other provisions in the same
section is to prevent avoidance of payment of tax on capital gains by the owners thereof
resorting to modes which are not recognised in law, but which in substance have the
same effect. In other words, if the owner by such transfer ceases to have any interest
in the property and transfers all his interest in the property to the transferee and earns
profits and gains, but declines to pay tax on the capital gains, on the ground that such
transfer is not a transfer recognised in law, then the law in such cases to plug the
loop hole has used the term "otherwise transferred". Once it is sold, the question of
considering whether it has been otherwise transferred would not arise. Under section
2(47), any transaction involving the allowing of possession of immovable property to be
taken or retained in part performance of a contract of the nature referred to in section
53A of the Transfer of Property Act, 1882 is a deemed transfer in relation to a capital
asset. Therefore even if the stock-in-trade which was prior to its conversion a capital
asset, as treated by the Tribunal as a capital asset, as possession is not delivered, it
would not become a transfer and the question of payment of tax on capital gains would
not arise. The Central Board of Direct Taxes Circular No. 495, dated September 22, 1987
(see [1987] 168 ITR (St.) 87) which came into effect from April 1, 1988 explains the
purpose of sub-clause (vi) of section 2(47). (AY. 2001-02 to 2004-05)
Dy. CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
977 S. 45 : Capital gains – Business income – Profits from purchase and sale of shares –
Assessable as capital gains [S. 28(i)]
Dismissing the appeal of revenue, the Court held that the Assessee not registered with
any authority or body to trade in shares. Entire investments made out of assessee's own
296
S. 45 Capital gains
funds. That purchase and sale of shares were for investment accepted by Department
in earlier years. No material placed on record by Department to come to different
conclusion. Gains from purchase and sale of shares cannot be taxed as business income.
(AY. 2006-07)
CIT v. SMAA Enterprises P. Ltd. (2016) 382 ITR 175 / 138 DTR 373 / 288 CTR 103 (J&K)
(HC)
S. 45 : Capital gains – Colourable device – Gain arising from sale of share and 978
renunciation of rights is business income and not capital gains. Further, the loss
claimed on renunciation of rights was a contrived loss and the transaction of
renunciation of rights was a colourable device to claim such a loss. [S. 28(i), 260A]
During the year, the assessee sold shares and declared the income arising therefrom as
long term capital gains. Further, right issue was declared in respect of certain shares
held by assessee. The assessee sold its right entitlement to a related company and
claimed a capital loss on such renunciation of rights.
The AO noted that the renunciation of rights was made below the market price. Further,
the AO held that the transaction was a sham transaction to purchase losses for set off
against gains. The CIT(A) confirmed the order of the AO. The ITAT, however, accepted
the assessee’s contention and allowed the claim of loss as capital loss. The ITAT was
of the view that the shares were held as investments and not trading assets. On appeal,
the HC held that Income received from renunciation of rights is assessable as business
income and not capital gains since the closing stock was valued at cost or market value,
whichever is lower. This treatment could only be accorded to shares held as stock in
trade and not as investment. There was no explainable position as to why the rights
were renounced for merely a meagre portion of its market value. Hence, in order to
avoid paying of tax, the assessee had entered into transaction of renunciation of shares
with related company which was not for business purpose but to contrive a loss. Hence,
the transaction was a sham transaction or colourable device to claim loss. (AY. 1992-93)
CIT v. Abhinandan Investment Ltd. (2016) 282 CTR 466 (Delhi)(HC)
S. 45 : Capital gains – Accrual – Deferred consideration dependent on a contingency 979
does not accrue unless the contingency has occurred and is not liable to capital gains
tax in year of transfer. [S. 48]
Dismissing the appeal of revenue the Court held that The Tribunal held that what
amount has to be brought to tax is the amount which has been received and/or accrued
to the assessee and not any notional or hypothetical income as the revenue is seeking
to tax the assessee in the subject assessment year 2006-07… learned counsel for the
Revenue urged that in terms of section 45(1) of the Act that transfer of capital asset
would attract the capital gains tax. It is further submitted that the amount to be taxed
under section 45(1) is not dependent upon the receipt of the consideration. In support of
the above he invites our attention to Section 45(1)(A) and section 45(5) of the Act which
in contrast brings to tax capital gains on amount received… in the subject assessment
year no right to claim any particular amount gets vested in the hands of the assessee.
Therefore, entire amount of ` 20 crores which is sought to be taxed by the Assessing
Officer is not the amount which has accrued to the assessee. The test of accrual is
297
Capital gains S. 45
whether there is a right to receive the amount though later and such right is legally
enforceable… contention of the Revenue that the impugned order is seeking to tax
the amount on receipt basis by not having brought it to tax in the subject assessment
year, is not correct. This for the reason, that the amounts to be received as deferred
consideration under the agreement could not be subjected to tax in the assessment year
2006-07 as the same has not accrued during the year. (AY. 2006-07)
CIT v. Hemal Raju Shete (Mrs.) (2016) 136 DTR 417 / 239 Taxman 176 (Bom.)(HC)
980 S. 45 : Capital gains – Business income – sale of shares and mutual funds held as
investment – maintenance of two separate accounts in respect of shares held in trading
portfolio and investment portfolio – gains arising on sale of shares held in investment
portfolio to be treated as capital gains. [S. 28(i)]
The assessee held two separate accounts in respect of dealing in shares and mutual
funds under trading portfolio and under investment portfolio. During the year under
consideration, the assessee sold shares and mutual funds in investment portfolio
and returned long term capital gain on the same. The Assessing Officer held that the
gains arising out of the same has to be treated as business income as he is a trader
in shares for the reason that the assessee held the shares of the same company both
under investment portfolio and trading portfolio and the assessee has the discretion
to decide which scrip is to be held under investment portfolio and which one under
trading portfolio. On appeal, the CIT(A) upheld the order of the Assessing Officer,
which was subsequently reversed by the Tribunal. On appeal by the Revenue, the High
Court held that the tests applied by the Assessing Officer is not correct relying upon
Circular No. 4 of 2007 dated 15-6-2007 which gives the discretion to the assessee to
treat a particular scrip either as investment or as stock in trade. Further, also following
the principle of consistency as it was held that the gain is to be assessed as capital gain
in the preceeding previous year, it was held that the gain arising on the sale of shares
and mutual funds is to be assessed as capital gain in the year under consideration. (AY.
2006-07)
CIT v. IHP Finvest Ltd. (2016) 236 Taxman 64 (Bom.)(HC)
981 S. 45 : Capital gains – Sale of business of firm as a going concern to a company for
consideration of paid up capital does not amount to transfer liable as tax as capital
gains – Conversion of capital asset in to stock-in-trade – Distribution of capital assets
necessary to invoke the provisions of the section. [S. 2(47) 28(v), 45(2)]
The assessee was a firm and was having a shopping centre and land which was non
business asset and hence was kept out of the Balance sheet. During the year under
appeal, the said asset was brought into the stock of the business and corresponding
credit was given to the respective capital accounts of the partners in their profit sharing
ratio. The firm was converted into a joint stock company with the same objects to
deal in land, building and construction. The Assessing Officer noticed that the asset
i.e. is the shopping centre was introduced for the first time in the books and thus
charged this receipt of income. Alternatively, the Assessing Officer observed that in
this transaction the assessee has transferred an asset where the cost of acquisition is
nil for a consideration of ` 1,16,40,000/- for Shopping Centre and for the land which
had acquisition value of ` 12,00,000/- for a consideration of ` 65,00,000/- The Assessing
298
S. 45 Capital gains
Officer treated the same as short term capital gain as the asset had been brought for the
first time in its books of account and added it to the income of the assessee.
Before the CIT(A) the assessee contended that the provisions of section 28(iv) of the Act
were not applicable as neither the act of bringing an asset into the books or revaluation
thereof would amount to benefit or perquisite because the asset was already owned by
the assessee, though not reflected in its books. The fact that the asset had been brought
into its books did not amount to obtaining any benefit by the assessee. It was further
contended that no capital gains had occurred when it had converted the firm into a
joint stock company as in view of the provisions of Chapter IV of the Companies Act,
the act of declaring a firm as a company did not amount to transfer. It was contended
that if the property is transferred from an individual to himself, then no profit or gain
accrues to such person.
The CIT(A) held that a transfer of assets by a partnership firm to a company comprising
only of shareholders who were earlier partners of the firm attracts liability under section
45 of the Act and directed the Assessing Officer to compute the capital gains as per
the provisions of section 48 read with section 55 of the Act. The Tribunal held that
capital gains can be brought to assessment only, if the full value of the consideration is
received by or accrues to the transferor. The consideration in the instant case is stated
to be allotment of shares though the shares were issued by the company not to the firm
but to its partners. Even if it was considered that the shares somehow represented the
consideration, the firm would not be liable to tax.
After going through the various submissions and contentions of both the parties and
relying on various judicial precedents the High Court (including decision of Bombay
High Court in case of Texspin Engineering and Manufacturing Works (263 ITR 345) (Bom.)
and held that impugned transaction is not chargeable to tax under section 28(iv), 45 and
45(4) of the Act. Accordingly department’s appeal was dismissed. (AY. 1996-97)
Dy. CIT v. R. L. Kalathia and Co. (2016) 381 ITR 180 / 237 Taxman 621 / 139 DTR 189
(Guj.)(HC)
Editorial : SLP is granted to the Revenue, DCIT v. R. L. Kalathia & Co. (2016) 242 Taxman
104 (SC)
S. 45 : Capital gains – Penny Stocks – The fact that the stock is thinly traded and 982
there is unusually high gain is not sufficient to treat the long-term capital gains as
bogus when all the paper work is in order. The revenue has to bring material on
record to support its finding that there has been collusion/connivance between the
broker and the assessee for the introduction of its unaccounted money. [S. 48, 68]
Allowing the appeal of assessee the Tribunal held that the fact that the stock is thinly
traded and there is unusually high gain is not sufficient to treat the long-term capital
gains as bogus when all the paper work is in order. The revenue has to bring material
on record to support its finding that there has been collusion/connivance between the
broker and the assessee for the introduction of its unaccounted money. On facts the
assessee has produced all relevant documents as per the law. (ITA No. 19/kol/2014, dt.
02.12.2016) (AY. 2005-06)
Dolarri Hemani v. ITO (Kol.)(Trib.); www.itatonline.org
299
Capital gains S. 45
983 S. 45 : Capital gains – Benami transaction – No profit arises on execution of sale deed
by Assessee as GPA holder – Any material collected at the back of the assessee cannot
be read in evidence against him.
Any material collected at the back of the assessee cannot be read in evidence against
him in light of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC). No profit arises
on execution of sale deed by Assessee as GPA holder and hence there is no transfer of
capital asset by the assessee to give rise to Capital gains. (AY. 2007-08)
Inder Singla v. ITO (2016) 181 TTJ 368 / 141 DTR 137 (Chd.)(Trib.)
984 S. 45 : Capital gains – Business income – Shares were held as investment – Income
assessable as capital gains and not as business income. [S. 28(i)]
Allowing the appeal of the assessee, the Tribunal held that; Shares purchased and sold
in systematic and organized manner, treated as investment and accepted by Department
for several years as investment. Income from same transaction cannot be treated as
business gains by Department upon scrutiny assessment when no change in facts for
current year. (AY. 2008-09)
Tarujyot Investment Ltd. v. ACIT (2016) 48 ITR 33 (Ahd.)(Trib.)
985 S. 45: Capital gains – Business income – Profits on sale of shares – Assessee
consistently treating securities as investment and not stock-in-trade in previous years
– Revenue cannot take contrary view in present year.
Dismissing the appeal of the revenue, the Tribunal held that stand once taken, cannot
be allowed to be changed in the consequent years. Therefore, observing the fact that the
assessee treated the transactions and the income arising therefrom as capital gains in
the preceding years consistently, the Revenue was not justified to take a contrary view
in the present year. (AY. 2008-09)
Dy. CIT v. Mahender Kumar Bader (2016) 48 ITR 596 (Jaipur)(Trib.)
986 S. 45 : Capital gains – Transfer of land as per joint development agreement was
held to liable to capital gains tax though the sale deed was executed in next year,
however part of expenditure recorded by developer which had no direct nexus with
construction could not be adopted as sale consideration for transfer of land for
purpose of computing capital gain in hands of assessee [S. 2(47)(v), 48, 269UA]
Tribunal held that AS per Joint Development Agreement, builder would get 47 per cent
and landowner 53 per cent of built up area and during current year landowner handed
over entire land to developer, though sale deed was executed in next year, in current
year itself there was transfer of capital assets for consideration being cost of 53 per
cent of built up area. However part of expenditure recorded by developer which had no
direct nexus with construction could not be adopted as sale consideration for transfer of
land for purpose of computing capital gain in hands of assessee. (AY. 2005-06)
Essae Teraoka Ltd. v. DCIT (2016) 157 ITD 728 (Bang.)(Trib)
987 S. 45 : Capital gains – Capital asset – Agricultural land – Buying and selling of
agricultural land – Assessable as short term capital gains. [S. 2(14)(iii), S. 2(42B)]
Assessee engaged in buying/selling of immovable properties was to be upheld as land
was converted from agricultural to non-agricultural prior to sale with sole purpose and
300
S. 45 Capital gains
intent to sell land for industrial purpose and period of holding was also very short; land
in question did not fall under exclusion clause (iii) to section 2(14) hence assessable as
capital gains. (AY. 2007-08)
Dy. CIT v. B. Sudhakar Pai (2016) 159 ITD 875 (Bang.)(Trib.)
S. 45 : Capital gains – Transfer – Joint development agreement – In the year of 988
handing over of physical possession of property to builder is liable to be assessable
to capital gains and not in later assessment year when sale deed was registered.
[S. 2(47)(v)]
The assessee claimed that it had originally entered into Joint Development Agreement
(JDA) with promoters on 9-7-2005 and according to him, transfer took place in AY.
2006-07 and not in A.Y. 2009-10. The AO disagreed with contention of assessee and
observed that transfer took place vide registered sale deed dated 1-4-2008 in AY. 2009-
10 and, thus, taxability of gains arising on transfer of said lands had to be dealt in
AY 2009-10. CIT(A) held that Transfer took place in the year 2006-07. On appeal by
revenue dismissing the appeal of the Revenue, held that in AY. 2006-07, in terms of
JDA, assessee handed over physical possession of property to builder/developer who had
given substantial amount to assessee in form of refundable deposit and had also shown
willingness to perform his part of duty to assessee and there was no question of going
back from his consent to act as builder. Merely because an agreement of sale had not
been registered in year of transfer, it could not be taken out of ambit of S. 2(47)(v) when
parting of possession of immovable property had already taken place. (AY. 2009-10)
ITO v. Ayisha Fathima (Smt.) (2016) 160 ITD 377 / 182 TTJ 437 (Chennai)(Trib.)
S. 45 : Capital gains – Transfer took place when possession was taken over by buyer 989
and not when buyer exercised option to buy said property after five years. [S. 2(47)
(v), Transfer of Property Act, 1882, S. 53A)
Assessee entered into an agreement for sale of office premises and parking space to
a bank. As per agreement sale would be completed only after expiration of five years
but before sixth year from purchaser and would have option to complete transaction
or rescind same. Possession of property in question was handed over to bank in part
performance of contract. As per agreement purchaser-bank exercised its option to
purchase said property. The AO held that transaction of transfer within meaning of s.
2(47) took place and capital gain was chargeable to tax in relevant assessment year.
Tribunal held that in terms of s. 2(47) date of transfer would be date on which any
transaction involving allowing of possession of any immovable property to be taken or
retained in part performance of a contract of nature referred to in s. 53A of Transfer
of Property Act, 1882 takes place. Since in instant case, possession was allowed to be
taken over by bank in part performance of sale agreement, transfer within meaning of
s. 2(47)(v) took place. Therefore, capital gain in relation to capital asset in question
could not be taxed in relevant assessment year. (AY. 1991-92)
Zuari Estate Development & Investment Company (P.) Ltd. v. JCIT (2016) 159 ITD 28
(Panaji)(Trib.)
301
Capital gains S. 45
990 S. 45 : Capital gains – Call options – Capital asset – When call option would be
exercised, option right was to be reckoned as a transfer/alienation of a valuable right
but the consideration received therefor would not be taxed as capital gain in India in
terms of article 13(6) – DTAA – India-Singapore. [S. 2(47), 5(2), 9(1)(i), Art. 13]
The assessee was tax resident of Singapore and was a non-resident Indian. The strike
price or the call option was agreed for US $ 1 and the consideration mentioned was
US $ 2450,000 and such call option was spread in to period of 150 years. The AO held
that the assessee had received income through or from transfer of capital asset situated
in India and therefore, the consideration of USD 24.50,000 equivalent to Indian Rupees
11,71 00,000 received by the assessee was taxable in India as per section 5(2) read with
section 9(1) as income from other sources. In appeal CIT(A) also up held the order of
the Assessing Officer. Allowing the appeal of the assessee the Tribunal held that in
common parlance, a call option is reckoned as a contract in which the holder (buyer)
has the right (but not an obligation) to buy a specified quantity of a security/shares at
a specified price (strike price) within a fixed period of time. In the present case, there
is very peculiar agreement/arrangement, where the strike price has been mentioned and
the fixed period of time for exercising the call option has been fixed for 150 years. This
factum itself means that the call option in the shares has been given for perpetuity. Not
only that, an irrevocable power of attorney has also been executed in favour of the ING
Bank in respect of all the shares in Assessee confirming that assessee will not at any
time purport to revoke the same, which inter alia shows that assessee has alienated a
substantive and valuable right as an owner of the shares in perpetuity, albeit without
dejure alienating the shares itself. Hence, it cannot be held merely as a call option
agreement simplicitor.
The option right in the shares has to be reckoned as transfer/alienation of a valuable and
substantive right. Such a valuable right/interest in shares would certainly be a 'capital
asset'. Parting with any substantive interest in the asset or creating any substantive
interest in any asset or extinguishment of a right/in an asset, directly or indirectly
would surely be reckoned as a 'transfer' of an asset/property even under the domestic
law, that is, under section 2(47). When call option would be exercised, option right
was to be reckoned as a transfer/alienation of a valuable right but the consideration
received therefor would not be taxed as capital gain in India in terms of article 13(6).
(AY. 2002-03)
Praful Chandaria v. ADDIT (2016) 161 ITD 153 / 181 TTJ 731 / 143 DTR 1 (Mum.)(Trib.)
991 S. 45 : Capital gains – Joint development agreement – Possession was not parted with,
development agreement was not registered, there was no intention to transfer, capital
gain cannot be taxed [S. 2(47)(v), 51, Transfer of Property Act, S. 53A, Registration
Act, 1908 S. 17(IA)]
In terms of agreement, possession of land was to be given to developer only upon
fulfilment of certain conditions, Thus, important condition of transfer u/s. 2(47)(v)
was not fulfilled, as possession was not parted with, development agreement was not
registered and therefore transaction does not fall u/s. 2(47)(v) hence no capital gain can
be taxed. (AY. 2008-09)
ACIT v. Jawaharlal L. Agicha (2016) 161 ITD 429 / (2017) 183 TTJ 176 (Mum.)(Trib.)
302
S. 45 Capital gains
S. 45 : Capital gains – Business income – Share investment was continuously shown 992
shares as investment, entitled to treat gains arising on purchase and sale of shares as
capital gain. [S. 28(i), 111A]
Assessee declared gain arising on purchase and sale of shares as short-term capital gain,
took a view that shares were held for a short period and meant for purpose of business
and therefore gain would be part of business activity, taxable as 'business income'.
Tribunal held that assessee had disclosed shares as investment in balance sheet, entitled
to treat gains as short-term capital gain. (AY. 2008-09)
Suresh Babulal Shah (HUF) v. DCIT (2016) 161 ITD 514 (Pune)(Trib.)
S. 45 : Capital gains – Transfer – Entering into a "joint development agreement" with 993
the builder and handing over possession/power of attorney will not amount to a
"transfer" and gives rise to capital gains. [S. 2(47)(v), Transfer of Property Act, 1882,
S. 53A, Indian Registration Act, 1908, S. 17(IA)]
Dismissing the appeal of revenue, the Tribunal held that; entering into a "joint
development agreement" with the builder and handing over possession/power of attorney
will not amount to a "transfer" and gives rise to capital gains. (ITA No. 1844/Mum/2012,
dt. 28.09.2016) (AY. 2008-09)
ACIT v. Jawaharla Agicha (Mum.)(Trib.), www.itatonline.org
S. 45 : Capital gains – Consideration for alienation of rights under a "Call Option 994
agreement" for shares is not taxable as "capital gains" or as "income from other
sources" – DTAA – India-Singapore DTAA. [S. 5(2), 9(1), 48, 56, Art. 13]
Allowing the appeal of assessee the Tribunal held that; the consideration received has
to be taxed under the head “capital gain” as there is a transfer of an asset/property.
The taxability of a capital gain under India-Singapore DTAA has been given in Article
13. So far as conditions and factors mentioned in paragraphs 1, 2 & 3 of Article 13,
surely same would not be applicable here in this case. As regards the alienation of
shares as mentioned in paras 4 and 5, the same again will not be applicable because
here no actual shares which has been transferred or alienated albeit a substantive and
valuable right has been given in the shares, which has to be reckoned as capital asset
or property as per our discussion herein above. Hence, it is gains from the alienation of
an asset or property and any gain from alienation of such kind of “property” will fall
within the scope of Para 6 of Article 13, whereby, the taxing right has been given to the
resident state, that is, the state of the alienator, which here in this case is Singapore.
The allocation of taxing right under Article 13(6) cannot be attributed to India but to
the resident state. Thus, on the facts and circumstances of the case as discussed above,
we hold that, firstly, the consideration received by the assessee is arising from the
assignment of substantive and valuable rights in the shares of an Indian company which
is assessable under the head “capital gain” and secondly¸ such a capital gain cannot
be held to be taxable in India in terms of para 6 of para 13 of India-Singapore-DTAA.
With these observations, the addition made by the AO and as confirmed by the CIT(A)
is directed to be deleted. (AY. 2002-03)
Praful Chandaria v. ADIT (2016) 143 DTR 1 (Mum.)(Trib.)
303
Capital gains S. 45
995 S. 45 : Capital loss – Long term – Off market sale transaction of shares and carried
forward said amount for future set off – Genuine loss could not be disallowed as it did
not fall within ambit of s. 10(38) because of non-payment of STT. [S. 10(38)]
Assessee suffered long-term capital loss on off market sale transaction of shares
and carried forward said amount for future set off. The AO observing that if those
transactions h ad been made through recognized Stock Exchange with STT payment,
then loss would not have been carried forward within meaning of s. 10(38), held that
assessee used a colorable device to avoid tax and, therefore, disallowed such loss by
holding it as bogus. The ITAT held that the lacuna in s. 10(38) had been lawfully
exploited by assessee by transferring shares held as long-term capital assets through off
market transactions resulting into genuine loss and, thus, escaping rigor of exemption
provision contained in s. 10(38), which would have otherwise disentitled it to claim
set off and carry forward of such a loss. This was a glaring example of tax planning
rather than tax avoidance as had been held by AO and such loss being a genuine loss
could not be disallowed as it does not fall within ambit of section 10(38) because of
non-payment of STT. (AY. 2010-11)
Mridu Hari Dalmia Parivar Trust v. ITO (2016) 158 ITD 521 / 139 DTR 143 / 179 TTJ 577
(Delhi)(Trib.)
996 S. 45 : Capital gains – Co-owner – Mere fact that the assessee is shown as a co-owner
of the property does not mean that the capital gains are partly assessable in her hands
if the facts show that the other co-owner bought the property from his own funds and
showed it as his sole property in the balance sheet.
Dismissing the appeal of revenue the Tribunal held that; Mere fact that the assessee is
shown as a co-owner of the property does not mean that the capital gains are partly
assessable in her hands if the facts show that the other co-owner bought the property
from his own funds and showed it as his sole property in the balance sheet. (AY. 2009-
10)
ITO v. Vandana Bhulchandani (Dr.) (2016) 140 DTR 25 (Mum.)(Trib.)
997 S. 45 : Capital gains – Assessee acquiring land on distribution of assets in family
settlement pursuant to partition – Not transfer – Holding asset as beneficial holder
since 1963 – period of holding from 1963 – FMV as on 1981 to be taken [S. 48]
The assessee acquired land on distribution of assets on partition of the Hindu undivided
family in a family settlement dated November 15, 1985, which was recognized by the
High Court through an award dated January 21, 1987. The Department contended that
the assessee became the owner of the property in the year 1987 only by incurring a
cost and hence the property was to be deemed to be held from 1987 and the benefit
of indexation was to be granted from that date only. The Commissioner (Appeals) held
that the family settlement could not be termed a transfer and directed the Assessing
Officer to allow the cost of acquisition of the property as a market value as on April
1, 1981, and indexation on that cost. The Tribunal held that the land was originally
acquired in the family partnership in the year 1963. The assessee along with his two
sons were 50 per cent partners in the firm. In terms of section 47 of the Income tax
Act, 1961, any distribution of capital assets on the total partition of a Hindu undivided
304
S. 45 Capital gains
family would not be regarded as transfer within the meaning of section 45. Hence, it
could not be said that the assessee acquired the property in 1987. In terms of law, the
rights of the assessee in the property had been only reinstated or redetermined and
no fresh rights had taken birth. It was just refixation of the rights which the assessee
was already having, in one way or the other. The assessee was holding the property as
beneficial owner of the property since 1963. Hence, the cost incurred by the previous
owner shall be adopted while computing the capital gains in the hands of the assessee,
and also, the period of holding of the assets in the hands of the assessee was also to be
reckoned from 1963, and accordingly for the purpose of taking the cost of acquisition,
the value as on April 1, 1981, was to be adopted in the hands of the assessee for the
purpose of computing the taxable amount of capital gains. The benefit of indexation was
accordingly to be provided with effect from April 1, 1981. (AY. 2007-08)
ITO v. P.M. Rungta (HUF) (2016) 46 ITR 579 (Mum.)(Trib.)
S. 45 : Capital gains – Business income – Investment in share – Substantial and 998
frequent transactions – Considering the circular of Board No. 6 /2016 dated 29-2-2016
– Profit is assessable as capital gains. [S. 28(i)]
Tribunal held that since the assessee has treated the securities as investment and not as
stock-in-trade in all the years, therefore, in view of the CBDT Circular No. 6/2016 dated
29.02.2016, the revenue is not permitted to take a contrary view in the present year
and claim that the security is stock-in-trade and, therefore, the profit/gain caused to the
assessee be treated as business income. In our view, there is no merit in the contention
of the revenue and is deserves to be dismissed in view of the circular. (ITA No. 605/
JP/2013, dt. 18.03.2016) (AY. 2008-09)
DCIT v. Mahendra Kumar Bader (Jaipur)(Trib.); www.itatonline.org
S. 45 : Capital gains – Business income – Investment in shares – Frequency of 999
transaction being very low assessable as capital gains. [S. 28(i)]
Where shares were purchased by assessee as an investor and frequency of share
transactions was very low, profit arising from sale of such shares was liable to tax under
head 'capital gains' and not 'business income'. (AY. 2005-06).
Anjana Devi Agarwal v. ACIT (2016) 157 ITD 702 (Kol.)(Trib.)
S. 45 : Capital gains – Long term capital gains from equities – Shares held as 1000
investment was settled by the settlor as corpus of Trust – Shares were sold within
a week of settlement – Assessable as capital gains and not as business income. [S.
10(38), 28(i)]
Assessee-trust was created in 2010 to ensure effective succession planning mechanism
and intergenerational transfer of trust corpus and income Six lakh shares of Tech
Mahindra were contributed by settlor towards corpus of assessee-trust. Out of total
number of shares, 96% were allotted to settlor under ESOP in 2007 by his company.
Remaining 4% shares were bought by settlor in 2008. In books, these shares were
treated as an investment and not as stock-in-trade. Sales of these shares were affected
within a week of settlement for securing investment because of down trend of price of
share. AO assessed the capital gains as business income. CIT(A) accepted the income
305
Capital gains S. 45
as capital gains. On appeal by revenue dismissing the appeal the Tribunal held that;
activity was neither a business activity, nor was it an adventure in nature of trade hence
profit on sale of shares was assessable as capital gain and exempt under section 10(38).
(AY. 2010-11)
ACIT v. Vernan Private Trust (2016) 157 ITD 211 / 137 DTR 223 / 178 TTJ 550 (Mum.)
(Trib.)
1001 S. 45 : Capital gains – Business income – Transaction of sale and purchase of shares
– Assessable as capital gains. [S. 28(i)]
Assessee declared certain amount of short-term and long-term capital gains from
transaction of sale and purchase of shares. AO treated same as business income of
assessee holding that assessee was engaged in systematic trading activity. CIT(A)
accepted the income as capital gains. On appeal by revenue dismissing the appeal, the
Tribunal held that liquidating of investment with a view to minimize losses when share
market is showing volatility could not be considered as business Act of maintaining
regular books along with demat account and contract notes and, thus, organising
proper records could not be considered as systematic and regular trading activity since
maintaining books and organising records is necessary for evaluating investment activity
in shares. Portfolio held by assessee, when considered in light of lack of frequency of
transactions, consistent valuation of shares at cost value, separation of speculation/F&O
business from investment activity, investment being made from own funds, showed that
assessee was engaged as investor in shares and not as trader and, therefore, income
returned by assessee as short-term and long-term capital gain had to be assessed under
respective heads as claimed by assessee and not as business income. (AY. 2010-11)
ACIT v. Nemichand P. Jain HUF (2016) 157 ITD 257 (Mum.)(Trib.)
1002 S. 45 : Capital gains – Cost of acquisition – Partition of HUF Family arrangement –
Cost incurred by previous owner shall be adopted and period of holding of the assets
should be reckoned from 1963 – Benefit of Indexation to be granted from 1981. [S.
2(42A), 47, 49, 55(2)(b)]
Held that the family arrangements which was settled through award in 1987 should
not be regarded as transfer u/s. 47 as section provides that any distribution of capital
assets on the total partition of HUF shall not be regarded as transfer. It cannot be said
that assessee acquired property in 1987 because as per law the rights of assessee have
only been reinstated or redetermined. No fresh rights have taken birth. Assessee was a
beneficial owner of the property since 1963 as term ‘held’ in section 2(42A) does not
imply that it should be actually be held as owner. Even otherwise, assessee would fall
in situations as provided in sec. 49(1). Hence, in any case cost incurred by the previous
owner shall be adopted while computing capital gains in the hands of assessee and
period of holding of assets in the hands of the assessee should also be reckoned from
1963. Therefore, value for the purpose of taking cost and benefit of indexation should
be adopted as on 1st April 1981. (AY. 2007-08)
ITO v. P.M. Rungta (HUF) (2016) 176 TTJ 648 / 133 DTR 146 (Mum.)(Trib.)
306
S. 45 Capital gains
S. 45 : Capital gains – Long term or Short term – Gains arising on the assignment of 1003
leasehold interest in the land being a capital asset was rightly offered for tax as long
term capital gains – Consideration attributable to the transfer of the building was
rightly offered as short term capital gains – Treatment in books of account doesn’t
have bearing on taxability – Amount paid to trust directly in view of agreement was
to be taxed in the hands of trust only there being no diversion of overriding title. [S. 4]
The assessee acquired a plot of land on lease for the period of 98 years. The assessee
constructed a factory building on the land taken on lease which it was using for its
business. It granted lease of first floor of the said constructed building to a trust. During
the year under consideration the assessee entered into an agreement pursuant to which
it transferred to S Ltd., the factory building and assignment of benefits of his leasehold
interest for the unexpired period for ` 4.95 crores out of which 1.5 cr was towards
sale consideration for the land which was offered as long term capital gains. The Trust
was paid ` 1.5 cr as per terms of agreement on vacation of premises. Balance 1.95 cr
was reduced from block of assets in respect for building. The AO held that land was
an integral part of the asset on which the factory building existed and accordingly he
held that entire consideration was on account of sale of a depreciable asset i.e., factory
building. Further he contended that assessee has not shown the land in its fixed asset
schedule. On appeal to Tribunal, it held that assessee transferred two rights i) lease right
which is a capital asset and 2) factory building. Treatment of assets in purchaser’s account
does not have any material bearing on taxability of the receipt in the hands of assessee.
Since assessee had not paid any sum by way of premium for acquisition of land, there
was no question of reflecting land as an asset in the balance sheet. As evident from
the agreement and Form 37-I submitted before appropriate property, the assessee had
transferred independent interests in two different assets and therefore the capital gains
arising on the assignment of leasehold interest in the land being a capital asset was rightly
offered for tax as long term capital gains and the consideration attributable to the transfer
of the building was rightly offered as short term capital gains. Further the amount paid
to trust by S Ltd. cannot be held as income in the hands of the assessee as the same was
paid in view of agreement and therefore was based on a legal obligation on vacant of
premises by trust. Since the payment was received by trust directly, there is no diversion
of overriding title and the amount was taxable in the hands of trust only. (AY 2003-04)
DCIT v. J. B. Engg. Works (2016) 176 TTJ 699 / 133 DTR 63 (Mum.)(Trib.)
S. 45 : Capital gains – Slump sale – Sale of entire shareholding to subsidiary company 1004
to third party – It was mere transfer of shares cannot be assessed as slump sale. [S.
2(19AA, 2(42C) 48, 50B]
The assessee sold its entire share holdings in its subsidiary company to a third party. On the
said sale the assessee worked the capital gains under section 48 of the Act. The AO treated the
sale consideration as slump sale of undertaking and computed the capital gains under section
50B. CIT(A) upheld the order of AO. On appeal the Tribunal held that where the assessee
sold its entire share holdings to third party, since it was a case of mere transfer of shares and
moreover sale consideration was received by assessee itself and not by subsidiary it could
not be treated as slump sale within the meaning of section 2(42C) of the Act. (AY. 2007-08)
UTV Software Communications Ltd. v. ACIT (2016) 157 ITD 71 / 176 TTJ 315 / 131 DTR
352 (Mum.)(Trib.)
307
Capital gains S. 45
1005 S. 45 : Capital gains – Slump sale of undertaking – Capital gain is not chargeable if
valuation placed on various assets was not ascertainable. [S. 50B]
The Tribunal held that capital gain on sale of business undertaking for a lump sum
consideration is not chargeable to tax if valuation placed on various assets is not
ascertainable. The Tribunal held that capital gain is not chargeable. (AY. 1996-97 to
1998-99)
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.)
1006 S. 45 : Capital gains – Slump sale – where assessee did not sell all assets of tea estate
owned by it and, moreover, consideration stipulated for transfer of estate had been
split over different assets, both movable and immovable, it could not be regarded as
a case of slump sale. [S. 42C, 50B]
Assessee-company carried on business of growing and manufacture of tea. It owned two
tea gardens. During relevant year, assessee sold one tea estate for a total value of ` 18
crores. Assessing Officer held that the assessee company sold its entire tea estate as a
going concern basis hence liable to assessed as slump sale. CIT(A) held that the sale of
tea estate was not a slump sale within the meaning of section 2(42C) read with section
50B of the Act. On appeal the tribunal held that the assessee had not sold all assets
belonging to tea estate. Moreover, total consideration stipulated for transfer of estate had
been split over different assets, both movable and immovable, hence on facts, it was not
a case of slump sale merely for reason that tea estate was transferred to buyer as a going
concern,therefore, impugned addition was to be deleted. (AY. 2000-01)
Dy.CIT v. Tongani Tea Co. Ltd. (2016) 156 ITD 188 (Kol.)(Trib.)
1007 S. 45 : Capital gains – Short term – Transfer – (Sweat equity Stock option) – Exercised
the option after three years and same day shares were sold – Gains will be short
term or alternative income from other sources – Not entitled exemption under section
10(38). [S. 2(47), 10 (38)]
Allowing the appeal of revenue, the Tribunal held that where sweat equity shares were
offered to assessee by employer was accepted immediately and assessee exercised option
after three years and on same date shares were also sold, gains would be short-term
capital gain or, in alternative, income from other sources, not liable for exemption under
section 10(38) or section 54EC. (AY. 2002-03, 2004-05)
ACIT v. Pramod H. Lele (2016) 156 ITD 571 (Mum.)(Trib.)
1008 S. 45 : Capital gains – Premium received on grant of tenancy right was held to be
assessable as capital gains and not as income from house property. [S. 2(14), 2(47),
54EC, 147, Transfer of Property Act, S. 105]
The assessee trust received the premium from the tenants for grant of tenancy rights.
Assessee has shown the said receipt as long term capital gain and invested the said
amount and claimed exemption under section 54F of the Act. Assessing Officer assessed
the premium as income from house property and denied the exemption under section
54EC of the Act. on appeal the Commissioner (Appeals) allowed the claim of assessee.
On appeal by revenue, dismissing the appeal the Tribunal held that the premium
received by the assessee from the tenants is a capital asset and not advance rent exigible
308
S. 45 Capital gains
to tax under the head income from house property. Tribunal has also allowed the Cross
objection of assessee on the reassessment. (ITA No. 844/Mum/2014 & C.O. 76/Mum/2015
dt. 29.02.2016) (AY. 2005-06)
ITO v. Dr. Vasant J. Rath Trust (Mum.)(Trib.); www.itatonline.org
S. 45 : Capital gains – Not liable to tax in India – No liability to withhold tax – No 1009
need to file return of income – Section 115JB not applicable to foreign companies –
DTAA-India-Mauritius. [S. 115JB, 195, Art. 13(4)]
Assessee, an investment company incorporated in Mauritius and holding tax residency
certificate. Shares subscribed by it in its own name in Indian asset company and
Indian trustee company and bank statements showing it had paid for such shares.
Share purchase agreement for sale of shares held in Indian asset company and Indian
trustee company to non-resident company. Bank party to agreement only in its capacity
as sponsor and in order to comply with mutual funds regulation. AAR held that the
assessee was not liable to tax in India. No liability to withhold tax. No need to file
return of income. Section 115JB is not applicable to foreign companies.
Shinsei Investment I Ltd. In re (2016) 389 ITR 11 / 242 Taxman 293 / 290 CTR 490 (AAR)
S. 45: Capital gains – Non-resident – Transfer of shares in Indian company by 1010
company in Mauritius to U.S company, was held to be not taxable in India as control
and management was not wholly in India – Position prior to 1-4-2017 – DTAA-India-
Mauritius. [S. 112(1), Art. 13(4)]
AAR has held that transfer of shares in Indian company by company in Mauritius to
U. S. company, was held to be not taxable in India as control and management was not
wholly in India. Effective control and management of affairs of applicant not wholly in
India. Position prior to 1-4-2017.
Mahindra-BT Investment Company (Mauritius) Ltd., In re (2016) 389 ITR 19 / 289 CTR
614 / 73 taxmann.com 74 (AAR)
S. 45 : Capital gains – To be calculated on real gains and not on basis of notional 1011
values – No tax chargeable where no consideration accrues – Transfer of share or
interest which derives, directly or indirectly, its value substantially from assets located
in India – "Substantial" – Means at least 50 per cent – Transfer pricing – Provisions
not attracted where there is no charge – DTAA-India-Italy. [S. 2(47), 9(1)(1), 47(vi),
55(2), 92 to 92F, 195, Art. 14, 25]
Amalgamation of Italian company having branch in India with Italian group company
holding 15 per cent shareholding in it. Shareholders of transferor company (excluding
transferee) allotted additional shares in transferee company. No consideration received
by transferor company before amalgamation. Notional market value of Indian branch
could not be treated as consideration. Transferor company not liable to tax in India.
Exemption under section 47(vi) available to transferor company. No consideration
accrued to transferee company and no capital gains chargeable to tax in its hands
in India. Shareholders of transferor company parting with their shares in it and not
movable property of Indian branch, hence not chargeable to tax in India. Transfer of
share or interest which derives, directly or indirectly, its value substantially from assets
309
Capital gains S. 45(3)
located in India – "Substantial". Means at least 50 per cent. Transfer pricing provisions
is not attracted where there is no charge.
Banca Sella S.P.A. In re (2016) 387 ITR 358 / 242 Taxman 475 / 288 CTR 661 (AAR)
1012 S. 45(3) : Capital gains – Transfer of capital asset to firm – Stock-in-trade – Land was
brought in a firm by partners as current assets and firm had also accounted for it as
a current asset, section 45(3) would not be applicable. [S. 10(2A), 45 147]
Dismissing the appeal of the revenue, the Tribunal held that, S. 45(3) is applicable only
in respect of a capital asset and thus, where the land was brought in a firm as current
asset and the said firm has shown the land as current asset provision of section 45(3)
cannot be invoked. Accordingly on revaluation of asset the assessee did not make any
short term capital gain addition on account of such revaluation was not sustainable.
Tribunal also held that the reassessment was not valid by law. (AY. 2008-09)
ITO v. Orchid Griha Nirman (P.) Ltd. (2016) 161 ITD 818 / 182 TTJ 415 (Kol.)(Trib.)
1013 S. 45(4) : Capital gains – Distribution of capital asset – Dissolution of firm – Partners
of assessee firm constituted a private limited company – Company made partner in
the firm – partners gave their interest in the firm to the company in consideration
of shares of the company – AO invoked section 45(4) – Held, whatever rights natural
partners had in capital assets of firm by way of being its partners, continued to exist
in form of equity shares they held in company – Held, not a case of transfer of assets
on dissolution. [S. 2(47), 45]
The partners of assessee-firm, constituted a private limited company. The company
was admitted as partner in the assessee-firm. Later on, the natural partners executed
a release deed giving up all their rights in assessee-firm, in favour of the company. As
a consequence, the company became absolute owner of the assessee-firm. The natural
partners were allotted shares in the company for relinquishing their rights in the
assessee-firm. AO invoked section 45(4) in the hands of the firm and held that there
was a transfer of assets by way of distribution of capital assets on dissolution of the
assessee-firm. High Court held that every distribution of capital assets may not lead
to the attraction of section 45(4) unless it happens on the dissolution of a firm and
also every distribution of capital assets on the dissolution of a firm may not attract
section 45(4) unless it was a case of transfer of a capital asset. High Court, further, held
that whatever rights partners had in the capital assets of the firm by way of being its
partners, continued to exist in the form of equity shares that they held in the private
limited company and it was a mere change in form of ownership. Accordingly, it was
held that section 45(4) was not attracted. (AY. 1991-92)
Pipelines India v. ACIT (2016) 238 Taxman 9 / 288 CTR 603 (Mad.)(HC)
1014 S. 45(4) : Capital gains – Distribution of capital asset – Conversion of firm to a
company – When a partnership firm is transformed into a limited company with no
change in the number of partners and extent of property, there is no transfer of assets
involved and hence, there is no liability to pay tax on capital gains. [S. 2(47), 45]
The assessee, erstwhile registered firm, was engaged in the business of training and
trading of software. It consisted of only two partners, who were holding equal stakes in
the firm. Subsequently, the assessee firm revalued its assets and the partnership business
310
S. 45(4) Capital gains
was converted into the business of Private Limited Company as a going concern and
all the assets of the firm got vested as assets of the Private Limited Company, in which,
the same partners were interested.
The Assessing Officer opined that the transfer of business assets of the assessee firm to
the Private Limited Company would constitute distribution of assets and would attract
capital gains as contemplated under section 45(4) and that the assessee was liable to
pay tax on 'capital gains'.
The Commissioner (Appeals) allowed the appeal holding that when a partnership firm
was transformed into a private limited company, there was no transfer of capital assets
as contemplated under section 45(4).
The Tribunal again held that the transfer of assets of a partnership firm, without
dissolution, to a private limited company fell within the expression 'otherwise' as
contemplated under section 45(4) and, therefore, the assessee was liable to pay tax.
The High Court held that before a levy on the capital gain can be imposed, it is a must
to ensure that, such a gain has arisen from the disposal of the asset, by any one of the
mode, referred to in the definition of the term 'transfer' in section 2(47). It was well
settled that when a partnership firm is transformed into a private limited company, there
is no distribution of assets and as such, there was no transfer and therefore, the assessee
was not liable to pay any tax on capital gains. There was no case law supporting the
proposition that even in cases of subsisting partners of a partnership firm transferring
assets to a private limited company, there would be a transfer, covered under the
expression 'otherwise'. So far as this case is concerned, there is no transfer of asset as
(a) no consideration was received or accrued on transfer of assets from the firm to the
company; (b) the firm has only revalued its assets which will not amount to transfer;
(c) the provision of section 45(4) of the Act is applicable only when the firm is
dissolved. In the instant case, there is no distribution of asset, but only taking over of
the assets from the firm to the Company. Therefore, it is clear that the vesting of the
property in the private limited company is not consequent or incidental to a transfer.
There is no transfer of a capital assets as contemplated by section 45(1). (AY. 1992-93)
CADD Centre v. ACIT (2016) 383 ITR 258 / 237 Taxman 401 (Mad.)(HC)
S. 45(4) : Capital gains – Firm – Retirement – No property or asset of the firm was 1015
transferred to retiring partner additions cannot be made. [S. 45]
Assessee was a partnership firm constituted by two partners, engaged in business of
construction of housing and commercial projects. In terms of partnership deed, one
partner contributed land and other partner had contributed funds. Subsequently, two
new partners were admitted and all four partners continued. After word one of the
partner retired from firm who contributed land in firms. In terms of agreement, retiring
partner accepted amount of credit standing in its name and cash in lieu of agreed
constructed area from stock-in-trade of firm. Department invoked provisions of s. 45(4)
and computed capital gains chargeable to tax in hands of firm. ITAT held that in order
to attract S. 45(4), there has to be a transfer of a capital asset from firm to retiring
partners, by which firm ceases to have any right in property which is so transferred.
Since, no property or asset of firm had been handed over or given to retiring partner,
S. 45(4) had no implication. (AY. 2006-07)
Keshav & Company v. ITO (2016) 161 ITD 798 (Mum.)(Trib.)
311
Capital gains S. 45(4)
1016 S. 45(4) : Capital Gains – Distribution of capital asset – Retirement – Amount received
is not chargeable to tax. [S. 45]
Amount received by assessee on retirement as partner from firm, on account of credit
balance standing in capital account and current account, and not for relinquishing or
extinguishing his rights over any assets of firm, would not be chargeable under section
45(4) as capital gains. (AY. 2009-10)
Sharadha Terry Products Ltd. v. ACIT (2016) 180 TTJ 284 (Chennai)(Trib.)
1017 S. 45(5) : Capital gains – Compensation and enhanced compensation awarded on
compulsory acquisition of land – Question relating to ownership of rights in land
which had been transferred pending in High Court – Compensation, enhanced
compensation and interest thereon – Not assessable in hands of assessee – transferor.
[S. 45, Land Acquisition Act, 1894, S. 4, 18, 31]
As a result the appeals arising, both from the proceedings under section 31 of the
Land Acquisition Act and the proceedings for enhancement of the compensation under
section 18 of the Land Acquisition Act, were pending before the Court. Compensation
and enhanced compensation awarded on compulsory acquisition of land, question
relating to ownership of rights in land which had been transferred pending in High
Court. Therefore the compensation, enhanced compensation and interest thereon is not
assessable in hands of assessee-transferor. Income cannot be said to accrue or arise to
an assessee unless and until there is created in favour of the assessee a debt due by
somebody. Unless that happens it could not be said that the assessee had acquired a
right to receive the income or the income has accrued to him. (AY. 1985-86, 1988-89
to 1992-93)
CIT v. Suman Dhamija (2016) 382 ITR 343 (Delhi)(HC)
S. 47 : Transactions not regarded as transfer.
1018 S. 47 : Capital gains – Transaction not regarded as transfer – Transfer of development
rights – Assessee was not wholly owned subsidiary of holding company hence not
entitle to exemption. [S. 47(v)]
Transfer of development was claimed as exemption u/s. 47(v). AO has held that the
assessee has not proved that the transfer was to wholly owned subsidiary. CIT(A) has
allowed the claim of the assessee. On appeal by the revenue, allowing the appeal of the
revenue, the Tribunal held that; the assessee was unable to prove that it was a wholly-
owned subsidiary of holding company it would not be entitled to benefit of section
47(v), because to claim benefit under section 47(v), assessee must be a wholly owned
subsidiary of holding company hence transfer of development rights was held to be
taxable. (BP. 1-4-1990, 21-11-2000)
DCIT v. Sunaero Ltd. (2016) 161 ITD 472 (Delhi)(Trib.)
312
S. 48 Capital gains
S.48. Mode of computation.
S. 48 : Capital gains – Slump sale – Deduction – Payment to ESOP Fund was to be 1019
allowed while computing capital gain arising from slump sale of trading business. [S.
2(19A), 2(42C)], 45, 50B]
Assessee-company, engaged in trading of chemicals, sold a part of its unit as a going
concern. Assessee had created an ESOP Trust Fund for its employees. In terms of
business transfer agreement, assessee had to buy back shares from its employees. In
assessment proceedings, assessee's claim for deduction of said payment while computing
amount of capital gain was rejected. Tribunal allowed the claim of assessee. On appeal
by revenue, dismissing the appeal the Court held that; since transferee had disclaimed
any responsibility to honour ESOP conditions, funding of ESOP Fund became integral
part of transfer itself, therefore, assessee's claim for deduction of payment to ESOP
Fund was to be allowed while computing capital gain arising from slump sale of trading
business. (AY. 2005-06 to 2009-10)
PCIT v. Nitrex Chemicals India Ltd. (2016) 243 Taxman 371 (Delhi)(HC)
S. 48 : Capital gains – Full value of consideration – Part of consideration was paid by 1020
said other company directly to shareholders of assessee with its consent would not
absolve assessee from recognising entire consideration for computing capital gains.
[S. 45]
Allowing the appeal of revenue the Court held that where in terms of scheme of
arrangement assessee transferred one of its divisions to other company, it was only
assessee which was entitled to receive entire consideration for transfer of its assets
and mere fact that part of consideration was paid by said other company directly to
shareholders of assessee with its consent would not absolve assessee from recognising
entire consideration for computing capital gains. (AY. 1997-98)
CIT v. Salora International Ltd. (2016) 386 ITR 580 / 240 Taxman 7 (Delhi)(HC)
Editorial : SLP is granted to the assessee Salora International Ltd CIT v. (2016) 242
Taxman 474 (SC)
S. 48 : Capital gains – Full value of consideration – Market value cannot be 1021
substituted. [S. 45, 45(2), 45(4), 50C]
AO substituted the consideration received on sale of shares by break up method and
converted loss in to gain. On appeal CIT(A) held that in the absence of any provision in
the Act to replace the consideration received on sale of shares by adopting the market
value is not permissible. Tribunal up held the order of CIT(A). On appeal by revenue
dismissing the appeal the Court held that when ever the Parliament thought it fit that
the consideration on a transfer of a capital asset has to be ascertained on the basis of
market value of the asset transferred, specific provision has been made in the Act. To
illustrate section 50C provides for stamp value duty in case of transfer of land and
buildings. Similarly, section 45(2) and section 45(4) provide that in cases of conversion
of investment in to stock in trade or transfer of shares on dissolution of a firm to its
partners respectively has to be market value. Accordingly the consideration disclosed
on sale of shares by the assessee was in fact the only consideration received/accrued
313
Capital gains S. 48
to it, no occasion to substitute the same can arise. (ITA No. 2337 of 2013 dt 8-3-2016)
(AY. 2008-09)
CIT v. B. Arunkumar & Co (Bom.)(HC) (Unreported) (2016) BCAJ-March-P. 46
1022 S. 48 : Capital gains – Computation – Sale of property acquired under gift or Will,
if title of previous owner was itself defective or subject to some encumbrance, cost
incurred on its removal or discharge would qualify for deduction. [S. 45]
Tribunal held that in case of sale of property acquired under gift or Will, if title of
previous owner was itself defective or subject to some encumbrance, cost incurred on its
removal or discharge would qualify for deduction. However, cost incurred by legatee/s, if
any, towards discharge of a mortgage created either by him or even by previous owner
would not qualify to be considered or included as a part of cost of acquisition. (AY.
2012-13)
Kumar Rajaram v. ITO (2016) 157 ITD 772 / 178 TTJ 168 (Chennai)(Trib.)
1023 S. 48 : Capital gains – Computation – Sale of inherited property – Cost inflation index
has to be applied with reference to year in which said capital asset was first acquired
by previous owner. [S. 2(42A), 45, 47(iii), 49(1)(ii)/(iii), 55(2)(b)(ii)]
Dismissing the appeal of the revenue, the Tribunal held that where assessee sells an
inherited property, for computing amount of capital gain, cost inflation index has to be
applied with reference to year in which said capital asset was first acquired by previous
owner. (AY. 2007-08)
ITO v. Sudip Roy. (2016) 161 ITD 709 (Kol.)(Trib.)
1024 S. 48 : Capital gains – Cost of improvement of asset – Payments made to brothers who
were living with him for vacating the house was held to be allowable as deduction
from capital gains. [S. 45]
Allowing the appeal of the assessee, the Tribunal held that Payment made by assessee to
brothers who were living with him, for vacating house to be sold would be considered
as an expenditure incurred for improvement of asset or title and would be deducted
from long term capital gain on sale of said house. (AY. 2008-09)
Nanubhai Keshavlal Chokshi HUF v. ITO (2016) 161 ITD 211 (Ahd.)(Trib.)
1025 S. 48 : Capital gains – Cost of acquisition – Matter remanded. [S. 45]
Allowing the appeal of the assessee Tribunal held that evidence in form of completion
certificate, depositing compounding fee for change in structure etc. was enough to show
that some construction work must have been carried out on said plot. Accordingly,
matter was remanded back for recomputation of capital gain. (AY 2007-08, 2009-10)
Nand Lal Popli v. Dy. CIT (2016) 160 ITD 413 (Chd.)(Trib.)
1026 S. 48 : Capital gains – Cost of improvement – Maintenance expenses of for remaining
life of tree cannot form cost of improvement – Loss likely to incur for future earning
from trees can not be allowed as deduction. [S. 45]
Dismissing the appeal of the assessee the Tribunal held that maintenance expenses
for remaining life of trees cannot form cost of improvement since once a tree becomes
314
S. 48 Capital gains
able to bear fruit, whatever expenses are incurred same will be revenue and recurring
expenses. Further, no deduction could be allowed to assessee for loss of likely/future
earning from trees. (AY. 2007-08)
Jai Chand v. ITO (2016) 157 ITD 684 (Chd.)(Trib.)
S. 48 : Capital gains – Portfolio management service fee paid by assessee to various 1027
portfolio managers could not be allowed as deduction while computing capital gain.
[S. 45]
Portfolio management service fee paid by assessee to various portfolio managers could
not be allowed as deduction while computing capital gain arising from sale of shares
kept in portfolio management service accounts held with various funds. (AY. 2008-09)
Capt. Avinash Chander Batra v. Dy. CIT (2016) 158 ITD 604 (Mum.)(Trib.)
S. 48 : Capital gains – Computation – Interest on borrowed money utilized for 1028
acquiring shares can be capitalized as cost of acquisition. [S. 45]
Dismissing the appeal of revenue the Tribunal held that the interest paid by the assessee
on loans taken for acquiring the shares the past can be allowed as a deduction u/s 48
as cost of acquisition while computing capital gain on sale of such shares. Followed
Trishul Investments Ltd. (2008) 305 ITR 434 (Mad.)(HC). ITA No. 236/Mum/2010, dt.
08.05.2015) (AY. 2005-06)
DCIT v. Fritz D. Silva (Mum.)(Trib.); www.itatonline.org
S. 48 : Capital gains – Cost of Improvement – Legal expenses were incurred to protect 1029
the investments of assessee and should be added to the cost of shares as cost of
improvement. [S. 45]
The assessee was engaged in the business of manufacturing and processing of Ayurvedic
medicines. The assessee engaged lawyers as financial advisors to evaluate the maximum
value to get and to prevent other companies to buy the shares at low price. The assessee
claimed the expenditure incurred towards legal services as legal expenses. The AO
invoked section 14A of the Income-tax Act, 1961, and disallowed the expenses on the
ground that the expenses were incurred to safeguard the investment and that investment
would yield exempt income in form of dividend. The CIT(A) confirmed the order of
the AO.
On appeal, the Tribunal held that there was an improvement in the value of the shares
held by the assessee. Hence, the expenses could be added to the cost of shares as cost
of improvement. The AO was to recompute the amount of capital gains earned by the
assessee. (AY. 2009-10)
Vaipa Pharmaceuticals Pvt. Ltd. v. ACIT (2016) 46 ITR 109 (Mum.)(Trib.)
S. 48 : Capital gains – Computation – Cost of improvement – Fails to establish his 1030
claim of renovation – Deduction was not allowed. [S. 45]
Dismissing the appeal of the assessee, Tribunal held that Assessee's claim towards
cost of improvement while computing capital gain on sale of a flat was rejected where
assessee failed to establish his claim of renovation being carried out in said flat with
any cogent or reliable evidence. (AY. 2009-10)
Yashovardhan Sinha v. ITO (2016) 156 ITD 540 (Patna)(Trib.)
315
Capital gains S. 49
S. 49. Cost with reference to certain modes of acquisition.
1031 S. 49 : Capital gains – Previous owner – Cost of acquisition – Succession of firm by
company – Firm purchased land and subsequently revalued it, after taking over of
said firm by assessee, cost of acquisition would still be original purchase price; and
not revalued amount. [S. 45, 47]
Firm purchased a piece of land in AY 2006-07 for ` 2.5 lakh. In AY 2007-08, the cost
was revalued and valuer enhanced book value to ` 3.70 crore. The firm was taken over
by Assessee along with its assets and liabilities. The assessee company sold the assets
for a consideration of ` 2 crore and showed the STCL of ` 1.81 crore. AO took cost of
acquisition in hands of Assessee at ` 2.5 lakh instead of enhanced value of ` 3.7 crore
and accordingly computed gains. The CIT(A) conformed the order of the AO. ITAT
held that the firm is succeeded by the company, therefore, the cost of acquisition of the
company would be as that of acquisition of the firm. The valuation of land and assets of
firm though valued by the valuer will not change or alter the cost of acquisition of the
firm despite valuation of assets of the firm and would remain the same, and therefore
the cost of acquisition of the company would be cost of acquisition of the firm. The firm
is being succeeded by the company and the company is not buying or purchasing the
assets of the firm. The element of sale and purchase of the assets of the firm were not
involved in the case of succession of the firm to the company. The assessee would only
be entitled to the indexation on the cost of acquisition of the firm and not on revalued
assets. (AY. 2009-10)
Utsav Cold Storage (P.) Ltd. v. ITO (2016) 159 ITD 639 / 181 TTJ 704 (Jaipur)(Trib.)
1032 S. 49 : Capital gains – Previous owner – Cost of acquisition – There is no difference
between gift and settlement and, therefore, settlement of asset in favour of assessee has
to be considered as gift in terms of S. 49(1)(ii) for computing the period of holding by
previous owner. [S. 2(42A), 49(1)(ii), 54F]
The assessee was gifted a trademark by a deed of settlement. During the year the
assessee has sold the trademark and claimed deduction under section 54F by relying
on provisions of section 49(1)(ii), since the period of holding by previous owner is to
be considered. The Assessing Officer held that the sale of trademark was short term
capital gains hence not eligible for exemption u/s. 54F. On appeal the CIT (A) held that
the settlement deed could not be considered as gift deed. On appeal by the assessee,
allowing the appeal the Tribunal held that for purpose of section 49(1)(ii), there is no
difference between gift and settlement and, therefore, settlement of asset in favour
of assessee has to be considered as gift in terms of section 49(1)(ii) and, accordingly,
Explanation 1(i)(b) to section 2(42A) has to be applied so as to compute period of
holding of asset after taking into consideration holding period of said capital asset by
previous owner i.e. settlor. Accordingly the exemption u/s. 54F was allowed. (AY 2012-
13)
T.T. Siddarth v. DCIT (2016) 159 ITD 519 (Chennai)(Trib.)
316
S. 50 Capital gains
S.50. Special provision for computation of capital gains in case of depreciable assets.
S. 50 : Capital gains – Depreciable assets – Block of assets – Restricted to mode of 1033
computation of gains, does not affect entitlement to exemption where asset held for
more than thirty six months. [S. 2(29B), 45, 48, 49, 54E]
The assessee disclosed capital gains from sale of its loading platform in the year 1989
and claimed exemption under section 54E of the Income-tax Act, 1961 thereon. The
asset had been purchased in the year 1972. The Assessing Officer rejected the claim to
exemption under section 54E of the Act on the ground that the assessee had claimed
depreciation on this asset and, therefore, the provisions of section 50 were applicable.
This was upheld by the Commissioner (Appeals), but the Appellate Tribunal allowed
the assessee's appeal holding the assessee entitled to exemption under section 54E of the
Act. The High Court, following its decision in CIT v. ACE Builders Pvt. Ltd. (2006) 281
ITR 210, affirmed the view of the Tribunal that the assessee was entitled to deduction
under section 54E in respect of capital gains on which depreciation had been allowed
and dismissed the Department's appeal. On further appeal dismissing the appeal the
court held that the view of the High Court was correct. Decision of the Panaji Bench of
the Bombay High Court (printed below) affirmed. (AY. 1989-90)
CIT v. V.S. Dempo Company Ltd. (2016) 387 ITR 354 / 242 Taxman 434 / 290 CTR
401 / 144 DTR 1 (SC)
Editorial : Decision in, CIT v. V.S. Dempo Company Ltd., ITA No. 61 of 2016 dt.
11-12-2016 (Bom.)(HC) is affirmed.
S. 50 : Capital gains – Depreciable assets – Block of assets – When property is 1034
acquired the same is sufficient for the concept of block of asset and not for the
purpose of claim of depreciation. [S. 2(11), 32, Transfer of Property Act, S. 53A]
Allowing the appeal of the assessee, the Tribunal held that where assessee had parted with
full sale consideration and reduced terms of agreement into writing by way allotment letter
and by gaining ability to have every other person excluded from dealing with property, it
had demonstrated that assessee had acquired property for purposes of S. 50(1)(iii). Use is
relevant for the purpose of claiming depreciation and not for section 50(1)(iii). (AY. 2012-13)
Indogem v. ITO (2016) 160 ITD 405 (Mum.)(Trib.)
S. 50 : Capital gains – Depreciable assets – Cost of shares allotted to members of BSE 1035
pursuant to corporatization of BSE would be calculated as per section 50 and not as
per section 55(2)(ab) if depreciation was claimed on BSE membership – Indexation
benefit on sale of such share would be available from date of corporatization of BSE
and not from date of acquisition of original membership of BSE. [S. 55(2)(ab)]
Dismissing the appeal of assessee, the Tribunal held that cost of shares allotted to
members of BSE pursuant to corporatization of BSE would be calculated as per section 50
and not as per section 55(2)(ab) if depreciation was claimed on BSE membership; further,
indexation benefit on sale of such share would be available from date of corporatization
of BSE and not from date of acquisition of original membership of BSE. (AY. 2008-09)
Twin Earth Securities (P.) Ltd. v. ACIT (2016) 158 ITD 764 / 177 TTJ 527 / 136 DTR 300
(Mum.)(Trib.)
317
Capital gains S. 50(B)
S. 50B. Special provision for computation of capital gains in case of slump sale.
1036 S. 50B : Capital gains – Slump sale – Assets were put to sale after their valuation
hence cannot be assessed as slump sale – Capital gains on liquidation of a firm are
chargeable to tax. [S. 2(14), 2(42C), 45]
Dismissing the appeal of assessee the court held that; where partnership firm had
dissolved and assets were put to sale after their dissolution and there was specific and
separate valuation for individual assets and even liabilities were taken care of when
amount of sale was apportioned amongst outgoing partners, said transactions could not
be treated as slump sale. Capital gains on liquidation of a firm are chargeable to tax.
The upshot of the aforesaid discussion would be to allow the appeals partly only to the
extent that business income/revenue income in the Assessment Year in question is to
be assessed at the hands of AOP-3, in terms of the orders of the High Court, as AOP-
3 retained the tax amount from the consideration which was payable to the assessees
herein and it is AOP-3 which was supposed to file the return in that behalf and pay tax
on the said revenue income. (AY. 1995-96)
Vatsala Shenoy v. JCIT (2016) 389 ITR 519 / 243 Taxman 152 / 289 CTR 457 / 142 DTR
201 (SC)
CIT v. Mangalore Ganesh Beedi works (2016) 289 CTR 457 / 142 DTR 201 (SC)
Editorial: Review petition was dismissed Vatsala Shenoy v. JCIT (2017) 391 ITR 363 (SC)
1037 S. 50B : Capital gains – Slump sale – The fact that certain assets of the "undertaking"
are left out of the sale transaction because it would cause inconvenience for the
purchaser does not mean that the transaction is not a "slump sale". To expect a
purchaser to buy and pay value for defunct or superfluous assets flies in the face of
commercial sense. [S. 2(19A), 2(42C)]
Allowing the appeal the Court held that (i) The sale transaction was reported for
a total consideration of ` 45.83 crores. The sale was for a going concern, which
included ongoing service contracts, employment contracts and other tangible assets,
and intangible assets such as technical know-how etc. To expect a purchaser to buy
and pay value for defunct or superfluous assets flies in the face of commercial sense.
Unfortunately, the Revenue’s understanding is that in a going concern the buyer is
bound to pay good money, transact and purchase bad and irrecoverable debts. Not only
does it fly in the face of common and commercial understanding, but it is not even a
pre-condition, as is evident from the definition of “undertaking”, cited in Explanation
(1) to Section 2(19)(A) of the Act.
(ii) This definition of “undertaking” is what has been engrafted into by reference, under
Section 2(42C) of the Act. Therefore, if certain assets or properties are left out because
they would cause inconvenience or lead to some kind of a trouble for the purchasing
party, it is well within its right to exclude it from the list of assets. (AY. 2006-07)
Triune Project Pvt. Ltd. v. DCIT (2017) 145 DTR 190 / 291 CTR 268 (Delhi)(HC)
318
S. 50(C) Capital gains
S. 50B : Capital gains – Slump sale – Net worth of undertaking – Aggregate value 1038
of total assets not to be taken at written down value of block of assets – Actual cost
to be reduced, inter alia, by depreciation as would have been allowable for years
commencing on or after 1-4-1988 – Depreciation actually allowed for these years not
relevant. [S. 2(11), 32, 43(6)(i)(C)]
The Tribunal had accepted the assessee's contention that in case the entire block of
assets was sold, the written down value of the block of assets as existing must be taken
at the aggregate value of the total assets. On appeal allowing the appeal of revenue the
Court held that this was not correct for the reason that there was no provision which
mandates adopting this method of computation. It could not be disputed that the plain
language of sub-clause (b) of clause (C) contemplates reduction from the actual cost of
assets of the depreciation "that would have been allowable to the assessee for any AY
commencing on or after the 1st day of April, 1988, as if the asset was the only asset
in the relevant block of assets. In view of the plain language, there was no scope to
read the provisions of sub-clause (b) of clause (C) to permit deduction of depreciation
actually allowed and not as "would have been allowable". With the introduction of the
concept of block of assets, the direct co-relation between depreciation allowed and a
separate asset constituting the block is lost. Therefore, it was not possible to co-relate
the quantum of depreciation allowed in respect of individual assets constituting a block.
(AY. 2001-02)
CIT v. Dharampal Satyapal (2016) 380 ITR 527 / 283 CTR 37 / 237 Taxman 452 / 130
DTR 145 (Delhi) (HC)
S. 50C. Special provision for full value of consideration in certain cases.
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Once reference 1039
made report of Departmental Valuation Officer binding on Assessing Officer for
assessment – Assessment done without reference to such report on basis of valuation
by stamp valuation authority is not proper. [S. 45]
Dismissing the appeal of revenue the Court held that once a reference was made by
the Assessing Officer under section 50C of the Act, to the Departmental Valuation
Officer, for valuation of the capital asset, the Assessing Officer was obliged to complete
the assessment in conformity with the estimation made in the report by the Valuation
Officer pursuant to such reference made by him. Under sub-section (2) of section 50C,
it was such lower valuation which was required to be taken into consideration for the
purposes of assessment. There was no legal infirmity in the orders of the Appellate
Authorities warranting interference. No question of law arose. (AY. 2006-07)
CIT v. Ravjibhai Nagjibhai Thesia (2016) 388 ITR 358 / 76 taxmann.com 76 / (2017) 150
DTR 166 (Guj.)(HC)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Value declared 1040
by assessee exceeded value adopted by Stamp Valuation Officer, there was no question
of referring valuation of plot to Valuation Officer. [S. 45]
During year, assessee had sold a plot of land and declared its value at ` 8 crores.
Assessing Officer made reference to Departmental Valuation Officer to determine fair
319
Capital gains S. 50(C)
market value of plot. Valuation Officer determined value of plot at ` 10 crores. Tribunal
deleted the addition. On appeal by revenue, dismissing the appeal the Court held that;
since value of plot declared by assessee exceeded value adopted by Stamp Valuation
Officer, condition precedent for invoking sub-section (1) of section 50C was not satisfied.
Therefore, there was no question of referring valuation of plot to Valuation Officer. (AY.
2007-08)
PCIT v. Shanubhai M. Patel (2016) 73 taxmnn.com 138 (Guj.)(HC)
Editorial : SLP of revenue was dismissed, PCIT v. Shanubhai M. Patel (2016) 242 Taxman
114 (SC)
1041 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Provision will
not be applicable while computing capital gains on transfer of leasehold rights in land
and buildings. [S. 2(14), 45, 260A]
Revenue has informed that they have not filed appeal before the High Court in Atul J.
Puranik v. ITO (2011) 132 ITD 499 (Mum.)(Trib). Dismissing the appeal of the revenue,
the Court held that where the Department had accepted the decision of the court or
the Appellate Tribunal on an issue and had not appealed against it, then a subsequent
decision following the earlier decision could not be challenged. That the Department
had not shown that there were any distinguishing features either in facts or in law
in the present appeal from that which arose in the earlier decision of the Appellate
Tribunal which was not appealed against. No question of law arose. (AY. 2007-08)
CIT v. Greenfield Hotels and Estates P. Ltd. (2016) 389 ITR 68 / (2017) 77 taxmann.com
308 (Bom.)(HC)
1042 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Reference to
DVO was held to be valid. [S. 45, 142A]
During relevant year, assessee sold three pieces of agricultural lands situated in different
villages. While scrutinizing such assessment, Assessing Officer desired to obtain
valuation of such properties, for which purpose he made a reference to DVO under
section 50C(2). The assessee challenged the reference made to DVO on the ground
that capital gain could not be computed on basis of report of DVO as same had been
assessed on basis of Jantri rates prevailing at time of sale. Dismissing the petition the
Court held that Jantri rates had not been revised for a long time. Moreover, in terms of
section 142A Assessing Officer had power to obtain valuation reports even in context
of issues other than that of capital gains computation. (AY. 2008-09)
Kanaiyalal Dhansukhlal Sopariwala v. DVO (2016) 243 Taxman 378 / (2017) 391 ITR 56
(Guj.)(HC)
1043 S. 50C : Capital gains – Full value of consideration – Stamp valuation Provision does
not apply to transfer of land and building, being leasehold property – When revenue
has accepted the order of Tribunal in one assessee, if the facts are identical, revenue
cannot challenge the order of Tribunal in another assessee. [S. 45, 260A]
The issue before the Tribunal was whether Section 50C of the Act would be applicable
to transfer of leasehold rights in land and buildings. The Tribunal followed its decision
in Atul G. Puranik v. ITO (ITA No. 3051/Mum/2010) decided on 13th May, 2011 (2011)
320
S. 50(C) Capital gains
132 ITD 499 (Mum.)(Trib.) which held that Section 50C is not applicable while
computing capital gains on transfer of leasehold rights in land and buildings. On appeal
by the department to the High Court HELD dismissing the appeal.
The Revenue has not preferred any appeal against the decision of the Tribunal in
the case of Atul Puranik (supra). Thus, it could be inferred that it has been accepted.
Our Court in DIT v. Credit Agricole Indosuez (2015) 377 ITR 102 (Bom.)(HC), (dealing
with Tribunal order) and the Apex Court in UOI v. Satish P. Shah (2001) 249 ITR 221
(SC) (dealing with High Court order) has laid down the salutary principle that where
the Revenue has accepted the decision of the Court/Tribunal on an issue of law and
not challenged it in appeal, then a subsequent decision following the earlier decision
cannot be challenged. Further, it is not the Revenue’s case before us that there are any
distinguishing features either in facts or in law in the present appeal from that arising
in the case of Atul Puranik (supra). In the above view, the question as framed by the
Revenue does not give rise to any substantial question of law. Thus, not entertained.
(AY. 2007-08)
CIT v. Greenfield Hotels & Estates Pvt. Ltd. (2017) 245 Taxman 125 (Bom.)(HC)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Assessable in 1044
the year of handing over of possession of property and not on entering into agreement
for sale of property. [S. 2(47)(v), 45]
Dismissing the appeal the Court held that; Even if the agreement to sell was executed
in the financial year 2004-05, possession of the property was handed over only in the
financial year 2005-06 and therefore, the transfer of the land would not fall under
section 2(47)(v) of the Act and therefore, section 50C of the Act was applicable. Since
the assessee itself had claimed capital gains in the return filed for the AY 2006-07 on
the basis of the sale deed dated May 10, 2005, it would not be open to the assessee
to challenge its assessability in the AY. 2006-07 contending that it was taxable in the
AY. 2005-06 on the basis of the retrospective amendment by the Finance Act, 2012
incorporating Explanation 2 to section 2(47) which was made effective from April 1,
1962. The assessee was unable to substantiate that on the basis of the sale deed dated
May 10, 2005, the capital gains could not be taxed in the AY. 2006-07 and equally had
failed to demonstrate that section 50C of the Act was not applicable particularly when
the Assistant Valuation Officer had assessed the fair market value at ` 18,16,250. (AY.
2006-07)
Guru Dashmesh Rice and General Mills v. CIT (2016) 386 ITR 97 (P&H)(HC)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Value 1045
ascertained by the DVO lesser than the value adopted by the State Stamp Duty
authority – Held, value ascertained by DVO to be taken as full value of consideration
[S. 45]
Assessee sold the property for a total consideration of ` 47 lakh. Sub-Registrar of the
Stamp Duty valued the asset at ` 3.4 crores. The assessee carried the said valuation in
appeal before the Deputy Collector, Stamp Duties who valued the property at ` 1.33
crores. AO adopted the latter value as the full value of consideration. CIT(A) called for
the valuation report from DVO, who inturn valued the property at ` 71.98 lakh. The
said value was adopted by the CIT(A) as full value of consideration. Held, as per the
321
Capital gains S. 50(C)
provisions of section 50C, where the value ascertained by the DVO is lesser than the
value adopted by the State Stamp Duty authority, then the earlier one is to be taken as
full value of consideration. (AY. 2007-08)
PCIT v. Rajabhai Lumbhabhai Hadiya (2016) 237 Taxman 528 (Guj.)(HC)
1046 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Agreement
was entered in 2001 and part consideration was received and later sale deed was
executed in April 2003, transfer of property could be said to have taken place in 2001,
when provision of section 50C was not in existence hence same was not applicable.
[S. 2(47), 45, 48]
The provisions of section 50C are not applicable in the case where the agreement for
sale is entered into prior to the introduction of section 50C, i.e. AY 2003-04 and sale
deed is entered into after the introduction of Section 50C. The moment the agreement
for sale is entered into, transfer is said to have taken place for the purpose of section
50C and relying upon the decision of the Supreme Court in the case of Sanjeev Lal v.
CIT [2014] 365 ITR 389 wherein it was held that once an agreement to sell is executed
in favour of some person, the said person gets a right to get the property transferred in
his favour and, consequently, some right of the vendor is extinguished, it was held that
the transfer in the instant case took place in 2001 i.e. the year in which the agreement
for sale was entered into and as provisions of section 50C were not in the statute then,
there was no case of application of section 50C of the Act. (AY. 2003-04, 2004-05)
CIT v. Shimbhu Mehra (2016) 236 Taxman 561 (All.)(HC)
1047 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Valuation
adopted by DVO is more than stamp valuation stamp valuation is to be adopted. [S.
45]
Assessee had sold house property for an amount of ` 73.60 lakhs and stamp duty had
been paid at circle rate of ` 1.25 crores. District Valuation Officer (DVO) valued property
at ` 2.97 crores, treating same to be commercial property. Assessing Officer considered
sale consideration on basis of valuation made by DVO and accordingly made addition.
On appeal, Commissioner (Appeals) considered sale value on basis of valuation made
by stamp valuation authorities. On appeal to Tribunal the assessee raised objections
regarding valuation made by DVO. Tribunal held that objections raised against valuation
made by DVO had no meaning, as assessment in hands of assessee had not been made
on such valuation report but on a much lesser value as determined by stamp valuation
authorities. On appeal High Court upheld the order of Tribunal. (AY. 2006-07)
B.M.J. Real Estate (P.) Ltd. v. CIT (2016) 236 Taxman 579 (P&H)(HC)
1048 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Provisions
could not be applied to sale of development rights of land owned by assessee [S. 45,
269UA]
Provision could not be applied to sale of development rights of land owned by assessee.
(AY. 2005-06)
Voltas Ltd. v. ITO (2016) 161 ITD 199 (2017) 183 TTJ 788 / (2017) 148 DTR 84 (Mum.)
(Trib.)
322
S. 50(C) Capital gains
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Flats in 1049
re-developed property – Sale consideration was combination of sale and exchange
total value of which was more than stamp duty valuation therefore value declared in
development agreement was to accepted as consideration. [S. 45]
Dismissing the appeal of the Revenue, the Tribunal held that since assessee received
consideration in two-folds i.e. partly cash and partly in kind, i.e., by way of property
in shape of flats in re-developed property, such transactions were thus a combination
of sale and exchange. Since market value of assessee's share including additional
consideration in respect of carpet area given to assessee was higher than stamp duty
valuation value declared in development agreement was to accepted as consideration.
(AY. 2007-08)
ITO v. Bharat Raojibhai Patel (2016) 159 ITD 473 (Mum.)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Where 1050
assessee has transferred only rights in impugned land which cannot be equated to
land or building or both, provisions cannot be applicable. [S. 45]
Allowing the appeal of the assessee the Tribunal held that on facts assessee had
transferred only rights in impugned land which could not be equated to land or building
or both and, therefore, provisions of section 50C could not be applied. (AY. 2006-07)
Devindraben I. Barot (Smt.) v. ITO (2016) 159 ITD 162 / 182 TTJ 805 (Ahd.)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Provision is 1051
applicable when residential property is transferred by executing sale-cum-General
power of Attorney. [S. 2(47)(v), 45]
The stamp duty authority has determined the market value of the property and has
collected ad hoc stamp duty. Further admitted fact that the assessee admitted long-term
capital gain. This clearly shows that the transfer took place within the meaning of
S. 2(47)(v). The moment transfer took place, the deeming provisions provided in s. 50C
is applicable when the sale consideration shown in the sale deed is less than the value
determined by the stamp duty authority for the purpose of payment of stamp duty. (AY.
2007-08)
DCIT v. Chalasani Mallikarjuna Rao (Dr.) (2016) 161 ITD 721 (Visakha)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Insertion of 1052
proviso to S. 50C by Finance Act, 2016 with effect from 1-4-2017, has retrospective
effect. [S. 45]
Assessee entered into an 'agreement to sell' a piece of land on 29-6-2005. Sale deed of
land was executed on 24-4-2007. The AO having invoked provisions of S. 50C, adopted
stamp duty valuation rate prevailing on date on which sale deed was executed and
accordingly, certain addition was made to capital gain arising from sale of land.
Insertion of proviso to S. 50C by the Finance Act, 2016 with effect from 1-4-2017, has
retrospective effect. in view of the same addition set aside for recomputation of capital
gain on basis of stamp duty valuation rate prevailing on date of 'agreement to sell'. (AY.
2008-09)
Dharamshibhai Sonani v. ACIT (2016) 161 ITD 627 / 181 TTJ 721 (SMC) (Ahd.)(Trib.)
323
Capital gains S. 50(C)
1053 S. 50C : Capital gains – Full value of consideration-Stamp valuation – Right in land
– Section would have no application where assessee has transferred only rights in
impugned land which cannot be equated to land or building or both. [S. 45]
Allowing the appeal the Tribunal held that section 50C is a deeming provision and it
extends only to land or building or both. Section 50C can come into play only in a
situation where the consideration received or accruing as a result of the transfer by an
appellant of a capital asset, being land or building or both is less than the value adopted
or assessed or assessable for the purpose of payment of stamp duty in respect of such
transfer. It is settled legal proposition that deeming provision can be applied only in
respect of the situation specifically given and, hence, cannot go beyond the explicit
mandate of the section. Clearly, therefore, it is essential for application of Section 50C
that the transfer must be of a capital asset, being land or building or both. If the capital
asset under transfer cannot be described as 'land or building or both', then Section 50C
will cease to apply. (AY. 2006-07)
Devindraben I. Barot (Smt.) v. ITO (2016) 141 DTR 302 / 159 ITD 162 (Ahd.)(Trib.)
1054 S. 50C : Capital gains – Full value of consideration – Stamp valuation – In view of
provisions of section 50C, for purpose of computing capital gains arising from sale of
land, DVO has to take into consideration rates prevailing on date of agreement to sell
and not on date of execution of sale deed of land. [S. 45]
Assessee entered into an agreement to sell a piece of land on 7-5-2007. Sale deed of
plot was executed on 21-10-2010. For relevant year, assessee filed its return declaring
certain long term capital gain arising from sale of plot. Assessing Officer referred the
matter to DVO for determining value of plot for purpose of computing capital gains. DVO
computed sale price of plot on basis of rates prevailing on date of execution of sale deed.
Accordingly, certain addition was made to assessee's income. It was held that for purpose
of computing capital gains arising on sale of plot, rates applicable on date of execution
of sale agreement were to be taken into consideration. Therefore, impugned addition was
to be set aside and, matter was to be remanded back for fresh disposal. (AY. 2011-12).
Dharmidevi Kanaiyalal Suthar v. ITO (2016) 51 ITR 55 (Ahd.)(Trib.)
1055 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Matter was
set aside to decide de novo as the valuation report was received after the passing of
the order. [S. 45]
Tribunal set aside the order of CIT(A) to AO to decide de novo as the valuation report
was received after the passing of the order. (AY. 2009-10)
ITO v. Ruchita Gir (Smt.) (2015) 70 SOT 486 / 41 ITR 634 (Hyd.)(Trib.)
1056 S. 50C : Capital gains – Full value of consideration – Stamp valuation – If the
difference between the sale consideration of the property shown by the assessee and
the FMV determined by the DVO u/s. 50C(2) is less than 10%, the AO is not justified
in substituting the value determined by the DVO for the sale consideration disclosed
by the assessee. Unregistered sale agreements prior to 01.10.2009 are not subject to
S. 50C as per CBDT Circular No. 5/10 dt. 03.06.2010 [S. 45]
Allowing the appeal of assessee the Tribunal held that, If the difference between the
sale consideration of the property shown by the assessee and the FMV determined
324
S. 50(C) Capital gains
by the DVO u/s. 50C(2) is less than 10%, the AO is not justified in substituting the
value determined by the DVO for the sale consideration disclosed by the assessee.
Unregistered sale agreements prior to 01.10.2009 are not subject to s. 50C as per CBDT
Circular No. 5/10 dt. 03.06.2010. (AY. 2007-08)
Krishna Enterprises v. ACIT (2017) 146 DTR 73 (Mum.)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Investment 1057
in new house – For exemption entire investment in new house to be considered
irrespective of source of funds. [S. 45, 54F]
Dismissing the appeal of revenue the Tribunal held that, for the purpose of exemption
u/s. 54F the consideration determined as per section 50C is to be adopted. For exemption
entire investment in new house to be considered irrespective of source of funds. (ITA
No 848/Hyd/2015 dt 13-5-2016) (AY. 2010-11)
ITO v. Kondal Reddy Mandal Reddy (2016) BCAJ–June P. 53 (Hyd.)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – The proviso 1058
to S. 50C inserted by the Finance Act, 2016 w.e.f. 01.04.2017 – It should accordingly
be given retrospective effect from 1st April 2003, i.e. the date effective from which s.
50C was introduced. [S. 45]
The proviso to S. 50C inserted by the Finance Act 2016 w.e.f. 01.04.2017 to provide that
the stamp duty valuation of property on the date of execution of the agreement to sell
should be adopted instead of the valuation on the date of execution of the sale deed is
curative and intended to remove an undue hardship to the assessee and an apparent
incongruity. It should accordingly be given retrospective effect from 1st April, 2003, i.e.
the date effective from which S. 50C was introduced. (AY. 2008-09)
Dharamshibhai Sonani v. DCIT (2016) 142 DTR 62 (Ahd.)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – Leasehold 1059
property – Provisions of the Act could not be invoked in respect of transfer of
leasehold rights. [S. 45]
The assessee acquired a land on lease for 99 years from the Kanpur Development
Authority. During the previous year relevant to the assessment year 2007-08, the
assessee transferred the leasehold rights to a company. The Assessing Officer brought
the capital gains to tax under section 50C of the Income-tax Act, 1961 as long term
capital gains on sale of leasehold property. The Commissioner (Appeals) reversed this
holding that section 50C of the Act was applicable only to transfer of capital assets and
not to the transfer of leasehold rights in capital assets. On appeal the Tribunal held that
the provisions of section 50C of the Act could not be invoked in respect of transfer of
leasehold rights. (AY. 2007-08)
ITO v. Hari Om Gupta (2016) 45 ITR 137 (Lucknow)(Trib.)
S. 50C : Capital gains – Full value of consideration – Stamp valuation – The stamp 1060
duty value on the date of agreement and not date of sale deed has to be taken. [S. 45]
Allowing the appeal of assessee the Tribunal held that the issue as to whether the
date of agreement or the date of execution of sale deed has to be considered for the
325
Capital gains S. 50(C)
purpose of adopting the SRO value under S. 50C of the Act, is now settled in favour
of the assessee by the decisions of the Hon’ble Supreme Court in the case of Sanjeev
Lal and Smt. Shantilal Motilal v. CIT (2014) 365 ITR 389 (SC) as well as decisions of
the coordinate bench of this Tribunal at Visakhapatnam in the cases of Lahiri Promoters
Visakhapatnam v. ACIT, Circle 1(1), Visakhapatnam (ITA No.12/Vizag/2009 dated
22.6.2010) and Moole Rami Reddy v. ITO (ITA No.311/Vizag/2010 dated 10.12.2010).
Therefore, the SRO value as on the date of agreement of sale has to be considered for
the purpose of computation of capital gains. (AY. 2006-07)
Mohd. Imran Baig v. ITO (2016) 130 DTR 33 / 175 TTJ 319 (Hyd.)(Trib.)
1061 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Stock-in-
trade – Provision applies to development agreement. [S. 45]
Land purchased by a builder with the knowledge that there are encumbrances on it
and development is not feasible is a “capital asset” and not “stock-in-trade”. The gains
on transfer of such land is assessable as capital gains and not as business profits.
S. 50C applies to development agreements if the effect of the development agreement
read with the conveyance deed is that the entire land with ownership rights are
transferred. (AY. 2007-08)
ACIT v. Dattani Development (2017) 147 DTR 224 (Mum.)(Trib.)
1062 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Valuation
is a matter of estimation and some degree of difference is bound to be there. If the
difference between the stamp duty valuation and the declared sale consideration is
less than 10%, addition u/s. 50C should not be made. [S. 45]
Allowing the appeal of the assessee the Tribunal held that (i) The Pune Bench of the
Tribunal in the case of Asstt. CIT v. Harpreet Hotels (P) Ltd. vide ITA Nos. 1156-1160/
Pn/2000 dismissed the appeal filed by the Revenue where the CIT(A) had deleted the
unexplained investment in house construction on the ground that the difference between
the figure shown by the assessee and the figure of the DVO is hardly 10 per cent.
(ii) The Pune Bench of the Tribunal in the case of ITO v. Kaaddu Jayghosh Appasaheb,
vide ITA No. 441/Pn/2004 for the asst. yr. 1992-93 following the decision of the J&K
High Court in the case of Honest Group of Hotels (P) Ltd. v. CIT (2002) 177 CTR (J&K)
232 had held that when the margin between the value as given by the assessee and the
Departmental valuer was less than 10 per cent, the difference is liable to be ignored and
the addition made by the AO cannot be sustained.
(iii) In Rahul Construction v. DCIT in ITA No. 1543/PN/2007 (2010) 38 DTR (Pune)(Trib.) it
was held that since the difference is less than 10 per cent and considering the fact that
valuation is always a matter of estimation where some degree of difference is bound to
occur, the AO is not justified in substituting the sale consideration at ` 20,55,000/- as
against the actual sale consideration of ` 19,00,000 disclosed by the assessee.
(iv) In the instant case, the difference between the valuation adopted by the Stamp
Valuation Authority and declared by the assessee is less than 10%. Therefore,
respectfully following the decision of the Hon’ble Co-ordinate Bench, we hereby direct
the AO to adopt the value as declared by the assessee. This ground of the assessee is
allowed. (AY. 2010-11)
Sita Bai Khetan v. ITO (2016) 142 DTR 122 (Jaipur)(Trib.)
326
S. 50(C) Capital gains
S. 50C : Capital gains – Full value of consideration – Stamp valuation – The stamp 1063
duty value on the date of agreement and not date of sale deed has to be taken. The
nature of the property on the date of agreement has to be considered – Proviso to
S. 56(2)(vii)(b) is curative and retrospective left open. [S. 56(2)(vii)(b)]
The stamp duty value on the date of agreement and not date of sale deed has to be
taken. Followed the ratio in Sanjeev Lal and Smt. Shantilal Motilal v. CIT (365 ITR 389)
as well as decisions of the Coordinate Bench of this Tribunal at Visakhapatnam in
the cases of M/s. Lahiri Promoters Visakhapatnam v. ACIT, Circle 1(1), Visakhapatnam
(ITA No. 12/Vizag/2009 dated 22.6.2010) and Moole Rami Reddy v. ITO (ITA No. 311/
Vizag/2010 dated 10.12.2010). It is therefore, now settled that the SRO value as on
the date of agreement of sale has to be considered for the purpose of computation of
capital gains. The next question is the nature of the property for valuation under S. 50C,
because, according to the assessee, even if the date of registered sale deed is considered
for determination of the fair market value under S. 50C, the SRO value should be taken
for residential area and not commercial area. He submitted that if the value of the
residential area as on 1.4.2006 i.e. ` 10,000 per sq. yard, is taken into consideration,
the sale consideration received by the assessee was more than the SRO value and no
addition was warranted. Therefore, the nature of the property as on the date of transfer
attains importance. There cannot be any dispute that the nature of the property on
the date of transfer/sale is to be considered. Proviso to s. 56(2)(vii)(b) is curative and
retrospective left open. (ITA No. 1942/hyd/2014, dt. 27.11.2015) (AY. 2006-07)
Mohd. Imran Baig v. ITO (Hyd.)(Trib.); www.itatonline.org
S. 50C : Capital gains – Full value of consideration – Stamp valuation does not apply 1064
to transfer of leasehold rights in land. [S. 45]
Allowing the appeal of assessee the Tribunal held that; Section 50C of the Act provides
that if the consideration received or accruing is less than the value adopted or assessed
or assessable by the Stamp Valuation authority of the State Government for such transfer
then the value so adopted or assessed or assessable shall be deemed to be the full value
of consideration and the capital gains will be computed accordingly. The phraseology of
section 50C of the Act clearly provides that it would apply only to “a capital asset, being
land or building or both”. The moot question before us is as to whether such expression
would cover the transfer of a capital asset being leasehold rights in land or building.
There cannot be a dispute to the proposition that the expression land by itself cannot
include within its fold leasehold right in land also. Ofcourse, leasehold right in land is
also a capital asset and we find no fault with this stand of the Revenue. So however,
every kind of a ‘capital asset’ is not covered within the scope of section 50C of the Act
for the purposes of ascertaining the full value of consideration. In fact, the heading
of section itself provides that it is “Special provision for full value of consideration
in certain cases”. Therefore, there is a significance to the expression “a capital asset,
being land or building or both” contained in section 50C of the Act. The significance
is that only capital asset being land or building or both are covered within the scope
of section 50C of the Act, and not all kinds of capital assets. (ITA No. 5136/Mum/2014,
dt. 16.03.2016) (AY. 2010-11)
Farid Gulmohamed v. ITO (Mum.)(Trib.); www.itatonline.org
327
Capital gains S. 50(C)
1065 S. 50C : Capital gains – Full value of consideration – Stamp valuation difference being
less than 2% addition was held to be not justified. [S. 45]
It was held that difference between the valuation for the stamp duty and the actual
consideration received by the assessee being less than 2 per cent the addition made by
the AO by adopting the valuation of the impugned property as determined for stamp
duty purposes as the sale consideration for the purpose of computing the long term
capital gains is not sustainable. (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
1066 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Provision
cannot be applied in case of transfer of leasehold rights. [S. 45]
The capital gains arising out of transfer of leasehold rights was not offered to tax by
the assessee. The AO computed the capital gains by applying provisions of s. 50C. The
ITAT held that provisions of s. 50C cannot be invoked in respect of transfer of leasehold
rights. (AY. 2007-08)
ITO v. Hari Om Gupta [2016] 45 ITR 137 (Luck.)(Trib.)
1067 S. 50C : Capital gains – Full value of consideration – Stamp valuation – Amount
of sale consideration has been determined in view of stamp duty valuation –
Consideration cannot be estimated. [S. 45]
Held that provisions of sec. 50C lays down that the value adopted or assessed by
Stamp Valuation Authority shall be deemed be full value of consideration. Law is well
settled that scope of deeming fiction cannot be extended beyond what has been clearly
mentioned in law. Full value of consideration of the asset has been determined based
upon the value as was assessed by the Stamp Valuation authority. Therefore, once the
amount of sale consideration has been determined keeping in view of provisions of law
no question would arise of estimating the value of consideration once again. CIT(A)
erred in estimating lease rent as it was beyond the provisions of law. (AY. 2003-04,
2006-07, 2007-08)
Kamala Brothers v. ITO (2016) 176 TTJ 178 / 131 DTR 106 (Mum.)(Trib.)
1068 S. 50C : Capital gains – Full value of consideration – Fair Market Value – Primary duty
of the AO to refer to the Departmental Valuation Officer – Failure by AO to discharge his
duty – Matter Remanded to refer the matter to the Departmental Valuation Officer.[S. 45]
The assessee, a HUF, was engaged in the business of money lending. During the
previous year, the assessee sold an item of immovable property comprising of land
and building. The assessee stated that the sale deed was not released after registration
owing to sudden dispute and the case was pending before the court of law. The AO
after confirming the market value of that land from the Sub-Registrar’s office, invoked
the provisions of section 50C of the Act and computed the capital gains on the sale of
the immovable property. The Commissioner (Appeals) confirmed this.
On appeal, the Tribunal held that the AO failed to refer the matter to the Department
Valuation Officer for valuing the property in accordance with the section 50C(2) of the Act and
also failed to consider the matter of litigation involved in the title to the property. The AO was
to refer the matter to the Departmental Valuation Officer and decide it afresh. (AY. 2009-10)
S. D. Vimalchand Jain v. ITO (2016) 45 ITR 628 (Chennai)(Trib.)
328
S. 54 Capital gains
S. 54. Profit on sale of property used for residence.
S. 54 : Capital gains – Profit on sale of property used for residence – Utilisation 1069
of capital gains in construction of residential house within a period of two years
would suffice to claim exemption, irrespective of fact neither the sale transaction was
concluded nor registration had taken place within two years. [S.45]
Dismissing the appeal of the Revenue, the Court held that utilisation of capital gains
in construction of residential house within a period of two years would suffice to
claim exemption, irrespective of fact neither the sale transaction was concluded nor
registration had taken place within two years. (AY. 2003-04)
CIT v. Shakuntala Devi (Mrs.) (Decd.) (2016) 389 ITR 366 / 75 taxmann.com 222 (Karn.)
(HC)
S. 54 : Capital gains – Profit on sale of property used for residence – Merely because 1070
the assessee got the occupancy certificate after 4 years and such delay was beyond
control of the assessee, assessee’s claim for deduction was to be allowed. [S.45]
Dismissing the appeal of revenue where assessee sold a residential property and
entered into an agreement with a builder for purchasing flat by investing the sale
proceeds within the prescribed period of two years. Merely because the assessee got the
occupancy certificate after 4 years and such delay was beyond control of the assessee,
assessee’s claim for deduction u/s. 54 was to be allowed.
CIT v. Girish L. Ragha (2016) 239 Taxman 449 / 140 DTR 418 / 289 CTR 213 (Bom.)(HC)
S. 54 : Capital gains – Profit on sale of property used for residence Residential house 1071
along with land was transferred for purpose of development, it would be eligible for
exemption.[S. 45]
Allowing the appeal of the assessee the Tribunal held that ;Transfer of residential house
along with land was transferred for purpose of development, it would be eligible for
exemption. (AY. 2006-07)
Rukmani Santhanam (Smt.) v. ITO (2016) 160 ITD 338 / 182 TTJ 388 (Chennai)(Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – Advance payment 1072
to builder would amount to purchase of house and entitled exemption. [S.45, 54G]
Dismissing the appeal of the revenue, the Tribunal held that payment made by the
assessee before the due date of filing of return towards advance for purchase of flat
from the builder would amount to utilization of capital gains as required under section
54(2). The assessee is entitled to exemption under section 54. Followed Supreme Court
in Fibre Boards (P) Ltd. v. CIT (2015) 376 ITR 596 (SC)(AY. 2011-12)
ACIT v. Kannan Santhanam (2016) 161 ITD 792 / (2017) 183 TTJ 8 (Chennai)(UO)(Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – Agricultural land 1073
– Land was a Jirayat fallow land and that no agricultural activity having been carried
on by assessee – Denial of exemption was held to be justified. [S. 2(14), 45, 153A]
Assessee claimed that suit land was an agricultural land and it fell outside definition of
capital asset u/s. 2(14). AO held that land in question was not an agricultural land as it
329
Capital gains S. 54
was Jirayat fallow land i.e. land being not capable of cultivation. Therefore, profit from
transfer of such land was not exempt as an agricultural income and denied deduction
claimed by assessee. CIT(A) upheld order of AO holding that land in question was not
an agricultural land. On appeal, the Tribunal observed that according to 7/12 extract,
land was a Jirayat fallow land and that no agricultural activity having been carried on
by assessee. Also, Report of Inspector was obtained by AO, which clearly mentioned that
land was not fit for cultivation which had not been challenged by assessee. Assessee
in return of income had not claimed that it sold agricultural land, but on other hand
had claimed deduction u/s. 54, in support of which, assessee failed to furnish any
documents and hence that claim of section 54 was held to be not allowable to assessee.
Accordingly, Assessee’s appeal was dismissed. (AY. 2009-10)
Abhijit Subhash Gaikwad v. Dy. CIT (2015) 70 SOT 429 / 60 taxmann.com 259 (Pune)(Trib.)
1074 S. 54 : Capital gains – Profit on sale of property used for residence – Advance payment
– Amount utilized of capital gain for purchasing of new flat before due date of filing
of return would be entitled to claimed exemption even though construction of flat did
not complete on date of payment.[S. 45, 54G]
Assessee sold residential flat and earned as capital gain. He advanced a sum of rupees
for purchase of residential flat from a builder on due date of filing of return. He claimed
exemption u/s. 54. The AO disallowed the claim stating that advance payment was made
by the assessee for purchase of flat. The CIT(A) allowed the claim of the assessee.
Tribunal held that amount utilized of capital gains for purchasing of new flat before due
date of filing of return and, therefore assessee would be entitled to claimed exemption
u/s. 54 even though construction of flat did not complete on date of payment. (AY.2011
-12)
ACIT v. Kannan Santhanam (2016) 161 ITD 792 / (2017) 183 TTJ 8 (UO) (Chennai)(Trib.)
1075 S. 54: Capital gains – Profit on sale of property used for residence – Date of
commencement of construction of house property is irrelevant, construction may be
commenced even before transfer of asset. [S.45]
Profit on sale of property used for residential house in order to claim deduction u/s.
54, date of commencement of construction of house property is irrelevant and thus
construction may be commenced even before transfer of asset. (AY. 2007-08)
DCIT v. Chalasani Mallikarjuna Rao (Dr.) (2016) 161 ITD 721 (Visakh)(Trib.)
1076 S. 54 : Capital gains – Profit on sale of property used for residential house –
Investment in construction of house – Construction did not materialize and the amount
was refunded. Assessee was entitled to exemption. [S. 45]
Where assessee having sold residential property, paid entire sale consideration for
purchase of another house property within time limit prescribed, even though said
transaction did not eventually materialise and amount was refunded which was paid by
assessee, still assessee's claim for deduction was to be allowed. (AY. 2009-10)
T. Shiva Kumar v. ITO (2016) 158 ITD 329 (Bang.)(Trib.)
330
S. 54 Capital gains
S. 54 : Capital gains – Profit on sale of property used for residence – Cost of 1077
improvement to make it habitable – Exemption cannot be denied. [S. 45]
Assessee is allowed to purchase or construct residential house without any ceilings as to
amount of investment, then merely because taxpayer has purchased a residential house
and thereafter followed it with alterations and modifications carried out to make said
house habitable, benefits cannot be denied by revenue. (AY. 2009-10)
Rustom Homi Vakil v. ACIT (2016) 158 ITD 588 (Mum.)(Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – The date 1078
of "purchase" of the new residential house is the date when the assessee receives
possession and not the date of the agreement of purchase. [S. 45]
Allowing the appeal of the assessee the Tribunal held that, in the given facts of the case
and also the case law relied on by learned Counsel for assessee in the case of V. M.
Dujodwala co-ordinate Bench of this Tribunal and also of Hon’ble Bombay High Court in
the case of Smt. Beena K. Jain, we are of the view that the assessee’s claim of deduction
u/s. 54 of the Act is to be reckoned from the date of handing over of the possession
of the flat by the builder to the assessee i.e. 11.09.2009, and if we take that date, the
assessee is entitled to deduction u/s. 54 of the Act because the assessee has sold his
residential flat on 24.02.2010. We allow the assessee’s claim and order accordingly. (ITA
No.2896/Mum/2014, dt. 08.06.2016)(AY. 2010-11)
Bastimal K. Jain v. ITO (Mum.)(Trib.), www.itatonline.org
S. 54 : Capital gains – Profit on sale of property used for residence – Assessee can 1079
deposit unutilized capital gains in prescribed bank or institution before due date
of filing income tax return as per section 139(1), despite fact that he had already
purchased one residential flat. [S. 45, 139(1)]
Tribunal held that there is no bar under section 54(2) on assessee for making deposit
of unutilized capital gain in capital gains account with prescribed bank or institution
before due date of filing income tax return as per section 139(1), despite fact that
assessee had already purchased one residential flat. However, such amount needs to be
utilized for purchase or construction of new asset within period specified in sub-section
(1) of section 54. (AY. 2008-09)
Suresh Kumar K. Tek v. ITO (2016) 157 ITD 119 (Mum.)(Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – Gift of property 1080
– Entitled to exemption. [S. 45, 47(iii)]
Dismissing the appeal of revenue, the Tribunal held that where assessee had sold
his residential property in April, 2010 and invested sale proceeds in August, 2010 in
another residential property and in November, 2010 he had settled new property to his
daughter out of love and affection, settlement of property was a gift falling under section
47(iii) and assessee was entitled to exemption under section 54 in respect of capital
gains arising on sale of property. (AY. 2011-12)
ITO v. Abdul Hameed Khan Mohammed (2016) 156 ITD 778 (Chennai)(Trib.)
331
Capital gains S. 54
1081 S. 54 : Capital gains – Profit on sale of property used for residence – Deduction
allowable on purchase of residential house which could include multiple residential
units. [S. 45]
The assessee sold his tenancy rights and claimed deduction u/s. 54 in respect of
purchase of two flats in different locations in different societies. The AO did not allow
the deduction on one of the flats. The ITAT held that deduction u/s. 54 could be
claimed for a residential house which could include multiple residential units based
on the judgment of the Hon'ble Madras High Court in the case of CIT v. Smt. V. R.
Karpagam [2015] 373 ITR 127 (Mad). The ITAT observed that the amendment to s. 54F
to make it applicable to only one residential house would become effective from 1st
April, 2015. (AY. 2009-10)
Nilesh Pravin Vora & Yatin Pravin Vora (Legal heirs of Pravin Laxmidas Vora) v. ITO
(2016) 45 ITR 228 (Mum.)(Trib.)
1082 S. 54 : Capital gains – Profit on sale of property used for residence – Assessee utilising
entire capital gains within period of one year in constructing a house which could not
be completed due to circumstances beyond assessee’s control – Assessee was entitled
to exemption.[S.45]
The AO disallowed the exemption u/s. 54 of the Act on the ground that the assessee
had entered into a development agreement with S for construction of an independent
house in a gated community in the land but the construction of the house was not
completed within the stipulated period. The CIT(A) allowed the exemption. On appeal
held that the assessee had utilised the capital gains within the period of one year but
due to certain circumstances beyond the control of the assessee, the construction of the
house could not be completed within the specified period. Therefore, the assessee was
entitled to exemption. (AY. 2009-10)
ITO v. Narayan Rao (2016) 46 ITR 178 (Hyd.)(Trib.)
1083 S. 54 : Capital gains – Profit on sale of property used for residence – Construction of
new residential flat was not completed beyond three years from transfer – No entitled
to exemption. [S. 45]
Dismissing the appeal of assessee, the Tribunal held that where construction of new
residential flat was not completed by end of three years from transfer, assessee would
not be entitled to exemption under section 54. (AY. 2009-10)
Yashovardhan Sinha v. ITO (2016) 156 ITD 540 (Patna)(Trib.)
S. 54EC. Capital gains not to be charged on investment in certain bonds.
1084 S. 54EC : Capital gains – Investment in bonds – Depreciable assets – Eligible
exemption. [S.45, 50]
Assessee-company was engaged in business of running a hotel, claimed deduction u/s.
54EC by claiming that sale proceeds of hotel building had been invested in NABARD
bonds. The AO. took a view that since hotel building was a depreciable asset, it had to
be treated as short term capital asset as per deeming provision of S. 50 and thus capital
gains arising from sale of said building was not eligible for deduction u/s. 54EC. Legal
332
S. 54F Capital gains
fiction created in s. 50 for deeming a capital gains as short term capital gain does not
mean that asset itself is a short-term capital asset and thereby converting a long-term
capital asset into short-term capital asset. Therefore, deduction u/s. 54EC could not be
denied to assessee by fiction created u/s. 50. (AY. 2004-05)
Travotel (India) (P.) Ltd. v. ITO (2016) 158 ITD 878 (Mum.)(Trib.)
S. 54EC : Capital gains – Investment in bonds – Bonds were not available – Purchased 1085
with in the reasonable time of made availability of Bonds – Eligible – Exemption.
[S.45]
Where bonds of assessee's choice were not available throughout stipulated period for
investment for claiming exemption from capital gains, time limit to invest in bonds
would get automatically extended. Where the assessee purchased the Bonds within the
time allowable, he is eligible for exemption. (AY. 2006-07)
Sunil Kumar Saha v. ITO (2016) 156 ITD 1 (Kol.)(Trib.)
S. 54EC : Capital gains – Investment in bonds – Payment of cheque dates back to date 1086
of presentation and not date of encashment [S.45]
Allowing the appeal of the assessee the Tribunal held that the period of six months
available for making investment means six months and not 180 days. Payment by
cheque dates back to date of presentation and not date of encashment. (AY. 2005-06)
(ITA No. 7548/Mum/2012 dt. 28-8-2015) Bench ‘B’.
Neela S. Karyakarte v. ITO (2016) 176 TTJ 52 (URO) / BCAJ–March–P. 30 (Mum.)(Trib.)
S. 54F. Capital gains on transfer of certain capital assets not to be charged in case of
investment in residential house.
S. 54F : Capital gains – Investment in a residential house – Agreement to sell does not 1087
amount to transaction of immovable property – Claim for exemption was held to be
not allowable. [S.45, Transfer of Property Act, 1882]
Dismissing the appeal of assessee the Court held that there was an agreement for
purchase of land which was not carried out and matter was taken to Court, where
parties entered into settlement for transfer of plot. Fact remains that no legal document
having effect of transfer of immovable property was placed before Appellate Authority.
Under the provisions of Transfer of Property Act, 1882 unless a registered sale deed is
executed, title of immovable property cannot pass. Agreement to sale is not a transaction
of immovable property but only a promise to enter into another agreement relating to
sale of immovable property. That is why Tribunal has recorded a finding that from order
of Assessing Authority it is evident that there was no sale of property in dispute for the
reason that no sale deed was placed before revenue authorities so as to claim capital
gain. There is no error in the judgment of Tribunal. (AY. 1995-96)
Shobha Jain (Smt.) v. CIT (2016) 243 Taxman 368 (All.)(HC)
333
Capital gains S. 54F
1088 S. 54F : Capital gains – Investment in a residential house – Relaxation for claiming
benefit under section 54F only within time prescribed under that section and that too,
if before making such claim, he had complied with required conditions to claim such
deduction – Rejection of petition by CBDT was held to be justified. [S.45, 119(2)(c)]
Dismissing the petition the Court held that; relaxation for claiming benefit under section
54F only within time prescribed under that section and that too, if before making such
claim, he had complied with required conditions to claim such deduction - Rejection
of petition by CBDT was held to be justified.
Shivinder Singh Brar, Karta HUF v. CBDT (2016) 243 Taxman 176 / 290 CTR 121 / 142
DTR 154 (P&H)(HC)
1089 S. 54F : Capital gains – Investment in a residential house – Seven flats – Income from
property was assessed as income from house property therefore exemption cannot be
denied. [S. 22, 14, 45]
Dismissing the appeal of revenue the Court held that income from these flats was
offered to tax under head 'income from house property' in view of specific provisions
of section 22, read with section 14. Tribunal held that treatment of income by assessee
could not be treated as an act by which assessee had considered seven flats as
residential house owned by him and, therefore, denial of claim of assessee for deduction
under section 54F was unassailable. (AY. 2009-10)
CIT v. Gregory Mathias (2016) 243 Taxman 25 (Karn.)(HC)
1090 S. 54F : Capital gains – Investment in a residential house – Exemption could not be
denied to the assessee, where he sold a land and purchased another house property.
[S. 45]
Dismissing the appeal of revenue the Court held that where assessee was owner of
a residential house and a commercial property and earned income from both the
properties. Exemption could not be denied to the assessee, where he sold a land and
purchased another house property. (AY. 2009-10)
CIT v. I. Ifthiqar Ashiq (2016) 239 Taxman 443 (Mad.)(HC)
1091 S. 54F : Capital gains – Investment in a residential house – Failure to deposit the
amount of consideration not utilized towards the purchase of new flat in the specified
bank account before the due date of filing return of Income u/s. 139(1) is fatal to the
claim for exemption. [s. 45, 139(1)]
Dismissing the appeal of assessee the Court held that, failure to deposit the amount
of consideration not utilized towards the purchase of new flat in the specified bank
account before the due date of filing return of Income u/s. 139(1) is fatal to the claim
for exemption. The fact that the entire amount has been paid to the developer/builder
before the last date to file the ROI is irrelevant. Contrary view in K. Ramchandra Rao
277 CTR 0522 (Kar.) is sub-silentio and is not good law. (AY. 1996-97)
Humayun Suleman Merchant v. CCIT (2016) 387 ITR 421 / 242 Taxman 189 / 140 DTR
209 / 290 CTR 496 (Bom.)(HC)
334
S. 54F Capital gains
S. 54F : Capital gains – Investment in a residential house – Full payment made to 1092
builder and residential unit allotted to assessee within three year period – That outer
date for completion of construction beyond three year period or builder did not hand
over possession within three year period – Not to disentitle assessee of exemption –
Utilisation of gains in construction of residential house is material factor. [S. 45, 54]
The assessee effected sale of equity shares on July 7, 2007, which gave rise to long –
term capital gains. The assessee invested part of the gains in construction of a residential
house and claimed exemption thereof under section 54F of the Income-tax Act, 1961.
The assessing authority disallowed the claim on the ground that the construction was
not completed within the three year period stipulated in the section. The Commissioner
(Appeals) dismissed the assessee's appeal. The Tribunal found that though the agreement
for construction entered into by the assessee with the builder gave an outer date which
went beyond the three year period from the date of sale of the shares the assessee had
done all that he could do for acquiring the villa by paying the whole of the price on July
28, 2007 itself. Following CIT v. Sambandam Udaykumar [2012] 345 ITR 389 (Karn.) the
Tribunal held that the fact that the builder had not handed over possession would not
disentitle the assessee from claiming the benefit under section 54F and that the assessee
was entitled to the exemption under section 54F because he had re-invested the entire
capital gains by making payment in full to the builder. On appeal by the Department:
Held, dismissing the appeal, that if the Tribunal had followed the decision of the
court, no substantial question of law would arise for consideration in the appeal. The
Department's contention that since the tax amount was less in the earlier case and the
matter had been not carried before the Supreme Court, the efficacy of the decision of
the court would be lost was not tenable. When on the same issue a co-ordinate Bench
of the court had already taken a view, departure therefrom was not permissible unless
there were strong and valid reasons or the Supreme Court had taken a different view.
When the issue was covered by the decision of the court, no substantial question of law
would arise for consideration. (AY. 2008-09)
PCIT v. C. Gopalaswamy (2016) 384 ITR 307 (Karn.)(HC)
S. 54F : Capital gains – Investment in a residential house – Amount invested in new 1093
asset need not be entirely sourced from capital gain. [S.45]
The assessee claimed benefit of section 54F, however, he did not entirely source the
amount invested in his new asset from capital gains receipts and therefore the he AO
made an addition to the income of the assessee. The CIT(A) upheld the addition made
by the AO. The Tribunal reversed order of the CIT(A) holding that section 54F did not
put any restriction whether the investment was made out of loan amount or from the
sale consideration and, therefore, for availing the benefit of section 54F amount invested
in the new asset need not be entirely sourced from capital gain.
The High Court upheld the order of the Tribunal and held that, no provision had been
made in the statute that in order to avail benefit of section 54F, the assessee had to
utilize the amount received by him on sale of original capital asset for the purposes of
meeting the cost of the new asset. Once that is so, the assessee was entitled for benefit
under section 54F. (AY. 2009-10)
CIT v. Kapil Kumar Agarwal (2016) 382 ITR 56 / 237 Taxman 555 / 284 CTR 75 / 131
DTR 87 (P&H)(HC)
335
Capital gains S. 54F
1094 S. 54F : Capital gains – Investment in a residential house – Investment of consideration
should be in name of the assessee, land bought in name of daughter is not entitled to
exemption. [S.45]
Dismissing the appeal of the assessee the Tribunal held, that the exemption under
section 54F of the Act had to be claimed only by the assessee on purchase and
construction of new residential property in the assessee's own name and not in that of
his unmarried daughter. The exemption was exclusive to be claimed by the assessee
which could not be clubbed or applied to the blood relation or family members. (AY.
2011-12)
D. Devadass v. ITO (2016) 48 ITR 613 (Chennai)(Trib.)
1095 S. 54F : Capital gains – Investment in a residential house – Exemption cannot be
denied to assessee when he has invested entire sales consideration in residential
property, but is unable to get possession of flat, which is under construction, due to
fault of builder. [S.45]
Allowing the appeal of the assessee, the Tribunal held that when an assessee has
invested entire sale consideration of his plot in a residential property within time
prescribed u/s. 54F, but he is unable to get possess of flat, which is under construction,
due to fault of builder, he cannot be denied deduction u/s. 54F. (AY. 2010-11)
Rajeev B. Shah v. ITO (2016) 159 ITD 964 (Mum.)(Trib.)
1096 S. 54F : Capital gains – Investment in a residential house – Due date for assessee to
invest amount of capital gains in purchase/construction of new residential asset or
investment in capital gains scheme u/s. 54F refers to 'extended due date' u/s. 139(4),
matter remanded. [S. 45, 139(4)]
Assessing Officer denied the exemption u/s. 54F on the ground that, the assessee had
filed return of income u/s. 139(4) and not u/s. 139(1). Tribunal held that, 'Due date' for
assessee to invest amount of capital gains in purchase/construction of new residential
asset or investment in capital gains scheme u/s. 54F refers to 'extended due date' u/s.
139(4). However, during intermediary period, i.e., after sale of capital asset till date
of investment, a fund has to be deposited in capital gains account scheme as notified
by Central Government. In view of aforesaid, the matter was remanded back to AO to
examine fulfilment of conditions u/s. 54F through intermediary period, that is, from date
of sale of capital asset to date of actual investment in residential house. (AY. 2011-12)
G. Ramesh v. ITO (2016) 159 ITD 633 (Chennai)(Trib.)
1097 S. 54F : Capital gains – Investment in a residential house – Development rights is a
capital asset and sale proceeds is chargeable as capital gains, hence consequential
exemption is available. [S. 2(14), 45, 56]
The AO treated entire consideration as income from other sources and denied the
exemption u/s. 54F of the Act. Dismissing the appeal of the revenue, the Tribunal held
that gains on sale of development rights over property are capital in nature and comes
within definition of capital asset and, therefore, taxable as capital gains. Accordingly
consequential exemptions u/s. 54F would be allowable. (AY. 2007-08)
ITO v. Bharat Raojibhai Patel (2016) 159 ITD 473 (Mum.)(Trib.)
336
S. 54F Capital gains
S. 54F : Capital gains – Investment in residential house – Family settlement – Transfer 1098
of property was made in favour of assessee's son and daughter under a family
arrangement within a period of three years from purchase of said property, exemption
cannot be denied. [S.45]
AO denied assessee's claim of exemption u/s. 54F on ground that assessee was allotted
two flats and one of these flats was transferred within a period of three years to
assessee's son and daughter under a family arrangement. Allowing the appeal the
Tribunal held that even though two flats were allotted to assessee, they were to be
construed as one single unit and since said transfer of one of flats was not by sale and
only a transfer in favour of son and daughter under a family arrangement, same would
be liable for exemption u/s. 54F. (AY 2006-07)
Rukmani Santhanam (Smt.) v. ITO (2016) 160 ITD 338 / 182 TTJ 388 (Chennai)(Trib.)
S. 54F : Capital gains – Investment in a residential house – Partial in property – 1099
Exemption could not be denied on sale of another property. [S. 45]
The assessee claimed exemption u/s. 54F on sale land. AO. disallowed claim on the
ground that the assessee owned more than one house on the date of sale of land.
Tribunal held that only a partial interest in said property was conveyed to assessee by
mother by means of settlement deed and life interest over said property was retained
by mother. Since such partial interest could not be considered as full ownership and
therefore exemption u/s. 54F could not be denied to the assessee. (AY. 2011-12)
V. R. Usha (Mrs.) v. ITO (2016) 159 ITD 402 (Chennai)(Trib.)
S. 54F : Capital gains – Investment in a residential house – Exemption is available if 1100
net consideration is invested even though the stamp duty valuation is more than net
consideration. [S. 45, 50C]
Assessee invests net sale consideration for purpose of purchase/construction of new
residential house property, then he is eligible for exemption even though full value of
consideration as per s. 50C is more than net sale consideration as a result of transfer.
(AY. 2007-08)
DCIT v. Chalasani Mallikarjuna Rao (Dr.) (2016) 161 ITD 721 (Visakha)(Trib.)
S. 54F : Capital gains – Investment in a residential house – If the assessee has made 1101
full payment to the builder for purchase/construction of a new residential house but
is not able to get the title of the flat registered in his name or is unable to get the
possession of the flat within the prescribed period due to fault of the builder, the
assessee cannot be denied deduction. [S. 45]
Allowing the appeal of the assessee the Tribunal held that we find that so far as the
facts in question are not disputed, the only issue is that when the assessee is not able to
get the title of the flat registered in his name or unable to get the possession of the flat,
which is under construction, due to fault of the Builder, the assessee cannot be denied
deduction u/s. 54F of the Act. It is a fact that the assessee has invested this amount of
` 18,60,000/- in purchase of residential house within the stipulated period prescribed
u/s. 54F of the Act. But, it is not in the assessee’s hand to get the flat completed or
to get the flat registered in his name, because it was incomplete. The intention of the
337
Capital gains S. 54F
assessee is very clear that he has invested almost the entire sale consideration of land in
purchase of this residential flat. It is another issue that the flat could not be completed
and the matter is pending before the Hon’ble Bombay High Court seeking relief by the
assessee by filing suit for direction to the Builder to complete the flat. It is impossible
for the assessee to complete other formalities i.e. taking over possession for getting the
flat registered in his name and this cannot be the reason for denying the claim of the
assessee for deduction u/s. 54F of the Act. In view of the above facts of the case, we are
of the view that the assessee is entitled for deduction u/s. 54F of the Act, because the
assessee has already invested a sum of ` 18.60 lakhs in the residential property under
construction within the time limit prescribed u/s. 54F of the Act. Accordingly, this issue
of assessee’s appeal is allowed. (ITA No.262/Mum/2015, dt. 08.07.2016)(AY. 2010-11)
Rajeev B. Shah v. ITO (Mum.)(Trib.), www.itatonline.org
1102 S. 54F : Capital gains – Investment in a residential house – Demolition of structure
does not amount to transfer – Entitle exemption – CIT(A) is bound to follow the order
of Jurisdictional High Court in the case of another Co-owner. [S. 2(47), 45]
Demolition of structure does not amount to transfer, capital gain exemption cannot
be withdrawn. Tribunal also held that judicial discipline and rule of law demand and
requires that lower judicial authorities should and must follow the decisions/judgment
of higher judicial authorities on identical facts. Thus, the CIT(A) was bound by law to
follow the jurisdictional High Court judgment in the case of Mrs. Chhaya B. Parekh. In
our considered view that this instant case is squarely covered by the decision of Hon’ble
Bombay High Court in the case of Mrs. Chhaya B. Parekh and hence the assessee is
entitled for his claim of deduction u/s. 54F of the Act as claimed in the return of
income filed with the Revenue. (AY. 2007-08)
Dilip Manhar Parekh v. DCIT (2016) 136 DTR 113 / 178 TTJ 513 (Mum.)(Trib.)
1103 S. 54F : Capital gains – Investment in a residential house – While allowing exemption
deemed consideration u/s. 50C has to be taken into consideration and it cannot be
restricted to the consideration mentioned in the sale deed – Funds invested need not
be from same source it can be from other source. [S. 45, 50C]
Dismissing the appeal of revenue the Tribunal held that ;the ultimate object and purpose
of section 50C of the I.T. Act is to see that the undisclosed income of capital gains
received by the assessee should be taxed and that the law should not encourage and
permit the assessee to peg down the market value at their whims and fancy to avoid tax,
but when the capital gains is assessed on notional basis, whatever amount is invested
in the new residential house within the prescribed period under section 54 of the I.T.
Act, the entire amount invested, should get benefit of deduction irrespective of the fact
that the funds from other sources are utilised for new residential house. (ITA No. 848/
hyd/2015, dt. 13.05.2016)(AY. 2010-11)
ITO v. Kondal Reddy Mandal Reddy (Hyd.)(Trib.); www.itatonline.org
338
S. 55 Capital gains
S. 54F : Capital gains – Investment in a residential house – Construction was not 1104
completed within three years – Whole of capital gains was liable to be taxed in
previous year in which period of three years expired from date of sale of original
asset. [S.45, 263]
Assessee sold a property and purchased a vacant site for construction of residential
house. She deposited remaining sale consideration in Capital Gain Account Scheme
and claimed exemption. AO allowed the exemption. She could not complete
construction within period of three years and offered capital gain for tax after three
years. Commissioner in revision proceedings held that only unutilized portion of sale
consideration was taxable in previous year in which period of three years expired from
date of sale of original asset but investment made in vacant site was to be taxed in
year in which capital gains arose. Tribunal held that the view of Commissioner was
incorrect. Assessee was required to pay tax on whole capital gains in previous year in
which period of three years from date of transfer of original asset expired. (AY. 2009-10)
Vegesina Kamala v. ITO (2016) 157 ITD 457 (Visakha)(Trib.)
S. 54F : Capital gains – Investment in a residential house – Property booked by 1105
assessee’s mother-in-law, payments made and possession of house taken by her –
Assessee later applying to add her name – Payments made 17 months prior to date of
sale – Assessee not entitled to exemption. [S. 45]
Purchase of a constructed house in a self-financing scheme from any authority would be
treated as construction and not purchase of a residential house. However, in the instant
case, the possession letter was issued in the name of the mother-in-law, on 7-11-2006
and possession was to be taken by her on or before 14-12-2006, which was taken by
her on 15-11-2006. Perpetual lease was executed on 23-6-2007, in which name of the
assessee and her mother-in-law had been shown. Accordingly, the order of CIT(A) on
the first exemption claim u/s. 54F of the Act was upheld.(AY. 2008-09)
Seema Singh Beniwal v. Dy. CIT (2016) 45 ITR 664 (Jaipur)(Trib.)
S. 54F : Capital gains – Investment in a residential house – Purchase of plot out of 1106
sum deposited in capital gains account scheme – Construction within 3 years from the
date of sale – Habitable as servant quarters – Entitled to deduction. [S. 45]
The CBDT has clarified that purchase of plot of land is a part of residential house for claiming
deduction u/s. 54F of the Act. The assessee sold first flat on 20-10-2007 and second one on
15-3-2008 whereas the assessee constructed a room on the plot up to 15-3-2010 which was
within three years from the date of sale of the first flat, 20-10-2007. Thus, the assessee was
entitled to deduction u/s. 54F of the Act on second investment at ` 29.37 lakhs. (AY. 2008-09)
Seema Singh Beniwal v. Dy. CIT (2016) 45 ITR 664 (Jaipur)(Trib.)
S. 55. Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”.
S. 55 : Capital gains – Cost of acquisition – Value as on 1-4-1974 – Tribunal was 1107
justified in adopting the value as on 1-4-1974 at higher value than the value shown
in wealth tax return. [S.45, 260A]
AO and Commissioner (Appeals) determining value at ` 2 or 3 per sq. yard based on
valuation filed by assessee for wealth-tax purposes. Tribunal determining value at ` 50
339
Capital gains S. 55
per sq. yard based on comparable sales. High Court reversed the finding of the Tribunal.
Allowing the appeal, the Court held that;a declaration in the return filed by the assessee
under the Wealth-tax Act, 1957 would be a relevant fact for determination of the cost of
acquisition which under section 55(2) is to be determined by a determination of the fair
market value. Equally relevant for the purposes of the determination would be comparable
sales though slightly subsequent in point of time for which appropriate adjustments could
be made as had been made by the Tribunal (from ` 70 per square yard to ` 50 per square
yard). Comparable sales, if otherwise genuine and proved, could not be shunted out from
the process of consideration of relevant materials. They had been taken into account by the
Tribunal which is the last fact finding authority under the Act. Unless such cognizance was
palpably incorrect and therefore, perverse, the High Court should not have interfered with
the order of the Tribunal. That apart, the reference court under the Land Acquisition Act,
1894 had enhanced the compensation to ` 40 per square yard. This fact, though subsequent,
would not be altogether irrelevant for the purposes of consideration of the entitlement of the
assessee. In the facts of the present case the High Court ought not to have interfered with
the order of the Tribunal. (AY. 1989-90)
Ashok Sharma v. CIT (2016) 389 ITR 462 / 290 CTR 481 / 144 DTR 137 / 76 taxmann.
com 1 (SC)
Editorial: Decision of the Uttaranchal High Court CIT v. Ashok Prapann Sharma ITA No.
67 of 2003 dt 13-07-2006 was reversed.
1108 S. 55 : Capital gains – Cost of acquisition – In determining the cost of acquisition as on
01.04.1974 (or 01.04.1981), the value declared in the wealth-tax return as well as the
comparable sales, even if later in point of time, have to be considered. The High Court
should not interfere with findings of fact, unless palpably incorrect. [S. 45, 260A]
Allowing the appeal the Court held that the assessee was subjected to payment of
income-tax on capital gains accruing from land acquisition compensation and sale
of land. The dispute arose as to how the cost of acquisition is to be worked out for
the purposes of deduction of such cost from the receipts so as to arrive at the correct
quantum of capital gains exigible to tax under the Income-Tax Act, 1961 (for short “the
Act”). The Assessing Officer as well as the First Appellate Authority took into account
the declaration made in the return filed by the assessee under the Wealth Tax Act (`
2 per square yard) in respect of the very plot of land as the cost of acquisition. Some
instances of comparable sales showing higher value at which such transactions were
made (` 70/ – per square yard) were also laid by the assessee before the Assessing
Officer. The same were not accepted on the ground that such sales were subsequent
in point of time i.e. 1978-1979 whereas under Section 55(2) of the Act the crucial date
for determination of the cost of acquisition is 1st April, 1974. The Tribunal took the
view that the comparable sales cannot altogether be ignored. Therefore, though the
comparable sales were at a higher value of ` 70/ – per square yard, the learned Tribunal
thought it proper to determine the cost of acquisition at ` 50/ – per square yard. In
Second Appeal, the High Court exercising jurisdiction under Section 260A of the Act
reversed the said finding bringing the Assessee to this Court by way of present appeal.
On appeal to the Supreme Court HELD reversing the High Court:
(i) A declaration in the return filed by the assessee under the Wealth Tax Act would
certainly be a relevant fact for determination of the cost of acquisition which
340
S. 55 Capital gains
under Section 55(2) of the Act to be determined by a determination of fair market
value. Equally relevant for the purposes of aforesaid determination would be the
comparable sales though slightly subsequent in point of time for which appropriate
adjustments can be made as had been made by the learned Tribunal (from ` 70/-
per square yard to ` 50/- per square yard). Comparable sales, if otherwise genuine
and proved, cannot be shunted out from the process of consideration of relevant
materials. The same had been taken into account by the learned Tribunal which is
the last fact finding authority under the Act. Unless such cognizance was palpably
incorrect and, therefore, perverse, the High Court should not have interfered with
the order of the Tribunal. The order of the High Court overlooks the aforesaid
severe limitation on the exercise of jurisdiction under Section 260A of the Act.
(ii) That apart, it appears that there was an ongoing process under the Land
Acquisition Act, 1894 for determination of compensation for a part of the land
belonging to the Assessee which was acquired [39 acres (approx.)]. The Reference
Court enhanced the compensation to ` 40/- per square yard. The above fact,
though subsequent, would not again be altogether irrelevant for the purposes of
consideration of the entitlement of the Assessee. However, as the determination of
the cost of acquisition by the learned Tribunal was on the basis of the comparable
sales and not the compensation awarded under the Land Acquisition Act, 1894 (the
order awarding higher compensation was subsequent to the order of the learned
Tribunal) and the basis adopted was open for the learned Tribunal to consider, we
take the view that in the facts of the present case the High Court ought not to have
interfered with the order of the learned Tribunal. Appeal of assessee was allowed.
(CA No. 2314/2007, dt. 24.11.2016)(AY.1989-90)
Ashok Prapann Sharma v. CIT (SC), www.itatonline.org
S. 55 : Capital gains – Cost of improvement – Cost of acquisition Expression 'where 1109
capital asset became property of assessee before 1-4-1981' as used in section 55(2)(B)
(i) of Act cannot be equated to legal ownership, Indexation is eligible from the date
of acquisition. [S.45, 263]
In March 1971, State Government assigned a property to assessee for construction of
building and errection of machinery. Subsequently, State Government handed over
management of said industrial estate to State Small Industries Development Corporation
Ltd. State Corporation sold property in question to assessee in year 1994 by executing a sale
deed for a consideration already paid by assessee in terms of deed of assignment. Assessee
sold said property and computed capital gains on basis of fair market value of land as on
1-4-1981. Assessing Officer accepted capital gain declared by assessee. Commissioner was of
view that assessee became owner of property in year 1994 only and, thus, computation of
long term capital gain was incorrect. Tribunal held that from records that assessee obtained
possession of land and paid entire purchase consideration in terms of deed of assignment
much prior to 1-4-1981. It was also undisputed that sale deed merely recognised assessee's
ownership with reference to original deed of assignment. Accordingly the assessee was
entitled to adopt fair market value of property as on 1-4-1981 as cost of acquisition and,
thus, grant of consequent indexation benefit was justified. (AY. 2004-05)
Stewarts & Lloyds of India Ltd. v. CIT (2016) 158 ITD 456 / 178 TTJ 188 (Kol.)(Trib.)
341
Capital gains S. 55A
S. 55A. Reference to Valuation Officer.
1110 S. 55A : Capital gains – Reference to Valuation officer – Reference to DVO unjustified
when the valuation of the Government approved valuer was on the higher side as on
1-4-1981. [S.45]
The High Court held that the reference to the DVO for valuation of the property was
unjustified as the valuation done by the Government Approved Valuer appointed by the
assessee was on the higher side and therefore, the condition precedent to invoke section
55A was not satisfied. (AY. 2000-01)
Kiritbhai Jayantilal Kundalia (HUF) v. ITO (2016) 242 Taxman 182(Guj.)(HC)
1111 S. 55A : Capital gains – Cost of acquisition – Fair market value as on 1-4-1981 –
Assessee's valuation high in opinion of AO – Reference to District Valuation Officer
proper – Within jurisdiction of AO.[S.45]
The action of the AO in making a reference to the District Valuation Officer was within the
parameters of section 55A(b)(ii), which empowered him to make a reference if in his opinion
the fair market value estimated by the assessee was not proper. The reference made by the
AO to the District Valuation Officer was competent and permissible under law.(AY. 1996-97)
Nirmal Kumar Ravindra Kumar-HUF v. CIT (2016) 386 ITR 10 / 240 Taxman 404 / 288
CTR 710 / 140 DTR 432 (Cal.)(HC)
1112 S. 55A : Capital gains – Reference to valuation officer – Cost of acquisition –
Authorities are not justified in adopting the rate on their own estimation.
It is incumbent upon the assessing authority to call for report from the Department
Valuation Officer for ascertaining the fair market value of the asset. The authorities are
not justified in adopting the rate on their own estimation as the assessee had furnished
a report from Government approved valuer. (AY. 2008-09, 2009-10)
ACIT v. Synbiotics Ltd. (2016) 48 ITR 210 (Ahd.)(Trib.)
1113 S. 55A : Capital gains – Reference to Valuation Officer – In the interest of justice to
avoid the sending the matter back to the AO, Tribunal arrived at the FMV based on
an average rate.
Tribunal held that it is incumbent upon the assessing authority to call for report from
DVO for ascertaining the fair market value of the asset, in the event, if he is not satisfied
on the claim of the assessee. On facts it was found that without calling from the DVO’s
report, the AO has adopted a different rate and the CIT(A) has adopted a different rate,
in the interest of justice and considering the fact that there would be further delay in
obtaining an expert’s report, the Tribunal arrived at the FMV based on an average rate.
DCIT v. Ambalal Sarabhai Enterprises Ltd. (2016) 48 ITR 210 (Ahd.)(Trib.)
S. 56. Income from other sources.
1114 S. 56 : Income from other sources – Gift – Where assessee was an AOP sum of ` 1.60 crore
received by it without consideration could not be included in its total income. [S. 56(2)(vi)]
Assessee was a beneficiary trust assessed in status of AOP. It received a gift from settlor's
wife during year towards trust fund which was not included in total income in terms
342
S. 56 Income from other sources
of S. 56(2)(vi). The AO included said amount in income of trust. The ITAT held that
any sum exceeding ` 50,000/- can fall within ambit of s. 56(2)(vi) only if it is received
by an individual or HUF. Since assessee was an AOP and not any individual or HUF,
such a receipt could not be included in its total income within framework of S.56(2)
(vi)(AY. 2010-11)
Mridu Hari Dalmia Parivar Trust v. ITO (2016) 158 ITD 521 / 139 DTR 143 / 179 TTJ
577 (Delhi)
S. 56 : Income from other sources – Interest received under the Land Acquisition Act, 1894 1115
is taxable as income from other sources. [S. 2(28A), Land Acquisition Act, 1894, S. 28]
The assessee HUF received interest under section 28 of the Land Acquisition Act, 1894.
Section 28 empowers the court to award interest on the excess amount of compensation
awarded by it over the amount awarded by the Collector. Assessee contended that the
said interest would partake the character of compensation or damage and therefore,
would not be liable to tax. High Court held that the interest received u/s. 28 was on
account of keeping back the amount payable to the owner and did not form part of the
compensation or damages for the loss of right to retain possession. Accordingly it was
held that amount received by the assessee was in the nature of interest and was taxable
as income from other sources. (AY. 2010-11)
Manjet Singh (HUF) Karta Manjeet Singhv. UOI (2016) 237 Taxman 116 (P&H)(HC)
S. 56 : Income from other sources – Construction activities – Deposited surplus funds 1116
in FRDs – Interest earned thereon was to be taxed as 'income from other sources. [S. 4]
Allowing the appeal of revenue the Tribunal held that where assessee, engaged in
construction activities, deposited its surplus funds in FDRs, interest earned thereon was
to be taxed as 'income from other sources'. (AY. 2007-08 to 2009-10)
ACIT v. Z Square Shopping Mall (P.) Ltd. (2016) 157 ITD 105 (Luck.)(Trib.)
S. 56 : Income from other sources – Income from house property – Let out building 1117
with furniture in a composite manner assessable under the head income from other
sources. [S. 22]
Tribunal held that where assessee let out his building along with furniture and fixtures
and electrical installations and offered rental income under head 'Income from house
property', rental income would fall under head 'Income from other sources, as the let
out was in a composite manner which were inseparable from each other. (AY. 2010-11)
ACIT v. Ajay Kalia (2016) 157 ITD 187 / 135 DTR 147 / 178 TTJ 507 (Delhi)(Trib.)
S. 56 : Income from other sources – Capital gains – Mere making of payment by assessee 1118
to a builder, even prior to sanction of building plan itself, cannot be said to have yielded
a vested right in assessee to get a property which was neither in existence at that time
nor any process for construction of same had started – Income accrued to the assessee
was held to be assessable as income from other sources. [S. 2(47), 45]
Assessee paid certain amount to a builder for allotment of offices in a building in
allotment letter, it was specifically mentioned that after construction of building,
offices located in said building could be used only for activities relating to information
343
Income from other sources S. 56
technology. Since assessee was not involved in any activity of information technology,
it entered into agreement for sale of office premises with builder. Thereupon, builder
sold allotment rights of assessee to third parties at a higher amount. Assessee offered
the amount as capital gains. AO assessed the gain as income from other sources. On
appeal by assessee dismissing the appeal the Tribunal held that mere making of payment
by assessee to a builder, even prior to sanction of building plan itself, cannot be said
to have yielded in a vested right in assessee to get a property which was neither in
existence at that time nor any process for construction of same had started. On facts, it
could be concluded that assessee had advanced money to builder to make quick profits
either by way of interest or by way of share in profits which builder may gain by selling
properties. Therefore, income accrued to assessee relating to aforesaid transaction was
to be assessed as income from other sources. (AY. 2009-10)
S. Narendrakumar & Co v. Dy. CIT (2016) 156 ITD 440 / 175 TTJ 113 / 129 DTR 1 (Mum.)
(Trib.)
1119 S. 56 : Income from other sources – Interest income on fixed deposits – Method of
accounting – Income was offered on the basis of certificate received from the Bank –
Addition was held to be not justified. [S.4]
Tribunal held that where assessee was following same method of accounting to show
interest income on fixed deposits on basis of bank certificates only, no addition could
be made on ground that portion of interest was not shown. (AY. 2006-07)
Sunil Kumar Saha v. ITO (2016) 156 ITD 1 (Kol)(Trib)
1120 S. 56 : Income from other sources – Interest awarded on compensation for personal
disability does not have the character of "income" and cannot be taxed. CBDT requested
to issue instructions to mitigate hardship of accident victims.[S. 56(2)(vii), 145A]
The assessee is an unfortunate victim of a motor accident. On 18th May 1990, she was
travelling in a car, which met with a serious accident, leaving her permanently disabled,
which was termed by the competent authority, at ninety percent level. She claimed a
compensation of ` 15,00,000 for this tragic loss of her physical abilities. She did eventually
get it but she had to knock the doors of Hon’ble Supreme Court, and it was finally on 26th
April, 2011 that her claim was upheld. As if this long struggle of 21 years in the judicial
process was not enough, the destiny had more in store for her. It is this settlement of the
accident compensation claim that has led to a new round of litigation – this time about
taxability of a component of compensation, i.e. interest component. Mercifully, there is no,
and there cannot be, any dispute about the fact that the compensation for disability cannot
be subject to tax, but the stand of the Assessing Officer is that interest component on
compensation awarded by Hon’ble Supreme Court is taxable as it is covered under section
145A(b) r.w.s. 56(viii) of the Act. In appeal, learned CIT(A) has confirmed this stand. On
appeal by the assessee HELD allowing the appeal:
(i) Section 145A starts with a non obstante clause which restricts the scope of Section
145 dealing with the method of accounting. It is not a charging provision. The
only impact it has on taxability of an income is its timing of taxability. What is
not taxable is not made taxable under section 145A(b) but what is taxable under
the mercantile method of accounting, i.e. on accrual basis, is made taxable on cash
basis of accounting, i.e. at the point of time when interest is actually received.
344
S. 56 Income from other sources
Nothing else needs to read into this provision, and the memorandum explaining
the provision of Finance Bill, 2009, as reproduced earlier, makes that amply clear.
As for the provisions of Section 56(2)(viii), it is only an enabling provision, as
unambiguously made clear in the above memorandum as well, to bring interest
income to tax in the year of receipt rather than in the year of accrual. Section
56(2)(viii) provides that……”incomes, shall be chargeable to income tax under
the head ‘income from other sources’, namely ….(viii) income by way of interest
received on compensation or enhanced compensation referred to in clause (b) of
Section 145A”. The starting point of this exercise is income, and it is only when
the receipt is in the nature of an income, that the classification of income under a
particular category arises. In other words, when interest received by the assessee
is in the nature of income, such interest can be taxed under section 56(2)(viii).
Section 56(1) makes this aspect even more clear when it states that “Income of
every kind, which is not to be excluded from the total income under this Act, shall
be chargeable to income tax under the head “income from other sources”, if it is
not chargeable to income tax under any of the heads specified in Section 14, items
A to E”, and then, in the subsequent provision, i.e. Section 56(2), proceeds to set
out an illustrative, rather than exhaustive list of, such “incomes”. Clearly, unless a
receipt is not an income, there is no occasion for the provisions of Section 56(1)
or 56(2) coming into play. Section 56 does not decide what is an income. What it
holds is that if there is an income, which is not taxable under any of the heads
under Section 14, i.e. item A to E, it is taxable under the head ‘income from other
sources’. The receipt being in the nature of income is a condition precedent for
Section 56 coming into play, and not vice versa. To suggest that since an item is
listed under section 56(2), even without there being anything to show that it is in
the nature of income, it can be brought to tax is like putting the cart before the
horse. The very approach of the authorities below is devoid of legally sustainable
merits. The authorities below were thus completely in error in bringing the interest
awarded by Hon’ble Supreme Court to tax. The question of deduction under
section 57(iii), given the above conclusion, is wholly irrelevant. We vacate this
action of the Assessing Officer, and disapprove the CIT(A)’s action of confirming
the same. Grievance of the assessee is thus upheld.
(ii) As we part with the matter, we must say that, as fellow citizens, we are deeply
anguished to take note of the long journey that the assessee had to undertake to
get her dues and then to fight this unjust income tax demand on her. In order to
ensure that others do not have to tread the same arduous path at least with respect
to the tax demand, and to bring an element of certainty, we would suggest that
the Central Board of Direct Taxes may as well take a conscious call on issuing
appropriate administrative instructions in this regard and ensuring that what was
brought as a measure of relief to the taxpayers is not used, by the field officers,
as a source of taxation. Such a step certainly cannot mitigate the pain of an
accident victim but it can probably help in ensuring that hardships of the accident
victim are not further compounded, and that’s the least that a responsive tax
administration, like the one we fortunately have at present, can do. (AY. 2012-13)
Urvi Chirag Sheth v. ITO (2016) 159 ITD 199 / 179 TTJ 245 / 136 DTR 345 / 51 ITR 491
(Ahd.)(Trib.)
345
Income from other sources S. 56
1121 S. 56 : Income from other sources – Gifts – Trust – Beneficiary – Amount received by
beneficiary from trusts could not be said to be received without consideration and
hence could not be taxed under section 56(2)(vi). [S. 56]
Allowing the appeal of the assessee, the Tribunal held that, amount received as
beneficiary from trusts was nothing but his own income in his status as a beneficiary
of said trust character of income in hands of beneficiary would remain same, hence the
amount received cannot be sad to be without consideration hence cannot be assessed
under section 56(2)(vi). (AY. 2008-09)
Sharon Nayak (Mrs.) v. Dy. CIT (2016) 159 ITD 143 (Bang.)(Trib.)
1122 S. 56 : Income from other sources – Bonus shares can never considered as received
without consideration or for consideration less than fair market value. [S. 56(2)(vi)]
Dismissing the appeal of the revenue, the Tribunal held that the bonus shares can never
be given nil value and its value has to be worked out by the principle of averaging. It
is that for every bonus share issued, there is a corresponding reduction in the actual
fair market value of the equity share originally held. An assessee who received bonus
shares could never be considered as receiving something without consideration or for
a consideration less than the fair market value of the property. When bonus shares are
received, it is not something which has been received free or for a lesser fair market value.
A consideration flows from the holder of the shares, may be unknown to him, which is
reflected in the depression in the intrinsic value of the original shares held by him.
Bonus shares can never be considered as received without consideration or for
inadequate consideration calling for application of sub-clause (c) of clause (vii) of
section 56(2). The order of Commissioner (Appeals) deleting the addition made by the
Assessing Officer was justified.
DCIT v. Dr. Rajan Pai (2016) 48 ITR 170 / 143 DTR 20 / 180 TTJ 0714 (Bang.)(Trib.)
1123 S. 56 : Income from other sources – Deemed – Gift – Group company's shares taken –
over by a closely held company, fair market value was not properly applied, matter
was set aside. [S. 56(2)(viia) R. 11U, 11UA(c)(b)]
Allowing the appeal the Tribunal held that the Assessing Officer ought to have
computed FMV in accordance with prescribed method under rules and then compared
same with consideration paid by assessee and applied provision. Even when transactions
were between related parties, provisions of section 56(2)(viia) could be applied only in
accordance with prescribed method. Since provisions of section 56(2)(viia) were not
properly and correctly applied in assessee's case, matter was to be remanded back for
reconsideration. (AY. 2011-12)
Medplus Health Services (P.) Ltd. v. ITO (2016) 158 ITD 105 / 48 ITR 396 (Hyd.)(Trib.)
346
S. 57 Income from other sources
S. 57. Deductions.
S. 57 : Income from other sources – Deduction – Interest on money borrowed for 1124
investment in shares of company, though shares yielded no dividend is held as an
allowable deduction
Allowing the appeal the Court held that there was nothing to indicate that the assessee
herself or in concert with others intended acquiring control for any reason. The
High Court observed it was not held that the reason of the assessee for acquiring the
shares was for the purpose of acquiring or even maintaining control. The High Court
distinguished the facts in the present case with the Bombay High Court ruling in the
case of CIT v. Amritaben R. Shah (1999) 238 ITR 777 (Bom.)(HC). The High Court
held that it is reasonable to presume that the assessee acquired the shares wholly and
exclusively for the purpose of making or earning income and not for the purposes of
acquiring controlling interest and allowed entire interest. (AY. 1997-98)
Satish Bala Malhotra (Smt.) v. CIT (2016) 143 DTR 321 (P&H)(HC)
S. 57 : Income from other sources – Write off of interest and lease charges which were 1125
earlier offered to tax under section 56 cannot be claimed as a deduction under section
57(iii) or under section 36(1)(vii) [S. 36(1)(vii), 56]
Assessee had given loans to its subsidiary and had also leased out its machineries
and was entitled to receive interest on loans and rental income for lease of machines.
Interest and rental income which had accrued were shown as income from other sources
under Section 56 in the return of income. As the subsidiary was incurring losses, the
assessee wrote off the interest and lease charges and claimed the same as deduction.
AO denied the claim under section 57(iii). High Court held that where income has been
offered to tax under the head income from other sources, the claim for deduction can
be considered only under section 57. High Court denied the assessee’s claim for write
off of interest and lease charges as the requisites under section 57(iii) were not satisfied.
High Court further held that deduction cannot also be claimed under section 36(1)(vii)
as the same can be availed only where the income is offered under the head profits and
gains from business or profession. (AY. 2008-09)
Malankara Plantations Ltd. v. ACIT (2016) 236 Taxman 61 (Ker.)(HC)
S. 57 : Income from other sources – Interest paid could not be allowed to be set off 1126
against interest received on income – tax refund; however, restrictive deduction would
be granted u/s. 57(iii). [S.57(iii)]
Tribunal held that Interest paid could not be allowed to be set off against interest received on
income-tax refund; however, restrictive deduction would be granted u/s. 57(iii). (AY. 2007-08)
Lupin Ltd. v. ACIT (2016) 159 ITD 10 (Mum.)(Trib.)
S. 57 : Income from other sources – Interest paid during period of suspension as a 1127
stock broker is allowable as deduction. [S. 57(iii)]
Assessee stockbroker had make deposit with NSE and said deposits were made after
taking loan from banks, interest so paid during period of suspension of assessee as a
stock broker allowed as deduction u/s. 57(iii). (AY. 2008-09, 2009-10)
Triumph International Finance India Ltd. v. ACIT (2016) 161 ITD 464 (Mum.)(Trib.)
347
Clubbing of income S. 64
CHAPTER V
INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME
S. 64. Income of individual to include income of spouse, minor child, etc.
1128 S. 64 : Clubbing of income – Benami property of assessee and income of such unit was
rightly clubbed with income of assessee. [S. 143(3), Indian Contract Act, 1872, S.11]
Dismissing the appeal the Court held that where assessee filed returns of his daughter
'K' declaring income derived from a unit 'P' and stated that said unit belonged to his
wife 'S' and 'K' had purchased it from 'S', since it was apparent from record that unit
'P' was neither owned by 'K' nor by 'S', it would have to be held that said unit was
benami property of assessee and income of such unit was rightly clubbed with income
of assessee. The High Court held that, if 'K' was minor, it is difficult to understand how
she earned money to pay the same to her mother. Moreover when she was minor, how
she has got capacity to execute promissory note in favour of her mother. The HC further
relied on the observations made by the Supreme Court in the case of Mathai Mathai v.
Joseph Mary @ Marykkutty Joseph [2015] 5 SCC 622 to hold that any contract by the
minor is void. Thus it concluded that 'K' was not competent to execute any promissory
note which is also an agreement between her and her mother, hence such document
is void one. Taking into consideration of all these documents and statement of 'K', the
Bench was of the considered view that the unit 'P' is not owned by 'K'. Moreover neither
the assessee takes the plea nor is document proved to show that the said unit is owned
by his wife 'S'. Thus it was held that 'P' is a benami property of the assessee.
Sri Suru Bhaskar Rao v. CIT (2016) 386 ITR 419 / 286 CTR 200 / 239 Taxman 6 / 135
DTR 41 (Orissa)(HC)
1129 S. 64 : Clubbing of income – Spouse qualified and having expertise in business matters
– Remuneration not includible in total income of assessee.
Assessee's wife was a post-graduate and a director in many companies. She had
expertise in business matters also. She was a separate assessee for many years and her
income could not be clubbed with that of the assessee. (AY. 1995-96 to 1998-99)
CIT v. O.P. Srivastava (2013) 219 Taxman 133 / (2014) 265 CTR 481 / (2016) 385 ITR
547 (All.)(HC)
CIT v. Subrata Roy (2013) 219 Taxman 133 / (2014) 265 CTR 481 / (2016) 385 ITR 547
(All.)(HC)
Editorial : The decision was recalled by order dt. 21st February, 2014. The Supreme Court
set aside the order (CIT v. Subrata Roy (2016) 385 ITR 570 (SC)
1130 S. 64 : Clubbing of income – Spouse – A property was jointly held by assessee and
her husband – Source of funds for investment in said property was made by husband.
Property was reflected in husband’s balance sheet and short term gain was disclosed
in the return of husband, short term gain cannot be assessed in the hands of wife.
[S. 45]
Assessee and her husband were joint owners of a property. On the basis of AIR
information, the AO held that since assessee's name appeared in agreement and
348
S. 64 Clubbing of income
assessee's husband had set off short-term capital gain on sale of said property against
sale proceeds of some shares, assessee was liable to be taxed for 50 per cent of STCG
arising from sale of said property. CIT(A) deleted the addition. Dismissing the appeal of
the revenue, the Tribunal held that although assessee was shown as co-owner of said
property, in fact, her husband made entire investment in purchase of it and same was
reflected in his balance sheet and STCG arising thereon was disclosed in his return of
income, therefore entire STCG arising on sale of said property was to be assessed in
hands of assessee's husband and not in assessee's hands. (AY. 2009-10)
ITO v. Vandana Bhulchandani (Dr.) (2016) 160 ITD 552 / 180 TTJ 505 (Mum.)(Trib.)
349
Cash credits S. 68
CHAPTER VI
AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS
S. 68. Cash credits.
1131 S. 68 : Cash credits – Produced all relevant details in its possession, such as names,
permanent account numbers, income-tax returns, and bank statements of all the
investors, merely because the summons could not be served, transactions could not be
held to be non-genuine, Assessing Officer could have verified from the record. [S. 131]
Dismissing the appeal of the Revenue, the Court held that PAN and Income tax returns
were furnished to the AO and he could have easily verified the same. Therefore, merely
because summons could not be served upon some parties or they did not appear before
him, transactions could not be held to be non-genuine. (AY. 2006-07, 2007-08)
PCIT v. D & H Enterprises (2016) 241 Taxman 157 (Guj.)(HC)
1132 S. 68 : Cash credits – Unexplained money – Mere mistake in mention of section 69A
as provision under which assessment made instead of section 68 – Assessment not
rendered invalid – Creditors were held to be non-genuine, addition was held to be
justified. [S. 69A, 143(3)]
Dismissing the appeal of assessee the Court held that the assessee claimed to have
received the amount as a loan. The burden, therefore, was on him to establish that fact
in which he failed. This was merely a case of a wrong section being mentioned in the
assessment order and in the order of the Commissioner (Appeals). All the jurisdictional
facts for invoking section 68 existed. The enquiries made by the AO in the assessment
proceedings were not stated to be under any particular provisions. The enquiries were
merely factual relating to the source of acquisition of the money. The assessee had not
been prejudiced in any manner whatsoever on account of the AO having mentioned the
wrong section. The assessment was valid. (AY. 2008-09)
Namdev Arora v. CIT (2016) 389 ITR 434 / 241 Taxman 303 / (2017) 147 DTR 138 (P&H)
(HC)
1133 S. 68 : Cash credits – Share application money – Permanent account numbers, bank
details of share applicants and affidavits of directors of share applicant company was
furnished, share application money cannot be considered as unexplained cash credits.
Dismissing the appeal of revenue the Court held that the assessee had provided
sufficient indication by way of permanent account numbers, to highlight the identity
of the share applicants and produced the affidavits of the directors of the companies.
Furthermore, the bank details of the share applicants too had been provided. Thus, the
assessee complied with the law spelt out by the Supreme Court in the decision of CIT
v. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC). The share application money of the
assessee could not be considered as unexplained cash credit. CIT v. Lovely Exports P.
Ltd. (2009) 319 ITR (St.) 5 (SC) (AY. 2003-04)
CIT v. Softline Creations P. Ltd. (2016) 387 ITR 636 (Delhi)(HC)
350
S. 68 Cash credits
S. 68 : Cash credits – Negative cash balance – Land jointly held by the assessee 1134
along with his brother – Deficit amount belonged equally to assessee and his brother,
addition was held to be justified.
Dismissing the appeal of the assessee, the Court held that the Tribunal order are based
on material on record and hence the order does not call for interference. (AY. 2009-10)
Pavittar Singh v. CIT (2016) 282 CTR 285 (P&H)(HC)
S. 68 : Cash credits – Gifts from NRI brother – Failed to establish the creditworthiness 1135
of the brother, addition was held to be justified.
On appeal High Court held that since assessee failed to establish creditworthiness of
donor and genuineness of transaction, impugned addition deserved to be upheld. (AY.
2005-06)
E. Ummer Bava v. CIT (2016) 72 taxmann.com 123 (Ker.)(HC)
Editorial: SLP filed against impugned order was to be dismissed E. Ummer Bava v. CIT
(2017) 244 Taxman 193 (SC)
S. 68 : Cash credits – Cash deposits – The Special Leave Petition filed against 1136
impugned order was dismissed by the Supreme Court.
SLP dismissed against High Court ruling where it was held that where the assessee had
failed to give list of persons who advanced cash to him along with their confirmation
in respect of huge amount of cash deposited in its bank account, Assessing Officer was
justified in adding said amount to assessee’s taxable income under section 68.
Sudhir Kumar Sharma (HUF) v. CIT (2016) 239 Taxman 264 (SC)
Editorial: Refer Sudhir Kumar Sharma (HUF) v. CIT (2014) 224 Taxman 178 (P&H)(HC)
S. 68 : Cash credits – Trade creditors – When the facts show that the loan applications 1137
of 37 alleged trade creditors were processed and handled by the assessee and that the
loan amounts were not reflected in the returns of the alleged creditors, the High Court
erred in remanding the matter to the AO on the ground that the AO ought to have
given notice to the alleged trade creditors.
Allowing the petition of revenue, the Court held that Both the Assessing Officer and the
C.I.T. had recorded findings of fact adverse to the Assessee which has been upheld by
the learned single judge of the High Court. The Division Bench of the High Court in the
Writ Appeal thought it appropriate to reverse the said findings on the ground that the
37 persons who had advanced the loan to the Assessee ought to have been given notice.
The jurisdiction of the Division Bench in a Writ Appeal is primarily one of adjudication
of questions of law. Findings of fact recorded concurrently by the authorities under the
Act and also in the first round of the writ proceedings by the learned single judge are
not to be lightly disturbed.
In the present case, in the face of the clear findings that the loan applications were
processed by the Officers of the Assessee and the loan transactions in question of the
aforesaid 37 persons were also handled really by the assessee and further in view of
the categorical finding that the loan amounts were not reflected in the returns of the
37 persons in question, we do not see how the High Court could have taken the above
view and remanded the matter to the Assessing Officer.
351
Cash credits S. 68
It has been pointed out before us that pursuant to the impugned order passed by the
Division Bench of the High Court fresh assessment proceedings have been finalized by
the Assessing Officer. The said exercise has been done in the absence of any interim
order of this Court. However, merely because fresh assessment proceedings have been
carried out in the meantime it would certainly not preclude the Court from judging the
validity and correctness of the order of the Division Bench of the High Court. For the
reasons stated, we cannot uphold the order of the Division Bench passed in the Writ
Appeal in question. Consequently, we allow this appeal and set aside the order of the
Division Bench and consequently all further orders passed pursuant thereto
CIT v. Karnataka planters Coffee curing Work (P) Ltd. (2016) 387 ITR 1 / 140 DTR 20 /
288 CTR 241 / 243 Taxman 21 (SC)
1138 S. 68 : cash credits – Increase in opening capital – Gifts – Commissioner (Appeals)
deleting additions on basis of explanation given by each donor and documentary
evidence – Tribunal restoring additions holding there was no evidence that gifts
genuine – Not proper. [S. 254(1)]
Allowing the appeal the Court held that the Tribunal fell into error in interfering with
the order of the Commissioner (Appeals) without first dislodging the reasons given
by him. Assuming that another view was possible, that itself would be no ground
to interfere with the order of the Commissioner (Appeals) unless it was shown that
the appreciation of evidence by the Commissioner (Appeals) was either perverse or
untenable and that in holding in favour of the assessee the Commissioner (Appeals) had
either ignored material evidence or that the view taken by him was patently untenable.
(AY. 1996-97)
Prahlad Bhattacharya v. CIT (2016) 386 ITR 708 / 71 taxmann.com 63 (Cal.)(HC)
1139 S. 68 : Cash credits – Forfeiture of deposits – Additions to income justified.
Unexplained amount shown as forfeiture of deposits made by various persons also
remained unsubstantiated. The assessee had claimed before the Tribunal that the amount
added to its income on this account was relatable to surrender of ` 50,00,000 made
during the AY 2007-08. The plea was not established and was repelled by the Tribunal.
The concurrent findings of fact recorded by the authorities below were based on
material on record. The additions to the assessee’s income were justified. (AY. 2005-06)
Sharma and Gangadhar Build and Colonziers P. Ltd. v. CIT (2016) 386 ITR 527 (P&H)(HC)
1140 S. 68 : Cash credits – Share capital – Non-existent shareholders – AO entitled to make
enquiry – Matter remanded for consideration in light of decision of Full Bench of Delhi
High Court.
Allowing the appeal of revenue the Court held that Upon enquiry, when it transpired
that the so called shareholders were non-existent, the AO was entitled to take the view
that the share capital was unexplained cash credits. However, there was substance
in the submission of the assessee that if the AO had been in a hurry to complete the
assessment he could not have had time to scrutinise the evidence adduced by the
assessee, and it could not be said that the assessee had failed to discharge its burden.
Therefore, it would be appropriate to remand the matter to the AO to be considered
352
S. 68 Cash credits
in the light of the law laid down by the Full Bench of the Delhi High Court in Sophia
Finance Ltd. and the decision of the Calcutta High Court. Matter remanded. (AY. 2000-
01, 2001-02)
CIT v. Shyam Sel Ltd. (2016) 386 ITR 312 (Cal.)(HC)
S. 68 : Cash credits – Share application – Assessee cannot be held liable if 1141
shareholders have acquired money illegally.
The AO was of the view that the share application money was received by the assessee
from the shareholders whose sources of income were doubtful. However, it was a finding
of fact by the Tribunal and the Commissioner (Appeals) that the money received by
the company was credited in the account and that the shares were issued. On appeal:
Held, dismissing the appeal, that if the shareholders had acquired the money illegally,
the assessee could not be held liable. There was nothing on record to show that the
money belonged to the assessee itself and the Department could only proceed against
the shareholders. No question of law arose. (AY. 2006-07)
CIT v. K. C. Pipes P. Ltd. (2016) 386 ITR 532 (P&H)(HC)
S. 68 : Cash credits – Genuineness of credits established – No addition to income can 1142
be made.
The assessee had received fixed deposits from nine persons. The AO called upon the
assessee to prove the genuineness of the transaction of receipt of the fixed deposits from
these persons with necessary evidence. The assessee filed some details and also produced
one of such depositors. In the absence of the assessee producing the other creditors, the
AO held that the deposits amounting to ` 44 lakhs received from six persons were bogus.
The assessee had also claimed deduction in respect of interest paid on such fixed deposit
receipts to its depositors. The AO made further addition of ` 1,94,710 representing interest
paid in respect of about six credits, making a total addition of ` 45.94 lakhs. Held the
AO had not given any adverse remarks and the assessee had furnished elaborate details
regarding the deposits of such depositors giving their permanent account number and the
bank accounts showing all particulars. (AY. 2005-06)
PCIT v. Talbros Engineering Ltd. (2016) 386 ITR 154 (P&H)(HC)
S. 68 : Cash credits – Gift – Gift was not proved by the assessee as close relations with 1143
donor were not proved nor donor was produced – Addition was held to be justified.
Assessee had received an alleged gift of ` 5,00,000 by demand draft from a donor
who was third party. The AO added u/s. 68 of IT Act by not being satisfied with the
purported gift of the said amount added ` 5,00,000/- on surrendered amount by assessee
and taxed same u/s. 68 of IT Act. CIT(A) deleted the addition on the ground that the
said surrender was under coercion. On appeal in Tribunal, Tribunal reversed the finding
of CIT (A). On further appeal in HC, HC upheld the findings of Tribunal and held that
Gift was not proved by the assessee as close relations with donor were not proved nor
donor was produced. Assessee had voluntarily surrendered the amount after enquiries
by the AO and argument of the assessee that the assessee was pressurized and coerced
to surrender is wholly unjustified and on afterthought addition u/s. 68 was sustainable.
(AY. 2002-03)
Jyoti Jajoo (Smt.) v. CIT (2016) 139 DTR 129 / 288 CTR 87 (Raj.)(HC)
353
Cash credits S. 68
1144 S. 68 : Cash credits – Advances taken by the assessee against proper receipt which is
adjusted against the full sale price at the time of giving delivery of motorcycles cannot
be taxed as cash credit.
Assessee had taken advances from the buyers of motor cycles which were credited in
the books of account. AO held these amounts as bogus liability and added the same as
income under section 68. ITAT deleted the addition holding that the advance deposits
from customers were on account of sale of motorcycle and as and when the sale took
place, within one to two months, these deposits were adjusted against the sale price of
the motor cycle. HC held that the question whether the assessee had in fact received
the amounts as advances was proved by way of evidence and the ITAT was satisfied
that the amounts were not bogus liabilities was a question of fact and no substantial
question of law arose from it. (AY. 2010-11)
PCIT v. Dutta Automobiles (P) Ltd. (2016) 287 CTR 684 (Cal.)(HC)
1145 S. 68 : Cash credits – Where deposits was made with assessee represented booking
amount received toward construction and same was done through banking channel
and copies of account of depositor were duly filed, section 68 would not apply.
Dismissing the appeal of revenue the Court held that ;where deposits was made with
assessee represented booking amount received toward construction and same was done
through banking channel and copies of account of depositor were duly filed, section 68
would not apply. (AY. 2000-01)
ITO v. Shanti Enterprise (2016) 240 taxman 698 (Guj.)(HC)
1146 S. 68 : Cash credits – Unsecured loan – No documentary evidence furnished by
assessee – Concurrent findings recorded by authorities confirming addition – Court
will not interfere. [S. 260A]
A sum of ` 25 lakhs claimed by the assessee to be an unsecured loan was treated
as unexplained cash credit under section 68 of the Act on the ground that its source
was not proved by the assessee with any documentary evidence. The Commissioner
(Appeals) held that since the assessee was not able to prove the source of cash credit,
the addition was justified. The Tribunal held that the assessee failed to furnish any
evidence on the source of the cash deposit and creditworthiness of the creditor and
therefore, failed to prove the creditworthiness of the creditor and the genuineness of the
transaction. It confirmed the addition on account of the cash credit. On appeal: Held,
dismissing the appeal, that the concurrent findings recorded by the authorities below
had not been shown to be illegal or perverse by the assessee. No question of law arose.
(AY. 2009-10)
Sanjeev Kumar v. CIT (2016) 385 ITR 493 (P&H)(HC)
1147 S. 68 : Cash credits – Share capital – Denying subscription – Notices were retuned in
served – Addition was held to be justified.
Dismissing the appeal of assessee the Court held that the assessee not producing books
of account or bank accounts or shareholders’ register. Eight out of fifty six persons
from shareholders’ list provided by assessee denying subscription. Remaining notices
returning with endorsement “not known”. Concurrent findings of Commissioner
354
S. 68 Cash credits
(Appeals) and Tribunal based on evidence that credits not explained. Unexplained share
application money rightly treated as assessee’s income. (AY. 1983-84)
Rick Lunsford Trade and Investment Ltd. v. CIT (2016) 385 ITR 399 (Cal.)(HC)
Editorial : SLP of assessee is rejected Rick Lunsford Trade & Investment Ltd. v. CIT (2017)
245 Taxman 43 (SC)
S. 68 : Cash credits – The assessee is bound to be provided with the material used 1148
against him apart from being permitted to cross examine the deponents. The denial of
such opportunity goes to root of the matter and strikes at the very foundation of the
assessment order and renders it vulnerable. [S. 143(3), 147, 148]
(i) On a very fundamental aspect, the revenue was not justified in making addition
at the time of reassessment without having first given the assessee an opportunity
to cross examine the deponent on the statements relied upon by the ACIT. Quite
apart from denial of an opportunity of cross-examination, the revenue did not even
provide the material on the basis of which the department sought to conclude that
the loan was a bogus transaction.
(ii) In the light of the fact that the monies were advanced apparently by the account
payee cheque and was repaid vide account payee cheque the least that the revenue
should have done was to grant an opportunity to the assessee to meet the case
against him by providing the material sought to be used against assessee in arriving
before passing the order of reassessment. This not having been done, the denial
of such opportunity goes to root of the matter and strikes at the very foundation
of the reassessment and therefore renders the orders passed by the CIT(A) and
the Tribunal vulnerable. In our view the assessee was bound to be provided with
the material used against him apart from being permitted to cross examine the
deponents. Despite the request dated 15th February, 1996 seeking an opportunity
to cross examine the deponent and furnish the assessee with copies of statement
and disclose material, these were denied to him. In this view of the matter we are
inclined to allow the appeal (ITA No. 58 of 2001, dt. 30.06.2016) (AY. 1983-84)
H. R. Mehta v. ACIT (2016) 138 DTR 217 (Bom.)(HC); www.itatonline.org
S. 68 : Cash credits – Firm – Partners – In the case of a newly incorporated 1149
partnership firm, unexplained source of funds should be considered in the hands of
the partners and not the firm.
The assessee, a partnership firm, filed its first return and received additional capital
from its partners. The partners got the said additional capital via gifts/loans entirely
in cash during the year 1986-87 & 1987-88 and filed their returns up to AY 1991-92,
which were summarily assessed u/s. 143(1). The AO assessed the entire income u/s. 68
in the hands of the firm as the partners did not explain the source of the funds. On first
appeal, the CIT(A) upheld the order of the AO.
On further appeal, the Tribunal allowed the appeal of the assessee as the said amount
should not have been assessed in the hands of the firm but should have been assessed
in the hands of the partners.
On Revenue’s appeal, the HC held that since it was the first year of the firm, there was
no business of the firm to carry forward such income. Therefore, it was for the partners
to explain the source of funds and it was not open to the AO to treat the said amount
355
Cash credits S. 68
as income in the hands of the firm. Accordingly, if at all the assessments had to be
made, they were to be made in the hands of the partners and not in the hands of the
firm. (AY. 1991-92)
CIT v. Anurag Rice Mills (2016) 282 CTR 200 / 129 DTR 157 (Patna)(HC)
1150 S. 68 : Cash credits – Share capital – Initial burden which lay upon Assessee to
establish source of share capital received shall be duly discharged by the Assessee –
Without any material to contrary – No addition can be made. [S. 131]
The High Court held that the Revenue’s allegation that the assessee were themselves
being used as conduit for routing the ‘on-money’ or that investment in the assessee was
also for routing such ’on-money’ has not even prima facie been able to be established
by the Revenue. On one hand there was attempt to treat the cash credit found in books
of Accounts to be ‘undisclosed income’ by showing investors to be paper companies.
On other hand, the attempt was to show that this money in fact belonged to certain
other entities whose source was not explained by assessee. Thus there was no clarity
in the stand of the Revenue. During the search proceedings the assessee had produced
the books of account and also the source of investments. However the Revenue was
unable to produce any further evidence to the dispute. The AO did not appear to have
undertaken any particular investigation into the affairs of the Table I, II and III apart
from issuing notice under section 131 of the Act which was duly responded. Detailed
findings had been given by the Tribunal after thorough examination of the records.
Hence there was no reason to differ from the findings of the Tribunal. The High court
further held that since the order of the Tribunal was examined in the light of section
68 of the Act, and hence Tribunal was fully justified in coming to the conclusion that
there was no evidence to establish that there was any re-routing of the money collected
by the assessee companies. Thus the High court dismissed the appeal of the Revenue.
(AY. 2003-04 to 2009-10)
CIT v. SVP Builders (India) Ltd. (2016) 238 Taxman 653 (Delhi)(HC)
1151 S. 68 : Cash credits – Share application money – Identity, genuineness of transaction
and creditworthiness of persons from whom assessee received funds – No examination
by Tribunal – Matter remanded.
The Tribunal had not examined the facts relating to the assessee. The Tribunal had simply
proceeded on the basis of the facts obtaining in the case of Pranjul Overseas (P.) Ltd.on the
statement of the parties that the facts of that case were similar to the facts in the case of
the assessee. However, an examination of the documents, it did not appear that the facts
in the case of Pranjul Overseas (P.) Ltd, were similar to those obtaining in the present case.
In the case of Pranjul Overseas (P.) Ltd., the assessee disputed that any search took place
at its registered office but the written submissions filed by the assessee in this case did not
indicate that any such dispute was raised. Even before the court it had not been contended
that no search took place at the declared registered office of the assessee. Thus, the matter
was remanded to the Tribunal to examine the facts relevant to the assessee for determining
whether an addition u/s. 68A was sustainable. It would also be open for the Tribunal to
remand the matter for further enquiries if it so considered necessary. (AY. 2003-04 to 2009-10)
PCIT v. Matchless Glass Services P. Ltd. (2016) 380 ITR 370 / 237 Taxman 195 / 284 CTR
150 (Delhi)(HC)
356
S. 68 Cash credits
S. 68 : Cash credits – Onus on the Assessee is to only prove creditworthiness and 1152
genuineness of the source from which it has received loan – No onus to prove
genuineness of source.
For the year under consideration, Assessee had received loan from Tom Investments
Limited of ` 38 lacs. During assessment proceedings of Assessee, authorised
representative of Tom Investments Limited attended the proceedings to substantiate the
genuineness of loan transaction and Tom Investment Limited intimated that the amount
lent to Assessee was had in turn borrowed from M/s. Tuq Credits Limited. The Tom
Investments Limited was unable to furnish the information to prove genuineness and
credibility of Tuq Credits Limited. Therefore the Assessing Officer concluded that Tuq
Credits Limited is not a genuine party and the entire chain of lending and borrowing
was bogus. Hence the loan received was treated as unexplained income and entire
interest expenditure was disallowed to the Assessee.
High Court while deciding the case in favour of the Assessee, relied on Gauhati High
Court decision in case of Nemi Chand Kothari v. CIT (2003) 264 ITR 254 (Gauhati) (HC),
wherein it was held that it is not the burden of the Assessee to prove the genuineness
of the transactions between his creditor and sub-creditors nor it is the burden of the
Assessee to prove that the sub-creditor had the creditworthiness to advance the cash
credit to the creditor form whom the cash credit has been, eventually, received by the
Assessee. In the present case the Assessee has indeed discharged its onus of proving
the creditworthiness and gaminess of the lender (TIL), hence the HC held that no
disallowance or addition could be made under section 68 of the Act. (AY. 1994-95)
CIT v. Shiv Dhoot Pearls & Investment Limited (2016) 237 Taxman 104 (Delhi)(HC)
Editorial: Amendment in Section 68 of the Act in Finance Act, 2012]
S. 68 : Cash credits – Gift – Identity of the donor and capacity of the donor to gift the 1153
sum established – Assessee not under obligation to provide the business dealings of
the donor to the Assessing Officer.
Addition was made under section 68 in respect of gift received from the donor through
M/s. Blackfin Development Company Inc., USA. The addition on account of the
same was made by the Assessing Officer under section 68 of the Act due to certain
discrepancies noticed by the Assessing Officer between the statement of the donor and
the assessee and that the donor did not provide the details pertaining to its business
transactions, agreement with Blackfin, details of bank accounts etc. and that the
existence of the agreement between the assessee and Blackfin casts certain doubt in the
nature of the transaction. The Tribunal, on going through various explanations filed by
the donor, assessee and also by Blackfin and also evidence substantiating the same, held
that the gift received by the assessee was genuine and therefore, no addition could have
been made under section 68. On appeal by the Revenue, it was held by the High Court
that the apart from doubting and questioning the material produced by the assessee,
the Assessing Officer had not produced any positive evidence which could lead to the
inference that the amount received by the assessee was not gift and therefore, dismissed
the appeal of the revenue.
CIT v. Sudhir Budharaja (2016) 236 Taxman 50 (Delhi)(HC)
357
Cash credits S. 68
1154 S. 68 : Cash credits – Gift – In a case where the assessee did not prove the financial
capacity of the donors or the fact that the assessee had close relations with the donors,
the gifts could not be treated as genuine.
The assessee had received gifts during the year which were introduced as capital in his
proprietary concern. During the course of assessment, details were sought by the AO
in respect of these gifts. Assessee produced two persons and filed declaration of gift
from the others. AO held that the persons making the gift did not have the capacity
of making such gifts and further had no relations with the assessee and there was no
natural love and affection between the parties. AO held that the assessee had not proved
identity of certain persons making the gift and creditworthiness and genuineness of all
of them. AO, therefore, added the amount of gift as an unexplained cash credit under
section 68. CIT(A) set aside the addition. CIT(A)’s order was reversed by the Tribunal.
High Court observed that the income tax returns of the persons making the gift showed
that the donors did not have the financial capacity to make gifts. Therefore, the assessee
did not prove the creditworthiness of the donors. Assessee did not bring any evidence
to show whether the alleged donors had adequate funds or that they had the financial
capacity to make such gifts. High Court observed that it could not be held that gifts
were genuine. (AY. 2002-03)
Laxmandas Sujandas Dalpat v. ITO (2016) 381 ITR 283 / 236 Taxman 372 / 134 DTR 351
/ 287 CTR 666 (Guj.)(HC)
1155 S. 68 : Cash credits – Gift – Where the assessee received a gift from NRE account
through banking channels, however was not able to demonstrate close relationship
nor did it submit affidavit from donor, the said gift was taxable as unexplained cash
credits.
The assessee shown credit of certain amount in the capital account as “Gift”. The AO
treated the said gift as unexplained cash credit u/s. 68 on the ground that the assessee
had failed to prove genuineness of the gift. However, the order of the AO was reversed
by the CIT(A). The Revenue preferred an appeal before the Tribunal wherein the
findings of the AO were restored.
The assessee preferred an appeal before the HC. The HC concurred with the findings
of Tribunal that the assessee has failed to prove her relationship with the donor and
genuineness of the gift. The factum that the transaction was out of love and affection, is
a sine qua non to establish a genuine gift and therefore, the said amount was correctly
held to be taxable u/s. 68. (AY. 1994-95)
Sarita Aggarwal v. ITO (2016) 131 DTR 103 / (2017) 294 CTR 71 (Delhi)(HC)
1156 S. 68 : Cash credits – Bogus share capital – Amendment to S. 68 casting onus
on assessee and requiring it to explain source of source of share subscription
is clarificatory and retrospective – Burden is on the assessee to prove the
creditworthiness of the shareholder – As the assessee has failed to prove the
genuineness of the transaction addition was held to be justified. [S. 56(2) (viib)]
Dismissing the appeal of assessee the Tribunal held that amendment to S. 68 casting
onus on assessee and requiring it to explain source of source of share subscription is
clarificatory and retrospective. Burden is on the assessee to prove the creditworthiness
358
S. 68 Cash credits
of the shareholder. As the assessee has failed to prove the genuineness of the transaction
addition was held to be justified. (ITA No. 1835 & 1836 /Mum/2014, dt. 24.08.2016)(AY.
2006-07, 2007-08)
Royal Rich Developers Pvt. Ltd. v. DCIT (Mum.)(Trib); www.itatonline.org
S. 68 : Cash credits – Wrong credit entry by payer – client in Form 26AS, Assessing 1157
Officer had to examine its genuineness,matter was set aside. [Form, 26AS]
Allowing the appeal of the assessee, the Tribunal held that wrong credit entry by payer-
client in Form 26AS, Assessing Officer had to examine its genuineness, matter was
set aside. Tribunal held that the Assessing Officer was equally responsible to find out
whether credit entry was genuine or not. Assessing Officer is conferred with power of
civil court to examine and find out real nature of transaction Assessing Officer could not
take advantage of ignorance or handicap of assessee and say that there was undisclosed
receipt. Matter remanded. (AY. 2011-12)
P.K. Rajasekar v. ITO (2016) 161 ITD 189 (Chennai)(Trib.)
S. 68 : Cash credits – Sundry creditors denied transaction – Matter remanded to verify 1158
genuineness of creditors.
AO enquired regarding the claim of two sundry creditors who had denied to
acknowledge credit given to the assessee. Subsequent to failure of assessee to provide
any explanation for the same, the AO made an addition of sundry creditors u/s. 68
(unexplained cash credits). The Tribunal restored the issue of the sundry creditors to
the AO to provide/deny relief to the assessee subject to the verification of genuineness
of the sundry creditors. (AY. 2010-11)
B. Banamber and Co. v. ITO (2016) 48 ITR 41 (Cuttack)(Trib.)
S.68 : Cash credits – Survey – Debentures and fixed deposit from investors – Additions 1159
made only on basis of surrender made at time of survey was not justified. [S.133A]
Assessee-company claimed to have raised funds through debentures and fixed deposits
from its investors. During survey assessee was unable to provide necessary evidence of
genuineness of these debentures and full details of transactions and surrendered relevant
amount. After ten months assessee retracted from its surrender and filed return of
income with voluminous details and evidences. AO made addition as unexplained cash
credit. CIT(A) deleted the addition. Dismissing the appeal of the revenue, the Tribunal
held that; since no material was collected during course of survey which could establish
that credit was non-genuine, additions made only on basis of surrender made at time
of survey was not justified.
Dy.CIT v. Bansal Credits Ltd. (2016) 51 ITR 44 (Delhi)(Trib.)
S. 68 : Cash credits – Search and seizure – Buy back of shares – genuineness of 1160
transactions and creditworthiness of shareholders doubted – Additional ground
was raised challenging the assessment – Matter was remanded to CIT(A) for fresh
adjudication. [S. 153A, 153C]
Assessee has raised additional ground challenging the assessment, first time before the
Tribunal. Tribunal allowed the additional ground being pure question of law which
359
Cash credits S. 68
goes to root of matter and remanded to CIT(A) for fresh adjudication. (AY. 2004-05 to
2009-10)
Rite Pack Industries P. Ltd. v. Dy. CIT (2016) 48 ITR 555 / (2017) 145 DTR 41 (Delhi)(Trib.)
Kiwi Foods India P. Ltd. v. Dy. CIT (2016) 48 ITR 555 / (2017) 145 DTR 41 (Delhi)(Trib.)
1161 S. 68 : Cash credits – Once transaction is confirmed and explanation provided assessee
cannot be compelled to explain source in hands of creditors beyond certain point
matter remanded.
Allowing the appeal the Tribunal held that; the Revenue was not able to point out any
discrepancy or defect therein. It was also noted that there was no adverse material in
possession of the lower authorities to controvert the evidence. Once a transaction stands
confirmed and the assessee has explained source of amount received in its possession,
then the assessee cannot be compelled to explain the source in the hands of the
creditors beyond a particular point. (AY. 2006-07)
Genius Printers P. Ltd. v. ACIT (2016) 48 ITR 588 (Mum.)(Trib.)
1162 S. 68 : Cash credits – Listed Company sold shares through registered brokers at
prevalent market rate, addition cannot be made as cash credits only because buyers
had not shown such purchase in their balance-sheet. [S.10(38)]
Dismissing the appeal of the Revenue, the Tribunal held that listed Company sold shares
through registered brokers at prevalent market rate, addition cannot be made as cash
credits only because buyers had not shown such purchase in their balance-sheet. (AY.
2011-12)
ACIT v. Pardeep Kumar Aggarwal (2016) 159 ITD 54 (Chd.)(Trib.)
1163 S. 68 : Cash credits – Loan received from husband – Addition was held to be not
justified.
Allowing the appeal of the assessee the Tribunal held that just because description
was wrongly stated in the balance sheet of the husband, addition was held to be not
justified. (AY 2007-08)
Anita Raj Hingorani v. ITO (2016) 46 CCH 715 / 50 ITR 63 (Mum.)(Trib.)
1164 S. 68 : Cash credits – Cash receipts was assessed as income from other sources and
the business loss was allowed to be set of. [S. 56, 71, 115BBE]
Allowing the appeal of the assessee the Tribunal held that where, cash receipts was
assessed as income from other sources and the business loss was allowed to be set of.
(AY. 2010-11)
Satish Kumar Goyal v. JCIT (2016) 159 ITD 393 (Agra)(Trib.)
1165 S. 68 : Cash credits – Bank deposits – Bank Pass Book could not be construed to be a
book maintained by assessee for any previous year hence additions cannot be made
as cash credits. [S.145]
The AO examined bank Pass Book of assessee and treated cash deposits in bank
account as unexplained cash credit within meaning of s. 68 and added same in income
of assessee. Allowing the appeal of the assessee Tribunal held that since assessee was
360
S. 68 Cash credits
not maintaining any accounts books and bank Passbook or bank statement could not
be construed to be a book maintained by assessee for any previous year, addition was
unsustainable on account of inapplicability of S. 68. (AY. 2011-12)
Manasi Mahendra Pitkar (Smt.) v. ITO (2016) 160 ITD 605 (Mum.)(Trib.)
S. 68 : Cash credits – Confirmation was filed – Addition was held to be not justified. 1166
Allowing the appeal of assessee the Tribunal held that Onus laid on department to
show that explanation offered by assessee should not be accepted. Assessee has filed
the confirmation and the lender is assessed to tax. In this view of matter, no addition of
` 20 lakhs could be made against assessee only because there was some time gap
between amount advanced by Shri Manjit Singh and used by assessee for purchase
of property. Considering totality of facts and circumstances and above discussion, any
justification to sustain addition of ` 20 lakhs wasn’t found. Orders of authorities below
was set aside and deleted addition of ` 20 lakhs. Appeal of assessee was allowed. (AY.
2006-07)
Pritam Singh v. ITO (2016) 139 DTR 28/179 TTJ 776 (Chd.)(Trib.)
S. 68 : Cash credits – Share application money – Loans – Investment in plot and 1167
construction – Addition was held to be not justified. [S. 69]
Tribunal held that the assessee having produced PAN card, bank statements and
confirmation of the individual shareholders, it has discharged the onus cast upon it and
therefore, AO was not justified in making the addition under section 68 in respect of
the share application money received by the assessee.
Tribunal held that the assessee has filed the names, addresses, details, etc. of all loan
creditors and even filed their confirmations. Therefore, the assessee had discharged the
onus cast upon him and there is no infirmity in the order of CIT(A), hence, the same
is upheld.
The Tribunal held that the assessee having made the investments in the plot and
construction through banking channel as is evident from its bank statements, the
impugned addition under section 69 cannot be sustained.
The Tribunal held that the assessee having paid the installments for purchase of plots
through DD, no addition could be made under section 69 simply because the assessee
was unable to produce its books of accounts which were in the custody of the CBI.
(AY. 2007-08)
ITO v. A. I. Developer (P) Ltd. (2016) 178 TTJ 332 / 46 ITR 321 (Delhi)(Trib.)
S. 68 : Cash credits – Foreign gifts from son’s friend – Addition confirmed. 1168
The assessee received a sum of ` 15 lakhs as gift by way of demand draft from his son’s
friend, who was residing at the United Arab Emirates. Since there was no sufficient
evidence to prove the creditworthiness of the gift, the Assessing Officer added the
sum as unexplained cash credits under section 68 of the Income tax Act, 1961. The
Commissioner (Appeals) deleted the addition. The Tribunal held that the assessee was
in no way related to the donor and there was no corresponding channel in the gift
instrument linking the assessee’s amount credit to the donor’s account. The assessee had
only proved the identity of the creditor along with capacity to gift. But the assessee had
neither produced his son had very good relations with the donor nor the donor himself
361
Cash credits S. 68
for necessary deposition right from scrutiny till date. The assessee had failed to prove
any love and affection with the donor. There was to be some reasonable element in an
explanation offered by the assessee so as to shift the onus on the Revenue. The gift
amount was rightly treated as unexplained cash credit. (AY. 2004-05)
DCIT v. Bhanuprasad O. Trivedi (2016) 46 ITR 307 (Ahd.)(Trib.)
DCIT v. Balaben B. Trivedi (Smt.) (2016) 46 ITR 307(Ahd.)(Trib.)
1169 S. 68 : Cash credits – When the details of the parties along with bank details were
submitted by the assessee, no addition can be made by the AO.
The assessee had unsecured loans from various parties. The AO made an addition
u/s. 68 on account the loans were unexplained. The ITAT deleted the addition since the
Assessee had submitted the details of the parties along with bank statements to prove
the genuineness of the transaction. The ITAT held that initial burden was discharged
by the assessee and there was no basis for making the addition u/s. 68. (AY. 2007-08)
ACIT v. Vikrant Puri (2016) 47 ITR 708 (Delhi)(Trib.)
1170 S. 68 : Cash credits – Loan from parties who are not income tax assessees – No
addition in case the assessee had submitted bank passbook to prove the financial
capacity and identity of the party from which loan was taken.
During the course of assessment it was noticed that the assessee received loans from
various parties. To prove the genuineness, the assessee submitted the copy of bank
passbook to support the financial capacity and identity of the party. The AO made an
addition u/s. 68 on the ground that the lenders did not file PAN details as they were
not income tax assessees. The ITAT deleted the addition on the basis that the assessee
had discharged its onus and the AO had not found any incriminating material. (AY.
2003-04, 2005-06 to 2008-09)
Chhaya P. Gangar (Ms.) v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
1171 S. 68 : Cash credits – Onus is on AO to establish that cash withdrawn from bank is
utilized elsewhere – No unexplained cash credits in hands of assessee
During the year under consideration, the AO added ` 20,65,000/- as unexplained cash
credits. The AO held that the assessee could not establish that the cash withdrawn
had not been used anywhere else. On appeal to Tribunal, it was held that the assessee
submitted detailed cash summary showing inflow and outflow of the cash for the entire
year. Onus was upon the AO to prove that cash had been utilized elsewhere by the
assessee before he rejected the claim of the prove assessee. Unless any such contrary
material was brought on record by him to that cash had been utilized elsewhere by the
assessee, he should get benefit of cash withdrawn by the assessee from the bank account
against the amount of cash deposit into the bank account of the assessee, especially
when the cash had been withdrawn and deposited in the same financial year, even
if the bank from where cash was withdrawn and bank where the cash was deposited
were different. The disallowance had been made by the lower authorities under wrong
assumption of facts. (AY. 2009-10)
Jaspal Singh Sehgal v. ITO (2016) 47 ITR 193 (Mum.)(Trib.)
362
S. 68 Cash credits
S. 68 : Cash credits – Shares – Long-term capital gains arising from transfer of penny 1172
stocks cannot be treated as bogus merely because SEBI has initiated an inquiry with
regard to the Company & the broker if the shares are purchased from the exchange,
payment is by cheque and delivery of shares is taken & given. [S.45]
Dismissing the appeal of the revenue , the Tribunal held that the AO has treated the
share transaction as bogus on the plea that SEBI has initiated investigation in respect
of Ramkrishna Fincap Pvt. Ltd. The AO further stated that investigation revealed
that transaction through M/s. Basant Periwal and Co. on the floor of stock exchange
was more than 83%. We found that as far as initiation of investigation of broker is
concerned, the assessee is no way concerned with the activity of the broker. Detailed
finding has been recorded by CIT(A) to the effect that assessee has made investment in
shares which was purchased on the floor of stock exchange and not from M/s. Basant
Periwal and Co. Against purchases payment has been made by account payee cheque,
delivery of shares were taken, contract of sale was also complete as per the Contract
Act, therefore, the assessee is not concerned in any way with the broker. Nowhere the
AO has alleged that the transaction by the assessee with these particular brokers or
shares was bogus, merely because the investigation was done by SEBI against broker or
his activity, assessee cannot be said to have entered into ingenuine transaction, insofar
as assessee is not concerned with the activity of the broker and have no control over
the same. We found that M/s Basant Periwal and Co. never stated any of the authority
that transaction in M/s Ramkrishna Fincap Pvt. Ltd. on the floor of the stock exchange
are ingenuine or mere accommodation entries. The CIT(A) after relying on the various
decision of the co-ordinate Bench, wherein on similar facts and circumstances, issue was
decided in favour of the assessee, came to the conclusion that transaction entered by the
assessee was genuine. Detailed finding recorded by CIT(A) at para 3 to 5 has not been
controverted by the department by brining any positive material on record. Accordingly,
we do not find any reason to interfere in the findings of CIT(A). Moreover, issue is also
covered by the decision of jurisdictional High Court in the case of CIT v. Shyam R.
Pawar (2015) 229 Taxman 256 (Bom), wherein under similar facts and circumstances,
transactions in shares were held to be genuine and addition made by AO was deleted.
Respectfully following the same vis-à-vis findings recorded by CIT(A) which are as per
material on record, we do not find any reason to interfere in the order of CIT(A). (ITA
No. 4861/Mum/2014, dt. 27.05.2016)(AY. 2005-06)
ITO v. Indravadan Jain (HUF) (Mum.)(Trib.), www.itatonline.org
S. 68 : Cash credits – Long-term capital gains on sale of “penny” stocks cannot be 1173
treated as bogus & unexplained cash credit if the documentation is in order & there
is no allegation of manipulation by SEBI or the BSE – Denial of right of cross –
examination is a fatal flaw which renders the assessment order a nullity. [S.45, 143(3)]
Allowing the appeal of assessee the Tribunal held that long-term capital gains on
sale of “penny” stocks cannot be treated as bogus & unexplained cash credit if the
documentation is in order & there is no allegation of manipulation by SEBI or the BSE-
Denial of right of cross-examination is a fatal flaw which renders the assessment order
a nullity. (ITA No. 3801/mum/2011, dt. 27.04.2016)(AY. 2005-06)
Farrah Marker v. ITO (Mum.)(Trib.), www.itatonline.org
363
Cash credits S. 68
1174 S. 68 : Cash credits – Share application money – Assessee had given complete details
about share applicants clearly establishing their identity and creditworthiness –
addition could not be made.
Where assessee had furnished name, address, PAN No. details of share applicants,
income-tax returns, bank statements of assessee-company, balance sheet of share
applicants and confirmed that all payments were received through regular banking
channels, obligation of assessee to prove existence of share applicants and source of
share application money stood duly discharged and no addition could be made in its
hand u/s. 68 on account of share application money. (AY. 2006-07)
Dy. CIT v. Global Mercantiles (P.) Ltd. (2016) 157 ITD 924 (Kol.)(Trib.)
1175 S. 68 : Cash credits – Sundry creditors – Merely because non-verifiability of sundry
creditors but there being no dispute as regards purchases and trading results having
been accepted, addition as cash credits was not sustainable.
AO has drawn an adverse conclusion only on account of non-verifiability of sundry
creditors but there being no dispute as regards purchases, and trading results having
been accepted, addition as cash credits was not sustainable. (AY. 2005-06)
ITO v. Zazsons Exports Ltd. (2015) 153 ITD 1 (2016) 158 ITD 1 (TM)(Luck)(Trib.)
1176 S. 68 : Cash credits – Agricultural income – Credit worthiness is not established –
Addition was held to be justified.
Creditor stated that amount of loan given to assessee was out of savings of seven-eight
years of agricultural income but did not produce proof of any agricultural activity,
creditworthiness of such creditor was not established. Addition was held to be justified.
(AY. 2005-06)
Mahendrabhai B. Shrivastav v. ITO (2016) 158 ITD 755 / 181 TTJ 713 (2017) 152 DTR
72 (Ahd.)(Trib.)
Chandrakant R. Shrivastav v. ITO (2016) 158 ITD 755 / 181 TTJ 713 / (2017) 152 DTR
72 (Ahd.)(Trib.)
1177 S. 68 : Cash credits – Shares – Demat – Consideration was received through banking
channel – Addition was held to be not justified. [S. 143(3)]
During the year, the assessee sold shares through a stock broker M/s. Hem Securities
Limited and treated the gains as exempt long term capital gains. The AO treated the
sale as bogus on the ground that certain information was received from the Investigation
Wing as a consequence of a search and seizure action carried out under section 132 of
the Act in the case of M/s. Alliance Intermediaries & Network Pvt. Ltd., through which
the assessee had effected purchase of the impugned shares in the immediately preceding
year. As a result, the sale consideration has been treated as income from undisclosed
sources on the ground that there was no real sale and purchase of shares.
Held, the purchase of shares in the immediately preceding year was accepted by the
Department in an order u/s. 147 r.w.s 143(3) of the Act. The shares were evidenced by
entries in the demat statement and consideration was received through banking channel.
There was no clinching material to say that the impugned transaction was bogus. Also,
the statement recorded during the search on M/s Alliance Intermediaries & Network
364
S. 68 Cash credits
Pvt. Ltd. does not contain any infirmity qua the impugned transaction. Therefore, the
addition as income from undisclosed income was liable to be deleted. (ITA No. 2799/
Mum/2015, dt. 29.02.2016)(AY. 2009-10)
Arvind Asmal Mehta v. ITO (Mum.)(Trib.), www.itatonline.org
S. 68 : Cash credits – Share capital – Identity, genuineness and creditworthiness of the 1178
shareholder companies was furnished – Addition was held to be not justified.
Assessee company having produced copies of share applications, confirmations of the
shareholders, copies of their PANs, board resolutions, directors reports, auditors reports,
balance sheets, P & L A/c and bank accounts in all the cases to prove the identity,
genuineness and creditworthiness of the shareholder companies and AO having not
clarified what enquiry was conducted and what evidences have been collected to draw
adverse conclusion against the assessee, impugned addition made by the AO cannot be
sustained. (AY. 2008-09)
Jadau Jewellers & Manufacturers (P) Ltd. v. ACIT (2016) 130 DTR 17 / 175 T TJ 344
(Jaipur)(Trib.)
S. 68 : Cash credits – Addition cannot be made for loans taken in the period prior to 1179
the commencement of business as well as in the initial period of business. No addition
in respect of parties against whom summons for examination was not issued by the
AO.
The Assessee obtained unsecured loans from numerous parties, while installing its
plant and machinery and also for 6 months after commencement of manufacturing.
Confirmation of majority of the parties was submitted by the assessee and were even
produced before the AO. However, addition u/s. 68 was made by the AO for want for
creditworthiness of the parties. The ITAT deleted the addition made by the AO and
held that receipts during the pre-commencement period and during the initial duration
of operations could be assumed to be capital receipts since the Assessee could not
have earned huge income / profits during the pre-commencement and initial period of
business. Further, the ITAT also held the addition could not be made on the parties who
were not presented by the assessee, since no summons for their examination was issued
by the AO. (AY. 2006-07, 2007-08)
Kundles Loh Udyog v. ITO (2016) 45 ITR 11 (Chd.)(Trib.)
S. 68 : Cash credits – Advance received against sale of accommodations in name of 1180
close family members of assessee – Matter remanded.
The accommodations were already stated to be acquired out of undisclosed income of the
assessee which was brought to tax as undisclosed income in the hands of the assessee by
a block assessment order and orders of the Settlement Commission were framed against
the assessee with taxes paid to the department. Hence, the capital gains arising on sale
of these accommodations owned and held by the assessee in the name of close family
members were chargeable to tax in the hands of the assessee. The AO was directed to
compute capital gains arising out of these two accommodations in the hands of the
assessee after duly verifying and authenticating the claim of the assessee with respect to
acquisition and ownership of the above accommodations. Matter remanded. (AY. 2007-08)
Vishwanath Acharya v. ACIT (2016) 157 ITD 1032 / 45 ITR 554 (Mum.)(Trib.)
365
Cash credits S. 68
1181 S. 68 : Cash credits – Cash deposits – Additional evidence – Matter remanded.
There was sufficient cause shown by the assessee which prevented the assessee from
producing the additional evidence during the assessment proceedings. Therefore, the
AO was to admit the additional evidence and decide the issue afresh on the merits
after giving sufficient opportunity of being heard to the assessee. Matter remanded. (AY.
2007-08)
Vishwanath Acharya v. ACIT (2016) 157 ITD 1032 / 45 ITR 554 (Mum.)(Trib.)
1182 S. 68 : Cash credits – Memorandum of Understanding – Cash returned to assessee
and surrendered the property as part of total surrender – Credit cannot be treated as
unexplained.
Tribunal held that the cash was returned as per the Memorandum of Understanding
hence addition cannot be made as cash credits. (AY. 2006-07)
Today Homes and Infrastructure Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 586 (Delhi)(Trib.)
1183 S. 68 : Cash credits – Share capital – Cross examination of witness was not given –
Addition was held to be not justified. [S.133(6)]
On appeal, the Tribunal held that the AO neither provided opportunity of cross-
examination of his witness as demanded by the assessee nor brought any material on
record to controvert the material placed on record by the assessee. The AO made direct
enquiries with company C u/s. 133(6) of the Act, in response to which confirmation was
filed by that company. But the AO preferred to rely upon the statement of the Director
and disregarded all the other evidence. Therefore, the addition made by the AO was
not sustainable. (AY. 2007-08)
Vitrag Metal Pvt. Ltd. v. ITO (2016) 46 ITR 201 (Mum.)(Trib.)
1184 S. 68 : Cash credits – Accommodation entries – No addition could be made in hands
of assessee on account of unexplained cash credit.
Tribunal held that on appeal the High Court had held that the order of the Commission
was final and conclusive as to the matters stated therein for the AY decided by the
Commission. The order of the Commission showed that all the relevant material
including the seized material was duly considered by the Commission. Moreover, the
jurisdictional High Court had held that even if some material had been suppressed
from the Commission, the only course available to the Revenue was to approach the
Commission for declaring its order a nullity. The order of the Commission was binding
on the Department and the logical consequences of the order had to be given effect.
Thus, the addition u/s.68 could not be made in the case of the conduit companies. (AY.
2008-09)
Omni Farms Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 505 (Delhi)(Trib.)
1185 S. 68 : Cash credits – Share transactions – General statement of director of another
company before Investigating wing and not providing assessee opportunity to confront
director in relation to transactions related to assessee – Additions was held to be not
justified. [S. 132]
Tribunal held that the AO made additions on the basis of a general statement of the
director of the company. The name of the assessee did not appear specifically in any
366
S. 68 Cash credits
of the statement of the director. Merely because the assessee could not produce the
director before the AO that itself was not a sufficient ground for the confrontation of the
additions. Even the AO, in his remand report, did not controvert the evidence filed by
the assessee. Therefore, the additions made by the AO were not warranted. (AY. 2003-04)
Yamuna Estate P. Ltd. v. ITO (2016) 45 ITR 517 (Mum.)(Trib.)
S. 68 : Cash credits – Share application – Addition can be made in the hands of 1186
alleged bogus share holders and not in the recipient company.
Dismissing the appeal of revenue the Tribunal held that in case of receipt of share
application money from the alleged bogus shareholders, addition can be made in the
hands of the alleged share holders and not in the income of the recipient company. (ITA
No 3645/ Mum/ 2014 Bench A dt. 30-11-2015 (AY. 2007-08)
ITO v. Superline Construction Pvt. Ltd. (2016) BCAJ-January-P. 18(Mum.)(Trib.)
S. 68 : Cash credits – Share application money received from an associate concern 1187
cannot be assessed as cash credits if assessee has discharged its initial onus to prove
the identity, creditworthiness and genuineness of the transaction.
Dismissing the appeal of revenue; the Tribunal held that the CIT(A) has dealt with
issue all the objections raised by the AO and after considering the documents placed on
record, recorded a categorical finding to the effect that amount payable and receivable
by the assessee was squared off which was in accordance with the provisions of
Companies Act. Further finding was recorded to the effect that these companies were
assessed with I.T. Department for several years. The identity and genuineness of the
transaction was duly accepted. The detailed finding recorded by CIT(A) are as per
material on record. (ITA no. 1470/Mum/2011, dt. 30.03.2016)(AY. 2007-08)
DCIT v. Overseas Infrastructures (Mum.)(Trib.); www.itatonline.org
S. 68 : Cash credits – Confirmation was filed – Burden was discharged – Addition 1188
was deleted.
The assessee filed the confirmation letters and other evidences, Tribunal by following
the ratio laid down in CIT v. Orissa Corporation (1986) 159 ITR 78 (SC), held that
addition was not justified. (ITA No. 5500/Del/2013, dt. 24.02.2016)(AY. 2009-10)
Hitender Pal Singh v. ITO (Delhi)(Trib.); www.itatonline.org
S. 68 : Cash credits – Share application and share premium from private companies 1189
cannot be treated as bogus and assessed as cash credits merely on the basis of report
of Inspector.
Dismissing the appeal of revenue the Tribunal held that share application and share
premium from private companies cannot be treated as bogus and assessed as cash
credits merely on the basis of report of Inspector. (ITA No. 1103/JP/2011, dt. 21.03.2016)
(AY. 2008-09)
ACIT v. Dhanlaxmi Equipment Pvt. Ltd. (Jaipur)(Trib.); www.itatonline.org
367
Unexplained investments S. 69
S. 69. Unexplained investments.
1190 S. 69 : Unexplained investments – Capital gains – Sale of property – Photocopy of cash
receipt duly signed and witnessed by assessees – Corroborated by assessees’ statements
– No evidence produced by assessee rebutting contents of receipt or statements or to
show signatures thereon forged – Assessment of capital gains on basis thereof proper.
[S.45, 143(3)]
The assessee, with his mother and brother, co-owned a property, which they sold for
a consideration as shown in the registered sale deed of ` 39 lakhs. The Investigation
Wing of the Department received a tax evasion petition and enquiries were initiated
against the three. During the course of the investigation they were confronted with
a photocopy of a receipt for ` 55 lakhs in cash as part payment for the sale, signed
by the mother with the assessee and his brother signing as witnesses. The AO issued
a notice under section 148 for initiation of reassessment proceedings. The assessees’
written pleadings denying their signatures on the receipt and contending that they
were either forged or morphed were not accepted by the AO who determined the long
– term capital gains. The Commissioner (Appeals) dismissed the assessees’ appeals. The
Tribunal held that the value of the photocopy of a document as material evidence for
the purpose of assessment depended upon the nature and contents of the document
and the surrounding facts. It dismissed the assessee’s appeal and held that the AO had
rightly assessed based on the contents of the receipt which was duly corroborated by
the assessees in their respective statements. On appeals :
Held, dismissing the appeals, that the findings recorded by the authorities below were
findings of fact which were not shown to be illegal or perverse calling for interference.
No question of law arose. (AY. 2001-02)
Vikrant Dutt Chaudhary v. CIT (2016) 389 ITR 411 (P&H)(HC)
Editorial : The Supreme Court has dismissed the special leave petition filed by the
assessee against this judgment Vikrant Dutt Chaudhary v. CIT (2016) 384 ITR 124 (St.)]
1191 S. 69 : Unexplained investments – Investment in House was disclosed under VDIS,
addition cannot be made – Addition cannot be made on the basis of stamp valuation
as unexplained investment – No substantial question of law. [S. 260A]
Dismissing the appeal of the revenue, the Court held that investment is house was
disclosed in VDIS and only on the basis of stamp valuation addition cannot be made
unless some evidence was found. No substantial question of law.
CIT v. Suresh Jain (2016) 242 Taxman 460 (Karn.)(HC)
1192 S. 69 : Unexplained investments – Bogus purchases – Profit embedded in such
transactions can be added to total income – Disallowance of 25% of the cost of such
purchases was held to be proper. [S. 143(3)]
During the course of assessment proceedings, the Assessing Officer called upon the
assessee to prove the genuineness of purchases of varied amounts for various assessment
years. The assessee furnished material in respect of the purchases but the Assessing
Officer rejected it and made additions of various amounts as bogus purchases. The
assessee preferred appeals before the Commissioner (Appeals). The Commissioner
368
S. 69 Unexplained investments
(Appeals) partly allowed the appeals. The Appellate Tribunal reversed the finding of
the Commissioner (Appeals) and confirmed the entire additions made by the Assessing
Officer. On appeals:
Held, that it was not the entire amount covered by such purchase, but the profit element
embedded therein which would be subject to tax. It would be appropriate to restrict the
disallowance made in this regard to 25 per cent of the cost of such purchases in each
year. (AY 1993-94 to 1996-97)
Vijay Trading Co. v. ITO (2016) 388 ITR 377 (Guj.)(HC)
S. 69 : Unexplained investments – In absence of any independent material to come to 1193
conclusion that assessee has paid extra consideration for purchase of property over
and above what was stated in sale deed of property – mere report of DVO cannot form
sale basis to make addition under section 69 of the Act
Allowing the appeal of assessee the court held that the basis of the addition is only
valuation report of the District Registrar under the Stamp Act and the Departmental
valuer. As such, there is no independent material which had come on record for such
purpose. The payment of additional stamp duty may be on the basis of the valuation
of the valuer of the Stamp Act authority but same ipso facto cannot be said to be
a valid ground to initiate the proceedings under section 69 of the Act. Under such
circumstances, the addition made by the AO and further upheld by the CIT(A) as well
as by the Tribunal, cannot be sustained. Hence the High Court ruled in favour of the
assessee. (AY. 2006-07)
S. S. Jyothi Prakash v. ACIT (2016) 240 Taxman 741 (Karn.)(HC)
S. 69 : Unexplained investments – Income from undisclosed sources – Bogus purchases 1194
– Excess of sales over purchases – Satisfactory evidence not adduced despite being
given opportunity – Addition proper.
Dismissing the appeal of the assessee the Court held that Since the view taken by
the authorities below that the purchase was bogus was not an impossible view in the
absence of production of necessary documents by the assessee to prove the genuineness
of the purchase, addition was to be upheld. If the assessee withheld the best evidence
and relied upon secondary evidence even assuming that any secondary piece of evidence
had been adduced, the presumption in law would be against the assessee. The question
of any lapse on the part of the Tribunal in accepting the sum of sales did not arise
because the figure had been furnished and admitted by the assessee. When the assessee
had not been able to prove the purchase, the amount of its profit had increased which
led to an addition in its income. The Tribunal was justified in confirming the addition
Kalyani Medical Stores v. CIT (2016) 386 ITR 387 (Cal.)(HC)
S. 69 : Unexplained investments – Income from undisclosed sources – Nexus between 1195
investment and unaccounted profit – Commissioner (Appeals) giving benefit of
telescoping and Tribunal confirming order without giving valid reasons – Order
unsustainable. [S. 132, 153C]
Allowing the appeal of revenue the Court held that there has to be nexus between
investment and unaccounted profit. Commissioner (Appeals) giving benefit of telescoping
369
Unexplained investments S. 69
and Tribunal confirming order without giving valid reasons. Order unsustainable. Matter
was remanded. (AY. 2001-02 to 2007-08)
CIT v. Promy Kuriakose (2016) 386 ITR 597 /( 2017) 148 DTR 287 / 293 CTR 440 (Ker.)(HC)
1196 S. 69 : Unexplained investments – Loose sheets – Presumption u/s. 132(4A) can also
be applied to person whose premises are not searched – Reassessment was held to be
valid. [S. 132(4A), 147]
On appeal to High Court, substantial question of law which was raised is whether
presumption u/s. 132(4A) can be raised only against the person whose premises were
searched i.e. assessee’s father or also against the assessee in the present case. High Court
held that the AO’s reliance on sec. 132(4A) provisions being applicable to assessee even
though assessee’s place was not searched will not change the nature of order. High Court
further held that the principle of natural justice was complied with as opportunity was
given to the assessee to explain the entries in loose sheet but it was assessee which
chose not to answer. High Court further held that the AO has formed his opinion on a
reasonable basis as he had a reason to believe that income added u/s. 69 has escaped
assessment based on the material / loose sheet. Thus, the order of Tribunal was upheld
by High Court. (AY. 1987-88)
Ashok Kumar v. CIT (2016) 386 ITR 342 / 239 Taxman 436 / 290 CTR 450 (Patna)(HC)
1197 S. 69 : Unexplained investments – Search and Seizure – It was not open for AO to
draw an inference on the basis of projection of document which was ‘dumb’ document
– When the Assessee offered a plausible explanation for the document,the burden
shifted on Revenue and hence the addition made was unjustified. [S. 132, 158BB,
158BC]
Dismissing the appeal of the revenue, the Court held that it was not open for AO to
draw an inference on the basis of projection of document which was ‘dumb’ document-
when the assessee offered a plausible explanation for the document, the burden shifted
on revenue and hence the addition made was unjustified. Thus the High Court was
of the view that Tribunal was justified in deleting the addition made by the AO. (AY.
2002-03)
CIT v. Vatika Landbase Pvt. Ltd. (2016) 383 ITR 320 / 238 Taxman 448 / 136 DTR 262
(Delhi)(HC)
1198 S. 69 : Unexplained investments – Capital gains – ”penny” stocks gave rise to huge
capital gains in a short period does not mean that the transaction is “bogus” if
the documentation and evidences cannot be faulted – Addition cannot be made as
unexplained investments – Off market transaction not unlawful. [S.10(38), 45]
On appeal by the Department to the High Court HELD dismissing the appeal: The ITAT
allowed the claim of the assessee by recording that the purchase of shares were duly
recorded in the books maintained by the assessee. The ITAT has recorded a finding
that the source of funds for acquisition of the shares was the agricultural income which
was duly offered and assessed to tax in those Assessment Years. The Assessee has
produced certificates from the aforesaid four companies to the effect that the shares
were infact transferred to the name of the assessee. In these circumstances, the decision
of the ITAT in holding that the assessee had purchased shares out of the funds duly
370
S. 69 Unexplained investments
disclosed by the assessee cannot be faulted. Similarly, the sale of the said shares for
` 1,41,08,484 through two Brokers namely, M/s. Richmond Securities Pvt. Ltd. and M/s.
Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that
the assessee has received the said amount is not in dispute. It is neither the case of
the Revenue that the shares in question are still lying with the assessee nor it is the
case of the Revenue that the amounts received by the assessee on sale of the shares
is more than what is declared by the assessee. Though there is some discrepancy in
the statement of the Director of M/s. Richmand Securities Pvt. Ltd. regarding the sale
transaction, the Tribunal relying on the statement of the employee of M/s. Richmand
Securities Pvt. Ltd. held that the sale transaction was genuine. (ITA No. 456 of 2007,
dt. 07.09.2011)(AY. 2011-02)
CIT v. Mukesh Ratilal Marolia (Bom.)(HC), www.itatonline.org
Editorial: Judgement of Tribunal in Mukesh R.Marolia v. Add.CIT (2006) SOT 247 (Mum)
(Trib.) is affirmed. SLP of revenue was dismissed by Supreme Court. SLP No 20146/
2012 dt 27-1-2014
S. 69 : Unexplained investments – Search carried on at the premises of third party – 1199
Merely on the basis of third party statement addition cannot be made. [S. 131, 132]
A search was conducted upon one ‘S’ and certain agreements to sell were seized from
his possession, which indicated that the assessee had entered into agreement with ‘S’
to purchase various plots of land. Further, statement of ‘S’ was also recorded u/s. 131.
’S’ clarified that the plots referred to in the agreement to sell were disputed and could
not be transferred due to pending civil suits. In place of those plots, other plots which
were in the same vicinity were transferred to the person specified by the assessee and
the entire consideration in terms of the agreement to sell had been paid by a person/
representative of the assessee. Thereupon the Assessing Officer made additions in crores
of rupees under section 69 to the income of the assessee in relation to the assessment
years 2005-06 to 2008-09. The Tribunal upon appreciation of the evidence on record
held that insofar as assessment year 2005-06 was concerned, the agreement proved that
` 11 lakhs had been paid by the assessee. It, accordingly, partly allowed the appeal in
relation to assessment year 2005-06 by upholding the addition to the extent of ` 11
lakhs and allowed the assessee’s appeals in relation to assessment years 2006-07 and
2007-08. On analysis of the various documents, the High Court held that revenue had
failed to bring on record any reliable material to prove that the assessee had made actual
investment in crores in the previous years relevant to assessment years 2005-06, 2006-
07 and 2007-08 except for the payment of ` 11 lakh. Held no addition u/s 69 justified.
(AY. 2005-06 to 2007-08)
PCIT v. Vivek Prahladbhai Patel (2016) 237 Taxman 331 / 138 DTR 158 (Guj.)(HC)
S. 69 : Unexplained investments – Bank deposits – Cash received was recorded in the 1200
books of account hence addition cannot be made.
Dismissing the appeal of the Revenue, the Tribunal held that addition cannot be made
on account of cash deposited in bank where assessee had clearly shown that such
deposit was out of cash received on sale of land which was duly recorded in cash book.
(AY. 2011-12)
ACIT v. Pardeep Kumar Aggarwal (2016) 159 ITD 54 (Chd.)(Trib.)
371
Unexplained investments S. 69
1201 S. 69 : Unexplained investments – Unaccounted sales – Amount deducted from export
price on account of buying agent’s commission is not part of export sales, and it
cannot be added to exports.
Allowing the appeal of the assessee, the Tribunal held that as a commercial practice,
buying agent’s commission is also borne by seller in sense that it is reduced from selling
price and, thus, effectively, selling price of exporter is gross invoice amount minus
buyer’s agency commission. When services were rendered by agent to buyer, there could
not be any question of evidence of services having been rendered by agent to assessee
or a charge, on that account, to profits of assessee and, therefore, AO was in error in
making the addition. (AY. 2005-06)
Manish H. Agarwal v. ACIT (2016) 159 ITD 287 (Ahd.)(Trib.)
1202 S. 69 : Unexplained investments – Estimate of stock given to bank – Addition was held
to be not justified.
Dismissing the appeal of the revenue since assessee had merely given statements of
monthly stock on basis of a rough estimate by incorporating monthly purchases and
sales, statements could not be made basis of addition. (AY. 2008-09)
ITO v. Triple V Timber Sales Corpn. (2015) 70 SOT 811/40 ITR 204 (Chd.)(Trib.)
1203 S. 69 : Unexplained investments – Payment made by cheque to travel companies –
Amount not assessable as unexplained expenditure
During the year under consideration, the AO added ` 4,91,120/- as unexplained
expenditure on account of foreign travel. It was held that the assessee had given item
wise details and particulars of cheque no. of various amounts paid by the assessee for
meeting the expenditure incurred on foreign travel. These details clearly reflected that
the assessee had made payment by cheque to two travel companies for foreign currency.
The disallowance had been made by the lower authorities under wrong assumption of
facts. (AY. 2009-10)
Jaspal Singh Sehgal v. ITO (2016) 47 ITR 193 (Mum.)(Trib.)
1204 S. 69 : Unexplained investments – Survey – Letter found for cessation of liability –
accepted in statement – Retraction thereof – Addition deleted.
Dismissing the appeal of the Revenue, the Court held that the seized paper was
not reliable since it had not shown the correct state of affairs and it was also not
corroborated by any independent evidence. There was interpolation of the date and
the language contained therein clearly showed that the letter was not disclosing correct
facts. It was also not explained why the original letter remained with the assessee
and how the payment of ` 90 lakhs had been verified and P had not confirmed the
payment. Hence, the assessee had a justification to retract from the earlier statement
making surrender of ` 90 lakhs. The Commissioner (Appeals) and Tribunal on proper
appreciation of facts and material on record, correctly deleted the addition. (AY. 2009-10)
DCIT v. Vipin Aggarwal (2016) 46 ITR 367 (Chd.)(Trib.)
372
S. 69 Unexplained investments
S. 69 : Unexplained investments – Bogus purchases – Sales was accepted as genuine 1205
– Purchase cannot be assessed as bogus.
Dismissing the appeal of revenue the Tribunal held that assessee has furnished
quantitative reconciliation, gross profit rate is comparable to earlier and subsequent
years, suppliers are income tax assessee and their sales have not been treated as bogus
by their Assessing Officer, payments are by account payee cheques and other evidence
was available , hence the purchases cannot be treated as bogus purchases. (ITA No.
5163/Mum/ 2013 dt. 24-02-2016 (AY. 2010-11)
ACIT v. Jaybharat Textiles & Real Estate Ltd (Mum)(Trib.) www.itatonline.org
S. 69 : Unexplained investments – Discrepancy in Stock – Assessee’s bank had taken 1206
insurance policy for stocks to protect cash credit facility provided–Inference of AO
that the same meant to be declaration made by assessee – Letters issued by bank
and policy document,stock reconciliation statement proves no quantity difference –
Addition towards suppression of closing stock cannot be sustained.
The assessee’s bank had taken an insurance policy of stocks of ` 1.5 crore in order
to protect its cash credit facility advanced to the assessee. In the insurance policy, it
was mentioned that the property insured was ‘on stock of cement manufacturing’. The
closing stock of finished goods declared by assessee was to the tune of ` 33,895 in its
balance sheet. The AO inferred that the insured amount of stock is the stock declared
to bank for finished goods alone and added the differential amount under section 69.
On appeal to Tribunal, it was held that the clarificatory letter issued by bank, insurance
policy document and stock reconciliation statement showed that the amount insured
was for raw materials and finished goods both and that there was no quantity difference
between what was submitted to bank vis-à-vis the audited balance sheet filed with
return. No addition was to be made towards suppression of closing stock. (AY 2008-09)
ACIT v. Bharat Hi-Tech (Cement) P. Ltd. (2016) 176 TTJ 166 (Kol.)(Trib.)
S.69 : Unexplained investments – Genuineness of Transaction – Lease Deed properly 1207
registered and stamp duty was paid – Approved by BMC and State Government –
Transactions cannot be held to be sham on basis of doubts and apprehensions.
Held that CIT(A) has recorded detailed findings that the transaction was of lease only.
CIT(A) held that lease deed was properly registered and stamp duty was paid as per
Bombay Stamp Act. Further, lease deed was approved by BMC and State Government.
Title of the property continued in the name of assessee. Transactions cannot be held to
be sham merely on basis of doubts and apprehensions. Documents cannot be brushed
aside or rewritten without any contrary material on record. Thereby, no inference is
called for. (AY. 2003-04, 2006-07, 2007-08)
Kamala Brothers v. ITO (2016) 176 TTJ 178 / 131 DTR 106 (Mum.)(Trib.)
S. 69 : Unexplained investments – Details mentioned in pocket diary related to the 1208
items traded by the assessee – Only addition of gross profit was held to be justified.
Consequent to a search in the business premises of the Assessee, a pocket diary
containing details of cash, 50 chains and 28H set was found. The Director was
questioned only regarding the cash mentioned in the diary. The AO aggregated all the
three items as unexplained investment in the hands of the assessee. During the course
373
Unexplained investments S. 69
of assessment, the Director disowned the diary. The ITAT held that assessee did not
discharge the burden upon him to disprove the documents obtained during the course
of the search. Since the items mentioned in the diary related to the business of the
assessee, it could have been unaccounted for in its books. Since, the assessee had
furnished the gross profit earned from sale of jewellery, the ITAT held that the addition
was to be restricted to the amount of gross profit on that sum. (AY. 2009-10, 2010-11)
Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. ACIT (2016) 45 ITR 636 (Mum.)(Trib.)
1209 S. 69 : Unexplained investments – Books of account having been accepted no addition
can be made in respect of suppressed sales of scrap. [S. 145]
The Tribunal held that assessee’s books of account having been accepted and there being
no evidence whatsoever of suppression of sales of scrap, addition was not justified. (AY.
2007-08)
Gillette India Ltd. v. ACIT (2015) 70 SOT 289 / (2016) 175 TTJ 35 (UO)(Jaipur)(Trib.)
1210 S. 69 : Unexplained investments – Addition or disallowance can be set off –
Telescoping of amount surrendered.
The Tribunal held that addition or disallowance made by the AO can be set off against
the amount surrendered during the search proceedings when no other undisclosed
income has been discovered during the assessment proceedings. (AY. 2012-13)
Gillco Developers & Builders (P) Ltd. v. Dy. CIT (2016) 175 TTJ 81 (UO)(Chd.)(Trib.)
1211 S. 69 : Unexplained investments – Bogus purchases – An addition on account of bogus
purchases cannot be made only on the basis of information received from the MVAT
department. [S.143(3)]
Allowing the appeal of assessee the Tribunal held that; we have carefully considered
the rival submissions. The entire discussion in the assessment order reveals that
purchases from four parties namely Dhruv sales Corporation – ` 13,67,640/-; Subhlaxmi
Sales Corp. – ` 20,20,800/-; Dharshan Sales Corporation - ` 9,64,656/-; and Paras
(India)- ` 33,98,400, totalling to ` 77,51,496/- have been treated to be bogus based on
the purported enquiries conducted by the Sales Tax Department of the Government
of Maharashtra. Ostensibly, the Assessing Officer ought to have brought on record
material which is relevant to the transactions of the assessee with the aforesaid four
parties instead of making a general observation about the information received from the
Sales Tax Department of the Government of Maharashtra. Quite clearly, the Assessing
Officer as well as CIT (Appeals) have taken note of the fact that no sales could have
been effected by the assessee without purchases. In the present case, assessee has
explained that all its sales are by way of exports. The books of account maintained by
the assessee show payment for effecting such purchases by account payee cheques and
also the vouchers for sale and purchase of goods, etc. Notably, no independent enquiries
have been conducted by the Assessing Officer. Under identical circumstances, our Co-
ordinate Benches in the cases of Deepak Popatwala Gal, Shri Rajeev G. Kalathil and
Ramesh Kumar and Co. have held that the Assessing Officer was not justified in making
additions merely on the basis of information obtained from the Sales Tax Department
of the Government of Maharashtra without conducting any independent enquiries.
Before the CIT (Appeals), one of the points raised by the assessee was with respect to
374
S. 69 Unexplained investments
an opportunity to cross-examine the four parties, but we find that no such opportunity
have been allowed. Considering the entirety of facts and circumstances of the case and
the aforesaid precedents, which have been rendered under identical circumstances, in
our view, the CIT (Appeals) erred in sustaining the addition to the extent of ` 4,19,356/-
instead of deleting the entire addition of ` 9,68,937/- made by the Assessing Officer. We
direct accordingly. (ITA No. 5427/Mum/2015, dt. 18.03.2016)(AY. 2009-10)
Imperial Imp & Exp. v. ITO (Mum.)(Trib.); www.itatonline.org
S. 69 : Unexplained investments – Bogus purchases – Theory that transaction “defies 1212
human probabilities” cannot be applied to purchases in isolation but has to be
applied to the entire transaction in the light of documentary evidence produced by the
assessee – Sales are accepted as genuine – Purchases cannot be disallowed. Addition
was deleted. [S.143(3)]
Allowing the appeal of assessee following the ratio of decision in CIT v. Nikunj Eximp
Enterprises Pvt. Ltd. (2015) 372 ITR 619 (Bom.)(HC), the Tribunal held that there cannot
be sales without purchases and the fact that the assessee has exported the goods was
not controverted. It is a known fact that the claim of export cannot be considered to
be not-genuine, since the export cannot take place without clearance from Customs
Authorities, another arm of Government of India. Hence, the claim of export has to be
necessarily accepted on the basis of relevant documents. In the instant case also, the
assessee has furnished the copies of purchase invoices, confirmation letters, copies of
ledger accounts, copies of export bills, the details of re-import of the same and details
of payment of customs duty on reimport, the details of purchase return. All these
chronological events have not been disproved by the tax authorities. Therefore the
theory of human probability has been applied to only part of transactions and not to
the whole round of transactions. In any case, it cannot be said that the claim of the
assessee defies the human probabilities, when one examines the documents furnished
by the assessee. Accordingly, we are of the view that the Ld CIT(A) was not justified
in confirming the addition made by the AO. Accordingly, we set aside the order of Ld
CIT(A) on this issue and direct the AO to delete the impugned addition. (ITA no. 3823/
Mum/2014, dt. 09.03.2016)(AY 2009-10)
Maruti Impex v. JCIT (Mum.)(Trib.); www.itatonline.org
S. 69 : Unexplained investments – Additions confirmed by the CIT(A) was deleted by 1213
considering the details submitted by the assessee.
Assessing Officer made the addition which was confirmed by the CIT(A) without
considering the various submissions and details filed by the assessee. On appeal
tribunal held that we have considered the rival contentions of the parties and perused
the material available before us. We have also perused various certificates and bank
statements which were brought to our notice during the course of hearing from page
nos. 13 to 42 of the paper book. As discussed above we find it is a classical case where
various additions have been made by the AO without proper application of mind and
has no distant connection with the material on record. We find that the third party
transactions were added in the hands of the assessee without any basis or material
and thus, the AO framed the assessment in a hypothetical way putting the assessee
to enormous harassment and inconvenience. Similarly, the ld. CIT(A) confirmed the
375
Unexplained money S. 69A
addition without looking into the merits and facts of the cases which are very clear and
apparent from the records produced. Therefore, in view of these facts, the additions of
` 1,40,43,154/- in ground No.1, ` 10 lakhs in ground No. 2 and ` 26 lakhs in ground
No.3 on account of unexplained/undisclosed income are ordered to be deleted by
reversing the order of First Appellate Authority. AO is directed accordingly. (ITA No.
5302/mum/2012, dt. 15.03.2016) (AY. 2007-08)
Mintu Sayermal Jain (Mrs) v. ITO (Mum.)(Trib.); www.itatonline.org
S. 69A. Unexplained money, etc.
1214 S. 69A : Unexplained money – Gifts – Associates residing abroad – Not required to
prove the source of the money of the donor – Large amount received gift cannot be he
basis to treat the amount as deemed income of the assessee – Deletion of addition by
the Tribunal was held to be justified. [S.68]
Dismissing the appeal of revenue, the Court held that gifts received from abroad from
donors who are total strangers to the assessee and not related by relationship, business
or friendship – Deletion of addition was held to be justified. Suspicion and doubt may
be the starting point of an investigation but cannot, at the final stage of assessment,
take the place of relevant facts, particularly where a deeming provision is sought to
be invoked. The principle that governs a deeming provision is that the initial onus
lies upon the revenue to raise a prima facie doubt on the basis of credible material.
The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if
the assessee is unable to proffer a credible explanation, the Assessing Officer may
legitimately raise an inference against the assessee. If, however, the assessee furnishes
all relevant facts within his knowledge and offers a credible explanation, the onus
reverts to the revenue to prove that these facts are not correct. The revenue cannot
draw an inference based upon suspicion or doubt or perceptions of culpability or on
the quantum of the amount, involved. Any ambiguity or any if and buts in the material
collected by the Assessing Officer must necessarily be read in favour of the assessee,
particularly when the question is one of taxation, under a deeming provision. Thus,
neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction
by the Assessing Officer. The above exposition shall not be misconstrued to restrict the
power of the revenue to raise an inference as to the efficacy of material produced by
or before the Assessing Officer. The Assessing Officer proceeded as if the entire onus
lay upon the assessee, ignored the material received from the Central Board of Direct
Taxes from the Inland Revenue Service, Great Britain and failed to follow the matter
any further with respect to Varinder Sharma and on the basis of suspicion, held that
gifts are not genuine. Accordingly the Court held that,it was for the revenue to proceed
to investigate the matter further hence no error in the opinion recorded by the Tribunal
and consequently, the substantial question of law is answered against the revenue.
CIT v. Jawahar Lal Oswal (FB) (2016) 382 ITR 453 / 133 DTR 15 / 284 CTR 188 238
Taxman 225 (P&H)(HC)
CIT v. Monica Oswal (Ms)(FB) (2016) 382 ITR 453 / 133 DTR 15 / 284 CTR 188 (P&H)(HC)
CIT v. Ruchika Oswal (Ms)(2016) 382 ITR 453 / 133 DTR 15 / 284 CTR 188 (FB)(P&H)(HC)
CIT v. Jawahal Lal Oswal (FB) (2016) 382 ITR 453 / 133 DTR 15 / 284 CTR 188 (P&H)(HC)
Editorial : CIT v. Jawahar Lal Oswal (2004) 190 CTR 56 (P&H)(HC)
376
S. 69A Unexplained money
S. 69A : Unexplained money – Bank deposits – Amount deposited in assessee’s savings 1215
bank account was sales of partnership firm in which assessee was partner and same
was duly accounted for by said firm, said amount could not be treated as undisclosed
income of assessee.
Dismissing the appeal of the revenue the Tribunal held that cash deposited in assessee’s
saving bank account was sales of partnership firm in which assessee was partner and
same was duly explained with help of sales receipt recorded in books of account of
partnership firm, said amount could not be added in assessee’s hands as unexplained
money. (AY. 2009-10)
ITO v. Vinod Chadha (2016) 160 ITD 558 / 50 ITR 119 / (2017) 183 TTJ 380 / 145 DTR
169 (Delhi)(Trib.)
S. 69A : Unexplained money – Unexplained cash deposits – Failure by Department to 1216
produce documents to establish whether assessee opened account with her signature
– No liability could be fastened on assessee for deposits made in account
The Department received a complaint that the assessee owned an illegal saving bank
account. The AO, having reason to believe that income had escaped assessment initiated
proceedings under section 147. The CIT u/s. 263 set aside the assessment framed under
Section 147 and directed the AO to make assessment afresh. AO thereafter made an
addition on account of unexplained cash deposit in the hands of assessee and completed
assessment. Before CIT(A), the assessee contended that the matter be referred to the
Government examiner to examine the handwriting in the matter to verify the correctness
of the signature of the assessee whether she had opened the bank account or not.
However no steps were taken by him. On appeal to Tribunal, it was held that the branch
manager of the bank reported that the account had no concern with the assessee. Further
since the relevant documents for opening of a new bank account were not brought on
record and no comparison was made with them, the AO had failed to bring sufficient
evidence on record to justify the findings that the assessee opened the bank account
under her signature. Therefore no liability could be fastened on the assessee for the
deposits made. (AY. 2000-01)
Subhra Agrawal (Mrs) v. DCIT (2016) 47 ITR 283 (Agra)(Trib.)
S. 69A : Unexplained money – Pay order – On the basis of evidence found in the 1217
course of search addition was made, since assessee had not established that amount
mentioned in pay order was not in nature of income, impugned addition deserved to
be upheld. [S. 292C]
On 5-1-2007, Authorised Officer conducted a search under section 132 upon assessee
and one ‘K’, who was colleague of assessee, and seized various documents including
a letter dated 12-4-1999, bearing seal of UBS-AG (Union Bank of Switzerland), from
residence of ‘K’. In said letter, it was stated that pay order in favour of assessee payable
in India had expired its encashment period and fresh pay order was in process of being
issued. Said letter was written by Chief Manager UBS-AG to assessee. Assessing Officer
assessed assessee for Assessment Year 2000-01 and on basis of said letter made a certain
addition to his income on account of income from undisclosed sources by way of pay
order. Assessee denied any knowledge of aforesaid letter. On appeal the Tribunal held
377
Unexplained money S. 69A
that the onus to establish nature of money/receipt as being not in nature of income
was on assessee and which he had clearly not established, under circumstances, there
was no basis to consider amount mentioned in pay order as not received by assessee
during relevant assessment year and being not in nature of income therefore, impugned
addition deserved to be upheld. (AY. 2000-01)
Hassan Ali Khan v. Dy. CIT (2016) 157 ITD 529 / 180 TTJ 209 (Mum.)(Trib.)
1218 S. 69A : Unexplained money – Jewellery given to daughter at the time of marriage as
per Will – No addition could be made merely on ground that ‘Will’ was not registered
and no probate or letter of Administration had been obtained.
Allowing the appeal of assessee the Tribunal held that Assessing Officer could not
make addition to assessee’s income in respect of jewellery given to his daughter at
time of marriage as per ‘Will’ of assessee’s mother merely on ground that ‘Will’ was not
registered and no probate or letter of Administration had been obtained. (AY. 2006-07)
Subhash Chander Goel v. ITO (2016) 156 ITD 808 (Chd.)(Trib.)
1219 S. 69A : Unexplained money – No addition if the difference in stock of gold was
reconciled by the Assessee as it had received gold on sale or return basis which was
not included in its books as stock.
During the course of search, there was a difference in the physical stock of gold as
against the book stock. The shortage in stock was treated as unaccounted sales by the
AO and added to the income of the assessee. Before the CIT(A), the Assessee submitted
that the difference in stock was because it had given certain stock to karigars and it
had also received certain stock on sale or return basis. While, the CIT(A) accepted that
certain stock was kept with karigars, he did not accept that some gold was received
on sale or return basis. The ITAT held that the CIT(A) had adopted a pick and choose
method and the Director need not have all the minutest details of the stock of gold. The
addition was deleted on the basis of the documentary evidence filed by the Assessee
which was not controverted by the Department. (AY. 2009-10, 2010-11)
Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. ACIT (2016) 45 ITR 636 (Mum.)(Trib.)
1220 S. 69A : Unexplained money – Negative cash balance was added as unexplained
money in the absence of any explanation by the assessee.
The AO noticed negative cash balance on certain dates, and peak of this negative
balance was added and unexplained income. The assessee alleged that the entries were
recorded in the books of account on the wrong dates which led to the negative cash
balance. The ITAT held that the AO had found specific defects in the cash book which
could not be controverted by the Assessee and the addition was upheld. (AY. 2008-09)
Brothers Pharma P. Ltd. v. ITO (2016) 45 ITR 154 (Jaipur)(Trib.)
378
S. 69B Amounts of investments not fully disclosed in books of account
S.69B. Amount of investments, etc., not fully disclosed in books of account.
S. 69B : Amounts of investments not fully disclosed in books of account – Cost of 1221
construction – On the basis of estimate by valuation officer, addition cannot be made
– Excess stock of jewellery – Reconciliation filed – Addition was not justified. [S. 132,
158B]
Dismissing the appeal of the revenue the Court held that in the absence of any material
document recovered during search, no addition could be made on the basis of valuation
report of the Valuation officer. When the assessee has filed the reconciliation statement
of jewellary seized, addition was held to be not justified.(AY 1990-91 to 2000-01)
CIT v. S. Jayalakshmi Ammal (2016) 242 Taxman 449 / (2017) 390 ITR 189 (Mad.)(HC)
S. 69B : Amounts of investments not fully disclosed in books of account – Addition 1222
deleted if it was merely based on the fact that the Assessee could not submit itemwise
details of the seized jewellery.
During the course of search, the AO seized diamond jewellery. The Assessee claimed
that the entire jewellery was included in the income declared by it. The AO treated it
as unexplained investment u/s. 69B since the assessee could not submit itemwise details
of the jewellery. The ITAT deleted the addition and held that the Assessee had included
the said diamond jewellery in the declaration by it. (AY. 2003-04, 2005-06 to 2008-09)
Chhaya P. Gangar (Ms.) v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
S. 69B : Amounts of investments not fully disclosed in books of account – Substitution 1223
of ‘full value of consideration received’ with ‘stamp value’ in terms of section 50C,
is applicable in hands of seller of property who has to compute capital gains u/s. 48
pursuant to transfer of a capital asset in nature of land or building or both; same
cannot be extended in case of purchaser to estimate undisclosed investment. [S.48,
50C, 56(2)(vii)]
The assessee purchased a property for a consideration of ` 48 lakhs. The AO observed
that the value determined by the stamp valuation authority for the said property was
` 1.05 crores and, accordingly treating the same to be the fair market value of the
properties. AO. made an addition of ` 57.13 lakhs as unexplained investment u/s. 69B.
The ITAT held that substitution of ‘full value of consideration received’ with ‘stamp
value’ in terms of s. 50C, is applicable only in hands of seller of property who has to
compute capital gain u/s. 48 pursuant to transfer of a capital asset in nature of land
or building or both and same cannot be extended in case of purchaser to estimate
undisclosed investment. Where there was nothing on record to show that assessee
had made any additional investment in property in addition to what had been stated
in books of account, no addition could be made in its hands on basis of stamp duty
charged by sub-registrar. S. 56(2)(vii) which provides for substitution of ‘stamp value’
with ‘actual purchase price, in excess of ` 50,000’ in hands of buyer is applicable only
where any immovable property is purchased after 1-10-2009 and since in instant case
property had been purchased by assessee in AY. 2006-07, S. 56(2)(vii) could not apply
retrospectively. (AY. 2006-07)
Dy. CIT v. Global Mercantiles (P.) Ltd. (2016) 157 ITD 924 (Kol.)(Trib.)
379
Amounts of investments not fully disclosed in books of account S. 69B
1224 S. 69B : Amounts of investments not fully disclosed in books of account – Ornaments,
watches, cash was found in the course of search – Since income returned by assessee
for preceding nine years was meager, impugned addition deserved to be confirmed.
Assessing Officer on basis of various documents seized on search from assessee made
certain addition to his income on account of unexplained ornaments, watches and cash
in hand. Assessee stated that he had shown said assets in account books for current
assessment year 2000-01 as opening capital carried over from generations as part of
family heirlooms. On appeal Tribunal held that since income returned by assessee for
nine years preceding current year was meager, being not sufficient for family even to
meet two ends, impugned addition deserved to be confirmed. (AY. 2000-01)
Hassan Ali Khan v. Dy. CIT (2016) 157 ITD 529 / 180 TTJ 209 (Mum.)(Trib.)
S. 69C. Unexplained expenditure, etc.
1225 S. 69C : Unexplained expenditure – Estimation of commission at 5% of receipt by the
Assessing Officer was held to be justified.
Assessee was running a hospital. Statement of assessee’s accountant was recorded
under section 131 wherein he admitted that assessee had been paying commission to
various Doctors for referring patients to hospital. It was further stated that said payments
were made in cash and records pertaining to same were not produced for examination
of Assessing Officer. In such a situation, Assessing Officer estimated payments of
commission at rate of 5 per cent of total receipts. Accordingly, an addition of ` 21 lakh
was made to assessee’s income. On appeal Tribunal restricted said addition to ` 5 lakh.
On appeal by Revenue allowing the appeal of revenue, the Court held that it was found
that normal practice in profession was to give a commission of 10 per cent of billed
amount to Doctor referring patients but it was possible that some patients came without
reference and that some Doctors did not take such commission. Whether in aforesaid
circumstances, estimated addition made by Assessing Officer at rate of 5 per cent was
justified and, same was to be restored. (AY. 2005-06)
CIT v. International Institute of Neuro Sciences & Oncology Ltd. (2016) 243 Taxman 364
(P&H)(HC)
1226 S. 69C : Unexplained expenditure – Payment of commission – Refusal of cross
examination of the agents – Natural justice was not vilated – Addition was held to be
justified. [S.131, S.148, Evidence Act, 133]
Assessee claimed deduction of payment of certain commission to three companies
which was accepted in the original assessment. Thereafter, a search was conducted on
the entities to whom commission was paid and during the search, managing director of
the said three payee companies admitted in a statement that the transactions with the
assessee were hawala entries. Thereafter the assessment of the assessee was reopened.
During the reassessment proceedings, assessee was offered an opportunity to cross-
examine but assessee expressed its inability to cross-examine at a short notice of two
working days and assessment was finalized. Tribunal restored the matter back to the
AO for cross examination. Assessee was asked to cross-examine ‘but it refused to cross-
examine him on the ground of his being stranger to the transaction. AO finalized the
380
S. 69C Unexplained expenditure
assessment after making the addition. High Court held that, de hors the evidence was,
by itself, sufficient to draw an adverse inference against the assessee that the payments
of the commission were fictitious. It was further held that, since the assessee chose not
to cross examine that means, they have admitted the said statement. High Court also
held that there was no violation of principles of natural justice and the uncontroverted
statements were sufficient to substantiate the case of the revenue against the assessee.
(AY. 1981-82, 1983-84)
Roger Enterprises (P.) Ltd. v. CIT (2016) 382 ITR 639 / 238 Taxman 434 / 134 DTR 337
(Delhi)(HC)
S. 69C : Unexplained expenditure – Birthday expenses – Addition was reduced to half 1227
– Held to be justified.
AO has made addition to the income of the assessee on account of expenses incurred on
birthday party of his grand son. On appeal Tribunal reduced the addition to half holding
that the invitation to birth day party was from son and daughter-in-law of assessee. On
appeal the High Court affirmed the view of the Tribunal. (AY. 2007-08)
Vijay Agarwal v. CIT (2016) 236 Taxman 542 (P& H)(HC)
S. 69C : Unexplained expenditure – Investments – Explanation regarding amounts in 1228
the name of sundry creditors – Amounts representing credits can be added to total
income – Matter remanded to permit parties to prove genuineness of creditors. [S. 68,
69]
Allowing the appeal of assessee, the Court held that; If sundry credits are not proved
by the assessee addition can be made by the Assessing Officer by resorting to section
69C. Held, that the Tribunal had found on factual scrutiny that the sundry creditors
indicated in the books of account of the assessee were not proved in their entirety
and the genuineness of the sundry creditors being a question of fact it was required to
be examined by the Assessing Officer. It remitted the matter to the Assessing Officer
reserving liberty to the Revenue as well as the assessee to prove the genuineness of
sundry creditors. This was justified. (AY. 2003-04, 2004-05)
P. M. Abdulla v. ITO (2015) 60 taxmann.com 52 / (2016) 380 ITR 125 / 139 DTR 124
(Karn.)(HC)
S. 69C : Unexplained expenditure – Bogus purchases – Estimation of 25 % of purchases 1229
was held to be justified. [S. 158BC]
Dismissing the appeal of the assessee the Court held that the Tribunal was justified in
estimating 25% of alleged bogus purchases.
N. K. Industries Ltd. v. Dy. CIT (2016) 142 DTR 162 / 72 taxmann.com 289 / (2017) 292
CTR 354 (Guj.)(HC)
S. 69C : Unexplained expenditure – Bogus purchases – Estimation of GP at the rate of 1230
12.5% was held to justified. [S. 133(6)]
Tribunal held that though S. 133(6) notices were returned unserved and the assessee
could not produce the alleged bogus hawala suppliers, the entire purchases cannot be
added as undisclosed income. The addition has to be restricted by estimating Gross
381
Unexplained expenditure S. 69C
profit ratio on the purchases from the alleged accommodation entry providers. (ITA No.
4736 & 52047/Mum/2014, dt. 14.12.2016)(AY. 2010-11)
Ashwin Purshotam Bajaj v. ITO (Mum.)(Trib.); www.itatonline.org
1231 S. 69C : Unexplained expenditure – License fee – Stamp duty charges – Additions were
made on presumptions, matter was remanded.
The Assessing Officer has made the addition on the presumption that the assessee might
have paid the licence fee and not debited to P&L, account. Tribunal remanded the matter
by observing that since neither the assessee provided any evidence to support nor his
stand or revenue disproved by assessee. Matter remanded for fresh consideration. (AY.
2005-06)
Ramesh D. Murpana v. ACIT (2016) 159 ITD 1019 (Mum.)(Trib.)
1232 S. 69C : Unexplained expenditure – Bogus purchases – The AO cannot treat purchases
as bogus (accommodation entries) merely on the basis of information received from
the sales – tax department and without conducting independent inquires. [S. 37(1)]
Dismissing the appeal of revenue ; the Tribunal held that The AO cannot treat purchases
as bogus (accommodation entries) merely on the basis of information received from the
sales-tax department and without conducting independent inquires especially when
the assessee has discharged its primary onus of showing books of account, payment by
way of account payee cheque and producing bills for purchase of goods. (ITA No. 5149/
Mum/2014, & ITA No. 4260/mum/2015 dt. 16.09. 2016)(AY. 2011-12 & 2010-11)
DCIT v. Shivshankar R. Sharma (Mum.)(Trib.), www.itatonline.org
1233 S. 69C : Unexplained expenditure – Addition based on entry in diary maintained by
college accountant cannot be upheld without any corroborative evidence.
A search was conducted in the premises of the institution to whom the Assessee had
given donation/capitation fee for admission of her son in a medical college. The AO
reopened the assessment of the assessee. The assessee was unable to provide satisfactory
explanation as to the source of the capitation fee / donation and hence addition u/s.
69C was made by the AO. The ITAT deleted the addition and held that the same was
based on the diary maintained by the accountant of the college and not supported by
any other corroborative evidence. ((AY. 2001-02)
Huseina Dawoodi (Dr.) v. ITO (2016) 47 ITR 735 (Mum.)(Trib.)
1234 S. 69C : Unexplained expenditure – Bribe – VCD – Best Bakery case – Supreme Court
in criminal proceedings – Addition cannot be made without corroborating it with any
other evidence. [S. 69A]
AO added an amount as unexplained payment made by assessee on basis of a VCD found
in famous ‘Best Bakery case’ without corroborating it with any other evidence. Tribunal
held that action of AO was held to be not justified. Merely on the basis of observation of
Supreme Court in criminal proceedings additions cannot be made.(AY. 2005-06)
Mahendrabhai B. Shrivastav v. ITO (2016) 158 ITD 755 / 181 TTJ 713 / (2017) 152 DTR
72 (Ahd.)(Trib.)
Chandrakant R. Shrivastav v. ITO (2016) 158 ITD 755 / 181 TTJ 713 / (2017) 152 DTR
72 (Ahd.)(Trib.)
382
S. 70 Set off of loss
S. 69C : Unexplained expenditure – Personal expenditure – Addition of ` 7.50 lakhs 1235
was confirmed as against addition of ` 28.50 lakhs to income of assessee on account
of life style other expenditure,
Assessing Officer made an addition of ` 28.50 lakhs to income of assessee on account of
life style other expenditure. Tribunal held that said estimate of ` 28.50 lakhs, to be valid
in law, had to be an informed one, taking into account different variables or attributes
on which it depended. Since no such exercise had been attempted by revenue, addition
on account of lifestyle required to be made on basis of assessee’s own estimate at ` 7.50
lakhs. (AY. 2000-01)
Hassan Ali Khan v. Dy. CIT (2016) 157 ITD 529 / 180 TTJ 209 (Mum.)(Trib.)
S. 69C : Unexplained expenditure – Addition on account of marriage expenses of 1236
daughter on basis of surmises and conjectures was deleted.
Allowing the appeal of assessee the Tribunal held that Assessing Officer without making
a reasonable estimate of expenses incurred by assessee on marriage of his daughter on
basis of material on record, could not make addition under section 69C merely on basis
of surmises and conjectures. (AY. 2006-07)
Subhash Chander Goel v. ITO (2016) 156 ITD 808 (Chd.)(Trib.)
S. 69C : Unexplained expenditure – Assessment – Bogus Sales and purchases – 1237
Addition solely on the basis of information received from the sales – tax department
is not sustainable. Suspicion of the highest degree cannot take the place of evidence.
[S.143(3)]
Allowing the appeal of assessee the Tribunal held that the AO had made the addition
on the basis of information received from the Sales tax department, but, he did not
make any independent inquiry. He did not follow the principles of natural justice before
making the addition. The First Appellate Authority had reduced the addition to 20%,
but he has not given any justification except stating that same was done to plug the
probable leakage revenue. Considering the peculiar facts and circumstances of the case,
we are reversing the order of the First Appellate Authority. (ITA No. 4547/2545/1275/
Mum/2014, dt. 01.01.2016)(AY. 2009-10)
Hiralal Chunilal Jain v. ITO (Mum.)(Trib.); www.itatonline.org
S. 70. Set off of loss from one source against income from another source under the
same head of income.
S. 70 : Set off of loss – One source against income from another source – Same head 1238
of income – Losses in Futures & Option derivative trading business could be set off
against short-term capital gains from sale of shares and other income earned by
assessee except salary income; unless return is filed within due date unadjusted loss
could not be carried forward. [S. 71, 73, 80, 139(1)]
Tribunal held that losses in Futures & Option derivative trading business which are
non-speculative business losses, would be set off against capital gains on sale of shares
and other income earned by assessee; however, same would not be set off against salary
income by virtue of section 71(2A) debarring such adjustment. Since assessee did not
383
Set off of loss S. 70
file return of income within due date as prescribed under section 139(1), he would not
be allowed to carry forward unadjusted business loss arising from Futures & Option
derivative trading business chargeable to tax under head ‘Profits and gains of business
or profession’ which remained unadjusted. (AY. 2008-09)
Deepak Sogani v. DCIT (2016) 158 ITD 533 (Mum.)(Trib.)
1239 S. 70 : Set off of loss – One source against income from another source – Same head
of income – Loss of 10A eligible unit allowed to be set off against profit of non-10A
unit. [S. 10A, 72]
The Assessee had two units one eligible for deduction u/s. 10A which had incurred a
loss and another non-eligible unit. The assessee set-off the loss from the eligible unit
against the profit of the non-eligible unit. The ITAT allowed the claim of the Assessee
based on the circular of the CBDT, which stated that loss of eligible units would be
allowed for carry forward and set off u/s. 72. (AY. 2008-09)
NEC HCL System Technologies Ltd. v. ACIT (2016) 176 TTJ 436 (Delhi)(Trib.)
S. 71. Set-off of loss from one head against income from another.
1240 S. 71 : Set off of loss – One head against income from another – Free trade zone – Loss
suffered by assessee in a unit entitled for exemption under section 10A cannot be set
off against income from any other unit not eligible for such exemption. [S.10A]
Tribunal held that loss suffered by assessee in a unit entitled for exemption under
section 10A cannot be set off against income from other unit which is not eligible for
such exemption. (AY. 2008-09)
Super Auto Forge (P.) Ltd. v. ACIT (2016) 157 ITD 467 (Chennai)(Trib.)
S. 72. Carry forward and set off of business losses.
1241 S. 72 : Carry forward and set off of business losses – Cash credits – As income not
classifiable under any heads of income as per section 14, such income not eligible to
set off brought forward business losses and unabsorbed depreciation. [S.14, 68]
A sum of ` 5,13,55,093/- was found credited in the books of account of the assessee as
commodity trading profit, said income was set off by the assessee against business losses
for the year. AO during assessment proceedings found that assessee was not a client of
any member on the Exchange and concluded that the transactions showing generation
of commodity trading profit was bogus. CIT(A) upheld the order of AO in totality, but
the Tribunal in assessee’s appeal, held in favour of assessee so far as set off of losses
& unabsorbed depreciation against the unexplained cash credit income was concerned.
High Court held that once the income was treated as non-genuine and addition under
section 68 was confirmed by the Tribunal, Tribunal was not justified in allowing the
set off of loss against it and thereby set aside the order of Tribunal to that extent. (AY.
2010-11)
CIT v. Kerala Sponge Iron Ltd. (2016) 133 DTR 265 (Ker.)(HC)
384
S. 73 Losses in speculation business
S. 72A. Provisions relating to carry forward and set off of accumulated loss and
unabsorbed depreciation allowance in amalgamation or demerger, etc.
S. 72A : Carry forward and set off of accumulated loss and unabsorbed depreciation 1242
– Amalgamation.
The High Court held that ‘commencement of business’ is different from ‘engaged
in business’. It is the latter phrase which has been used in Section 72A(2)(a).
‘Commencement of business’ may be from the date when production may start but
to say that a party would be ‘engaged in business’ only from the date it commences
production, would not be correct. A party engages itself in a particular business from
the day when it gets involved in setting up of the business. The Court further held
that, a perusal of Sub-section (2) of Section 72A of the Act would go to show that
it is the loss of the amalgamating company as a whole, which is set off or carried
forward, and not of a particular unit or division of that amalgamating Company. It is
the amalgamating company, which should be in business for three years or more, prior
to the date of amalgamation, and not a particular unit or division of that amalgamating
company. (AY 2005-06)
CIT v. KBD Sugars & Distilleries Ltd. (2016) 129 DTR 227 (Karn.)(HC)
S. 73. Losses in speculation business.
S. 73 : Losses in speculation business – Speculation business – Allotment of shares 1243
cannot be termed as purchase, then the assessee cannot be said to be carrying on a
speculation business to the extent to which the business consists of the purchase and
sale of such shares.
Assessee, a dealer in chemicals, applied in public issue of certain companies and was
allotted shares which it sold and suffered loss. Assessee claimed that application of
shares from primary market and loss incurred on sale of such shares would not fall
within purview of being categorized as speculation loss under Explanation to section
73. Assessing Officer has held that that the loss was speculative nature, which was
confirmed by the Tribunal. On appeal by assessee, allowing the appeal of assessee the
Court held that the allotment of shares cannot be termed as purchase, then the assessee
cannot be said to be carrying on a speculation business to the extent to which the
business consists of the purchase and sale of such shares. Thus, it shall not be covered
under Explanation to Section 73 and therefore the sale of such shares would not become
the speculation business under the said Explanation. (AY. 2001-02)
AMP Spinning & Weaving Mills (P.) Ltd. v. ITO (2016) 243 Taxman 1 / (2017) 393 ITR 349
/ 150 DTR 390 (Guj.)(HC)
S. 73 : Losses in speculation business – Sale of shares of sister concern – Assessee – 1244
company had properly delivered shares at time of selling, transaction would not come
under provisions of section 43(5) of the Act and hence case of assessee would not be
covered under Explanation to section 73 of the Act. [S. 2(13), 43(5)]
On appeal by the assessee, the High Court held that in the present case, as the main
activity is only in manufacture and sale of yarn, the purchase of shares, having not
385
Losses in speculation business S. 73
been regular, should be construed only as an investment. The High Court further held
that since there is no systematic or organised course of activity, no regularity in the
transaction and since the purchase is only a one-time activity, it cannot be construed
as a speculative transaction. When the purchase of shares cannot come within the
definition of business, under section 2(13) of the Act, there is no point in contending
that the assessee is engaged in the business much less in a speculative business. Thus,
the High Court held that the AO ought to have allowed the loss, as short-term capital
loss and set off against the other business income of the assessee-company. When the
provisions of section 43(5) of the Act is not applicable, the contention of the revenue
that the case of the assessee-company would be covered under explanation to section 73
of the Act, cannot be accepted. In the result, the appeal filed by the assessee is allowed
and the order passed by the Tribunal is set aside (AY. 1990-91)
Rajapalayam Mills Ltd. v. DCIT (2016) 241 Taxman 50 / 293 CTR 518 (Mad.)(HC)
1245 S. 73 : Losses in speculation business – Derivatives – Losses incurred on account of
derivatives will be deemed to be business loss in view of proviso to section 43(5) and
not speculation loss. [S.43(5), 70]
The assessee-company was dealing in settlement of future and option/derivatives and
suffered loss. AO treated the said loss as speculation loss by applying provision of
Explanation to section 73. Department tried to argue that provision of section 73 are
more specific as compared to general provisions of section 43(5). High Court held that,
it cannot be said that section 43(5) is a general provision and the provision contained in
section 73 is specific in nature. On the contrary, the object of sub-section (5) of section
43 is to define ‘speculative business’. It was held that once the transaction forms part
of a deemed business under relevant clauses of section 43(5), then the losses of such
business can be set off against income of any other business. In so far as Explanation
to section 73 is concerned, the Court held that, it does not apply to derivatives, on the
contrary applies to shares and that derivatives cannot be treated at par with shares.
Accordingly, the Court held that, loss from derivatives is a business loss and not a
speculative loss. (AY. 2009-10)
Asian Financial Services Ltd. v. CIT (2016) 240 Taxman 192 / (2017) 148 DTR 105 / 293
CTR 240 (Cal.)(HC)
Editorial: SLP of revenue was admitted CIT v. Asian Financial Services Ltd. (2016) 243
Taxman 147 (SC)
1246 S. 73 : Losses in speculation business – Loss arising on dealing in units of mutual
funds/bonds would not be considered as loss in speculation business.
Dismissing the appeal of revenue, the Court held that Loss arising on dealing in units
of mutual funds/bonds would not be considered as loss in speculation business. (AY.
2004-05)
CIT v. Hertz Chemicals Ltd. (2016) 386 ITR 39 / 239 Taxman 431 (Bom.)(HC)
Editorial : SLP of revenue is admitted CIT v. Hertz Chemicals Ltd. (2017) 245 Taxman
272 (SC)
386
S. 73 Losses in speculation business
S. 73 : Losses in speculation business – Principal business is trading of shares, 1247
loss incurred in share trading will not be treated as speculation business loss –
Amendment inserted in Explanation to S. 73 by Finance (No. 2) Act, 2014 w.e.f.
1-4-2015 is clarificatory in nature.
Allowing the appeal of the assessee, the Tribunal held that if principal business is
trading of shares, loss incurred in share trading will not be treated as speculation
business loss. Amendment inserted in Explanation to S. 73 by Finance (No. 2) Act, 2014
w.e.f. 1-4-2015 is clarificatory in nature and would therefore operate retrospectively from
1-4-1977 from which date Explanation to S. 73 was placed on statute. (AY. 2009-10)
Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554) / 181 TTJ 750 (Mum.)(Trib.)
S. 73 : Losses in speculation business – If the assessee manages his transactions of 1248
sale and purchase of shares in cash segment and in future segment as a composite
business, the transactions cannot be segregated to arrive at profit or loss in each
segment separately. The provisions of the Income-tax Act cannot be interpreted to
the disadvantage of the assessee and to segregate the transactions in cash and future
segment which will be against the spirit of the taxation law.
Dismissing the appeal of the revenue the Tribunal held that the peculiarity of the
business of the assessee is such that the transactions carried out by the assessee in
cash segment and in future segment cannot be segregated. The business of the assessee
survives on the ultimate resultant figure arrived at after setting off/adjusting of the
profit and loss from each segment. It cannot be said that the transactions in each
segment done by the assessee are independent of each other. Before parting we would
like to further add that certain exceptions have been carved out under section 43(5)
vide which certain transactions in derivative named as ‘eligible transactions,’ done on
a recognized stock exchange, subject to fulfilment of certain requirements, are deemed
to be non-speculative. The said provisions have been inserted in the Act for the benefit
of the assessees keeping in view the fact that in such type transactions on recognized
stock exchange, the chance of manipulating and thereby adjusting the business profits
towards speculative losses by the assessee is negligible because such transactions are
done on recognized stock exchange and there are less chances of manipulation of
figures of profits and losses. These provisions have been inserted for the benefit of the
assessee so that the assessee may be able to set off and adjust his profit and losses
from derivatives in commodities against the normal business losses. These provisions
are intended to ease out the assessee from the difficulties faced due to the stringent
provisions separating the speculative transactions from the normal transactions.
However, these exclusions given to the assessee cannot be allowed to be so interpreted
to the disadvantage of an assessee so as to give it a different meaning and thereby
denying the assessee the set off of otherwise eligible business loss from one segment
as against the other segment, especially when the activity done by the assessee is a
composite activity and profit and loss in one segment not only depends but the very
transaction is done taking into consideration not ‘expected’ but certain future profit or
loss in other segment. (ITA No. 3654 & 3660/M/2014, dt. 28.12.2016)(AY. 2009-10)
J. M. Financial Service Ltd. v. JCIT (Mum.)(Trib.); www.itatonline.org
387
Losses in speculation business S. 73
1249 S. 73 : Losses in speculation business – Shares – Since assessee was a non-banking
finance company engaged in principal business of granting loans and advances,
Explanation to section 73 would not apply to its case. [S. 43(5)]
Assessee-company was engaged in trading of shares, securities and derivatives. Assessee
filed its return claiming set off of share trading loss against profit derived from
derivative trading. Assessing Officer took a view that loss in question was speculation
loss and in view of Explanation to section 73, same could not be allowed to be set
off against other business profits. Since assessee was a non-banking finance company
engaged in principal business of granting loans and advances, Explanation to section
73 would not apply to its case, therefore, assessee’s claim for set off of loss was to be
allowed. (AY 2008-09)
ITO v. Snowtex Investment Ltd. (2015) 174 TTJ 875 (Kol.)(Trib.)
1250 S. 73 : Losses in speculation business – The amendment to Explanation to s. 73 by
Finance (No. 2) Act, 2014 w.e.f. 01.04.2015 is clarificatory in nature and operates
retrospectively from 01.04.1977, being the date the Explanation to s. 73 was placed on
the statute. Therefore, the loss incurred in share trading business by companies whose
principal business is trading in shares will not be treated as speculation loss but as
normal business loss and the same can be adjusted against income from business or
other sources. [S. 28(i), 56]
Allowing the appeal of assessee the Tribunal held that;
(1) The intention of the Legislature, from a perusal of the Wanchoo Committee Report
and CBDT Circular No. 204 dated 24.07.1976, was not to treat purchase and sale
of shares by companies whose main business is trading in shares as speculative
business and therefore the Explanation to section 73 of the Act should be read only
to the extent of the purpose for which it was inserted. The subsequent amendment
made by Finance (No.2) Act, 2014 in the Explanation to section 73 of the Act
appears to be made in order to clarify the real intention behind the insertion
thereof, by removing the obvious hardship caused to various assessees whose
main business is trading in shares. The amendment has removed the anomaly
and brought the ambit of the Explanation to section 73 of the Act in line with the
intention of the Legislature by placing the companies whose principal business is
trading in shares as part of the exception to Explanation to section 73 of the Act,
because such companies were not the companies for whom the Explanation was
inserted.
(ii) The insertion of the amendment in the Explanation to section 73 of the Act
by the Finance (No. 2) Act, 2014, in our view, is curative and classificatory in
nature. If the amendment is applied prospectively from A.Y. 2015-16, a piquant
situation would arise that an assessee who has earned profit from purchase and
sale of shares in A.Y. 2015-16 would be treated as normal business profit and not
speculation business profit in view of the exception carried out by the amendment
in Explanation to section 73 of the Act. In these circumstances, speculation
business loss incurred by trading in shares in earlier years will not be allowed to
be set off against such profit from purchase and sale of shares to such companies
in A.Y. 2015-16. For this reason also, the amendment inserted to Explanation to
388
S. 73 Losses in speculation business
section 73 of the Act by Finance (No. 2) Act, 2014 is to be applied retrospectively
from the date of the insertion to Explanation to section 73 of the Act. (ITA No.
321/Mum/2013, dt. 13.05.2016)(AY. 2009-10)
Fiduciary Share & Stock P. Ltd. v. ACIT (Mum)(Trib.); www.itatonline.org
S. 73 : Losses in speculation business – Neither trading in shares done by taking 1251
delivery, nor derivative transaction (Future and options) in shares are speculative
transaction; loss from one can be set off from profit from other. [S. 43(5)]
The assessee is engaged in broking business and also in hedging and arbitrage business.
The assessee incurred loss in dealing in shares which was claimed as regular business of
assessee. In respect of non-delivery based transactions, the assessee had profit on futures
and option dealings while incurred loss on NSE and BSE capital market. AO treated
losses on both delivery and non-delivery based share transactions as speculation loss
hereby making the assessee ineligible to set off the same against the regular business
profit derived from derived transaction. On appeal CIT(A) upheld the order of AO. On
second appeal Tribunal held that ‘Trading of shares which is done by taking delivery
does not come under purview of section 43(5); similarly, as per sub-clause (d) of section
43(5), derivative transaction in shares is also not speculation transaction as defined in
section 43(5); and therefore, both profit/loss from all share delivery transactions and
derivative transactions have same meaning as far as section 43(5) is concerned loss
from share dealing should be allowed to be set off from profits from F & O in share
transactions. Thus, before application of Explanation to section 73, aggregation of
business profit or loss from these transactions is to be worked out irrespective of fact
whether it is from share delivery transaction or derivative transactions. (AY. 2008-09)
Lohia Securities Ltd. v. Dy. CIT (2016) 157 ITD 265 (Kol.)(Trib.)
S. 73 : Losses in speculation business – Dividend and interest income entitled to set off 1252
the loss arising out of trading in futures and options/derivatives against other income.
[S. 56, 72]
During year the assessee earned dividend income and interest income and it claimed set
off of loss arising out of trading in Futures and Options/derivatives against other income.
Lower authorities disallowed the claim. On appeal the Tribunal held that; assessee’s case
would fall within purview of exception carved out in Explanation to section 73, and,
therefore, it was entitled to set off of loss against other income (AY. 2006-07)
A. K. Capital Markets Ltd. v. Dy. CIT (2016) 156 ITD 528 (Delhi)(Trib.)
S. 73 : Losses in speculation business – Where the assessee is a dealer in shares, the 1253
entire business of share trading and derivatives should be treated as a composite
business and aggregated before applying Explanation to S. 73. [S. 43(5)]
Allowing the appeal of assessee the Tribunal held that; The assessee was a member
of two recognized Stock Exchanges – BSE & NSE. Both Exchanges had two separate
segments i.e. Capital Market Segment and Derivative Segment. In Capital market
segment, assessee made trading of equity shares whereas in Derivative segment,
future and options. The AO held that the transactions done by the assessee which
were not covered u/s. 43(5) shall be hit by explanation to section 73 and shall be
389
Losses S. 74
treated as speculative in nature and accordingly he disallowed a sum of ` 56,94,166/-
as deemed speculative loss, applying Explanation to section 73. CIT(A) held that
derivative transactions were covered by sec. 43(5)(d) and therefore, could not be held
as speculative transactions. On the other hand, share trading done in the cash market is
hit by explanation to section 73, and therefore, any loss/profit arising therefrom shall be
deemed to be speculative, and could only be set off against income of subsequent years.
Held, by the Tribunal, where the assessee is a dealer in shares, the entire business
consists in sale purchase of shares, then, it should be treated as composite business.
Also, assessee’s stand of treating the whole business as composite business has always
been accepted by the revenue in earlier as well as subsequent years. Accordingly, whole
of assessee’s business was treated as speculative and loss of current year was allowed to
be set off against profits of the current year. (ITA NO.4053/Mum/2013, dt. 16.03.2016)
(AY. 2009-10)
J.G.A. Shah Brokers P. Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org
S. 74. Losses under the head “Capital gains”.
1254 S. 74 : Losses – Capital gains – Deemed short term capital gains under section 50 can
be set off against brought forward long term capital gains, if character of such gain is
on account of sale of long term capital asset. [S. 50]
The assessee had set off brought forward long term capital losses against the deemed
short term capital gains which arose on account of the sale of depreciable asset. The
AO disallowed the set off of brought forward long term losses as the same were not
permitted under section 74 of the Act. On appeal the CIT(A) and Tribunal ruled in
favour of the assessee by following decision in case of CIT v. ACE Builders (2006) 281
ITR 210 (Bom.)(HC) and Komac Investments and Finance Pvt. Ltd. (2011) 132 ITD 290
(Mum.)(Trib). Aggrieved by the Tribunal’s decision the Revenue was in appeal before
the High Court.
High Court after placing reliance on the above decisions held that the deeming fiction
under section 50 is restricted only to the mode of computation of capital gains contained
under sections 48 and 49 of the Act. It does not change the character of the capital
gain from long term gain to short term gain for purpose other than section 50 of the
Act. Thus for the purpose of section 74 of the Act, the deemed short term capital gain
continues to be long term capital gain. As a result the Revenue’s appeal was dismissed
by the High Court. (AY. 2005-06)
CIT v. Parrys (Eastern) (P) Ltd. (2016) 384 ITR 264 / 238 Taxman 14 (Bom.)(HC)
1255 S. 74 : Losses – Capital gains-loss arising from transfer of short-term capital asset,
which are brought forward from earlier years, can be set-off against capital gain
assessable for subsequent assessment year in respect of any other capital asset. [S. 70]
Allowing the appeal of assessee the Tribunal held that in view of provisions of section
74(1)(a) loss arising from transfer of short-term capital asset, which are brought
forward from earlier years, can be set-off against capital gain assessable for subsequent
assessment year in respect of any other capital asset which could be either long-term
capital gain and short-term capital gain. (AY. 2010-11)
GSB Capital Markets Ltd. v. Dy. CIT (2016) 156 ITD 770 (Mum.)(Trib.)
390
S. 80C Deduction
S. 79. Carry forward and set-off of losses in the case of certain companies.
S. 79 : Carry forward and set off of losses – Change of hundred per cent shareholding 1256
and beneficial ownership of shares in assessee – No question of piercing veil at
instance of assessee to show ultimate beneficial ownership with parent company arises
– Loss was not allowed to be set off.
Dismissing the appeal of assessee the Court held that having examined the facts as well
as the concurrent orders of the AO and the ITAT, the Court finds that there was indeed
a change of ownership of 100% shares of Yum India from Yum Asia to Yum Singapore,
both of which were distinct entities. Although they might be AEs of Yum USA, there is
nothing to show that there was any agreement or arrangement that the beneficial owner
of such shares would be the holding company, Yum USA. The question of ‘piercing the
veil’ at the instance of Yum India does not arise. In the circumstances, it was rightly
concluded by the ITAT that in terms of Section 79 of the Act, Yum India cannot be
permitted to set off the carry forward accumulated business losses of the earlier years.
(AY. 2009-10)
ITO v. Yum Restaurants (I) P. Ltd. (2016) 380 ITR 637 / 131 DTR 23 / 237 Taxman 652 /
283 CTR 129 (Delhi)(HC)
S. 80C : Deduction in resect of life insurance premia, deferred annuity, contribution to
provident fund, subscription to certain equity shares or debentures, etc.
S. 80C : Deduction – Deduction for repayment of loan is not available when loan was 1257
taken after acquisition of the house property. [S. 24, 80C(2)(xviii)]
Assessee, an individual, filed return of income claiming deduction for repayment of
loan under section 80C(2)(xviii) of the Act. The Assessing Officer denied the deduction
on the ground that the property was purchased in November 2005 and loan was taken
only in December 2005. The CIT(A) and Tribunal upheld the order of the Assessing
Officer. On appeal, the High Court held that deduction under section 80C(2)(xviii) is
available only if loan was utilized for acquisition of the property therefore, assessee was
not entitled to claim the deduction under section 80C. (AY. 2007-08)
Vijay Aggarwal v. CIT (2016) 236 Taxman 542 / 286 CTR 452 (P&H)(HC)
S. 80C : Deduction – Repayment of loan acquired for the property income from which 1258
is chargeable under ‘income from house property” – Deduction is allowable. [S. 22, 24]
Assessee was joint owner of farm land that was acquired by raising a house loan
from a bank. The owners entered into a development agreement for construction
of farm house on property. The developer was entitled to 70% of the rent and joint
owners were entitled to 30% of the rent received from the farm house. AO rejected
deduction claimed u/s. 80C on the ground that loan amount was not spend on
construction of farm house. CIT(A) upheld order of AO. On Appeal, the Tribunal held
that Explanation to the proviso to section 24 clarifies that the property can either be
acquired or constructed with borrowed capital, no requirement/condition that property
must be acquired as well as constructed with borrowed capital. Assessee borrowed the
amount for acquiring the property, income from which was assessed under the head
391
Donation S. 80G
"Income from house property" and made the repayment of the loan. Hence deduction
u/s. 80C allowed. (AY. 2010-11)
Samiksha Mahajan (Mrs.) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.)
Anita Rani (Mrs.) v. ACIT (2016) 47 ITR 59 (Delhi)(Trib.)
S. 80G. Deduction in respect of donations to certain funds, charitable institutions, etc.
1259 S. 80G : Donation – Refusal to renew approval without assigning reasons was held to
be not valid. [S. 2(15)]
Dismissing the appeal of revenue the Court held that the order of the DIT(E) had been
passed without specifying which of the objects were not charitable in nature and in
what way. The proviso to section 2(15) was inserted with effect from April 1, 2009.
It had also not been mentioned or clarified in the order why on the same objects the
trust had been granted exemption under section 80G earlier. Moreover construction of a
prayer hall or encouraging meditation yoga, etc., would not be religious activities. The
Tribunal was justified in setting aside the order of the DIT(E).
CIT v. Shree Public Charitable Trust (2016) 388 ITR 222 (Karn.)(HC)
1260 S. 80G : Donation – Renewal of registration – Non-maintenance of accounts pertaining
to grant received from Government – Matter remanded to ITAT to re-examine the facts
and re-consider the grant of renewal of registration under section 80G. [S. 80G(5)(i)]
The assessee-society had filed an application for renewal of registration granted under
section 80G. The Commissioner rejected the application on the ground that the receipt
of grant from the Government towards vermiculture project and expenditure incurred
from the same were not accounted for in the books of the society. On appeal before
the Tribunal, the Tribunal held that the assessee is entitled to renewal of registration
under section 80G of the Act. On further appeal before the High Court by the Revenue,
the matter was remanded back to the Tribunal to re-decide the matter on merits as the
Tribunal, in the earlier occasion, overturned the findings of the Commissioner without
appreciating the facts and unsupported by reasons substantiating the same.
CIT v. Vijaya Mahantesh Vidyavardak Sangha (2016) 236 Taxman 414 (Karn.)(HC)
1261 S. 80G : Donation – Once registration u/s. 12AA has been granted to a company
incorporated u/s. 25 of Companies Act, 1956, it cannot be denied approval u/s. 80G(5)
(vi) unless there is non-fulfilment of conditions specified in S. 80G(5). [S. 12AA]
Allowing the appeal of the assessee the Tribunal held that Once registration u/s. 12AA
has been granted to a company incorporated u/s. 25 of Companies Act, 1956, it cannot
be denied approval u/s. 80G(5)(vi) unless there is non-fulfilment of conditions specified
in s. 80G(5).
Hemdha Medi Resources (P.) Ltd. v. CIT (2016) 159 ITD 627 (Jaipur)(Trib.)
1262 S. 80G : Donation – Rule 11AA(6) – Failure by authorities to pass order within
prescribed time of six months as per rule – Order rejecting approval barred by
limitation – Registration granted under Section 12A still subsisting
The assessee submitted an application dated April 23, 2011 for grant of approval under
Section 80G(5)(vi) of the Act. The AO rejected the application by an order dated May
392
S. 80HHB Foreign projects
31, 2012 which was beyond the prescribed limit of six months as mandated by rule
11AA sub-rule (6) of the Income-tax Rules, 1962. On appeal to Tribunal, it was held
that since the registration granted to the assessee under Section 12A of the Act as
charitable association was existing and had not been withdrawn or cancelled till date,
grant of approval under Section 80G could not be denied or rejected. The assessee had
done what was expected from it under the relevant provisions of the Act and the rules
made thereunder. It further held that the authority had failed to take appropriate action
within the prescribed limit under rule 11AA(6) and hence the order was barred by
limitation and not sustainable in law. The assessee was therefore entitled to approval
under Section 80G of the Act.
S.J.A Alumi Association v. CIT (2016) 47 ITR 274 (Mum.)(Trib.)
S. 80G : Donation – Approval of institution – Disqualification of religious trusts – 1263
Trust registered as religious trust – Not spending any amount for religious purposes
or activities – Trust entitled for registration. [S. 80G(5)]
On appeal, the Tribunal held that though the assessee was registered as a religious trust
its income and expenditure account showed that it had spent amount on education,
medical relief and relief to the poor. Hence, it was eligible for the benefits of section
80G(5B). The Commissioner was directed to grant section 80G(5) registration to the
assessee. (AY. 2015-16)
Yamunaji Mandir Trust v. CIT (2016) 46 ITR 283 (Rajkot)(Trib.)
S. 80HH. Deduction in respect of profits and gains from newly established industrial
undertakings or hotel business in backward areas.
S. 80HH : New industrial undertakings – Not necessary that setting up of industry 1264
and manufacturing activity should take place simultaneously – Undertaking set up in
accounting year relevant to AY. 1980-81 – Manufacturing activity started in accounting
year relevant to AY. 1985-86 – Entitled to deduction. [S. 80I]
Court held that, since the assessee’s industry was already in existence prior to insertion
of section 80-I of the Act, the benefit of the provisions of section 80-I could not be
given. As regards claim under section 80HH is concerned, it is not necessary that setting
up of industry and manufacturing activity should take place simultaneously. Undertaking
set up in accounting year relevant to AY. 1980-81 and Manufacturing activity started in
accounting year relevant to AY 1985-86. Assessee is entitled to deduction for the AYs.
1985-86 and 1987-88. (AY. 1985-86 to 1990-91)
U.P. Transformers (I) P. Ltd. v. CIT (2016) 382 ITR 66 / 137 DTR 273 / 287 CTR 450 (All.)(HC)
S.80HHB: Deduction in respect of profits and gains from projects outside India.
S. 80HHB : Foreign projects – Transfer from general reserve account after specified 1265
period of five years – Not entitle to deduction.
Assessee transferring from general reserve account after period of five years hence held
to be not eligible for deduction. (AY. 1983-84)
Reliance Infrastructure Ltd. v. CIT (2016) 76 taxmann.com 257 / (2017) 390 ITR 271
(Bom.)(HC)
393
Export business S. 80HHC
S. 80HHC. Deduction in respect of profits retained for export business.
1266 S. 80HHC : Export business – Netting of interest for computing deduction was held to
be justified.
The issue in the appeal was whether the Tribunal was correct in law in directing the
AO to allow netting of interest for computing deduction under section 80HHC of the
Act. In this regard, the Supreme Court placed reliance in the case of ACG Associated
Capsules (P) Ltd v. CIT (2012) 343 ITR 89 (SC). However the Revenue had argued the
correctness of the order of the High Court and contended that the High Court had made
an error in framing the question and answering the same. In this regard, the Supreme
Court held that in the present appeal the issue was the correctness of the opinion of the
High Court and if the Revenue had any grievance with regard to the question framed
and the relevance thereof, the Revenue could take out remedies available to it under
law including moving to High Court by way of review. Thus the appeal of the Revenue
was disposed of by the Supreme Court.
Liberty Footwear Co. v. CIT (2016) 383 ITR 195 / 238 Taxman 89 / 286 CTR 369 / 136
DTR 31 (SC)
1267 S. 80HHC : Export business – Commission – Deduction of 90% has to be on net
commission and not on gross commission.
Following the ratio in ACG Associated Capsules Pvt. Ltd. v. CIT (2012) 343 ITR 89 (SC),
the Apex Court held that the deduction of 90% has to be on net commission not on
gross commission. Order of High Court was set aside and remanded the matter to the
Assessing Officer for afresh consideration. (AY 1993-94, 1994-95)
Veejay Marketing v. CIT (2016) 382 ITR 395 / 239 Taxman 392 / 243 Taxman 232 (SC)
1268 S. 80HHC : Export business – Industrial undertaking – Whether the assessee is entitled
deductions under all three sections, i.e., 80HHC, 80-IA, 80-IB, matter referred to larger
Bench. [S. 80IA(9), 80IB]
Controversy on whether S. 801A(9) mandates that the amount of profits allowed
as deduction u/s. 801A(1) has to be reduced from the profits of the business of the
undertaking while computing deduction under any another provisions under heading
“C” in Chapter VI-A of the Income-tax Act, 1961 is referred to larger Bench. While
Hon’ble Mr. Justice Anil R. Dave took the view that the judgement of the Delhi High
Court in Great Eastern Exports v. CIT (2011) 332 ITR 14 (Delhi) lays down the correct
position in law and allowed the appeals of the Revenue, Hon’ble Mr. Justice Dipak Misra
dissented and held that the law laid down by the Bombay High Court had in Associated
Capsules Private Limited v. Dy. CIT (2011) 332 ITR 42 (Bom.) lays down the correct
position in law and dismissed the appeals of the Revenue. In view of difference of
opinion, the matters have been referred to a larger Bench in terms of signed reportable
judgment. The Registry has been directed to place the matters before the Hon’ble the
Chief Justice of India.
ACIT v. Micro Labs Ltd. (2016) 380 ITR 1 / 283 CTR 9 / 237 Taxman 74 / 130 DTR 113
(SC)
394
S. 80HHC Export business
S. 80HHC : Export business – Total turnover – Sale proceeds of scrap cannot be 1269
included in total turnover.
The issue in these appeals pertains to the question whether the proceeds generated from
the sale of scrap would be included in the total turnover. In the recent decision of this
Court in CIT v. Punjab Stainless Steel Industries & Ors. reported in (2014) 364 ITR 144
(SC) it has been held that sale proceeds generated from the sale of scrap would not be
included in the total turnover for the purpose of deduction under Section 80HHC of the
Income Tax Act, 1961. (AY. 1989-90 to 1991-92)
Jagraon Export v. CIT (2016) 132 DTR 86 / 284 CTR 209 / 238 Taxman 88 (SC)
Editorial : Judgement inCIT v. Bicycle Wheels (India) (2011) 335 ITR 384 / 244 CTR 453
/ 61 DTR 243 (P&H)(HC) is reversed.
S. 80HHC : Export business – Export turnover – Export through export house and 1270
receipt of sum in Indian currency – Sum constitute export turnover eligible for
deduction.
High Court held that; where the assessee exported marine products through an export
house and received 3.5 percent of freight on board value of the goods exported in Indian
currency the sum received could not be considered as export turnover as it had not been
received in convertible foreign exchange and part of the sum was not eligible for the
benefit granted under section 80HHC. On appeal allowing the appeal the Court held that
the assessee was entitled to the deduction. (AY. 1994-95, 1995-96, 1996-97)
Southern Sea Foods Ltd. v. JCIT (2016) 382 ITR 306 / 243 Taxman 231 / 137 DTR 192 /
287 CTR 108 (SC)
Editorial : Decision in Southern Sea Foods Ltd v. JCIT (2007) 288 ITR 151 (Mad.)(HC) is
reversed.
S. 80HHC : Export business – Earning of interest on advancing surplus funds does not 1271
come within the purview of business income or as profits from business.
The issue before the High Court was whether the assessee is entitled to deduction
under section 80HHC in respect of interest earned by it by employing the surplus funds
locally. Allowing the appeal of the revenue, the Court held that It was not established
by the Assessees that the business of export carried on by them was connected with or
dependent upon such advances or loan given by it and hence it could not be termed
that earning of interest on such loans was incidental to business of export. Accordingly,
the High Court ruled in favour of the Department. (AY. 1989-90, 1991-92)
CIT v. Vimal Chand Surana (2016) 137 DTR 131 (Raj.)(HC)
S. 80HHC : Export business – Turnover of all businesses to be clubbed together. 1272
Dismissing the appeal of the assessee the Court held that in order to compute the
special deduction under section 80HHC the turnover of all independent businesses are
to be clubbed together. (AY. 2000-01, 2001-02)
Devraj R. Agarwal v. ACIT (2016) 389 ITR 642 (Guj.)(HC)
395
Export business S. 80HHC
1273 S. 80HHC : Export business – Industrial undertaking – Gains due to fluctuations in
rate of foreign exchange to be taken into consideration – Duty drawback is not to be
taken into consideration for the purpose of deduction. [S. 80-I, 80-IA]
Gains on fluctuation in foreign exchange rates had to be taken into account for
computing deduction under sections 80HHC, 80I and 80-IA. Duty drawback is not to be
taken into consideration for the deduction. (AY. 1994-95, 1996-97, 1997-98)
CIT v. Metrochem Industries Ltd. (2016) 389 ITR 181 (Guj.)(HC)
1274 S. 80HHC : Export business – Profits should be derived from business – Interest on
fixed deposits pledged with FCI and Sales Tax Department – Not profits derived from
business – Not includible in business profits. [S. 56]
Dismissing the appeal the Court held that; the Tribunal had concluded that interest on
fixed deposits had accrued on the fixed deposits pledged with the FCI and also with
the Sales Tax Department. The interest on fixed deposits did not have an immediate
nexus with the export business and, therefore, had to be necessarily treated as income
from other sources and not business income derived from export business activity. (AY.
2004-05)
Shiv Shakti Rice Mills v. ACIT (2016) 389 ITR 255 (P&H)(HC)
1275 S. 80HHC : Export business – Interest from fixed deposits with bank out of compulsory
retention and transfer of export earnings – Income from other sources and not business
income – Amount not includible for computing deduction. [S. 56]
Dismissing the appeal the Court held that; after considering the letter of the bank
produced by the assessee and thereafter held that interest income earned on deposits
made by the assessee for availing of credit facilities was not deductible, as it was
income earned from other sources. Hence it was not includible for computing the
special deduction under section 80HHC. (AY. 1999-2000)
Gerard Perira v. ITO (2016) 389 ITR 547 (Mad.)(HC)
1276 S. 80HHC : Export business – Waiver of interest – Entire income chargeable to tax
under section 41(1) was to be excluded under Explanation (baa) to section 80HHC for
the purposes of computing the deduction allowable to the assessee under that section.
[S. 41(1)]
Dismissing the appeal of revenue, the Court held that, in terms of judgment of Supreme
Court rendered in case of ACG Associated Capsules (P.) Ltd. v. CIT (2012) 343 ITR 89 (SC)
benefit would only be available on net interest and that alone was to be excluded under
Explanation (baa) of section 80HHC for purposes of computing deduction allowable
to assessee. Entire income chargeable to tax under section 41(1) was to be excluded
under Explanation (baa) to section 80HHC for the purposes of computing the deduction
allowable to the assessee under that section. (AY. 2001-02)
CIT v. Purewal and Associates Ltd. (2016) 243 Taxman 392 / 286 CTR 297 (HP)(HC)
396
S. 80HHC Export business
S. 80HHC : Export business – Hotel – Foreign exchange receipts entitled to deduction 1277
on both – Total turnover for computation of deduction of profits from exports to be
taken excluding foreign exchange receipts from hotel business. [S. 80HHD]
Assessee was entitled to deductions both under section 80HHC and section 80HHD.
The assessee had income in convertible foreign exchange which arose from its hotel
business in India and income from its export business. It was not the legislative intent
that the benefit under section 80HHC was to be regulated by the turnover of the hotel
business to which section 80HHD was applicable. Appeal of revenue was dismissed.
(AY. 2004-05)
CIT v. ITC Ltd. (2016) 386 ITR 487 (Cal.)(HC)
S. 80HHC : Export business – Gain arising out of Exchange rate fluctuation is to be 1278
included in the profits for the purpose of computation of deduction under section
80HHC. [S. 80IA]
It was held that the gains arising out of exchange rate fluctuation is to be included
in the profits for the purpose of computation of deduction under section 80HHC. (AY.
2000-01)
PCIT v. Sun Pharmaceutical Industries Ltd. (2016) 240 Taxman 686 / (2017) 148 DTR
332 / 293 CTR 489 (Guj.)(HC)
S. 80HHC : Export business – Receipt of sale proceeds in India within stipulated time 1279
or within extended time allowed by competent authority – Grant of extension of time
should be clear and unambiguous – Denial of deduction was held to be justified.
The assessee had applied to the Reserve Bank of India for extension of time till
December 1, 2001. The Reserve Bank of India in its reply dated December 28, 2001
advised that as the date, that is, December 1, 2001, till which extension was sought for,
had already expired, the assessee should apply for further extension. Incidentally the
amount was received on November 26, 2001. The letter of the Reserve Bank of India
requesting the assessee to apply for further extension could not be taken as an approval
in any manner whatsoever. The Assessing Officer was right in denying the special
deduction under section 80HHC. (AY. 2001-02)
CIT v. Asha Trading Co. (2016) 382 ITR 438 (Cal.)(HC)
S. 80HHC : Export business – While computing profits eligible for deduction u/s. 1280
80HHC, entire amount of deemed income u/s. 41 would be taken in consideration, even
if it is in the nature of interest, commission, etc. However, while computing interest,
only the net interest, i.e. gross interest as reduced by the expenditure incurred for
earning such income, is to be taken into consideration [S. 41(1)]
The assessee received a waiver of interest payable as a result of one-time settlement
with the bank. The same was offered as deemed income u/s. 41(1) and was fully claimed
as a deduction u/s. 80HHC. The AO denied the exemption to the extent of ninety per
cent of the deemed income u/s. 41(1) as the same was not derived from the exports of
the assessee. On appeal, the CIT(A) confirmed the AO’s order. The Tribunal, however,
allowed the claim.
On Revenue’s appeal, the HC held that S. 41(1) creates a legal fiction and can be
extended for the purpose of deduction u/s. 80HHC. Further, the liability incurred by
397
Convertible foreign exchange S. 80HHD
the assessee in respect of the interest, earlier allowed as a deduction while computing
the profits of the export business will not undergo a change in its nature and become
an independent income. However, while calculating the interest under clause (baa) of
the explanation, only the net interest i.e. gross interest as reduced by the expenditure
incurred for earning such interest will be used for the purpose of allowing deduction
u/s. 80HHC. (AY. 2001-02)
CIT v. Purewal & Associates Ltd. (2016) 131 DTR 63 / 286 CTR 297 / 243 Taxman 392
(HP) (HC)
Editorial : SLP of revenue is dismissed, CIT v. Purewal & Associates Ltd. (2016) 242
Taxman 507 (SC)
S. 80HHD. Deduction in respect of earnings in convertible foreign exchange.
1281 S. 80HHD : Convertible foreign exchange – Hotel – Reserve utilised in subscribing
to share capital of company running hotel – Amount utilised in expansion of hotel
business is entitled to deduction. [S. 80HHD(4)]
Court held that Reserve utilised in subscribing to share capital of company running
hotel, as the amount was utilised in expansion of hotel business, is entitled to
deduction. (AY. 2003-04)
New Kenilworth Hotel P. Ltd v. CIT (2016) 387 ITR 201 / (2017) 292 CTR 336 (Cal.)(HC)
S. 80-IA. Deductions in respect of profits and gains from industrial undertakings or
enterprises engaged in infrastructure development, etc.
1282 S. 80-IA : Industrial undertakings – Wind mills – Initial assessment year – Assessee
had the option to choose its first/initial assessment year for claiming deduction and
the said year need not be the year of commencement of eligible business.
Dismissing the appeal of the revenue, the Court held that the assessee had the option
to choose its initial assessment year and the said initial assessment year u/s. 80IA(5)
would only mean the year of claim of deduction and not the year of commencement of
eligible business. (AY. 2011-12)
CIT v. Defree Engineering (P.) Ltd. (2016) 76 taxmann.com 11 (Mad.)(HC)
Editorial : SLP of revenue is dismissed CIT v. Defree Engineering (P.) Ltd (2017) 244
Taxman 217 (SC)
1283 S. 80-IA : Industrial undertakings – Set of its losses against other income of business
enterprises – Entitled to claim deduction.
Assessee, an industrial undertaking, had already set off its losses against other income
of business enterprise. It exercised option and claimed deduction under section 80-IA,
in view of decision in case of Velayudhaswamy Spg. Mills (P.) Ltd. v. ACIT (2012) 340
ITR 477 (Mad.)(HC) assessee was entitled to claim deduction. (AY. 2012-13)
CIT v. Sri Renganathar Industries (P.) Ltd. (2016) 242 Taxman 427 (Mad.)(HC)
Editorial : SLP of revenue was admitted, CIT v. Sri Ranganathar Industries (P.) Ltd. (2016)
242 Taxman 102 (SC)
398
S. 80-IA Industrial undertakings
S. 80-IA : Industrial undertakings – Loss in trading activities – AO accepting loss on 1284
basis of books of account – Different yardsticks cannot be applied for claims under
sections 80IA and 80HHC – Matter remanded to AO for recalculating deduction by the
Tribunal was held to be justified. [S. 80HHC]
Dismissing the appeal of the revenue, the Court held that the finding of the Commissioner
(Appeals) which was essentially one of fact and the analysis of fact was neither perverse
nor absurd. The Appellate Tribunal was right in remanding the matter to the AO to
recalculate the deduction under section 80-IA. No question of law arose.(AY. 1998-99)
CIT v. Nahar Export Ltd. (2016) 389 ITR 33 / 76 taxmann.com 146 (P&H)(HC)
S. 80-IA : Industrial undertakings – Wind mill – Entitled to deduction without setting 1285
off losses/unabsorbed depreciation pertaining to wind mill, which were set off in
earlier year against other business income of assessee.
Assessee claimed deduction under section 80IA. Tribunal, following decision of Madras
High Court in case of Velayudhaswamy Spinning Mills (P.) Ltd. v. Asstt. CIT (2012) 340
ITR 477 held that assessee was entitled to deduction under section 80IA without setting
off losses/unabsorbed depreciation pertaining to wind mill, which were set off in earlier
year against other business income of assessee. It further held that initial assessment
year in section 80-IA(5) would only mean year of claim of deduction under section 80IA
and not year of commencement of eligible business. Appeal of revenue is dismissed by
the Court. (AY. 2010-11)
CIT v. P. S. Velusamy (2016) 243 Taxman 408 (Mad.)(HC)
Editorial : SLP filed against order of High Court by the revenue was dismissed, CIT v. P.
S. Velusamy (2016) 243 Taxman 149 (SC)
S. 80-IA : Industrial undertakings – Wind mill – Entitled to deduction without setting 1286
off losses/unabsorbed depreciation pertaining to wind mill, which were set off in
earlier year against other business income of assessee.
Assessee claimed deduction under section 80IA. Tribunal, following decision of Madras
High Court in case of Velayudhaswamy Spinning Mills (P.) Ltd. v. Asstt. CIT (2012) 340
ITR 477 held that assessee was entitled to deduction under section 80IA without setting
off losses/unabsorbed depreciation pertaining to wind mill, which were set off in earlier
year against other business income of assessee. It further held that initial assessment
year in section 80IA(5) would only mean year of claim of deduction under section 80IA
and not year of commencement of eligible business. Appeal of revenue is dismissed by
the Court. (AY. 2011-12)
PCIT v. Prabhu Spinning Mills (P.) Ltd. (2016) 243 Taxman 462 (Mad.)(HC)
Editorial : SLP of revenue was dismissed, PCIT v. Cheran Spinning Mills (P.) Ltd. (2016)
243 Taxman 438 (SC)
S. 80-IA : Industrial undertakings – Wind mills – Option to choose Initial assessment 1287
year – Entitled to deduction without setting off losses/unabsorbed depreciation
pertaining to wind mill, which were set off in earlier year against other business
income. [S. 32, 72]
Dismissing the appeal of the Revenue, the Court held that, the assesse had the option to
choose Initial assessment year and also entitled to deduction without setting off losses/
399
Industrial undertakings S. 80-IA
unabsorbed depreciation pertaining to wind mill, which were set off in earlier year
against other business income. Followed, Velayudhaswamy Spinning Mills (P.) Ltd. v. A
CIT (2012) 340 ITR 477. (AY. 2011-12)
CIT v. Best Corporation Ltd. (2016) 76 taxmann.com. 286 (Mad.)(HC)
Editorial : SLP of revenue is dismissed, CIT v. Best Corporation Ltd. (2017) 244 Taxman
151 (SC)
1288 S. 80-IA : Industrial undertakings – Infrastructure development – Completion
certificate of local authority not provided – Rejection of application set aside – CBDT
directed to consider certificate from State Government which had granted subsidy to
assessee. [S. 80IA(4), 119]
The assessee applied for approval for setting up an industrial park at a village, which
would enable it to claim deduction under section 80IA(4) of the Income-tax Act, 1961.
The certificate was denied by the CBDT. On writ allowing the petition the Court held
that the order of the Central Board of Direct Taxes had principally two elements. One
was the objection of the Central Board of Direct Taxes that no completion certificate was
issued by the local authority, one of the requirements under the Industrial Development
Scheme of 2008. The second and the factual aspect of the matter was regarding the
availability of evidence that the assessee's project was completed before March 31, 2011.
This latter element could be further sub-divided into two parts: (a) with respect to the
evidence produced by the assessee and (b) with respect to the question of establishment
of industrial units on the plots for infrastructural project development by the assessee.
The State Level Approval Committee had agreed to grant subsidy to the assessee. The
Central Board of Direct Taxes insisted that the project completion certificate must be
obtained from the Ahmedabad Urban Development Authority. At the request of the
assessee, the Ahmedabad Urban Development Authority on May 8, 2013, certified that
the assessee had carried out and completed the work of infrastructure development
and construction work in accordance with the rules and regulations of the Ahmedabad
Urban Development Authority. The Central Board of Direct Taxes had brought in the
element of completion of industrial units on the proposed industrial park instead of
completion of the project. There was voluminous evidence on record to suggest that the
project was completed before March 31, 2011. In a strict sense of the term, perhaps the
assessee did not fulfil this requirement. However, a more liberal or practical approach
could be that when M was appointed by the GIDC and had certified that the project
was completed before March 31, 2011 and when the State Government had acted on
such report and approved the subsidy, this should have been seen as a substantial
compliance with such requirement. However, to put the issue beyond any controversy,
the assessee was to be permitted to produce such certificate from the GIDC, a local
authority, before the Central Board of Direct Taxes latest by September 30, 2016. If such
certificate showing that the project of the assessee was completed before March 31,
2011, was issued, the Central Board of Direct Taxes shall approve the assessee for grant
of deduction under section 80-IA(4) of the Act and issue the necessary notification in
this respect, within three months from the date of receipt of such certificate. The order
dated November 5, 2014 was to be set aside.
Devraj Infrastructures Ltd. v. Chairman/Member (Industrial Park) CIT (2016) 388 ITR 99
/ (2017) 145 DTR 131 / 292 CTR 58 (Guj.)(HC)
400
S. 80-IA Industrial undertakings
S. 80-IA : Industrial undertakings – Telecommunication services – Derived from – 1289
Refund from universal service fund, interest from others, liquidated damages, excess
provision written back and others including sale of directories, publications, forms,
waster papers was held to be eligible deduction. [S. 80IA(2A)]
The Assessing Officer held that the six items of income, i.e., extraordinary items, refund
from universal service fund, interest from others, liquidated damages, excess provision
written back and others including sale of directories, publications, forms, waster papers, etc.
could not be said to be derived from the business of the assessee and added the income
therefrom to the returned income of the assessee. The Commissioner (Appeals) confirmed
the order with regard to three items and with regard to the other three, held that the income
was derived from the business. The Tribunal held that the orders of the Assessing Officer
and the Commissioner (Appeals) to the extent they denied the assessee, which was in the
business of providing telecommunication services, deduction in respect of the items in terms
of section 80IA(2A) of the Income-tax Act, 1961 were unsustainable. On appeals:
Held, dismissing the appeals, that section 80IA(2A) treats an undertaking providing
telecommunication services as a separate species warranting a separate treatment. Such
an undertaking would be entitled to take the benefit of deduction in terms of section
80IA(2A), notwithstanding that the enterprise of which it formed part might have other
eligible businesses for which the deduction would have to be calculated in terms of section
80IA(1) of the Act. The Tribunal rightly allowed the income from all other items as business
income. (AY. 2004-05)
PCIT v. Bharat Sanchar Nigam Ltd. (2016) 388 ITR 371 / 289 CTR 198 / 141 DTR 16
(Delhi)(HC)
Editorial : Order of Tribunal in Bharat Sanchar Nigam Ltd. v. Dy. CIT (2016) 156 ITD 847
/ 175 TTJ 369 / 130 DTR 161 (Delhi)(Trib.) is affirmed
S. 80-IA : Industrial undertakings – Generation of power – Computation of quantum 1290
of benefit – Assessing Officer directed to compute deduction on basis of market rate
at which distribution licensee of a generating company sells.
The Tribunal held that deduction under section 80IA of the Income-tax Act, 1961
claimed by the assessee on the profit from the captive power unit was allowable while
the Department was of the view that the power generated by the assessee was consumed
by the other units of the assessee itself and that there was no sale to any outside party
and no real profit and therefore, the claim for deduction was not allowable. On appeals:
Held, partly allowing the appeals, that the Assessing Officer was to compute the
deduction based on the evidence that was to be adduced by the assessee as regards the
market value at which cost electricity was sold to a distribution licensee by a generating
company. (AY. 2003-04, 2004-05)
CIT v. Tata Metaliks Ltd. (2016) 387 ITR 411 (Cal.)(HC)
S. 80-IA : Industrial undertakings – Generation of power – Wind mills – Losses incurred 1291
in the eligible unit were adjusted against profits of ineligible unit – Appeal not projecting
grievance that decision of Special Bench of Tribunal misapplied or not applied – Tribunal's
conclusion not made subject matter of challenge – Appeal not maintainable. [S. 260A]
The assessee was engaged in the business of manufacture of material handling
equipment and generation of power. It had installed wind mills and that was a unit
401
Industrial undertakings S. 80-IA
eligible for deduction under section 80IA. The other unit of the assessee was not entitled
to deduction. The assessee claimed loss on account of the eligible unit for AYs, viz.
2005-06 to 2008-09. These losses incurred in the eligible unit were adjusted against
profits of ineligible unit, i.e. the manufacturing unit in the respective years. After
adjusting these losses, positive income was determined and tax was paid. For these
years in which the eligible unit incurred losses, there was no claim for deduction under
section 80IA by the assessee. The AO disallowed this claim of set off of loss of eligible
units against the income of ineligible units in the same year. The losses were, therefore,
added in the income of the assessee. The Commissioner (Appeals) granted partial relief.
The Tribunal held that loss incurred in business of power generation which was entitled
to deduction under section 80IA could be set off against business income from the
manufacturing unit. On appeal projecting the applicability of section 80IA(5) of the Act.
Held, that this was not an appeal projecting a grievance that the Special Bench decision
in CIT v. Goldmine Shares and Finance Pvt. Ltd. (2008) 302 ITR 208(AT)(SB) (Ahd.)(Trib.)
was mis-applied or not applied or incorrectly applied. Once the statement of facts
about which there was no dispute showed that there was no deduction claimed under
section 80IA for the AYs in question, there was no occasion for the Tribunal to have
gone into these questions. Merely because the Tribunal had gone into and considered
them, the court was not obliged to go into them given the admitted factual background.
The Department's question projected the applicability of section 80IA(5) of the Act. The
Tribunal`s conclusion was thus not made subject matter of challenge in this appeal by
the Department. (AY. 2005-06 to 2008-09)
CIT v. Hercules Hoists Ltd. (2016) 386 ITR 698 (Bom.)(HC)
Editorial : Order in Hercules Hoists Ltd. v. Asst. CIT [2013] 22 ITR (Trib) 527 (Mumbai)
affirmed. SLP is granted the Department, CIT v. Hercules Hoists Ltd. (2016) 380 ITR 7 (St.)
1292 S. 80-IA : Industrial undertakings – Development of infrastructure – Assessee engaged
in generation of power – Losses set off – Assessee entitled to special deduction.
Dismissing the appeal of revenue the Court held, that the assessee was an individual
having income from salary, business and other sources and was generating power
through windmills and had claimed the benefit of deduction under section 80IA of
the for the assessment year 2011-12 and for the subsequent years as well. Having
exercised his option and his losses having been set off already against other income of
the business enterprise, the assessee fell within the parameters of section 80IA of the
Act. He was entitled to special deduction under section 80IA of the Act. (AY. 2011-12)
CIT v. P.V. Chandran (2016) 385 ITR 479 (Mad.)(HC)
1293 S. 80-IA : Industrial undertaking – Losses and depreciation set off against other profits
and gains of earlier years – Assessee entitled to deduction.
Assessee was entitled to deduction under section 80IA of the Act without setting off the
losses and unabsorbed depreciation pertaining to the wind mill. (AY. 2003-04, 2004-05,
2005-06)
CIT v. SAS Hotels and Enterprises Ltd. (2016) 385 ITR 324 (Mad.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. SAS Hotels and Enterprises Ltd. (2016) 383 ITR 18 (St.)
402
S. 80-IA Industrial undertakings
S. 80-IA : Industrial undertakings – Wind mills – Losses already set off against other 1294
business income – Not to be notionally brought forward for computation of profits in
assessment year – Assessee is entitled to deduction.
The Department appealed against the order of the Tribunal holding that the assessees,
which were infrastructure business undertakings, were entitled to claim deduction
under section 80IA of the Income-tax Act, 1961, for the assessment year 2001-02 and
the subsequent years as well. On appeals:
Held, dismissing the appeals, that having exercised their option and their losses having
been set off already against other income of the business enterprise, the assessee in
each of the appeals fell within the parameters of section 80IA of the Income-tax Act,
1961 and was entitled to deduction. The order of the Tribunal was proper. (AY. 2001-02)
CIT v. Pondicherry Chlorate Ltd. (2016) 384 ITR 371 (Mad.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. Pondicherry Chlorate Ltd. (2016) 383 ITR 5 (St.)
S. 80-IA : Industrial undertakings – Losses set off against other income of business 1295
enterprise in earlier years – Assessee is entitled to deduction.
Assessee for the business of wind mill, claimed the benefit of deduction under section
80IA of the Income-tax Act, 1961. The Tribunal allowed the deduction. On appeal: Held,
dismissing the appeal, that since the assessee exercised its option and its losses were
set off already against other income of the business enterprise, the assessee fell within
the parameters of section 80IA of the Act. The assessee was entitled to deduction under
section 80IA of the Act. (AY. 2010-11)
CIT v. Sangeeth Textiles Ltd. (2016) 384 ITR 218 (Mad.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment, CIT v. Sangeeth Textiles Ltd. (2016) 380 ITR 7 (St.)
S. 80-IA : Industrial undertakings – High profit – Deduction is allowable. [S. 10A(7), 1296
80IA(10)]
On appeal on the questions whether the Tribunal was justified in holding that there
was nothing to show that the abnormally high profits of the unit were due to an
extraordinary arrangement between the assessee and the German company entered into
only with a view to boost the profits of the assessee and that there was no material
available with the Assessing Officer to estimate the profits of the unit eligible for
deduction invoking the provisions of section 80IA(10) read with section 10A(7) of the
Income-tax Act, 1961: Held, dismissing the appeal, that the Appellate Tribunal had
followed its own order in respect of the assessee for the assessment year 2004-05 which
was upheld by the High Court. No substantial question of law arose for consideration.
(AY. 2005-06)
CIT v. Schmetz India P. Ltd. (2016) 384 ITR 140 (Bom.)(HC)
Editorial: The Supreme Court has dismissed special leave petition filed by the Department
against this judgment CIT v. Schmetz India P. Ltd. (2016) 382 ITR 3 (St.)
403
Industrial undertakings S. 80-IA
1297 S. 80-IA : Industrial undertakings – Infrastructure development – As the words
“derived from” are absent, there is no requirement to prove “first degree nexus” of
the receipts with the eligible business. All receipts of the undertaking are eligible for
100% deduction. [S. 80IA(2A)]
Dismissing the appeal of revenue the Court held that; As the words “derived from” are
absent there is no requirement to prove “first degree nexus” of the receipts with the
eligible business. All receipts of the undertaking are eligible for 100% deduction. (AY.
2005-06 2008-09)
PCIT v. Bharat Sanchar Nigam Ltd. (2016) 141 DTR 16 (Delhi)(HC)
1298 S. 80-IA : Industrial undertakings – Infrastructure facility – Inland port – Container
freight stations are inland ports hence entitled to benefit. [S. 80IA(4)(i)]
The assessee, a clearing and forwarding agent, claimed deduction under section 80IA
of the Income-tax Act, 1961, on the container freight station. The Assessing Officer
disallowed the claim holding that the container freight station could not be classified
as an inland port for the purpose of section 80IA(4)(i) of the Act and that the facility
of a container freight station would not constitute an infrastructure facility as defined
in Explanation to section 80IA(4)(i) of the Act. The Commissioner (Appeals) allowed
deduction under section 80IA holding that the container freight station was an inland
port for the purpose of Explanation to section 80IA(4)(i) of the Act. The Tribunal
confirmed this. On appeal:
Held, dismissing the appeal, that the office memorandum of the Ministry of Commerce
and Industry dated May 21, 2009 clarified the status of the container freight stations
as inland ports and the Chennai Port Trust had issued a certificate stating that the
container freight station of the assessee might be considered an extended arm of the
port in accordance with the Central Board of Direct Taxes Circular No. 793, dated June
23, 2000* read with Circular No. 133 of 1995 dated December 22, 1995 of the Central
Board of Excise and Customs. The assessee was entitled to the benefit under section
80IA of the Act. (AY. 2009-10)
CIT v. Kailash Shipping Services P. Ltd. (2016) 383 ITR 630 (Mad.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. Kailash Shipping Services P. Ltd. (2016) 380 ITR (St.) 65
1299 S. 80-IA : Industrial undertakings – Excess expenses of product development –
Precedent – Decision of High Court in earlier case allowing deduction followed by
Commissioner (Appeals) and order of Commissioner (Appeals) upheld by Appellate
Tribunal – Decision of High Court binding. [S. 143, 147, 148]
Held, dismissing the appeal, that the facts and circumstances based on which the appeal
had arisen were similar to those cases which had already been decided by the court in
favour of the assessee and against the Department. Therefore, no interference was called
for. (AY. 2006-07)
CIT v. Ucal Fuel Systems Ltd. (2016) 383 ITR 15 (Mad.)(HC)
Editorial : Order of the Appellate Tribunal in Deputy CIT v. Ucal Fuel Systems Ltd. (2015)
42 ITR 51 (Chennai)(Trib.) is affirmed.
404
S. 80-IA Industrial undertakings
S. 80-IA : Industrial undertakings – Deduction is allowable without setting off losses/ 1300
unabsorbed depreciation which were set off earlier years against other business
income. [S. 32(2), 72]
The High Court had to consider whether the assessee is entitled to deduction under
Section 80IA without setting off the losses/unabsorbed depreciation pertaining to
the windmill, which were set off in the earlier year against other business income
of the assessee following the decision of the jurisdictional High Court in the case of
M/s. Velayudhaswamy Spinning Mills (340 ITR 477), when the same is pending appeal
before the Supreme Court in SLP. Civil No. 33475 of 2012. Held by the High Court
dismissing the appeal:
(i) On the basis of the decision in Velayudhaswamy Spinning Mills (340 ITR 477), the
Central Board of Direct Taxes has issued Circular No. 1/2016 dated 15.2.2016. The
CBDT has clarified that an assessee who is eligible to claim deduction u/s. 80IA
has the option to choose the initial/first year from which it may desire the claim
of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as
prescribed under that sub-Section. It is clarified that once such initial assessment
year has been opted for by the assessee, he shall be entitled to claim deduction
u/s. 801A for ten consecutive years beginning from the year in respect of which he
has exercised such option subject to the fulfillment of conditions prescribed in the
section. Hence, the term ‘initial assessment year’ would mean the first year opted
for by the assessee for claiming deduction u/s. 801A. However, the total number
of years for claiming deduction should not transgress the prescribed slab of fifteen
or twenty years, as the case may be and the period of claim should be availed in
continuity.
(ii) We cannot resist our temptation to record one more fact. If an issue is covered
by the judgment of the High Court, it is always open to the Department to take
it on appeal to the Supreme Court and get the law settled once and for all. But,
once a decision is taken at the level of the Board, we do not know why repeated
appeals should be filed, only to meet with the same fate as that of a decision, on
which, a circular has been issued. The Department shall take note of this for future
guidance. (TCA No. 176 of 2016, dt. 01.03.2016) (AY. 2010-11)
CIT v. G.R.T. Jewellers (India) Pvt. Ltd. (Mad.)(HC); www.itatonline.org
S. 80-IA : Industrial undertakings – Infrastructure development – Application of 1301
deduction under section 80IA in case of captive consumption of electricity generated
– Rate to be adopted for the purpose of computation of deduction under section 80IA
The assessee was engaged in the manufacture of paper board. It installed power
generating plant for the purpose of supplying uninterrupted power to manufacturing
plant. The entire production from the plant was supplied to the paperboard
manufacturing unit. For the purpose of computation of deduction under section 80IA,
the assessee adopted the rate at which the Andhra Pradesh State Electricity Board
(APSEB) supplied electricity to it. It was the stand of the Assessing Officer that the
assessee was not entitled to deduction under section 80IA for the reason that as it was
a case of captive consumption of electricity and there was no profit arising from the
sale of electricity. It was also held that the rate adopted by the assessee is not correct
405
Industrial undertakings S. 80-IA
as the purchase rate cannot be said to be the market value and therefore, adopted the
rate which was adopted by M/s. Indian Aluminium Company Ltd, which is assessed in
the same circle, to Grid Corporation of Orissa Ltd and as a result, loss was determined
and thereby, denied benefit under section 80-IA of the Act. The High Court held that
the assessee was entitled to claim of deduction under section 80-IA of the Act even
on account of captive consumption for the reason that the premise for claiming the
benefit according to clause (iv) of sub-section (4) of section 80-IA was setting up of an
undertaking for the generation of power during the specified period and therefore, it
cannot be held that the benefit under section 80-IA was not available to the assessee
because the power generated was consumed at home or by other business of the
assessee and that it is now well-settled that a statute granting incentives for promoting
growth and development should be construed liberally so as to advance the objective
of the provision and not to frustrate it. On the issue of price to be adopted for the
purpose of computation of deduction under section 80-IA, it was held that the rate at
which electricity was purchased from ABSEB by the paper unit of the assessee can, by
no means, be the market rate at which the power plant of the assessee could have sold
its production in the open market and that the rate to be adopted can be ascertained on
the basis of the rates fixed by the Tariff Regulation Commission for sale of electricity by
the generating companies to the distribution licensees. Matter remanded to determine
the market value based on above. (AY. 2002-03)
CIT v. ITC Ltd. (2016) 236 Taxman 612 / 286 CTR 400 (Cal.)(HC)
Editorial : Special Leave Petition filed against impugned order was granted, ITC Ltd. v.
CIT (2016) 243 Taxman 148 (SC)
1302 S. 80-IA : Industrial undertakings – Infrastructure development – Choice of initial AY
to claim deduction is with the Assessee and prior year losses cannot be notionally
set-off against the profit from subsequent years.
The Assessee’s two wind mills, which were eligible for deduction u/s. 80-IA, incurred
losses from AY. 2004-05 to 2006-07. The losses were set-off against the profits derived
from business of cable jointing, etc. which was not eligible for deduction. Deduction
u/s. 80-IA was claimed by the Assessee from AY. 2007-08 onwards. The AO did not
allow the deduction on the ground that the losses from AY 2004-05 to 2006-07 were to
be notionally set-off against the profits from AY. 2007-08 onwards, thereby resulting in
income from eligible business at nil. The ITAT dismissed the Department’s appeal, by
following its own order for AY. 2010-11, wherein it was held that the initial assessment
year to claim deduction u/s. 80-IA was at the option of the Assessee. Further, it was held
that the losses incurred from eligible business could not be notionally set-off against the
subsequent year’s profits, and that the loss had to be set-off against the profits derived
from non-eligible business. (AY. 2012-13)
DCIT v. Yamuna Power and Infrastructure Ltd. (2016) 47 ITR 533 (Chd.)(Trib.)
1303 S. 80-IA : Industrial undertakings – Infrastructure development – Initial assessment
year – Option to choose with the assessee.
The Tribunal held that option of choosing initial assessment year for claiming deduction
under section 80IA in a block of ten years out of 15 years is with the assessee. (AY. 2010-11)
Dy. CIT v. KEC Industries Ltd. (2016) 177 TTJ 6 (UO) (Chd.)(Trib.)
406
S. 80-IAB Undertaking
S. 80-IA : Industrial undertakings – Adjustment of brought forward losses set off in 1304
earlier years – There is no need to notionally carry forward these losses up to the
initial assessment year and set-off the same against the profits of the eligible business.
The Tribunal held that losses claimed by the assessee in respect of eligible business
period to the initial assessment year are to be set off against the income of the assessee
from other ineligible business and there is no need to notionally carry forward these
losses upto the initial assessment year and set off the same against the profits of the
eligible business. (AY. 2010-11)
Dy. CIT v. KEC Industries Ltd. (2016) 177 TTJ 6 (UO) (Chd.)(Trib.)
S. 80-IA : Industrial undertakings – Infrastructure development – Liquidated damages 1305
– excess provision written back – Interest and other refund from universal services –
Deduction for telecommunication services is available in respect of profits of eligible
business and it is not restricted to profits derived from eligible business as mentioned
in section 80IA(1).
Assessee claimed deduction u/s. 80-IA(2A). AO disallowed deduction on various
miscellaneous income on the ground that sub-section (1) of section 80-IA uses the
phrase “derived from”. According to the assessee section 80-IA alongwith sub-section
(1), (2) and (2A) of the same, the qualification of “derived from” as is available in
sub-section (1) of section 80-IA of the Act cannot be read into sub-section (2A) of
section 80IA of the Act. It was held that sub-section (2A) of S. 80-IA overrides the
requirements of sub-sections (1) and (2) as it starts with non obstante clause, namely,
`notwithstanding” which is further qualified by “anything contained in sub-section (1)
or sub-section (2)” and uses the words “profits and gains of eligible business” as against
“profits and gains derived by an undertaking or an enterprise from” used in sub-sections
(1) and (2) and, therefore, the restriction of “derived from” contained in sub-section (1)
cannot be read into the provision of sub-section (2A) of S. 80IA. (AY. 2004-05)
Bharat Sanchar Nigam Ltd. v. Dy. CIT (2016) 156 ITD 847 / 175 TTJ 369 / 130 DTR 161
(Delhi)(Trib.)
S. 80-IAB. Deductions in respect of profits and gains by an undertaking or enterprise
engaged in development of Special Economic Zone.
S. 80-IAB : Undertaking – Development of Special Economic Zone – Income received 1306
from sale of scrap and professional fees being part of regular business is eligible
deduction.
Assessee, being a developer of SEZ, was eligible for deduction u/s. 80-IAB in respect of
income earned from operation and maintenance of SEZ. As regards deduction claimed
u/s. 80-IAB on income received from sale of scrap and professional fees, since both
were part of regular business activities which assessee was carrying on in field of
infrastructure development and they could not be treated separately. (AY. 2009-10)
ACIT v. Zydus Infrastructure (P.) Ltd. (2016) 161 ITD 611 (Ahd.)(Trib.)
407
Undertaking S. 80-IB
S. 80-IB. Deduction in respect of profits and gains from certain industrial undertakings
other than infrastructure development undertakings.
1307 S. 80-IB : Undertaking – Conditions precedent should be fulfilled for each assessment
year for which deduction claimed – Maintenance of separate accounts is not a
condition precedent.
Dismissing the appeal of revenue, the Court held that, conditions precedent should be
fulfilled for each assessment year for which deduction claimed and maintenance of
separate accounts is not a condition precedent. In respect of three appeals the tax effect
did not exceed ` 20 lakhs. These appeals, therefore, had to be dismissed in view of the
Circular No. 21 of 2015. (AY. 2003-04 to 2009-10)
CIT v. Micro Instruments Company. (2016) 388 ITR 46 / 289 CTR 152 / 75 taxmann.com
304 (P&H)(HC)
1308 S. 80-IB : Undertaking – Audit report – Furnishing of audit report along with return
not mandatory – Audit report furnished during assessment proceedings, exemption
cannot be denied – Expenditure disallowed to be taken into account for computing
the deduction. [S. 40A(3), 80IA(7), 153A]
Dismissing the appeal of the revenue the Court held that; the audit report was filed before
passing of the assessment order. Hence the requirement under section 80-IB was satisfied.
That the assessee's claim of deduction under section 80-IB is allowable in respect
of disallowance under section 40A(3) made on the undisclosed income declared in
consequence of the search. (AY. 2005-06)
CIT v. Surya Merchants Ltd. (2016) 387 ITR 105 / 290 CTR 168 / 72 taxmann.com 16
(All.)(HC)
1309 S. 80-IB : Undertaking – Income-tax Authorities cannot sit in judgment over the
approval granted by the prescribed authority under section 80-IB(8A) r.w. Rule 18D
[S. 80IB(8A), 263, Rule 18D]
The Commissioner of Income-tax passed the order under section 263 of the Income-tax
Act denying deduction under section 80-IB(8A) of the Income-tax Act on the ground that
the assessee is not involved in research and development activity. Quashing the order
of the Commissioner, it was held that the assessee had obtained required approval from
the prescribed authority as per section 80-IB(8A) r.w. Rule 18D and therefore, it was not
within the scope of the revenue authorities to look into the same and go beyond the
decision of the revenue authorities and that as the periodic review are to be done by the
prescribed authorities under Rule 18D, there is no scope for any income-tax authorities
to exercise jurisdiction to look into the same. However, it does not curtail the powers
of the income-tax authorities to look into the other aspects of the claim. (AY. 2008-09)
PCIT v. B.A. Research India Ltd. (2016) 240 Taxman 443 / 288 CTR 399 / 137 DTR 369
(Guj.)(HC)
1310 S. 80-IB : Undertaking – Cash expenses in excess of prescribed limit was added back
to income is eligible for deduction. [S. 40A(3)]
Tribunal held that though this amount may be disallowable but since it becomes gross
income and deduction u/s. 80IB is allowable, further prays that the expenses incurred in
408
S. 80-IB Undertaking
cash even if disallowed, becomes part of his gross income, deduction on these amounts
should also be given. (AY. 2008-09)
Vaneet Sood v. ACIT (2016) 159 ITD 320 (Chand.)(Trib.)
S. 80-IB : Undertaking – Claim for deduction could not be restricted where the AO. 1311
failed to bring on record any material to show existence of any arrangement for
business transacted between two concerns. [S. 80-IA(10)]
Assessee, engaged in manufacturing and packing of consumer articles for GCPL, a
Godrej group company, claimed benefits u/s. 80IB. The AO noticed that main promoter
of assessee had been closely associated with Godrej group and its net profit margin was
significantly higher than what it should ideally be. AO. held that reasonable net profit
of assessee should be 10 per cent as against 35.5 per cent declared, and applying s. 80-
IA(10) deduction u/s. 80-IB was allowed on 10 per cent of gross receipts. The A.O. can
invoke provisions of deeming fiction created u/s. 80-IA(10) only when he proves that
there is a close connection of assessee with other entity and further affairs are arranged
in such a manner to inflate profits of eligible business. Since in instant case, AO had
failed to bring any material on record to show existence of any arrangement for business
transacted between two entities and it was not known on what basis he had arrived at
net profit rate of 10 percent. S. 80-IA(10) could not be invoked and assessee was entitled
to deduction u/s. 80-IB as claimed. (AY. 2006-07 to 2008-09)
ACIT v. Ishwar Manufacturing Co. (P.) Ltd. (2016) 157 ITD 883 (Chd.)(Trib.)
S. 80-IB : Undertaking – Subsidies – Transport, interest, and power – Profit derived 1312
from undertaking – Eligible for deduction. [S. 28(iii)(b), 56, 80-IB(4), 80IC]
The assessee claimed deduction under Section 80IB of the Income Tax Act on the profits and
gains of business of the industrial undertaking. The assessee included the following subsidies
in the profits and gains, namely, Transport subsidy, Interest subsidy and Power subsidy. The
Assessing Officer held that the amounts received by the assessee as subsidies were revenue
receipts and did not qualify for deduction under Section 80-IB(4) of the Act and, accordingly,
the assessee’s claim for deduction on account of the three subsidies aforementioned were
disallowed. This was upheld by the CIT(A) though reversed by the ITAT. The High Court
also upheld the claim of the assessee. On appeal by the department to the Supreme Court;
held dismissing the appeal the Court held that subsidies transport, interest, and power - Profit
derived from undertaking hence eligible for deduction. (AY. 2004-05, 2006-07)
CIT v. Meghalaya Steel Ltd. (2016) 383 ITR 217 / 132 DTR 273 / 284 CTR 321 / 238
Taxman 559 (SC)
Editorial : From the Judgment of Gauhati High Court in CIT v. Meghalaya Steel Ltd (2013)
261 CTR 17 / 91 DTR 81 (Gau.)(HC)
S. 80-IB : Undertaking – Fact that the AO allowed deduction in the year of setting up 1313
does not disentitle him from examining the eligibility in subsequent years – Keeping
separate books of account is not a condition precedent to a claim for a deduction,
there was no statutory provision making it mandatory for an assessee to maintain
separate books of account – Claim of assessee was allowed. [S. 145]
An assessee must fulfil each of the conditions stipulated in Section 80-IB in each of
the years in which the deduction thereunder is sought. The Assessing Officer would
409
Undertaking S. 80-IB
be entitled to ascertain in each of the assessment years whether or not the conditions
of Section 80-IB remained fulfilled. In other words, even where an assessee is found
to have fulfilled all the conditions of Section 80-IB in the initial assessment year and
has on account thereof been granted the deduction thereunder, an Assessing Officer
assessing the assessee’s income in subsequent years would be entitled to ascertain
whether in that assessment year the conditions in Section 80-IB remained fulfilled or
not. If not, he is bound to deny the deduction. Keeping separate books of account is
not a condition precedent to a claim for a deduction under Section 80-IB. There was no
statutory provision making it mandatory for an assessee to maintain separate books of
account. That it may be easier for an assessee to establish a claim for deduction under
Section 80-IB in the event of separate books of account being maintained is another
matter altogether. That is a question of evidence and not a legal obligation.
The Assessing Officer also disallowed the deduction on the ground that the workers/
employees were common in respect of Unit-I and Unit-II and that there was no
demarcation of employees/workers as per the attendance register produced. As per
Section 80-IB(2)(iv), where the industrial undertaking manufactures or produces articles
or things, the section would apply if the undertaking inter alia employs ten or more
workers in a manufacturing process carried on with the aid of power. The assessees,
admittedly, carry on their activities with the aid of power. Appeal of revenue was
dismissed. (ITA No. 958 of 2008, dt. 02.09.2016) (AY. 2003-04)
CIT v. Mirco Instruments Company (P & H) (HC); www.itatonline.org
1314 S. 80-IB : Undertaking – Initial assessment year – Year in which special deduction
is available – Year of manufacture – Manufacture started in accounting year 1994-95
relevant to AY. 1995-96 not 1996-97.
The assessee was in the business of manufacturing machine tools. At about the
end of 1994, the assessee had manufactured three vertical machining centres. The
assessee participated in an exhibition during January, 1995, and the three machines
were displayed at the exhibition. According to the assessee, the three machines so
manufactured were prototype and in order to have field trial being conducted, it
sold the three machines to group companies in March, 1995. It was the case of the
assessee that the purpose of sale to such group companies was only to conduct field
trial and to get feedback in order to know the technical faults, if any in the machines
and to set right such defects. The assessee claimed special deduction u/s. 80-IB for
the AY. 2005-06. According to the assessee, the initial AY from which the deduction
was being claimed was the AY. 1996-97. The Assessing Officer held that the initial
AY was 1995-96 and the assessee was not entitled to claim deduction u/s. 80-IB(3).
This was confirmed by the Commissioner (Appeals) and the Tribunal. On appeal to
the High Court:
Held, dismissing the appeal, that even before the products were sold to the group
companies in the month of March, 1995, the machines were exhibited in public at
New Delhi. There was a lot of appreciation for the machines and in fact during the
exhibition, bookings took place. Merely because the assessee had sold three machines
to its group companies, it could not be said that there was no commercial transaction.
It could not be said that the machines were manufactured only on trial basis and not
410
S. 80-IB Undertaking
for commercial purposes in the financial year 1994-95 relevant to the AY. 1995-96. The
assessee was not entitled to deduction u/s. 80IB for the AY. 2005-06. (AY. 2005-06)
ACE Manufacturing Systems Ltd. v. Addl. CIT (LTU) (2016) 380 ITR 432 / 136 DTR 313 /
287 CTR 573 (Karn.)(HC)
S. 80-IB : Undertaking – Small scale undertaking – Conditions prescribed to be 1315
observed every year for claiming deduction – Assessee’s undertaking investing in plant
and machinery more than prescribed limit – Not eligible for deduction
The assessee had 4 units for manufacturing of automobile components. Its Unit 2
commenced manufacturing activity in the year 1998-99 and started claiming benefit
under Section 80-IB. The AO observed that a normal industrial undertaking (other
than small scale undertaking) was eligible for deduction only if it had commenced its
manufacturing activities before March 31, 1995. The assessee therefore would be eligible
for deduction only if it was a small scale undertaking since it commenced its operations
after 31st March 1995. The AO further observed that assessee’s undertaking had exceeding
the limit of investment in plant and machinery which is one crore and assessee had
made investment of 3 crores. Accordingly the AO denied the deduction to assessee.
The assessee contended that the limit was required to be seen only in the initial year
or first year of claim and that the condition need not be satisfied every year after year.
On appeal to Tribunal, it was held that the assessee was not entitled to deduction as the
conditions prescribed for small scale industries were not fulfilled. Further the allowance of
deduction in an earlier year in which the assessee satisfied the conditions of a small scale
undertaking does not mean that the assessee must be allowed deduction in subsequent
eligible years also. Conditions were to be met in each year. (AY. 2006-07, 2008-09)
Sodecia India P. Ltd v. DCIT (2016) 47 ITR 297 (Chennai)(Trib.)
S. 80-IB : Undertaking – Whether manufacturing process carried on by assessee with 1316
aid of power or not – Additional evidence in the form of certificate from Institute of
Chemical Technology submitted by assessee in second round of litigation – Certificate
admitted as the same was vital and essential for resolving dispute – Matter remanded
for de novo consideration in light of additional evidence
The assessee had set up an industrial unit and was engaged in the manufacture of
industrial lubricants. In the first round of litigation, the Tribunal remanded the matter to
the AO on the ground that in the absence of technical expert opinion and other relevant
material on record, it was not able to give a finding as to whether the manufacturing
process carried on by the assessee was with the aid of power or not. The AO denied the
claim. In the second round of appeal before the Tribunal, the assessee produced a copy
of a certificate from the Institute of Chemical Technology as additional evidence whereby
the Institute certified that the numbers given in the letter for power consumption was
realistic. The additional evidence submitted by the assessee was accepted in the interest
of substantial justice as the evidence was vital and essential for resolving the controversy
and went to the root of the matter for resolving the dispute, despite the fact that this was
second round of litigation and the assessee had failed to produce evidence earlier. The
matter was remanded to the AO for de novo determination of the issue after considering
the additional evidence submitted by the assessee. (AY. 2003-04, 2004-05)
Kishore Ramchandani v. ITO (2016) 47 ITR 134 (Mum.)(Trib.)
411
Undertaking S. 80-IB
1317 S. 80-IB : Undertaking – Matter remanded to the AO to verify whether excess
deduction was claimed by the eligible unit out of the transactions with the non-eligible
unit.
The assessee, a manufacturer, had 2 units of which one was eligible for deduction u/s.
80-IB. The AO disallowed the deduction on the basis that there was close connection
between the eligible and non-eligible units and the business between the two were so
arranged that excess deduction was claimed by the eligible unit. The assessee filed
additional evidence before the CIT(A) to prove that the said transactions took place
without mark-up. The CIT(A) upheld the disallowance by the AO, without considering
the remand report of the AO in which it was observed that sufficient evidence were
submitted by the assessee to prove that there was no manipulation of books. On appeal,
the ITAT remanded the matter to the AO and directed him to consider the evidences
submitted by the Assessee along with the remand report of the AO. (AY. 2009-10)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.)
1318 S. 80-IB : Undertaking – Hotel – Rent and other misc. items – Derived from the
business of the Hotel – Entitle the deduction. [S. 80IB(7)]
Amounts by way of rent and other misc. items, though shown as "other income" in
the books, constitutes "key revenue category" as per ICAI Guidelines and are "derived"
from the business of the hotel and eligible deduction. (ITA No. 240-242/Coah/2015, dt.
01.03.2016) (AY. 2007-08, 2008-09, 2010-11)
Kumarakom Lake Resort Pvt. Ltd. v. ACIT (Cochin)(Trib.); www.itatonline.org
1319 S. 80-IB : Undertaking – Failure to maintain separate books of account – AO shall
compute to deduction on reasonable basis. [S. 145]
Tribunal held that where assessee claimed deduction under section 80-IAB but failed to
maintain separate books of account for eligible units, Assessing Officer shall compute
deduction on reasonable basis. (AY. 2009-10, 2010-11)
Dy. CIT v. A.P. Industrial Infrastructure Corporation Ltd. (2016) 156 ITD 410 (Hyd.)(Trib.)
1320 S. 80-IB(10) : Housing projects – Balcony – Built-up area – Terrace in pent house not
part of built-up area – Finding that assessee was developer and built-up areas were
within specified limits – Assessee entitled to deduction.
Dismissing the appeal of Revenue, the Court held that the Tribunal had found that the
assessee was a developer. The assessee had undertaken full responsibility of constructing
the residential units and had also been responsible for the resultant profit or loss arising
out of such venture. The assessee thus, had undertaken full risk. The Tribunal had
rightly held that the open space attached to a penthouse could not be included in the
term "balcony". The Tribunal was right in law and on facts in allowing the deduction
claimed by the assessee under section 80IB(10). (AY. 2006-07)
CIT v. Amaltas Associates (2016) 389 ITR 175 (Guj.)(HC)
1321 S. 80-IB(10) : Housing projects – Proportion deduction on the housing project was held
to be proper.
Tribunal held that assessee was entitled to deduction under section 80IB(10)
proportionately out of profits in respect of wings 'A' to 'F'; whereas assessee had claimed
412
S. 80-IB(10) Housing projects
deduction for entire project, i.e., inclusive of Wing 'G' and not part of project. Revenue
raised following question of law for consideration of High Court as to whether Tribunal
was justified in upholding decision of Commissioner (Appeals) in proportionately
allowing deduction under section 80-IB(10) out of profits in respect of Wings 'A' to
'F' without appreciating that assessee had claimed deduction for entire project, i.e.,
inclusive of Wing 'G' and not part of project. High Court held that above question stood
concluded in favour of assessee and against revenue by an earlier decision of Bombay
High Court in case of CIT v. Vandana Properties (2013) 353 ITR 36 and, therefore, no
substantial question of law arose for consideration. (ITA No. 2244 of 2013 dt. 4-2-2016)
CIT v. Aakash Nidhi Builders & Developers (Bom.)(HC)
Editorial : SLP filed against order of High Court was dismissed, CIT v. Aakash Nidhi
Builders & Developers (2016) 243 Taxman 517 (SC)
S. 80-IB(10) : Housing projects – Deduction at source – Expenditure added back to 1322
income of assessee is eligible for deduction. [S. 40(a)(ia)]
Dismissing the appeals of the revenue the Court held that in view of the scheme of
section 40 deduction of tax at source was not effected by the assessee and payment
to contractors could not be deducted as the expenditure became inadmissible. The
expenditures were added back to the income being eligible income. This income eligible
for deduction in terms of section 80-IB(10) only increased by the figure of disallowed
expenditure. (AY. 2006-07)
CIT v. Sunil Vishwambharnath Tiwari (2016) 388 ITR 630 / 290 CTR 234 / 143 DTR 94
(Bom.)(HC)
S. 80-IB(10) : Housing projects – Two flats in project exceeding specified dimension 1323
– Assessee entitled to deduction in respect of other flats not exceeding specified
dimension.
The Assessing Officer found that the assessee had built two flats measuring 1572
square feet and 1653 square feet respectively. He held that since there was a breach
of the condition specified under section 80-IB(10) of the Income-tax Act, 1961 in the
construction of the two flats as they measured more than 1500 square feet, the deduction
to the entire project and flats sold during the year was to be denied. The Commissioner
(Appeals) confirmed the assessment order. The Appellate Tribunal held that the assessee
would be disqualified for the deduction proportionately, only in respect of the two flats
of area exceeding 1500 square feet but would be entitled to deduction in respect of the
other flats which measured less than 1500 square feet. On appeal:
Held, dismissing the appeal, that the Tribunal was right in holding that the assessee was
entitled to deduction under section 80-IB(10) with respect to income from flats measuring
less than 1500 sq. ft. limit and would not be entitled to deduction under section 80IB(10)
proportionately only with respect to the income from the two flats exceeding the limit
of 1500 sq. ft. when the assessee had considered all the flats as forming part of a single
project on interpretation of the provisions of section 80IB(10)(c). The order passed by the
Appellate Tribunal was correct in the eye of law and the contentions raised on behalf of
the Department could not be countenanced. (AY. 2010-11)
CIT v. Elegant Estates (2016) 383 ITR 49 (Mad.)(HC)
413
Housing projects S. 80-IB(10)
1324 S. 80-IB(10) : Housing projects – Completion certificate from local authority – size
of residential units including terrace exceeding 1500 sq. ft. – Commercial area more
than 3%
The Assessing Officer, for the assessment year 2010-11, disallowed the deduction
claimed by the assessee under section 80-IB(10) of the Income-tax Act, 1961, on the
grounds that (i) the completion certificate of building had not been obtained by the
assessee from the local authority but only from an architect thereby violating the
provisions of Explanation (ii) to section 80-IB(10)(a), (ii) the size of the residential units
was more than 1,500 sq. ft. including the terrace area thereby violating the provisions of
section 80-IB(10)(c), and (iii) the builtup area of the commercial establishment included
in the project was higher than three percent of the aggregate area and more than 5,000
sq. ft. thereby violating the provisions of section 80-IB(10)(d). This was confirmed by the
Commissioner (Appeals). The Tribunal held that (i) that the assessee had duly applied
for the completion certificate from the Jodhpur Development Authority (i.e., the local
authority) according to the condition laid down in section 80-IB(10) immediately after
completion of the project. However, that authority instructed the assessee to take the
completion certificate from a registered architect for official purposes. The project was
completed within the allotted time frame and possession certificates were also duly
furnished before the Assessing Officer. Therefore, expecting the assessee to produce
the completion certificate from a local authority would only result in impossibility of
performance on the part of the assessee. Accordingly, the rejection of deduction under
section 80IB(10) by the Assessing Officer was not in order. (ii) That the actual builtup
area of the residential building should not exceed the maximum area specified in the
Act and there was no scope for making the assumptions and estimates. The definition
of builtup area means inner measurement of the residential unit at the floor level
including the projections and balconies as increased by the thickness of the walls but
does not include the common areas shared with other residential units. Hence, it could
be concluded that the open terrace was not covered within the meaning of the builtup
area as it was open to the sky and would not be part of the inner measurement of the
residential floor at any floor level. Therefore, the terrace area needs to be excluded
from the builtup area and if the terrace area was excluded, the resultant builtup area
was well within the 1,500 sq. ft limit prescribed in the Act and, hence, rejection of
deduction under section 80-IB(10) by the Assessing Officer was not in order. (iii) That
the commercial project was handled by an independent partnership for construction
of commercial complex along with the approved plan, and both the residential and
the commercial properties being independent units and belonged to two independent
entities. The assessee had considered 58 bighas of land for construction of residential
units and adjacent land of 11 bighas belonged to another firm which constructed the
commercial project separately. Hence, the deduction under section 80-IB(10) should
be claimed unitwise and, hence, rejection of deduction under section 80-IB(10) by the
Assessing Officer was not in order. (AY. 2010-11)
Ashiana Amar Developers v. ITO (2016) 46 ITR 17 / 178 ITR 474 / 136 DTR 137 (Kol.)
(Trib.)
414
S. 80-IC Special category States
S. 80-IB(11A) : Industrial undertakings other than infrastructure development 1325
undertakings – Handling, storage and transportation of food grains – Business of
ginning and pressing of cotton – Failed to show integrated activities – Rejection of
claim was held to be justified.
Assessee was engaged in business of ginning and pressing of cotton and warehousing.
Assessee filed his return claiming deduction u/s. 80IB(11A). AO rejected assessee's claim
holding that assessee was not engaged in integrated business of handling, storage and
transportation of food grains. Assessee could not bring any document on record to show
any agreement/arrangement with outsourcing agencies for supply of labour, also had
not placed on record any agreement/arrangement with transporters for transportation
of food grains nor any bills/invoices had been produced to substantiate payment
for transportation. Assessee had not been able to show that activities of handling,
storage and transportation of food grains allegedly carried out by him were part of one
composite activity and were integrated in any manner. Hence, claim of the assessee was
rejected. (AY. 2008-09)
Anurag Radhesham Attal v. ITO (2016) 158 ITD 867 / (2017) 183 TTJ 423 / 147 DTR 207
(Pune)(Trib.)
S. 80-IC. Special provisions in respect of certain undertakings or enterprises in certain
special category States.
S. 80-IC : Special category States – Income from erection and servicing of machinery 1326
manufactured in specified area – Entitled to deduction.
Allowing the appeal the Court held that it was not disputed that the business of
manufacturing activity of stone crushing plants and machinery, was entitled for
deduction under the special provision of section 80-IC. The assessee was involved only
in manufacturing activity of stone crushing plants and it was not installing or servicing
machinery, manufactured by others. The assessee was entitled to special deduction
under section 80IC in respect of the service and erection charges. (AY. 2007-08)
Torsa Machines Ltd. v. CIT (2016) 389 ITR 377 (Gauhati)(HC)
S. 80-IC : Special category States – Only those hotels which are set up as Eco-tourism 1327
units are eligible for deduction [S. 80IC(2)(b)]
The assessee had set up hotels in Dehradun. AO held that for claiming deduction
under S. 80-IC(2)(b), it was not enough to set up a hotel but the assessee’s hotel
also had to be associated with ecotourism as S. 80-IC(2)(b) read with the Fourteenth
Schedule covers only those undertakings or enterprises which are engaged in eco-
tourism including hotels, resorts, spa, entertainment/amusement parks and ropeways.
HC held that Legislature did not intend that any person who sets up a hotel in
Uttarakhand, without any regard to the exact location, and the manner in which it
operates, its impact on the environment, its relationship with the local people, what
it does for the people there, should be entitled to claim the benefit. HC further held
that only those hotels which were setup as Ecotourism units would be entitled to the
benefit of 80-IC and the fact that a No Objection Certificate has been obtained from
415
Special category States S. 80-IC
the Pollution Control Board is not determinative of the fulfilment of conditions of S.
80-IC. Appeal of revenue was allowed.
CIT v. Aanchal Hotels (P) Ltd. (2016) 138 DTR 169 / 287 CTR 233 / 241 Taxman 108
(Uttarakhand)(HC)
CIT v. Pankaj Nagalia (2016) 138 DTR 169 / 287 CTR 233 / 241 Taxman 108
(Uttarakhand)(HC)
1328 S. 80-IC : Special category States – Industrial undertaking – Assessing Officer
re-allocating purchases between exempt and non-exempt units – Same products sold
from both units at same price range – Cost same – Reason to believe assessee inflating
profits in exempt unit – Assessing Officer has powers to compute reasonable profit
[S. 80IA]
Held, dismissing the appeal of the assessee; that the purchases for both units were made
from common sources. The products were manufactured by both units, majority of its
expenditure and some of the customers were also common. The same products were
sold from both the units at the same price range. It was shown that the machines cost
less at an exempt unit, but the assessee failed to explain the reason for it. When the
end product was the same, the cost would also be the same. By installing a machine
of less cost, it could not be said that the assessee was achieving economy of scale or
some other technological development. There was definitely a reason to believe that
the assessee inflated the profits in the eligible unit and in such situation, the Assessing
Officer had clear powers in terms of section 80-IA(10) of the Act to compute the
reasonable profit. (AY. 2010-11)
Deepak Verma v. CIT (2016) 384 ITR 154 (P&H)(HC)
Editorial : The Supreme Court has dismissed special leave petition filed by the assessee
against this judgment, Deepak Verma v. CIT (2016) 383 ITR 5 (St.)
1329 S. 80-IC : Special category States – It is 'undertaking or enterprise', rather than
'assessee' or profits and gains, which is to be subjected to deduction.
It is 'undertaking or enterprise' rather than assessee, which is to be subjected to
deduction under section 80-IC; a unit arising due to substantial expansion would
constitute new business and period of 10 years' tax holiday would commence from
initial assessment of that unit. (AY. 2008-09)
Aggarwal & Co. (Engg. & Eractors) v. DY. CIT (2016) 160 ITD 540 (Asr.)(Trib.)
1330 S. 80-IC : Special category States – Sale of scrap being part and parcel of activities of
undertaking, profit derived hence to be considered for deduction.
Sale of scrap being part and parcel of activities of assessee’s undertaking, gains
derived from said activity was required to be take into consideration for purposes of
computation of deduction u/s. 80-IC. (AY. 2008-09 to 2011-12)
SBL (P.) Ltd. v. ITO (2016) 161 ITD 379 (Jaipur)(Trib.)
416
S. 80-O Royalties
S. 80-IC : Special category States – Assembling electric bikes, would amount to 1331
manufacturing hence eligible deduction.
Assessee assembling parts procured from China using simple machinery to produce
electric bikes. Imported parts underwent a change and a new product was produced,
said activity would come under term 'manufacture' and therefore deduction u/s. 80-IC
is allowable. (AY. 2008-09)
ACIT v. Accura Bikes (P.) Ltd. (2016) 161 ITD 275 / (2017) 146 DTR 222 (SMC) (Ahd.)
(Trib.)
S. 80M. Deduction in respect of certain inter corporate dividends.
S. 80M : Inter corporate dividends – Estimation of expenditure – Where the Appellate 1332
Authorities found that expenses liable to be deducted for computation of deduction
under section 80M was considered under wrong head, they must direct Assessing
Officer to rectify that error for all purposes.
Assessee-company received dividend income from two group companies and claimed
deduction. Assessing Officer enumerated management expenses related to dividend
income under section 80M and allowed proportionate management expenses. Tribunal
held that section 80M does not authorize Assessing Officer to estimate expenditure
and recompute income. On appeal by revenue allowing the appeal the Court held that
since, assessee did not provide any bifurcation of expenditure incurred in respect of
dividend income, Assessing Officer had no option but to estimate expenditure and to
recompute income by way of dividend to arrive at deduction that may be allowed under
section 80M. Where Appellate Authorities found that expenses liable to be deducted for
computation of deduction under section 80M was considered under wrong head, they
must direct Assessing Officer to rectify that error for all purposes. (AY. 1991-92)
CIT v. Hero Cycles Ltd. (No. 2) (2016) 243 Taxman 28 / (2017) 393 ITR 264 / 293 CTR
23 / 147 DTR 265 (P&H)(HC)
Editorial: SLP of assessee is admitted CIT v. Hero Cycles Ltd v. CIT (2017) 245 Taxman
355 (SC)
S. 80-O. Deduction in respect of royalties, etc., from certain foreign enterprises.
S. 80-O : Royalties – Foreign enterprises – Procurement of marine products in India 1333
for foreign enterprise – No expertise capable of being used abroad – Not entitled to
deduction.
Allowing the appeal of revenue the Court held that Procurement of marine products in
India for foreign enterprise. As no expertise capable of being used abroad the assessee
is not entitled to deduction. (AY. 1993-94)
CIT v. Ramnath and Co. (2016) 388 ITR 307 (Ker.)(HC)
CIT v. Concord International (2016) 388 ITR 307 (Ker.)(HC)
CIT v. Laxmi Agencies (2016) 388 ITR 307 (Kar.)(HC)
417
Royalties S. 80-O
1334 S. 80-O : Royalties – Foreign enterprises – Remuneration from foreign enterprises
– Allocation of expenses – Failure by assessee to follow consistent method for
apportionment of expenses hence method adopted by assessee resulting in distorted
apportionment was held to be unacceptable.
Dismissing the appeal of the assessee the Court held that the allocation of expenses
between foreign business and domestic business should be on proportionate basis. On
facts the Court held that there was failure by assessee to follow consistent method for
apportionment of expenses hence method adopted by assessee resulting in distorted
apportionment was held to be unacceptable. (AY. 1993-94, 1997-98)
Continental Carriers v. CIT (2016) 384 ITR 102 / 135 DTR 293 (Delhi)(HC)
S. 80P. Deduction in respect of income of co-operative societies.
1335 S. 80P : Co-operative societies – Society was not a co-operative bank but a
co-operative society and as such entitled for exemption. [S. 80P(2)(a)(i)]
Dismissing the appeal of the revenue, the Court held that the assessee was giving
credit facilities only to the members and that would not make assessee a co-operative
bank. Accordingly, after relying upon the judgment of the Bombay High Court in case
of Quepem Urban Co-operative Credit Society Ltd. v. ACIT [TA. Nos. 22 to 24 of 2015,
dt.17-1-2015], it held that finding of the ITAT, which was not alleged to be perverse,
that assessee was not a co-operative bank deserved to be upheld.
PCIT v. Goa PWD Staff Co-op. Credit Society Ltd. (2016) 242 Taxman 422 (Bom.)(HC)
Editorial: SLP is granted to the revenue; CIT v. Goa Staff Co-operative Housing Finance
& Federation Ltd. (2016) 242 Taxman 366 (SC).
1336 S. 80P : Co-operative societies – Business of Banking – No finding regarding issue by
the Tribunal – Matter remanded.
Allowing the appeal of Revenue, the Court held that there was no finding by the
Tribunal against the assessee on the issue whether it was engaged in the business of
carrying on banking business. The Tribunal, did not think it necessary to decide this
issue as it found that the assessee was entitled to succeed on another basis. Thus since
it might be necessary to consider leading of additional evidence, the Tribunal was to
decide the issue. In the event of the Tribunal finding that the assessee was engaged
in carrying on the business of banking, the Tribunal should decide whether on that
basis the assessee was entitled to the benefit of section 80P(2)(a)(i) or under any other
provision in respect of the claims. Matter remanded. (AY. 2003-04)
CIT v. Punjab State Co-op. Agricultural Development Bank Ltd. (2016) 389 ITR 607 (P&H)
(HC)
1337 S. 80P : Co-operative societies – Interest from investment of its reserve funds and call
deposits made with various banks – Assessee is not entitled to deduction on basis that
it was providing credit facilities to its members.
Allowing the appeal of revenue, the Court held that the assessee was not entitled to
deduction on the basis that it was engaged in carrying on the business of providing
credit facilities to its members. If the interest income was attributable to the business of
418
S. 80P Co-operative societies
banking, exemption under section 80P(2)(a)(i) would be available. The issue whether the
assessee carried on the business of banking was not considered and had been remanded
to the Tribunal. If it was established upon remand that the assessee carried on the
business of banking the result might be different. (AY. 2003-04)
CIT v. Punjab State Co-op Agricultural Development Bank Ltd. (2016) 389 ITR 607 (P&H)
(HC)
S. 80P : Co-operative societies – Interest earned on advances to employees – Definition 1338
of members does not include employees in accordance with Punjab Co-operative
Societies Act – Assessee is not entitled to benefit.
Allowing the appeal of the Revenue, the Court held that the assessee would be entitled
to the benefit of section 80P(2)(a)(i) in respect of the interest earned on advances to its
employees only if employees fell within the ambit of the term "members" in that section.
The assessee’s employees could not be said to be members. The definition of members
in accordance with section 2(g) of the Punjab Co-operative Societies Act, 1961 does not
include employees. (AY. 2003-04)
CIT v. Punjab State Co-op. Agricultural Development Bank Ltd. (2016) 389 ITR 607 (P&H)
(HC)
S. 80P : Co-operative societies – Interest income – Other sources – Not entitled to 1339
deduction.
Assessee was a co-operative society. In banks other than co-operative banks, it made
short-term investment of surplus which was not immediately required for business
purpose. Assessee also advanced loan to employees for housing and conveyance.
Tribunal found that deduction under section 80P(2)(a)(i) was available only in respect of
core activities of societies; that interest received by assessee was not from core activities
and, therefore, same had to be taxed as 'Income from other sources' and, thus, assessee
would not be entitled to deduction under section 80P. On appeal High Court held that
since nothing was demonstrated that approach of Tribunal was erroneous or perverse
in any manner, no substantial question of law arose for consideration. (AY. 2011-12)
Punjab State Co-operative Federation of House Building Societies Ltd. v. CIT (2016) 76
taxmann.com 98 (P& H)(HC)
Editorial : SLP was granted to the assessee, Punjab State Co-operative Federation of House
Building Societies Ltd. v. CIT (2016) 243 Taxman 518 (SC)
S. 80P : Co-operative societies – Primary agricultural credit society entitled to 1340
deduction.
Dismissing the appeals of the revenue the Court held that the primary object of the
assessee-society was to provide financial accommodation to its members to meet all
the agricultural requirements and to provide credit facilities to the members, as per the
bye-laws and as laid down in section 5(cciv) of the Banking Regulation Act, 1949. The
assessee society was admittedly not a co-operative bank but a credit co-operative society.
It was entitled to the deduction under section 80P. (AY. 2008-09, 2009-10, 2011-12)
CIT v. Veerakeralam Primary Agricultural Co-operative Credit Society (2016) 388 ITR 492/
241 Taxman 324 (Mad.)(HC)
419
Co-operative societies S. 80P
1341 S. 80P : Co-operative societies – Capital or revenue – Co-operative bank – Deduction
is available on sum amortised.
The assessee, a co-operative bank, sometimes purchased securities at the market value
which was more than the face value. On the basis of the guidelines issued in the
Circular dated March 28, 2005 by the Reserve Bank of India, it amortised the differential
amount between the face value and the market value of the securities purchased and
claimed deduction under section 80P(2)(a)(i). in respect thereof. On the issue whether
amortisation was permissible or not, held, allowing the appeal, that the amortisation
of premium might be permitted so long as the deduction was available to the assessee
under section 80P. If the income of the assessee had been deductible under section 80P,
whether the income had been reduced by the amortisation or not would not have any
effect on the Department. There had been no loss of revenue. In such a case, refusal
to allow the amortisation would have resulted in following a practice that would have
been contrary to the circular that had been issued by the Reserve Bank of India. The
Tribunal had erred in law in holding that the amortisation of the sum of premium paid
on the investment was capital expenditure. (AY. 2005-06)
Contai Co-op. Bank Ltd v. ACIT (2016) 386 ITR 144 (Cal.)(HC)
1342 S. 80P : Co-operative societies – Assessees not credit co-operative banks but credit
co-operative societies – Exclusion clause not applicable – Exemption cannot be denied
on mere ground of belated filing of return – Assessees are entitled to deduction –
Matter was remanded to Tribunal [S. 80P(4), 139]
Allowing the appeal the Court held that, Assessees are not credit co-operative banks but
credit co-operative societies hence exclusion clause not applicable therefore exemption
cannot be denied on mere ground of belated filing of return. Assessee is entitled to
deduction, accordingly the matter was remanded to the Tribunal for reconsideration.
Chirakkal Service Co-op. Bank Ltd. v. CIT (2016) 384 ITR 490 / 239 Taxman 417 / 286
CTR 439 / 135 DTR 361 (Ker.)(HC)
1343 S. 80P : Co-operative societies – Assessee fell within the term ‘co-operative bank’ and
was not entitled for deduction. [S. 80P(4)]
The Assessee was a State Co-operative Agricultural and Rural Development
Bank. The question that arose before the High Court was whether Assessee was a
'co-operative bank' which was a 'primary agricultural credit society' or not. According
to Revenue, Assessee was a co-operative bank, other than a 'primary agricultural credit
society'/'primary co-operative agricultural and rural development bank' and, therefore,
section 80P of the Act did not apply to it in view of sub-section (4) of section 80P.
The Assessee submitted that section 80P(4) of the Act provided that the provisions of
this section did not apply in relation to any ‘co-operative bank’ other than ‘primary
co-operative agricultural and rural development bank’. In this regard, the High Court
firstly decided whether the Assessee would be a co-operative bank which is a ‘primary
agricultural credit society’. In this regard, the High Court went through various
definitions and provisions of the Banking Regulation Act, 1949 and the National Bank
for Agricultural and Rural Development Act, 1981 and Kerala Co-operative Act, 1969
and decided that the Assessee would fall within the terms of the term ‘co-operative
420
S. 80P Co-operative societies
bank’. Further the High Court decided whether the Assessee was a ‘primary agricultural
credit society’ or not. In this regard, it observed the provisions of explanation (a) to
section 80P(4) of the Act and held that it was not a ‘primary agricultural credit society’.
Thus the High Court held that the Assessee was not a co-operative Bank which was a
‘primary agricultural credit society’ and the Assessee did not fall under section 80P(4)
of the Act and hence the appeal of the Assessee was dismissed. (AY. 2007-08)
Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. CIT (2016) 383
ITR 610/ 238 Taxman 638 (Ker.)(HC)
S. 80P : Co-operative societies – Earning of co-operative society must be through 1344
utilisation of labour of members – Society running toddy shops – Tapping of toddy
not main business of society – Income from utilising labour of members for tapping
toddy – Not entitled to [S. 80P(2)(a)(vi)]
Since income of the society had nothing to do with the collective disposal of the labour
of its members but was entirely from the price realised by it for the sale of toddy
through the society’s own toddy shops, the Tribunal was justified in holding that the
assessee-societies were not eligible for the. (AY 2008-09, 2009-10)
Hosdurg Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT (2016)
380 ITR 34 (Ker.)(HC)
Nileswar Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT (2016)
380 ITR 34 / 129 DTR 161 (Ker.)(HC)
Peravoor Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT (2016)
380 ITR 34 (Ker.)(HC)
S. 80P : Co-operative societies – Income tax authorities neither competent nor they 1345
possess any jurisdiction to decide whether the assessee is a co-operative society or a
co-operative Bank – Entitled exemption. [S. 2(24)(viia)]
The assessee was a co-operative society registered under the Karnataka State
Co-operative Society Act, 1956. It claimed deduction under section 80P(2)(a)(i) of the
Act. The Assessing Officer opined that the assessee was not entitled to the deduction,
as, claimed, for the reason that the activity of the assessee was covered under section
2(24)(viia) which required the inclusion of profits and gains of any business of banking
(including providing credit facilities) carried on by a co-operative society. It was held
that the bye-laws of the assessee indicated that their primary object was transactions
that were apparently in the nature of banking. In that, the assessee was receiving
deposits from its members and providing loans to other members and, hence, it satisfied
all the three conditions contemplated under section 56(ccv) of the Banking Regulation
Act. From this premise, the Assessing Officer had proceeded on the basis that a primary
co-operative bank meant a co-operative society. Therefore, he held that the assessee
being a primary co-operative bank was not eligible for deduction under section 80P.
The CIT(A) and the Tribunal confirmed the order of the Assessing Officer. On appeal
to the High Court the Court held that the Authorities under Income-tax Act are neither
competent nor do they possess any jurisdiction to resolve controversy as to whether
assessee was a co-operative society or a co-operative bank, as defined under provisions
of Banking Regulation Act. The assessee is entitled the exemption. (AY. 2009-10)
Belgaum Merchants Co-op. Credit Society Ltd. v. CIT (2016) 236 Taxman 351 (Karn.)(HC)
421
Co-operative societies S. 80P
1346 S. 80P : Co-operative societies – Marketing societies – Income derived by assessee
from marketing of toddy which was produced by its members by tapping coconut trees
grown by them, was eligible for deduction [S. 80P(2)(a)(iii)]
Allowing the appeal of the assessee, the Tribunal held that; Toddy is an agricultural
produce and, therefore, income derived by assessee society from marketing of toddy
which was produced by its members by tapping coconut trees grown by them, was
eligible for deduction u/s. 80P(2)(a)(iii). (AY. 2008-09 to 2011-12)
Kannur Range Kallu Chethu Vyavasaya Thozhilali Sahakarana Sangam Ltd. v. ACIT
(2016) 159 ITD 507 / 181 TTJ 538 / (2017) 148 DTR 189 (Cochin)(Trib.)
1347 S. 80P : Co-operative societies – Not a co-operative bank, entitled to deduction
[S. 80P(2)(a)(i)]
Dismissing the appeal of the appeal of the revenue the Tribunal held Assessee, a
co-operative society, was not carrying on banking business as it was not receiving
deposits from persons who were not members and, moreover, bye-laws of society
permitted admission of any other co-operative society as its members, hence the assessee
could not be regarded as primary-co-operative bank, hence eligible to deduction. (AY.
2007-08, 2009-10)
ITO v. Shiva Credit Souhard Sahakari Niyamit (2016) 68 SOT 228 (Panaji)(URO)(Trib.)
1348 S. 80P : Co-operative societies – Primary co-operative bank – Not entitle to deduction.
[S. 80P(2)(a)(i), Banking Regulation Act, 1949, S. 5(ccv)]
Assessee had fulfilled all three conditions of being held a Primary Co-operative Bank as
given in section 5(ccv) of Banking Regulation Act, 1949 therefore provisions of section
80P(4) were applicable and assessee was not entitled for deduction under section 80P(2)
(a)(i). (AY 2010-11)
ITO v. Shri Durdundeshwar Urban Co-operative Credit Society Ltd. (2015) 68 SOT 240
(Panaji)(URO)(Trib.)
1349 S. 80P : Co-operative societies – Interest and dividend earned by a co-op society on
investments with other co-operative societies is eligible for deduction. [S. 80P(2)(d)]
Allowing the appeal of assessee the Tribunal held that interest and dividend earned by a
co-op. society on investments with other co-operative societies is eligible for deduction.
The question whether the co-op. society is engaged in the business of banking for
providing credit facilities to its members and the head under which the income is
assessable is not material. (ITA No. 3566/Mum/2014, dt. 15.01.2016) (AY. 2009-10)
Land End Co-operative Housing Society Ltd. v. ITO (Mum.)(Trib.); www.itatonline.org
1350 S. 80P : Co-operative societies – Interest earned on investments was held to be
allowable deduction – Dividend received from mutual funds, interest from serving
bank account and miscellaneous receipts, deduction was not allowable.
The Tribunal held that the assessee is entitled to deduction under section 80P on
interest earned on investments but not entitled to deduction under section 80P relating
to dividend received from mutual funds which is income from other sources. Similarly
interest from saving bank accounts and other receipts viz. service charges, cheque return
422
S. 80RR Professional income-Foreign sources
charges, DD commission, processing fees, loan from fees and other interest not being
covered by the provisions of section 80P are not eligible for deduction under section
80P in the hands of the assessee society. (AY. 2010-11)
ITO v. Kundalika Nagari Sahakari Patpedhi Maryadit (2016) 178 TTJ 381 / 137 DTR 210
(Pune)(Trib.)
ITO v. Kamal Mahila Nagari Sahakari Patpedhi Maryadit (2016) 178 TTJ 381 / 137 DTR
210 (Pune)(Trib.)
S. 80QQB. Deduction in respect of royalty income, etc. of authors of certain books
other than test books.
S. 80QQB : Royalty – Authors other than text books – Book written on income tax 1351
problems in question answer form – Entitle to deduction.
It was held that book authored by the assessee on income tax problems in question
answer form is a literary work in terms of s. 80QQB and, therefore, assessee is entitled
to deduction u/s. 80QQB in respect of the royalty received by him on the same. (AY.
2005-06).
Dilip Loyalka v. ACIT (2016) 130 DTR 73 / 175 TTJ 334 (Kol.)(Trib.)
S. 80RR. Deduction in respect of professional income from foreign sources in certain
cases.
S. 80RR : Professional income-Foreign sources – Sportsperson – Need not be currently 1352
playing in field and income need not be directly from playing in field only – Held
eligible deduction.
Assessee claimed deduction in respect of professional income from foreign sources.
Assessing Officer held that the assessee did not fall any category of profession defined
u/s. 80RR. On appeal Tribunal held that the assessee is a sportsman and sportsman
may also be used to describe former player who continues to remain associated and
engaged, for the promotion of the related sports activities. On the facts the assessee has
been undoubtedly a cricketer of international stature, hence deduction is available to
the assessee. (AY. 2001-02 & 2002-03)
Sunil Gavaskar v. ITO (2016) 47 ITR 243 / 177 TTJ 500 / 134 DTR 113 (Mum.)(Trib.)
423
Double taxation relief S. 90
CHAPTER IX
DOUBLE TAXATION RELIEF
S. 90. Agreement with foreign countries or specified territories.
1353 S. 90 : Double taxation relief – Permanent establishment – The main business is
fabrication and installation of platforms, project office acting as a communication
channel would qualify as an activity of auxiliary character, hence eligible for
exclusionary clause of Art. 5(3)(e) of the DTAA – Installation activities lasted from
19/11/2006 to 27/04/2007 which is less than minimum period of 9 months – Even if
period during which pre-installation activities were in place, the total period would
not exceed nine months, therefore, no PE under Art. 5(2)(h). Agreement between
assessee and ASL is on principal-to-principal basis. ASL acted as an agent of
independent status to whom art. 5(5) applies. ASL would not constitute Dependent
Agent PE in India – DTAA-India-UAE [Art. 5(3)(e)]
The assessee, a company incorporated in UAE, entered into contracts with ONGC for the
installation of petroleum platforms and submarine pipelines and also included various
activities. Whilst the activities relating to survey, installation and commissioning were
done entirely in India, the platforms were designed, engineered and fabricated overseas.
The assessee filed its return of income for relevant years.
The AO opined that the assessee had a fixed place PE in India in the form of a project
office at Mumbai and also, held that Arcadia Shipping Limited (“ASL”) constituted a
Dependent Agent PE (“DAPE”) of the assessee in India. The DRP upheld the order of
AO. On an appeal, the Tribunal concluded that the assessee's project office in India
was its PE.
On appeal, the HC held that the assessee’s project office in Mumbai cannot be treated
as PE in India. Firstly, there were no material to support that employees of the project
office were present at the meeting or they had participated in review of the engineering
documents or in the discussions or approval of the designs submitted to ONGC, it has
to be accepted that the assessee’s project office was only used as a communication
channel. Secondly, the main business of assessee was fabrication and installation of
platforms whereas project office only acted as a communication channel. Therefore, the
activities of project office would be covered by the exclusionary clause under Art. 5(3)
(e) of the DTAA.
On applicability of Art. 5(2)(h), the HC held that it is necessary that the 'site, project
or activity continues for a period of more than nine months'. During the period,
21/05/2006 to 19/11/2006, the assessee did not have access to the site office, therefore,
this period cannot be considered for determination of PE in India under Art. 5(2)(h).
The installation activities lasted from 19.11.2006 to 27.04.2007, which is much less than
the minimum period of nine months. Even if the time spent by ASL in conducting the
pre-engineering, pre-design survey is included, the duration of the project activities in
India would not exceed nine months. Therefore, if the duration of the project activities
in India was less than nine months, Assessee did not have a PE in India under Art.
5(2)(h) of the DTAA.
On ASL being treated as a Dependent Agent PE (“DAPE”) of the assessee under art.
5(4) of the DTAA, the HC held that the ASL provision of logistics and consultancy
424
S. 90 Double taxation relief
support was in its regular course of business and the agreement between the assessee
and ASL was on principal-to-principal basis. Further, the consultancy agreement does
not authorise ASL to conclude contracts on behalf of the assessee. Therefore, ASL is an
agent of independent status and therefore, would not constitute a DAPE of the assessee
in India. (AY. 2007-08, 2008-09)
National Petroleum Construction Company v. DIT(IT) (2016) 383 ITR 648 / 131 DTR 113
/ 284 CTR 373 / 238 Taxman 40 (Delhi)(HC)
Editorial : SLP is granted to the revenue; DIT(IT) v. National Petroleum Construction
Company (2017) 244 Taxamn 56 (SC)
Editorial : SLP is granted to the revenue; DIT v. National Petroleum Construction Co.
(2016) 242 Taxman 250 (SC)
S. 90 : Double taxation relief – Assessee is eligible to claim credit of taxes paid in 1354
other country even if income is exempt by virtue of section 10A – DTAA-India-USA-
Canada [S. 4, 5, 10A, Art. 25, 23]
Assessee carried on business of exporting software including services for on-site
development of software through its permanent establishment in other country. The
income earned by the assessee from export and on site development was exempt under
section 10A of the Act. During the assessment proceeding, it claimed credit for taxes
paid, in respect of permanent establishment, in other countries. The Assessing Officer
denied the claim of the assessee on the ground that no revised return was filed by the
assessee. The CIT(A) allowed the relief to assessee however, the Tribunal remanded it
back to Assessing Officer with the observation that the income is exempt under section
10A. Therefore the assessee would not be able to claim credit for taxes paid outside
India. On appeal, the High Court held that payment of taxes in both the countries is
not sine qua non for claiming benefit of section 90. Taxability of income in India is
not precondition to claim benefit of section 90 as section 10A does not give blanket
exemption, it only has the effect of suspending the collection of revenue for 10 years.
The income exempted under section 10A is chargeable to tax under section 4 and
includible in the total income under section 5 but, taxability is suspended for 10 years.
It was also held that the countries with which there is no agreement under section 90,
credit of taxes is available by virtue of provisions of section 91. (AY. 2001-02 to 2004-05)
Wipro Ltd. v. DCIT (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 / 129 DTR 68
(Karn.)(HC)
S. 90 : Double taxation relief – Offshore contract – Income from offshore contract was 1355
held to be not chargeable to tax – DTAA-India-Japan. [S. 9(1)(vii), Art. 7]
Allowing the appeal of assessee Tribunal held that where Japanese company executed
Engineering, Procurement, Construction and Commissioning contracts in India through
Indian project office, income from offshore services, though chargeable under section
9(1)(vii) was exempt under DTAA and, hence, could not be charged to tax in light of
section 90(2). (AY. 2008-09)
IHI Corporation v. ADIT(IT) (2016) 156 ITD 677 (Mum.)(Trib.)
425
Double taxation relief S. 90
1356 S. 90 : Double taxation relief – Surcharge and education cess is not leviable when tax
rate is prescribed under DTAA-India-UK. [Art. 2]
Dismissing the appeal of revenue the Tribunal held that when tax rate is determined
under DTAA, then tax rate prescribed therein shall have to be followed strictly without
any additional taxes thereon in form of surcharge or education cess. (AY. 2010-11)
Dy. CIT v. BOC Group Ltd (2016) 156 ITD 402 (Mum.)(Trib.)
1357 S. 90 : Double taxation relief – Computation of profits attributable to PE – Position
settled by amendment in protocol to DTAA – Simply because there is more specific
provision post protocol amendment, it cannot be concluded that the judicial precedent
by Tribunal ceases to hold good – DTAA-India-UAE. [Art. 7]
A protocol amending India-UAE treaty has been entered into. Protocol has two major
changes- first with regards to definition of a ‘resident of a contracting state’ and second
restrictions under domestic tax law specifically extending to computation of taxable
profits under Article 7. Reverse discrimination which would have resulted by not
restricting the deductions in the light of provisions of the Act for non-resident assessee
was not permissible under India-UAE DTAA prior to the protocol amendment and such
a reverse discrimination is not permissible even now as specifically provided for in the
said protocol amendment. Every specific amendment to the law or a treaty particularly
when it is disadvantageous to the taxpayers and is enacted as a measure of abundant
caution is generally fraught with what tax academicians and policymaker term as the
risk of its kill effect. The issue is squarely covered by the decision of Tribunal in
assessee’s own case. This stand has now been accepted in the protocol to India-UAE
treaty. Just because there is more specific and unambiguous provision post the protocol
amendment, one cannot come to conclusion that judicial precedent rendered by
Co-ordinate Bench, even without specific and unambiguous expressions, ceases to hold
good. That will be stretching the things too far and will also be contrary to the approach
adopted by a very large number of judicial precedents. (AY. 2002-03)
Mashreq Bank PSC v. DDIT (2016) 176 TTJ 85 / 131 DTR 1 (Mum.)(Trib.)
S. 91 : Countries with which no agreement exists.
1358 S. 91 : Double taxation relief – Income tax must be paid in both countries, for
claiming relief. [S. 35D, 80HHB]
Amount of deduction claimed under sections 80HHD and 35D are not subjected to
tax in India but forming part of assessee’s income. Relief under section 91 can not be
granted. (AY. 1983-84)
Reliance Infrastructure Ltd. v. CIT (2016) 76 taxmann.com 257 / (2017) 390 ITR 271
(Bom.)(HC)
426
S. 92A Transfer pricing
CHAPTER X
SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX
S. 92. Computation of income from international transaction having regard to arm’s
length price.
S. 92 : Transfer pricing – Arm’s length price – Specified domestic transactions – 1359
Reference to Transfer pricing Officer – Assessee investing more than ` 5 crore in
company in which directors of assessee held in aggregate more than 20 per cent
of shares – Prima facie material to show assessee was covered under section 92 –
Reference to transfer pricing Officer was held to be valid. [S. 92A, 92BA, 92CA, 40A(2)
(b)]
The assessee filed Writ petition against reference to Transfer Pricing Officer; Dismissing
the petition the Court held that the assessee had made expenditure in the nature of
advertisement, rent and purchase of investment in subsidy to W Ltd., the aggregate of
which admittedly exceeded ` 5 crores. There was prima facie material suggesting that
the directors of the assesse company, in the aggregate, held more than 20 per cent of the
shares in voting power in W Ltd. The aggregate of expenditure incurred by the assessee
to such company exceeded ` 5 crores. Under the circumstances, the transfer pricing
procedure was to be allowed to proceed further without interjecting at this intermediary
stage. (AY. 2013-14)
D. B. Corp. Ltd v. Dy. CIT (2016) 389 ITR 162 (Guj.)(HC)
S. 92A. Meaning of Associated Enterprises.
S. 92A : Transfer pricing – Associate enterprise – When there is no connection by way 1360
of participation in management or control or capital by entities or its subsidiaries,
either directly or indirectly between two enterprises, they cannot be said to be
associated enterprises and provision of Chapter X of Act cannot be applied. [S. 92C]
Dismissing the appeal of the revenue, the Tribunal held that Since there was no
connection whatsoever by way of participation in management or control or capital by
entities or its subsidiaries, either directly or indirectly, assessee and Cummins could
not be said to be associate enterprises in order to apply provisions of Chapter X of Act.
(AY. 2008-09)
JCIT v. Suttati Enterprises (P.) Ltd. (2016) 159 ITD 348 / 181 TTJ 199 (Pune)(Trib.)
S. 92A : Transfer pricing – Associated Enterprises – Bright Line Method – Assessee 1361
entered into licence agreement with a foreign company for particular branch –
Licensor did not participate in capital and management of assessee, both companies
could not be AE of each other. [S. 92C]
Assessee Company was engaged in business of manufacture and sale of readymade
garments under licence agreement with Jockey International Inc., USA ('JII'), A company
incorporated in USA and owner of brand 'Jockey'. During the TPO proceedings, TPO
view that expenditure incurred by assessee on advertisement and marketing and
product promotion on behalf of JII was an international transaction. TPO made certain
adjustment to assessee's ALP in respect of expenditure by applying Bright Line Method.
427
Transfer pricing S. 92A
On appeal Tribunal held that; in order to constitute relationship of an AE, parameters
laid down in both sub-section (1) and (2) of s. 92A should be fulfilled. Since there was
no participation of JII in capital and management, parameters laid down in sub-section
(1) of section 92A were not fulfilled and, there was no relationship of AE between
assesse and JII. Consequently the adjustment was set aside. (AY. 2010-11)
Page Industries Ltd. v. Dy. CIT (2016) 159 ITD 680 / 181 TTJ 798 (Bang.)(Trib.)
1362 S. 92A : Transfer pricing – Associated enterprises – Distribution Partners – In absence
of participation in management or control or capital of buyer in seller, no AE relation
would exist [S. 92C]
The Assessee entered into distribution channel arrangements with certain foreign entities
(buyers). These entities had no dominant influence over prices and other conditions of
sale amounting to their de facto control over assessee. Tribunal held that since there was
no participation of entities in management or control or capital of assessee and assessee
chose to accept buyers' terms due to business compulsions and assessee's export sales
to entities was less than 5 per cent of its entire exports. Provisions of S. 92A could not
be invoked. Buyer must have dominant influence over prices and other conditions of
sale amounting to de facto control of buyer over seller. (AY. 2011-12)
Orchid Pharma Ltd. v. Dy. CIT (2016) 182 TTJ 809 / (2017) 162 ITD 303 (Chennai)(Trib.)
S. 92B. Meaning of international transaction.
1363 S. 92B : Transfer pricing – Arm's length price – Reference to Transfer Pricing Officer –
Assessee must be given an opportunity to be heard before reference to Transfer Pricing
Officer. [S. 92C]
Where the assessee raises a threshold objection that it has not entered into any
international transaction within the meaning of section 92B of the Act, it is imperative
for the AO to deal with such an objection. If the AO decides to nevertheless make a
reference, he has to record the reasons, even prima facie, why he considers it necessary
and expedient to make such a reference to the Transfer Pricing Officer. While section
92CA(1) does not itself talk about a hearing having to be given to the assessee upon
the latter raising an objection as to the jurisdiction of the AO to make a reference, such
requirement appears to be implicit in the very nature of the procedure that is expected
to be followed by the AO. The AO has to record that he considers it necessary and
expedient to make a reference. The AO has to deal with the objections raised by the
assessee. It is only thereafter that the AO can come to the conclusion, even prime facie,
that it is necessary and expedient to make the reference. This has to be done prior to
making a reference. The Central Board of Direct Taxes's Instruction No. 15 of 2015 as
replaced by the Instruction No. 3 of 2016, dated March 10, 2016 clarifies the correct
legal position. Since this is a procedural aspect and is intended to benefit the assessee
it requires to be applied with retrospective effect. (AY. 2010-11)
Indorama Synthetics (India) Ltd v. Addl. CIT (2016) 386 ITR 665 / 241 Taxman 523 / 290
CTR 176 / 143 DTR 55 (Delhi)(HC)
428
S. 92B Transfer pricing
S. 92B : Transfer pricing – International transaction – Advance converted into equity 1364
with in three months, could not be regarded as international transaction merely on
the ground that same was reflected in Form 3CEB. [S. 92C]
Allowing the appeal of the assessee, the Tribunal held that;advance of money to its AE
for expansion of its business in abroad which was converted into equity within three
months, it could not be regarded as international transaction of interest free loan merely
on ground that same was reflected in that way by assessee inadvertently in Form 3CEB.
(AY. 2008-09)
DLF Hotel Holdings Ltd. v. Dy. CIT (2016) 159 ITD 1075 / 181 TTJ 58 (Delhi)(Trib.)
S. 92B : Transfer pricing – Reimbursement of expenses – International transaction 1365
– Expenditure incurred prior to incorporation of AE, could not be classified as an
international transaction. [S. 92C]
Allowing the appeal of the assessee, the Tribunal held that assessee established AE in
UK and to give effect to efficient group structure, performed various activities both prior
to and post to incorporation of UK AE, expenditure incurred prior to incorporation of
AE, could not be classified as an international transaction. (AY. 2007-08)
New Delhi Television Ltd. v. ACIT (2016) 160 ITD 491 / 182 TTJ 46 (Delhi)(Trib.)
S. 92B : Transfer pricing – International transaction – Interest – Transaction of 1366
extending credit period to AE was to be regarded as an international transaction even
if it did not give rise to any income – Advance or loan and, therefore, both had to be
clubbed and aggregated for purpose of determination of ALP. [S. 92C]
Tribunal held that transaction was otherwise capable of generating income but because
related parties decided not to charge or pay to each other, basic character and nature of
transaction would not change. Thus transaction of extending credit period to AE was
to be regarded as an international transaction even if it did not give rise to any income.
Extending credit period for realization of sales to AE was a closely linked transaction
with transaction of providing services to AE and, therefore, could not be treated as an
individual and separate transaction of advance or loan and, therefore, both had to be
clubbed and aggregated for purpose of determination of ALP. (AY. 2007-08)
Tally Solutions (P.) Ltd. v. ACIT (2016) 160 ITD 465 (Bang.)(Trib.)
S. 92B : Transfer pricing – Interest – Amendment by Finance Act, 2012 in s. 92B, at 1367
least to extent it dealt with question of issuance of corporate guarantees, is effective
from 1-4-2012 and cannot have retrospective effect from 1-4-2002. [S. 92C]
An anti-abuse legislation such as GAAR, SAAR, does not trigger levy of taxes it only
tells what behaviour is acceptable or what is not acceptable and requires taxpayer to
organize their affair in a manner compliant with set out norms. Amendments in anti-
abuse legislations can only be prospective, amendment by Finance Act, 2012 in s. 92B,
at least to extent it dealt with question of issuance of corporate guarantees, is effective
from 1-4-2012 and cannot have retrospective effect from 1-4-2002. (AY. 2009-10)
Rusabh Diamonds v. ACIT (2016) 158 ITD 564 / 48 ITR 707 / 178 TTJ 425 / 135 DTR 121
(Mum.)(Trib.)
429
Transfer pricing S. 92B
1368 S. 92B : Transfer pricing – Corporate Guarantees – Explanation i(c) to S. 92B,
though stated to be clarificatory and stated to be effective from 01.04.2002, has to
be necessarily treated as effective from at best AY. 2013-14 as it is an "anti abuse"
provision. [S. 92C]
Allowing the appeal of assessee the Tribunal held that 2012 amendment does not add
anything or expand the scope of international transaction defined under section 92B,
assuming that it indeed does not – as learned Departmental Representative contends, this
provision has already been judicially interpreted, and the matter rests there unless it is
reversed by a higher judicial forum. However, if the 2012 amendment does increase the
scope of international transaction under section 92B, as is our considered view, there is no
way it could be implemented for the period prior to this law coming on the statute i.e., 28th
May 2012. The law is well settled. It does not expect anyone to perform an impossibility.
It is for this reason that the Explanation to Section 92B, though stated to be clarificatory
and stated to be effective from 1st April 2002, has to be necessarily treated as effective
from at best the assessment year 2013-14. In addition to this reason, in the light of
Hon’ble Delhi High Court’s guidance in the case of New Skies Satellite BV also, the
amendment in the definition of international transaction under Section 92B, to the extent
it pertains to the issuance of corporate guarantee being outside the scope of ‘international
transaction’, cannot be said to be retrospective in effect. The fact that it is stated to be
retrospective, in the light of the aforesaid guidance of Hon’ble Delhi High Court, would
not alter the situation, and it can only be treated as prospective. (AY. 2009-10)
Siro Clinpharm Private Ltd. v. DCIT (2016) 177 TTJ 609 / 134 DTR 1 (Mum.)(Trib.)
1369 S. 92B : Transfer pricing – lending money – Transaction of advancing money by
assessee to its AE located abroad for acquisition of satellite rights of Hollywood films
did not fall within purview of expression 'international transaction'. [S. 92C]
The AO has made certain adjustments on account of Arm’s length interest, and
computed on notional basis in respect of advance given to the AE by assessee. The DRP
confirmed the addition. On appeal Tribunal held that transaction of advancing money
by assessee to its AE located abroad for acquisition of satellite rights of Hollywood films
did not fall within purview of expression 'international transaction' in terms of section
92B. Accordingly the addition was deleted. (AY. 2010-11)
KSS Ltd. v. Dy. CIT (2016) 157 ITD 124 (Mum.)(Trib.)
1370 S. 92B : Transfer pricing – Corporate guarantee – Issuance of corporate guarantee
by assessee on behalf of its subsidiary company is in nature of quasi capital or
shareholder activity and not in nature of 'provision for services' and, therefore, said
transaction is to be excluded from scope of 'international transaction'. [S. 92C]
Tribunal held that issuance of corporate guarantee by assessee on behalf of its subsidiary
company is in nature of quasi capital or shareholder activity and not in nature of
'provision for services' and, therefore, said transaction is to be excluded from scope of
'international transaction'. Even otherwise, since issuance of corporate guarantee does not
have "bearing on profits, income, losses or assets", it does not constitute an international
transaction, under section 92B, in respect of which an arm's length price adjustment
can be made. (AY. 2006-07)
Micro Ink Ltd. v. Add. CIT (2016) 157 ITD 132 / 175 TTJ 8 / 129 DTR 49 (Ahd.)(Trib.)
430
S. 92C Transfer pricing
S. 92C : Computation of arm’s length price.
S. 92C : Transfer pricing – Transfer pricing provisions not applicable where exercise 1371
results in reduction of income chargeable to tax – No substantial question of law
arose. [S. 80HHC, 92(3)]
Dismissing the appeal of Revenue, the Court held that Section 92(3) provides that the
transfer pricing provisions would not apply where it resulted in reduction of income
chargeable to tax. The Department’s contention that the import of pigments was at a
price lower than the Arm's length price would increase the import price of pigments,
resulting in a reduction in income chargeable to tax was not tenable. The finding arrived
at by the Tribunal on the basis of imposition of anti-dumping duty by the customs
was not challenged. The finding of the Tribunal that no adjustment was called for
in the price paid by the assessee for import of pigments for its associated enterprises
was a finding of fact which was not shown to be perverse or arbitrary. Therefore, no
substantial question of law arose. (AY. 2003-04)
CIT v. Merck Ltd. (2016) 389 ITR 70 / 241 Taxman 535 / 290 CTR 226 / 143 DTR 86
(Bom.)(HC)
Editorial : Order in Merck Ltd. v. Deputy CIT (2014) 2 ITR (Trib.) OL 629 (Mumbai)
affirmed.
S. 92C : Transfer pricing – Arms’ length price – TNMM Method – Comparable – 1372
Software development services or even the IT enabled services – Matter was set aside.
[R. 10B]
The High Court held that the finding of TPO was that the said comparable was only
engaged in provision of software development services. Further, the Tribunal had failed
to peruse the material and merely in the absence of availability of segmental information
with respect to E-Infochip Bangalore Ltd. rendered a finding that the TPO should not
have considered the said comparable. Accordingly, the Court set aside the matter to
the ITAT to consider whether the said comparable renders only software development
services or even the IT enabled services.
PCIT v. Allscripts (India) (P) Ltd. (2016) 140 DTR 188 / 288 CTR 675 / 241 Taxman 545
(Guj.)(HC)
S. 92C : Transfer pricing – TNMM – Adjustment would be only in relation to transactions 1373
with Associate enterprises and not on entire turn over of assessee at entry level.
Dismissing the appeal of the revenue the Court held that Adjustment would be only in
relation to transactions with associate enterprises and not on entire turnover of assessee
at entry level. Followed CIT v. Thyssen Krupp Industries (I) Pvt. Ltd. (2016) 381 ITR 413
(Bom.)(HC) and CIT v. Tara Jewels Exports Pvt. Ltd. (2016) 381 ITR 404 (Bom.)(HC) (AY.
2008-09)
CIT v. Lanxess India (P.) Ltd. (2016) 242 Taxman 472 (Bom.)(HC)
S. 92C : Transfer pricing – Arms’ length price – Assessee could not be characterized as 1374
a distributor but was an Agent – Possible view, no question of law. [S. 260A]
Dismissing the appeal of the Revenue, the Court held that CIT(A) on analysis of the
agreements as well as on analysis of the activities performed came to the conclusion
431
Transfer pricing S. 92C
that the assessee was a commission agent and not a distributor. ITAT confirmed the said
finding, no material was brought on record to show that the finding of fact of the lower
authorities was perverse. Accordingly, it held that the view taken by the ITAT was a
possible view. (AY. 2004-05)
CIT v. Haworth (India) (P.) Ltd. (2016) 241 Taxman 100 (Bom.)(HC)
1375 S. 92C : Transfer pricing – Arm's length price – Reference to Transfer Pricing Officer
– Sufficient reasons in satisfaction recorded by AO – Reference to Transfer Pricing
Officer was held to be proper. [S. 92A, 92B]
An assessee is not entitled as a matter of right to invoke the writ jurisdiction at the
stage of reference by the AO to the Transfer Pricing Officer. Grievances can be raised
in a challenge to the draft assessment order before the Dispute Resolution Panel or the
final assessment order before the Commissioner (Appeals).
The decision as to whether or not a transaction is an international transaction has far
reaching consequences upon the assessee. It is only fair then that the assessee is given
an opportunity of being heard on the question whether or not a transaction entered into
by it is an international transaction. The requirement of the AO to furnish the reasons
of satisfaction for a reference to the Transfer Pricing Officer of the arm's length price is,
inter alia, to enable an assessee firstly to meet the case and represent against it on the
ground that there is no international transaction and in the event of his objections being
overruled, to get an opportunity of challenging before the Dispute Resolution Panel or
the appellate authorities. (AY. 2011-12 to 2014-15)
Shri Vishnu Eatables (India) Ltd. v. Dy. CIT (2016) 389 ITR 385 / 243 Taxman 446 / 289
CTR 337 (P&H)(HC)
1376 S. 92C : Transfer pricing – Arm’s length price – Not open to Transfer Pricing Officer
to subject only one element to entirely different method.
Allowing the appeal the Court held that having accepted the transactional net margin
method as the most appropriate method, it was not open to the Transfer Pricing Officer
to subject only one element, i.e., payment of technical assistance fee, to an entirely
different method. The adoption of a method as the most appropriate one assured the
applicability of one standard or criteria to judge an international transaction. Each
method was a package in itself, as it were, containing the necessary elements that
were to be used as filters to judge the soundness of the international transaction in an
arm's length price fixing exercise. If this were to be disturbed, the end result would be
distorted and within one arm's length price determination for a year, two or even five
methods could be adopted. Therefore, the transactional net margin method had to be
applied by the Transfer Pricing Officer in respect of the technical fee payment too. (AY.
2008-09)
Magneti Marelli Power Train India P. Ltd. v. Dy. CIT (2016) 389 ITR 469 / 290 CTR 60 /
75 taxmann.com 213 / 142 DTR 329 (Delhi)(HC)
432
S. 92C Transfer pricing
S. 92C : Transfer pricing – Adjustment has to be done only in respect of International 1377
Transactions with Associated Enterprises and not an entity level – Revenue should
take consistent view. [S. 92]
Dismissing the appeal of revenue the Court held that the fact that the assessee has
chosen entity level PLI to benchmark the AE transactions and that it has not maintained
segmental accounts is irrelevant. If segmental accounts are not available, proportionate
adjustments have to be made only in respect of the international transactions with
Associated Enterprises Transfer Pricing adjustment has to be done only in respect of
International Transactions with Associated Enterprises. The fact that the assessee has
chosen entity level PLI to benchmark the AE transactions and that it has not maintained
segmental accounts is irrelevant. If segmental accounts are not available, proportionate
adjustments have to be made only in respect of the international transactions with
Associated Enterprises. Court also noted that during the course of all the above appeals,
the fact that two appeals had been admitted on the above issue were not pointed out.
Court also observed that the Income Tax Department within the jurisdiction of this
Court must adopt a consistent view on issues of law. In this case, we find that the
Revenue urges the absence of segmental accounts would warrant entity wise adjustment,
when the Revenue had itself in Pedro Araldite Pvt. Ltd. did not canvas the point, as
even according to it the issue stood covered by the earlier orders of this Court in
favour of the assessee. The Revenue must apply the law equally to all and cannot take
inconsistent position in law (de hors the facts) to apply different standards to different
assessee. The administration of the tax laws should not degenerate into an arbitrary and
inconsistent application of law dependent upon the assessee concerned. (AY. 2006-07)
CIT v. Alstom Project India Limited (2017) 394 ITR 141 (Bom.)(HC)
S. 92C : Transfer pricing – Arms’ length price – Mere availability of proportion of 1378
turnover allocable for software product sales per se cannot lead to an assumption that
segmental data for relevant facts is available to determine profitability of concerned
comparable.
Dismissing the appeal of revenue, the Court held that nature of transaction and
appropriate filter determines elements that are to be considered in TNMM and therefore,
costs, sales and assets employed wherever relevant are to be applied; mere availability
of proportion of turnover allocable for software product sales per se cannot lead to an
assumption that segmental data for relevant facts is available to determine profitability
of concerned comparable. (AY. 2011-12)
PCIT v. Saxo India (P.) Ltd. (2016) 243 Taxman 411 (Delhi)(HC)
S. 92C : Transfer pricing – Profit level indicator – Berry ratio – Determination of arm's 1379
length price on basis of rate of commission reported by assessee with non-associated
enterprises without examining similarity between two transactions was held to be
not proper – Tribunal to conduct further in-depth inquiry as to relevant uncontrolled
transactions before determination of arm's length price, matter remanded.
Allowing the appeal of revenue, the Court held that although the Transfer Pricing
Officer found fault in the use of the Berry ratio, he did not proceed to select the most
appropriate method for computation of the arm's length price. The Transfer Pricing
433
Transfer pricing S. 92C
Officer imputed the character of the trading transactions to the indenting transactions
entered into by the assessee with its associated enterprises. Thus, he compared the
profit margin realised by the associated enterprises from such transactions with the
profit margin realised by the associated enterprises from a comparable uncontrolled
transaction. The approach was not right, since it was not permissible for the Transfer
Pricing Officer to recharacterise the tested transaction. The indenting transactions
reported by the assessee were plainly in the nature of facilitating trade where the
assessee was required to do nothing more than to follow up the customers for
facilitation of the transaction. The assessee was not required to raise invoices for
sale and purchase and its financial commitment and risk were inconsiderable. The
Tribunal erred in proceeding to determine the arm's length price on the basis of the
rate of commission reported by the assessee in respect of indenting transactions with
non-associated enterprises, without further examination as to the similarity between
the two transactions. The Tribunal effectively used the comparable uncontrolled price
method for imputing the arm's length price of the assessee's indenting transaction with
the associated enterprises. This might well be the most appropriate method to be used
for determining the arm's length price. It was necessary for the Tribunal to conduct
a further in-depth inquiry as to the relevant uncontrolled transactions. The Tribunal
did not conduct any such enquiry and this methodology was used by the Tribunal at
a stage at which it might not be feasible. The use of the Berry ratio as a profit level
indicator resulted in indicating less than fair arm's length prices in tax jurisdiction
where the assessees had a lower bargaining power. Therefore, the Berry ratio could not
be used as a profit level indicator in cases of assessees which were using intangibles.
However, there was no cogent material for the Transfer Pricing Officer to hold that the
assessee had developed supply chain and human resources intangibles. In any event,
there was no material to conclude that the costs of such intangibles were not captured
in the operating expenses. The reason stated by the Transfer Pricing Officer, that the
rate of commission paid to the assessee was based on the value of the goods, would
be a valid reason to reject the use of Berry ratio because the Berry ratio could only be
applied where the value of the goods was not directly linked to the quantum of profits
and the profits were mainly dependent on expenses incurred. The fundamental premise
being that the operating expenses adequately represented all functions performed and
risks undertaken. For this reason the Berry ratio was effectively applied only in cases of
stripped down distributors; that is, distributors that have no financial exposure and risk
in respect of the goods distributed by them. The assessee's business was comprised of
two segments, the trading segment and the indenting segment and the functional risk
and the reward in the two segments were different. In the trading segment, the assessee
earned a higher profit margin while in the indenting segment its profit margins were
lower. The use of the Berry ratio would give unreliable results if the product mix of the
comparables was different from the product mix of the assessee. This would make the
task of finding a set of comparables fairly difficult. The matters were remanded to the
Tribunal for decision afresh. (AY. 2007-08 to 2010-11)
Sumitomo Corporation India P. Ltd. v. CIT (2016) 387 ITR 611 / 242 Taxman 260 / 288
CTR 1 (Delhi)(HC)
434
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm's length price – Guarantee was not approved by RBI, 1380
adjustment was not valid in the absence of an international transaction.
The TPO made TP adjustment in respect of guarantee given on behalf of AE in form of
pledging of shares. However, the said transaction was not approved by RBI, resulting in
non-existence of any guarantee given by Appellant. Dismissing the appeal of revenue,
the Court held that; no TP adjustment could be made in absence of an international
transaction.
PCIT v. Adani Enterprises Ltd. (2016) 241 Taxman 542 / (2017) 152 DTR 102 (Guj.)(HC)
Editorial : SLP is granted to the revenue, PCIT v. Adani Enterprises Ltd. (2017) 247
Taxman 316 (SC)
S. 92C : Transfer pricing – Arm's length Price – ALP could not be determined on basis 1381
of Indian published price under new Exchange Control policy – Claim of royalty at
56% in relevant year was held to be justified. [S. 37(1) R. 10(B)(1)(e)]
Question of law in HC was whether the Tribunal was justified in deleting the
addition made by the AO on the basis of adjustment made by the TPO on account of
International transactions of payment of royalty and not confirming the action of the AO
in restricting the payment of royalty to 30% of the actual sales as against 5.6% claimed
by the assessee? Dismissing the Revenue’s appeal, HC held that once the liberalized
policy did away with the requirement of computing the royalty with reference to the list
price (Indian Published Price) the assessee was justified in enhancing the other royalty
payment to AE @ 56% of actual sales revenue from 30% of India Published price and
no adjustment in ALP was called for. (AY. 2004-05)
CIT v. Oracle India (P) Ltd. (2016) 386 ITR 1 / 241 Taxman 253 / 288 CTR 118 / 139 DTR
186 (Delhi)(HC)
S. 92C : Transfer pricing – Arm's length price – Tribunal set aside the matter – Order 1382
set aside was held to be justified.
Dismissing the appeal of revenue, the Court held that ITAT remanded the matter to
compute ALP, after holding that entire payment made by assessee towards 'management
services' would be taken as aggregate payment for all services rendered by AE.
Department contended that the set-aside should be general and the AO should be given
opportunity to find out the quantum of service rendered vis-à-vis the expenses incurred.
Court held that; the ITAT had given a finding after considering the relevant material
hence no interference required. (AY. 2009-10)
CIT v. Fosroc Chemicals India (P.) Ltd. (2016) 240 Taxman 731 / 290 CTR 221 / 143 DTR
153 (Karn.)(HC)
S. 92C : Transfer pricing – Arm's length price – Companies which were primarily 1383
engaged in providing services as merchant banker, cannot be compared to a company
providing investment advisory services.
Dismissing the appeal of revenue the Court held that a company essentially engaged in
activities with regard to telecom and providing call center services cannot be compared
to a company providing financial services. Companies which were primarily engaged
435
Transfer pricing S. 92C
in providing services as merchant banker, cannot be compared to a company providing
investment advisory services. (AY. 2007-08)
CIT v. Goldman Sachs (India) Securities (P.) Ltd. (2016) 240 Taxman 736 / 290 CTR 236
/ 143 DTR 158 (Bom.)(HC)
1384 S. 92C : Transfer pricing – Entire exercise of transfer of business by the assessee
to another domestic company was carried out independently on its own terms and
conditions do hors the global agreement between their respective holding companies
– No question of law arises. [S. 92B, 260A]
Tribunal interpreting S. 92B(2) of the Act concluded that transaction would not be
covered by the definition of International transaction. On revenue’s appeal in HC, HC
held that revenue having not disputed the findings of Tribunal that entire exercise
of transfer of business by the assessee to another domestic company was carried out
independently on its own terms and conditions do hors the global agreement between
their respective holding companies and that the ALP of the said transfer as determined
by the assessee is reasonable and the Tribunal having refused to restore the issue of
determination of ALP to TPO, the question were academic and no substantial question
of law arose. (AY. 2008-09)
CIT v. Kodak India (P) Ltd. (2016) 139 DTR 46 / 288 CTR 46 (Bom.)(HC)
1385 S. 92C : Transfer pricing – Arm’s length price – Cash profits to operating cost as PLI is
an appropriate ratio while applying TNMM, particularly when the ratio was adopted
by TPO in subsequent year.
Dismissing the appeal of revenue the Court held that adopting ratio of cash profits to
operating cost as PLI is an appropriate ratio under TNMM; particularly when the same
ratio was adopted by TPO in subsequent years. (AY. 2005-06)
CIT v. Reuters India P Ltd. (2016) 239 Taxman 428 / 288 CTR 714 / 140 DTR 436 (Bom.)
(HC)
1386 S. 92C : Transfer pricing – Finding of Tribunal regarding comparable cases based on
material on record – Finding of fact – Tribunal's order is justified.
Dismissing the appeal of revenue, the Court held that the finding of Tribunal regarding
comparable cases based on material on record. Finding of fact, hence, Tribunal's order
is justified. Followed CIT v. Thyssen Krupp Industries India P. Ltd. (2016) 381 ITR 413
(Bom)(HC). (AY. 2008-09)
CIT v. Thyssen Krupp Industries India P. Ltd. (2016) 385 ITR 612 / 239 Taxman 46 (Bom.)
(HC)
1387 S. 92C : Transfer pricing – As per CBDT's Instruction No. 3/2016 dated 10.03.2016, the
AO is required to give an opportunity to the assessee to show cause why the reference
should not be made to the TPO and thereafter pass a speaking order while making a
reference to the TPO. The failure to do so renders the reference void – Matter was set
aside to pass a speaking order. [S. 92E]
Allowing the appeal the Court held that (i) No speaking order has been passed by the
Assessing Officer while making a reference to the TPO, which is a requirement as per
436
S. 92C Transfer pricing
the Instruction No. 3/2016 dated 10th March, 2016, issued by the CBDT. Before making
a reference to the TPO, the assessee is required to be given an opportunity to show
cause why the reference may not be made to the TPO and thereafter a speaking order
is required to be passed by the Assessing Officer while making a reference to the TPO.
(ii) Under the circumstances, on the aforesaid ground alone, the impugned reference
made by the Assessing Officer to the TPO deserves to be quashed and set aside and
the matter is required to be remanded to the Assessing Officer to pass a speaking order
while making a reference to the TPO.
Alpha Nipon Innovatives Ltd. v. DCIT (2017) 145 DTR 206 / 291 CTR 309 (Guj.)(HC)
S. 92C : Transfer pricing – Arm's length price – Selection of comparables – An 1388
investment advisor could not be compared to a merchant banker
The assessee provides private equity investment advisory services to its AE at cost plus
12.5%. The TPO selected 8 comparables and on application of Transaction Net Margin
Method (TNMM) arrived at an arithmetic mean of 39.85% as against assessee operating
profit of 13.12%. Dispute Resolution Panel (DRP) confirmed the TPO’s order.
On appeal, the Tribunal rejected 7 comparables of the TPO following the decision of
Carlyle India Advisors (P.) Ltd v. ACIT (2012) 53 SOT 267)(Mum.)(Trib.), where it was held
that merchant bankers are not comparable to the assessee and used only one comparable
in respect of investment advisory functions of the assessee (i.e. IDC (India) Ltd).
Aggrieved by the Tribunal’s order the Revenue was in appeal before the High Court.
The High Court held that on application of Function, Assets and Risk (FAR) analysis
the Assessee Company’s functions are similar to Carlyle India Advisors (P.) Ltd. viz.
advising its AE on the possible companies it could invest. As far as assets are concerned
both companies have similar expertise available for rendering advice to the AEs, and as
far as risk is concerned the consideration received by it, is on cost plus basis similar
to that of Carlyle India Advisors (P) Ltd. The High Court also noted that the Revenue
was in appeal before the High Court against the Tribunal order in case of CIT v. Carlyle
India Advisors (P) Ltd. which was dismissed by the High Court (2013) 357 ITR 584 (Bom.)
(HC), following the same order of the co-ordinate Bench, the High Court dismissed the
Revenue’s appeal and held that the assessee company, being an investment advisor is
not comparable to a merchant banker. (AY. 2006-07)
CIT v. General Atlantic (P.) Ltd. (2016) 384 ITR 271 / 238 Taxman 535 / 136 DTR 413 /
287 CTR 97 (Bom.)(HC)
S. 92C : Transfer pricing – Adjustment arising out of Arm’s length price (ALP) has 1389
to be restricted to only international transactions with associated enterprise instead
of entire turnover – Chapter X does not apply to transactions with non-associated
enterprises.
The assessee had transactions with both associated as well as non-associated
enterprises. It was the contention of the Revenue that the adjustment with regard to
the turnover is to be made to both the transactions with associated as well as non-
associated enterprises, which was not accepted by the Tribunal. It was held by the
High Court that the provisions of Chapter X apply only in respect of transactions
with associated enterprises and while determining ALP in respect of transactions with
437
Transfer pricing S. 92C
non-associated enterprises, is against the mandate prescribed in section 92 of the Act.
(AY. 2007-08)
CIT v. Ratilal Becharlal & Sons (2016) 237 Taxman 71 / 138 DTR 316 / 288 CTR 31
(Bom.)(HC)
1390 S. 92C : Transfer pricing – Arm's length price – Adjustment only in respect of
transactions with its associated enterprises. [S. 92A, 92B]
Transfer pricing Officer applied Arm’s length price to sales to associated enterprises and
as well as to other enterprises. The Tribunal directed the Assessing Officer to compute
the Arm’s length price in respect of the international transactions entered in to between
the assessee with its associated enterprises alone. On appeal by revenue; dismissing the
appeal the Court held that the adjustment which was to be done to arrive at arm’s length
price was only in respect of the transactions with its associated enterprises. (AY. 2006-07)
CIT v. Tara Jewels Exports P. Ltd. (2016) 381 ITR 404 / 129 DTR 410 / 282 CTR 525 (Bom.)(HC)
1391 S. 92C : Transfer pricing – Arm's length price – Adjustment only in respect of
transactions with its associated enterprises. [S. 92A, 92B]
Dismissing the appeal of revenue the Court held that Tribunal was justified in restricting
adjustment only on international transactions. (AY. 2008-09)
CIT v. Gold Star Jewellery Design (P) Ltd. (2016) 388 ITR 510 / 238 Taxman 5 / 138 DTR
313 / 288 CTR 28 (Bom.)(HC)
1392 S. 92C : Transfer pricing – Arm's length price – Determination only with respect to
assessee's international transactions with associated enterprises – Not in respect of
transactions entered into by assessee with independent unrelated third parties.
Held, that in terms of Chapter X of the redetermination of the consideration was
to be done only with regard to income arising from international transactions on
determination of arm's length price. The adjustment which was mandated was only in
respect of international transaction and not transactions entered into by the assessee
with independent unrelated third parties. There was no issue of avoidance of tax
requiring adjustment in the valuation in respect of transactions entered into with
independent third parties. The adjustment as proposed by the Department if allowed
would result in increasing the profit in respect of transactions entered into with
enterprises other than associated enterprises and thus the adjustment was beyond the
scope and ambit of Chapter X. (AY. 2007-08)
CIT v. Thyssen Krupp Industries India P. Ltd. (2016) 381 ITR 413 / 129 DTR 412 / 70
taxmann.com 329 (Bom.)(HC)
1393 S. 92C : Transfer pricing – Arm's length price – Adjustment to be made only for
transactions attributed to international transactions and not to entire expenses.
Held, that the adjustment made by the Assessing Officer was related to the entire expenses
and not just the international transactions alone. Since the international transactions only
constituted 23.38%, a transfer pricing adjustment proportionate to that extent alone could
be made in respect of such international transactions. (AY. 2004-05, 2005-06)
CIT v. Keihin Panalfa Ltd. (2016) 381 ITR 407 / 286 CTR 107 (Delhi)(HC)
Editorial : Order in ACIT v. Keihin Panalfa Ltd. (2015) 4 ITR (Trib.) OL 492 (Delhi) affirmed.
438
S. 92C Transfer pricing
S. 92C : Transfer pricing – Adjustment arising out of Arm’s Length Price is to be 1394
restricted to only international transactions. [S. 92B]
During the year under consideration the assessee had international transactions with
Associated Enterprises over and above transactions with independent third parties. The
Tribunal by its impugned order negate the contention of the Revenue that adjustment
arising out of Arm’s length price has to be made to the entire turnover of the Assessee,
as same is contrary to the clear mandate for section 92 of the Act, which permits
adjustment only of income arising from International Transactions having regard to its
Arm’s length price.
High Court held that transactions with parties other than the International Transactions
with associated enterprise or in respect of specified domestic transactions are not within
the ambit of Chapter X of the Act. Similar view was taken in Tara Jewels Exports Pvt.
Ltd. (ITA No. 1814 of 2013, dtd. 5 October 2013) and Keihin Panalfa Ltd. (ITA No. 11 of
2015, dtd 9 September 2015). Revenue’s appeal was dismissed. (AY. 2007-08)
CIT v. Ratilal Becharlal & Sons (2016) 237 Taxman 71 (Bom.)(HC)
Editorial : Decision in CIT v. Tara Jewels Exports Pvt Ltd (2016) 381 ITR 404 (Bom.)(HC)
is accepted by the revenue.
S. 92C : Transfer pricing – Arm’s length price – Capital employed under TNMM 1395
method, without segregation of capital employed in respect of AE and non-AE
transactions, action of TPO was held to be not justified.
Assessee has applied base of total cost under TNMM method to determine PLI. TPO has
applied base capital employed. Tribunal applied base of total cost on ground that though
capital employed could be base in terms of rule 10B(1)(e)(i), return on capital employed
(‘RoCE’) obtained in absence of there being any segregation of capital employed in
respect of AE and non-AE transactions, would not give an appropriate result. On
appeal by revenue, dismissing the appeal the Court held that revenue could not show
application of RoCE method in assessee’s industry. On facts the view taken by Tribunal
being a reasonable and possible view order of Tribunal was up held. (AY. 2008-09)
CIT v. Gold Star Jewellery Design (P) Ltd. (2016) 388 ITR 510 / 238 Taxman 5 / 138 DTR
313 (Bom.)(HC)
S. 92C : Transfer pricing – Arm's length price – Several transactions between two 1396
or more associated enterprises can form single composite transaction – Burden to
prove – Relevance of whether transaction resulting in an increase in assessee's profit
– Whether business decision commercially sound or not – Not relevant.
The acquisition of various items or components in the assessee's venture could indeed
be telescoped into and form a single transaction. An assessee may enter into one
composite transaction with its associated enterprise involving the provision of various
services or the sale of various goods. If it is established that each transaction was so
inextricably linked to the other that the one could not survive without the other, it
could be said that it formed a part of a transaction and that it was an international
transaction. This would normally constitute one transaction.
Held, that the absence of profit may at the highest be a factor while considering whether
or not the transactions were genuine. That would depend upon the facts of each case.
439
Transfer pricing S. 92C
However, mere absence of profit would not be a ground for holding that the transactions
were not genuine and ought not to be taken into consideration in the assessment
proceedings.
(ii) That absent any law, an assessee could not be compelled to avail of the services
available in India. It was for the assessee to determine whose services it desired to
avail of and whose goods it intended to purchase. It was certainly understandable if
the assessee preferred to deal with its group entities/associated enterprises. So long as
there was no bar in law to the assessee availing of the services of a particular party, the
authorities under the Act must determine whether the consideration paid therefor was
at an arm's length price or not. [Matter remanded to the Tribunal for decision afresh.]
(AY. 2007-08)
CIT v. Knorr Bremse India P. Ltd. (2015) 128 DTR 25 / (2016) 380 ITR 307 / 236 Taxman
318 / 282 CTR 44 (P&H)(HC)
1397 S. 92C : Transfer pricing – Companies with large turnover like Infosys & Wipro are
not comparable to companies with smaller turnover and should be excluded from the
list of comparables.
(a) For transfer pricing purposes, the Tribunal did not accept three companies as
comparable by stating as follows:
(i) HCL Comnet Systems & Services Ltd.: We find force in the submission of
the ld. AR that this company cannot be a comparable as the turnover of this
company is 260.18 crores while in the case of the Assessee, the turnover
is around ` 11 crores only. While making the selection of comparables, the
turnover filter, in our opinion, has to be the basis for selection. A company
having turnover of ` 11 crores cannot be compared with a company which
is having turnover of ` 260 crores which is more than 23 times the turnover
of the assessee. This company cannot be regarded to be in equal size to the
asseessee. We, accordingly, direct the AO to exclude this company out of the
comparables.
(ii) Infosys BPO Ltd.: In this case also we noted the turnover in respect of this
Company is ` 649.56 crores while the turnover of the asseessee company
is around ` 11 crores which is much more than 65 times of the assessee’s
turnover. We, therefore, do not find any illegality or infirmity in the order of
CIT(A) in excluding this Company out of the comparables.
(iii) Wipro Ltd.: The turnover reported in the case of Wipro Ltd. Is ` 939.78
crores while in the case of the asseessee the turnover is around ` 11 crores.
Therefore, on the basis of the turnover filter itself this company cannot be
regarded to be comparable to the asseessee.
(b) The said findings of the Tribunal in respect of the said three Companies are on
the basis of appreciation of evidence on record. We find no infirmity in the said
findings of the Tribunal on that count. In fact, the Tribunal has endorsed the views
of the CIT Appeals whilst coming to such conclusions. The concurrent findings of
facts arrived at by the Authorities below, cannot be reappreciated by this Court in
the present Appeal as held by the Apex Court in the Judgment reported in 2011(1)
SCC 673 in the case of Vijay Kumar Talwar v. CIT.
440
S. 92C Transfer pricing
(c) The said Companies are no doubt large and distinct companies where the area
of development of subject services are different and as such the profit earned
therefrom cannot be a bench-marked or equated with the assessee. The learned
Counsel has rightly relied upon the Judgment of the Delhi High Court reported
in (2013) 36 taxmann.com 289 (Delhi) in the case of Commissioner of Income-
tax v. Agnity India Technologies (P.) Ltd. Learned Counsel has also brought to
our notice the Order of the Income Tax Appellate Tribunal whilst examining
similar circumstances for the assessment year 2005-06. He has taken us through
the findings therein to point out that the conclusions arrived at are based on
a comparison that the condition in any uncontrolled transaction between an
independent enterprises for the purpose of such comparison, economically relevant
characteristics must be sufficiently comparable if two parties are to be placed in
a similar situation. Learned Counsel as such submitted that it is not open for the
appellant to now contend a different criteria to ascertain the comparability. In fact
the Tribunal whilst passing the impugned Order has considered the said principles
whilst coming to the conclusion that the said three Companies cannot be treated
to be comparable to the assessee Company. The turnover is obviously a relevant
factor to consider the comparability. (AY. 2007-08)
CIT v. Pentair Water India Pvt. Ltd. (2016) 381 ITR 216 / 282 CTR 160 / 69 taxman.com
180 (Bom.)(HC)
S. 92C : Transfer pricing – Even if TNMM is found acceptable as regards all other 1398
transactions, it is open to the TPO to segregate a portion and subject it to an entirely
different method i.e., CUP if the assessee does not provide satisfactory replies to his
queries.
The High Court had to consider the question “Whether the Transactional Net Margin
Method adopted by the assessee is the most appropriate method envisaged under Section
92C(2) of the Income-tax Act, 1961 read with Rule 10C of the Income-tax Rules, 1962
and whether the Income Tax Appellate Tribunal had erred in directing the Assessing
Officer to apply Comparable Uncontrolled Price Method?” HELD by the High Court:
(i) The narrow controversy which this Court is called upon to decide is as to whether
the adoption of the CUP method by the revenue authorities was justified. What
the assessee urges essentially is that whereas the TP report furnished by it applied
the TNMM method which was found acceptable as regards all other transactions/
business activities, it was not open to the revenue to segregate a portion and
subject it to an entirely different method, i.e. CUP. The assessee relies upon paras
3.6, 3.9 and 3.10 of the OECD guidelines in support of its contentions. It also relies
upon certain rulings of different Benches of the ITAT to urge that such sequential
segregation and setting portion of the TP exercise – so to say, to break with the
integrity is unjustified and unsupported by the text of the law, i.e. Section 92C
of the Income-tax Act. The assessee also relies upon Rule 10E of the Income-tax
Rules, which guide the proper approach of the TPO in such matters.
(ii) The cumulative effect of various provisions of the Income-tax Act, notably
Sections 92, 92C, 92D and 92E read together with Rule 10B and 10D is the
obligation to discern, if in a given set of circumstances, the assessee has disclosed
441
Transfer pricing S. 92C
international transactions, as well as an ALP. The ultimate purpose of this exercise-
the primary onus of which is upon the assessee, is to ensure that no amount
which is otherwise to be designated or treated as income, under law, escapes
assessment. The assessee’s TP report is to be accurate and based on materials; its
explanations for the queries raised by the TPO, convincing and reasonable. The
underlying emphasis of the law (Section 92-C) is that the method appropriate to
the transaction, amongst the four specified ones, is to be applied.
(iii) The factual discussion in this case clearly reveals that the assessee chose to import
components not from the manufacturer (which was an AE) but an intermediary.
Normally, this would have been a commercial decision, which revenue authorities
would not question. However, interestingly, the vendor of the components (which
constituted over 85% of the raw materials imported and about 38% of the total
raw materials sourced) was also connected with both the assessee and the
manufacturer. If these realities emerged during the TP exercise, compelling the
TPO to closely scrutinize the value of such imports and seek further details from
the assessee, to justify its decision, the onus was clearly on the latter to afford
a convincing and reasonable explanation. Such of the explanations that were
forthcoming, were apparently unconvincing. What the assessee banks upon in its
appeal to this Court is the unbending and inflexible acceptance of its TP exercise;
according to its logic, a “bundled” or aggregated series or chain of transactions
used in the TP report should remain undisturbed. Now, there can be no dispute
that the AO would normally accept the figures given, if they do not show features
that call for his interference. However, his job also extends to critically evaluating
materials and in cases which do require scrutiny, go ahead and do so. In the
process, at least in this case, the unusual features which remained unexplained
by the assessee, influenced the TPO and the AO to resort to transfer pricing
adjustment and determine ALP by adopting the CUP method for the procurements
from Sumitomo Japan. The “second test” spoken of in Sony Ericsson (supra) i.e
“the form and substance of the transaction were the same but the arrangements
made in relation to a transaction, when viewed in their totality, differ from those
which would have been adopted by an independent enterprise behaving in a
commercially rational manner.” was in effect adopted. This Court finds no infirmity
in this approach. As a result, the question framed is answered against the assessee
and in favour of the revenue. (AY. 2002-03, 2003-04)
Denso India Ltd. v. CIT (2016) 388 ITR 324 / 133 DTR 33 / 240 Taxman 713 / 287 CTR
597 (Delhi)(HC)
Editorial : SLP of assessee is dismissed Denso India (P) Ltd. (2017) 246 Taxman 375 (SC)
1399 S. 92C : Transfer pricing – CUP method can be applied by a comparing a pricing
formulae, rather than the pricing quantification in amount. Rule 10AB inserted w.e.f.
01.04.2012 is beneficial in nature and so retrospective w.e.f. 01.04.2002
Dismissing the appeal of revenue the Court held that CUP method can be applied
by a comparing a pricing formulae, rather than the pricing quantification in amount.
Rule 10AB inserted w.e.f. 01.04.2012 is beneficial in nature and so retrospective w.e.f.
01.04.2002. (AY. 2007-08) (ITA No. 374/2015, dt. 10.12.2015)
Pr.CIT v. Global Forwarding India Pvt. Ltd. (Delhi)(HC); www.itatonline.org
442
S. 92C Transfer pricing
S. 92C : Transfer pricing – Advertising marketing and Sales promotion (AMP) 1400
Expenditure – Onus is on revenue. [S. 92B, 92CA]
Dismissing the appeal of revenue the Court held that the onus is on the Revenue to
demonstrate by tangible material that there is an international transaction involving
AMP expenses between the Indian Co and the AE. In the absence of that first step, the
question of determining the ALP of such a transaction does not arise. In the absence
of a machinery provision it is hazardous for any TPO to proceed to determine the ALP
of such a transaction since Bright Line Test has been negatived as a valid method of
determining the existence of an international transaction and thereafter its ALP. (AY.
2008-09)
CIT v. Whirlpool of India Ltd. (2016) 381 ITR 154 / 237 Taxman 49 / 283 CTR 273 / 129
DTR 169 (Delhi)(HC)
S. 92C : Transfer pricing – Arm's length price – Advertising, marketing and promotion 1401
expenses – Bright line method not legally permissible method – Need for detailed
examination – Matter remanded.
Adoption of the Bright Line test for determining the existence of an international
transaction involving the advertising, marketing and promotion expenses was no longer
legally permissible. Therefore, there would be a need for a detailed examination of the
operating agreement between the assessee, associated enterprise and the franchisees
to ascertain if any part of the advertising, marketing and promotion expenses was
for the purpose of creating marketing intangibles for the associated enterprise of the
assessee. It was only after an international transaction involving the assessee and its
associated enterprise in relation to the advertising, marketing and promotion expenses
was shown to exist, that the further question of determining the arm's length price of
such international transaction would arise. (AY. 2009-10)
ITO v. Yum Restaurants (I) P. Ltd. (2016) 380 ITR 637 / 131 DTR 23 / 237 Taxman 652 /
283 CTR 129 (Delhi)(HC)
S. 92C : Transfer pricing – Amount in dispute exceeding five crores of rupees – Matter 1402
has to be referred to Transfer Pricing Officer [S. 92CA, 144C]
The assessee had entered into international transactions. The international transactions
were certified to be at Arm's length, based on the transactional net margin method as
defined. The transfer pricing report and the transfer pricing documentation had been
filed with the Assessing Officer during the AY. 2012-13. The Assessing Officer proceeded
to pass an assessment order without referring the matter to the Transfer Pricing Officer.
On a writ petition to quash the order. Held, that since the provisions of the Act make
it very clear that u/s. 92CA the only option was to place the matter before the Transfer
Pricing Officer, and that option had not been followed, the assessment order was not
valid and had to be set aside. (AY. 2012-13)
Carrier Race Technologies P. Ltd. v. ITO (2016) 380 ITR 483 / 64 taxmann.com 252 (Mad.)
(HC)
443
Transfer pricing S. 92C
1403 S. 92C : Transfer pricing – Arm's length price – Adjustments – AMP expenses – Since
the revenue sharing model of the assessee was duly support by relevant documents
the TPOs alteration to the sharing ratio was to be set aside.
During relevant year, assessee entered into international transactions with its AE. In
terms of agreement, assessee retained 75 per cent of revenue and paid 25 per cent of
revenue to its subsidiaries for marketing and administrative support services provided
by them. The TPO fixed remuneration sharing model of 15 per cent in cases where
customers entered into contracts directly with assessee and thus made certain addition
to assessee's ALP. The CIT(A) and the Tribunal set aside said addition noting that TPO
in principle had accepted remuneration model of 25 per cent revenue sharing and
same had been substantiated and justified by documents submitted before him. Further
the department had not doubted the genuineness of the documents relied upon by the
assessee. Accordingly the High Court dismissed the department’s appeal. (AY. 2006-07)
CIT v. ITC, Infotech India Ltd. (2016) 384 ITR 380 / 237 Taxman 476 (Cal.)(HC)
1404 S. 92C : Transfer pricing – Arm's length price – Selection of comparables – Selecting
a comparable in a subsequent assessment year for determining ALP, would not ipso
facto make it a comparable to determine ALP in subject assessment year
For the purpose of determination of arm's length price, the assessee had, before the
CIT(A) forwarded three additional comparables. The assessee sought their inclusion
as they had been regarded as comparable in subsequent assessment years. The
CIT(A) sought a remand report from the TPO to determine whether these additional
comparables submitted by the assessee had been used as comparables in the subsequent
years. In the remand report, the TPO confirmed that the comparables had been used
in the subsequent years, and accordingly the CIT(A) considered the comprables in
determining the ALP. On appeal by the department, the Tribunal held that inclusion in
the subsequent years would not ipso facto lead to the same comarables being applied
in the subject assessment year. The Tribunal rejected the comparables on merits. The
High Court upheld the order of the Tribunal in holding that the comparables would not
ipso facto apply for determining ALP of the subsequent year. The High Court also held
that since neither the TPO nor the CIT(A) has examined the merits of including the
comparables, it would be appropriate to restore the matter to the TPO to consider the
comparables. (AY. 2003-04)
Advance Power Display Systems Ltd. v. CIT (2016) 382 ITR 607 / 237 Taxman 16 / 290
CTR 330 (Bom.)(HC)
1405 S. 92C : Transfer pricing – Arm's length price – AMP Expenses – No adjustment
could be made where on account of AMP expenses, where there was no international
transaction with AEs for promoting the brand of the AE.
The assessee-company was engaged in the business of manufacturing and trading of soft
contact lenses and eye care solutions. In transfer pricing proceedings, the TPO noted
that the assessee had entered into an agreement with its AE, B&L USA, for distribution
of the product manufactured by its group companies, in terms of which the assessee
was required to promote the B&L brand and to develop marketing intangibles for B&L
products in India by incurring expenditure on AMP. The TPO opined that the AMP
444
S. 92C Transfer pricing
expenses did not benefit the assessee as it had incurred a loss in assessment year 2006-
07. The TPO noted that the assessee did not receive any reimbursement from its AE
for the AMP expenses. The TPO concluded that the assessee had developed marketing
intangibles for its AE and was in the process of making the intangible even more valuable
by incurring huge AMP expenses, bearing risks and using both its tangible assets and
skilled, trained manpower. TPO, applied 10 per cent markup on AMP expenses and made
addition to assessee's ALP. The adjustment was confirmed by the DRP.
The High Court held that the mere fact that B&L, USA through B&L, South Asia, Inc
held 99.9% of the share of the assessee would not ipso facto lead to the conclusion
that AMP expenditure by the assessee involved an international transaction with B&L,
USA. The Court further held that merely because there was an incidental benefit to the
foreign AE, it cannot be said that the AMP expenses incurred by the Indian entity was
for promoting the brand of the foreign AE. The revenue had been unable to show the
existence of an international transaction involving AMP expenses between the assessee
and its AE and accordingly no adjustment could be made. (AY. 2006-07 to 2009-10)
Bausch & Lomb Eyecare (India) (P.) Ltd. v. ACIT (2016) 381 ITR 227 / 237 Taxman 24 /
283 CTR 296 / 129 DTR 201 (Delhi)(HC)
Editorial : SLP is granted the revenue; Addl. CIT v. Bausch & Lomb Eyecare (India) (P.)
Ltd. (2016) 242 Taxman 6 (SC)
SLP is granted to the revenue; Addl. CIT v. Bausch & Lomb Eyecare (India) (P.) Ltd. (2017)
245 Taxman 57 (SC)
S. 92C : Transfer pricing – Arms’ length price – Assessee, a logistics service provider, 1406
offering a bouquet of international and domestic freight handling services – residual
profits were split between the assessee and the AE’s in the ratio of 50:50 – similar
arrangement present with third parties – common industry practice – CUP applied by
assessee – Held, transaction at ALP.
Assessee, a logistics service provider, was offering a bouquet of international and
domestic freight handling services including time defined air and ocean transport and
freight forwarding services. In the said business, the residual profits were split between
the assessee and the AEs in the ratio of 50:50. The Assessee used the CUP Method for
benchmarking its international transactions with its AEs. TPO, for want of documents
/ vouchers related to third parties adopted TNMM instead of CUP. ITAT held that in
this field of business activity, the 50:50 business model (i.e. the business model of
sharing residual profits in equal ratio with the service provider at the other end of the
transaction i.e. at the consignee's end in the case of export transaction and at consigner's
end in the case of import transaction), was a standard practice. Further, it acknowledged
that where a standard formula is adopted, the data regarding the precise amount charged
or received for precisely the same services may not be available. ITAT upheld that ALP
of services rendered to, or received from, the AEs, which was computed on the basis of
the same 50 : 50 model as was the industry norm and was employed by the assessee
for computing similar services to the independent enterprises. High Court found the
impugned order of the ITAT to be well reasoned and researched and did not admit the
substantial question of law. (AY. 2006-07, 2007-08)
CIT v. Toll Global Forwarding India (P.) Ltd. (2016) 381 ITR 38 / 237 Taxman 326 / 283
CTR 346 / 130 DTR 401 (Delhi)(HC)
445
Transfer pricing S. 92C
1407 S. 92C : Transfer pricing – DTAA does not contain machinery provision for applying
arm's length standard as envisaged in aforesaid Article – Adjustment was held to be
justified – DTAA-India-Netherlands [S. 90, Art. 9, 12]
The assessee was a company incorporated in and tax resident of the Netherlands. During
the relevant previous years, the assessee had rendered certain technical services to its
associated enterprises in India.
The income so earned by the assessee, from rendition of technical services to Indian AE
was subjected to arm's length price adjustments under the transfer pricing regulations,
to the tune of ` 100.03 crores. The quantification of arm’s length price was not disputed
by the assessee. The assessee contended that; in view of the treaty protection available
to the assessee, the impugned ALP adjustments cannot be made. Dismissing the appeal
of the assessee, the Tribunal held that Transfer pricing legislation cannot be rendered
ineffective on basis of limitations in provisions of Article 9 of India-Netherlands DTAA.
Therefore, as long as conditions precedent in article 9 are attracted application of arm's
length standard certainly comes into play and, in such a situation, domestic transfer
pricing law will apply because DTAA does not contain machinery provision for applying
arm's length standard as envisaged in article 9(1) of India Netherlands DTAA. (AY.
2007-08 to 2010-11)
Shell Global Solutions International BV v. DDIT (IT) (2016) 182 TTJ 830 / (2017) 162 ITD
193 (Ahd) (Trib.)
1408 S. 92C : Transfer pricing – Cup method – No reason was given for rejecting
comparables selected by assessee, matter required readjudication
Tribunal held that Commissioner (Appeals) at time of working out adjustment on Arm's
length price did not give any opportunity to assessee while rejecting CUP method and
taking TNMM as most appropriate method and also did not provide any reason for
rejecting comparables selected by assessee, matter required readjudication. (AY. 2004-
05, 2005-06)
RS Components & Controls Ltd. v. DCIT (2016) 158 ITD 118 (Delhi)(Trib.)
1409 S. 92C : Transfer pricing – Arm’s length price – Assessing Officer/TPO should allow
adjustments on account of under-utilisation of capacity and also difference in
depreciation method adopted by assessee and comparable companies
Tribunal held that adjustments on account of under-utilization of capacity and difference
in depreciation are factors which are likely to materially affect price or cost charged or
paid, or profit arising from, such transactions in open market, Assessing Officer/TPO
should allow adjustments on account of under-utilisation of capacity and also difference
in depreciation method adopted by assessee and comparable companies. (AY. 2008-09)
Srini Pharmaceuticals Ltd. v. ACIT (2016) 158 ITD 275 / 180 TTJ 742 (Hyd.)(Trib.)
1410 S. 92C : Transfer pricing – Arm’s length price – Comparable – Export sales of a
comparable amounted to 97 per cent of total revenue, it could not be rejected from
comparable list for failing export revenue filter.
Tribunal held that Turnover filter being an important criteria in choosing comparables,
comparables having turnover of more than ` 200 crores have to be eliminated from
446
S. 92C Transfer pricing
list of comparables when assessee was in slab of ` 1 cr to ` 200 crs. When TNMM
is adopted as most appropriate method for determination of ALP, only net margin of
tested party has to be considered relative to an appropriate base, without looking into
individual elements of cost, as all direct and indirect costs of operation are aggregated,
irrespective of their classification and composition. Assessee being a software service
provider, a software product company, a company rendering bio-informatics software
product/services and engaged in development of products in field of bio-technology, and
pharmaceuticals and company actively involved in R&D activities with leading scientific
and educational institutions are not comparable to assessee. Where export sales of a
comparable amounted to 97 per cent of total revenue, it could not be rejected from
comparable list for failing export revenue filter. (AY. 2008-09)
ITO v. Infinera India Ltd. (2016) 157 ITD 637 (Bang.)(Trib.)
S. 92C : Transfer pricing – Transaction which is on capital account, and from which 1411
no income/potential income arises, cannot come within purview of Indian Transfer
pricing provisions. [S. 2(24), 92B]
Tribunal held that; if an international transaction is on capital account and does not
result in income as defined under section 2(24), provisions of Chapter X of Act would
not be applicable to such transaction. (AY. 2009-10)
Topsgrup Electronic Systems Ltd. v. ITO (2016) 157 ITD 1123 / 48 ITR) 753 / 178 TTJ 19
(Mum.)(Trib.)
S. 92C : Transfer pricing – Loan granted by assessee to its foreign AE – LIBOR rate of 1412
interest should be applied for determining ALP
In the case of Siva Industries & Holdings Ltd. (supra), identical issue was considered
by the Tribunal. In fact, the ITAT Bangalore Bench in the case of TTK Prestige Ltd. v.
Asstt. CIT [IT Appeal No. 1257 (Bang.) of 2011] for AY. 2005-06, has also dealt with
an identical issue and following the decision of the Mumbai Bench of the Tribunal in
Tata Autocomp Systems Ltd. v. Asstt. CIT (2012) 52 SOT 48 held that in the matter of
determination of ALP in respect of a loan transaction, LIBOR rate of interest should be
the interest rate applied for determining the ALP. (AY. 2008-09)
Indegene Life Systems (P.) Ltd. v. ACIT (2015) 70 SOT 279 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Advisory related support service 1413
cannot be compared with merchant banking activities.
Assessee-company was rendering investment advisory related support services to its
AE. Tribunal held that a company carrying out merchant banking activities could not
be accepted as valid comparable while determining ALP of the assessee. A company
offering portfolio management services for domestic retail investors in different fields,
could not be accepted as comparable – A company in whose case there had been a
restructuring/realignment of investment advisory business which had impacted its
financial results of relevant period, could also not be accepted as valid comparable.
(AY. 2010-11)
Carlyle India Advisors (P.) Ltd. v. ACIT (2016) 157 ITD 600 (Mum.)(Trib.)
447
Transfer pricing S. 92C
1414 S. 92C : Transfer pricing – Arm’s length price – TNMM-KPO cannot be equated to a
low end ITES provider, the issue is restored to file of TPO to carry out this exercise.
The assessee-company was engaged in the provision of Information Technology enabled
back office support services in the nature of customized business/financial research
support to its AE. The assessee selected Transactional Net Margin Method as the most
appropriate method. Selecting 15 comparables it claimed that its transaction was at arm's
length price. The TPO selected fresh comparables and recommended TP adjustment. On
appeal the Tribunal held that in a TNMM methodology identical FAR analysis cannot
be insisted upon and method is in fact resorted to when complete data is not available;
in that case impact on net profitability of minor variations in comparable companies
so selected is considered as capable of tolerating minor variations in FAR analysis
of comparables. The selection of comparables is an exercise which would be hugely
facilitated and relatively free from the need to address micro variations. Accordingly,
the issue is restored to file of TPO to carry out this exercise. (AY. 2010-11, 2011-12)
Copal Research India (P.) Ltd. v. Dy. CIT (2016) 160 ITD 523 / (2017) 152 DTR 94 (Delhi)
(Trib.)
1415 S. 92C : Transfer pricing – Arm's length price – Royalty – Matter was set aside to
readjudication.
Assessee was a leading BPO services company. It had made payment towards royalty
and aggregated this international transaction, by using TNMM, along with ITES services
and stated that payment of royalty was at arm's length. TPO held that royalty should
have been treated as a separate transaction and should not have been aggregated with
ITES. TPO held CUP to be most appropriate method and determined ALP of transaction
relating to royalty to be at nil and thus, proposed adjustment. On appeal the Tribunal
held that since TPO did not examine arm's length price of impugned royalty payment
in accordance with provisions of section 92C, it had been wrongly determined as nil by
TPO and hence matter required readjudication. (AY. 2009-10)
Daksh Business Process Services P. Ltd. v. DCIT (2016) 49 ITR 49 (Delhi)(Trib.)
1416 S. 92C : Transfer pricing – Purchase equipment from AE – Equipment was sold on
cost-to-cost basis hence addition was held to be not justified.
Dismissing the appeal of revenue, the Tribunal held that Equipment was sold on cost to
cost basis hence addition was held to be not justified. (AY. 2007-08)
Dy. CIT v. C-Dot Alcatel-Lucent Research Centre (P.) Ltd. (2016) 177 TTJ 211 (Delhi)(Trib.)
1417 S. 92C : Transfer pricing – Comparable – Company developing its own software
products could not be accepted as comparable, with a company engaged in providing
open and end-to-end web solutions software consultancy and design and development
of software using latest technology and also turnover.
The assessee company is engaged in the business of development of software and
provides sales & marketing support. Dismissing the appeal of the revenue, the Tribunal
held that; a company developing its own software products could not be accepted as
comparable. A company engaged in providing open and end to end web solutions
software consultancy and design and development of software using latest technology,
448
S. 92C Transfer pricing
was not acceptable as comparable on account of functional difference. Turnover
being an important filter, in view of fact that assessee's turnover was only ` 8.15
crores, companies having turnover in excess of ` 200 crores could not be accepted as
comparables.
Dy. CIT v. Fair Isaac India Software (P.) Ltd. (2016) 51 ITR 117 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – ALP of AMP expenses by simply 1418
comparing quantitative figure of AMP expenses incurred by assessee and comparables
is not sufficient – The amount of subsidy or reimbursement received from AE
on account of AMP expenses cannot be reduced from total AMP expenses before
determination of ALP of such expenses.
Tribunal held that ALP of AMP expenses by simply comparing quantitative figure of
AMP expenses incurred by assessee and comparables is not sufficient. Matter remanded.
The amount of subsidy or reimbursement received from AE on account of AMP
expenses cannot be reduced from total AMP expenses before determination of ALP of
such expenses. Decided in favour of revenue. (AY. 2006-07)
Casio India Co. (P.) Ltd. v. Dy. CIT (2015) 70 SOT 48 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Software product company cannot be 1419
compared with software development service company.
Tribunal held that A software product company can not be compared with software
development service company. A company, which owns significant intangible and has
huge revenues from software products, cannot be compared with software development
service company. Assessee can raise a plea for exclusion, especially when it had objected
to the inclusion before the TPO and the DRP. No purpose will be served in remitting
the question of comparability back to the TPO/Assessing Officer. Restriction of working
capital adjustment based on PLR of SBI will be appropriate since it is based on a
presumption with all lending or credit having uniform interest rates as decided by SBI.
(AY. 2009-10)
Citrix R & D India (P.) Ltd. v. Dy. CIT (2016) 136 DTR 335 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arms’ length price – AMP expense not an international 1420
transaction since there was no agreement, arrangement or understanding between the
assessee and AE to share or incur any such expenditure. [S. 92B]
The assessee was in the business of providing IT enabled services. The TPO alleged
that it had incurred excessive advertising expenditure, and applied bright line test to
determine the incremental AMP expense incurred by it. On appeal, the ITAT held that
the TPO had wrongly invoked provisions of section 92, since there was no evidence
of any arrangement, agreement or understanding between the Assessee and its AE for
sharing or incurring advertisement, marketing and promotion expenses. Further, the ITAT
dismissed the argument of the Revenue that the amendment to section 92B included
AMP expenses as an international transaction, on the basis that the explanation to
section 92B provided an illustrative list of international transactions and incurrence of
advertisement, marketing and promotion was not specifically listed as an international
transaction. (AY. 2009-10)
Amadeus India P. Ltd. v. ACIT (2016) 52 ITR 83 (Delhi)(Trib.)
449
Transfer pricing S. 92C
1421 S. 92C : Transfer pricing – Arm's length price – No adjustment on account of notional
interest attributable to delayed payments receivable from the AE if the TPO has
accepted that the overall profit margin of the Assessee is at arm’s length based on
TNMM.
The TPO made an adjustment u/s. 92C on account of notional interest attributable
to delayed payments receivable from its AE. The TPO alleged that the AE ought to
have paid within 30 days of the invoice and any excess credit period would require
compensation of delayed interest at 15.77%. The ITAT following the decision in the case
of Rusabh Diamonds (2016) 48 ITR (Trib.) 707 (Mum.) held that if the overall profitability
of the Assessee is accepted by the TPO as per TNMM, then no separate adjustment can
be made on account of notional interest attributable to delayed payments receivable
from the AE. Further, it was also held that although the amendment to section 92B
would include trade debts, the same would not be applicable for assessment years prior
to AY. 2013-14. (AY. 2009-10)
Amadeus India P. Ltd. v. ACIT (2016) 52 ITR 83 (Delhi)(Trib.)
1422 S. 92C : Transfer pricing – Arm’s length price – Health care comparable was held to
be acceptable by applying the functional test.
Allowing the appeal of the assessee the Tribunal held that; In case of assessee company
rendering business support services to its AE. Providing services under head technical
assistance and human resource development, providing event management services and
a company providing access to information relating healthcare technology to healthcare
delivery institution and health professionals in India, were acceptable as comparable.
However, a company rendering pay roll services to its clients could not be accepted as
comparable on account of functional difference. (AY. 2010-11)
Eli Lilly & Co. (India) (P.) Ltd. v. ACIT (2016) 159 ITD 482 / 176 TTJ 234 (Delhi)(Trib.)
1423 S. 92C : Transfer pricing – Arm's length price – comparable with 4% export revenue as
compared to 100% export revenue of assessee cannot be included – comparable being
public sector undertaking functioning in controlled environment cannot be comparable
for private company – pre-operating and preliminary expenditure not to included in
operating cost.
The Tribunal held that
(i) HMT Bearings Ltd. cannot be compared with the assessee, as the former is a public
sector undertaking, totally operating under controlled environment, whereas the
latter is a private company operating in uncontrolled business environment.
(ii) The export sales of SLN Bearings Ltd. are less than 4%, the company had no
functional similarity with the assessee, therefore could not be compared with the
assessee-company whose exports constituted 100% of the sales.
(iii) The TPO was not justified in excluding foreign exchange gain from the operating
profit of the assessee, and such gains should be included as part of operating
income.
(iv) Preliminary and pre-operating expenditure have nothing to do with operations of
the company and should not be included as part of operating cost. (AY. 2005-06)
KHF Components Pvt. Ltd. v. ITO (2016) 49 ITR 46 (Bang.)(Trib.)
450
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm's length price – Knowledge process outsourcing 1424
companies not comparable with business process outsourcing – Companies whose
functional profile different from assessee's not comparable – Comparable transactional
net margin method covering within its ambit royalty payments – Transfer pricing
officer not examining Arm's length price of royalty payment in accordance with
provisions – Matter remanded. [S. 92CA]
The Tribunal held that a comparable that provided high level services involving
specialized knowledge and domain expertise and was involved in knowledge process
outsourcing services was entirely different from the assessee’s business process
outsourcing services, and could not be included as a comparable. Also, the TPO was
incorrect in overlooking the fact the a comparable that outsourced most of its work to
other vendors or service providers would have a different cost structure as compared
to a business model were services were rendered using one’s own employees and own
infrastructure. As far as royalty is concerned the Tribunal held that it was not necessary
for the assessee to prove anything in excess of the fact that expenditure is incurred
wholly and exclusively for purpose of business and nothing more. The TPO cannot
determine ALP at nil, and in the present case the TPO did not examine the ALP of the
royalty payment in accordance with S. 92C therefore, the issue was to be examined
afresh by the TPO. (AY. 2009-10)
Daksh Business Process Services P. Ltd. v. Dy. CIT (2016) 49 ITR 49 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – a company which grew with a 1425
compounded annual growth rate of 147 per cent for 3 years should be excluded from
comparable list due to consistently abnormal profits earned by it.
The Appellate Tribunal held that where company grew with a compounded annual
growth rate (CAGR) of 147 per cent for 3 years, it should be excluded from comparable
list due to consistently abnormal profits earned by it. (AY. 2008-09)
ACIT v. Transcend MT Services (P.) Ltd. (2016) 158 ITD 507 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – comparables inappropriate on account 1426
of functional difference and related party transactions – had to be excluded
Where in case of one comparable selected by TPO, there was amalgamation of another
company and said extraordinary event resulted in earning of high operating margin of
that company, it had to be excluded from list of comparables. (AY. 2005-06)
ADP (P.) Ltd. v. Dy. CIT (2015) 70 SOT 716 (Hyd.)(Trib.)
S. 92C : Transfer pricing – Arms’ length price – international loan transaction in hard 1427
currency – interest rate on rupee transactions in India would not be relevant.
Where ALP of an international loan transaction, which was designated in hard currency,
is to be ascertained, interest rate on rupee transactions in India is not relevant. (AY.
2008-09)
Advanta India Ltd. v. ACIT (2016) 137 DTR 233 / 179 TTJ 50 (Bang.)(Trib.)
451
Transfer pricing S. 92C
1428 S. 92C : Transfer pricing – Computation of Arm's length price – Adjustment on account
of corporate guarantee fee – assessee itself charged guarantee commission of 1 per
cent from its AE in subsequent assessment year and also offered the same for tax –
guarantee commission should be benchmarked by taking 1 per cent of the outstanding
guaranteed amount.
Assessee itself having agreed to charge guarantee commission @ 1 per cent of the
outstanding guaranteed amount from its AE in the subsequent years, and the Tribunal
having accepted charging of guarantee commission at rates between 0.5 per cent and 1
per cent in various cases, guarantee commission in respect of the corporate guarantees
given by the assessee on behalf of its AEs should be benchmarked by taking the rate of
1 per cent of the outstanding guaranteed amount. (AY. 2009-10)
Aegis Ltd. v. Addl. CIT (2016) 131 DTR 172 (Mum.)(Trib.)
1429 S. 92C : Transfer pricing – Uncontrollable price method – Sale price between two
parties could not be merely on basis of written down value. Therefore, the tribunal
upheld the findings of the DRP.
Dismissing the appeal of the revenue, the Tribunal held that when machinery was
sold, buyer of machinery would naturally look for efficiency and life of machinery
after purchase. Therefore, written down value might be one of factor to be taken into
consideration for determining value of machinery. However, in view of specific provision
in Rule 10B(1)(a) of IT Rules, written down value could not be determining factor to
decide ALP. Value of machinery had to be compared with identified transaction in
uncontrolled market. Since such exercise was not done by TPO, the Tribunal was of
considered opinion that DRP rightly found that sale price between two parties could not
be merely on basis of written down value. Therefore, the Tribunal upheld the findings
of the DRP and accordingly, appeal of Revenue was dismissed. (AY. 2010-11)
ACIT v. Interpump Hydraulics India P. Ltd. (2016) 50 ITR 43 (Chennai)(Trib.)
1430 S. 92C : Transfer pricing – Arm's length price – Comparable – Companies engaged in
Medical description could not be compared with the companies which is engaged in
software development.
Allowing the appeal of the assessee, the Tribunal held that; Companies engaged in
activity of medical transcription and portfolio management and providing open and
end-to-end web solutions and industry specialised services could not be compared with
assessee in TP study, which is engaged in software development. (AY. 2007-08)
AOL Online India (P.) Ltd. v. Dy. CIT (2016) 158 ITD 437 (Bang.)(Trib.)
1431 S. 92C : Transfer pricing – Arm's length price – Royalty – Import of raw materials
and export of finished goods with royalty payment – TPO was justified in segregating
transactions and determining ALP of royalty payments by applying CUP method,
matter was remanded.
Tribunal held that since payment of royalties and fee for technical services had no
relation with total sales made by assessee, it could not be construed as interlinked
with other international transactions entered into with AE. Therefore, TPO justified in
segregating international transactions of payment of royalty and fee for technical services
452
S. 92C Transfer pricing
from other international transactions and determining their ALP on basis of CUP
method. Fact that assessee paid expenses in nature of royalty and fee for technical as a
percentage of 'value addition' made by it and not on sale price, TPO not only applied
CUP method in a wrong manner but also went wrong in determining ALP. Matter was
remanded. (AY. 2011-12)
Gruner India (P.) Ltd. v. Dy. CIT (2016) 159 ITD 772 / 179 TTJ 1 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Royalty – Rate of royalty approved 1432
by RBI has a persuasive value in process of determination of ALP but it cannot be
considered as conclusive
Tribunal held that, rate of royalty approved by RBI has a persuasive value in process of
determination of ALP but it cannot be considered as conclusive, therefore, royalty and
fees for technical services paid by it to its AE as per rates approved by RBI and same
per se be considered at ALP, was to be rejected. (AY. 2011-12)
Gruner India (P.) Ltd. v. Dy. CIT (2016) 159 ITD 772 / 179 TTJ 1 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Eligibility u/s. 80-IC, does not operate 1433
as a bar on determination of ALP – Enhancement of income cannot be considered for
claiming exemption u/s. 80IC. [S. 80IC]
Tribunal held that;eligibility of assessee to deduction u/s. 80-IC does not operate as
a bar on determining ALP of international transaction undertaken by it and further
enhancement of income due to such transfer pricing adjustment cannot be considered
for allowing benefit of deduction under said section. (AY. 2011-12)
Gruner India (P.) Ltd. v. Dy. CIT (2016) 159 ITD 772 / 179 TTJ 1 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arms length price – Comparbles – Significant soft 1434
ware products, super normal profits,testing of various products and engaged in
infrastructure development was incomparable to market support service provider.
Tribunal held that Company which owned significant software products and was
engaged in various diversified business operations was incomparable to assessee, a
software development service provider. Company engaged into high end service (KPO)
and which returned super normal profits could not be compared with low end service
provider. Company providing services in nature of testing of various products and
engaged in infrastructure development was incomparable to market support service
provider. (AY. 2008-09)
Avaya India (P.) Ltd. v. Dy. CIT (2016) 160 ITD 179 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Provisions can be invoked, in case of 1435
assessee, which is a 100 per cent EOU under STP scheme and enjoys a tax holiday
[S. 10A]
Tribunal held that TPO provisions can be invoked even assessee, is a 100 per cent
EOU under STP scheme and enjoys a tax holiday u/s. 10A. Followed, Aztec Software &
Technology Services (P.) Ltd. v. ACIT (2007) 107 ITD 141 (Bang.)(SB) (AY. 2006-07)
Transcend MT Services (P.) Ltd. v. ACIT (2016) 159 ITD 967 (Delhi)(Trib.)
453
Transfer pricing S. 92C
1436 S. 92C : Transfer pricing – Arm's length price – Royalty – matter was set aside.
Allowing the appeal of the Revenue, the Tribunal held that the matter was to be
relooked as the percentage computed by the. TPO is 1.14% in comparison with the
Arm's Length Price margin being 4.60%. The disputed issue was remitted back to
the Assessing Officer for recalculation to consider Royalty payment on brought out
components based on technical specifications. (AY. 2011-12)
DCIT v. Regen Powertech (P.) Ltd. (2016) 161 ITD 43 (Chennai)(Trib.)
1437 S. 92C : Transfer pricing – Price charged by AE would include mark up for extended
period credit period provided hence adjustment was not justified.
TPO rejected assessee's explanation and computed adjusted CUP price by loading CUP
price with interest attributable to credit period of 120 days as mentioned in invoice.
TPO made a downward adjustment to price of raw material paid by assessee to its AE.
Allowing the appeal the Tribunal held that since assessee was enjoying larger credit than
printed in invoice, i.e. it ranged 120 days to 240 days, it was appropriate to consider
extra credit period enjoyed by assessee so as to determine ALP. Price charged by AE
would include mark up for extended period credit period provided hence adjustment
was not justified. (AY. 2008-09)
Salcomp Manufacturing India (P.) Ltd. v. ACIT (2016) 161 ITD 35 (Chennai)(Trib.)
1438 S. 92C : Transfer pricing – External Commercial Borrowing (ECB) availed from AE
– Interest paid by assessee was in accordance with LIBOR – TPO could not make
adjustment to ALP by applying implicit interest rate on India's External Debt, which
was an unadjusted industrial average.
In appellate proceedings, assessee-company raised a plea that while determining ALP
interest rate in respect of External Commercial Borrowing (ECB) availed from Associated
Enterprise, the TPO had relied on an inappropriate source and, thus, adjustment made
by him deserved to be set aside. Tribunal held that since interest paid by assessee
was in accordance with LIBOR, which was an accepted method, TPO could not apply
implicit interest rate on India's External Debt, which was an unadjusted industrial
average. Therefore, impugned adjustment made to interest rate paid on ECBs, was set
aside. (AY. 2008-09)
Salcomp Manufacturing India (P.) Ltd. v. ACIT (2016) 161 ITD 35 (Chennai)(Trib.)
1439 S. 92C : Transfer pricing – Arm's length price – CUP method is most appropriate
method for international transaction of purchase of raw material and CPM is most
appropriate method for sale of exports.
Allowing the appeal the Tribunal held that CUP method is most appropriate method
for international transaction of purchase of raw material and CPM is most appropriate
method for sale of exports. (AY. 2010-11)
Golkonda Aluminium Extrusion Ltd. v. ITO (2016) 161 ITD 273
454
S. 92C Transfer pricing
S. 92C : Transfer pricing – The assessee is obliged to carry out a bench-marking 1440
exercise with independent comparables and prove that its transactions with AEs are
at Arm's length. Mere fact that the transaction is approved by the RBI and Govt. is
not sufficient, matter was set aside.
The assessee is obliged to carry out a bench-marking exercise with independent
comparables and prove that its transactions with AEs are at Arm's length. Mere fact
that the transaction is approved by the RBI and Govt is not sufficient. Therefore, in the
interest of justice and fair play, this case should be restored back to the file of AO, how
shall require the assessee to bench mark its international transaction of ‘royalty’ with
independent comparables following suitable methods prescribed under the Act and on
its compliance, the AO after giving adequate opportunity to the assessee shall decide
this issue in accordance with the TP regulations. (AY. 2007-08)
Sara Lee TTK Ltd. v. DCIT (2016) 142 DTR 258 (Mum.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – RBI approval of royalty rates paid by 1441
assessee to its AE itself implied that payments were at arm's length price. Appeal of
revenue was dismissed.
Assessee in business of manufacture and sale of whole and ground spices-exported
spices to its AEs and AEs had given their support and technology for setting up a
state of art steam sterilization facilities to cater to spices market of world. Assessee
paid royalty to its AEs at 0.75 per cent on FOB value. Royalty agreement was prior to
applicability of TP provisions and rate of royalty was below 8 per cent rate prescribed
under automatic route for year 2004. Royalty payments were RBI prescribed, and found
approval of Government of India. RBI approval of royalty rates paid by assessee to its
AE itself implied that payments were at arm's length price. Appeal of revenue was
dismissed. (AY. 2004-05 to 2010-11)
DCIT v. AVT McCormick Ingredients Ltd. (2016) 178 TTJ 99 / 137 DTR 92 / 67 taxmann.
com 322 (Chennai)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Adjustment on account of price 1442
variation in export sale was deleted.
TPO made an adjustment on account of arm's length price of transaction between AEs
for price variation in export sales of whole and ground spices. CIT(A) deleted same
holding that revenue had not brought any evidence to show that price variation was on
higher side and impacted arm's length price. Tribunal affirmed the view of the CIT(A).
(AY. 2004-05, 2005-06)
DCIT v. AVT McCormick Ingredients Ltd. (2016) 178 TTJ 99 / 67 taxmann.com 322 / 137
DTR 92 / 67 taxmann.com 322 (Chennai)(Trib.)
S. 92C : Transfer pricing – Arm's Length Price – Charging of interest on receivables 1443
– Adjustment on account of notional interest on share application money which
re-characterized as loan was not sustainable in law.
DRP held that “charging of interest was not warranted and AO directed not to charge
notional interest. Held, allotment of shares did not make any change to position of
Assessee, as subsidiary was admittedly wholly owned subsidiary of Assessee. Delay in
455
Transfer pricing S. 92C
allotment of shares by subsidiary company, as long as subsidiary was wholly owned
subsidiary, did not prejudice interests of Assessee. Since Assessee was only shareholder
of subsidiary company, fruits of said investment belong to Assessee only and in entirety.
Assessee had behaved in commercially rational manner inasmuch as whether new
shares were allotted at x point of time or y point of time, it did not make difference to
position of shareholder so far as subsidiary was wholly owned by single shareholder.
Nominal value of shares, as long as all shares were held by Assessee was entirely
benefit neutral from commercial point of view. Very foundation of adjustment made by
AO was devoid of legally sustainable merits. Adjustment on account of notional interest
on share application money which re-characterized as loan was not sustainable in law.
(AY. 2009-10)
ITO v. Sterling Oil Resources (P) Ltd. (2016) 137 DTR 308 / (2016) 179 TTJ 298 (Mum.)
(Trib.)
1444 S. 92C : Transfer pricing – Arm’s length price – Payment of royalty or technical know-
how fees to AE was at arm’s length.
Dismissing the appeal of assessee the Tribunal held that the fact that no remuneration
was paid for similar services rendered by the AE in the past is no ground to reject
payment in a later financial year for non-business consideration. The TPO has not
disputed the most appropriate method of determination of ALP chosen by the assessee
viz., CUP method and comparability of the companies set out in the TP study of the
assessee. Rate of royalty paid by the assessee at 1.5 per cent is lower than the rate of
royalty paid by the comparable uncontrolled enterprises in similar conditions. Therefore,
the payment of royalty by the assessee was at arm’s length. (AY. 2004-05)
Dy. CIT v. Bata India Ltd. (2016) 179 TTJ 328 / 138 DTR 78 (Kol.)(Trib.)
1445 S. 92C : Transfer pricing – Transaction between two foreign parties couldn't constitute
a comparable uncontrolled transaction for CUP method – Matter remanded.
CUP is most appropriate method for determining ALP of purchase or sale of goods
or services because it seeks to compare exact price charged or paid rather than profit
rate. TPO proceeded to determine ALP of import of raw matarials, components and
semi-finished goods under CUP method by considering transaction between assessee's
AE in Italy and third party also in Italy. Such a geographical difference, wherein both
buyer and seller were foreign parties, could not constitute a comparable uncontrolled
transaction. CUP method requires comparison of price charged in a comparable
uncontrolled transaction and then making transfer pricing adjustment for difference, if
required. Since TPO had not compared any price charged in a comparable uncontrolled
transaction with price paid by assessee, therefore matter is remanded back. (AY. 2004-05)
Dy. CIT v. Rayban Sun Optics India Ltd. (2016) 179 TTJ 219 / 69 taxmann.com 137 / 138
DTR 329 (Delhi)(Trib.)
1446 S. 92C : Transfer pricing – Arm's length price – RPM is a useful method where goods
purchased by Indian AE are sold without any value enhancement – Addition was
deleted.
Assessee benchmarked its international transaction of import of finished goods under
TNMM. However, TPO rejected TNMM on ground that it was a transaction of import
456
S. 92C Transfer pricing
of finished goods from its AE, which were sold as such without any value addition
by assessee in capacity of a distributor and adopted RPM as most appropriate method
and computed ALP of import of finished goods and thereby proposed transfer pricing
adjustment. The ITAT held that RPM is a useful method where goods purchased by
Indian AE are sold without any value enhancement. ALP of an international transaction
of purchase of goods is always determined on basis of gross profit margin on resale price
charged in a comparable transaction between enterprises other than AEs. Thus where
the TPO had not brought on record any comparable uncontrolled case and had not
eventually determined gross profit margin from purchase and resale of similar goods in
a comparable uncontrolled transaction, action of Assessing Officer in making additions
could not be approved. (AY. 2004-05)
Dy. CIT v. Rayban Sun Optics India Ltd. (2016) 179 TTJ 219 / 69 taxmann.com 137 / 138
DTR 329 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Interest – Commercial expediency of 1447
a loan to subsidiary is wholly irrelevant in ascertaining arm's length interest on such
a loan – no bar on anyone advancing an interest free loans to anyone but when such
transactions are covered by international transactions between AEs S. 92C mandates
that income from such transactions are to be computed on basis of arm's length price.
AO by adopting an arm's length interest on this loan made ALP adjustment to income
of assessee and brought it to tax in hands of assessee. Assessee contended since there
was no erosion of tax base in India by Assessee Company giving an interest free loan
to its Indian AE, provisions of transfer pricing could not have been pressed into service.
Commercial expediency of a loan to subsidiary is wholly irrelevant in ascertaining arm's
length interest on such a loan. There is indeed no bar on anyone advancing interest free
loans to anyone but when such transactions are covered by international transactions
between AEs. S. 92C mandates that income from such transactions is to be computed
on basis of arm's length price. Computation of income on basis of arm's length price
does not require that assessee must report some income first, and only then it could
be adjusted for ALP. When no income was reported in respect of an item in nature of
income, such as interest, but, substitution of transaction price by arm's length price
resulted in an income, it could very well be brought to tax u/s. 92. (AY. 2003-04, 2004-
05)
Instrumentarium Corporation Ltd. v. ADIT (2016) 160 ITD 1 / 179 TTJ 665 / 138 DTR 225
/ 49 ITR 489 (SB) (Kol.)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Company having turnover more than 1448
ten times that of assessee, could not be accepted as comparable while determining ALP.
Assessee-company was rendering software development services to its AE, companies
having turnover more than ten times that of assessee, could not be accepted as
comparables while determining ALP. Company developing its own software products
was also not acceptable as comparable.
DCIT v. Sunquest Information Systems (India) (P.) Ltd. (2016) 160 ITD 49 (Bang.)(Trib.)
457
Transfer pricing S. 92C
1449 S. 92C : Transfer pricing – Arm’s length price – Foreign exchange gain/losses
are considered as part of operational income/loss of assessee, then such items
of expenditure or gain are to be considered as operational in nature in case of
comparable also.
Foreign exchange adjustment once allowed as operational in nature should also be
considered while working out the operating margin of the comparables. This is because
comparability should be done based on equal footing and if foreign exchange gains/
losses are considered as part of operational income/loss of the assessee, then such
items of expenditure, are also to be considered as operational in nature in the case of
comparables also. TPO is therefore directed to work out the margin of the comparables
that are left in the list after considering foreign exchange gains/losses as operational in
nature.
DCIT v. Sunquest Information Systems (India) (P.) Ltd. (2016) 160 ITD 49 (Bang.)(Trib.)
1450 S. 92C : Transfer pricing – Selection of Comparables – Accepted by TPO in preceding
as well as succeeding years – No ground for deviation.
The Tribunal held that the comparables selected by assessee in the year under
consideration having all along been accepted by TPO in preceding as well as succeeding
assessment years, there is no ground from deviating the same in the year under
consideration. (AY. 2009-10)
Halliburton Technology India Pvt. Ltd. v. Dy. CIT (2016) 178 TTJ 12 (UO) (Pune)(Trib.)
1451 S. 92C : Transfer pricing – TPO was not justified in changing base from ‘costs’
incurred to ‘FOB value of exports’ and applying 6 per cent mark up.
The Tribunal held that the action of Assessing Officer/TPO in making adjustment on
account of transfer pricing cannot be upheld mere so as the shifting of the base on
which mark up has been applied has been rejected by the jurisdictional High Court in
the assessee’s own case in earlier years. (AY. 2009-10)
Li & Fung (India) (P) Ltd. v. Dy. CIT (2016) 158 ITD 498 / 178 TTJ 10 / 136 DTR 15
(Delhi)(Trib.)
1452 S. 92C : Transfer pricing – Cup method and acceptability of quotations of comparable
cases. [S. 10B]
The Tribunal held that the AO was in error not only in resorting to an unscientific and
unrecognized method for ascertaining the ALP of the services rendered by the assessee
but also in rejecting bona fide quotations as a valid input for ascertaining the ALP.
Hence, impugned ALP adjustment is deleted. (AY. 2011-12)
Gulf Energy Maritime Services (P) Ltd. v. ITO (2016) 178 TTJ 683 / 136 DTR 130 (Mum.)
(Trib.)
1453 S. 92C : Transfer pricing – Whether a transaction is entered into at an Arm’s Length
Price or not must depend upon the facts of each case relating to the transaction per
se. The fact that the transaction has not yielded results or has resulted in a loss is
irrelevant
(i) The contention of the lower authorities for not accepting the assessee’s case
was that the assessee had not been able to substantiate that the payment for the
458
S. 92C Transfer pricing
services had actually increased its profits. The TPO held that the assessee should
have been able to show the level of increase in profit post the said transactions.
(ii) The answer to the issue whether a transaction is at an arm’s length price or not is
not dependent on whether the transaction results in an increase in the assessee’s
profit. This would be contrary to the established manner in which business is
conducted by people and by enterprises. Business decisions are at times good and
profitable and at times bad and unprofitable. Business decisions may and, in fact,
often do result in a loss. The question whether the decision was commercially
sound or not is not relevant. The only question is whether the transaction was
entered into bona fide or not or whether it was sham and only for the purpose of
diverting the profits.
(iii) The TPO observed that regular increase in profits is a normal incidence in
business. This is entirely incorrect. All businesses are not profitable. All decisions
do not enhance profitability. Losses are also an incidence of business. Many are
the failed business ventures of people and enterprises.
(iv) Enterprises, businessmen and professionals constantly experiment with different
business models, theories and ventures. The aim indeed is to further the business,
to enhance their profits. So long as that is the aim, it is sufficient for the purpose
of the Income-tax Act. In a given case, profit may not even be the motive. Even so
it would not indicate that the transactions in question are not at an arm’s length
price. Whether a transaction is entered into at an arm’s length price or not must
depend upon the facts of each case relating to the transaction per se, i.e., the
transaction itself. Profit is only a possibility and a desired result with or without
the aid of an international transaction. Every business venture is not necessarily
profitable or successful. All business ventures do not succeed equally or
uniformally. Indeed, if an assessee is able to establish financial or other commercial
benefits arising from a transaction, it would further strengthen its case. But if it
cannot do so, it does not weaken it. (ITA No. 5886/Del/2012, dt. 23.08.2016) (AY.
2008-09)
Knorr-Bremse India Pvt. Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org
S. 92C : Transfer pricing – Arm's length price – Determination of ALP of notional 1454
interest on interest-free loans to AE remanded to verify whether there was also a
receipt of interest-free loans – ALP of guarantee commission to be 0.50% following
earlier year orders – ALP of interest on outstanding trade balances should be similar
interest charged on third parties and not LIBOR.
The assessee had granted interest-free loans to its AEs as well as guarantees to loans
given by banks to its AEs. The TPO held that in a third party situation, interest would
have been charged and consequently, notional interest on the loans was added to
the income of the Assessee as ALP. Further, notional guarantee commission was also
added to the income of the Assessee. As the issue of interest-free loans received by
the Assessee was not raised before TPO or the DRP, the ITAT, following its earlier
order, remanded the matter to the AO, to verify whether the Assessee had also received
interest-free loans from its AEs and consequently, ALP to be determined. Further, the
ITAT followed its earlier year to hold that ALP guarantee commission should be taken
as 0.50%.
459
Transfer pricing S. 92C
Further, the TPO also made an addition on the outstanding trade balances of the AE and
took LIBOR as the ALP. The ITAT, following its earlier year order, deleted the adjustment
and held that trade balances was not an international transaction per se, but were only
a consequence of international transactions. However, if ALP was to be determined,
then the same should be the interest charged by the assessee to third parties on such
outstanding balances and not LIBOR. Since no such attempt was made by the TPO to
determine the ALP, the adjustment was deleted by the ITAT. (AY. 2009-10)
Nimbus Communications Ltd. v. ACIT (2016) 47 ITR 496 (Mum.)(Trib.)
1455 S. 92C : Transfer pricing – Arm's length price – Internal TNMM cannot be applied in
case single comparable, which was earlier an AE, is selected.
The assessee was providing ITeS services to its AEs as well as to one non-AE. The
non-AE party was an AE in the previous years, but during the current year, it was not
an AE. Applying TNMM, the assessee compared the margin earned by it from its AE
transactions with the margin from its transaction with the non-AE party, and submitted
that it was at arm’s length. The TPO rejected the benchmarking analysis of the Assessee.
The ITAT held that though a single comparable may be valid, in case of an indirect
method like TNMM, the same may not be true. The availability of data being one of the
conditions under rule 10C(1)(c) for selecting the most appropriate method, existence of
one single comparable would be a serious limitation to select TNMM. Further, the fact
that the non-AE was an AE in the earlier years and the assessee continued to provide
services to it at a loss, makes internal TNMM less reliable than external TNMM, which
was more applicable to the assessee.
The ITAT also remanded the proposition of restricting the adjustment to the overall
income earned by the AE from the third party since necessary details were not
submitted by the assessee. Further, with respect to capacity adjustment, the ITAT did
not allow the same since mere fact of high employee cost with no quantification of
underutilised capacity could not be a reason for allowing capacity adjustment. (AY.
2008-09)
Fortune Infotech Ltd. v. ACIT (2016) 157 ITD 1244 / 47 ITR 113 / 176 TTJ 619 / 131 DTR
321 (Ahd.)(Trib.)
1456 S. 92C : Transfer pricing – Arm's length price – margin for 96% transactions
determined in MAP – No distinction in facts or nature for remaining 4% – Same
margin should be adopted.
The assessee provided information technology enabled services to its associated
enterprises. It had shown a margin of 12.26 per cent. The Assessing Officer treated
the information technology enabled services business as one and applied the markup
at 21.58 per cent. Out of the total transactions with its associated enterprises around
the world, around 96 per cent of the transactions were with entities based in the U.
S.A. and the remaining 4 per cent were with associated enterprises located elsewhere.
The lower authorities did not make any distinction while applying the markup and the
treated the entire turnover as one and, accordingly, applied the markup. The Tribunal
held that the Deputy Commissioner issued the letter dated April 9, 2015, under the
mutual agreement procedure proceedings for the assessment years 2006-07 to 2010-
460
S. 92C Transfer pricing
11 in the case of the assessee. For the assessment year 2006-07, for the transactions
with associated enterprises in the USA, the margin of 14.38 per cent (as against the
margin of 21.58 per cent determined by the Transfer Pricing Officer) was confirmed.
The annual accounts of the assessee showed that the aggregate turnover was shown at
` 47,30,521, and no distinction was made between transactions with associated
enterprises in the USA and others. Similarly in the orders passed by the lower
authorities also no such distinction was made out. Therefore, whatever margin was
determined for the 96 per cent of the transactions, should be determined for the
remaining 4 percent transactions as well. Even at this stage, no distinction in facts or
nature of transactions was brought out on record. Therefore, the markup of 14.38 per
cent should be determined for the remaining 4 percent transactions pertaining to entities
not in the USA as well. (AY. 2006-07, 2007-08)
J.P. Morgan Services Pvt. Ltd. v. DCIT (2016) 46 ITR 561 / 70 taxmann.com 228 (Mum.)
(Trib.)
S. 92C : Transfer pricing – Arm's length price – Most appropriate method – Rule of 1457
consistency
For assessment years 2006-07 to 2008-09, international transactions entered into by
the assessee with its associated enterprises included the export of finished goods to
overseas companies and import of finished goods for resale and the Transfer Pricing
Officer had accepted the aggregation and the transactional net margin method applied
by the assessee in its transfer pricing study report. For the present assessment year,
the assessee explained the reasons for adopting the transactional net margin method
and the difference between the exports made to the associated enterprises and non
associated enterprises and also sales made in the domestic market and further explained
the functional risks which were different for the two segments. The conduct of the
business and the products manufactured were identical in the year under consideration,
when compared to assessment years 2006-07, 2007-08 and 2008-09. The explanations of
the assessee were rejected by the Transfer Pricing Officer without any basis. Since the
Transfer Pricing Officer had failed to demonstrate how the facts of the present year were
different from those of the other years, there was no justification for taking a different
stand. Therefore, the transactional net margin method should be applied on aggregate
basis for benchmarking international transactions of the assessee and since the margins
declared by the assessee were higher than the margins declared by the comparables
selected by the assessee, the international transactions entered into by the assessee with
its associated enterprises were at arm’s length and the addition was not warranted. (AY.
2005-06)
Vishay Components India P. Ltd. v. Addl. CIT (2015) 174 TTJ 354 / 128 DTR 178 / (2016)
45 ITR 471 (Pune)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Turnover filter – Turnover over ` 200 1458
crores to be excluded – RPT filter – RPT up to 15% can be considered.
The Tribunal held that the assessee, engaged in development of delivery of domain
specific software to its AE could not be compared to companies engaged in development
of both, software products and software.
461
Transfer pricing S. 92C
Further, considering both conflicting views on the elimination of comparable companies
based on turnover, the Tribunal, following favourable view in CIT v. Pentair Water India
Pvt. Ltd., Bombay High Court, held that turnover is a relevant criteria for choosing
comparable companies in determination of ALP and excluded companies on the basis
of turnover and size. Assessee turnover was around ` 47.46 crs. It would, therefore, fall
within the category of companies in the range of turnover between ` 1 crore and ` 200
crores. Thus, companies having turnover of more than ` 200 crores had to be eliminated
from the list of comparables. Thus, the order of the Dispute Resolution Panel excluding
the six companies from the list of comparable companies chosen by the Transfer Pricing
Officer on the basis of turnover and size was upheld. That comparables having related
party transactions of up to 15 per cent of the total revenues could be considered.
The Transfer Pricing Officer/Assessing Officer was further directed to examine the
financials of the company and adopt a threshold limit of 15 per cent of the total revenue
attributable to related party transaction as a ground for rejecting comparable companies.
(AY. 2010-11)
Obopay Mobile Technology India Pvt. Ltd. v. DCIT (2016) 157 ITD 982 / 46 ITR 42 / 177
TTJ 191 (Bang.)(Trib.)
1459 S. 92C : Transfer pricing – Interest on delayed realization of marketing expenses from
Associated Enterprises – Transaction of extending credit period to AEs cannot be
regarded as “international transaction” in the absence of any income arising therefrom
is not acceptable – Both transactions have to be aggregated for determination of ALP.
[S. 92CA]
Tribunal held that Transaction of extending credit period to AEs cannot be regarded
as “international transaction” in the absence of any income arising therefrom is not
acceptable. Both transactions have to be aggregated for determination of ALP. (ITA No.
1364/Bang/2011, dt. 19.08.2016) (AY. 2007-08)
Tally Solutions Pvt. Ltd. v. ACIT (Bang.)(Trib.); www.itatonline.org
1460 S. 92C : Transfer pricing – The TPO is required to be consistent in matters relating to
selection of comparables. If a comparable has been included or rejected in an earlier
year, he is not entitled to take a different view in a later year if there is no change in
circumstances. [S. 92CA]
The Tribunal held that; The TPO is required to be consistent in matters relating to
selection of comparables. If a comparable has been included or rejected in an earlier
year, he is not entitled to take a different view in a later year if there is no change in
circumstances. (ITA No. 1722/Del/2015, dt. 05.08.2015) (AY. 2010-11)
Hyundai Rotem Company v. ACIT (Delhi)(Trib.); www.itatonline.org
1461 S. 92C : Transfer pricing – Arm's length price – once combined net profit had been
arrived at by taking into account all transactions of AE as well as non-AE which was
factored into all costs and revenue then to separate out non-AE transactions over and
above such a profit determined was not desirable
Wherein respect of revenue derived by assessee-company from distribution of television
channels and sale of advertisement time, Profit Split Method (PSM) was adopted on
basis of detailed analysis and allocation of demand between AEs and non-AEs, DRP was
462
S. 92C Transfer pricing
not justified in concluding that profits from non-AE would not be covered under PSM
and same had to be determined separately at a higher rate. (AY. 2007-08)
Satellite Television Asian Region Ltd. v. Dy. CIT (2016) 177 TTJ 249 / 133 DTR 153 / 66
taxmann.com 247 (Mum.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Additional mark-up applied by 1462
TPO without any FAR analysis or without any benchmarking exercise with any
comparables, adjustment on account of extra mark-up is unjustified
Where an additional mark-up applied by TPO was without any FAR analysis or without
any benchmarking exercise with any comparables, addition/adjustment on account of
extra mark-up was to be deleted. (AY. 2010-11)
Tamasek Holdings Advisors India (P.) Ltd. v. Dy. CIT (2016) 177 TTJ 678 / 138 DTR 282
(Mum.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Company having income from sale of 1463
I.P. rights is incomparable to software development service provider
A company having income from sale of I.P. rights is incomparable to software
development service provider. (AY. 2006-07)
VeriSign Services India (P.) Ltd. v. Dy. CIT (2016) 177 TTJ 372 / 132 DTR 73 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Comparable and adjustment – Assessee 1464
has benchmarked international transactions on TNMM basis and Transfer Pricing
Officer has neither disputed assessee's claim that TNMM is most appropriate method,
nor comparable selected by assessee, it is not open to Transfer Pricing Officer to even
reject benchmarking done by assessee.
Where assessee had benchmarked international transactions on TNMM basis and
Transfer Pricing Officer had neither disputed assessee's claim that TNMM was most
appropriate method, nor comparable selected by assessee, it was not open to Transfer
Pricing Officer to even reject benchmarking done by assessee and make ad hoc addition
in value of international transaction; such a course of action is not permissible under
scheme of transfer pricing law. Even when a method of ascertaining ALP is, for good
and sufficient reasons, rejected by TPO, he has to select most appropriate method, out
of recognised methods under rules 10AB and 10B, and then apply same. (AY. 2008-09)
Det Norske Veritas A/S v. Addl. DIT (2016) 157 ITD 1022 / 178 TTJ 59 / 134 DTR 97
(Mum.)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Where on FAR analysis conclusion 1465
that a company is correctly chosen as a comparable remains unassailed, then it is
necessary for revenue at that stage to bring some cogent reason, argument or fact
justifying that still comparable needs to be excluded.
Where on FAR analysis, conclusion that a company is correctly chosen as a comparable
remains unassailed, then it is necessary for revenue at that stage to bring some cogent
reason, argument or fact justifying that still comparable needs to be excluded; merely
re-iterating TPO's stand at this stage that it is consistently a loss making company, will
not hold good. (AY. 2005-06)
Dy. CIT v. Nortel Networks India (P.) Ltd. (2016) 157 ITD 971 / 176 TTJ 25 (UO) (Delhi)(Trib.)
463
Transfer pricing S. 92C
1466 S. 92C : Transfer pricing – Arm's length price – Company providing software
development services could not be compared with company which was (a) engaged in
sale and development of software, (b) having huge turnover in comparison to turnover
of assessee, (c) predominantly product development company, (d) having minimal
employee cost, (e) engaged in development of niche product and development service,
(f) engaged in animation services or (g) incurring selling/research & development
expenditure for sale/development of products.
Assessee was providing software development services to its AE and non-AEs. The
TPO applied (a) new comparables, (b) negative working capital adjustment and
(c) took cost incurred in non-AE transactions to determine ALP. Company which was
(a) engaged in sale and development of software, (b) having huge turnover in comparison to
turnover of assessee, (c) predominantly a product development company, (d) having minimal
employee cost, (e) engaged in development of niche product and development service, (f)
engaged in animation services or (g) incurring selling/research & development expenditure for
sale/development of products could not be accepted as valid comparable while determining
ALP. No clear cut direction could be given for negative working capital adjustment as it
was required to be analyzed on basis of assessee's work profile and comparable companies,
working results; therefore, A.O./TPO was to be directed to re-workout working capital
adjustment after giving due opportunity to assesse. AO./Transfer Pricing Officer was to be
directed to exclude TP adjustment on non-AE transactions and re-workout costs pertaining to
AE transactions and restrict adjustment only to AE transaction. (AY. 2007-08)
NTT Data India Enterprises Application Services (P.) Ltd v. ACIT (2016) 157 ITD 897
(Hyd.)(Trib.)
1467 S. 92C : Transfer pricing – Arm's length price – In case of assessee, engaged in
development and delivery of domain specific software to its AE, companies having
turnover in excess of ` 200 crore and companies having related party transactions in
excess of 15 per cent, could not be accepted as comparable while determining ALP.
Assessee entered into international transaction of development and delivery of domain
specific software to its AE, Obapay Inc., USA. Since turnover of assessee was less than
` 20 crores, companies having turnover in excess of ` 200 crores, could not be accepted
as comparables. Companies having related party transactions in excess of 15 per cent
during relevant period, were not acceptable as comparables. A company engaged in
development of its own software products, could not be accepted as comparables.
Foreign exchange fluctuation gain was to be treated as part of operating profit while
determining ALP. (AY. 2010-11)
Obopay Mobile Technology India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 982 / 46 ITR 42 / 177
TTJ 191 (Bang.)(Trib.)
1468 S. 92C : Transfer pricing – Arm’s length price – Interest – Assessee claims that interest
is not being charged from AEs as well as non-AEs for delay in realization of funds
given to AEs as a result of commercial transaction and that contention is not disputed
to be factually incorrect, it cannot be open to TPO to compute interest and make
adjustment accordingly.
Where assessee claims that interest is not being charged from AEs as well as non-AEs
for delay in realization of funds given to them as a result of commercial transaction and
464
S. 92C Transfer pricing
that contention is not disputed to be factually incorrect, it cannot be open to TPO to
compute interest and make adjustment accordingly. When international transactions have
been benchmarked on basis of TNMM, and interest on delay in realization of amounts
is only incidental to such transactions rather than a standalone transaction, such an
adjustment cannot be made independently. (AY. 2008-09)
Det Norske Veritas A/S v. Addl. DIT (2016) 157 ITD 1022 / 178 TTJ 59 (Mum.)(Trib.)
S. 92C : Transfer pricing – A company subjected to merger by way of amalgamation 1469
cannot be taken as comparable.
Tribunal held as under:—
1. A company subjected to merger by way of amalgamation cannot be taken as
comparable.
2. Company with outsourcing cost of 66 per cent cannot be taken as comparable to
assessee having outsourcing cost at 8 per cent.
3. A company functionally similar cannot be excluded from comparables on the
ground of law turnover. (AY. 2006-07)
American Express (I) (P) Ltd. v. Dy. CIT (2016) 177 TTJ 33 (Delhi)(UO)(Trib.)
S. 92C : Transfer pricing – Turnover being less than 20 crores, companies having 1470
turnover in excess of 200 crore are to be excluded.
Tribunal held that the assessee’s turnover being less than 20 crores, companies having
turnover in excess of 200 crore are to be excluded from the list of the comparables.
(AY. 2010-11)
Dy. CIT v. Obopay Mobile Technology India (P) Ltd. (2016) 157 ITD 982 / 46 ITR 42 / 177
TTJ 191 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – TPO adopted a comparable operating 1471
on larger scale than assessee – When there is wide difference in brand value of two
companies and, without quantification of same any company could not be ascertained
as comparable.
Assessee is an export oriented company and offered back office services (ITES) to one of
its AE. It adopted TNM method to calculate the ALP and adopted 14 comparables but
later contended before TPO to exclude Infosys BPO on grounds of its high revenue and
wider business model. TPO rejected the plea of assessee. The AO and DRP upheld the
decision of TPO. The Tribunal directed the TPO to exclude Infosys BPO as comparable
and held that assessee’s business profile is limited and not comparable to business
model of Infosys, owing to the wide difference in turnover. The wide difference in
turnover makes it clear that there is wide difference in the brand value of the two
companies. Department has not brought on record any brand value of Act is on record
and, When there is wide difference in brand value of two companies and, without
quantification of same any company could not be ascertained as comparable of assessee.
(AY. 2010-11)
Actis Global Services (P) Ltd. v. ITO (2016) 175 TTJ 506 / 141 DTR 40 (Delhi)(Trib.)
465
Transfer pricing S. 92C
1472 S. 92C : Transfer pricing – Arm's length price – Assessee rejected re-sale price method
(RSPM) giving reasons mentioned in transfer pricing study – TPO made adjustment of
ALP of international transaction involving import of goods for re-sale in India – Plea
to change the method could be entertained at Tribunal stage as additional ground.
Assessee rejected re-sale price method by giving reason that reliable data is not
available relating to comparables for applying RSPM in public domain. In selection of
comparables and comparability analysis, it was at the secondary stage after selection
of most appropriate method. DR submitted that only pure question of law can be
admitted as additional ground and in absence of basic facts relating to comparables, the
ground for selecting RSPM as appropriate method cannot be entertained as it requires
examination of fresh facts relating to comparables. The Tribunal held that selection of
method is a purely legal issue and can be entertained at Tribunal stage in the form of
additional ground. Having held so, it is required to be seen whether re-sale price method
is the most appropriate method as claimed by the assessee. Only because the assessee, at
the initial stage, while preparing transfer pricing study, has rejected RSPM and selected
TNMM for insufficient data in the public domain, it cannot be precluded from making
a plea at a later stage before the appellate authorities that RSPM is the most appropriate
method for determining the arm's length price of transaction relating to import and sale
of FDFs. However, considering the fact that the assessee has raised this issue for the first
time before the Tribunal, a fair opportunity must be given to the department, and matter
was restored to AO/TPO for examining afresh after considering all materials on record.
When the AO/TPO decide the issue relating to selection of most appropriate method,
reasonable opportunity must be afforded to assessee as well. (AY. 2003–04)
Pfizer Ltd. v. ACIT (2015) 64 taxmann.com 465 / (2016) 175 TTJ 92 / 139 DTR 81 (Mum.)
(Trib.)
1473 S. 92C : Transfer pricing adjustment – Arm's length price – Turnover filter – TPO
rejected assessee’s filters and applied certain new filters – Held in case functional
comparability was there, then comparable could be rejected, if assets employed and
risk assumed were significantly different – Filter by TPO held incorrect.
Assessee was wholly owned subsidiary and was primarily engaged in providing IT
enabled services to its parent company. Assessee entered into certain international
transaction. TPO examined filters used by assessee in search process and rejected
Assessee’s filters and applied new filters to arrive at appropriate comparables. Tribunal
held that authorities have made general observations and comparing functional
profile on broad basis is insufficient because in case of functional comparability, the
comparable could be rejected, if it was demonstrated that assets employed and risk
assumed were significantly different from tested party. (AY. 2010-11)
Rampgreen Solutions Pvt. Ltd. v. Dy. CIT (2016) 175 TTJ 531 (Delhi)(Trib.)
1474 S. 92C : Transfer pricing – Arm’s length price – Comparable – Abnormal profit, low
employee cannot be compared – Risk adjustment, matter remanded to the Assessing
Officer.
A company which had abnormal profit in relevant year as compared to preceding as
well as succeeding years, cannot be selected as comparable. A company which has very
466
S. 92C Transfer pricing
low employee cost as compared to assessee-company cannot be selected as comparable.
A company engaged in e-publishing business and mainly carrying out data conversion
work, can be selected as comparable to company which is involved in file conversion,
content medication and test editing as a part of its back office support services, which
is similar to data conversion. A leading provider of business process outsourcing service
cannot be compared to company rendering technical support services by its own.
Where an assessee, a captive service provider, does not assume any risk or takes lesser
risk as compared to comparable company which undertakes higher risks, it is entitled
to some risk adjustments; but where assessee had not produced complete spectrum of
risk faced by it, issue was to be restored to file of Assessing Officer. (AY. 2009-10)
Schlumberger Global Support Centre Ltd. v. Dy. DIT (2016) 131 DTR 58 / 176 TTJ 30
(Pune)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Advance of loan to subsidiary at 7 1475
percent was held to be at arm’s length price.
During relevant year, assessee had advanced loan to its subsidiary 'A' Ltd. at an interest
rate of 7 per cent per annum. TPO, finding that loan was advanced without any
security, concluded that 17.26 per cent per annum, compounded on monthly basis was
a reasonable uncontrolled price. He thus made certain addition to assessee's ALP. It
was undisputed that assessee had advanced loan to subsidiary at 7 per cent per annum
and therefore, as long as comparable uncontrolled price of US $ denominated lending
was less than 247 points (i.e., 700-453) above LIBOR rate, transaction entered into by
assessee with its subsidiary could not be said to be at less than arm's length price. In
view of fact that Indian Banks were charging 250 basis points above LIBOR on similar
loans, it could not be concluded that amount advanced by assessee to its subsidiary
company at 247 basis points above LIBOR which was equivalent to 7 per cent annum,
was not at arm's length price. Therefore, impugned addition was to be deleted. (AY.
2008-09)
UFO Movies India Ltd. v. ACIT (2016) 175 TTJ 633 / 131 DTR 81 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Company admitted financial 1476
irregularities and conspiracy hatched and committed by its directors, financial results
of said company could not be relied upon.
Where a company admitted financial irregularities and conspiracy hatched and committed
by its directors, financial results of said company could not be relied upon and said
company could not be selected as comparable for transfer pricing purposes. (AY. 2005-06)
ACIT v. Motherson Sumi Infotech & Design Ltd. (2015) 155 ITD 8 / 174 TTJ 766 / 129
DTR 106 (Delhi)(Trib.)
S. 92C : Transfer pricing – Net margin method – Arbitrary action of the AO in treating 1477
the payment by the assessee to the AE as excessive/unreasonable was held to be not
justified.
Dismissing the appeal of revenue the Tribunal held that, arbitrary action of the AO in
treating the payment by the assessee to the AE as excessive/unreasonable was held to
be not justified. (ITA No. 7700/Mum/2010, dt. 25.05.2016) (AY. 2003-04)
ITO v. Intertoll ICS india Private Limited (Mum.)(Trib.); www.itatonline.org
467
Transfer pricing S. 92C
1478 S. 92C : Transfer pricing – Advertising, marketing and sales promotion (AMP) – In the
case of a manufacturer operating in a competitive industry, high AMP expenditure
cannot be assumed to have been incurred for the benefit of the brand owner –
Adjustment by the TPO was deleted.
In the case of a manufacturer operating in a competitive industry, high AMP expenditure
cannot be assumed to have been incurred for the benefit of the brand owner. The TPO
has to prove that the real intention of the assessee in incurring AMP expenses was to
benefit the AEs and not to promote its own business. Also, if the assessee has reported
high turnover & profits & offered to tax, the basic ingredient required to invoke s. 92
that there is transfer of profit from India remains unproved. In the absence of the AO/
TPO showing that there is a formal/informal agreement to share the AMP expenditure,
the adjustment cannot be made. The matter cannot be remanded to the AO/TPO for
reconsideration. (ITA No. 7714, 1119, 976, 518 and 335/Mum/2012, dt. 04.05.2016) (AY.
2009-10, 2010-11)
Loreal India Private Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org
1479 S. 92C : Transfer pricing – Alleged excess investment in share capital of wholly owned
subsidiary cannot be termed as loan and notional interest charged thereon.
The Tribunal deleted the Transfer pricing addition on account of
a) alleged excess consideration paid on investment in share capital of wholly owned
subsidiary re-characterized as loan
b) and notional interest thereon on the ground that
i. Chapter X of the Act is inapplicable to an international transaction on capital
account which does not result in income chargeable to tax and
ii. Re-characterisation of the transaction is not permitted under the Act, and
iii. That potential income, to qualify as income subject to transfer pricing under
the Act, should arise from the impugned international transaction which is
before the TPO for consideration and not out of a hypothetical transaction
that may or may not take place in the future. (ITA No. 2115/Mum/2015, dt.
19.02.2016) (AY. 2009-10)
Topsgroup Electronic Systems v. ITO (Mum.)(Trib.); www.itatonline.org
1480 S. 92C : Transfer pricing – “Need Test”, “Evidence Test” or “Rendition Test” to evaluate
the ALP of intra-group services rendered by an Associated Enterprise – Adjustment by
the TPO was held to be not justified.
The rendering of intra-group services for which Assessee has paid ` 21,20,48,533/- TPO
determined ALP at NIL holding that the assessee did not obtained any benefit of such
services and the services provided by the foreign AE were either not required, these
are incidental or stewardship services or duplicate services and hence unwarranted.
Since, in his opinion, the assessee failed to provide any evidence about the services
rendered by the AE necessitating the payment of such charges, he computed the ALP of
this international transaction at ` Nil. TPO has simply held that as there is no benefit
from the services for which payments has been made in determined the ALP of this
international transaction at Nil without carrying out any FAR analysis of this intra-group
services. On appeal HELD by the Tribunal:
468
S. 92C Transfer pricing
(i) Regarding the need test, it is apparent that looking to the size of the business
of the assessee and also for the continuous growth of the services assessee has
justified that such services are required. It is pertinent to note that requirement
of the services should be judged from the viewpoint of the appellant as a
businessman. Therefore in this regard we are of the view that assessee has
substantiated that these services are required by it. As the company is one of
the parties as service receiver of that agreement it proves that such services were
required by the assessee. Further the assessee is part of the MNE organization,
which has provided the service to many companies across the globe. As all other
companies situated in all together different companies and operating in different
geographies have also received and used these services which is evident from the
allocation list submitted by the assessee therefore this itself proves that for the
assessee to remain competitive in its business such services are required. Therefore
the assessee satisfied the need test which is alleged by ld. TPO to have not been
satisfied by the assessee.
(ii) Regarding the receipt of the services from AE, the assessee can be asked to
maintain and produce the evidence of receipt of services, which a businessman
keeps and maintains regarding services related from the third party. The burden
cannot be higher on the assessee for evidencing the receipt of services of higher
level merely because the services have been rendered by its AE. Against these
overwhelming evidence placed by the assessee before the lower authorities ld.
TPO has merely stated that assessee has not been able to provide any evidence
n that the AE has provided such services to the assessee. We could not find any
instances placed in the order of LD, TPO where it held that the evidence placed
by the assessee are not substantiated by rendition of service by the AE.
(iii) Hence in view of the overwhelming evidence placed by the assessee for receipt of
services and following the decision of co-ordinate bench respectfully, we are of the
view that rendering of services must be seen from the view point of the assessee
and further assessee cannot be asked to keep and maintain evidences of services
rendered by AE higher than which is expected from a businessman receiving
services from an unrelated provider. Therefore, we reject the view point of Ld.
TPO and Ld. DRP that assessee has not shown the receipt of the services. In view
of above we are of the view that assessee has justified the receipt of services and
satisfied the rendition test.
(iv) From the above decision of Hon'ble High court it is apparent that the user of
the services are concerned with the usefulness of its services which enhances
the value thereof and consequently in furtherance of its commercial interest.
Merely profitability cannot be the criteria for benefit, it is much more than what
is determinable in monetary terms. Therefore while determining ALP of IA,
usefulness, enhancement in value and furtherance of business interest is required
to be seen. (ITA No. 5882/Del/2010 5816/Del/2011 & 6282/Del/2012, dt. 02.05.2016)
(AY. 2006-07 2007-08, 2008-09)
GE Money Financial Services Pvt. Ltd. Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org
469
Transfer pricing S. 92C
1481 S. 92C : Transfer pricing – Unpaid service-tax could not be disallowed as no deduction
was claimed – Carry forward of losses of amalgamating company cannot be disallowed
– Rule 46A is not applicable to DRP proceedings. [S. 43B, 72A]
The Tribunal held that
1. TP adjustment was to be restricted only to AE transactions despite the fact that
assessee carried out benchmarking at entity level;
2. Revenue’s contention that DRP erred in admitting additional evidence (which was
not produced by assessee before AO) in violation of Rule 46A, was invalid since
Rule 46A is not applicable to DRP proceedings
3. Disallowance of unpaid service tax could not be made under section 43B where
the assessee did not claim the same in its Profit and Loss account.
4. Where the assessee fulfilled all the conditions prescribed under Section 72A
read with Rule 9C, the AO could not deny the claim of carry forward of
losses pertaining to the amalgamating company. (ITA No. 5335, 5487, 2143 &
2095/M/2014, dt. 28.10.2015) (AY. 2007-08, 2009-10)
DCIT v. Alstom Project Ltd. (Mum.)(Trib.); www.itatonline.org
1482 S. 92C : Transfer pricing – Corporate Guarantees are not comparable to Bank
Guarantees – ALP of corporate guarantee was taken at 0.5%. [S. 92B, 92CA]
Corporate Guarantees are not comparable to Bank Guarantees & so the commission of
3% charged by Banks is not a benchmark to evaluate the ALP of a corporate guarantee
but it has to taken at 0.5%. ITAT decisions which upheld the 3% rate cannot be
followed as they are contrary to CIT v. Everest Kento Cylinders Ltd. (2015) 378 ITR 57
(Bom.) (HC). (ITA No. 859&768/MUM/2014Dt. 29.04.2016) (AY. 2008-09)
Thomas Cook (India) Limited v. ACIT (Mum.)(Trib.); www.itatonline.org
1483 S. 92C : Transfer pricing – Arm’s length price – Copy right infringement expenditure
– Matter was remanded.
Tribunal held that where assessee claimed deduction of expenditure incurred towards
copyright infringement settlement from operating cost of transactions with its AE, since
all facts relating to issue were not on record, i.e., whether infringement of copyright
was with regard to international transactions and whether it formed part of operating
expenditure or not, matter was to be remanded back for disposal afresh. (AY. 2010-11)
Avineon India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 483 (Hyd.)(Trib.)
1484 S. 92C : Transfer pricing – Arm’s length price – Expenditure was incurred by assessee
– Tour operator in its role of a principal and not as an agent of its foreign AE, for
arranging tours, inasmuch as said amount was not recoverable per se from its AE,
said sum could not at all be construed as 'Pass through costs' and were liable to be
considered while determining ALP of international transaction.
Assessee-company, engaged in business of inbound tours and travels, provided services
to foreign tourist (arranging hotels, tour and travels) sent by its AE to India. Assessee
claimed that expenses incurred for arranging tours were on behalf of AE and it was
simply paying such costs and passing through same to its AE and, hence, said expenses
being pass through cost, should be ignored while computing ALP of said transactions.
AO did not concur with the assessee’s submission hence by applying 11.72 percent on
470
S. 92C Transfer pricing
such costs made the addition. CIT(A) deleted the addition. On appeal by revenue, the
Tribunal held that. It was found that assessee got a composite fixed amount from its
AE for hotel, transportation, air fare and it had to bear all costs in making arrangements
for stay and travel of tourists in India. Since entire sum represented costs incurred
by assessee in its role of a principal and not as an agent of its AE, inasmuch as said
amount was not recoverable per se from its AE, said sum could not at all be construed
as 'Pass through costs' and were to be included while computing ALP of said transaction.
(AY. 2006-07)
Dy. CIT v. Fritidsresor Tours & Travels India (P.) Ltd. (2016) 157 ITD 495 / 139 DTR 336
/ 180 TTJ 65 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – For determining ALP under 'Cost plus 1485
method', both direct and indirect costs of providing services are to be considered in
hands of assessee as well as comparable uncontrolled companies – Current year data
only to be considered.
For determining ALP under 'Cost plus method', both direct and indirect costs of
providing services are to be considered in hands of assessee as well as comparable
uncontrolled companies. Ratio of 'Net profit to total costs' has no place in mechanism
provided for computing ALP under 'Cost Plus Method' under rule 10B. Since
determination of ALP had been made on basis of multiple year data and not current
year data alone, matter should be restored to file of Assessing Officer. (AY. 2006-07)
Dy. CIT v. Fritidsresor Tours & Travels India (P.) Ltd. (2016) 157 ITD 495 / 139 DTR 336
/ 180 TTJ 65 (Delhi) (Trib.)
S. 92C : Transfer pricing – Arm’s length price – Comparable – Company which had 1486
under gone business restructuring could not be accepted as comparable – Company
which had extrodinary event of amalgamation cannot be held to be comparables.
In case of assessee rendering software development services to its AE, company which
was developing its own software products and company which had undergone business
restructuring process during relevant year, could not be accepted as comparables while
determining ALP. A company in whose case extraordinary event of amalgamation took
place, a company which had huge brand value and a company engaged in business of
BPO service and providing high-end technology services such as software testing and
validation, could not be accepted as comparables. Matter remanded. (AY. 2010-11)
Equant Solutions India (P.) Ltd. v. Dy. CIT (2016) 157 ITD 292 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Interest – Transaction relating to extra 1487
credit period to AE has to be aggregated with sale transactions for determining ALP.
Tribunal held that; where extended credit period to AE for realisation of sale proceeds
is directly related to and arising out of sale transaction, sale transaction with AE and
resultant extended credit period for realisation of sale proceeds being two sides of
a coin, are closely linked transactions and, thus, transaction relating to extra credit
has to be aggregated with sale transactions for determining ALP. where assessee had
provided extended credit facilities for realisation of export receivables to both AE and
non-AE without charging interest but in case of AE extended period exceeded 180 days,
before concluding that a tangible benefit had been passed on to AE as a result of such
471
Transfer pricing S. 92C
extended credit facility, margin of both transactions, viz., AE and non-A.E., had to be
seen and, if there was considerable difference between margin of AE transaction with
that of non-A.E., then it needed to be examined whether higher margin charged to
A.E. took care of extended credit period for realisation of export sale proceeds. Matter
remanded. (AY. 2009-10)
Yash Jewellery (P.) Ltd. v. Dy. CIT (2016) 157 ITD 340 / 180 TTJ 464 (Mum.)(Trib.)
1488 S. 92C : Transfer pricing – Arm’s length price – When interest was includible in
operating income and operating income itself had been accepted as reasonable by TPO
under TNMM, there could not be an occasion to make adjustment for notional interest
on delayed realization of debtors.
Assessee was a leading ink manufacturer in India. During relevant year, assessee
supplied base material to its subsidiary in USA. Subsidiary company manufactured
printing ink by using base material and sold it in USA. TPO held that the assessee had
allowed its subsidiary an average credit period of 186 days as against average credit
period of 130 days allowed to independent enterprises, i.e., non-AEs. He thus made
adjustment in respect of excess credit period of 56 days by computing time value of
money at rate of 6.38 per cent on LIBOR plus basis. The DRP set aside the objections of
AO. On appeal Tribunal held that when interest was includible in operating income and
operating income itself had been accepted as reasonable by TPO under TNMM, there
could not be an occasion to make adjustment for notional interest on delayed realization
of debtors. Moreover, since assessee had sold semi-finished goods to its subsidiary
company whereas sale transactions with independent enterprises were in respect of
finished goods, there was no occasion of any comparison between them in order to
determine ALP. In view of aforesaid, impugned addition was to be deleted. (AY. 2006-07)
Micro Ink Ltd. v. Add. CIT (2016) 157 ITD 132 / 175 TTJ 8 (Ahd.)(Trib.)
1489 S. 92C : Transfer pricing – Arm’s length price – Export of commodities to AE at same
price at which those were purchased from local market did not call for transfer
pricing adjustment if transaction was made by assessee to retain status of Star Export
House.
Assessee had acted as a support service provider in respect of transactions of export
of guar gums and pet chips and did not make any profit and sold goods to AE at same
price at which it was purchased from local market and AE in turn sold commodities to
customers at same price at which these were bought from assessee, just to retain status
of Star Export House, international transactions with AE met arm's length standard and,
accordingly, addition on account of arm's length price was not justified. (AY. 2002-03)
Pepsico India Holdings (P.) Ltd. v. ADCIT (2016) 157 ITD 1 (Delhi)(Trib.)
1490 S. 92C : Transfer pricing – Arm’s length price – TP adjustment towards ALP, if any,
is required to be made only in respect of international transactions entered into by
assessee with its AEs and not at entity level of assessee.
Allowing the appeal of assesse the Tribunal held that TP adjustment towards ALP, if
any, is required to be made only in respect of international transactions entered into by
assessee with its AEs and not at entity level of assessee. (AY. 2008-09)
Maine Global Enterprises (P.) Ltd v. ACIT (2016) 156 ITD 841 (Mum.)(Trib.)
472
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm’s length price – CUP method – Transfer pricing 1491
adjustment made relying on TNMM was to be deleted.
Allowing the appeal of assessee the Tribunal held that; Where assessee had followed
CUP method for determining ALP, which was a standard method, it could not be
discarded in preference over transactional profit methods unless revenue authorities
were able to demonstrate fallacies in application of such method (AY. 2010-11).
Kailash Jewels (P.) Ltd. v. ITO (2016) 156 ITD 685 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Berry ratio can be used as PLI in 1492
benchmarking ALP for indenting and steel trading transactions of assessee; it does
not offend rule 10B.
Tribunal held that berry ratio could be used as PLI in benchmarking ALP for indenting
and steel trading transactions of assessee and berry ratio adopted by assessee does not
offend rule 10B. Compensation model of assessee did not include profit attributable
to assessee on account of location saving, hence, adjustments for use of locational
savings was unwarranted. Further, use of intangibles could not be inferred or assumed
and had to be demonstrated on basis of cogent materials by TPO/Assessing Officer
and adjustment for use of intangibles was unwarranted. TPO cannot make notional
adjustments to cost base of AEs for determining arm's length price of assessee and hence
same were to be deleted and matter was to be remanded back for necessary factual
verifications and ALP computation. (AY. 2010-11).
Marubeni Itochu Steel India (P.) Ltd. v. Dy. CIT (2016) 156 ITD 620 / 177 TTJ 539 / 134
DTR 145 (Delhi)(Trib.).
S. 92C : Transfer pricing – Arm’s length price – Comparables – Company which 1493
outsourced its ITES to third party vendors could not be accepted as valid comparables.
Allowing the appeal of assessee the Tribunal held that, where assessee, engaged in
manufacturing cassia gum powder, rendered marketing support services to its AE,
company involved in high end niche market segment of financial contents and company
which outsourced its ITES to third party vendors, could not be accepted as valid
comparables while determining ALP. Matter remanded. (AY. 2007-08)
Lubrizol Advanced Materials India (P.) Ltd v. Dy. CIT (2016) 156 ITD 249 / 180 TTJ 616
(Ahd.)(Trib.)
S. 92C : Transfer pricing – Arm’s length price (CUP) – Where internally uncontrolled 1494
comparable transactions of rendering similar services as provided to AEs are
available, CUP would be most appropriate method for determining ALP.
Tribunal held that, while determining ALP under CUP method, if number of comparable
uncontrolled transactions are available, it is arithmetic mean of price charged in all such
transactions, which is considered for determining ALP of an international transaction; in
such a case, neither Assessing Officer nor Transfer Pricing Officer can resort to cherry-
picking. (AY. 2005-06)
ADIT v. ABB Lummus Heat Transfer BV (2016) 156 ITD 168 / 135 DTR 233 / 177 TTJ 82
(Delhi)(Trib.)
473
Transfer pricing S. 92C
1495 S. 92C : Transfer pricing – Arm’s length price – Sale of product to associated
enterprises cannot be taken as bench mark.
Tribunal held that prices, on which assessee has sold same products to resident
associated enterprises, cannot be taken as bench mark for ascertaining arm's length
price of its similar sale transaction with non-resident enterprises (AY. 2007-08, 2008-09)
Gemstone Glass (P.) Ltd. v. JCIT (2015) 174 TTJ 800 / 128 DTR 108 / (2016) 156 ITD 176
(Ahd.)(Trib.)
1496 S. 92C : Transfer pricing – Arm’s length price – CPM method – TPO was directed to
adopt TNMM method.
Tribunal held that, CPM is not a residuary method in sense that if every other method
of ascertaining arm's length price fails, CPM can be applied on basis of imperfect data;
if at all there is a residuary method, or what is termed as method of last resort, it is
transactional net margin method. The matter was remitted to TPO to determine the
arm’s length price on the basis of TNMM method. (AY. 2007-08, 2008-09)
Gemstone Glass (P.) Ltd v. JCIT (2015) 174 TTJ 800 / 128 DTR 108 / (2016) 156 ITD 176
(Ahd.)(Trib.)
1497 S. 92C : Transfer pricing – Arm’s length price – Advertisement marketing and
promotion expenses – Matter remanded.
It was held that it is mandatory to make a comparison of the AMP functions performed
by the assessee and comparables and then making an adjustment, if any, due to
difference between the two so that the AMP functions performed by the assessee and
comparable are brought to a similar platform. TPO having made transfer pricing analysis
only on the basis of AMP spend without discussing AMP functions, matter remanded
for decision afresh. (AY. 2010-11).
Discovery Communications India v. Dy. CIT (2016) 130 DTR 137 / 175 TTJ 271 (Delhi)
(Trib.)
1498 S. 92C : Transfer pricing – Arms’ length price – Import of goods from AE – CUP
method – Adjustment on the basis of price on day-to-day basis was held to be not
justified.
Assessee having made imports from its AEs at a price lower than the accepted
comparable CUP price, no ALP adjustment could be made. When the ALP is justified
on the basis of the CUP method accepted by the TPO, there cannot be an occasion to
make adjustment on the basis of price averaging on day-to-day basis. (AY. 2004-05)
UE Trade Corporation India (P) Ltd. v. ITO (2016) 130 DTR 345 / 176 TTJ 252 (Delhi)
(Trib.)
1499 S. 92C : Transfer pricing – Arm's length price – Selection of comparable – Functionally
different cannot be treated as comparable.
It was held that the fact that the segmental details of SP Ltd. (comparable) in the public
domain for the relevant year were not reliable, the said company was functionally
incomparable to the business support services segment of assessee company as it
organized events on sponsorship and was functioning with an entirely different revenue
474
S. 92C Transfer pricing
generation model and, therefore, SP Ltd. cannot be treated as comparable to the
assessee. (AY. 2008-09)
Qualcomm India (P) Ltd. v. Dy. CIT (2016) 130 DTR 1 / 175 TTJ 497 / 45 ITR 370 (Delhi)
(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Assessee engaged in trading/ 1500
distributing activities – Resale Price Method to be regarded as most appropriate
method – Internal comparables were to be preferred to external comparables for
distribution segment, wherever appropriate data was available.
Assessee does central spare-parts management entity/division for all Honda products
sold in India and also exports products to Honda subsidiaries/dealers in Indian
subcontinent/Europe, Africa and South America. Assessee had used TNMM Method
as the most appropriate method. TPO rejected the TNMM used by the assessee as
most appropriate method and held that RPM was MAM. Further, also TPO considered
internal comparable uncontrolled transaction of the assessee for determination of the
ALP since assessee had transactions with both related and unrelated parties. DRP upheld
the action of TPO. Held that assessee has, in all its reports and submission, stated that
it is a distributor/re-seller of spare parts, and that it is selling as well as purchasing
the spare parts, from both related and unrelated entities. Even the functional analysis
carried on by the assessee in its TP report does not claim or indicate that the assessee
is carrying out manufacturing activity of any type. In the TP study, the assessee has
described itself to be engaged in the business of trading activity. However, the assessee
has, as a passing reference, stated before the DRP that it places order for certain spares
with the manufacturer in certain circumstances. Placing orders for manufacturing, does
not make the assessee a manufacturer. It would be a case of procurement of spares
through job work orders on factories. There may be cases of value addition, in case
the assessee supplies certain parts to the job work manufacturer for manufacture of
a spare part. Assessee is predominantly a distributor and is involved in some cases
in placing orders for certain spares from factories. This does not make the assessee a
manufacturer. Instead of buying goods off the shelf, it is buying spares by placing job
work order from manufacturer. The claim of laying down the design, specification etc.
by the assessee, is not acceptable for the reason that, it is the Automobile company
which manufactures the car, which does such functions. The type of specification,
quality etc., of spares is duly defined in each and every car/auto manufacture. Further,
assessee has expressed a situation where certain parts are imported, and used as parts
of the kit, that is manufactured/assemble locally on Job order basis, and then sold. The
burden is on the assessee to furnish the required data for separate determining of ALP
in all cases where there is value addition through manufacture/assembly. Facts and
functions of the assessee have not been properly reported by the assessee and resultantly
have not been appreciated and adjudicated upon by the TPO. The function of distributor
has to be treated differently from the function of job order manufacturer of spare or
cases where there is value addition. Hence, the facts of the case, the functional profile
etc. have to be examined afresh to arrive at the correct ALP. Following directions were
passed : (a) RPM is the MAM for the Distributor/trading segment. Finding of the DRP
for the segment where value addition is made to imported spares, and in case where
475
Transfer pricing S. 92C
procurement is done by placing job work orders, fresh adjudication is to be done de
novo to determine the MAM, is upheld. (b) The burden is on the assessee to substantiate
its claim of value addition etc. (c) Internal comparables were to be preferred to external
comparables for the distribution segment, wherever appropriate data was available. (AY.
2009-10, 2010-11)
Honda Motor India (P) Ltd. v. ACIT (2016) 176 TTJ 282 / 66 taxmann.com 9 / 137 DTR
254 (Delhi)(Trib.)
1501 S. 92C : Transfer pricing – Arm’s length price – Assessee was not having debtors and
was entirely funded by advance received from AE – Revenue did not contend that
comparables considered were not carrying any debtors, creditors and inventories –
Adjustment of working capital needed on comparables in order to bring parity.
Held that revenue has not disputed the averment of the assessee that it was carrying
no debtors and its supplies to the AEs were always funded by them through advances.
Effectively what it would mean was that assessee did not need any working capital loan
at all and was relying on its own resources. Hence to bring the uncontrolled transaction
comparable to the transactions of an assessee, it was required to eliminate the material
differences which are likely to affect the price or cost or profits arising from the
transactions. There is no case for the Revenue that the comparables considered were not
carrying debtors, inventories and creditors. When assessee was not having any debtors
and was entirely funded by advance received from AE abroad against supplies, then in
order to bring parity between the results of the selected comparables and that of the
assessee it is essential that adjustment for the working capital is made on the results of
such comparables. Only then can the uncontrolled transaction become comparable to
the international transactions of the assessee. Therefore, DRP was correct in giving the
direction to the AO to carry out the necessary working capital adjustment in working
out the average PLI of the comparables. (AY. 2010-11)
Indigra Exports (P) Ltd. v. DCIT (2016) 176 TTJ 384 / 64 taxmann.com 370 / 135 DTR
225 (Bang.)(Trib.)
1502 S. 92C : Transfer pricing – Arm’s length price – Foreign exchange gain/loss can be non-
operational – If AO shows that such gains/loss came out of hedging and transactions
which were independent of business revenue earning transaction of assessee –
Revenue earned by assessee was from export – Foreign exchange income/loss was to
be treated as operating in nature.
Held that foreign exchange gain/loss could be considered as non-operational only if the
AO could show that such gains/loss came out of hedging and transactions which were
independent of the business revenue earning transaction of the assessee. Preponderance
of probability will always weigh in favour of the assessee when its revenues are only
from exports. No presumption that foreign exchange gain/loss were not having any nexus
to the operations of the assessee. AO is directed to accept the claim of the assessee.
(AY. 2010-11)
Indigra Exports (P) Ltd. v. DCIT (2016) 176 TTJ 384 / 64 taxmann.com 370 / 135 DTR
225 (Bang.)(Trib.)
476
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm's length price – Assessee opined that economic slow- 1503
down, frequent power disruptions, spiralling cost of raw material all resulted in
lower utilisation of capacity, leading to underabsorption of fixed costs – TPO held that
assessee was not able to substantiate its claim for adjustment of depreciation while
working out its PLI – Depreciation on fixed assets need not be directly proportional
to utilisation of machinery because assets can get depreciated by non-usage as well –
Attempt of assessee to have a lesser charge of depreciation while working out its PLI
in guise of under utilisation of capacity, was not correct
Assessee had a capacity for production of 1,22,233 sq.mts. of granite but it had
only produced 28,336 sq.mt during the year. Therefore, there was underutilisation
of capacity and assets. Fixed cost remaining the same, irrespective of the actual
utilisation, such cost had to be charged to the production. As per assessee reason for
under utilisation was that there were difficulties in procuring raw material, not owning
any captive mines, and severe shortage of power. Thereby, assessee made adjustment
in depreciation. Held that it would mean that wear and tear of the fixed assets were
considered at a lower level than what it would have been if such assets were used
without respite. Depreciation on fixed assets need not be directly proportional to
utilisation of machinery. Assets can get depreciated by non-usage as well. Hence attempt
of the assessee to have a lesser charge of depreciation while working out its PLI in the
guise of underutilisation of capacity was not correct. No doubt, Rule 10B(1)(e) requires
adjustment of differences between international transactions and the comparable
uncontrolled transactions which would materially affect the net material margin. But
assessee was unable to establish that the comparables had claimed depreciation after
considering their capacity utilisation. Further assessee also could not establish the
existence of a linear relationship between its depreciation cost and machine utilisation.
Thereby, grounds are dismissed. (AY. 2010-11)
Indigra Exports (P) Ltd. v. DCIT (2016) 176 TTJ 384 / 64 taxmann.com 370 / 135 DTR
225 (Bang.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Comparables chosen on the basis of 1504
FAR Analysis – Cannot be excluded as it was not consistently loss making companies –
Onus on Revenue to bring more cogent reason, argument or fact to justify its exclusion.
The assessee had availed of the services of expatriates from its AE's for provision
of technical services to RIL under the agreement. The TPO after considering the
comparables chosen by the assessee excluded loss making companies like Himachal
Futuristic Communication Ltd. (HFCL) and made an adjustment. The CIT(A) observed
that the TPO had not disputed FAR of HFCL so far as comparability with the assessee
was concerned. Accordingly it held that it cannot be said that HFCL was consistently
loss making company and hence could not be treated as comparable. On appeal to
Tribunal, it was held that where on FAR analysis the conclusion that a company was
correctly chosen as a comparable remains unassailed, then it was necessary for the
revenue at that stage to bring some cogent reason, argument or fact justifying that still
the comparable needs to be excluded. It further held that merely reiterating TPO’s stand
would not hold good at Tribunal stage. (AY. 2005-06)
DCIT v. Nortel Networks India (P.) Ltd. (2016) 176 TTJ 25 (UO) / 66 taxmann.com 177
(Delhi)(Trib.)
477
Transfer pricing S. 92C
1505 S. 92C : Transfer pricing – Arm’s length price – Net operating profit margin of assessee
to be computed and compared with net operating profit margin of the comparable
companies with same base.
Assessee was a subsidiary of Agilent Technologies Europe BV. Its business operations
comprised of facilitation of sales of Agilent products in Indian market. It was a
'Commission agent' as regards its transactions under Indent model and a 'Trader' as
regards its transactions under Buy-Sell model. For the purpose of determining the ALP
of its international transaction, the assessee combined both the segments. It compared its
OP/OC (Operating Profit/Operating Cost) margin with the OP/VAE (Operating Profit/Value
added expenses) margin of the comparable companies for determining the ALP of its
international transactions To maintain parity, the TPO adopted 'Value Added Expenses'
as base (denominator) while computing the margin of the comparable companies. On
appeal to Tribunal, it was held that as per rule 10B(1)(e), while applying TNMM, the
margin of the tested party as well the comparable companies should be computed
having regard to the same base and accordingly, the action of the TPO was upheld by
the ITAT. Further, the ITAT also observed that for bench marking the trading segment,
operating cost could be an appropriate base, while value added expenses could be
an appropriate base of commission agents. Since both the segments were incorrectly
combined to determine the ALP, the matter was remanded for de novo determination.
(AY. 2005-06)
DDIT v. Agilent Technologies India (P.) Ltd. (2016) 176 TTJ 415 / 67 taxmann.com 95 /
136 DTR 25 (Delhi)(Trib.)
1506 S. 92C : Transfer pricing – Arm’s length price – Selection of comparables – A company,
though in almost similar line of business functionally, ceases to be comparable,
because of adoption of a different business model as per which activities are mostly
outsourced – Comparable cannot be rejected if there was no negative phase of
economic cycle.
The assessee’s primary functions include the provision of electronic publishing services,
such as, computerized data conversion, web-page construction, data entry/key boarding,
copyediting, and CAD/CAM/GIM mapping services to its AE. The assessee undertook one
international transaction of : 'Provision of IT-Enabled data Conversion services’. The TPO
selected 11 companies as comparables. On appeal to Tribunal, it was held that VIT Ltd.
though functionally similar to assessee but had outsourcing 75% of its jobs as against
complete in-house working of assessee, and hence could not be treated as comparable.
Though revenue has right to file cross objections against the adverse order of the
CIT(A) but it has no right to file appeal against the view taken by the AO/TPO himself
which was not disturbed in the first appeal. When TPO himself considered ASE Ltd as
comparable, there could be no reason for revenue to be aggrieved against its inclusion;
and department could take recourse to other legal remedies, if any, available as per law
insofar as its grievance against decision of Assessing Officer/TPO was concerned. Further
it held that comparable company namely Ask Me Info Hubs Ltd. could not be rejected if
there was no negative phase of economic cycle and TPO’s observations that the company
had declining turnover and profitability was factually unfounded. (AY. 2007-08)
ACIT v. Tech Books Electronics P. Ltd. (2016) 176 TTJ 20 / 65 taxmann.com 241 / 138
DTR 145 (Delhi)(Trib.)
478
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm’s length price – No transfer pricing adjustment if the 1507
TPO had accepted international transaction to be arm’s length in subsequent year and
facts have remained the same.
The Assessee submitted documents supporting the selection of CUP as the most
appropriate method to benchmark its transactions, which was rejected by the TPO on
the basis that they were sketchy. The TPO applied TNMM wherein one company was
selected as comparable by the TPO. The Assessee submitted additional evidences before
the CIT(A) to prove that CUP was the correct method to be applied and the company
selected by the TPO was not comparable to the assessee due to various reasons. The
CIT(A) accepted the additional evidences since the assessee was prevented by sufficient
cause, being the illness and subsequent death of his accountant, to submit them at
the time of assessment. The CIT(A) deleted the TP adjustment. On appeal by the
Department, the ITAT upheld the order of the CIT(A) since the AO did not dispute the
correctness of the additional evidences submitted by the Assessee and the Assessee
was prevented by sufficient cause from submitting the same at the time of assessment.
Further, the TPO had accepted the CUP method applied by the Assessee in subsequent
years. The ITAT also held that the company selected by the TPO as comparable was
into manufacturing activity while the Assessee was only into trading and hence the
adjustment made by the TPO was rightly deleted by the CIT(A). (AY. 2006-07)
DCIT v. Davinder Kumar Bhasin (2015) 174 TTJ 844 / 128 DTR 218 / (2016) 45 ITR 232
(Chd.)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Selection of comparable – DRP in 1508
preceding year accepted EDCIL as comparable – No change in circumstances in
current year – EDCIL to be accepted as a comparable – After including EDCIL as
comparable, margin within +/-5% – No transfer pricing adjustment.
During the assessment, TPO rejected the EDCIL as comparable on the basis that the said
is not functionally comparable. On appeal against the final assessment order, assessee
argued that EDCIL is engaged in provision of support services and company operates in
three segments. Two segments of EDCIL are comparable to services provided by assessee
to its AE. Held that, in assessee’s own case for AY. 08-09 DRP directed the TPO to
consider the two segments as comparable to the assessee and since business of EDCIL
and assessee has remained unchanged there exists no reason to reject the company in
the year under consideration. AO/DRP was directed to include the comparable in the
final set. Further, after inclusion of EDCIL margin comes within +/- 5%, international
transaction is considered to be at arm’s length and adjustment is liable to be deleted.
(AY. 2009-10)
Eli Lilly & Co. (India) (P) Ltd v. ACIT (2016) 159 ITD 482 / 176 TTJ 234 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arms’ length price – Adjustments of global profits of 1509
assessee – No judicial authority for the proposition that the TP adjustments cannot
result in a situation that these are in excess of global profits
Assessee contended that the total adjustment made to the arm's length price of the
appellant should be restricted to the overall income earned by the AE from third
parties. Conceptual justification for this proposition is that the ALP adjustment should
be restricted to the overall profits of the group as a whole. Held that all intra AE
479
Transfer pricing S. 92C
relationships are not linear. There are complex structures involved in many intra
AE transactions, and, if it is held that the ALP adjustments cannot exceed the global
profits, it will result in interaction of too many tax jurisdictions, in many a cases with
irreconcilable tax laws – particularly with respect to permissible tax manoeuvrings,
to come to a logical conclusion in such cases. Therefore, it cannot be held that ALP
adjustments cannot result in a situation that the profits of the AEs and the ALP
adjustments, put together, exceed the global profits of the group as a whole. There is
no judicial authority for the proposition that the TP adjustments of an assessee cannot
result in a situation that these are in excess of the global profits. Right course of action
will be to remit the matter to the Assessing Officer with a direction to re-examine
this aspect of the matter in the light of the decision of Global Vantage (P.) Ltd.' (2013)
354 ITR 21 (Del. HC) In the absence of necessary information such as average selling
expenses in this line of activity at the relevant point of time, this issue cannot be
decided at this stage. In case the assessee can indeed demonstrate that the residual
revenues belonging to the assessee, after making appropriate adjustments for the average
selling expenses in his line of commercial activity, are less than the transaction value,
or within 5% range of the same, the same will have to be accepted as an arm's length
price by the Assessing Officer. The functional profile of the AE, as also other related
factors such as weightage to this functional profile in terms of the revenue allocation,
will also have to be examined. (AY. 2008-09)
Fortune Infotech Ltd. v. ACIT (2016) 157 ITD 1244 / 176 TTJ 619 / 47 ITR 113 / 131 DTR
321 (Ahd.)(Trib.)
1510 S. 92C : Transfer pricing – Arm’s length price – Selection of Comparable – Turnover
relevant criteria for choosing comparables – Turnover of companies above ` 200 crs
to be excluded – AO directed to recompute arithmetic mean.
Held that Delhi High Court in the case of Chryscapital Investment Advisors (India) (P.)
Ltd. v. Dy. CIT 376 ITR 183 has considered the issue as to whether comparable can be
rejected on the ground that they have exceptionally high profit margins or fluctuation
profit margins, as compared to the assessee in transfer pricing analysis. The observations
of the High Court, insofar as it refers to turnover, were in the nature of obiter dictum.
Judicial discipline requires that the Tribunal should follow the decision of a non-
jurisdiction High Court. However, it was found that the Bombay High Court in the
case of CIT v. Pentair Water India Pvt. Ltd., Tax Appeal No. 18 of 2015 judgment dated
16-9-2015 has taken the view that turnover is a relevant criterion for choosing companies
as comparable companies in determination of ALP in transfer pricing cases. There was
no decision of the jurisdictional High Court on this issue. Following the principle that
where two views are available on an issue, the view favourable to the assessee has to
be adopted, the view of the Bombay High Court on the issue was to be followed and,
thus, the companies, viz., Flextronics Software Systems Ltd., iGate Global Solutions Ltd.,
Mindtree Ltd., Persistent Systems Ltd., Sasken Communication Technologies Ltd., Infosys
Technologies Ltd. having turnover above ` 200 crores should be excluded from the list
of comparable companies. The Assessing Officer was directed to compute the Arithmetic
mean by excluding the aforesaid companies from the list of comparable (AY. 2006-07)
FCG Software Services (India) (P) Ltd. v. ITO (2016) 176 TTJ 145 / 66 taxmann.com 296
(Bang) (Trib.)
480
S. 92C Transfer pricing
S. 92C : Transfer pricing – Arm’s length price – Adjustment on account 1511
of underutilization capacity – No specific submission and quantification of
underutilization capacity – Impact is to be with reasonable precision, quantified and
then only adjustment can be held.
Held that merely because the employee costs of the assessee are higher, it does not
lead to the conclusion that there is an underutilization of capacity. Underutilization
is much more in the case of non AE transactions inasmuch as "the employee costs to
turnover ratio in AE segment is 76% whereas in non-AE segment it is 97%". There is
no specific submission and quantification on the fact, if at all, of the underutilization of
capacity. There is no room for vague generalities and over simplifications, as the impact
of underutilized capacity is to be, with reasonable precision, quantified and then only
it can be adjusted. The exercise of quantifying the capacity underutilization has not
been carried out at all. There is no discussion in the orders of the authorities below
or in the submissions of the assessee. Therefore, we are not inclined to uphold the
assessee's grievance with respect to denial of adjustment for capacity underutilization.
(AY. 2008-09)
Fortune Infotech Ltd. v. ACIT (2016) 157 ITD 1244 / 176 TTJ 619 / 47 ITR 113 / 131 DTR
321 (Ahd.)(Trib.)
S. 92C : Transfer pricing – Arm's length price – Not permissible to substitute actual 1512
profit earned by assessee with any other profit base i.e. either by considering actual
profits for earlier years or by taking into account projected profits of subsequent years
Assessee adopted PLI of OP/OC and computed its weighted average profit rate of 16.53%,
by taking profit margins for a period of four years, being actual figure for the current
year at 6.52% and projected figures for coming three years at 17.23%, 19.05% and
19.05%. TPO rejected the approach and held that only profit for the current year could
be considered as the assessee's PLI. Held that when we consider the language of section
92(1) in juxtaposition to that of section 92C(1), it emerges that it is the income arising
from an international transaction which is to be computed having regard to its ALP.
Section 92C(3)(a) provides that where the AO is of the opinion that "the price charged or
paid in an international transaction" has not been determined as per ALP, then, he may
proceed to determine the ALP in relation to the said international transaction. The base
for comparison, being the actual income of the assessee from an international transaction,
cannot be substituted with any hypothetical figure by considering, inter alia, projected
profits for the subsequent years. Essence of the entire transfer pricing provisions is to
compare the actual price/profit realized/earned by the assessee from an international
transaction with the price/profit realized/earned from comparable uncontrolled
transactions. It is totally impermissible to substitute actual profit earned by the assessee
from an international transaction with any other profit base, either by considering the
actual profits for the earlier years as well or by taking into account the projected profits
of the subsequent years, for the purposes of determining the ALP of an international
transaction. Figures taken for subsequent three years are mere projections. Therefore, view
point of the assessee in calculating its PLI by considering figures for the current year and
also projected figures for subsequent three years is erroneous. (AY. 2008-09)
Headstrong Services India (P) Ltd v. DCIT (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR
73 (Delhi)(Trib.)
481
Transfer pricing S. 92C
1513 S. 92C : Transfer pricing – Arm’s length price – Transactional Net Margin Method –
Rule 10B(1)(e) – Calculation of net profit margin as per Rule 10B(1)(e) Adjustment to
the profit margin should be made to the comparables and not to the assessee.
Held that from bare perusal of Rule 10B(1)(e)(i) brings out that net profit margin
realized by the enterprise from an international transaction is to be computed in
relation to a particular base. Sub-clause (ii) provides that the net profit margin realized
by the enterprise from the comparable uncontrolled transaction is computed having
regard to the same base. Sub-clause (iii) provides that the net profit margin realized
by a comparable company, determined as per sub-clause (ii) above, 'is adjusted to
take into account the differences, if any, between the international transaction and the
comparable uncontrolled transactions which could materially affect the amount of net
profit margin in the open market.' On going through sub-clauses of Rule 10B(1)(e), it
becomes patent that as per the first step, the net profit margin 'realized' by the enterprise
from an international transaction is to be computed. Use of the word 'realized' in the
provision richly indicates that it is the calculation of actual operating profit margin of
the assessee earned from international transaction, which is not any adjusted figure.
From the language of sub-clause (iv), where again reference has been made to profit
margin 'realized' by the assessee from the international transaction. When we consider
sub-clauses (ii) and (iii), it turns out that, firstly, the net operating margin actually
realized from the comparable uncontrolled transaction is computed, which is determined
in the same way as that of the assessee as per clause (i), that is, actual figures without
making any adjustment. Then sub-clause (iii) talks of adjusting the actually realized
margin of comparables to bring the same at par with the international transaction
undertaken by the assessee, so as to iron out the effects of differences between the
international transaction and comparable uncontrolled transactions. On going through
all the sub-clauses of Rule 10B(1)(e), the position which follows is that the net profit
margin realized by the assessee from its international transaction is taken as such
and the adjustments, if any, due to differences between the international transaction
and comparable uncontrolled transactions, are given effect to in the profit margin of
comparables. Contention of AR that the adjustment should be carried out in the profit
margin of the assessee is devoid of merit and contrary to the legal provisions. (AY.
2008-09)
Headstrong Services India (P) Ltd v. DCIT (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR
73 (Delhi)(Trib.)
1514 S. 92C : Transfer pricing – Arm’s length price – Foreign Exchange Fluctuation can
be legally made in profit margin of comparables and not in the margin of assessee –
When assessee enters an agreement with its AE with effect from first day of previous
year – No scope for comparing foreign exchange rate of the year with previous
years.
Held that any northwards or southwards sojourn in the foreign currency rate leaves
its impact on the operating profit of the assessee in the same manner as on that of the
comparables. If the assessee's profit margin got shrinked due to adverse fluctuation in
the foreign exchange rate, the same rate when applied to the comparables, would have
affected their profit margins as well. Since adjustment was permissible in the profit
margin of comparables only due to differences between the international transaction and
482
S. 92C Transfer pricing
the comparable uncontrolled transaction, and not due to a factor affecting profit of both
the assessee and comparables in the same manner, we refuse to allow any adjustment
in the profit rate of comparables because of fluctuation in the foreign currency rate.
Therefore neither the assessee can claim any adjustment on account of foreign exchange
fluctuation rate in its profit nor such an adjustment. (AY. 2008-09)
Headstrong Services India (P) Ltd v. DCIT (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR
73 (Delhi)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – TNMM is the most appropriate method 1515
since domestic segment cannot be compared to export segment.
The assessee, engaged in manufacture and sale of tractors, selected TNMM as the
most appropriate method to benchmark its international transaction. The AO changed
the same to Cost Plus Method and compared the gross margin from sale of tractors in
the domestic segment to the AE segment. The ITAT held that TNMM was the most
appropriate method for since the domestic segment and export segment could not
be compared due to various differences in risks as well as the fact that the TPO had
accepted TNMM in the previous years. (AY. 2006-07, 2007-08)
John Deere India P. Ltd. v. DCIT & John Deere Equipment P. Ltd. v. ITO (2015) 172 TTJ
470 / 123 DTR 188 / 69 SOT 45 (2016) 45 ITR 389 (Pune)(Trib.)
S. 92C : Transfer pricing – Arm’s length price – Internal CUP method cannot be 1516
applied – in comparing revenue sharing formula between assessee & its AE on one
hand and its AE & third parties
Held that assessee has treated itself as a tested party in its transfer pricing study report,
which has been accepted by the TPO. Under the CUP method as prescribed under Rule
10B(1)(a), price charged for services rendered in a comparable uncontrolled transaction
is identified which is then adjusted to account for differences, if any, between the
international transaction undertaken by the assessee and comparable uncontrolled
transactions. Such adjusted price is taken as ALP in respect of the services provided by
the assessee in the international transaction. From the machinery provision contained
in Rule 10B(1)(a), it is clear that the internal CUP provides for comparing the assessee's
international transaction with another comparable uncontrolled transaction undertaken
by it. We fail to appreciate the logic behind the learned AR's submission in comparing
the Revenue sharing formula between the assessee and its AE on the one hand and
its AE and third parties on the other. As the assessee is a tested party, under the
CUP method, it is only the price charged by it which can be compared with the price
charged by some comparable(s) in uncontrolled transactions. The argument put forth
on behalf of the assessee can be successfully applied only in determining the ALP of
the international transactions undertaken by its AE so as to make a valid comparison
between remuneration paid by such AE to the assessee with that paid to unrelated
parties, provided other terms and conditions of the provision of services are similar.
Assessee can resort to the CUP method only by showing that the price charged by it
from its AE was favourably comparable to the price charged by some other comparable
company in uncontrolled transaction(s). No material on record to show the price charged
in a comparable uncontrolled situation. Therefore hold that the view before the DRP
483
Transfer pricing S. 92C
to the CUP method is devoid of merits and most appropriate method is TNMM which
was originally adopted by the assessee and also approved by the TPO. (AY. 2008-09)
Headstrong Services India (P) Ltd v. DCIT (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR
73 (Delhi)(Trib.)
1517 S. 92C : Transfer pricing – Arm’s Length Price – Burden is on asessee to show that
comparable had a particular capacity utlisation. [R. 10B(1)(e), 10B(3)]
Tribunal held that the assessee’s contention that the adjustment on account of difference
between capacity utilization of comparable companies and the assessee should be
adjusted in the profit margin of the assessee is rejected. Adjustment for capacity
utilization or for that matter any other adjustment, can be legally made only in the profit
margin of the comparables, if otherwise factually warranted. (AY. 2011-12)
Saxo India (P) Ltd. v. ACIT (2016) 176 TTJ 540 / 67 taxmann.com 155 (Delhi)(Trib.)
1518 S. 92C : Transfer pricing – Arm’s length price – As per separate segment of software
development covering IT infrastructure sector is comparable to software service
provider – Transaction being deemed to be two AEs will cease to be uncontrolled
transaction. [S. 92B]
Tribunal held that where a company which has a separate segment of software
development covering IT Infrastructure sector is comparable to software service provider.
Tribunal also held that as per section 92B assessee’s transaction with non-AE third
person shall be deemed to be a transaction entered in to between two AEs if there exists
a prior agreement in relation to relevant transaction between non-AE third person and
AE of assessee or terms are already determined between non-AE third person and AE of
assessee; transaction being deemed to be between two AEs, will cease to be uncontrolled
transaction. (AY. 2011-12).
Saxo India (P) Ltd. v. ACIT (2016) 176 TTJ 540 / 67 taxmann.com 155 (Delhi)(Trib.)
1519 S. 92C : Transfer pricing – Arm’s length price – Though functionally similar but
outsourcing 75 per cent of its jobs as against complete in house working of assessee,
cannot be treated as comparable. [R. 10B(1)(e)]
Tribunal held that though functionally similar but outsourcing 75 per cent of its jobs
as against complete in-house working of assessee, cannot be treated as comparable.
Arguments of the Department Representative to treat ASE-Ltd., as functionally dissimilar
and delete it from the list of comparables is not acceptable, as the same has been treated
by the TPO as comparable and the CIT(A) has not tinkered with this conclusion of the
AO/TPO. (AY. 2007-08)
ACIT v. Tech Books Electronics (P) Ltd. (2016) 176 TTJ 20 / 65 taxmann.com 241 / 138
DTR 145 (Delhi)(Trib.)
1520 S. 92C : Transfer pricing – Reimbursement for business support service – Addition
was deleted.
The Tribunal held that the assessee did not incur any expenditure on its own on this
behalf and provided all details of service rendered by AE worked out by assessee, the
addition towards ALP deleted. (AY. 2007-08)
Gillette India Ltd. v. ACIT (2015) 70 SOT 289 / (2016) 175 TTJ 35 (UO)(Jaipur)(Trib.)
484
S. 92C Transfer pricing
S. 92C : Transfer pricing – Most appropriate method – Matter was set aside. 1521
The Tribunal set aside the order of AO and directed AO to refer the matter again to the
DRP which shall determine the actual function performed by the assessee, the assets
employed and the risks assumed by it after examining the agreement between the parties
and thereafter decide the matter in accordant with law. (AY. 2009-10, 2010-11)
Roca Bathroom Products P. Ltd. v. Jt. CIT (2016) 175 TTJ 450 / 129 DTR 257 (Chennai)
(Trib.)
Dy. CIT v. Parryware Roca (P) Ltd. (2016) 175 TTJ 450 / 129 DTR 257 (Chennai)(Trib.)
S. 92C : Transfer pricing – Selection of comparables – In the absence of segmental 1522
analysis it cannot be considered as comparable.
The Tribunal held that in the absence of segmental analysis, it cannot be considered as
a comparable. Tribunal relied on the decision of Mumbai bench of Tribunal in the case
of Ivonik Degussa India (P) Ltd. (2013) 151 TTJ 1 (Mum.). The Tribunal upheld the order
of CIT(A) and dismissed the ground raised by the Department. (AY. 2003-04)
Dy. CIT v. Pfizer Ltd. (2015) 64 taxmann.com 465 / (2016) 175 TTJ 92 / 139 DTR 81
(Mum.)(Trib.)
S. 92C : Transfer pricing – Assessee falling within category of companies having 1523
turnover between ` 1 crore and ` 200 crores – Companies having turnover of more
than ` 200 crores to be eliminated from list of comparables – Foreign Exchange
Fluctuation Gains to be added to operating revenue.
On appeal, the Tribunal held that the turnover filter is an important criteria in choosing
the comparables. The assesee’s turnover was in the range of ` 1 crore to ` 200 crores.
Thus, companies having turnover of more than ` 200 crores had to be eliminated from
the list of comparables. Thus, the order of the Dispute Resolution Panel excluding the
six companies from the list of comparable companies chosen by the Transfer Pricing
Officer on the basis of turnover and size was upheld. Comparables having related party
transactions of up to 15 per cent of the total revenues could be considered. Matter
remanded. The foreign exchange fluctuation gains were required to be added to the
operating revenue. (AY. 2010-11)
Obopay Mobile Technology India Pvt. Ltd. v. Dy. CIT (2016) 157 ITD 982 / 46 ITR 42 /
176 TTJ 191 (Bang.)(Trib.)
S. 92C : Transfer pricing – AO shall examine issue of transfer pricing and with 1524
approval of Commissioner make a reference to Transfer Pricing Officer – No transfer
pricing adjustment can be made where assessee enjoyed benefit u/s. 10A or section
80HHE or where tax rate in country of associated enterprises is higher than in India.
[S. 10A, 80HHE, 92CA]
The assessee contended that under section 92C or 92CA, it is the statutory duty of the
AO to decide independently whether the determination of arm’s length price by the
assessee should be accepted, or whether or not after applying the provisions of section
92CA, the transfer pricing adjustment should be made and that similarly, it is only after
proper application of mind to all the facts and holding a prima facie belief that the AO
can make reference to the Transfer Pricing Officer.
485
Transfer pricing S. 92C
On appeal, the Tribunal held that the AO erred in not himself examining the issue of
transfer pricing and with the approval of the Commissioner, made a reference to the
Transfer Pricing Officer u/s. 92CA(1) of the Act. The AO as well as the CIT(A) failed to
apply their mind to the transfer pricing report filed by the assessee. The assessee was
correct in contending that no transfer pricing adjustment can be made in a case where
the assessee enjoyed the benefit u/s. 10A or section 80HHE of the Act or where the tax
rate in the country of associated enterprise is higher than that of the tax rate in India.
(AY. 2005-06)
Dy. CIT v. Tata Consultancy Services Ltd. (2015) 174 TTJ 570 / (2016) 46 ITR 394 (Mum.)
(Trib.)
1525 S. 92C : Transfer pricing – Argument that transfer pricing adjustment cannot be made
if the assessee's income is deductible u/s. 10A/10B is not acceptable. [S. 10A, 10B]
The assessee claimed that as its profit from the rendering of software development
services is deductible u/s. 10A, then, no motive can be attributed for artificially reducing
the profit by manipulating the price with its AE. It was submitted that the profit of an
assessee, eligible for deduction under section 10A, becomes tax neutral irrespective of its
quantum and that, therefore, either the international transaction should not be processed
in terms of Chapter-X of the Act or higher amount of deduction should be allowed
corresponding to the amount of addition on account of transfer pricing adjustment.
HELD by the Tribunal rejecting the contention:
(i) In so far as the first submission for not carrying out any transfer pricing adjustment
in view of the benefit enjoyed by it u/s. 10A of the Act is concerned, we find
that no exception has been carved out by the statute for non-determination of
the ALP of an international transaction of an assessee who is eligible for the
benefit of deduction section 10A/10B or any other section of Chapter- VIA of the
Act. Section 92(1) clearly provides that any income arising from an international
transaction is required to be computed having regard to its arm’s length price.
There is no provision exempting the computation of total income arising from
an international transaction having regard to its ALP, in the case of an assessee
entitled to deduction u/s 10A or 10B or any other relevant provision. Section 92C
dealing with computation of ALP clearly provides that the ALP in relation to an
international transaction shall be determined by one of the methods given in this
provision. This section also does not immune an international transaction from
the computation of its ALP when income is otherwise eligible for deduction. On
the contrary, we find that sub-section (4) of section 92C plainly stipulates that
where an ALP is determined, the AO may compute the total income of the assessee
having regard to the ALP so determined. This shows that the total income of an
assessee entering into an international transaction, is required to be necessarily
computed having regard to its ALP without any exception. Thus, the argument that
since its income is subject to deduction u/s. 10A, the provisions of the Chapter-X
of the Act should not be applied, in our considered opinion, has no force in view
of the clear statutory mandate contained in proviso to section 92C(4).
(ii) Our view is fortified by the Special Bench order in the case of Aztech Software
and Technology Services Ltd. v. ACIT (2007) 107 ITD 141 (SB)(Bangalore) in which
486
S. 92C Transfer pricing
similar issue has been decided by the Special Bench by holding that availability of
exemption u/s. 10A to the assessee is no bar to applicability of sections 92C and
92CA. Similar view has been taken by Pune Bench of the Tribunal in the case of
ACIT v. MSS India (P) Ltd. (2009) 123 TTJ 657 (Pune) and several other orders. The
reliance of the AR on the order of the Mumbai Bench of the Tribunal in the case
of DCIT v. Tata Consultants Services Ltd. (ITA No. 7513/M/2010) dated 4.11.2015,
in our considered opinion is misconceived, because, in that case, the Tribunal
primarily found that the AO erred in not himself examining the issue of TP and
failed to apply his mind to the TP report filed by the assessee. The last sentence
in para 54 of the order upholding the assessee’s contention that no TP adjustment
can be made where the assessee enjoys benefit of deduction u/s 10A or 80HHE, etc
is only obiter dicta inasmuch as the addition was found to be not sustainable on
the other main grounds as discussed in the body of the order. On the contrary, we
find that the decision of the Special bench in Aztech Software (supra) permitting
the applicability of sections 92C and 92CA to an assessee availing the benefit of
section 10A of the Act is its ratio decidendi. On a specific query, the learned AR
could not point out any judgment of some Hon’ble High Court deciding this point
either way. In view of the fact that there is already a Special Bench decision in
the case of Aztech Software (supra) which supports the making of transfer pricing
adjustment notwithstanding the eligibility of deduction u/s 10A to the assessee,
apart from clear statutory mandate contained in proviso to section 92C(4), we are
more inclined to go with the view of the Special Bench.
(iii) It is, therefore, held that the eligibility of the assessee to deduction u/s. 10A of the
Act does not operate as a bar for determining the ALP of international transaction
undertaken by it and further the enhancement of income due to such transfer
pricing addition cannot be considered for allowing the benefit of deduction under
this section. (AY. 2008-09)
Headstrong Services India Pvt. Ltd. (2016) 158 ITD 717 / 176 TTJ 665 / 135 DTR 73
(Delhi)(Trib.)
S. 92C : Transfer pricing – The existence of an "International transaction" w.r.t. AMP 1526
Expenditure cannot be assumed. The onus is on the TPO to prove such transaction.
There is no machinery provision to ascertain the price to promote the AE's brand
values. The AMP Expenditure should be treated as operating cost to apply TNMM and
determine ALP of transactions with AE.
(i) No TP adjustment can be made by deducing from the difference between AMP
expenditure incurred by assessee-company and AMP expenditure of comparable
entity, if there is no explicit arrangement between the assessee-company and its
foreign AE for incurring such expenditure. The fact that the benefit of such AMP
expenditure would also enure to its foreign AE is not sufficient to infer existence
of international transaction. The onus lies on the revenue to prove the existence of
international transaction involving AMP expenditure between the assessee company
and its foreign AE.
(ii) In the absence of machinery provisions to ascertain the price incurred by the
assessee-company to promote the brand values of the products of the foreign entity,
no TP adjustment can be made by invoking the provisions of Chapter X of the Act.
487
Transfer pricing S. 92C
(iii) On facts, it is not a case of revenue that there existed an arrangement and
agreement between the assessee-company and its foreign AE to incur AMP
expenditure to promote brand value of its products on behalf of the foreign
AE, merely because the assessee-company incurred more expenditure on AMP
compared to the expenditure incurred by comparable companies, it cannot be
inferred that there existed international transaction between assessee-company and
its foreign AE. Therefore, the question of determination of ALP on such transaction
does not arise.
(iv) However, the transaction of expenditure on AMP should be treated as a part of
aggregate of bundle of transactions on which TNMM should be applied in order to
determine the ALP of its transactions with its AE. In other words, the transaction
of expenditure on AMP cannot be treated as a separate transaction.
(v) In the present case, we find from the TP study that the operating profit cost to the
total operating cost was adopted as Profit Level Indicator which means that the
AMP expenditure was not considered as a part of the operating cost. This goes to
show that the AMP expenditure was not subsumed in the operating profitability
of the assessee-company. Therefore, in order to determine the ALP of international
transaction with its AE, it is sine qua non that the AMP expenditure should be
considered as a part of the operating cost. Therefore, we restore the issue of
determination of ALP, on the above lines, to the file of the AO/TPO. (ITA Nos.
29/B/14 & 227/B/15, dt. 05.02.2016) (AY. 2009-10, 2010-11)
Essilor India Pvt. Ltd. v. DCIT (2016) 178 T TJ 69 / 135 DTR 20 (Bang.)(Trib.); www.
itatonline.org
1527 S. 92C : Transferring pricing – adjustment on account of ECB from parent company –
When internal CUP with unrelated parties is available it should be given precedence
over external CUP – Addition was deleted.
Allowing the appeal of assessee the Tribunal held that revenue has not disputed the
submission made by the assessee before the CIT(A) that effective rate of interest paid by
it in India was 6.62% on loans. Interest paid by assessee on loans taken from AE abroad
was 5%. This was below the rate of interest assessee was paying on loans taken within
India. When internal CUP with unrelated parties is available, in our opinion, it should
be given precedence over external CUP. Addition was deleted. (ITA No. 1292/Bang/2010
& ITA No. 287/Bang/2013, dt. 18.03.2016) (AY. 2006-07, 2007-08)
Intergarden India Pvt. Ltd. v. ACIT (Bag.)(Trib.); www.itatonline.org
S. 92CA. Reference to Transfer Pricing Officer.
1528 S. 92CA : Reference to transfer pricing officer – Failure to supply satisfaction note
to assessee before making reference to TPO is at highest a mere irregularity and, it
cannot turn reference itself as void ab initio. [S. 92C]
Dismissing the petition the Court held that in terms of section 92CA, before making
reference to TPO, assessee has to be given an opportunity of being heard on question as
to whether transaction entered into by it is an international transaction or not. However,
488
S. 92CA Reference to transfer pricing officer
failure to supply satisfaction note to assessee before making reference to TPO is at
highest a mere irregularity and, it cannot turn reference itself as void ab initio.
Shri Vishnu Eatables (India) Ltd. v. DCIT (2016)389 ITR 385 / 243 Taxman 446 / 289 CTR
337 (P&H)(HC)
S. 92CA : Reference to transfer pricing officer – Mere existence of Technical 1529
Collaboration Agreement – For use of brand name, cannot imply arrangement with
foreign AE regarding AMP expense for promoting brand of foreign AE. [S. 92C]
The TPO had benchmarked the AMP expenses of the assessee by applying the Bright
line test (BLT) and compared the percentage of such expenses incurred to total sales
of the Appellant with that of comparable companies. The DRP further sustained the
adjustment made by the TPO. Aggrieved assessee filed an appeal before the Tribunal
which was disposed of and ruled against the assessee.
The High Court held that the Revenue had been unable to demonstrate with tangible
material the existence of an international transaction involving AMP expenses between
assessee and foreign AE, thus the question of determining ALP did not arise. The
High Court relying on Co-ordinate Bench ruling in Maruti Suzuki India Ltd. (ITA No.
110/2015) dated 11 December, 2015, held that assessees’ cases were not covered by
Delhi HC decision in Sony Ericson Mobile Communications India P. Ltd. (374 ITR 118)
(Del) since the assessees in that case were distributors who were receiving subsidies /
subventions from their respective AEs, and none of them appeared to have questioned
existence of international transaction on account of AMP expenses, as regards to the
question on existence of international transaction of AMP expenses, HC observed
that although, under section 92B read with Section 92F(v) of the Act an international
transaction could include an arrangement, understanding or action in concert but this
could not be a matter of inference, HC held that there had to be a tangible evidence on
record to show that two parties 'acted in concert'.
Further the HC had additionally held that mere existence of Technical Collaboration
Agreement whereby licence granted for use of brand name, cannot imply arrangement
with foreign AE regarding AMP expense for promoting brand of foreign AE. Further, HC
noted that the condition in the licence agreement that technology would be used for sale
of goods in designated jurisdictions/specified territories was not an unusual arrangement
and thus, recharacterization of assessee as “contract manufacturer” was unwarranted.
HC also observed that the Revenue could not controvert assessee's submission that
substantial turnover of assessee was from manufacturing activity as compared to
distribution activity and contention that market development in India is function of
AE was factually incorrect. Thus the High Court ruled in favour of the Assessee. (AY.
2008-09)
Honda Siel Power Products Ltd. v. Dy. CIT (2016) 237 Taxman 304 / 283 CTR 322 / 130
DTR 241 (Delhi)(HC)
Editorial : SLP is granted Dy. CIT v. Honda Siel Power Products Ltd. (2016) 240 Taxman
576 (SC).
489
Transaction in securities S. 94
S. 94. Avoidance of tax by certain transactions in securities.
1530 S. 94 : Transaction in securities – Loss arising in course of dividend stripping can be
set off against other capital gains. [S. 45]
The loss arising in the course of dividend stripping transaction before the introduction
of claim under section 94(7) with effect from April 1, 2002, could not be disallowed.
Therefore, the loss can be set off against other capital gains. (AY. 2004-05)
ACIT v. Gimpex Ltd. (2016) 48 ITR 347 (Chennai)(Trib.)
1531 S. 94 : Transaction in securities – Dividend stripping – Assessee sold securities within
three months on which dividend was received, loss on securities was liable to be
restricted to extent of dividend received.
Assessee adjusted short-term capital loss on sale of securities against short term capital
gains. Assessing Officer disallowed said loss on securities which were sold within a
period of three months since dividend was claimed from above securities. Commissioner
(Appeals) restricted disallowance to extent of dividend received. Order of Commissioner
(Appeals) had no infirmity since it was in accordance with law. (AY. 2005-06)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
S. 94A. Special measures in respect of transactions with persons located in notified
jurisdictional area.
1532 S. 94A : Transactions with persons located in notified jurisdictional area – Exchange
of information – International transactions – Double taxation avoidance agreements
– Legislative powers – Parliament – Deduction at source – Provision empowering
Government to notify specified territory outside India for certain purposes is held to
be valid – DTAA-India-Cyprus. [S. 9(1)(i), 90, 94, 201(1), (1A), Art. 28 Constitution of
India, Art. 226]
Dismissing the petition, challenging the Notification No. 86 of 2013 dated
1-11-2013 (2013) 359 ITR 8 (St.), on the ground that, Parliament cannot be curtailed
by execution of Double Taxation Avoidance Agreement with that territory Notification
of Cyprus as specified jurisdiction upon failure by that country to share information in
terms of Double Taxation Avoidance Information is held to be valid. Provision mandating
deduction of tax at source at 30 per cent in case of transactions with persons in notified
territory – Share purchase agreement with Cyprus party providing for burden of tax to
be borne by Cyprus party. Assessees not entitled to contend provisions invalid. Section
94A(1) of the Income-tax Act, 1961, Notification dated November 1, 2013, issued
thereunder specifying Cyprus as a notified jurisdictional area for the purpose of section
94A(1) of the Act and Press Release dated November 1, 2013 are valid. Notification
issued notifying Cyprus as notified under S. 94A is held to be valid.
K. Dhanakumar v. UOI (2016) 383 ITR 385 / 239 Taxman 283 / 286 CTR 28 (Mad.)(HC)
T. K. Dhanashekar v. UOI (2016) 383 ITR 385 / 239 Taxman 283 / 286 CTR 28 (Mad.)(HC)
T. Rajkumar v. UOI (2016) 383 ITR 385 / 239 Taxman 283 / 286 CTR 28 / 134 DTR 225
(Mad.)(HC)
490
S. 112 Tax on long term capital gains
CHAPTER XII
DETERMINATION OF TAX IN CERTAIN SPECIAL CASES
S. 112 : Tax on long term capital gains.
S. 112 : Tax on long term capital gains – Non-resident – Rate applicable would be 10% 1533
and not 20%. [S. 48, 112(1), Proviso]
Dismissing the appeal of revenue the Tribunal held that; as per the mandate of proviso
to S. 112(1), where the tax is payable in terms of long-term capital gains exceeds 10
per cent before computation under second proviso to S. 48, then such excess shall be
ignored and the tax rate will be restricted to 10 per cent. The Tribunal decided in favour
of assessee and held that second proviso to s. 48 not being applicable to capital gains
arising to a non-resident from the transfer of shares of an Indian Company, such case is
restricted to first proviso alone and capital gain in such case is covered by the proviso
to 112(1) and consequently, tax rate of 10 per cent should be applied. (AY. 2010-11)
DIT v. Mitsubishi Motors Corporation (2016) 179 TTJ 25 (UO) (Delhi)(Trib.)
S. 112 : Tax on long-term capital gains – Mutual fund – Merely because it had not 1534
filed details of capital gain in return of income filed, it could not be denied benefit
of provisions. [S. 45]
Assessee invested certain amount in mutual fund units of HSBC. It earned long-term
capital gain on redemption of HSBC Mutual Fund. It had not declared said gain in
return of income filed. The A.O. added amount of long-term capital gain to total income
of assessee and brought it to tax at special rate of 20 per cent without giving benefit
of cost inflation indexation. Long-term capital gain earned by assessee was chargeable
to tax u/s. 112(1)(a) read with first proviso to section 112(1). Merely because assessee
had not filed details of long-term capital gain in return of income filed, it could not be
denied benefit of provisions of section 112(1)(a). (AY. 2010-11)
Sanju Verma v. Dy. CIT (2016) 158 ITD 837 / 182 TTJ 909 (Mum.)(Trib.)
S. 112 : Tax on long term capital gains – Trust became non-exempt u/s. 11 due to 1535
contravention of s. 13(1)(c), such capital gain would be taxed at maximum marginal
rate in terms of S. 164(2) and benefit of section 112 could not be given to it. [S 11,
13, 164(2)]
Assessee Trust earned capital gains on sale of land and claimed same as exempt income.
As there was violation of section 13(1)(c), exemption u/s. 11 was denied to assessee and
its income was assessed under section 164(2). Since capital gain became non-exempt
as a consequence of contravention of provisions of section 13(1)(c) or (d), said income
would be subject to tax at maximum marginal rate and benefit of section 112 could not
be given to assessee. (AY. 2007-08)
Dy. DIT v. India Cements Educational Society (2016) 157 ITD 1008 / 46 ITR 80 (Chennai)
(Trib.)
491
Foreign companies S. 115A
S. 115A : Tax on dividends, royalty and technical service fees in the case of foreign
companies.
1536 S. 115A : Foreign companies – Tax – Technical services fees – Beneficial rates of tax
available under DTAA should be granted – DTAA-India-Singapore [S. 9(1)(vii), Art.
11, 12]
The benefits available under the Treaty should be granted to the assessee based on valid
TRC was the proposition approved by the Hon'ble Supreme Court in Azadi Bachao
Andolan (2003) 263 ITR 706 and further the Hon'ble Punjab & Haryana High Court in
Serco BPO (P.) Ltd. v. AAR (2015) 379 ITR 256.
The interest income earned by the assessee was also received by it being its beneficial
owner and which in turn, has been remitted though not in the instant year, is taxable
at concessional rate of taxes. (AY. 2010-11)
Imerys Asia Pacific (P) Ltd. v. DDIT (IT) (2016) 140 DTR 177 / 180 TTJ 544 (Pune)(Trib.)
S. 115BBC. Anonymous donations to be taxed in certain cases.
1537 S. 115BBC : Anonymous donations – Charity box – Donation received by assessee –
Trust in charity boxes was not taxable. [S. 2(24)(iia)]
The assessee was registered as charitable trust with object of helping people like
disabled persons, orphans, widows by providing them food, shelter etc. It received
donations in golaks (charity boxes) installed at different places. The Assessing Officer
brought to tax said receipts treating them as anonymous donations. CIT(A) held that
such donations cannot be taxed. On appeal by the revenue, dismissing the appeal the
Tribunal held that legislature intended to tax unaccounted money which was brought
in books of charitable trusts in bulk and this law was not meant for taxing small and
general charities collected by genuine charitable trusts. Anonymous donation to wholly
religious trusts or institutions will not be taxed in view of the Circular No. 14 dated
28-12-2006. (AY. 2010-11, 2011-12)
Dy. CIT v. All India Pingalwara Charitable Society (2016) 141 DTR 153 (Amritsar)(Trib.)
1538 S. 115BBC : Anonymous donations – Charity received by the assessee was not taxable
as anonymous donation.
The assessee was a charitable society with the object of serving disabled, aged, orphans,
destitute, etc. The charity received by it through golaks, kept at different places like
gurdwaras, bus stands, etc., was duly accounted for in its books of account. The AO
treated the same as anonymous donations and taxed it u/s. 115BC. The ITAT deleted the
addition made by the AO and held that s. 115BC was introduced to catch unaccounted
money and not petty charities. Further, it was also observed that the concept and
importance of charity existed in Indian society in all religions and hence the charity
received by the assessee could not be taxed as anonymous donation. (AY. 2010-11,
2011-12)
DCIT v. All India Pingalwara Charitable Society (2016) 158 ITD 410 / 47 ITR 1 / 178 TTJ
602 (Amritsar)(Trib.)
492
S. 115BBC Anonymous donations
S. 115BBC : Anonymous donations – Donations could not be taxed. [S. 12AA] 1539
Dismissing the appeal of revenue the Tribunal held that where assessee trust was
established for charitable and religious purposes and anonymous donation was received
by it without any specific direction that such donation was for any university or other
educational institutions or any hospital or other medical institutions run by assessee-
trust, such donation could not be taxed by invoking provisions of section 115BBC. (AY.
2009-10)
ITO(E) v. Satyug Darshan Trust (2016) 156 ITD 524 (SMC) (Delhi)(Trib.)
493
Book profit S. 115J
CHAPTER XII-B
SPECIAL PROVISIONS RELATING TO CERTAIN COMPANIES
S. 115J. Special provisions relating to certain companies.
1540 S. 115J : Book profit – Depreciation claimed after revaluing its fixed assets –
Adjustment by the AO was held to be not justified.
Appeal of the revenue was dismissed on the ground that the accounts of the assessee is
in accordance with provisions of section 350 of Companies Act. (AY. 1988-89)
CIT v. J. K. Synthetics Ltd. (2016) (2016) 243 Taxman 441 (All.)(HC)
Editorial : SLP of revenue is dismissed; CIT v. J. K. Synthetics Ltd. (2016) 242 Taxman
178 (SC)
1541 S. 115J : Book profit – Assessing Officer has no power to rework net profit arrived at
by company.
Dismissing the appeal the Court held that the Appellate Tribunal was right in confirming
the order passed by the Commissioner (Appeals) directing the Assessing Officer to
compute the book profits under section 115J based on the separate profit and loss
account furnished by the assessee.
CIT v. Cornerstone Brands Ltd. (2016) 387 ITR 455 (Guj.)(HC)
1542 S. 115J : Book profit – Depreciation on revalued asset – Assessing Officer cannot make
adjustment. [Companies Act, S. 350]
Assessee-company claimed depreciation after revaluating its fixed assets. Assessing
Officer while computing income of assessee under section 115J held that though net
profit shown in profit and loss account was in accordance with provisions of Parts II
and III of Schedule VI to Companies Act, 1956, but method of computation of profit
and loss was not in consonance with provisions of section 350 of Companies Act,
consequently he disallowed excess depreciation and added that amount in profit and
loss account. Tribunal relying upon decision of Supreme Court rendered in case of
Apollo Tyres Ltd. v. CIT (2002) 255 ITR 273 allowed appeal of assessee. On appeal by
revenue, dismissing the appeal the Court held that controversy involved in instant
appeal filed by revenue was squarely covered by decision of Supreme Court rendered
in case of Apollo Tyres Ltd, therefore, there was no substantial question of law arising
for consideration. (AY. 1988-89)
CIT v. J.K. Synthetics Ltd. (2016) 243 Taxman 411 (All.)(HC)
1543 S. 115J : Book profit – Powers of Assessing Officer – No power to go behind duly
certified books of account. [S. 115JA]
Dismissing the appeal of revenue, the Court held that Once there was no dispute that
the books of account were maintained in accordance with law and were duly certified, it
was not open to the Assessing Officer within his limited jurisdiction, to disallow a debit
entry made by the assessee. The Tribunal's order setting aside a similar disallowance for
the assessment year 1998-99 was also confirmed.
Both the provisions for doubtful debts and diminution in the value of investment were
covered by clause (g) of the Explanation to sub-section (2) of section 115JA of the Act.
494
S. 115JA Book profit
Clause (g) was introduced with effect from April 1, 1998. Disallowances were made in
the assessment year 1997-98. Therefore, the amendment which became operative from
April 1, 1998 was not applicable to the assessment year 1997-98. The disallowances
were deleted. (AY. 1997-98, 1998-99)
CIT v. Peerless General Finance and Investment Co. Ltd. (2016) 385 ITR 130 (Cal.)(HC)
S. 115JA. Deemed income relating to certain companies.
S. 115JA : Book profit – No disallowance of actual expenditure for computing MAT 1544
just because it was shown as deferred expenditure for shareholders, SLP of revenue
was dismissed.
The Honourable Apex Court dismissed the special leave petition filed against the order
of the Karnataka High Court in the case of CIT v. Karnataka Soaps and Detergents
Ltd. wherein it was held that the assessee is entitled to deduct the entire revenue
expenditure as claimed in the profit and loss account prepared in accordance with
the provisions of Part II of Schedule VI of Companies Act 1956 for the purposes of
computation of book profits under Section 115JA of the Act and whereas, in the
published accounts to show to the shareholders, such expenditure was deferred and
recognized in the balance sheet. (AY. 1999-00, 2000-01, 2006-07)
CIT v. Karnataka Soaps and Detergents Ltd. (2016) 236 Taxman 395 (SC)
Editorial : CIT v. Karnataka Soaps and Detergents Ltd. (2015) 59 taxmann.com 43 (Karn)
(HC)
S. 115JA : Book profit – Lease equalization charges is not to be added back to the 1545
income for the purpose of computation of book profits.
The Assessing Officer disallowed the lease equalization charges for the purpose of
computation of book profits, which was upheld by the CIT(A) but rejected by the
Tribunal. Upholding the order of the Tribunal and agreeing with the view taken by the
Delhi High Court in the case of CIT v. Virtual Soft Systems Ltd. (2012) 341 ITR 593 / 205
Taxman 257 / 18 taxmann.com 119, it was held that the lease equalization charge is a
method of recalibrating the depreciation claimed by the assessee in a given accounting
period and that the method employed by the assessee, therefore, over the full term
of the lease period would result in the lease equalization amount being reduced to a
naught, as the debits and credits in the profit and loss account would square off with
each other. Under the circumstances, the same is neither in the form of a reserve nor
a deduction. (AY. 2000-01)
PCIT v. Sun Pharmaceuticals Industries Ltd. (2016) 240 Taxman 686 / (2017) 148 DTR
332 / 293 CTR 489 (Guj.)(HC)
S. 115JA : Book profit – Debenture redemption reserve – Amount retained by way of 1546
providing for a known liability is not a reserve, consequently, amount which is set
apart as a Debenture redemption reserve is not a reserve, allowable as deduction.
[S. 115JB]
Adjustment claimed by assessee for debt redemption fund was declined with a
observation that debt redemption fund was an appropriation for purpose of creating
495
Book profit S. 115JA
a reserve and was a below a line adjustment and it did not fall in any category of
adjustments provided u/s. 115JB.
Tribunal held that an amount which is retained by way of providing for a known
liability is not a reserve and, consequently, amount which is set apart as a Debenture
Redemption Reserve is not a reserve within meaning of Expl. (b) to s. 115JA. Allowable
as deduction. (AY. 2006-07)
ACIT v. Genus Electrotech Ltd. (2016) 161 ITD 644 (Ahd.)(Trib.)
1547 S. 115JA : Book profit – Capital receipts – Such as subsidy & carbon credits which
have no income element, have to be excluded from book profits even if credited to
the P&L A/c. [S. 115JB]
Capital receipts – such as subsidy & carbon credits which have no income element, have
to be excluded from book profits even if credited to the P&L A/c. (ITA No. 417 & 418/
LKW/2013, dt. 09.02.2016) (AY. 2008-09, 2009-10)
ACIT v. L. H. Sugar Factory Ltd. (Luck)(Trib.); www.itatonline.org
1548 S. 115JAA : Book profit – Tax credit – Surcharge and education cess – Form which is
contrary to law is to be ignored – MAT credit under section 115JAA brought forward
from earlier years is to be set off against tax on total income after taking into account
amount of surcharge and cess.
Dismissing the appeal of the assessee the Court held that; the Tribunal was right
in confirming the set off of MAT Credit under section 115JAA brought forward
from earlier years against tax on total income including surcharge and education
cess instead of adjusting the same from tax on total income before charging such
surcharge and education cess. Form of income-tax return for relevant assessment year
2008-09 suggested that MAT credit under section 115JAA had to be allowed before
making addition of surcharge and cess. Said form had subsequently been corrected in
assessment year 2012-13. (AY. 2008-09)
Srei Infrastructure Finance Ltd. v. DCIT (2016) 289 CTR 412 / (2017) 244 Taxman 197
(Cal.)(HC)
S. 115JAA. Tax credit in respect of tax paid on deemed dividend income relating to
certain companies.
1549 S. 115JAA : Book profit – Deemed income – Tax credit – MAT credit to be given before
levy of surcharge and education cess.
The AO first computed the tax payable after giving MAT credit (inclusive of surcharge
and education cess) and thereafter, on the resultant figure, surcharge and education cess
was levied. However, vide order u/s. 154 tax was calculated after giving credit of MAT
without surcharge and education cess and thereafter on the resultant figure, surcharge
and education cess was levied. The ITAT upheld the order of the CIT(A) and held that
credit for MAT should be given before levy of surcharge and education cess. (AY 2007-
08, 2008-09)
DCIT v. J.K. Cement (2016) 45 ITR 50 (Luck)(Trib.)
496
S. 115JA Book profit
S. 115JB. Special provision for payment of tax by certain companies.
S. 115JB : Book profit – When the books of account is prepared by the assessee as per 1550
the Companies Act, AO cannot determine the book profit ignoring the books of account.
Dismissing the appeal of the revenue, the Court held that in the instant case, there was
no determination of the AO that the final accounts of the assessee were not prepared
in accordance with the Schedule-VI of the Companies Act and that the determination of
liability for payment of MAT under Section 115JB of the I.T. Act, by ignoring the profit
and loss account was not through due process. When the corrected return in consonance
with the audited profit and loss account was submitted, those figures should have been
the basis for determination of MAT under Section 115JB of the I.T. Act. (AY. 2006-07)
CIT v. Jajodia Engineering (P) Ltd. (2016) 289 CTR 208 / (2017) 79 taxmann.com 385 (Gau.)(HC)
S. 115JB : Book profit – Provision for unascertained bad and doubtful debts – Effect of 1551
insertion of clause (i) to Explanation (1) Section 115JB(2) of the Act – Conflict in two
judgments of Gujarat High Court as regards issue as to whether unascertained bad and
doubtful debt would be added in computation of income for MAT provisions under
section 115JB of the Act – Matter was to be referred to Larger Bench. [S. 36(1)(viii)]
The issue before the High Court was in relation to the effect of insertion of clause (i) to
Explanation (1) of sub-section (2) of section 115JB of the Act with effect from 1-4-2001
in computation of the assessee's liability under MAT provisions. The issue was whether
as per clause (i) to Explanation (1), for the purpose of Section 115JB, any provision for
bad and doubtful debts would have to be added while computing income of the assessee
for MAT provisions.
In respect of addition of provision for unascertained bad and doubtful debt while
computing book profit under Section 115JB of the Act, there were two views amongst
the Gujarat High Court.
The question considered by the Gujarat High Court in case of CIT v. Deepak Nitrite Ltd.
[TA No. 1918/2009, order dated 17.8.2011] was whether the decision of Supreme Court
in case of HCL Comnet Systems & Services Ltd. (2008) 305 ITR 409 (SC), would continue
to hold the field. The High Court took a view that by virtue of insertion of clause (i) to
explanation (1) of sub-section (2) of section 115JB of the Act, any provision for bad and
doubtful debts would have to be added while computing the income of the assessee for
MAT provisions. The said decision was rendered without considering the observations
of the Supreme Court in case of Vijaya Bank v. CIT (2010) 323 ITR 166 (SC).
Subsequently a similar issue came up before the Gujarat High Court in case of CIT
v. Indian Petrochemicals Corporation Ltd. [T A No. 1773/2008] dated 19 July 2017 and
connected appeals. In the said case, the High Court took a view that provision for bad
and doubtful debts not being ascertained, liability cannot be added back with the aid
of clause (c) to explanation (1) of sub-section (2) of section 115JB of the Act as it is not
an ascertained liability. In the said case, the High Court had not noticed the judgement
in case of Deepak Nitrite Ltd. (supra).
Considering the controversy between the rulings of the same High Court on similar
issues, the High Court held that the said controversy is required to be resolved by the
Larger Bench. Thus, the appeal was referred to a Larger Bench.
CIT v. Vodafone Essar Gujarat Ltd. (2016) 242 Taxman 352 / (2017) 151 DTR 204 (Guj.)(HC)
497
Book profit S. 115JB
1552 S. 115JB : Book profit – Provision for gratuity cannot be treated as unascertained
liability and be added back to the book profit when such provision was based on
actuarial valuation.
The High Court, followed its judgment in case of Dy. CIT v. Inox Leisure Ltd. (351 ITR
314) and held that provision for gratuity based on actuarial valuation cannot be treated
as unascertained liability and be added back to the book profit. (AY. 2007-08)
PCIT v. Gujarat State Electricity Corporation Ltd. (2016) 242 Taxman 357 (Guj.)(HC)
Editorial : SLP is granted to the Revenue; CIT v. Gujarat State Electricity Corporation Ltd.
(2016) 242 Taxman 257 (SC)
1553 S. 115JB : Book profit – Provision for diminution in value of investment not allowed
in earlier year – Write back of part of sum in later year – No increase in book profits
in earlier year – Write back cannot be allowed as sum withdrawn from reserve.
Dismissing the appeal of the assessee the Court held that under the statutory provisions
deduction could have been claimed, provided the book profits had actually been
increased but since the book profits of the assessee had never been increased, the
question of any deduction on account of any credit from the reserve did not arise. The
deduction could have been claimed provided the amount of provision had been added
to the book profits during the assessment year 2001-02, when it was created. Admittedly,
such addition had not been made and therefore, there was no scope for deduction as
claimed. The amendment to section 115JB of the Act by the Finance Act, 2009 had not
created any legal fiction. It had only said that if any amount of the book profits had
been increased, corresponding deduction might be availed of in future. The view taken
by the Tribunal, disallowing the deduction, was correct. (AY. 2006-07)
Stone India Ltd. v. CIT (Appeals) (2016) 385 ITR 542 (Cal.)(HC)
1554 S. 115JB : Book profit – Fringe benefit tax, securities transaction tax and prior period
expenses to be excluded.
When the Board has issued the circular and the fringe benefit tax was found to be allowable
while computing book profit, the Tribunal was correct in allowing it. (AY. 2008-09)
CIT v. Sansera Engg. P. Ltd. (2016) 386 ITR 349 (Karn.)(HC)
1555 S. 115JB : Book profit – Refund of excise subsidy – Reserve not created by debit
to profit and loss account – AO has no power to scrutinise except as provided in
Explanation – Sum cannot be added to book profits.
In the computation of income under Section 115JB, the AO added to the book profits
the sum received by the assessee on account of excise duty refund subsidy. Held, the
pronouncement in the decision of the Supreme Court was binding and therefore, the
AO and the Commissioner (Appeals) had erred in not following the judgment. The sum
was not taxable since the reserve was not created by debiting the profit and loss account
and the AO had no power to go behind the accounts. (AY. 2004-05)
CIT v. Shyam Century Ferrous Ltd. (2016) 386 ITR 477 (Cal.)(HC)
498
S. 115JB Book profit
S. 115JB : Book profit – Accounts prepared in accordance with provisions of 1556
Companies Act – Assessing Officer has no power to correct accounts.
Dismissing the appeal of revenue, the Court held that when the accounts produced
by an assessee are found to be maintained in accordance with the requirements of the
Companies Act, it is not open to the Assessing Officer to embark upon a fresh inquiry
in regard to the entries made in the books of account of the company. The Assessing
Officer has limited power of making appropriate correction in accordance with the
Explanation to section 115JB. To put it differently the Assessing Officer does not have
the jurisdiction to go behind the net profit reflected in the profit and loss account except
to the limited extent permitted by the Explanation to section 115JB. (AY. 2006-07)
CIT v. Jajodia Engineering P. Ltd. (2016) 384 ITR 364 / 141 DTR 243 (Gauhati)(HC)
S. 115JB : Book profit – Sale of land – profit directly credited to capital reserve – 1557
Audit report qualified to this extent – Held, no power to embark upon a fresh enquiry
in regard to the entries made in the books of account once the accounts are audited
and approved by the company in general body meeting and thereafter filed before the
Registrar of Companies – Held, no adjustment of Book Profit required.
Assessee sold the land and credited the capital gain arising out of the sale of the land
directly to capital reserve and not to profit and loss account. The auditor's report certified
with a qualification that the profit and loss account and balance sheet referred to in the
report complied with substantially in all material respects with the applicable accounting
standards referred to in section 211(3C) of the Companies Act except that the land and
building was sold during the year and the capital gain had been transferred directly to
capital reserve account instead of crediting to profit and loss account. The AO held that, as
per Clause 3(XII)(b) and (c) of Part II of Schedule VI and as per the accounting standards
applicable, the capital gains should be routed through Profit and loss account. Further, even
the auditors’ report was qualified and therefore, the AO held that the amount of capital
gain should have been credited to profit and loss account. High Court, after considering
the judgment in case of Apollo Tyres Ltd. v. CIT (2002) 255 ITR 273 (SC), held that AO
had no power to embark upon a fresh enquiry in regard to the entries made in the books
of account. It was also held that AO had no power to recompute the book profit and had
to rely upon the authentic statements of accounts of the company, the accounts being
scrutinized and certified by the statutory auditors though with a qualification, approved by
the company in general body meeting and thereafter filed before the Registrar of Companies,
who had a statutory obligation to examine and be satisfied that the accounts of the company
are maintained in accordance with the requirements of the Companies Act. (AY. 2002-03)
Sri Hariram Hotels (P.) Ltd. v. CIT (2016) 237 Taxman 564 / 285 CTR 190 / 133 DTR 102
(Karn.)(HC)
S. 115JB : Book profit – Addition made to book profit of assessee on account of 1558
disallowance of expenses made under s. 14A is unsustainable – Provisions of S. 14A
could not be imported into S. 115JA(1)(f). [S. 14A, 115JA(1)(f)]
Addition made to book profit of assessee computed under s. 115JB on account of
disallowance of expenses made under S. 14A of the Act is unsustainable. Provisions of
S..14A could not be imported into S. 115JA(1)(f) of the Act. (AY. 2008-09)
ACIT v. Tata Metalics Ltd. (2016) 48 ITR 272 (Kol.)(Trib.)
499
Book profit S. 115JB
1559 S. 115JB : Book profit – Second proviso to section 115JB(2) which was inserted by the
Finance Act, 2006, with effect from 1-4-2017 is not claiicatory in nature and cannot
be applied retrospectively. Matter was remanded.
Allowing the appeal of the assesses the Tribunal held that; Second proviso to section
115JB(2) which was inserted by the Finance Act, 2006, with effect from 1-4-2017 is not
claiicatory in nature and cannot be applied retrospectively. Matter was remanded. (AY.
2005-06)
Voltas Ltd. v. ITO (2016) 161 ITD 199 (2017) 183 TTJ 788 / (2017) 148 DTR 84 (Mum.)
(Trib.)
1560 S. 115JB : Book profit – Assessee not a company within the meaning of Companies
Act, 1956, provision is not applicable.
The Tribunal held that the assessee was not a company established under the
Companies Act, 1956. In the assessee's case for the assessment year 2002-03, the
Tribunal had held that in view of the legislative change brought about by the
introduction of Explanation 3 in section 115JB by the Finance Act, 2012, section 115JB
is applicable only to entities registered and recognised to be companies under the 1956
Act. Since the assessee was not a company within the meaning of the 1956 Act, section
211(2) of that Act and the proviso thereto was not applicable and therefore consequently
the provisions of section 115JB were also not applicable. (AY. 2009-10)
UCO Bank v. Dy. CIT (2016) 49 ITR 34 (Kol.)(Trib.)
1561 S. 115JB : Book profit – Unabsorbed depreciation is available as deductible
expenditure to calculate book profits. [Sick Industrial Companies (Special Provisions)
Act, 1985]
Tribunal held that restructuring credits brought into profit & loss account against
accumulated debit balance while giving effect to rehabilitation scheme would not
extinguish loss therefore and depreciation from accounts of assessee in actual terms.
And loss occurred not eligible as per accounts prepared under Parts-II and III of
Schedule-VI of Companies Act and, therefore, assessee will be entitled to claim
reduction of loss/unabsorbed depreciation, whichever is lower, from book profit. (AY.
2012-13)
Surat Textile Mills Ltd. v. Dy. CIT (2016) 159 ITD 373 / 181 TTJ 181 / (2017) 148 DTR
297 (Ahd.)(Trib.)
1562 S. 115JB : Book profit – If amount of brought forward loss or unabsorbed depreciation
is nil, then no deduction will be allowed under clause (iii) of section 115JB for
computing book profit.
Dismissing the appeal of the assessee, the Tribunal held that; if either the loss brought
forward or unabsorbed depreciation is nil, then the assessee will not be allowed any
deduction under clause (iii) of the Explanation 1 for computing the book profit under
section 115JB. (AY. 2008-09)
Indian Furniture Products Ltd. v. ACIT (2016) 161 ITD 148 (Panaji)(Trib.)
500
S. 115JB Book profit
S. 115JB : Book profit – Provision of section 115JB shall apply even to companies 1563
getting deduction u/s. 80IC. [S. 80IC]
Assessee engaged in the business of manufacturing of homeopathic medicines which
is getting deduction u/s. 80IC is also liable for tax on its book profits in respect of its
income eligible for deduction. (AY. 2008-09 to 2011-12)
SBL (P.) Ltd. v. ITO (2016) 161 ITD 379 (Jaipur)(Trib.)
S. 115JB : Book profit – Provision of gratuity on basis of report of actuarial valuation 1564
and it could not be said that liability of assessee on account of gratuity was
unascertained liability, said sum could not be added to book profits.
Held that the provision of gratuity was made by the assessee in the books of account on
the basis of the report of actuarial valuation and it cannot be said that liability of the
assessee on account of gratuity was unascertained liability. Therefore, the said sum cannot
be added to the book profits as per clause (c) of Explanation 1 to section 115JB of the Act.
JCIT v. Kanco Enterprises Ltd. (2016) 156 ITD 926 (Kol.)(Trib.)
S. 115JB : Book profit – ITR-6 format followed by assessee – Assessing Officer cannot 1565
follow different methods. [S. 115JAA, 143(1)]
Where assessee relied on ITR-6 format to arrive at total liability as well as MAT credit
calculations, AO. could not overlook said format and proceed to calculate MAT credit to
complete assessment u/s. 143(1) by applying different methods. (AY. 2012-13)
Virtusa (India) (P.) Ltd. v. DCIT (2016) 157 ITD 1160 / 139 DTR 72 / 179 TTJ 527 (Hyd.)
(Trib.)
S. 115JB : Book profit – Income from SEZ to be excluded. 1566
The income relating to the special economic zone unit was to be excluded while
computing book profits under section 115JB. (AY. 2009-10)
DCIT v. Gebbs Healthcare Solutions Pvt. Ltd. (2016) 46 ITR 551 (Mum.)(Trib.)
S. 115JB : Book profit – Disallowance u/s. 14A cannot be added back to book profits. 1567
[S. 14A, R. 8D]
The Assessing Officer added back the disallowance made under section 14A of the
Act read with Rule 8D, to the book profit of the assessee. The Commissioner (Appeals)
confirmed the order of the Assessing Officer. The Tribunal held that the disallowance
made under section 14A read with Rule 8D could not be added while computing the
book profits under section 115JB of the Act since the disallowance was only for the
purpose of computing the taxable income of the assessee in the normal course. There
was no provision in the Act to add this kind of disallowance while computing the book
profits under section 115JB and it could not change the book profits on this count.
Therefore, even if there is an addition in view of provision under section 14A read with
Rule 8D, that cannot be added back to compute the book profit under section 115JB.
(AY. 2005-06, 2008-09, 2009-10)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.)
501
Book profit S. 115JB
1568 S. 115JB : Book profit – Manner of computation – Profits of S. 10AA unit of assessee
should be excluded for purpose of computing book profits as per Profit and Loss
account. [S. 10AA, 10B]
Assessee was a 100% Export Oriented Unit and claimed benefits under sections 10B and
10AA. Method of computation of book profits is provided by Section 115JB of the Act.
It lays down where a company’s income-tax liability on the total income under the Act,
is less than a particular percentage of its book profit, such book profit shall be deemed
to be the total income of the assessee and the tax liability would be calculated on such
income shall be at the rate prescribed for such income. S. 115JB(6) however lays down
that income of the SEZ should be excluded from the profits as per P&L account for the
purpose of computing “book-profits”.
AO held that the Assessee was a unit in Special Economic Zone and therefore the
provisions of S. 115JB(6) of the Act were not applicable. The Tribunal held that this
conclusion of the AO is not correct and profits of the S. 10AA unit of the assessee
should be excluded for the purpose of computing book profits u/s. 115JB of the Act
from the profit as per Profit and Loss account referred to in that section. (AY. 2009-10)
ITO v. Last Peak Data (P) Ltd. (2015) 155 ITD 1099 / (2016) 175 TTJ 65 / 131 DTR 31
(Kol.)(Trib.)
1569 S. 115JB : Book profit – Corporation established under Damodar Valley Corporation
Act, 1948, provisions relating to book profit would not apply – Explanation 3 to
section 115JB inserted by Finance Act, 2012, has prospective effect and, thus, it is
applicable only with effect from assessment year 2013-14 onwards.
Provisions relating to book profit is applicable only to entities registered and recognised to
be companies under Companies Act, 1956 and, therefore, in case of assessee-corporation
established under Damodar Valley Corporation Act, 1948, provisions. Explanation 3
to section 115JB inserted by Finance Act, 2012, has prospective effect and thus it is
applicable only with effect from assessment year 2013-14 onwards. (AY. 2008-09, 2009-10)
Damodar Valley Corporation v. Add. CIT (2016) 157 ITD 415 / 139 DTR 201 / 180 TTJ
82 (Kol.)(Trib.)
1570 S. 115JB : Book profit – Disallowance of expenditure – Exempt income – Added back
for arriving book profit. [S. 14A, R. 8D]
In terms of clause (f) to Explanation 1 to section 115JB(2), disallowance made by
Assessing Officer under section 14A, read with Rule 8D of 1962 Rules, has to be added
back for purpose of arriving at figure of book profit. (AY. 2008-09)
Dy. CIT v. Viraj Profiles Ltd. (2016) 156 ITD 72 / 135 DTR 169 / 46 ITR 626 / 177 TTJ
466 (Mum.)(Trib.)
1571 S. 115JB : Book profit – Banking company – Provision is not applicable – Expl. 3 thereto
by the Finance Act, 2012 is applicable w.e.f. A.Y. 2013-14 only. [Companies Act, S. 211(2)]
Assessee being a nationalized bank and not a company within the meaning of the companies
Act, 1956. S. 211(2) and proviso thereto of that Act are not applicable to it and, therefore,
the provisions of S. 115JB are also not applicable. Amendment made to S. 115JB r.w. Expl. 3
thereto by the Finance Act, 2012 is applicable w.e.f. A.Y. 2013-14 only. (AY. 2002-03)
UCO Bank v. Dy. CIT (2016) 156 ITD 146 / 175 TTJ 607 / 130 DTR 113 (Kol.)(Trib.)
502
S. 115O Domestic companies
CHAPTER XII-D
SPECIAL PROVISIONS RELATING TO TAX ON
DISTRIBUTED PROFITS OF DOMESTIC COMPANIES
S.115O. Tax on distributed profits of domestic companies.
S. 115O : Domestic companies – Tax on distributed profits – Interest on delay in 1572
payment – When dividend declared – Mere provision for dividend does not amount to
declaration of dividend – Interest not payable on such provision. [S. 115P]
The assessee, a public limited company, made a provision for payment of dividend in its
books of account at the end of each of the financial years relevant for assessment years
2003-04 and 2009-10. After the accounts were finalised and approved by the board, the
shareholders of the company in the annual general meeting declared final dividend.
Dividend distribution tax was paid within 14 days of the declaration. The Assessing
Officer levied interest treating the provision for payment of dividend as declaration
of dividend. The Commissioner (Appeals) and the Tribunal deleted the interest. On
appeals:
Held accordingly, dismissing the appeals, that it was not in dispute that the dividend
distribution tax, under section 115O of the Income-tax Act, 1961, was paid by the
assessee well within 14 days of declaration of dividend by the shareholders in the
annual general meeting. Interest could not be levied under section 115P. (AY. 2003-04,
2009-10)
CIT v. NMDC Ltd. (2016) 383 ITR 56 (T&AP)(HC)
503
Venture capital companies S. 115U
CHAPTER XII-F
SPECIAL PROVISIONS RELATING TO TAX ON INCOME RECEIVED FROM
VENTURE CAPITAL COMPANIES AND VENTURE CAPITAL FUNDS
S. 115U. Tax on income in certain cases.
1573 S. 115U : Venture capital companies – Venture capital Funds – Tax on income – VCF
is given status of pass through vehicle for purpose of treatment of income received on
account of investment made in venture capital undertaking; therefore, assessee, which
invested in a VCF, would be entitled to book expenditure incurred by VCF as if same
had been incurred by assessee directly in VCF. [S. 115O]
Assessee-company had invested in a SEBI registered Venture Capital Fund (VCF). Said
VCF was invested in a company. The AO taxed interest income received by assessee
from VCF under head ‘other income’ on gross basis without giving deduction of
assessee’s share of expenses incurred by VCF for earning said income. The ITAT held
that venture capital company and venture capital fund are given status of pass through
vehicle for purpose of treatment of income received on account of investment made in
venture capital undertaking and, therefore, assessee-company would be entitled to book
expenditure incurred by VCF as if same had been incurred by assessee directly in VCF.
(AY. 2006-07, 2007-08)
Japan International Cooperation Agency v. DDIT (2016) 158 ITD 62 / 139 DTR 185 / 180
TTJ 152 (Delhi)(Trib.)
504
S. 115VB Shipping business
CHAPTER XII-G
SPECIAL PROVISIONS RELATING TO INCOME OF SHIPPING COMPANIES
S. 115VB. Operating ships.
S. 115VB : Shipping business – "Tonnage Tax" income earned on "slot charters" is also 1574
held to be eligible for tonnage on slot charter related income. [S. 115VD, 115VG]
It is only income from the business of operating qualifying ship that has to be computed
in accordance with the provisions of Chapter XIIG. As per Section 115VB of the Act,
a company is regarded as operating a ship if it operates any ship which is owned by
it or a ship which is chartered by it and it also includes a case where even a part of
the ship has been chartered by it in an arrangement such as slot charter, space charter
or joint charter etc. The question that has arisen for consideration pertains to ‘slot
charter’ i.e., should the ‘slot charter’ operations of a ‘Tonnage Tax Company’ be carried
on only in ‘qualifying ships’ to include the income from such operations to determine
the ‘tonnage income’ under ‘TTS’ in terms of the provisions of Chapter XIIG of the Act?
In other words, is the income derived from ‘slot charter’ operations of a ‘Tonnage Tax
Company’ liable to be excluded while determining the ‘Tonnage Income’ under the ‘TTS’
if such operations are carried on in ships which are not ‘qualifying ships’ in terms of
the provisions of that Chapter of the Act and the relevant provisions of the Income Tax
Rules, 1962. HELD by the Supreme Court:
(i) When the scheme of the aforesaid special provision for computation of income
under TTS is exempted, we find the balance tilted in favour of the assessee as
that was the precise purpose in introducing TTS in India. It may be stated in
brief that in view of the stiff competition faced by the Indian shipping companies
vis-a-vis foreign shipping lines, and in order to ensure an easily accessible, fixed
rate, low tax regime for shipping companies, the Rakesh Mohan Committee in
its report (of January, 2002) recommended the introduction of the TTS in India,
which was similar to, and adopted some of the best global practices prevalent. The
whole purpose of introduction of the Scheme was to make the Indian shipping
industry more competitive in the global space by rationalising its tax cost. For
the reason that it is impossible to cater to all shipping routes on owned ships, it
is an accepted and widely prevalent practice globally and in India that shipping
companies engage in slot charter operations. If such slot charter arrangements
are not entered into, then Indian shipping companies will not be able to take up
contract of affreightments and these contracts would have fallen to only foreign
shipping lines thereby making Indian shipping industry uncompetitive. Such slot
charter arrangements being with a shipping company but not in relation to or for
a particular ship, it is impossible for the Indian shipping company to identify the
cargo ship, which carried the goods.
(ii) We would also like to refer to Circular No. 05/2005 dated 15.07.2005 explaining
the need and essence of the introduction of these provisions which was issued
contemporaneously by the Central Board of Direct Taxes (CBDT). The Circular
clarifies that the Scheme is a “preferential regime of taxation”. It also clarifies that
505
Shipping business 115VB
“charging provision is under Section 115VA read with Section 115VF and Section
115VG.” Circulars of CBDT explaining the Scheme of the Act have been held to
be binding on the Department repeatedly by this Court in a series of judgments
including Azadi Bachao Andolan v. Union of India 263 ITR 706, Navnit Lal Jhaveri
v. K.K. Sen 56 ITR 198 SC, and UCO Bank v. CIT 237 ITR 889 (SC). (AY. 2005-06,
2008-09)
CIT v. Trans Asian Shipping service Pvt. Ltd. (2016) 385 ITR 637 / 138 DTR 1 / 240
Taxman 669 / 287 CTR 113 (SC)
506
S. 115WA Fringe benefits
CHAPTER XII-H
INCOME-TAX ON FRINGE BENEFITS
S. 115WA. Charge of fringe benefit tax.
S. 115WA : Fringe benefits – Charge of tax – Concessional rate of tax as per Rule 8 for 1575
tea manufacturers would be available for levy of FBT.
The assessee was engaged in the business of growing and manufacturing tea and
claimed the concessional rate of tax of 40% under Rule 8 for determining the taxable
value of fringe benefits. The AO alleged that same was not allowable since FBT was
payable even when income-tax is not payable and determined the taxable value of
fringe benefits at 100%. The ITAT allowed the claim of the assessee and held that the
FBT would fall within the ambit of the Income-tax Act and since there was no non-
obstante clause in the charging section, and consequently the benefit of rule 8 would
be available. (AY. 2008-09, 2009-10)
Mcleod Russel India Ltd. v. ACIT (2016) 45 ITR 182 (Kol.)(Trib.)
507
Income tax authorities S. 116
CHAPTER XIII
INCOME-TAX AUTHORITIES
S. 116 : Income-tax authorities.
1576 S. 116 : Income tax authorities – Promotion of CIT(A) – Based on Annual Confidential
Reports (ACRs) of CIT(A), promotion denied – representation made by the CIT(A)
against the ACR – Competent authority confirmed ratings in report without adverting
to the representation – CAT directed competent authority to decide the representation
of the CIT(A) afresh in the light of the directions issued – Held, competent authority to
dispose of the objections raised by CIT(A) in light of directions issued by CAT failing
which the CIT(A) shall be considered for promotion.
CIT(A)’s Annual Confidential Reports (ACRs) were assessed by the reporting authority
as 'good' as a result of which promotion was denied to the CIT(A). CIT(A) submitted
his representation against recording of his ACR as 'good'. The competent authority
rejected the representation and confirmed the ratings in the ACR. Central Administrative
Tribunal (‘CAT’) directed the competent authority to decide the representation of the
CIT(A) afresh in the light of the directions issued by the CAT. High Court directed the
competent authority to dispose of the representation made by the CIT(A) in an objective
manner in the light of the directions issued by the CAT within one month from the
date of the judgment, failing which the respondent would be considered for promotion
irrespective of such an entry found in the ACR.
UOI v. Subhash Kumar (2016) 237 Taxman 547 (P&H)(HC)
S. 119 : Instructions to subordinate authorities.
1577 S. 119 : Central Board of Direct Taxes – Powers – Discretion to admit claim made
beyond period specified is to be exercised on sound lines – Delay of one day in filing
return – Application for condonation of delay – Rejection of application by Central
Board of Direct Taxes was held to be not proper. [S. 139]
Dismissing the appeal of the revenue, against the single judge order, the Court held that
Once an authority had been conferred discretion to condone delay, an application by
the assessee seeking condonation of delay of one day could not be rejected for reasons
assigned by it. The Central Board of Direct Taxes had not exercised its discretion
properly in the matter and in keeping with the legal principles relevant for such
consideration. One could take judicial note of the fact that uploading of return required
not only an effort but was also time consuming. If the assessee had encountered certain
hardship or difficulty in uploading its return, as alleged by it due to technical snags in
the website of the Department due to the last hour rush of filing of returns, the delay
deserved to be condoned. The AO would process the return of the assessee for the
assessment year 2010-11. (AY. 2010-11)
CBDT v. Regen Infrastructure and Services P. Ltd. (2016) 389 ITR 138 / (2017) 244 Taxman
39 (Mad.)(HC)
Editorial : Decision of the single judge of the Madras High Court in Regen Infrastructure
and Services Pvt. Ltd. v. CBDT (2016) 384 ITR 407 (Mad.) is affirmed.
508
S. 119 Central Board of Direct Taxes
S. 119 : Central Board of Direct Taxes – Instructions – Waiver of interest – Declaring 1578
sale of property but not disclosing capital gains thereon – Failure to disclose not due
to unavoidable circumstances – Denial of waiver was held to be proper. [S. 234B]
The assessee filed a return disclosing the sale of property in the previous year relevant
to the AY in question. The computation of capital gains on the transaction resulted
in an assessment order and consequential levy of interest under section 234B of the
Act. The assessee applied to the Chief Commissioner seeking waiver of interest but his
request was turned down. On a writ petition, a single judge affirmed the order of the
Chief Commissioner. On appeal: Held, dismissing the appeal and affirming the order
of the single judge, (i) that the assessee’s case was not an instance where the return of
income was not filed due to unavoidable circumstances, which was the context taken
into account by clause 2(d) of the notification. The assessee had filed a return disclosing
the sale of landed property in the previous year relevant to the AY but had not returned
any liability to tax on capital gains. The order issued by the Central Board of Direct
Taxes in exercise of the powers conferred under sub-section (2)(a) of section 119 of the
Act contains directions to the Chief Commissioners and Directors General and was a
statutory order and would apply. The assessee was not entitled to waiver of interest.
Arun Sunny v. CCIT (2016) 382 ITR 533 (Ker.)(HC)
S. 119 : Central Board of Direct Taxes – The assessee failed to explain ‘Genuine 1579
Hardship’ for delay of 30 months in filing return of income therefore, application for
condonation of delay in filing return of income was to be rejected [S. 139]
Assessee filed return of income for the year on 18.01.2012 declaring total income of
` 2,30,667 and claiming refund of ` 1,29,126. There was a delay of 30 months in filing
return of income therefore, an application was made by the assessee under section
119(2) for condonation of delay in filing return of income. The assessee explained that
he was the only cable operator in the State and due to the difficult field job, personally,
he used to stay very disturbed. Secondly, he also submitted that TDS certificates were
misplaced therefore the return of income could not be filed in time. The application was
rejected by the Commissioner holding that no specific reason is given by the assessee
for delay. On Writ Petition, the High Court held that the assessee has failed to prove
the ‘genuine Hardship’ as he has not produced any evidence to support the explanation
furnished to the Commissioner. (AY. 2009-10)
Shyam Sundar Nirankari v. CIT (2016) 236 Taxman 591 (P&H)(HC)
S. 119 : Central Board of Direct Taxes – The Assessee was allotted PAN in the status 1580
of the firm in the year 2005 however, application for rectification in the status was
made only in the year 2014. The High Court denied the relief under section 119 as it
was not a case of “genuine hardship”. [S. 139A]
Assessee, an association of person, was carrying on the business managing properties.
It did not file any return of income as income earned by the AOP was offered by the
members in their proportionate interest. On 13.10.2011, the assessee received a notice
to file the return of income in the status of a “firm”. The assessee pointed out that the
department has inadvertently issued a PAN in the status of the firm instead of in the
status of the AOP and income earned by the AOP was offered to tax by the members
509
Jurisdiction of Assessing Officer S. 124
in the proportion of their share. The assessee, however, under protest filed the return
of income in the status of the firm and requested the Assessing Officer to process the
return of income and give credit to the tax deducted at source since the members of the
AOP had not received the credit for the same. The assessee also made an application to
Commissioner for condonation of delay and suitable direction to Assessing Officer. The
application was rejected by the Commissioner. On Writ Petition filed by the assessee,
the High Court held that PAN was allotted way back in the year 2005 however, assessee
did not take any action to rectify the same. The assessee made the application for relief
under section 119 only in the year 2014. Therefore, there was a clear lapse on the part
of the assessee and hence the case does not fall within the scope of “genuine hardship”.
(SCA No. 8193 of 2015 dt. 04/12/2015)
Tulsi Mall (Association of Person) v. CIT (2016) 236 Taxman 586 (Guj.)(HC)
S. 124 : Jurisdiction of Assessing Officers.
1581 S. 124 : Jurisdiction of Assessing Officer – Principal place of business Lucknow
till assessment year 2011-12 – Change of principal place of business to Delhi from
Assessment Year 2012-13 – Formalities for shifting place of business and PAN details
amended – Notice under section 143(2) for assessment year 2012-13 by Assessing
Officer in Lucknow was held to be not valid – Existence of alternate remedy is Not
an absolute bar for issue of writ. [S. 143(2), Art. 226]
Allowing the petition the Court held that (i) admittedly, on receiving the notice under
section 143(2) of the Act, the assessee tendered his reply. The pendency of the writ
petition was mentioned. The proceedings ignoring the objections were not justified. The
writ petition could be considered.
(ii) That the notice dated September 11, 2013, which was computer generated, revealed
that the Delhi address of the assessee was scored out and the local address had been
added in handwriting. Therefore, it was incorrect to say that the Delhi address was
not in the knowledge of the respondents and there was force in the submissions of the
assessee that local address was inserted deliberately to create jurisdiction. The entire
proceedings were ab initio illegal.
(ii) The rule of exclusion of the writ jurisdiction due to availability of an alternative
remedy is a rule of discretion and not of compulsion. In an appropriate case, in spite of
the availability of an alternative remedy, a writ court may still exercise its discretionary
jurisdiction of judicial review, in at least three contingencies, namely (a) where the writ
petition seeks enforcement of any of the fundamental rights; (b) where there is failure of
principles of natural justice; or (c) where the orders or proceedings are wholly without
jurisdiction or the vires of an Act are challenged. In these circumstances, an alternative
remedy does not operate as a bar. (AY. 2011-12)
Prashant Chandra v. CIT (2016) 387 ITR 88 / (2017) 292 CTR 481 (All.)(HC)
510
S. 127 Power to transfer cases
S.127. Power to transfer cases.
S. 127 : Power to transfer cases – Transfer from one Assessing Officer to another under 1582
two different jurisdictions – Agreement between two jurisdictional Commissioners –
Absence of disagreement not same as agreement – Positive state of mind required –
The transfer of the income-tax assessment file of the assessee from Assessing Officer,
Tamil Nadu to the Assessing Officer, Kerala was not justified.
Where the assessee's case is transferred from one Assessing Officer to another and
the two are not subordinate to the same Commissioner, under section 127(2)(a)
of the Income-tax Act, 1961 an agreement between the Commissioners of the two
jurisdictions is necessary. Section 127(2)(a) contemplates a positive state of mind of
the two jurisdictional Commissioners. Held accordingly, that as the file of the assessee
had been transferred from an Assessing Officer in Tamil Nadu to an Assessing Officer
in Kerala and the two Assessing Officers were not subordinate to the same Director
General or Chief Commissioner or Commissioner, under Section 127(2)(a) of the Act,
an agreement between the Director General, Chief Commissioner or Commissioner, as
the case may be, of the two jurisdictions was necessary. The counter affidavit filed on
behalf of the Department did not disclose that there was any such agreement. In fact,
it had been consistently and repeatedly stated in the counter affidavit that there was
no disagreement between the two Commissioners. Absence of disagreement was not
tantamount to agreement as visualised under the section. The transfer of the income-
tax assessment file of the assessee from Assessing Officer, Tamil Nadu to the Assessing
Officer, Kerala was not justified or authorised under section 127(2)(a) of the Act and
was to be set aside.
Noorul Islam Educational Trust v. CIT (2016) 388 ITR 489 / 243 Taxman 519 / 144 DTR
339 (2017) 291 CTR 230 (SC)
Editorial : Decision of the Madras High Court in CIT v. Noorul Islam Educational Trust
[2015] 375 ITR 226 / 231 Taxman 407 / (2017) 291 CTR 232 (Mad) is reversed.
S. 127 : Power to transfer cases – Transfer order issued transferring the case of the 1583
assessee from Ahmedabad to Moradabad without hearing the assessee is null and void.
The High Court held that the order of transfer of case of the assessee from Ahmedabad
to Moradabad as a result of the search proceedings in the case of the director of the
assessee-company is null and void as no opportunity was given to the assessee to place
its submissions and order was passed without hearing the assessee.
Genus Electrotech Ltd. v. UOI (2016) 242 Taxman 336 / (2017) 152 DTR 93 (Guj.)(HC)
S. 127 : Power to transfer cases – Transfer order issued transferring the case of the 1584
assessee from Ahmedabad to Surat without hearing the assessee is null and void.
The High Court held that the order of transfer of case of the assessee from Ahmedabad
to Surat as a result of the search proceedings in the case of one HVK International
Group, Surat is null and void as no opportunity was given to the assessee to place its
submissions and order was passed without hearing the assessee.
Lalabhai Kamabhai Bharwad v. CIT (2016) 140 DTR 153 / 289 CTR 36 72 taxmann.com
184 (Guj.)(HC)
511
Power to transfer cases S. 127
1585 S. 127 : Power to transfer cases – Transfer order issued transferring the case from
Bharuch to Kolkata is null and void.
The High Court held that the order of transfer of case of the assessee from Bharuch
to Kolkata is null and void as no search was carried out in the case of the assessee
and that mere declaration of the kind of web woven by the taxpayers is too general
statement not supported by any materials on record and can therefore, not form a basis
for transfer of assessment proceedings.
Hindustan M-I Swaco Ltd. v. CIT (2016) 241 Taxman 239 (Guj.)(HC)
1586 S. 127 : Power to transfer cases – Where assessee had challenged the assessment
proceedings on the ground that the proceeding was initiated with mala fide intentions
and the same is pending before the appellate authorities, the writ petition is to be
dismissed.
The High Court held that where assessee had challenged the assessment proceedings
on the ground that the proceeding was initiated with mala fide intentions and the same
is pending before the appellate authorities, the writ petition is to be dismissed. (AY.
2008-09 to 2014-15)
Jayanthi Shri, S. v. M. Kalpalatha Rajan, ACIT (2016) 288 CTR 354 / 241 Taxman 15 /
(2017) 148 DTR 355 (Mad.)(HC)
D. Ramgopla v. M. Kalpalatha Rajan, ACIT (2016) 288 CTR 354 / 241 Taxman 15 (Mad.)
(HC)
1587 S. 127 : Power to transfer cases – Assessment was made and appeal was filed, assessee
had already pursued a remedy, hence writ was dismissed. [S. 148, 246A, Art. 226]
Assessee had closed down its business. CIT sent notice for transfer of case at wrong
address. Case transferred to another place and assessment made. Appeal filed against
the transfer and assessment. Simultaneously, writ filed. Writ petition was dismissed on
the ground that the assessee had already pursued a remedy by filing an appeal before
CIT(A). (AY 2001-02)
Dev Bhumi Industries v. CIT & Ors. (2016) 143 DTR 273 / 290 CTR 317 (HP)(HC)
Editorial : SLP of assessee is dismissed Dev Bhumi Industries v. CIT (2017) 247 Taxman
8 (SC).
1588 S. 127 : Power to transfer cases – Power cannot be delegated – Notice should be
specific based on material facts – Notice by Deputy Commissioner – No proper consent
by transferee Commissioner – Notice vague – Order of transfer was held to be not
valid.
Allowing the petition the Court held that; the show-cause notices involved in the
petitions were issued by and under the signature of the Deputy Commissioner
(Headquarters) and not under the signature of the Commissioner. The Commissioner,
Jaipur had "no objection" to transfer of the cases to Jodhpur. In that view of the matter,
there was lack of "agreement between two competent authorities" as required under the
statutory provisions. The orders were not in compliance with the provisions of law as
there were no specific reasons mentioned in the orders for effecting transfer of cases
nor did there appear to be any material fact mentioned even in the show-cause notices
requiring transfer, which otherwise could have given an opportunity to the assessees to
512
S. 127 Power to transfer cases
put forth the grounds, if any, in a meaningful manner. Custody of part of the documents
with the Assistant Commissioner, Jodhpur could not be the reason for transfer of cases
in as much as there were equal number of documents in the custody of the income-
tax authorities at Nagpur. The custody of documents could not be a consideration for
deciding whether a case should be transferred or not. The orders of transfer of cases
were not valid.
Ramswaroop v. CIT (2016) 388 ITR 208 / 241 Taxman 21 / 290 CTR 520 / 143 DTR 367
(Bom.)(HC)
Sudhir v. CIT (2016) 388 ITR 208 / 241 Taxman 21 / 290 CTR 520 / 143 DTR 367 (Bom.)
(HC)
S. 127 : Power to transfer cases – Notice on ground that transfer necessary for 1589
coordinated investigation of connected cases – No material furnished regarding
connected cases – Furnishing of few documents subsequently is not sufficient hence
the order of transfer was held to be not valid.
Court held, that the notice issued consequent to the order of the Court was bereft of any
particulars, save and except that the transfer was required for the sake of co-ordinated
investigation along with other connected cases for administrative convenience. The
show-cause notice did not indicate the reasons for the proposed transfer, thus, making
it impossible for the assessee to effectively respond to the show-cause notice. It was the
show-cause notice which was to refer to the documents and the inferences drawn from
the documents by the Commissioner supporting the proposed transfer. By mere giving of
the documents relied upon without the party knowing what inference was being drawn
therefrom, the requirement of natural justice was not met. This itself would lead to a
breach of the principles of natural justice. The order of transfer of case was not valid.
(AY. 1996-97)
Zodiac Developers P. Ltd v. PCIT (No. 2) (2016) 387 ITR 223 / 241 Taxman 230 (Bom.)(HC)
S. 127 : Power to transfer cases – Order passed by the Commissioner was proper 1590
reasoned and public interest was discernable, order so passed did not require any
interference by the Court.
Dismissing the petition, the Court held that the reason for transfer, which was, conduct
of co-ordinated post search investigation and meaningful assessment, was valid reason
for transfer of cases. The High Court further held that, the order u/s. 127 could be
sustained only if there was real public interest and the reasons given by revenue for
transfer are not vague.
Chaudhary Skin Trading Co. v. Pr. CIT (2016) 290 CTR 533 / 76 taxmann.com 169 (Delhi)
(HC)
S. 127 : Power to transfer cases – Order was passed without application of mind was 1591
held to be in valid.
Allowing the petition, the Court held that a transfer order passed which is not based
on any cogent material, shows no application of mind and which does not disclose
the reasons for transfer of case, is not in consonance with compliance of principles of
natural justice and is liable to be struck down.
Anuben Lalabhai Bharwad v. PCIT (2016) 289 CTR 49 / 241 Taxman 511 (Guj.)(HC)
513
Power to transfer cases S. 127
1592 S. 127 : Power to transfer cases – Petition was not entertained as there was delay in
filing the petition and also the petitioner has participated in the proceedings. [S. 153A,
Constitution of India, Art. 226]
Dismissing the petition the Court held that a person moving to the Court for exercise
of writ jurisdiction, should move writ petition expeditiously. The petitioner moved writ
petition against order with unreasonable delay and no sufficient reason was given for
delay. Petitioner also participated in assessment proceedings pursuant to transfer of
cases, thus, the writ petition so filed before the HC was liable to be dismissed. (AY.
2007-08 to 2012-13)
Akshata Mercantile (P.) Ltd. v. Dy. CIT (2016) 290 CTR 381 / 143 DTR 360 / 76 taxmann.
com 228 / (2017) 391 ITR 236 (Bom.)(HC)
1593 S. 127 : Power to transfer cases – Notice must show application of mind and give
reasons – Principles of natural justice must be followed at every step – Defect in notice
cannot be cured by additional reasons in order.
Allowing the petition the Court held that proper application of mind by the competent
authority at Guwahati was lacking and because of this, the abdication of responsibility
was discernible. It further appeared from the show-cause notice that the Commissioner
had acted on the proposal of the investigation wing but what was that proposal and the
nature of the approval to such proposal or even the gist thereof, was not disclosed in the
show-cause notice issued by the Principal Commissioner. The notices and consequent
orders under section 127 were not valid.
Mul Chand Malu v. UOI (2016) 383 ITR 367 / 285 CTR 89 / 69 taxmann.com 4 / 132
DTR 297 (Gauhati)(HC)
1594 S. 127 : Power to transfer cases – Addl. CIT passed assessment order, however, no
order conferring concurrent jurisdiction to Addl. Commissioner of Income-tax over
cases of Income-tax Officer was available, assessment being without jurisdiction was
void ab initio – Notice served on old address could not be quashed if assessee did not
intimate the new address to department. [S. 142, 143(3), 282]
Assessee contended that there was no order u/s. 127 transferring case to Addl.
Commissioner of Income-tax in exercise of concurrent jurisdiction vested in her and
hence order passed by Addl. CIT was without jurisdiction. Revenue however submitted
that Addl. CIT was provided concurrent jurisdiction over cases through order of
Commissioner of Income-tax and, therefore, no separate order u/s. 127 was required to
be passed. However, no such order conferring concurrent jurisdiction to Addl. CIT over
cases of Income-tax Officer was either available on assessment record, or was produced
by revenue. Thus, in absence of any such order, assessment completed by Addl. CIT
being without jurisdiction was void ab initio. Tribunal also held that the notice served
on old address could not be quashed if assessee did not intimate the new address to
department. (AY. 2007-08)
Harvinder Singh Jaggiv. ACIT (2016)157 ITD 869 / 179 TTJ 232 (Delhi)(Trib.)
514
S. 131 Power
S. 131 : Power – Survey – Communication sent to assessee showing that investigation 1595
not completed and statements recorded yet to be used – Department willing to
furnish copies of sworn statement as and when proposed to be used in evidence
– Investigation process cannot be interdicted in exercise of writ jurisdiction – No
interference warranted [Art. 226]
The plea that all the individuals who had given statements were connected with the
company was not a ground to accede to the prayer as it would hamper the investigation.
Further, it had been communicated to the assessee's principal officer that the copies of
the sworn statements of the directors as well as the employees of the company taken
during the course of survey proceedings, would be provided, as and when they were
proposed to be used as evidence against the assessee or its directors or its employees.
Thus it was evident that till date the investigation was yet to be completed and their
statements were yet to be used against any person. The plea of mala fides had not been
specifically pleaded or established. What the assessee had sought to indirectly achieve
was to injunct a summon, which could not be done, that too in exercise of jurisdiction
under Article 226 of the Constitution of India.
Advantage Strategic Consulting P. Ltd. v. UOI (2016) 389 ITR 87 (Mad.)(HC)
S. 131 : Powers regarding discovery, production of evidence, etc.
S. 131 : Power – Discovery – Production of evidence – Summons can be issued u/s. 1596
131(1A) even after the search proceedings are initiated. [S. 132]
HC upheld the validity of the summons issued u/s. 131(1A) after the search proceedings
initiated u/s. 132. HC held that summons can be issued before or even after the
search proceedings are initiated. HC held that the words ‘referred to in sub-section
(1) of section 132 before he takes action under clauses (i) to (v) of that sub-section’
in S. 131(1A) qualify the words ‘authorised officer’ only and not the other specified
authorities named in the section.
Emaar Alloys (P) Ltd. v. DGIT (Inv) & Ors. (2015) 235 Taxman 569 (2016) 138 DTR 54 /
288 CTR 413 (Jharkhand)(HC)
S. 131 : Power – Discovery – Production of evidence – The Assessing Officer is 1597
empowered to visit the house of the assessee for the purpose of examining him on
oath, by camping at the residence of the assessee. [S. 131(IA), 132]
During the search proceedings, cash of ` 40 lakhs was found from the residence of
the Assessee. The Assessing Officer drew the Punchnama on the same day and issued
notice to assessee to be present at his residence for examination on oath. The assessee
challenged the action of the Assessing Officer before the High Court in a Writ Petition.
The Single Judge held that action of the Assessing Officer amounts to “trespass” and
the Assessing Officer is to be prosecuted. On appeal by the department, the Division
bench held that the Assessing Officer under section 131(1A) empowers the Assessing
Officer to appear before him at his office or he can go to the place of such person and
examine him on oath.)
DCIT (Inv.) v. Prakash V. Sanghavi (2016) 236 Taxman 176 (Karn.)(HC)
515
Search and seizure S. 132
S. 132. Search and seizure.
1598 S. 132 : Search and seizure – Supreme Court granted leave to appeal against the High
Court order holding that the Tribunal is bound to consider the validity of search for
determining the jurisdiction for making a block assessment. [S. 158BC]
The assessee challenged the block assessment order on the ground that the search was
illegal and contrary to law and therefore the order was void ab initio. Tribunal held that
it had no jurisdiction to examine the authorisation of the search as such authorisation
does not result in any tax demand on the assessee and as the appeal was with reference
to the tax liability imposed on the assessee, the Tribunal could not go into the validity
of the authorization of search. High Court remitted the matter to the Tribunal to look
into the validity of search for determining jurisdiction for making a block assessment.
Supreme Court has granted leave to appeal against the said judgment of the High Court.
(Special Leave to Appeal (C) No. 10472 of 2014 dt. 30-11-2015)
Dy. CIT v. V. Ram Prasad (2016) 236 Taxman 479 (SC)
Editorial : V. Ram Prasad v. Dy. CIT (2012) 210 Taxman 102 (Karn.)(HC)
1599 S. 132 : Search and seizure – Survey – Survey showing undisclosed cash and
documents – Warrant of authorisation issued by competent authority, search was valid.
– No material or information in possession of authorities giving rise to existence of any
circumstances as specified in section 132 – Search illegal and unauthorized. [S. 133A]
On Writ the Court held that (i) that the competent authority had reason to believe and
formed his opinion for taking action under section 132 of the Act, based on relevant
materials. The conditions for conducting search under section 132 of the Act were fully
satisfied in the case of assessees in two of the petitions. The search was valid.
(ii) That with regard to the assessees in the third petition, there was no material or
information in the possession of the income-tax authorities as required under section
132(1) of the Act giving rise to the existence of any circumstances as specified in clauses
(a), (b), (c) of sub-section (1) of section 132 of the Act and the search was illegal and
unauthorised.
D. S. (India) Jewelmart P. Ltd. v. UOI (2016) 387 ITR 593 (All.)(HC)
Mayank Chaturvedi v. UOI (2016) 387 ITR 593 (All.)(HC)
Mridul Garg v. UOI (2016) 387 ITR 593 (All.)(HC)
1600 S. 132 : Search and seizure – Court order for release of money and gold bars seized
11 years ago as no assessment was done till date. [S. 143(3)]
The High Court ordered for release of 6 kgs of gold bars and also the Indian currency
to the tune of ` 1,49,000/- as it was seized by the department 11 years ago in 2005 and
no assessment/reassessment proceedings were initiated till date.
Gauri Shankar & Ors. v. DIT (2016) 289 CTR 203 (Delhi)(HC)
1601 S. 132 : Search and seizure – Search proceedings initiated cannot be declared illegal if
there is sufficient material before the IT authorities on the basis of which satisfaction
is arrived at that the assessee has huge undisclosed income [S. 131]
Writ petition was filed by the assessee challenging the legality and validity of the
search and seizure operations carried out by the IT Authorities under section 132. HC
516
S. 132 Search and seizure
dismissed the writ petition and upheld the validity of the search operations on several
counts. HC observed that there was sufficient material before the IT authorities that
the assessee had not disclosed huge income. Further, before the issuance of the warrant
of authorization by the Director of IT to carry out search and seizure, the procedure
prescribed under section 132 had been followed. HC further observed that it need not
approve the subjective satisfaction arrived at by the lower authorities. It was sufficient
if there are supporting documents with a satisfaction note which is approved before the
issuance of a warrant of authorization for carrying out search and seizure operations.
Emaar Alloys (P) Ltd. v. DGIT (Inv) & Ors. (2015) 235 Taxman 569 / (2016) 138 DTR 54
/ 288 CTR 413 (Jharkhand)(HC)
S. 132 : Search and seizure – Retention of seized articles – No justification for search 1602
even after eleven years – No proceedings for assessment in respect of assets seized –
Retention of seized articles not valid.
Held, that the premises of the petitioners were raided on July 11, 2005 nearly 11 years
ago. 6 kilograms of gold bars and currency were seized therefrom. Till date, there was
no justification forthcoming for either the conduct of the raid or for seizure of the
articles. There was nothing on record to show that any proceedings for assessment or
reassessment were initiated till date against the petitioners in respect of the articles
seized in 2005. There was no justification for any further retention of the seized gold
bars as well as the currency amounting to ` 1,49,000/-.
DIT v. Gauri Shankar (2016) 384 ITR 545 / 137 DTR 84 (Delhi)(HC)
S. 132 : Search and seizure – Settlement commission – Addition made by the Assessing 1603
Officer on account of discrepancy in the physical value and book value of the stock –
Amount was offered by the partner of the assessee before the Settlement Commission
which was accepted – No addition can be made in the hands of the assessee – Method
of valuation of stock. [S. 245C, 245D]
During the course of the search carried out in the premises of the firm, certain materials
were seized. It was also found that there was a discrepancy in the physical value of
the stock and the book value of the stock as on the date of search. The partner of the
assessee-firm approached the settlement commissioner under section 245C of the Act
and disclosed the said difference which was also accepted by them. In the meantime,
the addition was made in the hands of the firm by the Assessing Officer which was
deleted by CIT(A) and confirmed by the Tribunal. On appeal before the High Court, it
was held that the addition cannot be made in the hands of the assessee as the amount
was disclosed by the partner of the assessee-firm before the Settlement Commission
and was also accepted by it which was never questioned by the Department. Therefore,
addition cannot be made in the hands of the assessee-firm. Further, in respect of method
to be adopted for valuation of stock, it was held by the High Court that it is a well-
settled principle of accountancy that the stock has to be valued at cost or market price
whichever is lower. (BP. 1996-97 to 2001-02)
CIT v. Jever Jewellers (2015) 236 Taxman 282 / (2016) 286 CTR 528 / 133 DTR 159
(Jharkhand)(HC)
517
Search and seizure S. 132
1604 S. 132 : Search and seizure – Seized diary had some scribbling regarding the assessee
– Nothing could be deciphered from the noting in that documents – Buyer denying
cash payment to assessee – No concrete information elicited by AO – Merely because
the stamp value was more, no conclusive inference that there was exchange of cash –
Addition not sustainable. [S. 133A]
The Tribunal found that seized accountant’s diary had some scribbling therein. However,
it could not be deciphered clearly from the noting that there was some receipt of
cash by the assessee. During examination of the accountant by the AO, no concrete
information could be elicited by him which could have thrown some light about the
nature and details of the scribbling. The AO also examined the purchaser who denied
having paid any amount in cash. No further corroboration had been done by the lower
authorities, which could have indicated exchange of cash. Thus it was held that no
conclusive inference could be drawn that merely because the stamp value was more,
there was exchange of cash between the parties, unless some more cogent contrary
material was brought on record. The addition made by the Assessing Officer was not
sustainable. (AY. 2007-08)
Arvik Properties and Investments P. Ltd. v. DCIT (2016) 52 ITR 74 (Mum.)(Trib.)
1605 S. 132(4) : Search and seizure – Statement on oath – Addition can be made if
Evidence/material found during Search – Statement recorded under section 132(4)
to have nexus with such evidence/material – On facts when source of cash were
not substantiated addition on undisclosed income on account of cash purchase of
immoveable property would be justified. [S. 158B(b), 158BA, 158BB]
During search on a person it was found that assessee purchased a property from the
person for ` 86 Lakhs out of which ` 12 Lakhs was through cheque and balance in cash
as per agreement found during search. The AO was noticed that the returned income of
assessee was insufficient and did not accept the claim that cash paid was received as
advances from group concerns and accordingly made the addition of total 86 Lakhs. The
CIT(A) deleted the addition of ` 12 Lakhs on account of cheques as the same was not
encashed. On appeal by assessee, the Tribunal deleted entire addition on the ground that
AO has not made valid case for Block assessment of such investment as unexplained
income. On appeal by revenue High Court dealt with various contentions of department.
High Court accepted that contention of Assessee that Block assessments can be made
on the basis of incriminating material found during the search and the statement under
section 132(4) must be relatable to the material found in Search. Statement cannot be
sole basis for making Block Assessment. On facts of the case it was held that since
assessee had paid cash which was not recorded in books seized at material time and
also diary was found showing undisclosed sales and purchases therefore department
had incriminating material which was relatable to statement and upheld the Block
Assessment. On merits also it was held that since source of income was not disclosed
the addition was justified. (BP AY. 1988-89 to 1999-00)
CIT v. Harjeev Aggarwal (2016)241 Taxman 199 / 133 DTR 122 (Delhi)(HC)
518
S. 132(4) Search and seizure
S. 132(4) : Search and seizure – Statement on oath – Mere voluntary disclosure 1606
of undisclosed income by assessee cannot form basis of addition if no evidence is
detected in search. Fact that retraction of statement is late is irrelevant. CBDT Circular
No. F.No.286/2/2003-IT (In) dated 10.03.2003 bars addition on the basis of confession.
It is a normal presumption that statement under Section 132(4) is given voluntarily
unless it is proved otherwise. There is no evidence on record to show that this
statement was given in any coercion. But this statement was subject to variation on
either side after verification i.e., assessee could reduce the disclosure made or the
Assessing Officer could enhance the same if the facts and evidence so warranted. May
be, even if this fact is not mentioned in the statement itself, the point will still remain
since it is no body’s case to get say any extra tax than is due. The reality remains that
there is no evidence what-so-ever with the department even in consequence of a serious
action like search and seizure followed by detailed security which could support the
earning of speculation income of ` 10,50,000/- in this year. In other words, there is no
evidence to support the very existence of this income except the so called statement u/s.
132(4) of the Act. It defies logic that an assessee will or should admit any income which
he had not earned and which the department had not found out. I do not find anything
against the arguments that disclosure u/s. 132(4) was subject to variation and once the
assessee had access to seized documents and he realised subsequently that there was no
occasion to make this disclosure, he was having an inherent right to clarify the situation
so that he could be taxed only on real income and not on an income which was not
there at all, since there was no evidence to prove otherwise too. In addition, the very
important fact that remains that inspite of the search, no material/evidence was found to
show that the assessee was having any other undisclosed assets which could be linked
with this disclosure. (AY. 1994-95)
Chetnaben J. Shah v. ITO (2016) 140 DTR 235 / 288 CTR 79 (Guj.)(HC)
S. 132(4) : Search and seizure – Statement on oath-Statement of person actively 1607
involved in business and competent to depose about business activities best evidence
– Statement cannot be discarded for want of confrontation – Addition made on basis
of statement justified. [S. 132, 18BC]
Dismissing the appeal the Court held that the statement recorded under section 132(4)
was attested by two witnesses. The statement was also not retracted in any manner. The
Assessing Officer, the Commissioner (Appeals) and the Tribunal were satisfied that the
person who gave the statement was actively involved in and was fully conversant with
the business activities of the firm. The statement was taken from a person who was
competent to depose about the business activities of the firm. The statement recorded
under section 132(4) of the Act was the best evidence and absence of confrontation
would not necessarily require eschewing or discarding such a statement. Thus the
assessment based on the statement under section 132(4) of the Act was proper. (AY.
2007-08, 2008-09)
Classy The Antique Defend Furniture v. Dy. CIT (2016) 387 ITR 212 / 242 Taxman 469 /
(2017 293 CTR 373 (Ker.)(HC)
519
Search and seizure S. 132(4)
1608 S. 132(4) : Search and seizure – Statement on oath, such oath statement had not been
withdrawn and/or retracted – No occasion for authorities to come to conclusion that
the undisclosed jewellery belongs to father or late mother, addition was held to be
justified. [S. 132]
Dismissing the appeal of assessee, the Court held that response filed by the assessee
after the search do not indicate that the statements are being retracted or that the
statements made under oath were incorrect. Further, there was no allegation of any ill
treatment. High Court held that the valuation report by itself does not indicate, in the
absence of any other corroborative evidence, that the jewellery belongs to the father and
the later mother and/or the minor children of the assessees and accordingly, the tribunal
order was affirmed.
Paras Shantilal Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC)
1609 S. 132(4) : Search and seizure – Statement on oath – absence of corroborative material
merely on the basis of statement additions cannot be made. [S. 69B, 132, 158B]
The High Court held that the statement recorded from the son of the assessee under
Section 132(4) of the Act was not corroborated by any material document. The Revenue
had also not confronted the assessee, with the said statement of his son. Accordingly
the High Court held that it could be safely concluded that, there was no material
documentary evidence, to substantiate and corroborate the statement of the son of the
assessee. The High Court held that if the assessee makes a statement under Section
132(4) of the Act, and if there is any incriminating documents found in his possession,
then the case is different. If mere statement made under Section 132(4) of the Act,
without any corroborative material, has to be given credence, than it would lead to
disastrous results. The High Court concluded that mere statement without there being
any corroborative evidence, should not be treated as conclusive evidence against the
maker of the statement. (AY 1990-91 to 2000-01)
CIT v. S. Jayalakshmi Ammal (2016) 242 Taxman 449 / (2017) 390 ITR 189 (Mad.)(HC)
1610 S. 132(4) : Search and seizure – Statement on oath – Discrepancies in stock in
trade were found at the time of search and the Director made a voluntary offer of
certain sum of amount to tax as income – Held the voluntary income is part of the
discrepancy in stock and not an additional income. [S. 132]
Consequent to a search in the business premises of the Assessee, the Director of the
company, in his sworn statement u/s. 132(4), voluntarily agreed to offer certain sum of
money as income. Certain discrepancies in stock as per books of accounts and physical
verification were also noted by the Department. However, when the return was filed
pursuant to the notice issued u/s. 153A, the same was not offered. The AO held that
the amount surrendered was independent of the difference in stock and taxed the same.
The Assessee alleged that the statement of the Director was obtained in coercion. On
appeal, the ITAT held that the statement was obtained under duress and the search
officials were posing questions for 4 days and the search was concluded immediately
after the Director surrendered the additional income. Thus, the disclosure made by the
Director was not voluntary. Further, since no incriminating material was seized during
520
S. 132A Powers
the search except for the discrepancies in stock, the additional income confessed by the
Director pertained to the difference in stock. (AY. 2009-10, 2010-11)
Tribhovandas Bhimji Zaveri (Delhi) P. Ltd. v. ACIT (2016) 45 ITR 636 / 177 T TJ 306
(Mum.)(Trib.)
S. 132A. Powers to requisition books of account, etc.
S. 132A : Powers – Requisition of books of account – Undisclosed income – Assessment 1611
of third person – Agreement on basis of which addition made not signed by company
and cannot be relied upon. [S. 132]
Dismissing the appeal of revenue the Court held that Agreement on basis of which
addition made not signed by company and cannot be relied upon. Hence, Tribunal
deleting addition on basis of facts. Decision of Tribunal does not raise question of law.
(AY. 2007-08)
CIT v. V. M. Reality P. Ltd. (2016) 388 ITR 225 (P&H)(HC)
S. 132A : Power to requisition books of account – Cash seized from third person – 1612
Third person stating that cash belonged to assessee and assessee admitting it – Amount
included in return filed by assessee – Request to adjust tax dues and return balance to
assessee – Request cannot be refused on ground that cash had been seized from third
person. [S. 132B, 153C]
In proceedings under Section 132A, VS from whom the cash had been seized had
clearly stated that it belonged to the assessee and the assessee had also in proceedings
under Section 153C admitted this. The Department had treated the cash as belonging
to the assessee. There was no dispute as regards the title to the seized assets (cash).
The Department was, therefore, not justified in not releasing the balance amount to the
assessee on the ground that the cash had been seized from VS.
Hemal Dilipbhai Shah v. ACIT (2016) 386 ITR 91 (Guj.)(HC)
S. 132A : Powers – Requisition of assets – Where the tax department had not gathered 1613
information regarding the ownership of the assets seized, the Trial Court was justified
in demanding security deposit from the tax department for obtaining custody of the
assets. [S. 132B]
The Tax Department received information from the Ujjain police station that they had
seized cash of ` 27.80 lakh and silver bullion items valued at ` 2.05 crore from the
assessee. The Tax Department as well as the assessee filed an application with the Trial
Court for obtaining the assets. The Trial Court directed the Police Authorities to deliver
the cash and jewellery to the Tax Department subject to payment of security deposit.
The Tax Department filed a writ challenging the restrictions placed by the Trial Court
for obtaining the assets whereas the assessee filed a writ petition demanding the release
of assets as the property could not be retained post 120 days as per section 132B if
there was no outstanding demand of tax, interest or penalty. High Court held that the
Trial Court was wrong in entertaining the application of the Tax Department under
section 132A because neither the police nor the CIT had gathered any information on
record regarding the ownership of silver. However, as the assessment proceedings in
521
Application of seized or requisitioned assets S. 132B
the assessee’s case were ongoing, the Trial Court was right in considering the payment
of security on production of silver. High Court set aside the Trial Court’s order and
allowed the assessee to move a fresh application and the Tax Department to move an
application under Section 132-A if it has any fresh information regarding the ownership
of the silver bullion etc.
Dy. DIT(I) v. Nayan Kothari (2016) 383 ITR 276 / 236 Taxman 398 (MP)(HC)
Rupam and Ors v. CIT (2016) 383 ITR 276 (MP)(HC)
S. 132B. Application of seized or requisitioned assets.
1614 S. 132B : Application of seized or requisitioned assets – Release of seized assets other
than cash – Directed to release the Gold ornaments. [S. 132]
Allowing the petition the Court held that Since the assessee had deposited the
amount of ` 20,40,101 pursuant to a promise made by the Department to release such
ornaments, if the Department was not in a position to return the ornaments, it was duty
bound to return the amount so deposited by the assessee. It could be safely presumed
that auctioning the seized ornaments did not appear to be a very feasible option to the
Department. In these circumstances, when the circular dated January 21, 2009 provided
that replacement of the seized assets with cash made it easier for the Department to
adjust the cash against the tax liability and also provided for release of the ornaments
subject to payment of the price in accordance with the valuation of the assets, it would
be in the interest of the Revenue to retain the amount and release the ornaments, in as
much as, at least to that extent, the dues of the assessee would stand recovered.
Kalpesh Laxminarayan Thakkar v. Dy. CIT (2016) 388 ITR 245 (Guj.)(HC)
1615 S. 132B : Application of seized or requisitioned asset – Read with Article 226 of the
Constitution – Writ could not be issued for release of jewellery and petitioner had to
avail remedies under Income-tax Act. [Art. 226]
Jewellery was seized from petitioner's locker. In the statement/panchanama, the
petitioner’s son stated that jewellery seized belonged to the petitioner. Basis the same,
the petitioner contended that a presumption should be drawn that jewellery seized from
her locker is owned by her. However, Department's case was that during assessment
proceeding of petitioner's son, he stated that jewellery belonged to petitioner's sons,
daughters, daughter-in-law.
Considering the disputed questions of facts, the High Court opined that it is unable
to consider granting the relief to the petitioner under the said Writ Petition of
mandamus and thus dismissed the writ petition. However, the High Court directed
the Commissioner of income-tax to consider the petitioner’s representations and pass
appropriate orders on merits and in accordance with law. (AY. 1997-98)
V. Reginakantham v. CIT (2016) 242 Taxman 466 (Mad.)(HC)
522
S. 132B Application of seized or requisitioned assets
S. 132B : Application of seized or requisitioned assets – Attitude of the revenue in not 1616
returning seized assets despite assessee having succeeded in appeal is clearly arbitrary
and shows an attitude of undue harassment to the assessee in the garb of public
Revenue, court awarded cost of ` 25,000 and directed the revenue to pay interest at
18%. [S. 132]
Pursuant to search and seizure FDRs etc. were seized. Block Assessment was made but
on petitioner’s appeal, same was set aside by Commissioner of Income Tax (Appeals),
Kanpur, vide order dated 21.2.2008 and that order was confirmed by Tribunal by
rejecting Revenue’s appeals. Tribunal also relied on this Court’s judgment in Income
Tax Appeal No. 506 of 2008 filed by revenue which was dismissed. In spite of the order
of the Tribunal the petitioner was not refunded the FDR. On writ allowing the petition
the Court held that the Respondents are directed to release all FDRs seized during
seizure and also refund the amount in question, if not already released or refunded.
In case FDRs and amount in question are not returned or refunded so far, they shall
be returned/refunded forthwith without any further delay along with interest @ 18%
per annum from the date of seizure till the date of actual returned/refund. Respondents
shall be at liberty to recover the said amount of interest from the official(s) concerned
who is/are found responsible for such negligence and illegal act, after making enquiry
as permissible under law. Petitioner shall also be entitled to cost which we quantify to
` 25,000. (WT No. 805 of 2013, dt. 14.09.2016)
Shreemati Devi v. CIT (All)(HC); www.itatonline.org
S. 132B : Application of seized or requisitioned assets – Strictures – Jewellery seized 1617
was directed to be released with cost of ` 3000. [S. 132, Constitution of India Art,
300-A]
Allowing the petition the Court held that Department's recalcitrance to release the
assessee's seized jewellery, even though it is so small as to constitute "stridhan" and
even though no addition was sustained in the assessee's hands, is not "mere inaction"
but is one of "deliberate harassment. The respondents shall also pay costs quantified at
` 30,000/- to the petitioner, within four weeks, directly.
Sushila Devi v. CIT (2017) 292 CTR 116 (Delhi)(HC)
S. 132B : Application of seized or requisitioned assets – Application for release of 1618
seized articles within time specified – Explanation furnished regarding articles seized
– Department has no authority to retain seized articles if no dispute raised within 120
days – Direction to authorities to immediately release seized assets. [S. 132]
Held, allowing the petition, that when an application was made for the release of the
assets under the first proviso to section 132B(1)(i) of the Act explaining the nature and
source of the seized assets and if no dispute was raised by the Department during the
permissible time of 120 days, it had no authority to retain the seized assets in view
of the mandate contained in second proviso to section 132B(1)(ii) of the Act. The
authorities were directed to release the seized assets of the assessees immediately.
Mul Chand Malu (HUF) v. ACIT (2016) 384 ITR 46 / 286 CTR 448 / 241 Taxman 189 /
136 DTR 12 (Gau.)(HC)
523
Application of seized or requisitioned assets S. 132B
1619 S. 132B : Application of seized or requisitioned assets – Application filed for release
of asset – disposed off by the AO after more than 1 year – Held, not valid and the
cash ordered to be released along with interest. [First proviso and second proviso to
S. 132B(1)(i)]
On 25.3.2014, certain cash was seized by the competent authority. Application was filed
by the assessee on 17.4.2014 for release of such cash. Despite repeated reminders, the
authority failed to dispose off such application and it was disposed off, denying such
release, only on 20.7.2015 i.e. after the expiry of more than 1 year. High Court held that
if an application is made under first proviso to Section 132B(1)(i) then the same should
be disposed off within the time limit given in the second proviso which is 120 days
from the date on which of the last of the authorizations for the search was executed.
Second proviso though speaks of releasing the assets as referred to in first proviso
within the time limit prescribed, still the question of not releasing the asset would arise
only upon the decision on the application is taken by the AO. If no decision is taken
within the time limit, then the releasing of assets becomes imminent. Further, it was
held that such time limit cannot be said to be directory in nature.
Nadim Dilip Bhai Panjvani v. ITO (2016) 383 ITR 375 / 237 Taxman 480 (Guj.)(HC)
1620 S. 132B : Application of seized or requisitioned assets – Seized cash can be adjusted
against self-assessment tax and not advance tax. [S. 153A]
A search was conducted and cash to the extent of ` 20 lakhs was seized by the
Department. On completion of assessment u/s. 153A, the AO adjusted the seized cash
against the self-assessment tax. However, this was rectified u/s. 154 as there was no
existing liability. The ITAT held that seized cash ought to be adjusted against the
tax liability pursuant to assessment u/s 153A which is an existing liability. Without
prejudice to the fact that Section 132B was prospective in nature and would be
inapplicable to the impugned case, the ITAT held that adjustment of seized cash against
self-assessment tax was allowed, but against advance tax was not allowed. Further, the
ITAT also held that the issue being debatable could not be rectified by the AO u/s. 154.
(AY. 2006-07)
ACIT v. Narendra N. Thacker (2016) 45 ITR 188 (Kol.)(Trib.)
S. 133 : Power to call for information.
1621 S. 133 : Power to call for information – Production of evidence – After 1995
amendment, by virtue of second proviso to S. 133(6), an Income tax authority below
rank of Commissioner could exercise power of enquiry u/s. 133(6), in a case where no
proceeding was pending, with prior approval of Director or Commissioner. [S. 131(1)]
Provisions of s. 133(6) could be invoked only in cases where proceedings were pending
and not otherwise, however, after 1995 amendment, by virtue of second proviso to
s. 133(6), an Income tax authority below rank of Commissioner could exercise power of
enquiry u/s. 133(6), in a case where no proceeding was pending with prior approval of
Director or Commissioner. (AY. 2006-07)
Gurpal Singh v. ITO (2016) 159 ITD 797 (Amritsar)(Trib.)
524
S. 133A Power of survey
S. 133 : Power to call for information – Constitutional validity of section 133(6) upheld 1622
insofar as the word “any inquiry” and the second proviso is concerned. [S. 133(6)]
The Constitutional validity of section 133(6) in so far seeking of information in respect
of “any inquiry” under the Act is concerned and also the second proviso to section
133, is upheld as it does not invade any privacy of an individual and that all decisions
which have espoused the right to privacy have been cautious in pointing out that such
rights would not extend to militate against right of the State to gather information under
its fiscal administration
Pattambi Services Co-operative Bank Ltd. v. UOI (2016) 387 ITR 299 / 240 Taxman 593 /
289 CTR 559 / 142 DTR 48 (Ker.)(HC)
S. 133A. Power of survey.
S. 133A : Power of survey – Disclosure – Voluntarily offering income to tax over and 1623
above regular income but claiming cash expenditure against it – Additions was held
to be sustainable.
Dismissing the appeal of the assessee Court held that; according to the statement of the
assessee during the survey operations, no registers or records were maintained by him
in so far as the expenditure incurred by him up to that point. Only sales and purchase
details were maintained in the computer. Therefore, the sudden booking of huge
expenditure in a month's time, that too, after survey operations were carried out, would
lead any reasonable and prudent man to an inference that it was deliberately booked
to neutralise the obligation to report the additional income over and above the normal
income. When expenditure was incurred in cash, receipts or vouchers ought to have
been maintained accurately and produced before the Assessing Officer. No explanation
was forthcoming as to why expenditure was shown to have been incurred for the first
time during the assessment year in question towards the payment of commission, while
similar expenditure was not reflected in the preceding four years, particularly when
there was no change in the line of business activity of the assessee, all these years.
Therefore, the inference drawn by the Assessing Officer could not be construed to be
perverse, but was a reasonable and deducible inference which was confirmed by the
Appellate Tribunal. (AY. 2008-09)
H. Gouthamchand Jain v. ITO (2016) 388 ITR 148 / 243 Taxman 198 (Mad.)(HC)
S. 133A : Power of survey – Statement Surrender of undisclosed income – Retraction 1624
after three months – Retraction does not absolve assessee from tax liability –
Documents establishing assessee in possession of assets over and above those disclosed
in books – Addition was held to be justified. [S. 145]
Dismissing the appeals the Court held that the appellate authorities adjudicated the
issues against the assessee on appreciation of material on record. The Tribunal's
finding was that the assessee had not explained the evidence found against it. Once the
assessee was unable to offer any plausible explanation for the sum surrendered during
the survey, merely relying on the retraction made on a later date, the assessee was not
absolved of its liability. It was the finding of the Commissioner (Appeals) that voluntary
surrender was made by the assessee based on the material allegedly in the possession
525
Power of survey S. 133A
of the Assessing Officer collected during the course of survey. Even the bills, cash and
supporting documents found with the assessee established that the assessee was in
possession of assets over and above the assets declared in the books of account against
which the surrender was made. There was no illegality or perversity in the concurrent
findings of fact recorded by the appellate authorities warranting interference. A
retraction of a statement, to be effective, has to be made at the earliest opportunity when
the pressure or coercion or undue influence on the person making the confession ceases
to be operative. Whenever there is delay in retracting from a confessional statement the
onus lies upon the person retracting to show the circumstances that existed for him not
to retract earlier. (AY. 2006-07)
Gurdev Agro Engineers v. CIT (2016) 387 ITR 218 (P&H)(HC)
1625 S. 133A : Power of survey – While an assessment cannot be made on the basis of
a statement recorded u/s. 133A, if the maker of the statement has re-affirmed the
statement and nothing has been produced to show that the contents of the statement
are incorrect, the assessment is valid. [S. 131, 143(3)]
Dismissing the appeal of the assessee the Court held that However, in so far as this case
is concerned the assessments made is not based only on the statement under Section
133A of the Act. On the other hand, the assessment order itself reveals that the Revenue
has placed reliance on the proceedings initiated against the appellant for imposition of
penalty under Section 67 of the KVAT Act based on an inspection held on 17.08.2006. It
is seen that the Revenue relied on letter dated 18.09.2007 issued by V. Ahammed to the
Assistant Director of Income Tax (Investigation) clarifying his statement under Section
133A of the Act. This shows that the maker of the statement himself has reaffirmed the
statement and nothing has been produced by the assessee to show that the contents of
the statement are incorrect. In such a situation, we cannot accept the contention now
raised by the learned counsel for the assessee and hold the assessments to be illegal.
The Court has directed to grant consequential relief as per the orders passes by VAT
authorities. (AY. 2002-03, 2008-09)
Kottakkal Wood Complex v. DCIT (2016) 386 ITR 433 / 72 taxmann.com 63 (Ker.)(HC)
1626 S. 133A : Power of survey – Unexplained money – Surrendering amount during survey
– Retraction from surrender and declaring a loss in the return of income – Addition
solely on basis of admission given by Managing Director during survey was not
justified. [S. 69C]
On appeal, the Tribunal held that relying only on the statement made by the managing
director of the assessee at the time of survey, the authorities could not made the
addition in the light of the retraction made by the managing director wherein he had
reconciled the receipts found during the survey. The AO had not bothered to enquire
into the veracity of the explanation given by the assessee. The order of the authority
was not sustainable. (AY. 2007-08)
Sahil Study Circle Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 182 (Delhi)(Trib.)
526
S. 139 Return of income
CHAPTER XIV
PROCEDURE FOR ASSESSMENT
S. 139. Return of income.
S. 139 : Return – Return declared invalid – Non-payment of admitted tax – Liability 1627
to tax does not cease to exist – Assessee is not entitled to refund of tax already paid
– Attachment was held to be valid. [S. 4, 139(9), 226(3), 240]
Assessing Officer held that, due to non-payment of tax and interest, as shown in the
return of income, constituted a "defect" under Explanation (aa) to the proviso to section
139(9) of the Act. The assessee was therefore, required to rectify the defect within the
specified period, failing which the return of income was to be treated as invalid. As
the defect was not rectified, the Department issued a letter dated November 3, 2014
declaring the return of income filed by the assessee for the assessment year 2013-14
an invalid return under section 139(9) of the Act. After declaring the return of income
invalid, the Department invoking coercive action for recovery of the tax and interest
shown in the invalid return of income, issued notice dated March 12, 2015 under
section 226(3) of the Act, thereby attaching various bank accounts of the assessee
maintained by the respondent-bank, without any prior or even any subsequent notice
to it. On a writ petition against the notice, the assessee contended that because of the
declaration of the Assessing Officer under section 139(9), the amounts paid or deposited
by it, were refundable and that the return was in effect a nullity and that consequently
the Department had no authority to claim the amounts that it did.
Held, dismissing the petition, that the assessee had admitted its tax liability. Moreover,
the assessment was at large, given that the search resulted in a notice to the assessee
under section 153A. No doubt, it had claimed refund; yet those issues were to be
adjudicated. Therefore, its claim could not succeed. Referred CIT v. Shelly Products
(2003) 261 ITR 367 (SC), the Supreme Court held that the liability to pay tax arises
because of section 4(1) of the Income-tax Act, 1961, which does not depend on an
assessment order, but upon the rate or rates applicable for a given assessment year. The
liability to pay tax arises on the total income on the publication of rates; such tax is to
be computed by the assessee in accordance with the provisions of the Act. (AY. 2013-14)
Shakti Bhog Foods Ltd. v. Dy. CIT (2016) 388 ITR 280 / (2017) 244 Taxman 206 (Delhi)(HC)
S. 139 : Return of income – Belated return – Reason given by assessee was not genuine 1628
and satisfactory reason that was required for condonation of delay.
The assessee filed late return. Later on, the assessee filed a revised return and moved
an application stating reasons for late filing of return on ground of severe illness of
his wife.The Assessing Officer rejected the claim stating that there was no genuine
and satisfactory reason for late filing of return. Both the Commissioner (Appeals) and
the Tribunal affirmed the order of the Assessing Officer. On appeal to the High Court,
dismissing the petition the Court held that the assessee did not specify nature of illness,
its duration and kind of treatment. Further, operation of assessee's wife took place
long after due date of filing of return. Reason given by assessee was not genuine and
satisfactory reason that was required for condonation of delay. (AY. 2011-12)
Laljibhai Mohanbhai Ghori v. CIT (2016) 243 Taxman 535 (Guj.)(HC)
527
Return S. 139
1629 S. 139 : Return – Revised return – Voluntary retirement – Delay in filing revised return
to be condoned. [S. 10(10C), 119(2)(b)]
The assessee had filed her revised return after expiry of limitation for such filing.
The assessee made an application under section 119(2)(b) of the Act to the Principal
Commissioner of Income-tax, claiming that the revised return income though filed
beyond a period of limitation, be entertained, as otherwise it would cause genuine
hardship to her. The Commissioner rejected the application for condonation of delay.
On a writ petition:
Held, allowing the petition, that the Principal Commissioner was satisfied that the
assessee would face genuine hardship if the revised application was not entertained.
However, it was rejected on the ground that the Central Board of Direct Taxes (CBDT)
had not issued specific instructions, directing the Department to extend the period
of limitation where revised return was filed beyond a period of limitation in case of
erstwhile employees of the bank. Under section 119(2)(b) of the Act, the authority
concerned had to apply his mind to the application before him and if he found that
non-granting of the application would result in genuine hardship, the application was
to be allowed by condoning the delay. There was no requirement of specific instructions
being issued by the Board to the Department to entertain the revised return in case
an erstwhile employee of the bank filed the application after expiry of the period of
limitation. Therefore, the delay in filing revised return was to be condoned. (AY. 2008-
09)
Leena R. Phadnis (Mrs.) v. CIT (2016) 387 ITR 721 / 241 Taxman 34 / (2017) 293 CTR
175 (Bom.)(HC)
1630 S. 139 : Return of income – Condonation of delay in filing return – Delay of 1 day –
due to technical snags in the Departments website return uploaded only in midnight
and hence date of filing reckoned by Department as the next day – Held, reason for
delay satisfactorily explained – Delay to be condoned. [S. 80, 119]
The assessee company was engaged in the business of execution and commissioning
of wind turbine generators. The due date of filing of return was 15-10-2010. Due to
technical snag in the Departments website, assessee could not upload the return and
it could be filed only in midnight of 15-10-2010 and, hence, the date of filing had
been reckoned by the Department as 16-10-2010. The assessee approached the CBDT
for condonation of delay. CBDT rejected the said application. High Court held that the
assessee had satisfactorily explained the delay in filing the return and it cannot be stated
that the delay in filing the return had occurred deliberately or on account of culpable
negligence or on account of mala fides. High Court directed the CBDT to condone the
delay. (AY. 2010-11)
Regen Infrastructure & Services (P.) Ltd. v. CBDT (2016) 384 ITR 407 / 238 Taxman 530 /
141 DTR 20 / 289 CTR 220 (Mad.)(HC)
1631 S. 139 : Return of income (Defective return) – Return of income could not be declared
as invalid for belated receipt of Form ITR-V for denying benefit of carry forward
losses. [S. 80]
AO declared return of income filed by assessee as invalid for non-receipt of ITR-V
within prescribed time and, accordingly, denied benefit of carry forward losses. Since
528
S. 139A Permanent account number
AO had not intimated any defect in return of income filed, to assessee, he was not
justified in treating original return of income as invalid for belated receipt of Form
ITR-V and denying benefit of determined business losses for future years. (AY. 2008-09
2009-10)
Fibres & Fabrics International (P.) Ltd. v. DCIT (2016) 160 ITD 102 / 182 TTJ 374 (Bang.)
(Trib.)
S. 139 : Return of income – Revised computation – Remission – Refusal to consider the 1632
revised computation was held to be not valid. [S. 143(3)]
Tribunal held that the Assessing Officer could not refuse to consider revised
computation wherein deduction was claimed on account of remission by bank under
one time settlement taking a view that assessee should have filed revised return for
raising such a claim (AY. 2007-08)
Furniture Concepts (I) Ltd. v. ACIT (2016) 156 ITD 233 (Mum.)(Trib.)
S. 139 : Return – Revised return filed electronically – CIT(A) was directed to redecide 1633
the issue. [R. 12]
Allowing the appeal of the assessee, the Tribunal held that when the assessee furnished
revised return electronically but had not submitted Form ITR-V and Commissioner
(Appeals) without dealing with issue as to whether in absence of verification in Form
ITR-V alleged revised return could be treated as a valid revised return dismissed
assessee's appeal, said issue required determination by Commissioner (Appeals) (AY.
2008-09)
Ganesh Metal Industries. v. ITO (2016) 157 ITD 828 (Amritsar)(Trib.)
S. 139A. Permanent account number.
S. 139A : Permanent account number – Two PAN cards – Second PAN Card was 1634
directed to surrender to service provider.
The dispute was as regard which of the two factions of the Society should be recognised
as being competent and authorised to operate the said PAN Card would depend on
the orders pending suit. Court held that were two PAN Cards were allotted in name of
assessee to two factions within management of assessee, it was held that question as
to, which of two actions should be authorized to operate PAN CARD would depend on
orders of pending suit; till that time, holder of second PAN CARD should Surrender
said second PAN Card to PAN Service provider. till that time, order of Deputy Director
of Income-tax could not be said to be invalid.
Sri Ram Chandra Mission v. CIT (2016) 239 Taxman 170 / 289 CTR 439 (Delhi)(HC)
529
Inquiry before assessment S. 142(2A)
S. 142. Inquiry before assessment.
1635 S. 142(2A) : Inquiry before assessment – Special audit – Notice was not given to
the assessee before the order was passed – Order was set aside – Fresh notice was
issued – For computing the limitation period from date of interim order till date was
excludible. [S. 158BE]
Court held that as a general rule, therefore, when there is no stay of the assessment
proceedings passed by the Court, Explanation 1 to Section 158BE of the Act may not
be attracted. However, this general statement of legal principle has to be read subject
to an exception in order to interpret it rationally and practically. In those cases where
stay of some other nature is granted than the stay of the assessment proceedings but the
effect of such stay is to prevent the Assessing Officer from effectively passing assessment
order, even that kind of stay order may be treated as stay of the assessment proceedings
because of the reason that such stay order becomes an obstacle for the assessing officer
to pass an assessment order thereby preventing the Assessing officer to proceed with
the assessment proceedings and carry out appropriate assessment. For an example, if the
court passes an order injuncting the Assessing Officer from summoning certain records
either from the assessee or even from a third party and without those records it is not
possible to proceed with the assessment proceedings and pass the assessment order,
even such type of order may amount to staying the assessment proceedings. The special
audit is an integral part of the assessment proceedings, i.e., without special audit it is
not possible for the Assessing Officer to carry out the assessment and so, stay of the
special audit may qualify as stay of assessment proceedings and, therefore, would be
covered by the said explanation.(AY. 1994-95 to 1998-99)
VLS Finance Ltd. v. CIT (2016) 384 ITR 1 / 286 CTR 146 / 134 DTR 305 / 239 Taxman
404 (SC)
Editorial: Decision in VLS Finance Ltd. v. CIT (2007) 289 ITR 286 (Delhi)(HC) is affirmed.
1636 S. 142(2A) : Inquiry before assessment – Special audit – Assessing Officer is not
competent to extend period for filing audit report on request of nominated auditor
– Period for filing audit report can be extended only on request made on behalf of
assessee. [S. 142(2A), (2C), 288(2)]
Dismissing the appeal of revenue, the Court held that under proviso to section 142(2C)
of the Income-tax Act, 1961, the Assessing Officer suo motu can extend the time for
filing audit report prior to April 1, 2008. That power was subsequently provided by
amending the proviso by the Finance Act, 2008 and the amendment was prospective in
nature. In terms of section 142(2A), special audit is conducted under an order passed
by the Assessing Officer, by an accountant as defined in the Explanation below section
288(2) of the Act who is nominated either by the Commissioner and such nominated
auditor is permitted to furnish an audit report in the prescribed form. When the
provision is read with the Explanation below section 288(2) of the Act, the nominated
auditor is not expected to be in a relationship of an agent of the assessee or in any other
capacity except as a nominee of the Commissioner. For this reason, the section 142(2C)
specifically states that the extension of time for submitting the audit report can be made
by the Assessing Officer “on an application made in this behalf by the assessee”. If the
530
S. 143(1) Assessment
legislative intent was to permit the application to be made by the auditor nominated by
the Commissioner, that would have been expressly provided for in the proviso to section
142(2C) of the Act. The Assessing Officer was not competent to extend the period for
filing the audit report on the request of the nominated auditor. It could be done only
on the request made on behalf of the assessee. (AY. 2005-06)
PCIT v. Nilkanth Concast P. Ltd. (2016) 387 ITR 568 / 241 Taxman 194 (Delhi)(HC)
Editorial: Order in Nilkanth Concast P. Ltd. v. Deputy CIT [2016] 48 ITR (Trib.) 264 (Delhi)
is affirmed. SLP is granted to the revenue, PCIT v. Nilkanth Concast (P) Ltd. (2017) 246
Taxman 371 (SC)
S. 142(2A) : Inquiry before assessment – Special audit – The assessment was barred 1637
by limitation – The power to extend the time limit for submission of Audit report was
available from A.Y. 2008-09 onwards. [S.153A]
A search and seizure operation was conducted under section 132 of the Income-tax Act,
1961, in the premises of the assessee and notice under section 153A of the Act was
issued. During the course of assessment proceedings, the Assessing Officer directed a
special audit under the provisions of section 142(2A) of the Act and at the request of the
auditor, the Assessing Officer extended the due date for furnishing of the audit report.
The audit report was furnished within the extended period and the Assessing Officer
passed the assessment order. On appeal, the assessee raised additional grounds against
the special audit and it was held that there was no evidence on record suggesting that
the assessee sought extension of time for submission of audit report under section
142(2A) of the Act. The Assessing Officer extended the time for submission of the
special audit report suo motu. At the relevant point of time, the Assessing Officer had no
power of suo motu extension of submission of the audit report under the provisions of
section 142(2A) of the Act and such power was granted by the statute to the Assessing
Officer only from the assessment year 2008-09. The assessment framed was barred by
limitation. (AY. 2005-06)
Nilkanth Concast P. Ltd. v. DCIT (2016) 48 ITR 264 (Delhi)(Trib.)
S. 143 : Assessment.
S. 143(1) : Assessment – Order for processing of refund even after scrutiny assessment 1638
notice was issued under section 143(2) and refund to be granted at the earliest. [S.
143(1)(d), 143(2)]
The High Court had directed the Assessing Officer to consider and expedite the process
of issue of refund to the assessee within 8 weeks and the application was pending since
April 2016 and more so, when no reasons were forthcoming as to why it could not be
processed before 31st March 2017 i.e. the time limit prescribed under section 143(1)
(d). (AY 2015-16)
Group M. Media India (P) Ltd. v. UOI (2016) 142 DTR 267 / 289 CTR 622 (2017) 77
taxmann.com 106 (Bom.)(HC)
531
Assessment S. 143(1D)
1639 S. 143(1D) : Assessment – Refund – AO cannot rely on Instruction No. 1/2015 dated
13.01.2015 to withhold refunds as the same has been struck down by the Delhi High
Court.
Allowing the petition, the Court held that the; AO cannot rely on Instruction No.1/2015
dated 13.01.2015 to withhold refunds as the same has been struck down by the Delhi
High Court in Tata Teleservices & the same is binding on all AOs across the Country.
Action of the AO in not giving reasons for not processing the refund application is
“most disturbing” and stating that he will wait till the last date is “preposterous”. Action
of the AO suggests that it is not enough that the deity (Act) is pleased but the priest
(AO) must also be pleased.(AY. 2015-16)
Group M. Media India Pvt. Ltd v. UOI (2016) 388 ITR 594 (Bom.)(HC)
1640 S. 143(1D) : Assessment – Refund – Instruction No.1 of 2015 dated 13.01.2015 which
curtails the discretion of the AO by ‘preventing’ him from processing the return
and granting refund, where notice has been issued to the assessee u/s. 143(2), is
unsustainable in law and quashed. [S. 143(2), 237]
Assessee was entitled huge amount of refund due to deduction of tax at source.
The assessee was not granted the refund in view of Instruction No. 1 of 2015 dated
13-1-2015 curtailed the discretion of the AO by preventing from him from processing
the return and granting refund where notice has been issued to the assessee u/s.
143(2) of the Act. On writ allowing the petition the Court held that instruction being
unsustainable in law and liable to be quashed. (AY. 2012-13, 2013-14, 2014-15)
Tata Teleservices Limited v. CBDT (2016) 386 ITR 30 / 136 DTR 145 / 240 Taxman 182 /
286 CTR 465 (Delhi)(HC)
1641 S. 143(2) : Assessment – Validity of notice – Assessee participating in assessment
proceedings without raising any objection in respect of service of notice – Annulment
of assessment proceedings by Commissioner (Appeals) on ground no evidence to prove
service of notice – Tribunal finding notice valid – Finding of fact based on record. [S.
133A, 292BB]
Dismissing the appeal of the assessee, the Court held that the notice dated August 20,
2013 was declared valid by the Appellate Tribunal by recording findings based on facts
produced before it, which included speed post entries, copies of the dispatch register
of the Department and the actual notice dated August 20, 2013 issued under section
143(2). The fact that the same number was allotted in the dispatch register to two
notices under different provisions to the same assessee could not lead to a conclusive
determination that the two notices could not be dispatched under the same number.
The only objection taken by the assessee was in respect of the earlier refused notice
dated September 28, 2012 and not to any notice issued after the filing of the return by
the assessee including the notice dated August 20, 2013. The Tribunal had determined
on questions of fact and therefore its order could not be termed as perverse warranting
interference. (AY. 2011-12)]
Josh Builders and Developers P. Ltd. v. PCIT (2016) 389 ITR 314 (P&H)(HC)
532
S. 143(2) Reassessment
S. 143(2) : Assessment – Notice – Search and seizure – Issuance of notice under section 1642
143(2) not required – Limitation of one year thereunder does not apply. [S. 153C]
That there was no requirement of a notice under section 143(2) for completing
assessment under section 153C and the question of time limit prescribed under the
proviso to section 143(2) did not have any relevance for assessments under section
153C. (AY. 2001-02 to 2007-08)
CIT v. Promy Kuriakose (2016) 386 ITR 597 / (2017) 148 DTR 287 / 293 CTR 440 (Ker.)(HC)
S. 143(2) : Assessment – Limitation – Amendment of proviso to section 143(2) with 1643
effect from 1-4-2008 – Return filed on 24-7-2007 – Proviso as amended not applicable
– Notice had to be issued within twelve months – Months means calendar months –
Notice issued on 26-9-2008 – Barred by limitation. [S. 143(3)]
Held, allowing the petition, that the proviso to section 143(2) has been amended with
effect from April 1, 2008. In the instant case, the return was filed on July 24, 2007.
According to the law as it stood then, i.e, prior to the amendment, the period for
issue of notice was twelve months from the end of the month in which the return
was furnished. “Twelve months” means twelve calendar months and not the AY. In
the instant case, twelve months period from the end of the month in which the return
was filed, expired on July 31, 2008, so a notice should have been served on or before
August 1, 2008, but it was given on September 26, 2008. It was barred by limitation.
(AY. 2007-08)
Tulsi Food Products v. Dy. CIT (2016) 380 ITR 192 (All.)(HC)
S. 143(2) : Assessment – Notice – Where notice is issued u/s. 143(2) beyond the 1644
period of limitation, the assessment order cannot be sustained and is to be quashed
– Substantial question of law can be raised first time before the High Court. [S.260A,
292BB]
The issue before the HC was that whether the AO was justified passing an assessment
order without serving a notice u/s. 143(2) within the stipulated period as prescribed
under the Act. The HC held that the jurisdiction of AO starts only if the notice u/s.
143(2) is issued within the prescribed time. It has nothing to do with service of the
notice which is contemplated u/s. 292BB. Therefore, the order of the Tribunal, first
appellate authority and the assessment order cannot be sustained and are to be quashed.
Further, the assessee had raised the aforesaid question for the first time before the HC
to which the Revenue raised objection for admission. The HC held that a substantial
question of law which is based on records and does not require any investigation of any
facts can be entertained in appeal before the HC even if the same is not taken before
the lower authorities. (AY. 1997-98)
U P Hotels Ltd. v. CIT (2016) 131 DTR 99 / 283 CTR 417 (All.)(HC)
S. 143(2) : Reassessment – Participation in assessment proceedings and no 1645
objection raised by Assessee regarding non-service of notice under section 143(2)
– Section 292BB, which cures defect squarely applicable – “Service” & “Issue” are
interchangeable – Reassessment valid. [S. 147, 292BB]
The Tribunal held that the assessee neither disputed the fact that it participated in the
assessment proceedings nor raised any objection before completion of the assessment
533
Assessment S. 143(2)
about non-service of notice under section 143(2). Therefore, the provisions of section
292BB were squarely applicable and the assessee was precluded from taking this
objection at a later stage. It could not be presumed that no notice under section 143(2)
was served. Even otherwise also, law applicable to service of notice is equally applicable
to issue of notice as the expression “serve” and “issue” are interchangeable as has been
noticed in section 27 of the General Clauses Act, 1897. Therefore, there was a valid
issue of notice and service under section 143(2) as well as service of notice on the
assessee. (AY. 2009-10)
DCIT v. Indo American Hybrid Seeds India P. Ltd. (2016) 52 ITR 201 / (2017) 147 DTR
265 / 183 TTJ 474 (Bang.)(Trib.)
1646 S. 143(2) : Assessment – Notice – Reassessment – Order passed without issuing notice
u/s.143(2) is held to be bad in law, failure to issue notice cannot be cured by invoking
the provision of section 292BB. [S. 147, 148, 292BB]
Allowing the appeal of the assessee, the Tribunal held that in case of reassessment,
issuance of statutory notice u/s. 143(2) cannot be dispensed with merely taking plea
that there was co-operation of assessee during procedure. Once an assessee files return
in pursuance of notice u/s. 148, which is deemed to be filed u/s. 139, in case AO
wants to proceed with return filed by assessee, he has to issue a notice u/s. 143(2); any
assessment framed without issue of notice u/s.143(2) will not be valid. Failure to issue
notice u/s. 143(2) couldn’t be cured by resorting to deeming fiction of s. 292BB. (AY.
2011-12)
Sanjeev Aggarwal v. Dy.CIT (2016) 159 ITD 302 (Chd.)(Trib.)
1647 S. 143(2) : Assessment – Notice – Where assessee did not file return under section
139(1); or under section 139(4); or in response to section 148; or in response to section
142(1); Assessing Officer was not required to issue notice under section 143(2) before
completing assessment under – Reassessment was held to be valid. [S. 139(1), 142(10),
148]
During relevant year, assessee filed its return beyond time limit available under
scheme of Act and it was therefore non est and invalid return in eye of law. Assessing
Officer reopened assessment by issuance of notice under section 148 and made certain
additions. Assessee questioned legality and validity of assessment order on ground
that assessment order passed under section 143(2), read with section 147, was without
jurisdiction in absence of service of statutory notice under section 143(2). CIT(A)
affirmed the order of AO. On appeal Tribunal held that since assessee had not filed
return under section 139(1); or under section 139(4); or in response to section 148; or
in response to section 142(1); provisions of section 143(2) did not get triggered at all,
therefore, assessee’s objection was held to be not valid. (AY. 2004-05)
Chawara Educational Trust v. ITO (2016) 157 ITD 281 (Pune)(Trib.)
1648 S. 143(2) : Assessment – Notice – Absence of notice entire reassessment is vitiated.
[S.292BB]
Mere order sheet entry mentioning that notice u/s. 143(2) has been issued cannot
substitute the mandatory requirement of law in respect of issue of notice. Sec. 292BB
534
S. 143(3) Assessment
is prospective in operation and is applicable from asst. yr. 2008-09 onwards. Entire
reassessment proceedings are vitiated for non-issuance of s. 143(2) notice by the AO.
(AY. 2004-05)
Dy. CIT v. Dharampal Satyapal Ltd. (2016) 130 DTR 241 / 175 TTJ 663 (Delhi)(Trib.)
S. 143(3) : Assessment – A firm can be partner in another firm and it cannot be held 1649
that only natural legal persons can be partners in partnership firm.
Allowing the petition, the Court held that; the fact that the assessee has been assessed
in the status of a partnership firm was not in dispute. Further, even the assessment order
passed by the AO under section 143(3) of the Act treated the assessee as a partnership
firm. However, the court held that a fundamental error was done by CIT(A) by stating
that a firm cannot be a partner in another firm and only legal persons can be partners
in a partnership firm. The Court held that there is no such law which says that a firm
cannot be a partner in another firm and without expressing any opinion on the power of
the CIT(A), the court allowed the Writ and held that a partnership firm can be a partner
in another firm. (AY. 2012-13)
Megatrends Inc. v. CIT & Anr. (2016) 287 CTR 687 (Mad.)(HC)
S. 143(3) : Assessment – Amalgamation – Assessee not bringing factum of 1650
amalgamation to notice of AO – Filing return for subsequent period in name of
amalgamating company – Assessment order passed after amalgamation effected – Not
a nullity. [S. 2(IB)]
The assessee filed its return for the AY 2002-03. The assessment was completed under
section 143(3) by an order dated March 31, 2005. The order was challenged by the
assessee mainly on the ground that the order passed was a nullity since the assessee
had merged with another company by virtue of an order passed by the High Court in
March, 2003. The Commissioner (Appeals) held against the Department. In the remand
report obtained by the Commissioner (Appeals) the AO had stated that the assessee by
filing of return for the AY 2003-04 and by going along with the assessment proceedings
as an unamalgamated entity to the extent of filing of appeal against the assessment order
also, it had asserted its claim to be an assessable entity. The Tribunal also held against
the Department. On appeal: Held, allowing the appeal, that the liability that arose out
of the order became the liability of the amalgamated company because according to the
definition of the expression “amalgamation” in section 2(1B), all the liabilities of the
amalgamating company immediately before the amalgamation became the liabilities of
the amalgamated company. The assessment pertained to the financial year which had
ended on March 31, 2002, whereas the amalgamation had taken place with effect from
November, 2002. It was the liability of the amalgamating company which had accrued
prior to amalgamation. The assessee had not only had not brought to the notice of the
Department, in particular the AO, the fact about the amalgamation sanctioned by the
High Court on March 26, 2003, but it had also filed its return for the subsequent AY
2003–04. Therefore, the assessee itself had not acted upon the amalgamation. Therefore,
the assessment order passed on March 31, 2005 pertaining to the AY 2002-03 did not
become a nullity, by reason of the amalgamation.(AY. 2002-03)
CIT v. Shaw Wallace Distilleries Ltd. (2016) 386 ITR 14 / 240 Taxman 348 (Cal.)(HC)
535
Assessment S. 143(3)
1651 S. 143(3) : Assessment – Fall in gross profit rate – Reasonable explanation for such
fall – No addition to income can be made.
Since the AO had assigned no reason for rejecting the books of account and had not
controverted the quantity or value of the closing and opening inventory, addition
on account of fall in GP ratio could not be made when the assessee duly explained
the same. The books of account were properly maintained by the assessee. It had
maintained all the stock registers required for the purposes of the payment of excise
duty. (AY 2005-06)
PCIT v. Talbros Engineering Ltd. (2016) 386 ITR 154 (P&H)(HC)
1652 S. 143(3) : Assessment – Firm – Assessee signing documents as partner – No evidence
that assessee was only an employee of firm – Assessment as partner was held to be
justified – Findings of fact cannot be set aside unless perverse. [S. 182, 184, 260A]
Dismissing the appeal, the Court held that the Appellate Tribunal, the Commissioner
(Appeals) and the Assessing Officer, had rightly placed reliance upon the unrebutted
documents to record findings of fact that B was a partner of B and Co. A finding of
fact can only be set aside if it is perverse or arbitrary, is contrary to law or has been
recorded by ignoring relevant evidence. A perusal of the orders and the material on
record showed that the finding that B was a partner was not in any manner, perverse
or arbitrary, contrary to record or in violation of any legal principle. The Tribunal was
justified in holding that B was a partner of B and Co. The finding of fact did not suffer
from any legal flaw. The questions of law were mere questions of fact. (AY. 1985-86,
1986-87)
Baldev Singh and Co. v. CIT(2015) 60 taxmann.com 30/ (2016) 384 ITR 91 (P&H)(HC)
Editorial: The Supreme Court has dismissed special leave petition filed by the assessee
against this judgment, Baldev Singh and Co. v. CIT [2016] 382 ITR 2 (St.)
1653 S. 143(3) : Assessment – Service of assessment order – Assessee intimating change
of address to Department – Assessee receiving all notices and orders in new address
except final assessment order and penalty order – Assessment order containing
date written by hand – Assessee not allowed to inspect entry in despatch register –
Presumption that final assessment order not passed within specified time – Assessment
order and consequent penalty order to be quashed. [S.144C(3), (4), 271(1)(c)]
On a writ petition : Held, allowing the petition, that despite several opportunities
given to the Department, no record was produced to reveal proof of dispatch of the
assessment order soon after it was passed. The entire assessment order contains the
date only in one place and that date was written by hand, but on the notice issued to
the assessee on the same date under section 274 of the Act, the date was typewritten.
In the circumstances, it was essential for the Department to demonstrate that the final
assessment order was in fact passed on April 22, 2013 and the failure to demonstrate
it, strengthened the doubts whether the final assessment order was passed on that
date. It was not clear why the address shown in the final assessment order was the
old address of the assessee when the Department already had the changed address
with it and except the final assessment order, all the notices and orders issued to the
assessee were sent to the changed address. Thus the Department failed to prove even
536
S. 143(3) Assessment
on preponderance of probabilities that the final assessment order was passed on the
date written by hand therein. Further, when the assessee sought to inspect the file to
see whether there was any entry in the despatch register, he was not allowed such
inspection. Therefore, it was incumbent on the Department to demonstrate that the
Assessing Officer who passed the assessment order ceased to have any control over
such order and that it left his hands soon after it was passed. The Department having
failed to do so, a presumption was to be drawn that the final assessment order was not
passed within the time period specified under section 144C(4) read with section 144C(3)
of the Act. Therefore, the assessment order dated April 22, 2013 under section 143(3)
of the Act and the consequent penalty order dated June 26, 2013 under section 271(1)
(c) of the Act and the notice dated April 22, 2014 under section 221 of the Act were to
be quashed. (AY. 2009-10)
ST Microelectronics P. Ltd v. Dy. CIT (2016) 384 ITR 550 / 72 taxmann.com 203 / 137 DTR
352 / 287 CTR 324 (Delhi)(HC)
S. 143(3) : Assessment – Admission – Admission of undisclosed income by assessee is 1654
not conclusive if no evidence is found to support the admission. A retraction, though
belated, is valid. Failure to provide cross–examination to assessee of persons whose
statements are relied up is fatal to the addition. CBDT Directive F.No.286/98/2013 IT
(INV.II) dated 18-12-2014 prohibits additions on the basis of confession.[S. 132(4)]
In view of Andaman Timber Industries v. CCE (2015) 62 taxmann.com 3 (SC) and CIT
v. Chandrakumar Jethmal Kochar [2015] taxmann.com 292 (Gujarat) we are of the view
that the admission made by the assessee is not a conclusive proof and such admission
can be used as an evidence unless it is not retracted. The assessee in this case has
already retracted the statement which in our opinion is a valid retraction. Although
there had been search in the case of Gokul Corporation and its partner Shri Suresh
A Patel on which the Revenue has relied for making the additions in the case of the
assessee but the Revenue could not bring any evidence or material except the statement
of the assessee which was recorded on 8.1.96 and also the statements of Shri Subhash
Pandey and Shri Kashyap Thakore and these statements were although recorded at
the back of the assessee. When the assessee has asked for their cross-examination, the
cross examination of Shri Subhash Pandey was not given to the assessee, although the
statement of the assessee was recored in consequence of the statement of Shri Subhash
Pandey recorded on 1.1.96 u/s. 131. The statements of Shri Suresh A Patel and Shri
Kashyap Thakore nowhere state the name of the assessee. Thus the Revenue has not
brought any evidence. The onus, in our opinion, is on the Revenue to prove that the
assessee has earned the income. It gets shifted on the assessee once the assessee claims
the exemption of income.(ITA No. 210 of 2008, dt. 20.07.2016)(AY. 1991-92)
CIT v. Ramanbhai B. Patel (Guj.)(HC) www.itatonline.org
S. 143(3) : Assessment – Duty of the Assessing Officer is to allow deduction even if 1655
not claimed in return – Unavailed MODVAT credit cannot be construed as income and
there is no liability to pay tax on such unavailed MODVAT credit. [S.139]
Once the return is filed the Assessing Officer commences the assessment proceedings,
the assessing authority is not the taxpayer’s opponent, in the strictly procedural sense
537
Assessment S. 143(3)
of the term. The Central Board of Direct Taxes Circular No 14 (XL.35 ) dated April 11,
1955 states that it is the duty of the Assessing Officer to make available to the assessee
any legitimate and legal tax relief to which the assessee is entitled, but has omitted
to claim one reason or another. Merely because the assessee in the return filed under
section 139(1) has not put forth a claim for relief, he cannot be estopped from getting
the tax relief if he entitled to it in law. Accordingly following the ratio in CIT v. Indo
Nippon Chemicals Co Ltd. (2003) 261 ITR 275 (SC), that the unavailed MODVAT credit
cannot be construed as income and there is no liability to pay tax on such unavailed
MODVAT credit.(AY. 2001-02 to 2004-05)
Dy. CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
1656 S. 143(3) : Assessment – Source of payment – Matter was remanded to the AO to
examine the seller of the property.
Allowing the appeal of the assessee, the Tribunal held that; just because the assessee
had made the admission, the additions were to follow inexorably, as a natural
consequence of the admission made by assessee. Sellers of the property ought to have
been called and examined. Matter was accordingly remitted to AO. AO was directed to
call the seller of the property to verify the fact of sale rate mentioned in the alleged sale
agreement and the rate as was settled between the seller and the purchaser at the time
of execution of sale deed. (AY. 2002-03)
Arvind Kumar v. ITO (2016) 180 TTJ 52 (UO)(Asr.)(Trib.)
1657 S. 143(3) : Assessment – Amalgamation of companies – Order of assessment against
amalgamating company invalid. [S. 292B]
Allowing the appeal the Tribunal held that; order of assessment against amalgamating
company invalid. Amalgamating company ceases to exist on date of effect. Passing of
order is not a procedural defect that can be cured u/s 292B but jurisdictional defect,
hence liable to be set aside. (AY. 2006-07)
Instant Holdings Ltd. v. ACIT (2016) 49 ITR 32 (Mum.)(Trib.)
1658 S. 143(3) : Assessment – Search – Stock – Surrender of income – Deletion of addition
was held to be justified. [S. 132(4)]
The revenue is aggrieved by the decision of learned CIT(A) in deleting the income
surrendered by the assessee in the statement given under section 132(4) of the Act in
both the years. The Tribunal held that in the instant case the learned CIT has given a
dear finding that the alleged excess stock pointed out by the search officials has since
been reconciled by the assessee and the AO did not make any addition on account
of alleged excess stock meaning thereby, he was also satisfied with the reconciliation
statement furnished by the assessee. The Tribunal further held that the assessee
has maintained books of account and further the difference in stock has been duly
reconciled. In the circumstance the CIT(A) was justified in deleting the additions made
by the AO. (AY. 2009-10, 2010-11)
CIT v. Tribhovandas Bhimji Zaveri (2016) 45 ITR 636 / 177 TTJ 306 (Mum.)(Trib.)
538
S. 143(3) Assessment
S. 143(3) : Assessment – Revised computation of income should be used for completing 1659
the assessment which was based on the audited books of accounts.
The assessee being a Government Company was audited by the Comptroller of Auditor
General (CAG). Based on the audit accounts, revised computation of income was filed
during the course of assessment. However, the AO completed the assessment based on
the original return of income which was filed prior to the finalization of accounts by
the CAG. The ITAT held that the assessment should be completed, like in previous AYs,
based on the revised computation of income. The purpose of assessment was to arrive
at the proper figure of income and it would be travesty of justice if audited accounts
are ignored during the course of assessment though they are available. (AY. 2001-02,
2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol)(Trib.)
S. 143(3) : Assessment – In an AIR scrutiny assessment, the AO is not entitled to widen 1660
the scope of scrutiny without approval of the CIT as per CBDT’s Instruction. Such an
assessment order is not sustainable.[S. 119]
Allowing the appeal of assessee the Tribunal held that (i) The AIR information was
regarding transaction of ` 25 lakhs dated 31.3.2011 Para 2 of the CBDT Instruction
dated 08.09.2010 states that the scrutiny of cases selected on the basis of information
received through AIR returns would be limited only to the aspects of information
received through AIR;
(ii) As seen, the AIR information in the present case was regarding cash deposits of
` 25 lakhs by the assessee in her savings bank account with OBC. Meaning thereby,
that the assessee was required to explain the source of such cash deposits. The assessee
explained the same as sale proceeds of her residential house amounting to ` 32.25 lakhs
received from Smt. Naunihal Kaur, the purchaser. Her this assertion was duly supported
by a copy of the concerned sale deed;
(iii) Now, as per the CBDT Instruction, nothing further was to be gone into by the AO,
since the information received through AIR was the cash deposits. However, the AO
as noted in paras 3.1 & 3.3 of the assessment order itself asked the assessee vide letter
dated 13.12.2013 to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, with whom the
assessee had entered into a separate agreement to sell and from whom, the assessee had
received a sum of ` 3 lakhs at the time of agreement “for their examination in order to
ascertain whether the agreement, was finalized or cancelled”. The AO observed that this
proceeding was limited to the extent of the AIR information;
(iv) Evidently, the matter of the other agreement to sell does not stand covered in
the AIR information, which was regarding the cash deposits of ` 25 lakhs, which
the assessee had adequately explained, as above. So, it was obviously not within the
purview of the AO to ask the assessee to produce Smt. Balbir Kaur and Smt. Kamaljit
Kaur, or to make addition of ` 3 lakhs, as was done;
(v) In fact, what the AO did was to widen the scrutiny. Now, para 2 of CBDT Instruction
is specific when it states that where it is felt that apart from the AIR information, there
539
Best judgment assessment S. 144
is potential escapement of income more than ` 10 lakhs, the case may be taken up for
wider scrutiny with the approval of the administrative Commissioner.
(vi) So, the proper course for the AO before making these additional enquiries would
have been to take approval from the administrative Commissioner to widen the scrutiny.
This, however, was not done and therefore, the action of the AO is violative of the
CBDT Instruction.(ITA No.87(Asr)/2016, dt. 24.03.2016)(AY. 2011-12)
Gurpreet Kaur v. ITO (Asr.)(Trib.); www.itatonline.org
S. 144. Best judgment assessment.
1661 S. 144 : Best judgment assessment – Estimation of net profit rate of 1 per cent of
turnover was held to be justified. [S. 145(3)]
Dismissing the appeal of assessee the Court held that; Appellate Tribunal applying net
profit rate of 1 per cent considering identical cases of traders in same area of business
is a finding of fact on basis of material evidence on record, which does not warrant
interference. (AY. 1997-98, 2000-01)
Bhura Ram (Dantaramgarh Group) v. CIT (2016) 388 ITR 259 (Raj.)(HC)
Bhura Ram (Phulera Group) v. CIT (2016) 388 ITR 259 (Raj.)(HC)
Rajaram Rajendra Bhandari (Ajmer Group) v. CIT (2016) 388 ITR 259 (Raj.)(HC)
1662 S. 144 : Best judgment assessment – Estimate based on consideration of similar cases
and submissions of assessee – Estimate valid. [S. 145(3)]
Dismissing the appeal of assessee the Court held that admittedly the books of account
had been found to be defective even on the admission of the assessee. The books of
account were rightly rejected for the reasons assigned by all the three authorities. The
Tribunal’s findings were elaborate and considered the submissions of both the sides.
When the books of account were to be rejected under section 145(3) and in a best
judgment assessment under section 144 some guess work was required to be applied to
come to a reasonable conclusion and it should be on some basis or reasoning. However,
the Tribunal had not gone by assumptions or presumptions but after considering other
identical similarly situated traders, dealing in the same line of business. Therefore, the
Tribunal had basis to apply a particular gross profit rate in both the country liquor
account as well as Indian made foreign liquor/beer account. Its orders were justified.
(AY. 2000-01, 2001-02)
Chaturbhuj Manoj Kumar v. CIT (2016) 388 ITR 194 (Raj.)(HC)
Rajaram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC)
Hazariram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC)
1663 S. 144 : Best judgment assessment – Unbiased and rational guess work – No
interference.
Dismissing the appeal, the Tribunal had adopted a plausible view based on appreciation
of material on record. It was categorically recorded by the Tribunal that the moot
question was the justification of estimation of seats. The Tribunal deemed it appropriate
to estimate the occupancy at 22 seats in each bus. For the best judgment assessment
some guess work based on rational basis had to be adopted. The assessee had not
540
S. 144C Reference to dispute resolution panel
proved that the Tribunal’s approach in arriving at its conclusion was arbitrary or
irrational. Moreover, the assessee had failed to furnish requisite information compelling
the Assessing Officer to have recourse to section 144 of the Income-tax Act, 1961 in
framing the best judgment assessment. There was no illegality or perversity in the order
of the Tribunal warranting interference. (AY. 2001-02)
Tara Singh v. ITO (2016) 387 ITR 587 (P&H)(HC)
S. 144 : Best judgment assessment – Failure to produce books of account best judgment 1664
assessment was held to be justified.
Allowing the appeal of the Revenue, Tribunal held that assessee failed to produce books
of account and various details required for confirmation of balance sheet and profit
and loss account, AO was justified to proceed with a best judgment assessment. (AY.
2008-09)
Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)
S. 144C. Reference to Dispute Resolution Panel.
S. 144C : Reference to dispute resolution panel – Dispute Resolution Panel – Superior 1665
to Assessing Officer – Assessing Officer bound by decision of Dispute Resolution Panel.
Allowing the petition the Court held that the language used by the Assessing Officer
while disagreeing with the binding order of the Dispute Resolution Panel was wholly
unacceptable. The draft assessment order dated March 28, 2014 and the final assessment
order dated January 28, 2015, passed by the Assessing Officer were void ab initio and
liable to be quashed on that basis. (AY. 2010-11)
ESPN Star Sports Mauritius S. N. C. et Compagnie v. UOI (2016) 388 ITR 383 / 241
Taxman 38 / 290 CTR 49 / 142 DTR 296 (Delhi)(HC)
ESS Distribution (Mauritius) S. N. C. et Compagnie v. UOI (2016) 388 ITR 383 / 241
Taxman 38 / 290 CTR 49 / 142 DTR 296 (Delhi)(HC)
S. 144C : Reference to dispute resolution panel – Transfer pricing – Arms’ length 1666
price – In terms of section 144C(12), prescribed period of nine months within which
DRP can issue directions, has to be computed from date of actual service of draft
assessment order on assessee – Matter remanded. [S.92C]
Allowing the petition the Court held that in terms of section 144C(12), prescribed period
of nine months within which DRP can issue directions, has to be computed from date
of actual service of draft assessment order on assessee - Matter remanded, the order
of the Dispute Resolution Panel, Bengaluru, dated 22-6-2015 is set aside and the DRP,
Bengaluru is directed to take up Form 35A filed by the assessee for a consideration on
merits. (AY. 2008-09)
Rain Cements Ltd. v. DCIT (2016) 243 Taxman 496 (AP&T)(HC)
S. 144C : Reference to dispute resolution panel – It is mandatory on the part of the 1667
Assessing Officer to pass the draft assessment order before passing the final assessment
order under section 143(3) of the Act. [S. 143(3)]
The High Court had held that in the case of a foreign company, it is mandatory to pass
the draft assessment order first before passing the final assessment order under section
541
Reference to dispute resolution panel S. 144C
143(3) of the Act in view of section 144C(15) which defines eligible assessee to whom
section 144C(1) applies to, inter alia, mean any foreign company. (AY. 2012-13)
International Air Transport Association v. DCIT (2016) 142 DTR 293 / 241 Taxman 249 /
290 CTR 46 (Bom.)(HC)
1668 S. 144C : Reference to dispute resolution panel – Petitioner not a foreign company –
TPO did not propose any variation – AO is not competent to pass draft assessment
order. [S.92C]
The petitioner, an Indian company has a subsidiary in Japan with which it had
International transactions. On reference to TPO order was passed without proposing
any variation to the returned income. The AO passed a draft assessment order and
made certain disallowances. On writ against draft assessment order it was held that
neither of the two conditions for applicability of section 144C i.e. Assessee is a foreign
company or where TPO has suggested variation to return of income on reference, gets
satisfied therefore the AO was not competent to pass draft order. The Assessee was not
an eligible assessee under 144C(15)(b). (AY. 2011-12)
Honda Cars India Ltd. v. Dy. CIT (2016) 382 ITR 88 / 285 CTR 39 / 133 DTR 48 / 240
Taxman 707 (Delhi)(HC)
1669 S. 144C : Dispute resolution panel – Filing of scanned application form – objections in
an application before DRP in Form No. 35A , same was a scanned copy but otherwise
it was in order in all respects– could not treat said application as ‘non-est’. [S.292B]
In transfer pricing proceedings, TPO made certain addition to assessee’s ALP. Assessee
filed its objections in an application before DRP in Form No. 35A same was only a
scanned copy containing signature of connected persons, DRP treated said application
as ‘non-est’ and dismissed same in limine. The ITAT held that revenue authorities did
not issue any defect notice to assessee at appropriate time calling for removal of defect,
failed to provide written reasons for rejecting original application. Otherwise in order
in all respects bearing correct signature of person who was duly authorised to file same
therefore the same application could not be said as ‘non-est’ and dismissed same in
limine. (AY. 2009-10)
MSM Satellite (Singapore) Pte. Ltd. v. DIT (2016) 161 ITD 602 (Mum.)(Trib.)
1670 S. 144C : Reference to dispute resolution panel – The AO should compulsorily pass
a draft assessment order and any final order passed without passing the draft order
will be void in nature. [S.92CA]
Consequent to a reference u/s 92CA, the TPO rejected the transfer pricing study report
maintained by the assessee and carried out his own study and proposed to make an
adjustment to the income of the assessee. The AO made the addition as proposed by the
TPO. On appeal before the CIT(A), relief was granted to the assessee on merits of the issue,
while the legal issue regarding the validity of the AO’s order was dismissed. The Department
filed an appeal before the ITAT and the assessee filed a CO. The ITAT allowed the assessee’s
CO and held that the order of the AO was without jurisdiction since he had failed to pass
a draft order and directly passed the final assessment order. (AY 2008-09)
ACIT v. Getrag Hi Tech Gears Pvt. Ltd. (2016) 47 ITR 545 / 69 taxmann.com 35 (Chd.)
(Trib.)
542
S. 145 Method of accounting
S. 144C : Reference to dispute resolution panel – The AO should compulsorily pass 1671
a draft assessment order and any final order passed without passing the draft order
will be void in nature.
Consequent to a reference u/s. 92CA, the TPO rejected the transfer pricing study report
maintained by the Assessee and carried out his own study and proposed to make an
adjustment to the income of the Assessee. The AO made the addition as proposed by
the TPO. On appeal before the CIT(A), relief was granted to the assessee on merits of
the issue, while the legal issue regarding the validity of the AO’s order was dismissed.
The Department filed an appeal before the ITAT and the assessee filed a CO. The ITAT
allowed the Assessee’s CO and held that the order of the AO was without jurisdiction
since he had failed to pass a draft order and directly passed the final assessment order.
(AY. 2008-09)
Getrag Hi Tech Gears Pvt. Ltd. v. ACIT (2016) 47 ITR 545 / 69 taxmann.com 35 (Chd.)
(Trib.)
S. 144C : Reference to dispute resolution panel – Non-passing of draft assessment order 1672
and later on rectifying the final assessment order would negate the entire proceedings.
AO issued the order u/s. 143(3) along with the demand notice. Thereafter, he wrote a
letter that the said order was actually a draft assessment order passed u/s. 143(3) r.w.s.
144C and the demand notice was issued inadvertently. A rectified draft assessment order
was issued to the Assessee. The ITAT held that the entre proceedings was illegal and it
was sine qua non for the AO to pass a draft assessment order and in the instant case
the AO had passed an order, consequent to which demand was computed and penalty
proceedings were initiated. This mistake could not be rectified by s. 292B since the
intention of passing such an order was not to pass a draft order, but a final assessment
order. Since the issue was taken up as an additional ground in the second round of
proceedings, the ITAT observed that additional grounds of appeal could be taken in the
second round of proceedings, if it went to the root of the issue and if decided, could
render other grounds as academic and infructuous. (AY. 2007-08)
Jazzy Creations (P) Ltd. v. ITO (2016) 176 TTJ 393 / 133 DTR 1 (Mum.)(Trib.)
S. 145. Method of accounting.
S. 145 : Method of accounting – Valuation of stock – So long as the assessee adopted 1673
such change bona fide and employed the new method regularly, it could not be
faulted. [S.144]
On a reference the Court held that The assessee had changed the method of ascertaining
the cost for the purpose of stock valuation and not the method of accounting employed
by it for the purpose of stock valuation as such. The method, as before, continued to be
“cost or market value whichever was lower”. It was only for determining the cost instead
of “lower purchase price”, that the “weighted average cost” was adopted on the footing
that the latter was a more scientific basis for accounting the closing stock. So long as
the assessee adopted such change bona fide and employed the new method regularly, it
could not be faulted. (AY. 1976-77, 1977-78)
Bajaj Auto Ltd. v. CIT (2016) 389 ITR 259 / (2017) 244 Taxman 31 (Bom.)(HC)
543
Method of accounting S. 145
1674 S. 145 : Method of accounting – Rejection of books of account not valid merely for the
reason that day-to-day stock register is not maintained. [S. 144]
The High Court held that the rejection of the books of accounts merely for the reason
that the day to day stock register is not maintained is not valid and that the books of
account maintained by it are tallying and the excise duty is paid on that basis and
The stock register is not tallying with the other books of account only because some
of the items were not deleted from the stock register. Moreover, it was also held that
the change in the method of accounting in respect of MODVAT could not be a reason
to reject books of account particularly when there was nothing to hold that change in
method of accounting was not a mala fide act on assessee’s part.
Jaytick Intermediates (P.) Ltd. v. ACIT (2016) 242 Taxman 319 (Guj.)(HC)
1675 S. 145 : Method of accounting – Switch over from one method of accounting to another
method in midst of an accounting year is not permitted.
Dismissing the appeal of the assessee, the Court held that switch over from one method
of accounting to another method in midst of an accounting year could lead to skewed
results as assessee could then avoid paying correct advance tax by following cash
system at first and then justify non-payment by switching over to mercantile system
and further, assessee could do this at least more than once leaving entire assessment in
a state of uncertainty and confusion which would fragment an assessment year. Such
a switch over in midst of financial year should be permitted by authorities only in
exceptional cases where same poses no difficulty in computing income and switch-over
was justified. (AY. 1984-85)
Munjal Sales Corpn. v. CIT (2016) 243 Taxman 523 / (2017) 393 ITR 248 / 150 DTR 293
(P&H)(HC)
Editorial: Refer Munjal Sales Corpn v. ITO (1994) 49 ITD 361 (Chd.)(Trib.)
1676 S. 145 : Method of accounting – Business income – Failure by assessee to maintain
books of account – Presumption that assessee following cash system of accounting –
Amount received in one year cannot be spread over several years – Failure by assessee
to produce vouchers as proof of expenditure – No basis for estimation of expenditure.
[S. 28(i), 37(1)]
Allowing the appeal of revenue, the Court held that; Since no books of account were
maintained by any of the three assessees, it was to be presumed that they followed the
cash system of accounting. Therefore, the question of income accruing or the right to
earn income accruing only upon the performance of a service at the end of a period did
not arise. The matching principle or the application of AS-9 issued by the Institute of
Chartered Accountants of India which dealt with the principle of revenue recognition
appeared to apply only to companies and not individuals. Once it was clear that it
was the cash system of accounting that was followed, the amount received in one year
could not be spread over several years. Thus the Commissioner (Appeals) was right in
affirming the order of the Assessing Officer to the extent of bringing the entire amount
received by the assessees to tax in the year in question. There was no reason to interfere
with the order of the Commissioner (Appeals) to the extent that he had disallowed
expenditure at an estimated 35 per cent., since there was no basis for estimation of
544
S. 145 Method of accounting
expenditure with the assessees not maintaining accounts and being unable to produce
vouchers or bills as proof of any expenditure. (AY. 2006-07)
CIT v. Aman Khera (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann.com 185 / 140 DTR
1 (Delhi)(HC)
CIT v. Jyoti Khera (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann.com 185 / 140 DTR 1
(Delhi)(HC)
CIT v. Raman Khera (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann.com 185 / 140 DTR
1 (Delhi)(HC)
Editorial: SLP of assessee is dismissed; Aman Khera v. CIT (2017) 245 Taxman 71 (SC)
S. 145 : Method of accounting – Fall in gross profit rate – Rejection of accounts was 1677
held to be not valid.
Dismissing the appeal of revenue the Court held that, mainly because of fall in gross profit
rate rejection of books of account was held to be not justified. (AY. 2003-04 to 2009-10)
CIT v. Micro Instruments Company. (2016) 388 ITR 46 / 289 CTR 152 / 75 taxmann.com
304 (P&H)(HC)
S. 145 : Method of accounting – Rejection of accounts was held to be not justified. 1678
Dismissing the appeal of revenue the Court held that The Commissioner (Appeals) and
the Tribunal after appreciating the material on record, recorded concurrent findings of
fact and gave detailed, cogent and convincing reasons for holding that the Assessing
Officer was not justified in rejecting the books of account of the assessee. Therefore,
the order was based upon concurrent findings of fact recorded by the Tribunal after
appreciating the material on record. The Department was not in a position to dislodge
the findings of fact recorded by the Tribunal by pointing out any material to the
contrary, nor was it the case of the Department that the Tribunal had placed reliance
upon any irrelevant material or that any relevant material had been ignored. Under the
circumstances the accounts could not be rejected.
PCIT v. Garden Silk Mills Ltd. (2016) 388 ITR 237 (Guj.)(HC)
S. 145 : Method of accounting – Accrual – Mercantile system of accounting – Non 1679
convertible unsecured debentures issued by group company– Resolution passed by
board of directors of assessee to waive interest on debentures for six years – Tribunal
holding that even though assessee following mercantile system of accounting interest
did not accrue – Neither perverse nor arbitrary, notional interest cannot be brought
to tax. [S.4]
Dismissing the appeals of revenue, the Court held that the order of the Tribunal was
based on the facts and its findings were not found to be perverse or arbitrary. It found
that the various resolutions passed by the company and the communications exchanged
between the parties established the fact that the interest on the debentures was waived
for six years and that there was no reason to disbelieve the resolution waiving the
interest. Amalgamation of the issuing company with the assessee also established the
fact that it was in financial difficulties. Moreover, for the assessment years prior to
2007-08 no additions were made by the Department on account of notional interest. No
question of law arose. (AY. 2007-08, 2009-10)
CIT v. Neon Solutions P. Ltd. (2016) 387 ITR 667 (Bom.)(HC)
545
Method of accounting S. 145
1680 S. 145 : Method of accounting – Best judgment assessment – Gross profit rate –
Determination of, a question of fact. [S.144]
Dismissing the appeal of the revenue, the Court held that the estimation of gross profit
is a question of fact. (AY. 2006-07)
CIT v. Satish Bala Malhotra (Smt.) (No.2) (2016) 387 ITR 408 (P&H)(HC)
1681 S. 145 : Method of accounting – Estimation of income – Even after search sales and
sales price were accepted gross profit rate could not be increased.
After the search was conducted, Assessing Officer computed gross profit on sales at
rate of 10% and accordingly made the addition, despite fact that sales were recorded in
regular books and sale price was accepted by the department. In earlier years 6% gross
profit was shown and after reducing cost price, net profit came to 5.66%. The issue
before the court was whether addition was to be made in gross profit and appropriate
deductions were to be given after considering 5.66 per cent profit rate of the earlier
years.
The High Court held that the assessee cannot be punished since sale price is accepted by
the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding
cost price is required to be deducted and tax cannot be levied on the same price and we
have to reduce the selling price accordingly as a result of which profit comes to 5.66%.
Therefore, the court held that considering the rate of 5.66% as appropriate, necessary
deductions should be accordingly made. In the result, the said question was answered
partially in favour of the assessee and partially in favour of the revenue.
N. K. Industries Ltd. v. Dy. CIT (2016) 142 DTR 162 / 72 taxmann.com 289 / (2017) 292
CTR 354 2 (Guj.)(HC)
1682 S. 145 : Method of accounting – Where books of account of assessee had not been
rejected and assessment having not been framed under section 144 estimation of
income cannot be made. [S. 144]
Dismissing the appeal of assessee the court held that; neither the AO nor the
Commissioner (Appeals) had rejected the books of account maintained by the assessee
in the course of the business. The Tribunal had rightly rejected or set aside the partial
addition made by the AO for arriving at gross profit and sustained by the Commissioner
(Appeals) and rightly held that the entire addition made by the AO was liable to be
deleted. The finding was based on sound appreciation of facts and it did not give rise
to a substantial question of law. (AY. 2006-07)
CIT v. Anil Kumar & Co. (2016) 386 ITR 702 / 67 Taxman.com 278 (Karn.)(HC)
1683 S. 145 : Method of accounting – Cash system – Advances/deposits to electricity board
and other market committee – AO taxed accrued interest – Held, cannot tax accrued
interest without any receipt. [S.5]
The assessee was a market committee. It made advances/deposits to electricity board
and other market committees. The AO assessed accrued interest on said advances. High
Court held that, assessee was following cash system of accounting and therefore, accrued
interest cannot be taxed in absence of any receipt. (AY. 2006-07)
CIT v. Market Committee, Shahabad (2016) 240 Taxman 535 (P&H)(HC)
546
S. 145 Method of accounting
S. 145 : Method of accounting – Rejection of accounts – Finding that assessee had been 1684
consistently following project completion method for booking revenue – Rejection of
accounts is not justified.
For the assessment year 2009-10 the assessee in its reply to the query raised by the
Assessing Officer, inter alia, claimed that it had been consistently following the method
of booking of revenue on the completion of the flat when full payment had been
made to it by the person concerned and possession was delivered to him. Though the
Assessing Officer rejected the plea of the assessee, the Commissioner (Appeals) accepted
it. This was confirmed by the Tribunal. On appeals: Held, dismissing the appeals,
that the assessee had been consistently following one of the recognized methods of
accountancy, i.e. the project completion method, for computation of its income. In the
absence of any prohibition or restriction under the Act for doing so, it could not be held
that the approach of the Commissioner (Appeals) and the Tribunal was erroneous or
illegal in any manner so as to call for interference by this court. No substantial question
of law arose. (AY. 2009-10)
CIT v. Principal Officer, Hill View Infrastructure (P) Ltd. (2016) 384 ITR 451 (P&H)(HC)
Editorial: Order in Hill View Infrastructure P. Ltd. v. Deputy CIT (2014) 34 ITR 128
(Chandigarh)(Trib.) is affirmed.
S. 145 : Method of accounting – Consistently following project completion method – 1685
Expenses of construction not debited to profit and loss account of assessee and shown
as cost of construction of block of buildings – Assessee offering tax in subsequent
financial year – No actual loss to revenue – Order of Tribunal was set aside.
Held, the method of accounting followed by the assessee in the present case, i.e., project
completion method was certainly one of the recognised methods and was consistently
followed by it. There was no good reason for the Tribunal to reverse the finding of
the Commissioner (Appeals). The reason that “risks and rewards” of ownership were
transferred to the buyers who had paid the booking advance amounts and in some
cases these rights were transferred to third parties, would not in any manner affect the
treatment of the amounts in the books of the assessee. The expenses of construction
were not debited to the profit and loss account of the assessee and were shown as cost
of construction or block of buildings. Only when a conveyance deed was executed or
possession delivered was the receipt shown as income. The Tribunal failed to take
note of the explanation added by way of notes to the accounts, when it came to the
conclusion that the percentage completion method should apply to the assessee. The
assessee offered to tax in the subsequent financial year the amounts received and
therefore there was no actual loss to the Revenue. Therefore, the order of the Tribunal
was to be set aside. That for the AY 2006-07, the advances received by the assessee were
in respect of a project that never took off. A part of the advance amount was returned
in the following financial year since the transaction itself fell through. Therefore, the
sum could not be treated as income in the hands of the assessee. No purpose would be
served in remanding the matter to the Assessing Officer for a fresh determination. (AY.
2005-06, 2006-07)
Paras Buildtech India P. Ltd. v. (2016) 382 ITR 630 / (2017) 145 DTR 313 / 291 CTR 549
/ 80 taxmann.com 335 (Delhi)(HC)
547
Method of accounting S. 145
1686 S. 145 : Method of accounting – Inability of the assessee, an Advocate, to reconcile
the professional receipts with the TDS certificates and to give a detailed party-
wise breakup of fees receipts does not mean that the difference can be assessed as
undisclosed income. [S.69, 194J]
The assessee challenged the order of the Commissioner of Income Tax in confirming
the addition of ` 47,37,000 made by Assessing Officer on account of non-reconciliation
of professional receipts with TDS certificates. Insofar as that aspect is concerned, the
Tribunal considered this submission of both sides and found that the assessee was
engaged as an Advocate to argue the matters by what is popularly known as Advocates
on record or instructing Advocates method, meaning thereby the client does not engage
the assessee directly but a professional or the Advocate engaged by the client requests
the assessee to argue the case. The brief is then taken as the counsel brief. That being
the practice, the assessee gave an explanation that the breakup as desired cannot
be given and with regard to all payments. It is pointed out that at times, assessee
receives fees directly from the clients or from the instructing Advocates or Chartered
Accountants if such professionals have collected the amounts from the clients. Under
these circumstances, the breakup as desired cannot be placed on record. An explanation
which has been given by the assessee and accepted in the past has been now accepted
by the Tribunal once again. On appeal by revenue dismissing the appeal the Court
held that since it is accepted for the Assessment Year 2006-07, in the peculiar facts, in
relation to the present assessee, we are of the view that this Appeal does not deserve to
be entertained. It does not give rise to any substantial question of law. (ITA No. 1930 of
2011, dt. 18.03.2014) (AY. 2006-07)
CIT v. S. Ganesh (Bom)(HC); www.itatonline.org
1687 S. 145 : Method of accounting – Minor discrepancies in the books of account cannot
lead to rejection of books of account and Best judgment assessment should be based
on some material, ad hoc addition to the income cannot be made.
Assessee was carrying on the business of manufacturing edible oil and oil cake and sale
thereof. During the course of assessment, the Assessing Officer noticed that stock register
is not maintained quality-wise and does not contain day-to-day shortage of lots in the
production. Accordingly, books of account were rejected and income was estimated
at 1.98% of turnover. The CIT(A) upheld the rejection of books of account however,
reduced the addition to 1.75%. The Tribunal held that rejection of books of account
was invalid and consequentially, addition made to the income was deleted. On appeal,
High Court held that the books of account were properly maintained by the assessee and
minor discrepancies in the stock register cannot lead to rejection of books of account
under section 145(3). The High Court also held that Best judgment assessment should
be based on some material and addition to the income cannot be made on ad hoc basis.
(AY. 2008-09, 2009-10)
Pr. CIT v. Bhawani Silicate Industries (2016) 236 Taxman 596 (Raj.)(HC)
548
S. 145 Method of accounting
S. 145 : Method of accounting – Valuation of closing stock – Change of method – New 1688
system of accounting was followed by the assessee in the subsequent assessment year
as well, Tribunal was not right in rejection of change in method. [S.145 (2)]
Court held that the change in the method of accounting was bon fide and the assessee
has followed the same method, in the subsequent assessment year as well, Tribunal was
not right in rejection of change in method. (AY. 1976-77, 1977-78)
Bajaj Auto Ltd. v. CIT (2016) 389 ITR 259 / (2017) 244 Taxman 31 / 146 DTR 210 (Bom.)
(HC)
S. 145 : Method of accounting – Valuation of Stock – Interest on working capital loan, 1689
such interest could not go into cost of work-in-progress or inventory. [AS. 2]
Dismissing the appeal of the revenue, the Tribunal held that assessee was contractor for road
construction and interest cost was attributed to loans taken for financing its normal trading
activity, such interest could not go into cost of work-in-progress or inventory. (AY. 2008-09)
Dy. CIT v. JSR Constructions (P.) Ltd. (2016) 159 ITD 749 (Bang.)(Trib.)
S. 145 : Method of accounting – Estimate of net profit was held to be justified. 1690
Dismissing the appeal of the revenue, the Tribunal held that estimate of net profit was
held to be justified. (AY. 2000-01)
ITO v. Brij Fertilizers Pvt. Ltd. (2016) 48 ITR 125 (Agra)(Trib.)
S. 145 : Method of accounting – Rejection of accounts on account of unverifiable 1691
nature of account, estimation at 8% reasonable as generally applicable in works
contract cases.
The AO invoked section 145(3) and on account of unverifiable nature of account,
estimated net profit at 10% of gross contract receipts, allowing salary and interest to
partners therefrom to determine taxable income. The ITAT allowed determination of net
profit at 8% of gross receipts which is generally applicable in case of works contracts.
B. Banamber and Co. v. ITO (2016) 48 ITR 41 (Cuttack)(Trib.)
S. 145 : Method of accounting – Civil contract business – Rejection of books of 1692
account without pointing out specific defects was held to be not justified. Matter was
remanded. [S. 44AD]
Allowing the appeal of the assessee the Tribunal held that rejection of books of account
without pointing out specific defects was held to be not justified. Matter was remanded.
(AY. 2008-09)
Amarjit Singh v. ITO (2016) 48 ITR 622 (Amritsar)(Trib.)
S. 145 : Method of accounting – Books of account duly audited and no defects pointed 1693
out regarding sales, purchase or profit – No basis for adopting rate of profit at 3 per
cent – Addition in excess of declared profits to be deleted.
Allowing the appeal of the assessee, the Tribunal held that when books of account
duly audited and no defects pointed out regarding sales, purchase or profit, therefore
no basis for adopting rate of profit at 3 per cent. Addition in excess of declared profits
to be deleted. (AY. 2008-09)
Samwon Precision Mould Mfg. (India) P. Ltd. v. ITO (2016) 48 ITR 630 (Delhi)(Trib.)
549
Method of accounting S. 145
1694 S. 145 : Method of accounting – Rejection of accounts – Liquor business, since practice
of not issuing bills was prevalent all over country in liquor trade, action of AO was
not justified.
Allowing the appeal of the assessee, the Tribunal held that liquor business, since
practice of not issuing bills was prevalent all over country in liquor trade, action of AO
was not justified. (AY. 2008-09, 2009-10)
Hem Raj v. ACIT (2016) 159 ITD 589 (Chd.)(Trib.)
1695 S. 145 : Method of accounting – Qualified engineer is engaged by a Coaching Institute
as a consultant – Income assessable as professional income and not as salary, without
rejecting the books of account expenses claimed cannot be disallowed. [S.15, 28(i)]
Allowing the appeal of the assessee the Tribunal held that without rejecting the books of
account expenses claimed cannot be disallowed. As consequence, assessee was entitled
to benefit under Act. No reason whatsoever had been given by authorities below for
rejecting books of account. Sole reason given by authorities below was that assessee was
salaried employee and not professional. Since assessee was professional, therefore, this
ground was also decided in favour of assessee. (AY. 2007-08)
Shiv Pratap Raghuvanshi v. ACIT (2016) 139 DTR 57 / 179 TTJ 761 (Jaipur)(Trib.)
1696 S. 145 : Method of accounting – Project completion method – Remuneration for
services in connection with project – Depending on project.
The assessee was paid a sum of ` 32 lakhs by A. A. Estate Pvt. Ltd. on account of
professional services rendered and since the assessee had not shown any income by
way of professional fees, the Assessing Officer added this sum to the assessee’s income.
The Commissioner (Appeals) deleted the addition holding that the quantification of
the actual amount payable to the assessee was possible only at the stage of completion
of the project and the amount received by the assessee during the year was only an
advance which was adjusted on the completion of the project. The Tribunal held that
the amount received by the assessee was including the expenditure incurred by it
which was paid by A. A. Estate Pvt. Ltd. The amount paid to the assessee had not been
claimed by A. A. Estate Pvt. Ltd. as expenditure but had only been shown as work-
in-progress. Hence, there was a consistency in the accounts of both the payer and the
payee. The services rendered by the assessee related to the activities of the builders
and developers and in terms of the Memorandum of Understanding, the quantification
of the remuneration of the assessee was dependent on the completion of the project
and, hence, the assessee was justified in following the project completion method
of accounting. The Commissioner (Appeals) had rightly concluded that the amount
received by the assessee during the year was an advance and the actual remuneration
was to be quantified at the completion of the project. The assessee was justified in not
offering the amount as income for the year. There was no infirmity in the order of the
Commissioner (Appeals). (AY. 2006-07, 2007-08, 2008-09, 2009-10)
ITO v. Trendsetter Construction Pvt. Ltd. (2016) 46 ITR 132 (Mum.)(Trib.)
550
S. 145 Method of accounting
S. 145 : Method of accounting – Change in method allowed, provided the AO verifies 1697
the calculation and correctness of the valuation of stock.
In AY 1989-90, the assessee changed its method of valuation of stock from net realizable
value to cost or market value, whichever is lower. The change was approved by the
board of directors. The AO did not allow the change in method. The matter travelled
up to the HC, which remanded the matter to the AO and asked him to reconsider the
matter after the assessee submits the true picture of the P&L A/c if the stock is valued
as per the old method. The new method was followed in the impugned year and similar
addition was made by the AO. The ITAT remanded the matter to the AO and held that
though the assessee was justified in changing the method, it was necessary that the AO
verified the calculation of the stock, which was not looked into earlier. (AY. 1990-91)
DCIT v. Sri Chamundeshwari Sugar Ltd. (2016) 47 ITR 291 (Bang.)(Trib.)
S. 145 : Method of accounting – Valuation of stock – Merely on the basis of survey 1698
addition was held to be not justified. [S.133A]
The assessee was running a cotton factory. A survey was conducted at premises of the
assessee. Consequently, the surveying authority alleged excess stock of Narma-cotton
by weighing stock on basis of cartons. The assessee objected that weighment was not
done in accordance with the provisions of the Standards and Weights and Measures
Act, 1976. The AO. made addition on basis of excess stock. The CIT(A) upheld addition
observing that there was no evidence that the assessee provided to the survey team the
necessary facility of weighment by a standardized scale.
The hon'ble ITAT held that it was surveying authority who arbitrarily never required
assessee to provide him with weightment facility and it was not assessee who refused
to do and, therefore, addition in income of assessee was not justified.(AY. 2011-12)
Kailash Devi Prop (Smt.) v. ITO (2016) 158 ITD 709 (Asr.)(Trib.)
S. 145 : Method of accounting – No addition based on monthly sales and purchases 1699
can be made by the AO when no unrecorded sales and purchases had been found by
the AO.
The assessee was a trader of consumer goods and followed direct marketing business
model. Since the assessee had failed to mention the gross profit rate in the audit report,
the AO calculated the same from the P&L A/c, Balance sheet and month-wise purchase
and sales as submitted by the assessee. Consequently, an addition was made by the
AO to the income of the assessee. The CIT(A) applied an average of the net profit rate
earned by the assessee in subsequent two years. On appeal by the Department, the ITAT
held that the AO failed to consider the genuineness of the purchases and sales and the
nature of business of the assessee. The ITAT held that the addition by the AO based on
month-wise details could not be sustained, when no unrecorded sales and purchases
had been found by him. The addition was deleted considering the fact that the net profit
rate was accepted by the Department in subsequent two years. (AY. 2009-10)
DCIT v. Smart Value Product and Services Ltd. (2016) 45 ITR 33 (Chd.)(Trib.)
551
Method of accounting S. 145
1700 S. 145 : Method of accounting – Valuation of closing stock – Value of unsold parking
space – Ad hoc addition as cost of construction was held to be not justified.
Tribunal held that the AO has made ad hoc addition as cost of construction of parking
spaces on an estimate basis without substantiating or bringing on record what separate
expenses were incurred on the same by the assessee and held that the parking spaces were
sold along with flats only to the flat purchasers and not to anybody else. The AO has made
the addition by nationally increasing the cost of construction of parking spaces. Therefore,
CIT(A) was justified in deleting the impugned addition made by the AO. (AY. 2009-10)
ACIT v. Vardhaman Estate Corporation (2016) 175 TTJ 15 (UO)(Mum.)(Trib.)
1701 S. 145 : Method of accounting – Cash system and mercantile system – Profession and
business – Two methods of accounting allowable for two sources of income was held
to be valid.
There would be no distortion in computing the correct income by following either of
the two methods of accounting regularly and there would be only a timing difference
and no prejudice would cause to the Revenue. Thus, the assessee was not following a
hybrid method of accounting. The method of accounting was allowable.(AY. 2007-08)
Vishwanath Acharya v. ACIT (2016) 157 ITD 1032 / 45 ITR 554 (Mum.)(Trib.)
1702 S. 145 : Method of accounting – Rejection of books of account – Books of account
cannot be rejected on an arbitrary basis. [S. 144]
Allowing the appeal of assessee Tribunal held that the assessee is a company having
declared a turnover of ` 44.45 crores and profit thereon of ` 1.65 crores. The books
of account are duly audited and no defect has been pointed out vis-a-vis the sales,
purchase or profit “It is a subsidiary of a Korean Company and therefore, the authorities
below had to be circumspect before arriving at such a conclusion, particularly when
there is no iota of material to doubt the quantitive details, audited results vis-a-vis the
turnover and profit declared so as to warrant rejection. Instances of irregularities in cash
payment cannot warrant ipso facts rejecting of books of accounts, at best disallowance
could have been made u/s. 40A(3) of the Act. We, therefore, hold that the books of
account were incorrectly rejected as it is not a case where it can be held that the books
of account was incorrect or incomplete or correct profits could not be deduced. On the
contrary, we find that completed audited books of account were produced before the
AO, which were duly examined and such book of account have not been shown to have
been maintained from where correct profits could not be deduced, thus vitiating the
entire action of the AO and CIT(A) for rejecting the books of account.”(ITA No. 2043/
Del/2013, dt. 02.02.2016)(AY. 2008-09)
Samwon Precision Mould Mfg. (India) P. Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org
S. 145A. Method of accounting in certain cases.
1703 S. 145A : Method of accounting – Valuation – Service tax billed has no relation to any
goods nor dies it have anything to do with brining to a particular location.
Dismissing the appeal of the revenue the Court held that it is very clear from the
reading of sec. 145A(a)(ii) of the Act that it only covers cases where the amount of
tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to
552
S. 145A Method of accounting
the place of its location and condition as on the date of valuation. The assessee has
admittedly not paid or incurred any liability for the purposes of bringing any goods to
the place of its location. Further, the respondent assessee is rendering services. Thus,
on the plain reading of sec. 145A(a)(ii) of the Act, it is self-evident that the same would
not apply to the service tax billed on rendering of services. This is so as the service tax
billed has no relation to any goods nor does it have anything to do with bringing the
goods to a particular location. (AY 2007-08, 2008-09)
CIT v. Knight Frank (India) (P.) Ltd. (2016) 143 DTR 32 / 242 Taxman 313 / 290 CTR 25
(Bom.)(HC)
S. 145A : Method of accounting – Valuation – Any fall in the value of such stock, is 1704
permissible as deduction.
Dismissing the appeal of revenue the Court held that there is no dispute that the
assessee has made payment for purchases of iron ore and the same are lying in the
custody of the assessee, at various ports. Such could validly be termed as stock-in-
trade. However, if the value of such stock has gone down at the year end, the assessee
is legitimate in claiming deduction on such fall. Such goods would be treated as stock-
in-trade, any fall in the value of such stock, is permissible as deduction. (AY. 2009-10)
PCIT v. STCL Ltd. (2016) 239 Taxman 2 (Karn.)(HC)
S. 145A : Method of accounting – Valuation – Service-tax billed on rendering of 1705
services is not includible as trading receipts. No disallowance can be made for the
unpaid service-tax liability which is not claimed as a deduction. [S. 43B]
Dismissing the appeal of revenue, the Court held that; Service-tax billed on rendering
of services is not includible as trading receipts. No disallowance can be made for the
unpaid service-tax liability which is not claimed as a deduction. (ITA No. 247 and 255
of 2014, dt. 16.08.2016)(AY. 2007-08, 2008-09)
CIT v. Knight Frank (India) Pvt. Ltd. (Bom.)(HC),www.itatonline.org
S. 145A : Method of accounting – Valuation – Change in closing stock – Corresponding 1706
adjustment to be done in the opening stock
Held that when adjustment of excise duty is made in closing stock then corresponding
adjustment is to be made in opening stock as held by decision of Delhi High Court in
case of CIT v. Mahavir Aluminum (2008) 297 ITR 77 (Del HC). (AY 1999-00, 2005-06)
K. G. Petrochem Ltd. v. ACIT (2016) 176 TTJ 1 (UO) (Jaipur)(Trib.)
S. 145A : Method of accounting – Valuation – Deposit made to port trust not included. 1707
The deposit made with the port trust is not includible in the computation made under
section 145A of the Act, if it does not fall in the category of tax, duty, cess or fee levied
under any law. Hence, the same shall be liable to be included in the adjustments made
under section 145A of the Act only if it is shown that the payment was made under
authority of any law. Further, if the deposit so made is refundable to the assessee,
then also the question of including the same under section 145A does not arise. The
Assessing Officer is directed to reexamine this issue in the light of the discussions made
supra. (AY. 2007-08 to 2010-11)
Mazgaon Dock Ltd. v. ITO (2016) 46 ITR 162 (Mum.)(Trib.)
553
Method of accounting S. 145A
1708 S. 145A : Method of accounting – Valuation – No disallowance on valuation of closing
stock if the assessee had consistently followed FIFO.
The assessee valued its stock based on FIFO method. The AO alleged that the closing
stock was undervalued, based on the average cost method. The ITAT deleted the
disallowance on the basis that the FIFO method was consistently followed by the
Assessee, which was also approved by the ICAI. (AY. 2009-10)
Kaiser Industries Ltd. v. JCIT (2016) 47 ITR 656 (Amritsar)(Trib.)
1709 S. 145A : Method of accounting – Valuation of stock – Inclusive method cannot be
applied selectively to closing stock without applying it to opening stock, purchases
and sales.
Tribunal held that inclusive method cannot be applied selectively to closing stock
without applying it to opening stock, purchases and sales. Matter remanded. (AY. 2007-
08)
Sunshield Chemicals (P.) Ltd. v. ITO (2016) 156 ITD 452 / 175 TTJ 129 (Mum.)(Trib.)
1710 S. 145A : Method of accounting – Valuation – Provision mandating inclusive method
of accounting to follow tax, duties or cess – Assessee ought to follow inclusive method
in respect of MODVAT.
The deposit made with the port trust was not includible in the computation made
u/s. 145A, if it did not fall in the category of tax, duty, cess or fee levied under the
law. It was liable to be included in the adjustments u/s. 145 only if it was shown
that the payment was made under authority of any law. Further, if the deposit so
made was refundable to the assessee, then also the amount of deposit could not
be included u/s. 145A. The AO was directed to re-examine this issue.(AY. 2004-05,
2007-08 to 2010-11)
Mazgaon Dock Ltd. v. ITO (2016)46 ITR 162 (Mum.)(Trib.)
S. 147. Income escaping assessment.
1711 S. 147 : Reassessment – No failure to disclose material facts – Reassessment was held
to be not valid. [S. 4, 5, 148]
On Revenue’s filing of Special Leave Petition, the Apex Court didn’t entertain the
petition and thus dismissed it. Excess amount paid to members of co-operative society
for buying sugarcane. No failure on part of assessee to disclose fully and truly all
material facts. Reassessment was held to be without jurisdiction. (AY. 2007-08)
ACIT v. Maroli Vibhag Khand Udyog Sahakari Mandi Ltd. (2016) 239 Taxman 393 (SC)
Editorial : Refer Shree Chalthan Vibhag Khand v. Dy. CIT (2015) 376 ITR 419 (Guj.)(HC)
1712 S. 147 : Reassessment – Accrual of income – Even if income by way of rent is
enhanced with retrospective effect, it accrues only when a right to receive the income
is vested in the assessee – Notice to assessee the income prior to accrual is without
jurisdiction. [S. 5, 22, 23, 148]
Following the ratio in E.D. Sassoon & Co Ltd. (1954) 26 ITR 27(SC), the court held that
even if income by way of rent is enhanced with retrospective effect, it accrues only
554
S. 147 Reassessment
when a right to receive the income is vested in the assessee hence notice to assessee
the income prior to accrual is without jurisdiction. (AY. 1989-90)
P.G.& W. Sawoo Pvt. Ltd. v. ACIT (2016) 385 ITR 60 / 136 DTR 113 / 286 CTR 460 / 239
Taxman 257 (SC)
Editorial : Decision of the Full Bench of the Calcutta High Court in P. G. and Sawoo P.
Ltd. v. A CIT (2008) 307 ITR 243 [FB] (Cal)(HC) reversed.
S. 147 : Reassessment – A Writ Petition to challenge the issue of a reopening notice is 1713
maintainable – Order of High Court was set aside. [S. 148, Art. 226]
Allowing the petition the Court held that the High Courts dismissed the writ petitions
preferred by the assessee challenging the issuance of notice under Section 148 of the
Income-tax Act, 1961 and the reasons which were recorded by the Assessing Officer
for reopening the assessment. The writ petitions were dismissed by the High Court as
not maintainable. The aforesaid view taken is contrary to the law laid down by this
Court in Calcutta Discount Limited Company v. Income Tax Officer, Companies District I,
Calcutta & Anr. [(1961) 41 ITR 191 (SC)]. We, thus, set aside the impugned judgments
and remit the cases to the respective High Courts to decide the writ petitions on merits.
We may make it clear that this Court has not made any observations on the merits of
the cases, i.e. the contentions which are raised by the appellant challenging the move
of the Income Tax Authorities to re-open the assessment. Each case shall be examined
on its own merits keeping in view the scope of judicial review while entertaining such
matters, as laid down by this Court in various judgments. We are conscious of the fact
that the High Court has referred to the Judgment of this Court in CIT v. Chhabil Dass
Agarwal (2013) 357 ITR 357 (SC)]. We find that the principle laid down in the said case
does not apply to these cases.
Jeans Knit Private Limited v. DCIT (2017) 390 ITR 10 / 244 Taxman 154 / 145 DTR 16 /
291 CTR 13 (SC)
Editorial : Decision in Jeans Knit Private Limited v. DCIT (2014) 367 ITR 773 (Karn)(HC),
JCIT v. Kalanthi Maran (2014) 366 ITR 453 (Mad.)(HC) is set aside.
S. 147 : Reassessment – Bad debt – Assessment reopened on ground no material 1714
to show debt written off as required under provision as amended with effect from
1-4-1989, notice was held to be valid. [S. 36(1)(vii), 148]
Allowing the appeal the Court held that having regard to the fact that though the
assessee has disclosed that the bad debts were transferred to K bank for realisation, the
authority recording the reasons prior to issuance of notice under section 148 of the Act
had specifically recorded that there was no material available on record to indicate that
the bad debts had been written off as mandatorily required under section 36(1)(vii) of
the Act as amended with effect from April 1, 1989. If that be so, no fault could be found
with the notice issued. The Court has not expressed no opinion on merits. (AY. 2004-05)
Dy. DIT v. Sumitomo Mitsui Banking Corporation (2016) 387 ITR 164 / 243 Taxman 514
/290 CTR 484 / 144 DTR 167 (SC)
Editorial : Bombay High Court in Sumitomo Mitsui Banking Corporation v. Dy. DIT W.P.
No. (Lodg) No. 140 of 2011 dt 22-2-2011 is reversed.
555
Reassessment S. 147
1715 S. 147 : Reassessment – Housing project – Failure fully and truly to disclose facts
material to assessment – Information regarding actual size of plot used for construction
available only in valuation report – Not full and true disclosure – Reassessment was
held to be valid. [S. 80IB(10), 148]
Dismissing the appeal the Court held that; in the communication dated February 10,
2003 addressed by the assessee to the Assessing Officer, only the value of the land
was stated and in support, a certificate from the registered architect and engineer was
filed. This information was supplied as there was some query about the value of the
land. Obviously, while going to this document the Assessing Officer would examine
the value of the land. However, the reason for issuing notice was that the assessee
had not correctly disclosed the actual assets of the plot and hence, it was not entitled
to deduction under section 80-IB(10) of the Act. The Income-tax Officer had himself
mentioned in the notice that such information was available only in the valuation
report. The Assessing Officer was not expected to go through the information available
in the valuation report for the purpose of ascertaining the actual construction of the
plot. Therefore, the Department was right in reopening the assessment and the High
Court had rightly dismissed the writ petition of the assessee challenging the validity of
the notice. (AY. 2001-02)
Girilal and Company v. ITO (2016) 387 ITR 122 / 243 Taxman 233 / 290 CTR 487 / 144
DTR 105 (SC)
Editorial: Decision in Girilal and Company v. S. L. Meena, ITO (2008) 300 ITR 432 (Bom.)
(HC) is affirmed.
1716 S. 147 : Reassessment – Change of opinion – Within four years – Issue of notice
of reassessment in absence of any allegation that there was any failure on part
of assessee to disclose truly and fully all material facts necessary for assessment,
considering first proviso to S. 147 was absolutely improper. Further, issue of notice
within period of 4 years was mere change in opinion and hence, reopening was not
sustainable. [S.148]
Dismissing the SLP of the revenue, the Court held that so far as initiation of impugned
reassessment proceedings and impugned notices u/s. 148 within 4 years was concerned,
it appeared that reopening taken place only on ground that assessee paid price of
sugarcane more than SMP. In all cases assessments were completed u/s. 143(3) by AO
after holding necessary inquiry. The High Court observed, that once at time of original
assessment AO accepted return, thereafter reopening of assessment could be said to be
on mere change of opinion of AO and merely on change of opinion of AO, reassessment
proceedings were not permissible. Thus, the High Court held that impugned notices u/s.
148 to reopen proceedings beyond 4 years and within 4 years on ground that payment
of purchase price in excess to SMP had escaped assessment could not be sustained and
same deserved to be quashed and set aside.
DCIT v. Vadodara District Co-op. Sugarcane Growners Union Ltd. (2016) 242 Taxman
110 (SC)
Editorial : Refer Shree Chalthan Vibhag Khand v. Dy CIT (2015) 376 ITR 419 / 233
Taxman 469 (Guj.)(HC) SLP rejected (2016) 240 Taxman 2 (SC)
556
S. 147 Reassessment
S. 147 : Reassessment – Mechanical way of recording satisfaction by Joint 1717
Commissioner for granting approval for reopening is unsustainable. [S. 148]
A search was conducted at the residential and business premises of assessee. Thereafter
notice for block assessment under section 158BC of the Act was issued and returns
were filed which were processed under section 143(1) of the Act. However, notice under
section 148 was issued by the Assessing Officer on basis of certain reasons recorded.
Order was passed under section 143(3) read with section 147, of the Act, pursuant to
that appeals were filed before the Commissioner on Income Tax (Appeals), Income Tax
Appellate Tribunal and the High Court.
The High Court found that the reasons recorded by the Joint Commissioner, for
according section, it only stated that “I am Satisfied”. As this action for sanction was
without application of mind and this was done in mechanical manner, following the law
laid down in case of Arjun Singh v. ADIT (246 ITR 363)(SC), the Commissioner (Appeals)
quashed the notice under section 148 of the Act, and the same having been upheld by
Tribunal and the Hon’ble High Court. Aggrieved by the High Court, Revenue filed an
appeal before the Supreme Court which was dismissed by the Hon’ble Supreme Court.
CIT v. S. Goyanka Lines & Chemical Ltd. (2016) 237 Taxman 378 (SC)
S. 147 : Reassessment – After the expiry of four years – Additional depreciation – 1718
Reopening of assessment was based on re-appreciation of material already available
on record at time of scrutiny assessment which amounted to mere change of opinion
hence bad in law. [S.32, 80IA, 148]
Dismissing the appeal of the Revenue, the Court held that the assessee had made true
and full disclosure of all relevant facts relating to the claim of additional depreciation.
The assessee had also submitted reply pursuant to all queries made by Assessing Officer
during the assessment proceedings under section 143(3). Thus, it was held that there
was no new tangible material to reopen the assessment and that the formation of the
belief by the AO regarding escapement of the assessment was based on re-appreciation
of the material already available on record at the time of scrutiny assessment which
amounted to mere change of opinion. Accordingly, the reassessment was held to be
invalid. (AY. 2005-06)
CIT v. Hindustan Zinc Ltd. (2016) 143 DTR 79 / 241 Taxman 392 / 290 CTR 322 (2017)
393 ITR 264 (Raj.)(HC)
S. 147 : Reassessment – After the expiry of four years – Disclosed fully and truly all 1719
relevant materials – Reassessment proceedings was held to be invalid. [S. 80I, 80HH, 148]
Dismissing the appeal of the revenue, the Court held that it was discernible from
the order of the Appellate Tribunal that the assessee had responded to the queries
raised by the AO in the original assessment proceedings and during the course of
such proceedings had produced all the relevant material facts as were called for and
necessary to complete the assessment for the year. The Appellate Tribunal was justified
in concluding that the reassessment proceedings were impermissible in view of the
embargo under the first proviso to section 147. The order of the Appellate Tribunal
was affirmed.
CIT v. Hindustan Latex Ltd. (2016) 389 ITR 407 / 76 Taxamnn.com 332 (Ker.)(HC)
557
Reassessment S. 147
1720 S. 147 : Reassessment – After the expiry of four years – Absence of new material
showing misdeclaration by assessee, notice was held to be invalid. [S. 28(i), 148]
Allowing the petition, the Court held that reassessment was not permissible once the
issue of allowability of loss had been thoroughly examined by the AO in the original
order of assessment without there being any suggestion that the AO was in possession
of some external material which would have shown that the assessee had not disclosed
material facts truly and fully. He had examined the issue at length before concluding
that the transactions were not off market transactions and that the loss suffered by the
assessee could not be disallowed. Whatever be the validity of such findings, the AO
himself could not question them by issuing the notice for reassessment, that too without
there being anything additional on record, suggesting that the assessee had not disclosed
true and full facts. In the reasons recorded, the AO merely hinted at the lack of
disclosure regarding the loss and did not refer to the assessee’s lack of disclosure of the
sister concern. In the assessment order itself the AO had referred to the sister concern
as one of the group concerns. His consideration of the issue of allowability of the loss
was therefore not tainted by any mis-declaration by the assessee. The reassessment
notice was invalid. (AY. 2004-05)
Prudent Finance P. Ltd. v. ACIT (2016) 389 ITR 488/ 75 taxmann.com 110 (Guj.)(HC)
1721 S. 147 : Reassessment – After the expiry of four years – AO not having new material
not forming part of original assessment proceedings, reassessment was held to be not
valid. [S. 80IA, 115JB, 148]
The reasons recorded by the AO nowhere demonstrated that the assessee had failed
to disclose true and full facts. The reasons recorded established that the AO was
referring to the material already on record to assert that the claim of expenditure was
not in tune with the minimum alternate tax provisions contained under section 115JB
and in particular, Explanation 1(c) thereto. The AO did not have additional or new
material which did not form part of the original assessment proceedings to question
the assessee’s claim to deduction in this respect. Notice of reopening based on such
ground which was issued beyond a period of four years, would therefore not be valid.
The claim to deduction under section 80IA(4)(iv) was examined not only in the context
of the petitioner’s larger deduction but, specifically to that portion of the claim which
related to the sale of steam. Such ground could not be re-agitated in exercise of power
for reassessment, that too beyond the period of four years. (AY. 2010-11)
Meghmani Energy Ltd. v. Dy. CIT (2016) 389 ITR 281 / 243 Taxman 551 (Guj.)(HC)
1722 S. 147 : Reassessment – After the expiry of four years – Sale of agricultural land –
Reassessment on basis that land sold for commercial purposes amounts to change
of opinion was held to be, not permissible – Writ petition cannot be dismissed on
ground of availability of alternate remedy, writ petition is maintainable. [S. 2(14), 148,
Constitution of India, Art. 226]
Allowing the petition the Court held that the Department could not deny the fact that
there was a full and true disclosure by the assessee of all material facts necessary for
assessment. The case of the assessee fell under the category of true and full disclosure
upon which the assessment order was passed on the opinion that the lands sold by the
558
S. 147 Reassessment
assessee were agricultural lands and did not fall under the category of mere production
of books of account and other records. The replies submitted by the assessee to the
questionnaire indicated that the claim of the assessee was examined by the AO before
he passed the original assessment order under section 143(3). Therefore to say after
four years that the lands were sold to a real estate company for the purpose of forming
a special economic zone amounted to a change of opinion which was not permitted by
law. Writ petition cannot be dismissed on ground of availability of alternate remedy, writ
petition is maintainable. (AY. 2008-09)
Kohinoor Hatcheries P. Ltd. v. Dy. CIT (2016) 389 ITR 493 / 76 taxmann.com 150 (T&AP)
(HC)
S. 147 : Reassessment – After the expiry of four years – Bogus labour expenses – Notice 1723
after application of mind by AO and formation of own belief that income chargeable
to tax had escaped assessment, notice was held to be valid. [S.371(1), 148]
Dismissing the petition the Court held that the reason for reassessment after four years
was that a substantial amount of labour charges were claimed though not incurred. The
Department relied on the material collected by the investigation wing pursuant to a
search operation. This material prima facie suggested that labour contractors were paid
sizable amounts of labour charges without such labour work having been taken by the
assessee. These aspects were not at large before the AO during the original assessment
proceedings. Any examination by the AO of the assessee’s claim of labour expenses
would be confined to the declarations made by the assessee and the material produced
by the assessee in response to the queries raised by the AO. The concluding portion
of the reasons recorded by the AO, were in the nature of his observations on the basis
of materials supplied by the investigation wing collected during the search operations.
These observations indicated the application of mind by the AO and formation of his
own belief that income chargeable to tax had escaped assessment. This was therefore,
not a case of the AO proceeding on a borrowed satisfaction of the investigation wing.
The notice was valid. (AY. 2008-09)
HVK International P. Ltd. v. Dy. CIT (2016) 389 ITR 630 / 72 Taxmann.com 208 (Guj.)(HC)
S. 147 : Reassessment – After expiry of four years – Depreciation – Change of opinion 1724
– Reassessment was quashed. [S. 32, 148]
For relevant year, assessment in case of assessee was completed under section 143(3).
After expiry of four years from end of relevant year, Assessing Officer reopened
assessment on ground that even though assessee-company had come into existence from
30-8-2003, yet it claimed depreciation for whole year which resulted in excess claim of
depreciation. On writ allowing the petition the Court held that it was undisputed that
prior to formation of company, assessee was operating as a partnership firm. It was
also undisputed that assessee company had claimed full deduction for entire year and
correspondingly, partnership in turn for same period did not claim any depreciation. Even
otherwise, Assessing Officer had allowed depreciation in original order of assessment
after scrutinising return in detail. In aforesaid circumstances, initiation of reassessment
proceedings merely on basis of change of opinion was not justified. (AY. 2004-05)
Anupam Rasayan India Ltd. v. ITO (2016) 243 Taxman 472 (Guj.)(HC)
559
Reassessment S. 147
1725 S. 147 : Reassessment – After the expiry of four years – No failure to disclose material
facts necessary for assessment, notice was not valid. [S.10A, 92C, 148]
Allowing the petition the Court held that with respect to the first reason, the Assessing
Officer was of the opinion that the additions made during the course of the original
assessment by applying the arm’s length price under section 92C of the Act would not
qualify for deduction under section 10A of the Act. Even if that be so, nowhere had
the Assessing Officer recorded that excess deduction was granted to the assessee due
to failure on the part of the assessee to disclose truly and fully all material facts. In
respect of the second reason it was clear from the record that under communication
to the Assessing Officer, the assessee had given detailed clarification regarding the
telecommunication expenses and freight and insurance charges. Thus, not only had
the assessee made full disclosures in the original return filed, this issue was examined
by the Assessing Officer during the original assessment for which the assessee had
given written explanation. There was no failure to disclose material facts necessary for
assessment. The notice was not valid.(AY. 2008-09)
Mastek Ltd. v. A CIT (2016) 387 ITR 72 (Guj.)(HC)
1726 S. 147 : Reassessment – After the expiry of four years – Original assessment after
scrutiny partially disallowing claim for exemption – Notice after four years to disallow
entire exemption was held to be not valid. [S. 37(1), 148]
Allowing the petition the Court held that in the notice for reassessment the reasons
started with narration “on verification of the case record...”. Thus, the conclusions of
the Assessing Officer were based on verification of the case record. In other words,
there was no material outside the assessment proceedings which enabled the Assessing
Officer to conclude that income chargeable to tax had escaped assessment. This element
would be crucial since notice for reopening had been issued beyond a period of four
years from the end of the assessment year. Quite apart from the assessee`s placing full
material at the disposal of the Assessing Officer, the claim was also examined by the
Assessing Officer during the assessment proceedings. Having accepted the claim in law,
but having made partial disallowance considering the facts, it was thereafter not open
to the Assessing Officer to issue notice for reopening, that too, without any additional
material which would suggest that the assessee had made a false declaration or provided
inaccurate particular. (AY. 2009-10)
Nishith Surendrabhai Soni v. ACIT (2016) 387 ITR 99 (Guj.)(HC)
1727 S. 147 : Reassessment – After the expiry of four years – Capital gains – Failure by
assessee to furnish cost of acquisition of shares and failure by Assessing Officer to
examine transfer of shares – Scrutiny permissible even if notice for reopening issued
beyond period of four years. [S. 148]
Dismissing the petition the Court held that prima facie it appeared that the assessee
effectively sold the shares in K for acquiring the shares in A which were allotted to the
assessee in accordance with the transfer arrangement between K and the assessee. The
assessee failed to place on record the cost of acquisition of shares in K. The nature of
transaction of transfer of investment was not visible from the declaration made by the
assessee. There was failure by the Assessing Officer to examine the transfer of shares
560
S. 147 Reassessment
in K by acquisition of preferential shares in A. Therefore, this was a case where further
scrutiny would be permissible even if the notice for reopening was issued beyond a
period of four years from the period of assessment year. The contention of the assessee
that the assessee held no shares in K and the amount of ` 21.99 crores against K's
preferential shares was mere mistake, could not be examined in the writ petition and
could be examined only at the time of reassessment. (AY. 2009-10)
Ravjibhai Nagarbhai Patel v. ITO (2016) 387 ITR 639 (Guj.)(HC)
S. 147 : Reassessment – After the expiry of four years – Unexplained expenditure – 1728
Accommodation entries – Fake transactions – Information from investigation wing –
Reassessment was held to be valid. [S. 69C, 143(3), 148]
Assessee firm was engaged in manufacturing and selling gold and other ornaments. It
filed return declaring certain taxable income - Assessing Officer completed assessment
under section 143(3) making certain additions. After expiry of four years from end of
relevant year, Assessing Officer sought to initiate reassessment proceedings on basis of
report of Investigation wing of department that assessee had shown certain purchases
of raw diamonds from firm ‘S’ Ltd. consisting of two directors who were engaged in
providing accommodation entries and, it being a fake transaction without real trading
of diamonds, assessee had thereby reduced its income by claiming fake purchases.
The assessee filed the writ petition against the reassessment proceedings. Dismissing
the petition, the Court held that it was undisputed that directors of ‘S’ Ltd. in course
of search proceedings had themselves admitted that they were engaged in providing
accommodation entries without actual sale of diamonds. On facts, merely because
information was supplied to Assessing Officer by investigation wing of department
would not mean that Assessing Officer could not rely upon it, therefore, validity of
reassessment proceedings was to be upheld. (AY. 2008-09)
Choksi Vachharaj Makanji & Co. v. ACIT (2016) 243 Taxman 465 (Guj.)(HC)
S. 147 : Reassessment – After the expiry of four years – Book profit – diminution of 1729
value of derivatives – Reassessment was held to be not valid. [S.80IA(4)]
Assessee-company was engaged in business of generation and distribution of power.
For relevant assessment year, assessee filed return of income, declaring ‘Nil’ income
under normal provisions of Act, and book profit of ` 4.23 crores under MAT provisions
- Assessing Officer completed assessment under section 143(3) accepting various
declarations made by assessee. After expiry of four years from end of relevant year,
Assessing Officer initiated reassessment proceedings on two grounds, firstly, loss
incurred by assessee on account of diminution of value of derivatives was required
to be added back for purpose of computation of book profit and, secondly, assessee’s
claim for deduction under section 80-IA(4)(iv) in respect of sale of steam to its sister
concern was wrongly allowed - Whether since there was no failure on part of assessee
to disclose truly and fully all material facts, in view of proviso to section 147, initiation
of reassessment proceedings after expiry of four years from end of relevant assessment
year was not justified. (AY. 2010-11)
Meghmani Energy Ltd. v. DCIT (2016) 243 Taxman 551 / 389 ITR 281 (Guj.)(HC)
561
Reassessment S. 147
1730 S. 147 : Reassessment – After the expiry of four years transfer pricing – Matter was
set aside to the AO to consider the objection raised by the assessee. [S.92CA(2C), 92E]
The AO reopened the assessment on the ground that the transfer pricing adjustment
has escaped assessment. On writ petition, the HC observed that, the original assessment
proceedings were completed prior to 1-7-2012 and thus, reopening is hit by S. 92CA(2C)
which provides that the AO is not empowered to invoke reassessment proceedings
u/s. 147 in respect of the transaction not reported in the report furnished u/s. 92E.
Accordingly, it was held that though this objection was not raised before the AO, but
it went to root of the matter & therefore, it was appropriate that this objection was
considered by the AO and disposed of expeditiously. (AY. 2008-09)
Amore Jewels (P.) Ltd. v. P CIT (2016) 290 CTR 681 / 241 Taxman 321 / 144 DTR 101
(Bom.)(HC)
1731 S. 147 : Reassessment – After the expiry of four years – Limitation – Notice issued after
six years – Beyond time limit provided under section 149(1)(b) – Reassessment notice
and proceedings pursuant thereto illegal. [S.148, 149(1)(b)]
Held, allowing the petition, the Court held that as far as the assessment year 1993-
94 was concerned the notice under section 148 of the Income-tax Act, 1961 and the
proceedings pursuant thereto were unlawful as the notice was issued after six years,
beyond the time limit prescribed under section 149(1)(b). (AY. 1993-94, 1994-95)
Nestle India Ltd. v. Dy. CIT (2015) 384 ITR 334 (Delhi)(HC)
1732 S. 147 : Reassessment – After the expiry of four years – Assessee maintaining separate
accounts and presenting accounts in course of assessment – Reasons recorded not
showing suppression of material facts – Notice issued beyond period of limitation –
Invalid. [S.80IA, 148]
Allowing the appeal the Court held that the reasons recorded by the AO were borne
out from the data available in the assessment records. Full separate accounts of both
the businesses that had been maintained by the assessee had also been presented by it
before the AO during the course of the assessment. Therefore, there was no failure on
the part of the assessee to disclose truly and fully all the material facts necessary for
assessment. The notice, which was issued beyond the period of limitation of four years,
for reopening of the assessment was to be quashed. (AY. 2008-09)
Jivraj Tea Ltd v. ACIT (2016) 386 ITR 298 (Guj.)(HC)
1733 S. 147 : Reassessment – After the expiry of four years – Conversion of investment in
to stock-in-trade – Reassessment was held to be not justified. [S. 45(2), 148]
Assessee converted its investment into stock-in-trade. Entered into JDA and executed a
Power of Attorney. In the original assessment AO did not invoke section 45(2). Reopened
on the ground that 45(2) applicable since after conversion stock transferred. ITAT held,
all the facts within the knowledge of the AO during the original assessment proceedings.
ITAT also held that AO either overlooked the applicability of provision or thought that
the transaction was not taxable in the year. ITAT held, no failure to disclose and it was
mere change of opinion, held, no substantial question of law. (AY 2005-06)
CIT v. Chaitanya Properties (P.) Ltd. (2016) 240 Taxman 659 / 140 DTR 224 (Karn.)(HC)
562
S. 147 Reassessment
S. 147 : Reassessment – After the expiry of four years – Share application money – No 1734
failure to disclose material facts necessary for assessment – Notice was held to be not
valid. [S. 68, 148]
Held, allowing the petition, that the matter was one of change of opinion. The
questionnaire specifically raised the issue with regard to share capital. It required the
assessee to give a list, source, genuineness, identity of the shareholders along with
confirmation copies of the ledger account of the party including confirmation of the
mode, date, address and acknowledgment of return, etc. from the party along with
source and relevant bank entries. The information was provided by the assessee. After
receipt of the information, the Assessing Officer did not think it fit to make an addition
and, under these circumstances, no addition itself amounted to forming an opinion.
Another reason why the notice under section 148 of the Income-tax Act, 1961 and
the proceedings consequent thereto had to be set aside was that the pre-condition of
there being a failure on part of the assessee to fully and truly disclose all the material
particulars necessary for assessment had not been made out. (AY. 2007-08)
Allied Strips Ltd. v. ACIT (2016) 384 ITR 424 / 69 taxmann.com 444 (Delhi)(HC)
S. 147 : Reassessment – After the expiry of four years – No new tangible material 1735
provided by Department – Nothing on record to show failure on part of assessee to
truly and fully disclose all material facts – Reassessment invalid. [S. 148]
Held, allowing the petition, the Court held that; as far as the Assessment Year 1994-95
was concerned the notice was issued after four years which was beyond the statutory
time limit. There was nothing on record to show that there was any tangible material
providing a live link to the reasons to believe that income escaped assessment. There
was no failure by the assessee to fully and truly disclose material facts. Thus, the order
dated March, 18, 2002, recording the reasons for reassessment was not in conformity
with the mandatory requirement under section 147 and was therefore unsustainable in
law. (AY. 1993-94, 1994-95)
Nestle India Ltd. v. Dy. CIT (2015) 384 ITR 334 (Delhi)(HC)
S. 147 : Reassessment – After the expiry of four years – Examined the details in the 1736
original assessment proceedings – Reassessment was quashed – DTAA-India-United
Kingdom. [S.9(1), 148, Art. 5, 7]
Allowing the petition, the Court held that; Assessment order indicating Assessing Officer
had conducted detailed examination. No reason to believe income escaped assessment.
Assessing Officer examining statement of computation of loss and recording satisfactory
finding. No material indicating accounts, vouchers or details provided by assessee
inaccurate or false. Notice for reopening assessment on account of change of opinion
liable to be quashed. (AY. 2002-03)
BBC Worldwide Ltd. v. ADIT (IT) (2016) 383 ITR 197 / 239 Taxman 121 / 135 DTR 86
(Delhi)(HC)
563
Reassessment S. 147
1737 S. 147 : Reassessment – After the expiry of four years – In original assessment
proceedings AO accepted that the income received by the assessee is to be taxed as
royalty under Article 12 of the India-USA DTAA – Notice u/s. 148 issued for taxing
income under Article 7 as the AO was of the view that royalty payable was linked
to its PE in India and by applying the principle of ‘force of attraction’ said royalty
would be taxable as business profits under the said Article 7 – Held, reassessment
not sustainable as there was no failure on part of assessee to disclose all material
facts and that the assessment was reopened merely on the basis of change of opinion
– DTAA-India-USA. [S. 9(1)(vi), 148, Art. 7, 12]
The assessee, a US based company, was engaged in the manufacture and production of
business support software. It had a wholly owned subsidiary in India, namely, OIPL. The
assessee entered into a ‘Software Duplication and Distribution License Agreement’ with
OIPL pursuant to which OIPL sub-licensed software products to various customers in
India. The assessee offered the royalty received under the aforesaid agreement to tax in
its return of income. During the original assessment proceedings, AO accepted the said
contention of the assessee. Subsequently, AO took a view that royalty payable to the
assessee by OIPL was linked to its PE in India and by applying the principle of ‘force
of attraction’, the said royalty would be taxable as business profits and not as royalty
under Article 12 of DTAA and accordingly, issued a notice u/s. 148. High Court held that,
there was no failure on the part of the assessee to disclose all material fact. The AO was
well aware about the existence of PE of the assessee in India and had himself taxed the
income from the aforesaid agreement as royalty income. Further, reasons for reopening of
assessment also did not indicate that the AO had discovered that the royalty in question
was earned by the assessee through a PE, it only alleged that it was observed that such
royalty was ‘linked’ to the assessee’s PE. Thus, it was held that there was no tangible
material available with the AO to reopen the assessment and that the reassessment would
amount to change of opinion which is not permissible in law. (AY. 2005-06)
Oracle Systems Corporation v. DIT(IT) (2016) 383 ITR 434 / 238 Taxman 165 / 137 DTR
33 / 287 CTR 636 (Delhi)(HC)
1738 S. 147 : Reassessment – After the expiry of four years – Reopening of assessment after
the expiry of four years without showing any failure on part of assessee to disclose
fully and truly all material facts, is liable to be quashed – Reopening of a claim which
has been examined and allowed in the original assessment proceedings, is a “mere
change of opinion”. [S. 10(33), 148]
In the return of income, the assessee claimed dividend income from units of mutual
fund as exempt u/s. 10(33) of the Act. The said claim was examined and allowed in
regular assessment proceedings.
Thereafter, the AO reopened the assessment u/s. 147 of the Act on the ground that
dividend income is not exempt u/s. 10(33) of the Act as it has arisen from transfer of units
of mutual funds and also, the assessee is a trader in shares and dividend income received
was integral part of traded goods and could not be segregated from cost of shares.
The assessee challenged the initiation of reassessment proceedings by filing a writ petition
before the Hon’ble Bombay HC. The HC quashed the initiation of reassessment proceedings
on the ground that assessment was reopened after the expiry of four years without showing
any failure on the part of the assessee to disclose fully and truly all material facts. Further,
564
S. 147 Reassessment
in the original assessment proceedings, claim of exemption u/s. 10(33) was specifically
examined and allowed, hence, reopening was a “mere change of opinion”.
On merits, the HC held that dividend income has been earned from holdings of units
of mutual funds and not from transfer of units. Therefore, impugned dividend income
is eligible for exemption u/s. 10(33). (AY. 2000-01)
Nirmal Bang Securities (P) Ltd. v. ACIT. (2016) 382 ITR 93 / 131 DTR 35 / 284 CTR 244
(Bom.)(HC)
S. 147 : Reassessment – After the expiry of four years – Deductions granted in original 1739
assessment after enquiry – Reassessment was held to be invalid. [S.148]
During original assessment proceedings, the assessee submitted complete details of the
software licence fees and justified its claim. Only thereafter did the Assessing Officer
while framing the assessment, treat the payment of software licence fees made to
the foreign companies as revenue expenditure and allow the deductions Subsequent
reopening on the ground that payment of software licence fees was in the nature
of royalty and, thus, in the nature of capital expenditure, and wrongly claimed the
deduction, was not valid. (AY. 2008-09)
E-Infochips Ltd. v. Dy. CIT (2015) 231 Taxman 838 / 123 DTR 199 / (2016) 380 ITR 449
(Guj.)(HC)
S. 147 : Reassessment – After the expiry of four years – Recompute valuation of stock 1740
– No failure to disclose material facts necessary for assessment – Notice was held to
be not valid. [S.148]
Where the issue of accounting treatment in respect of unutilised CENVAT credit for the
purpose of valuing the closing stock was already examined by the Assessing Officer during
the scrutiny assessment, reassessment proceedings on the same issue without any tangible
material is mere a change of opinion and, hence, not sustainable. (AY. 2009-10)
Tirupati Foam Ltd. v. Dy. CIT (2016) 380 ITR 493 (Guj.)(HC)
S. 147 : Reassessment – After the expiry of four years – Assessee disclosed all material 1741
facts necessary for making assessment and no failure on his part – Reassessment was
held to be invalid. [S.148]
Dismissing the appeal of revenue, the Court held that in the reasons recorded by
the Assessing Officer, he observed that the entries made related to purchases, which
explanation was given by the assessee in the original assessment proceedings.
Consequently, all the necessary explanation and information was furnished by the assessee
and, therefore, there was no failure on the part of the assessee to disclose fully and truly
all material facts for making assessment. The Tribunal had given a categorical finding that
the assessee had disclosed all the material facts necessary for making the assessment and
there was no failure on his part. This finding of the Tribunal was perfectly correct and the
Assessing Officer in his original assessment proceedings had considered each and every
document and the explanation given by the assessee on the seized documents. Therefore,
it was not a case where the assessee failed to disclose fully or truly all material facts
necessary for making the assessment. The notice issued u/s 148 was invalid. (AY. 1991-92)
CIT v. Hemkunt Timbers Ltd. (2016) 380 ITR 658 / 283 CTR 1 / 67 taxmann.com 231
(All.)(HC)
565
Reassessment S. 147
1742 S. 147: Reassessment – After the expiry of four years – CBDT instructions cannot
override the provisions – Assessing Officer has to form his own opinion –
Reassessment on the basis of Audit objection was held to be bad in law. [S.148]
Allowing the petition the Court held that Reopening of assessment to take remedial
action pursuant to audit objections as per Instruction No. 9 of 2006 is not valid if AO
disagrees with the objections. Instruction No. 9 cannot override the requirement in s.
147 that AO should form his own belief that income has escaped assessment. Court held
that the CBDT instructions cannot override the provisions of section 147. (AY. 2004-05)
Sun Pharmaceuticals Industries Ltd. v. DCIT (2016) 381 ITR 387 / 237 Taxman 709 / 137
DTR 18 / 287 CTR 621 (Delhi)(HC)
1743 S. 147 : Reassessment – Omission to issue notice under section 143(2) is not curable
defects – Reassessment was not valid – Notice and reassessment on basis of documents
discovered during income-tax survey and admission of assessee was held to be valid.
[S. 143(2), 148, 292BB]
Even within the time available for issuing notice under section 143(2) for making
regular assessment if the Assessing Officer is of the view that materials available with
him or discovered by him are such as to justify a belief of income escaping assessment
under section 147, he is free to record the reasons for the belief and proceed to
make the reassessment. In the absence of a notice under section 143(2), no further
proceedings can be continued for assessment under section 143 and without such a
notice the Assessing Officer cannot assume jurisdiction and this defect cannot be cured
subsequently, since it is not a procedural defect, but a defect that goes to the root of
the jurisdiction. Section 292BB creates an estoppel against the assessee in claiming that
no notice has been served on him, if he has participated in the proceedings. However,
the said section does not in any manner grant any privilege to the Assessing Officer
in dispensing with the issuance of a notice under section 143(2) of the Act. Since the
jurisdiction under section 143 is founded on the issuance of a notice under section
143(2), the Assessing Officer could have assumed jurisdiction only after issuing a notice
under section 143(2). Even the participation of the assessee would not provide the
benefit under section 292BB to the Revenue. The requirement that a notice be issued is
mandatory and the Assessing Officer has no other option but to issue the notice before
commencing the jurisdiction.
Travancore Diagnostics P. Ltd v. ACIT (2016) 290 CTR 241 / (2017) 390 ITR 167 / 244
Taxman 316 (Ker.)(HC)
1744 S. 147 : Reassessment – Search by Excise Department – AO had sufficient material
available with him which he perused, considered, applied his mind and recorded
finding of belief that income chargeable to tax had escaped assessment – Reassessment
was held to be valid. [S. 145, 148]
Allowing the appeal of the Revenue, the Court held that; the entire material collected
by the DGCEI during the search, which included incriminating documents and other
such relevant materials, was along with report and show-cause notice placed at the
disposal of the Assessing Officer which prima facie suggested suppression of sale
consideration of the tiles manufactured by the assessee to evade excise duty. Based
on such material, AO formed a belief that income chargeable to tax had also escaped
566
S. 147 Reassessment
assessment. Accordingly, the Court held that AO had such material available with him
which he perused, considered, applied his mind and recorded the finding of belief that
income chargeable to tax had escaped assessment, and therefore, the re-opening could
not be declared as invalid. (AY. 2004-05)
PCIT v. Gokul Ceramics & Ors. (2016) 141 DTR 45 / 289 CTR 126 / 241 Taxman 1 (Guj.)
(HC)
S. 147 : Reassessment – Jurisdiction of Assessing Officer – survey carried on by officer 1745
of Ward 46, since no objection was taken within 30 days even from date of issuance
of notice under section 148, assessee had lost right to raise objection by efflux of time.
[S. 124, 133A, 148]
The AO, Ward 46 conducted a survey u/s. 133A upon the assessee on 6-2-2015.
Thereafter he issued on the assessee a notice u/s. 148 dated 27-3-2015 pertaining to the
AY 2012-13 to 2014-15. Assessee filed a writ petition challenging the action of the AO
on the ground that he had no jurisdiction over its case on and from 15-11-2014 in view
of the CBDT Circular dated 22-10-2014. High Court directed to the AO to respond to the
assessee’s objection. AO held that the assessee had lost the right to raise objection to the
territorial jurisdiction by efflux of time. Assessee, again filed a writ petition. High Court
again dismissed the petition. Assessee filed an appeal against the said order. High Court
held that, the assessee had lost the right to raise the objection to territorial jurisdiction
of the Assessing Officer by efflux of time. (AY. 2012-13 to 2014-15)
Elite Pharmaceuticals v. ITO (2016) 242 Taxman 345 / (2017) 152 DTR 226 (Cal.)(HC)
S. 147 : Reassessment – Merger – Partly allowed by the Assessing Officer – 1746
Reassessment was held to be not justified. [S. 80HHC, 80IA]
Dismissing the appeal of the revenue, the Court held that the Assessing Officer had
considered issue relating to deductions under sections 80IA and 80HHC in detail in
original assessment proceedings and also the Assessing Officer had allowed assessee’s
claim for deduction partly against which, assessee had approached Commissioner
(Appeals), who had partly granted reliefs, therefore Tribunal was justified in setting
aside reassessment proceedings. (AY. 2000-01, 2001-02)
PCIT v. Sun Pharmaceutical Industries Ltd. (2016) 241 Taxman 332 (Guj.)(HC)
Editorial : SLP of the revenue was admitted; PCIT v. Sun Pharmaceutical Industries Ltd.
(2017) 244 Taxman 218 (SC). PCIT v. Sun Pharmaceutical Industries Ltd. (2017) 246
Taxman 60 (SC)
S. 147 : Reassessment – Notice u/s. 143(2) is mandatory and section 292BB does not 1747
in any manner grant any privilege to Assessing Officer in dispensing with issuance of
such a notice – Reassessment was held to be invalid. [S. 143(2), 148, 292BB]
Allowing the appeal of the assessee, the Court held that notice u/s. 143(2) is mandatory
and section 292BB does not in any manner grant any privilege to Assessing Officer in
dispensing with issuance of such a notice- Reassessment was held to be invalid In the
result, appeal is allowed and the assessment order is set aside. (AY. 2009-10)
Travancore Diagnostics (P.) Ltd. v. ACIT (2016) 290 CTR 241 / (2017) 244 Taxman 316 /
390 ITR 167 (Ker.)(HC)
567
Reassessment S. 147
1748 S. 147 : Reassessment – Conditions for reopening the assessment remains the same
even when no return of income is filed by the assessee. [S. 139, 148]
The High Court held that mere non filing of return of income does not give jurisdiction
to the Assessing Officer to re-open the assessment unless the assessee has total income
which is chargeable to tax. Therefore, non filing of return of income and/or not
obtaining of PAN does not ipso facto give jurisdiction to reopen an assessment under
Section 147/148 of the Act. Prima facie, the jurisdiction even in case of non filing
of return of income to issue notice of re-opening notice is a reasonable belief of the
Assessing Officer that income chargeable to tax has escaped assessment. The condition
precedent for issuance of notice under Section 147/148 of the Act is no different in
cases where no return of income has been filed. If clause (a) of Explanation 2 to Section
147 of the Act is to be applied then it must be established that the income of the person
to whom the notice is issued is in excess of the maximum amount not chargeable to
tax. (AY. 2008-09)
General Electoral Trust v. ITO (2016) 141 DTR 294 / 289 CTR 284 (Bom.)(HC)
1749 S. 147 : Reassessment – Reassessment not valid when reasons for reopening the
assessment was not served on the assessee. [S. 148]
The High Court held that the as reasons for reopening the assessment was not served
on the assessee despite request for the same by the assessee, the reassessment is invalid
and therefore, the notice under section 148 and reassessment order are liable to be
quashed. (AY. 2006-07)
Kothari Metals v. ITO (2016) 140 DTR 150 / 288 CTR 606 (Karn.)(HC)
1750 S. 147 : Reassessment – Reassessment due to change of opinion is invalid when
all details were filed before the Assessing Officer during the scrutiny assessment
proceedings. [S. 148]
The High Court held that the reassessment is not valid as all the details were filed
before the Assessing Officer during the scrutiny assessment proceedings and therefore,
the reassessment proceedings were initiated based on the change of opinion. In the
absence of any material, as anticipated by the AO in the office note, it is difficult to
appreciate on what basis the AO could form the “reasons to believe”, that for the AY in
question any income has escaped assessment.(AY. 1994-95)
Kulbhushan Khosla v. CIT (2016) 143 DTR 281 (Delhi)(HC)
1751 S. 147 : Reassessment – Notice issued under section 148 is quashed as the subject
matter of the notice had attained finality. [S. 148]
The High Court quashed the notice issued under section 148 of the Income-tax Act
for the reason the proposed disallowance on account of expenses incurred for land
consolidation already attained finality when the same was deleted by the Commissioner
of Income-tax (Appeals) against the order passed under section 143(3) and the same
being confirmed by the Tribunal. Further, existence of alternative remedy is not a ground
to dismiss the writ petition when the notice, on the face of it, is illegal. (AY. 2008-09)
Kiran Kanwar (Smt.) v. UOI (2016) 143 DTR 297 / 290 CTR 403 (Raj.)(HC)
568
S. 147 Reassessment
S. 147 : Reassessment – Service of Notice – AO had sent the notice at the address 1752
mentioned on the PAN through postal department – Postal authorities returned back
the notice with the remark “left” Reassessment was held to be valid. [S. 148]
AO had sent the notice at the address mentioned on the PAN through postal department.
Postal authorities returned back the notice with the remark “left”. Assessee challenged
the reassessment proceedings. Dismissing the petition the Court held that ;the petitioner
did not enquire with the postal department as to why and under what circumstances
was the remark ‘left’ made. Therefore, only on the ground of non-issuance of the service
of notice, the reassessment proceedings could not be terminated. (AY. 2009-10)
Atulbhai Hiralal Shah v. Dy. CIT (2017) 244 Taxman 27 (Guj.)(HC)
Editorial : SLP of assessee was dismissed; Atulbhai Hiralal Shah v. Dy. CIT (2016) 242
Taxman 259 (SC)
S. 147 : Reassessment – Deduction was allowed after enquiry in scrutiny assessment, 1753
reassessment was held to be not valid. [S. 80IB(10), 148]
Held, that deduction under section 80IB(10) was the main claim of the assessee which
came up for scrutiny in the assessment. The AO raised several queries. It was not
the case of the AO that in response to the queries raised during such assessment, the
assessee did not make true or proper disclosures. The reasons recorded did not rely on
any material outside the record. The notice under section 148 on the ground that the
deduction had been granted erroneously was not valid. (AY. 2005-06)
Amaltas Associates v. ITO (2016) 389 ITR 340 (Guj.)(HC)
S. 147 : Reassessment – Opinion of audit party on point of law not information 1754
enabling Income – tax Officer to initiate reassessment proceedings – Reassessment
notice void and to be set aside. [S.36(1)(iii), 80IB, 148]
In the original assessment the claim of deduction under section 80-IB was examined
by the AO. The matter was verified from the records and only thereafter the claim
was accepted as it was. The AO might have committed an error in allowing deduction
with respect to several amounts which might not be eligible for such deduction. An
erroneous decision of the AO was different from non-consideration of an issue at the
time of assessment. Therefore it could not be stated that the issue was not scrutinised
by the AO during the original assessment. The audit party brought a certain issue to
the notice of the AO and compelled her to issue notice of reopening despite her clear
opinion that the issue was not valid and that there was no escapement of income on
the grounds so urged by the audit party. Since the opinion of the audit party on a point
of law could not be regarded as information enabling the Income-tax Officer to initiate
reassessment proceedings, the notice was void and to be set aside. Indian and Eastern
Newspaper Society v. CIT [1979] 119 ITR 996 (SC) applied. (AY. 2001-02)
N.K. Proteins Ltd. v. ITO (2016) 389 ITR 541 / 76 taxmann.com 241 (Guj.)(HC)
569
Reassessment S. 147
1755 S. 147 : Reassessment – The Department’s reference to otherwise binding judgments of
the Supreme Court could have been the basis of a valid revision under section 263 but
could not be the ground for reopening of assessment – No valid reason for reassessment
proceedings to disallow claim of deduction under section 80IA. [S.148, 80IA]
It was evident from the reasons recorded by the Department that there was no allusion
to tangible material in the form of objective documents or information outside of
the concluded assessment and the documents which pertained to it. Without such
documents, evidence or tangible material, there could not be a valid reason leading to
proper reassessment proceedings by invoking section 147. The Department’s reference to
otherwise binding judgments of the Supreme Court could have been the basis of a valid
revision under section 263 but could not be the ground for reopening of assessment
under section 147. All further proceedings were to be quashed. (AY. 1997-98)
Woodward Governor India Ltd. v. ACIT (2016) 389 ITR 50 (Delhi)(HC)
1756 S. 147 : Reassessment – Book profit – Reasons recorded by Assessing Officer were not
sufficient to reopen assessment, therefore, impugned reassessment proceedings were
to be quashed. [S. 115JB]
Assessee filed its return of income declaring Nil income. Return was taken under scrutiny
by Assessing Officer, who passed order of assessment under section 143(3). Subsequently,
Assessing Officer initiated reassessment proceedings mainly on ground that assessee
was subjected to provisions of section 115JB and even though at present tax liability on
assessee as per normal computation was higher than tax liability under MAT provisions,
however, if assessee succeeded in appeal against order of assessment, question of applying
MAT provisions could arise. On writ allowing the petition the Court held that ; reasons
recorded by Assessing Officer were not sufficient to reopen assessment, therefore,
impugned reassessment proceedings were to be quashed. (AY. 2009-10)
National Dairy Development Board v. ACIT (2016) 243 Taxman 560 (Guj.)(HC)
1757 S. 147 : Reassessment – Search and seizure – Unsigned agreement – Reassessment was
held to be justified. [S. 56(2), 132, 148]
Assessee filed the petition contending that reopening of assessment on basis of unsigned
agreement to sell was not justified. Dismissing the petition the Court held that, it was
noted that in terms of agreement, assessee had received certain amount for vacating
post of trustee and handing over properties to ‘B’. On facts, even though agreement in
question was unsigned, yet it could form a reason to believe that assessee’s income had
escaped assessment to tax, therefore validity of reassessment proceedings deserved to
be upheld. (AY. 2010-11)
Jose Thomas v. DCIT (2016) 243 Taxman 483 (Ker.)(HC)
1758 S. 147 : Reassessment – Unexplained investments – Data from Bombay Stock Exchange
(BSE) – Record seized from an accommodation entry provider showed that assessee had
received certain amount (pay-out) on sale of shares of company P which was floated and
utilized for such purpose – Reassessment was held to be justified. [S. 69, 148]
Record seized from an accommodation entry provider showed that assessee had received
certain amount (pay-out) on sale of shares of company P which was floated and utilized
570
S. 147 Reassessment
for such purpose. Further, documents seized from company P showed that said amount
had, in fact, been received by assessee against payment of cash. Revenue authorities
matched transactions found in such records with data from Bombay Stock Exchange
(BSE) and entries were corroborated with trade data of company P maintained by BSE.
It was on basis of such exercise that Assessing Officer recorded his reasons that income
chargeable to tax had escaped assessment. The assessee challenged the reassessment
proceedings. Dismissing the petition the Court held that since reasons recorded by
Assessing Officer was valid, reopening of assessment was justified. (AY. 2010-11)
Vicky Rajesh Jhaveri v. DCIT (2016) 243 Taxman 573 / (2017) 148 DTR 150 / 293 CTR
291 (Guj.)(HC)
Editorial : SLP of assessee was dismissed, Sagar Rajesh Jhaveri v. DCIT (2016) 243
Taxman 515 (SC)
S. 147 : Reassessment – Unexplained investments – Reassessment on the basis of DVO’s 1759
report was held to be not valid. [S. 55, 69,148]
Assessment was completed under section 143(3). During process of assessment, all
relevant bills for construction of factory building were produced and only thereafter
assessment came to be finalized. Subsequently, on basis of report of DVO, Assessing
Officer took a view that assessee had underestimated cost of construction of factory
building. He thus issued a notice under section 148 seeking to reopen assessment. On
writ allowing the petition the Court held that in view of fact that entire construction
account was made available to Assessing Officer and only thereafter final assessment
had taken place, DVO’s report could not be construed as tangible material which would
warrant Assessing Officer to exercise power of reopening of assessment,therefore,
impugned reassessment proceedings deserved to be set aside. (AY. 2007-08)
Kisan Proteins (P.) Ltd. v. ACIT (2016) 243 Taxman 11 (2017) 292 CTR 345 (Guj.)(HC)
S. 147 : Reassessment – Charitable purpose – Issue which was examined by the 1760
Assessing Officer cannot be reopened – Relief is available to Trust promoting education
even if it was engaged in publication of school books. [S. 2(15), 11, 12, 12AA]
Allowing the petition the Court held that it appears that in the present proceedings, the
exemption issue generated by the authority has already been thoroughly examined and
therefore, it would not be proper on the part of the respondent-authority to reopen the
said issue and further there is not remote indication that assessee has not truly and fully
disclosed all material facts. In addition to this the circumstance prevailing on record
which indicates that there was no distinguishable material or there was no substantial
change of circumstance of any nature after carrying out scrutiny assessment which
has taken place and thorough examination is undertaken with respect to the issue of
exemption it is not proper on the part of the respondent authority to proceed further with
the reopening of assessment. Hence, in view of aforesaid circumstances, the impugned
notice issued under section 148 was quashed. Relief is available to Trust promoting
education even if it was engaged in publication of school books. (AY. 2005-06)
Gujarat State Board of School Textbooks v. ACIT (2016) 243 Taxman 311 (Guj.)(HC)
571
Reassessment S. 147
1761 S. 147 : Reassessment – At the stage of considering notice for reopening, one has to see
only prima facie whether on basis of tangible material on record, Assessing Officer
could form a valid belief that income chargeable to tax had escaped assessment. [S.4,
115JB, 148]
Dismissing the petition the Court held that at the stage of considering notice for
reopening, one has to see only prima facie whether on basis of tangible material on
record, Assessing Officer could form a valid belief that income chargeable to tax had
escaped assessment. Where elaborate reasons had been recorded by Assessing Officer
which demonstrated how prima facie it could be shown that technology developed by
assessee through use of its research and development facilities was routed through shell
companies to avoid payment of tax, same could form basis for reopening of assessment.
(AY. 2004-05)
Sun Pharmaceuticals Industries Ltd. v. ACIT (2016) 243 Taxman 299 (Guj.)(HC)
1762 S. 147 : Reassessment – within four years – Reassessment was held to be valid. [S.50C,
148]
Dismissing the petition the Court held that failure by Assessing Officer to examine issue
for reassessment during original assessment proceedings and failure by assessee to place
necessary and relevant information during original assessment proceedings, reopening
of assessment within four years was held to be permissible. (AY. 2007-08)
Chunibhai Ranchhodbhai Dalwadi (Late) v. ACIT (2016) 388 ITR 130 (Guj.)(HC)
1763 S. 147 : Reassessment – Contractor – Insurance claim on loss of equipment in transit
only its capacity as contractor in terms of contract entered in to with principal, said
claim would not be the income of assessee – Reassessment was held to be not valid.
[S.28(i), 148]
Dismissing the appeal of revenue the Court held that the two authorities concurrently
reached a finding of fact that the assessee was not the supplier of the equipment and
it had taken out an insurance claim only in its capacity as contractor and in terms
of the contract entered into between the parties. Nothing was shown to indicate that
the finding was perverse. The material used by the Assessing Officer for purportedly
forming this opinion was the description of the assessee of itself as “a supplier” of the
equipment in an EPC contract, which inter alia required it to take offshore delivery of
the equipment from a foreign vendor and supply and install it onshore. Mere description
as a “supplier” in a suit by the assessee against the insurance company claiming an
insurance claim for loss of equipment, when the assessee insured the equipment jointly
with the purchaser, could not possibly have any connection with the escapement of
income arising out of sale of the equipment. Since that was the only material used by
the Assessing Officer for issuance of the reopening notice, the notice was without legal
basis or justification. The order of the Tribunal for the assessment years 1999-2000 and
2002-03 also supported that the assessee was not supplier of the equipment and no
income assessable to tax had escaped assessment. The Commissioner (Appeals) and the
Tribunal were right in setting aside the notice. (AY. 2000-01)
DIT(IT.) v. Doosan Heavy Industries and Construction Co. (2016) 388 ITR 557 / 243
Taxman 421 (Bom.)(HC)
572
S. 147 Reassessment
S. 147 : Reassessment – Failure to deduct at source – Tangible material not available 1764
before Assessing Officer at time of assessment – Records destroyed in fire accident
made available to assessee under Right to Information Act, 2005 – Principles of natural
justice not violated and no prejudice caused to assessee – Notice valid. [S.148, Art.
226]
Held, dismissing the petition, that there was no violation of principles of natural justice.
The assessee was permitted to inspect the relevant record before it filed its objections to
the initiation of reassessment proceedings. Even otherwise, the entire records, as asked
for by the assessee, were made available under the Right to Information Act, 2005. The
assessee who had made an incorrect statement in the main body of the audit report that
the provisions regarding deduction of tax at source were not applicable could not turn
around and say that it had stated the facts in an annexure from which the Assessing
Officer could have discovered the incorrect statement. Moreover, the Assessing Officer
could have legitimately thought that statement to be correct even with respect to the
payment mentioned in the annexure for instance on the basis that the payee had
deposited the same and that therefore, the question of the assessee paying the same did
not arise. The reassessment notice was valid. (AY. 2010-11)
Franchise India Holdings Ltd. v. ACIT (2016) 388 ITR 563 / 293 CTR 474 (P&H)(HC)
S. 147 : Reassessment – Assessee communicated reasons for reopening – Assessee to 1765
submit objections before assessing authority Writ petition is not maintainable. [S. 148,
Art. 226]
Dismissing the petition, the Court held that the Court could not interfere with the
reassessment notice on the ground that there was no loss of revenue. The assessee was
communicated with reasons for reopening matter. The assessee has to file the return.
That the assessee had not carried forward the loss relating to the assessment year 2005-
06 nor set it off against the income of the subsequent years. The Court would not go
into the aspect as to what was the effect of not carrying forward the loss to the next
year or not setting it off against the income in the subsequent years and whether the
assessee would be entitled to file revised returns. The factual issues were to be raised
before the assessing authority and be decided by it and by court. (AY. 2005-06)
Sella Synergy India P. Ltd. v. ITO (2016) 388 ITR 539 / 290 CTR 154 / 76 taxmann.com
93 / 142 DTR 33 (Mad.)(HC)
S. 147 : Reassessment – Statement of partner before Excise authorities – Reassessment 1766
was held to be valid. [S. 148]
Dismissing the petition the Court held that the reasons recorded by the Assessing Officer for
his belief that income had escaped assessment were based on the information gathered by
the Excise Department from the statements of the two partners of the assessee-firm during
the search and the material found during further investigation, which constituted relevant
material for the purpose of invoking the provisions of section 147 of the Income-tax Act,
1961. The contention of the assessee that the proceedings should be kept in abeyance till
the Customs, Excise and Service Tax Appellate Tribunal decided its appeal could not be
accepted. The assessee would have to furnish requisite material information to the Assessing
Officer in the proceedings initiated under section 147. (AY. 2009-10, 2010-11, 2011-12)
Abc Classes PRS v. PCIT (2016) 387 ITR 119 (All.)(HC)
573
Reassessment S. 147
1767 S. 147 : Reassessment – If no addition is made on basis of issues recorded in grounds
for reassessment, Assessing Officer cannot make additions on any other issue during
course of reassessment proceedings. [S. 148]
Dismissing the appeal of revenue, the Court held that if no addition was made on the
basis of the reasons recorded by the Assessing Officer for reopening an assessment
under section 148 of the Income-tax Act, 1961, recourse cannot be had to Explanation
3 to section 147 to make an addition on any other issue not included in the reasons to
believe for reopening the assessment. (AY. 2003-04)
CIT(E) v. Monarch Educational Society (2016) 387 ITR 416 (Delhi)(HC)
Editorial: Order in Monarch Educational Society v. ITO (E) (2015) 37 ITR (Trib.) 512
(Delhi) is affirmed.
1768 S. 147 : Reassessment – Deduction allowed after detailed examination – Wrong
assumptions by Assessing Officer – Reassessment was held to be not valid. [S. 80P(2)
(d), 148]
Allowing the petition the Court held that the deduction was allowed after detailed
examination hence reassessment was held to be not valid. (AY. 2010-11)
Kaira District Co-op. Milk Producers Union Ltd. v. Dy. CIT (2016) 387 ITR 183 (Guj.)(HC)
1769 S. 147 : Reassessment – Violation of principles of natural justice – Statement relied
without giving an opportunity of cross examination – Reassessment was held to be
not valid. [S.148]
Allowing the petition the Court held that the Revenue was not justified in making
addition at the time of reassessment without having first given the assessee an
opportunity to cross-examine the deponent on the statements relied upon by the
Assistant Commissioner. Quite apart from denial of an opportunity of cross examination,
the Revenue did not even provide the material on the basis of which the Department
sought to conclude that the loan was a bogus transaction. In the light of the fact that the
monies were advanced apparently by account payee cheque and were repaid by account
payee cheque the least that the revenue should have done was to grant an opportunity
to the assessee to meet the case against him by providing the material sought to be
used against the assessee before passing the order of reassessment. This not having
been done, the denial of such opportunity went to the root of the matter. The order of
reassessment was not valid. Followed Andaman Timber Industries v. CCE (2015) 127 DTR
241 / 281 CTR 241 / 62 taxmann.com 3 (2016) 38 GSTR 117 (SC) (AY. 1983-84)
H.R. Mehta v. ACIT (2016) 387 ITR 561 / 72 taxmann.com 110 (Bom.)(HC)
1770 S. 147 : Reassessment – Company dissolved prior to issuance of notice – Assessee
liable to clarify all issues raised by Department with necessary documents –
Reassessment proceedings to be kept in abeyance till such time – Plea of limitation
cannot be raised if assessment to proceed further – Notice calling for clarifications
on factual issues cannot be challenged in writ petition. [S. 148, Constitution of India,
Art. 226]
Dismissing the petition, (i) that clarifications had been sought related to the assessment
year prior to the dissolution of the firm and it was appropriate for the assessee to
574
S. 147 Reassessment
produce the necessary documentary evidence called for by the Department and
appear before it and clarify all the issues. If the Department had called for certain
documents and sought for clarifications, it could not simultaneously proceed with the
reassessment proceedings under section 144 of the Income-tax Act, 1961 and only if
the assessee’s explanations were not satisfactory, could it proceed further in the matter.
The Department was directed to keep the reassessment proceedings in abeyance till it
took note of the clarifications and perused the documents after hearing the assessee and
then issuing a speaking order. No plea of limitation could be raised in the event the
assessment had to proceed further.(ii) That a notice calling upon the assessee to clarify
certain factual issues could not be challenged under article 226 of the Constitution.
(AY. 2009-10)
PVP Ventures Ltd. v. ITO (2016) 387 ITR 716 / 72 taxmann.com 129 (Mad.)(HC)
S. 147 : Reassessment – Transfer of stock in trade to investment – Once a notice is 1771
issued and reassessment proceedings are pending, the AO is debarred from issuing
another notice for reopening for the same assessment year. [S. 28(i), 148]
Allowing the petition, the Court held that once a notice for reassessment is issued and
reassessment proceedings are pending, the AO is debarred from issuing another notice
for reopening for the same assessment year. Transfer of share from stock in trade to
investment did not result in to any immediate income accruing to which could be taxed
in the assessment year in question. (AY. 2005-06)
Aditya Medisales Ltd. v. Dy. CIT (2016) 242 Taxman 228 (Guj.)(HC)
S. 147 : Reassessment – Bogus purchases – Even if the expenditure of bogus purchases 1772
is disallowed, the only effect it could have is to increase the profit of the assessee
which in any case is exempt under Section 10AA of the Act, addition cannot be made
as unexplained expenditure as the payment was made by account payee cheques. [S.
10AA, 69B, 69C]
On appeal quashing the reassessment proceedings; the Court held that it is undoubtedly
true that the reasons to be recorded before issuance of notice of reopening have to be
those of the Assessing Officer alone. This however, does not mean that the Assessing
Officer cannot rely on the exercise undertaken by other wings of the Government
Departments, if the material so collected through inquiry or investigation provides
prima facie information, a tangible material; which enables the Assessing Officer to
form a belief that income chargeable to tax has escaped assessment. On the contention
of assessee that, in any case, the entire income of the assessee being tax exempt under
Section 10AA of the Act, even if the stand of the Department as reflected in the reasons
recorded is correct and ultimately established, there would be no additional tax burden
on the petitioner, the High Court held that the result of the reassessment would be
that even if the expenditure of the so called bogus purchases is disallowed, the only
effect it could have is to increase the profit of the assessee which in any case is exempt
under Section 10AA of the Act. Separately, the High Court also held that in the present
case, Section 69C of the Act has no applicability as the explanation regarding source
of expenditure was very much available since in reasons recorded itself. Petition was
disposed in favour of the assessee. (AY. 2008-09)
Sajani Jewels v. Dy. CIT (2016) 143 DTR 263 / 241 Taxman 383 (Guj.)(HC)
575
Reassessment S. 147
1773 S. 147 : Reassessment – With in four years – Change of opinion – AO noted reasons
and accepted submission in original assessment proceedings, any later attempt to
reopen case doubting original position would be a mere change of opinion. [S. 54EC,
148]
Allowing the petition, the Court held that during the original scrutiny assessment, the
entire issue came up for discussion. The Assessing Officer raised the queries which
were answered by the assessee. In the order of assessment, the Assessing Officer passed
a reasoned order why he had accepted assessee’s classification of the sale proceeds of
the land under the separate heads of business income and long-term capital gain. He
also accepted the assessee’s claim under section 54EC in respect of investment made in
bonds of Rural Electrification Board out of LTCG. Thus the court held that any attempt
on his part, later on, to reopen the issue by doubting whether the sale proceeds would
qualify as capital gain or business income would be a mere change of opinion. (AY.
2010-11)
Manishkumar Tulsidas Kaneriya v. Dy. CIT (2016) 242 Taxman 164 / (2017) 145 DTR 26
(Guj.)(HC)
1774 S. 147 : Reassessment – With in four years – During assessment, Assessing Officer had
examined entire claim of interest expenditure incurred in respect of Deep Discount
Bonds and concluded said claim as not valid, he could not reopen assessment taking
ground that expenditure was disallowable for non-deduction of tax at source. [S. 40(a)
(ia), 148, 194A]
Allowing the petition, the Court held that the Assessing Officer had examined the entire
claim from various angles and concluded that the claim of expenditure of the assessee
was not valid. That being the position, in plain terms he could not have resorted to
reopening of the assessment on the ground that the expenditure had to be disallowed
for not deducting the tax at source. Thus, it was held that the impugned notice could
not be upheld. In the result, the High Court quashed the impugned notice and ruled in
favour of the assessee. (AY. 2005-06)
Nirma Ltd. v. Dy. CIT (2016) 242 Taxman 286 (Guj.)(HC)
1775 S. 147 : Reassessment – After scrutiny assessment AO received information from
Investigation wing that two well-known entry operators of country provided bogus
entries to various beneficiaries, and assessee was one of such beneficiary, AO was
justified in reopening assessment. [S. 148]
Dismissing the petition the Court held that the AO has applied his mind and has rightly
relied upon the information available before him while exercising the power to reopen
the assessment. Accordingly, AO was justified in issuing notice under section 148 of
the Act and the reasons were sufficient enough to permit him to exercise jurisdiction
to reopen the assessment. Even the order rejecting the objections also appears to the
Court cogent enough as supported by valid reasons. Accordingly, the notice was held
to be valid. (AY. 2009-10)
Peass Industrial Engineers Pvt. Ltd. v. Dy. CIT (2016) 289 CTR 139 / 72 taxmann.com
302 (Guj.)(HC)
576
S. 147 Reassessment
S. 147 : Reassessment – Accumulation of income – Reassessment was not justified as 1776
no amount have been accumulated. [S. 11(2), 148]
Allowing the petition the Court held that; On facts no application for accumulation was
made therefore, on the basis of reasons recorded by the Assessing Officer, he could not
have formed the belief that income chargeable to tax has escaped assessment in the
assessment years under consideration. The assumption of jurisdiction by the Assessing
Officer by issuing the impugned notices is, therefore, without any authority of law.
Consequently, it was held that the impugned notices cannot be sustained. (AY. 2008-09
to 2011-12)
Pal Gram Hindu Sarvajanik Trust v. ITO (2016) 241 Taxman 84 (Guj.)(HC)
S. 147 : Reassessment – Audit objection – If the AO reopens the assessment on 1777
information supplied by the audit party and also other issues independently applying
the mind, the reassessment was held to be valid. [S. 115JB, 148]
Dismissing the petition the Court held that if the AO reopens the assessment on
information supplied by the audit party and also other issues independently applying
the mind, the reassessment was held to be valid. (AY. 2009-10)
Elecon Engineering Co. Ltd. v. ACIT (2017) 148 DTR 81 (Guj.)(HC)
S. 147 : Reassessment – It is a regular practice for the broker to make modifications 1778
in the client code after the purchase and sale of securities. The mere fact that there
is a client code modification prima facie does not mean that any income has escaped
assessment. It appears to be case of ‘reason to suspect’ and not ‘reason to believe’ –
Petition was admitted and interim relief was granted. [S. 148]
(i) The reasons in support of the impugned notice relies upon the information
received from the Principal Director of Income Tax that the petitioner has benefited
from a client code modification by which a profit of ` 22.50 lakhs was shifted out
by the petitioner’s broker, resulting in reduction of the petitioner’s taxable income.
The only basis for forming the belief is the report from the Principal Director of
Income Tax and the application of mind to the report of the Assessing Officer
along with the record available with him. This information and application of
mind has led the Assessing Officer to form a reasonable belief that there is not
only an escapement of income but there has been failure to truly and fully disclose
all material facts and information as the modus operandi of shifting profits was
not known to the Revenue as not disclosed by the petitioner when the Assessing
Officer passed the order in regular assessment proceedings.
(ii) We note that the reasons in support of the impugned notice accept the fact that
as a matter of regular business practice, a broker in the stock exchange makes
modifications in the client code on sale and / or purchase of any securities, after the
trading is over so as to rectify any error which may have occurred while punching
the orders. The reasons do not indicate the basis for the Assessing Officer to come
to reasonable belief that there has been any escapement of income on the ground
that the modifications done in the client code was not on account of a genuine error,
originally occurred while punching the trade. The material available is that there is
a client code modification done by the Assessee’s broker but there is no link from
577
Reassessment S. 147
there to conclude that it was done to escape assessment of a part of its income.
Prima facie, this appears to be a case of reason to suspect and not reason to believe
that income chargeable to tax has escaped assessment. Petition was admitted and
interim relief was granted. (WP No. 2627 of 2016, dt. 23.11.2016)(AY. 2009-10)
Coronation Agro Industries Ltd. v. DCIT (Bom)(HC); www.itatonline.org
1779 S. 147 : Reassessment – Failure by AO to take note of audited books of account before
issuance of notice – No other material suggesting money laundering or other financial
irregularities in notice for reassessment – Notice was held to be not valid. [S. 148]
Allowing the petition the Court held that; The assessee was granted about twelve hours
of time to respond to the notice for production of material regarding investment made
in the mutual funds and upon the assessee failing to do so, the AO presumed that
such investment required further investigation. In fact, such investment was part of
the audited books of account of the assessee. If the AO had perused the accounts, they
would have clarified the investment in mutual funds. Having once issued the notice
it was not impermissible for the AO to drop the proceedings if the assessee pointed
out that the reasons for which the notice was issued were completely erroneous. The
contention of the Department that there was sufficient other material suggesting money
laundering or other financial irregularities, had not come in the reasons recorded and
that ground could not be examined to support the notice for reopening. (AY. 2008-09)
Asharam Ashram v. ITO (E) (2016) 386 ITR 222 (Guj.)(HC)
1780 S. 147 : Reassessment – Writ Petition challenging the notice issued is not maintainable
as Petitioner has the alternate remedy of challenging the reassessment order under
section 246A of the Act. [S. 148]
The objection filed by the assessee against the reopening were rejected by the AO. The
assessee filed a writ petition challenging the notice issued u/s. 148 of the Act on the ground
that full and true disclosure was made during the assessment proceeding and reopening
is based on change of opinion. The averment made by the assessee regarding the full
disclosure and change of opinion was not disputed by the AO. However, High Court held
that subsequent to the issue of notice, the assessment order has been passed for A.Y. 2007-
08, therefore in view of the subsequent development, the assessee has the alternate remedy
of filing an appeal u/s. 246A of the Act and thereafter to the Tribunal. For A.Y. 2008-09 the
assessment order has not been passed however, the similar alternate remedy is available
to the assessee. Therefore, the writ petition filed by the assessee deserves to be dismissed.
Kiran Kanwar v. UOI (2016) 135 DTR 209 / 286 CTR 262 (Raj.)(HC)
1781 S. 147 : Reassessment – Where on basis of evidences collected and statement recorded
during course of search of entry provider, Assessing Officer had reason to believe that
unsecured loans received by assessee from certain persons escaped assessment, it
could not be said that there was change of opinion. [S. 68, 143(3), 148]
Dismissing the petition the Court held that the reasons in support of the impugned
notice indicates that the Assessing Officer has received definite information that
one Mr. P. and the companies controlled by him was in the business of providing
accommodation entries. On receipt of the aforesaid information, the Assessing Officer
578
S. 147 Reassessment
called for the necessary information in regard to the accommodation entries made in
respect of the assessees in his jurisdiction. Consequent thereto, the Assessing Officer
found that the information received indicated that the eight companies mentioned in
the reasons belonged to P group and formed the basis of his reasonable belief. At this
stage the Assessing Officer has merely to establish that there is justification for him
to form a reasonable belief that income chargeable to tax had escaped assessment and
not conclusively prove the same. The statement of P prima facie completely negatives
the stand taken by the petitioner during the regular assessment proceedings. The exact
nature of the transaction is only privy to the parties to the transaction and when one
of the parties to the transaction states that what appears is not factually so, then the
Assessing officer certainly has tangible material to form a reasonable belief that income
chargeable to tax has escaped assessment. (AY. 2012-13)
Bright Star Syntax P. Ltd. v. ITO (2016) 387 ITR 231 / 240 Taxman 459 / 137 DTR 362
(Bom.)(HC)
S. 147 : Reassessment – Capital gains – Income cannot be said to have escaped assessment 1782
– Merely on presumption that sizable income must be disclosed – When both sale and
purchase transactions of huge amount are made in respect of properties. [S. 45, 148]
Allowing the petition court held that ;from the reason for reopening by AO that since
the assessee had purchased two properties at sizeable cost and showed income of only
` 2.44 lakhs and hence ` 1.16 crores had escaped assessment was lacking logic. There
is no direct co-relation between the purchase of properties by the assessee and his
disclosure of the income during a particular period. The AO seems to be presuming
that when the assessee had made purchase worth such huge amounts, he must disclose
sizable income. Despite the sale of land was not shown in the return, it was shown in
the previous year and duly taxed. If the AO was prima facie of the opinion that sale
transaction invited capital gain which the assessee had avoided by non-disclosure, the
same had not come on record in the reasons provided by the AO.
Further, when notice for reopening for scrutinized assessment was issued beyond the
period of four years, twin conditions to be satisfied were that the AO has some tangible
material to form a belief that income chargeable to tax has escaped assessment and
further that such escapement was due to failure on part of the assessee to disclose truly
and fully all material facts. When first condition of tangible material is not satisfied,
because the assessee failed to disclose the sale transaction would not by itself give
authority to AO to reopen the assessment on presumption that sizable income must be
disclosed when both sale and purchase transactions of huge amount are made in respect
of properties. Thus the petition filed by the assessee was allowed. (AY. 2008-09)
Jayesh Govindbhai Balar v. ITO (2016) 240 Taxman 703 (Guj.)(HC)
S. 147 : Reassessment – Cash credits – Cash deposited – Change of opinion – 1783
Reassessment initiated to treat the cash deposits in the bank account as unexplained
is invalid – Reassessment was held to be not valid. [S. 68, 133A, 148]
The assessee was in the business of issuing of cheques and demand drafts against cash
deposits received from the parties/customers in lieu of commission. The assessee had
submitted the details of bank accounts, cash book etc. establishing the train of money
579
Reassessment S. 147
in the reassessment proceedings initiated initially which was accepted by the Assessing
Officer. Subsequently a survey was carried out and in pursuance of the survey, the
Assessing Officer initiated fresh reassessment proceedings based on information received
from Additional Director. The High Court quashed the reassessment proceedings after
holding that there was no incriminating document found during the course of survey
and that all relevant details were filed during the first re-assessment proceedings and
therefore, it cannot be said that “income has escaped assessment” as it merely amounts
to change of opinion. (AY. 2008-09)
Shree Sidhnath Enterprise v. ACIT (2016) 387 ITR 644 / 240 Taxman 631 / 293 CTR 535
(Guj.)(HC)
1784 S. 147 : Reassessment – Reassessment initiated to treat the notional rent received by
the assessee is upheld [S. 23, 148]
The assessees were the owners of a industrial plot which was leased to a firm for
which rent is received and the same were offered to tax. Under a scheme floated by
Chhatisgarh Housing Board, the said industrial plot was converted into commercial
plot by paying charges to the Board, which was borne by the lessee and the same
was claimed as expenditure in the return of income filed by it. The Assessing Officer
reopened the assessee in the hands of the assessee to treat the said amount paid by the
lessee to the Board as a constructive receipt by the assessee and treating the same as
notional rent. The High Court upheld the validity of the reassessment as according to
the Court, based on the materials available, the Assessing Officer had reason to believe
that income chargeable to tax has escaped assessment and that the expression “reason
to believe” cannot be read to mean that the Assessing Officer should have finally
ascertained the fact by legal evidence or conclusion. It was also held that the assessee
has an equally efficacious remedy once the reassessment is concluded and therefore, the
petition is dismissed without deciding on the validity of the reassessment. (AY. 2005-06
to 2013-14)
Sumit Passi v. ACIT (2016) 386 ITR 46 / 240 Taxman 82 / 139 DTR 224 (P&H)(HC)
1785 S. 147 : Reassessment – Reopening of assessment to treat license fees from lease
as income from house property – Absence of materials on record to conclude
“camouflage” and “sham rental income” – Reassessment was held to be bad in law –
Rule of consistency. [S.28(i), 148]
Allowing the petition the Court held that by simply using the word “camouflage” and
“sham rental income” the AO was not relieved of the obligation of explaining why
he came to the conclusion. There was no material other than the licence deeds and
the licence receipts for him to come to the conclusion that there was any attempt at
camouflaging. The basis for forming the reasons to believe had not even been set out.
Therefore, reopening was not valid. For the AY 1982-83 an assessment order was passed
under section 143(3) accepting the stand of the assessee that the licence fee was in the
nature of business income. The assessee had consistently thereafter treated the licence
fees collected as business income including for the AYs in question. The licence fees
were assessable under the head “business income”. (AY. 1990-91 to 1993-94)
Agya Ram v. CIT (2016) 386 ITR 545 / 241 ITR 407 / 141 DTR 133 / 290 CTR 539 (Delhi)
(HC)
580
S. 147 Reassessment
S. 147 : Reassessment – Change of opinion – Re-assessment initiated to treat the 1786
difference between the cost of the shares of a company in the hands of the holding
company as and the value of the shares computed as per book value method under
section 28(iv) of the Income – tax Act is invalid as the disclosure with regard to the
purchase of the shares was already disclosed in the scrutiny assessment proceedings
[S. 28(iv), 148]
The Assessing Officer initiated the reassessment to treat the difference between the
purchase price of the shares from the holding company and the value of the shares
as per book value method under section 28(iv) of the Act. Quashing the reassessment
proceedings, it was held that all the required disclosures were made during the scrutiny
assessment proceedings with regard to the purchase transaction by disclosing the price
at which it was purchased etc and therefore, as it was a subject matter of enquiry in
the scrutiny assessment proceedings, the same cannot be reopened based on subsequent
change of opinion by the Assessing Officer. (AY. 2010-11)
Unitech Holdings Ltd v. DCIT (2016) 240 Taxman 70 / 138 DTR 272 / 290 CTR 201 (Delhi)
(HC)
S. 147 : Reassessment – Reassessment initiated to (a) treat the difference between 1787
FMV adopted by the assessee and the Assessing Officer as on 1/4/1981 for the purpose
of ascertaining the cost of acquisition in respect of asset acquired prior to 1/4/1981
and (b) to disallow claim of deduction under section 54EC in excess of ` 50,00,000/ –
quashed. [S. 48, 54EC, 148]
The Assessing Officer initiated reassessment proceedings to disallow the cost of
acquisition for the purpose of computation of capital gain in excess of the FMV
ascertained by the AO and also to disallow the excess claim of section 54EC beyond
` 50,00,000/-. The High Court quashed the reassessment on the ground that the
reassessment was initiated merely based on change of opinion and there was no reason
to believe that the income has escaped assessment. Further, on the issue of disallowance
of excess claim of exemption under section 54EC, it was held that the Assessing Officer
decided the allowability of the claim based on the decision of the jurisdictional Tribunal
and therefore, it merely amounted to change of opinion. (AY. 2011-12)
Swati Saurin Shah v. ITO (2016) 386 ITR 256 / 240 Taxman 758 (Guj.)(HC)
S. 147 : Reassessment – Non-supply by the AO of reasons recorded for reopening 1788
the assessment (even where the reopening is prior to GKN Driveshafts (India) Ltd.
v. ITO (2003) 259 ITR 19 (SC)) renders the reassessment order bad as being without
jurisdiction [S.148]
(i) The question as framed proceeds on the basis that the Respondent Assessee was
aware of the reasons for reassessment. The only basis for the aforesaid submission
is the submission made by the revenue before the Tribunal that the Respondent
Assessee is a public sector institution who was aware that search action has been
initiated on certain lessees in respect of transactions with IDBI i.e. Assessee.
On the basis of the above, it is to be inferred that the reason for reassessment
was known to the respondent assessee. The supply of reason in support of the
notice for reopening of an assessment is a jurisdictional requirement. The reasons
581
Reassessment S. 147
recorded form the basis to examine whether the Assessing Officer had at all
applied his mind to the facts and had reasons to believe that taxable income
has escaped reassessment. It is these reasons, which have to be made available
to the Assessee and it could give rise to a challenge to the reopening notice. It
is undisputed that the reasons recorded for issuing reopening notice were never
communicated to the Respondent Assessee in spite of its repeated requests. Thus,
the grievance of the Revenue on the above count is unsustainable.
(ii) An alternative submission is made on behalf of the Revenue that the obligation
to supply reasons on the Assessing Officer was consequent to the decision of
the Apex Court that GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 (SC)
rendered in 2003 while, in the present case, the reopening notice is dated 9
December 1996. Thus it submitted at the time when the notice under section 148
of the Act was issued and the time when assessment was completed, there was
no such requirement to furnish to the assessee a copy of the reasons recorded.
This submission is not correct. We find that the impugned order relies upon the
decision of this Court in Seista Steel Construction (P.) Ltd. [1984] 17 Taxman 122
(Bom.) when it is held that in the absence of supply of reasons recorded for issue
of reopening notice the assessment order would be without jurisdiction and needs
to be quashed. The above view as taken by the Tribunal has also been taken by
this Court in CIT v. Videsh Sanchar Nigam Ltd. [2012] 21 Taxman 53 (Bombay) viz.
non-supply of reasons recorded to issue a reopening notice would make the order
of Assessment passed thereon bad as being without jurisdiction. (ITA No. 494 of
2014, dt. 19.09.2016)(AY. 1993-94)
CIT v. IDBI Ltd. (Bom.)(HC); www.itatonline.org
1789 S. 147 : Reassessment – Reassessment proceedings taken over from Income-tax Officer
by Deputy Commissioner vested with pecuniary jurisdiction was held to be proper –
Furnishing copy of reasons recorded and order of Commissioner granting permission
along with notice to assessee is not mandatory – Copy of reasons and order of sanction
was furnished to assessee – No prejudice to assessee – Reassessment proceedings was
held to be valid. [S. 2(7A), 124 148, 151]
As provided under section 124(3) no person is entitled to call in question the
jurisdiction of an Assessing Officer after the expiry of the time allowed by the notice
issued under section 148. Held, the basic territorial and pecuniary jurisdiction to
assess income up to ` 10 lakhs to entertain the case of the petitioner vested with the
Income-tax Officer as an Assessing Officer and he had dealt with the assessment of
the period 2011-12 onwards. As soon as he noted from the return filed for the year
2010-11 that the income was more than ` one crore and the assessment was made
by the Joint Commissioner, he transferred the file to the Deputy Commissioner. There
was no illegality or irregularity on the part of the Income-tax Officer in issuing notice
under section 148 as well as order dated September 16, 2015 passed by the Deputy
Commissioner. Since the Joint Commissioner had dealt with the case of the assessee for
the assessment year 2010-11 pursuant to the transfer order passed by the Commissioner,
operative for the period February 9, 2012 to March 31, 2013, the assessee was not
entitled to contend that only an officer not below the rank of Joint Commissioner
582
S. 147 Reassessment
could make reassessment. The Deputy Commissioner dealing with the case was duly
competent and possessed the pecuniary and territorial jurisdiction to deal with the case
of the assessee for reassessment. The notice issued by the Department was not illegal,
bad in law or without jurisdiction. There was no infirmity in the order passed by the
Deputy Commissioner. No objection as to the jurisdiction was raised by the assessee
within the period of thirty days of issuance of notice under section 148. In response
to the notice dated March 25, 2015, the assessee did not raise any objection as to the
jurisdiction of the Income-tax Officer to issue such notice. He had raised the objection
as to reopening of assessment and issuance of notice under section 148 by the Income-
tax Officer for the first time by representation dated September 7, 2015. No person is
entitled to call in question the jurisdiction of an Assessing Officer after the expiry of
the time allowed by the notice issued under section 148.
On the request of the assessee the Income-tax Officer had provided the assessee a copy
of the reasons recorded and of the order passed under section 151 of the Act. No case
of prejudice to the assessee had been made out. (AY. 2010-11)
Suresh v. Addl. CIT (2016) 385 ITR 1 / 139 DTR 213 / 288 CTR 203 (Bom.)(HC)
Editorial : The Supreme Court has dismissed special leave petition filed by the assessee
against this judgment: Suresh v. Addl. CIT (2016) 383 ITR 18 (St.)
S. 147 : Reassessment – Change of opinion – No reference to new material other than 1790
that examined in original assessment proceedings – Issuance of notice on change of
opinion – Notice to be quashed. [S. 28(va), 148]
Allowing the petition the Court held that the Assessing Officer did not refer to any
material, other than what was examined in the initial round of assessment proceedings,
for forming his belief that the assessee’s income had escaped assessment. The Assessing
Officer’s belief was based solely on the basis of material already examined by him
during the first round of assessment proceedings. A perusal of the reasons recorded
by the Assessing Officer also indicated that he had initiated the proceedings for
reassessment pursuant to a letter sent by the Commissioner (Appeals) who had opined
that the revised agreement was void and the consideration of ` 38 per share should be
attributed to the non-compete clauses. This was a matter of opinion regarding agreement
and the revised agreement, which were duly considered by the Assessing Officer at the
time of initial assessment. In the case of another promoter shareholder of PLL, who
was also a party to the agreement and the revised agreement, the Assessing Officer had
accepted the sale of shares of PLL at ` 190 per share and assessed the gains from sale
of shares of PLL as capital gains. Accordingly, the action of the Assessing Officer was
not consistent with what he had done in the case of the assessee. Thus, it was apparent
that the issuance of the notices was occasioned by a change of opinion, which was
impermissible under section 147 read with section 148 of the Act and therefore, the
notices were to be quashed. (AY. 2007-08)
Priya Desh Gupta v. DCIT (2016) 385 ITR 452 / 240 Taxman 285 / (2017) 146 DTR 149
(Delhi)(HC)
Abha Gupta v. DCIT (2016) 385 ITR 452 / 240 Taxman 285 / (2017) 146 DTR 149 (Delhi)
(HC)
583
Reassessment S. 147
1791 S. 147 : Reassessment – Assessment proceedings pending – Material indicating that
assessee had received illegal gratification – Notice for reassessment was held to be
valid. [S. 148]
Dismissing the petition the Court held that the enquiry into the matter by the Income-
tax Department was still in progress and considering the fact that the Department had
indicated that the assessee was a key person having control over the decision making
process, it was not appropriate to hold that the material produced was not sufficient or
reliable enough to proceed in the matter. The assessment process was still in progress
and therefore, the question of change of opinion or reopening of assessment already
concluded would not arise. The notice of reassessment was valid. (AY. 2009-10)
Malay Shrivastava v. DCIT (2016) 385 ITR 14 / 135 DTR 249 / 287 CTR 387 (MP)(HC)
1792 S. 147 : Reassessment – Reopening on basis of audit objection based on fact –
Reassessment was held to be valid. [S. 37(1), 148]
The Tribunal dismissed the assessee’s appeal and held that the audit party's objection
that certain expenses which pertained to earlier years had been claimed in the current
assessment year was a factual error pointed out by the audit party which was information
and not an interpretation of law by the audit party, and that the reopening on the basis
of audit information was in accordance with law. It further affirmed the order of the
Commissioner (Appeals) holding that the prior period expenses as quantified by its auditors
were disallowable under section 37(1) but that the expenses to the extent incurred during
the assessment year in question could be allowed. On appeal: Held, dismissing the appeal,
that there was no error in the findings recorded by the Tribunal on appreciation of evidence
and relevant case law on the point, warranting interference. (AY. 2008-09)
Haryana Agro Industries Corporation Ltd. v. CIT (2016) 385 ITR 488 (P&H)(HC)
1793 S. 147 : Reassessment – Failure by Assessing Officer to apply mind before issuing
notice – Reassessment was not sustainable. [S.148]
Dismissing the appeal of revenue the Court held that; the Tribunal’s order was based on
uncontroverted facts. The variance between the amounts shown in the notice as income
escaping assessment and the additions made meant that the Assessing Officer himself was
not sure that the entire amount mentioned in the investigation report was on account of
escaped income of the assessee and that the Assessing Officer did not apply his mind before
issuing notice under section 148 of the Income-tax Act, 1961. No question of law arose.
CIT v. Ashian Needles P. Ltd. (2016) 384 ITR 144 (Delhi)(HC)
1794 S. 147 : Reassessment – With in four years – Non-resident – Reassessment notice issued
during pendency of appeal based on change of opinion – Not permissible – DTAA –
India – France [S.148, Art.13]
Allowing the petition the Court held that in view of third proviso to section 147,
reassessment notice issued during pendency of appeal based on change of opinion is
held to be not permissible, when earlier assessment order was the subject matter of
appeal. Department is not entitled to supply fresh reasons or material not found in
reasons recorded for reopening. (AY. 2004-05 to 2008-09)
Alcatel–Lucent France v. ADIT (2016) 384 ITR 113 / 240 Taxman 414 / 136 DTR 209 / 287
CTR 488 (Delhi)(HC)
584
S. 147 Reassessment
S. 147 : Reassessment – Notice – No proof of failure by assessee to truly or fully 1795
disclose primary facts pertaining to transaction relating to one of properties – Reasons
recorded not disclosing reason to believe that income had escaped assessment – Notice
was set aside [S. 45, 54EC, 148]
Allowing the petitions, the Court held that there was no proof of failure by assessee
to truly or fully disclose primary facts pertaining to transaction relating to one of
properties. Reasons recorded not disclosing reason to believe that income had escaped
assessment. Notice was set aside. (AY. 2007-08)
Ranglal Bagaria (HUF) v. ACIT (2016) 384 ITR 477 / 241 Taxman 72 / (2017) 292 CTR
100 (Cal.)(HC)
Sudershan Prasad Bagaria v. ACIT (2016) 384 ITR 477 / 241 Taxman 72 / (2017) 292
CTR 100 (Cal.)(HC)
S. 147 : Reassessment – Reopening notice issued to a private trust which received 1796
contributions of ` 6.58 crore on the ground that it has not obtained a PAN or filed a
return of income is not valid. The AO cannot assume all receipts are income and issue
the reopening notice [S. 2(24)(iia), 4, 148]
Admitting the petition and granting the interim stay the Court observed that reopening
notice issued to a private trust, which received contributions of ` 6.58 crore, on the
ground that it has not obtained a PAN or filed a return of income is not valid. The AO
cannot assume all receipts are income and issue the reopening notice. (AY. 2008-09)
General Electoral Trust v. ITO (2016) 141 DTR 294 (Bom.)(HC)
S. 147 : Reassessment – Order of reassessment cannot be passed without notice under 1797
section 143(2) – Jurisdictional error cannot be cured by section 292BB. [S. 143(2), 148,
292BB]
Dismissing the appeal of revenue the Court held that , the order of reassessment cannot
be passed without notice under section 143(2). Jurisdictional error cannot be cured by
section 292BB. (AY. 2005-06 to 2008-09)
PCIT v. Silver Line (2016) 383 ITR 455 / 283 CTR 148/ 65 taxmann.com 137 (Delhi)(HC)
S. 147 : Reassessment – Notice issued to, and reassessment order passed on, a non- 1798
existing entity is without jurisdiction. A writ petition can be entertained despite the
presence of alternate remedy. [S. 143(3), 148]
Normally we would not have entertained a petition as an alternative remedy to file
an appeal is available to the petitioners. However, prima facie, the impugned notice
has been issued in respect of a non-existing entity as M/s. Addler Security Systems
Pvt. Ltd., which stands dissolved, having been struck off the Rolls of the Registrar of
Companies much before its issue. Consequently, the assessment has been framed also
in respect of the non-existing entity. This defect in issuing a reopening notice to a
non-existing company and framing an assessment consequent thereto is a issue which
goes to the root of the jurisdiction of the Assessing Officer to assess the non-existing
company. Thus, prima facie, both the impugned notice dated 24th March, 2015 and
the Assessment Order dated 28th March, 2016, are without jurisdiction. (AY. 2008-09)
Jitendra Chandralal Navlani v. UOI (2016) 386 ITR 288 (Bom.)(HC)
585
Reassessment S. 147
1799 S. 147 : Reassessment – Residential Status – Resident or non-resident – Reassessment
notice was held to be valid. [S. 5, 6(ii), 142(1), 143(2), 148 & 282]
Question of law involved in HC was challenging the notices issued u/s. 148 and notice
not served in accordance to law and whether assessee was resident of India within the
meaning of S. 6(3)(ii) of the IT Act, 1961. On appeal in HC, by revenue, Hon’ble HC
allowed Department’s appeal and held that RG was not only doing the audit work of
the five assessee companies but determining who should be the directors of the said
companies, this coupled with the fact that the blank signed cheque books of all the five
companies together with rubber seals, the letterhead, the blank signed cheques and other
records were also found in Delhi office of RG & Co, the factual determination by the
AO that the management and control of five companies was actually wholly situated in
Delhi gets fortified, there were sufficient grounds for exercising the power u/s. 148, there
was an implied authority of RG r/w. order V r.20 CPC. The Court also held that there
were sufficient grounds for exercising the power u/s. 148, plea of the assessee that the
notices u/s. 142(1) & 143(2) were issued for the first time in 1998 and were time barred
was rejected. (AY. 1987-88 to 1989-90)
CIT v. Mansarovar Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Pasupati Nath Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Sovereign Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Swastik Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
CIT v. Trishul Commercial (P) Ltd. (2016) 134 DTR 105 / 287 CTR 28 (Delhi)(HC)
1800 S. 147 : Reassessment – Within four years – The basis of formation of belief by the
AO that income liable to tax has escaped assessment must form part of reasons
recorded by him – AO could not initiate reassessment proceedings merely on the basis
of information supplied by DGIT (Inv.) which is an external source of material not
forming part of reasons recorded – Thus basic requirement of section 147 was not
satisfied and the reassessment notices were quashed. [S. 143(1)]
For the relevant assessment years, the returns filed by the assessee were processed
under section 143(1). Subsequently, the AO issued notice under section 148 seeking to
reopen the assessment on ground that on verification of details available on record, it
was found that assessee had made bogus purchases and to that extent profit had escaped
assessment from tax. The assessee filed its objections to the reopening of assessment.
The AO passed an order rejecting the objections raised by the petitioner which showed
that the reopening was based on material received from the DGIT (Inv.), Mumbai,
pursuant to inquiries made by him (the DGIT). On writ filed by the petitioner against
reassessment, the HC observed that the material on the basis of which the AO sought
to assume jurisdiction under section 147 of the Act, was the information received from
an external source viz., from the DGIT and not the material on record as reflected in the
reasons recorded. Since the belief of the AO was not based upon the material on record,
but on some other material from an external source which did not find reference in the
reasons recorded by him, it was held that the basic requirement of section 147 was not
satisfied. Hence, the HC quashed and set aside the impugned notices under section 148
of the Act. (AY. 2009-10 to 2011-12)
Varshaben Sanatbhai Patel v. ITO (2016) 282 CTR 75 (Guj.)(HC)
586
S. 147 Reassessment
S. 147 : Reassessment – Tangible material to form belief that income chargeable to tax 1801
has escaped assessment – absence of reason – Issuance of notice u/s. 148 is without
authority of law [S. 148]
The assessee, a SSI unit, filed a return of income claiming deduction u/s. 80IB(10) for
the relevant assessment year. The said claim of assessee was allowed in the original
assessment proceedings. Subsequently, the AO reopened assessment u/s. 147 on the
basis that, on perusal of the Balance Sheet of the assessee, the assessee did not fulfil
conditions of being an SSI unit. Accordingly, the deduction u/s. 80IB(10) which was
allowed to assessee in the original assessment came to be withdrawn.
On appeal to the CIT(A), the CIT(A) partly allowed the appeal of the assessee. On
further appeal, the Tribunal held that reopening of assessment by the AO was without
authority of law.
On appeal before the HC, HC relying on decision of Gujarat Power Corporation Ltd. v.
ACIT (2013) 350 ITR 266 (Guj) held that as long as there was some tangible material
on basis of which AO would form a belief that income chargeable to tax has escaped
assessment, it could be permissible to reopen assessment u/s. 147 and such tangible
material need not be alien to the record. However, in the present case, AO proceeded
on erroneous assumption that assessee did not meet the requirement of being an SSI
unit where the record pointed out to be contrary and accordingly the order of Tribunal
was upheld quashing the initiation of reassessment proceedings. (AY. 2004-05 & 2005-06)
CIT v. Lincoln Pharmaceuticals Ltd. (2016) 129 DTR 355 / 282 CTR 588 (Guj.)(HC)
S. 147 : Reassessment – Search – Incriminating documents found against assessee in 1802
search at its own premises could be utilized for the purpose of reassessment. [S. 132,
148, 153C, 153A]
Search and seizure was conducted u/s. 132 at assessee’s factory premises. On the same
day, search was also conducted at the business and residential premises of ‘P’ group.
Proceedings u/s. 153A were initiated against assessee on the basis of search but was
subsequently dropped by AO as the name of the entity mentioned in the search warrant
u/s. 132 of the Act was incorrect. While conducting search at ‘P’ group, incriminating
documents were found against the assessee and accordingly notice u/s. 153C r.w.s. 153A
was issued to assessee but such proceeding was also subsequently dropped.
Based on the incriminating documents seized at assessee’s factory premises, AO had
reasons to believe that some income escaped assessment and thus initiated proceeding
u/s. 147 of the Act. On appeal before CIT(A), the reassessment order was set aside by
the CIT(A) on the ground that re-assessment proceedings were not valid. On Revenue’s
appeal, Tribunal allowed the appeal in part and restored back the matter to CIT(A)
to decide the matter on merits. HC relying on the principle laid down in the case of
Dr. Sarad B. Sahai & another v. CIT (235 CTR 596) (Allahabad HC), held that even if
search is declared illegal, the material found at the time of search can be utilized for
the purpose of assessment. HC further observed that the proceeding u/s. 153C and u/s.
147 were on totally different set of reasons and documents. The materials gathered from
premises of ‘P’ group against assessee was never used to initiate proceedings u/s. 147
against the assessee. The proceeding u/s. 147 was initiated only on the basis of materials
587
Reassessment S. 147
which were found at the assessee’s premises. No question of law arises and assessee’s
appeals dismissed. (AY. 2003-04 to AY 2006-07)
Shivam Gramodyog Sanstan v. CIT (2016) 282 CTR 96 / 129 DTR 18 (All.)(HC)
1803 S. 147 : Reassessment – Assessing Officer must pass speaking orders for separate
assessment years while disposing off the objections filed for separate assessment years.
[S. 148]
Assessing Officer reopened the assessment from AY. 2007-08 to 2010-11. Assessee filed
objections against the notice issued u/s. 148 for each year separately. The AO passed a
Non-speaking composite order disposing off the objections for all the assessment years.
On Writ Petition, the High Court held that the AO must pass a speaking order and Non-
composite order disposing off the objections of the assessee. Hence, the Composite order
passed was set aside. (AY. 2007-08 to 2010-11)
JVS Export v. Dy. CIT (2016) 130 DTR 411 (Mad.)(HC)
1804 S. 147 : Reassessment – Reassessment cannot be initiated merely because the assessee
suffered loss on shares of the company which was floated by one of the directors of
the assessee company. [S. 148]
Assessee filed return of income declaring income of ` 6,23,880. In the return of income
it had claimed loss of ` 1,28,80,000 on closing stock of shares namely, PP Ltd. whose
cost was more than the market price. The assessment u/s. 143(3) was completed without
any dispute on the point of valuation. Later on, during the assessment of A.Y. 1997-98,
the AO found out that the director of the assessee had floated PP Ltd. and company
does not carry on any business. Therefore, the transaction carried out by assessee were
collusive in nature. Accordingly, the AO issued notice u/s. 148 for assessing the loss
claimed on closing stock. The order of reassessment was quashed by CIT(A) which was
affirmed by the Tribunal. On appeal, the High Court held that the reason to believe
was not based on tangible material or information. In fact, it was purely on the basis of
surmises that the assessment was reopened. Further, the existence of common director
of the companies could not give the AO “reason to believe” to reopen the assessment.
Also, the loss claimed by the assessee on closing stock is based on the accounting
policy which assessee has been consistently following and has been accepted by the
department in the past. Therefore, the reassessment is invalid in law. (AY. 1995-96)
CIT v. Vishishth Chay Vyapar Ltd. (2016) 384 ITR 505 / 130 DTR 87 (Delhi)(HC)
1805 S. 147 : Reassessment – Assessment cannot be reopened, if all the facts and material
seized during the search was explained and accepted by the AO during the original
assessment proceeding.
A search u/s. 132(1) was conducted in the business premises of the assessee. During the
assessment proceedings, assessee was asked to explain the material that was seized during
the search. Based on the explanation furnished by the assessee, assessment was finalized
by the AO for AY. 1991-92. For AY. 1992-93, assessment made was challenged by the
assessee before CIT(A). While passing the order, the CIT(A) also issued directions to AO
to verify the material seized during the search again and compute the income for A.Y.
1991-92. The AO issued notice u/s. 148 based on the direction of CIT(A) and completed
588
S. 147 Reassessment
the assessment. The order of the AO was upheld by CIT(A). The Tribunal, quashed the
reassessment and reversed the order of CIT(A). On appeal, High Court held that during the
original assessment proceeding, assessee had explained the entire material seized during
the search. Therefore, there was no failure on the part of the assessee to make full and
true disclosure hence reassessment is bad in law. (AY. 1991-92)
CIT v. Hemkunt Timbers Ltd. (2016) 380 ITR 658 / 130 DTR 101 / 283 CTR 1 (All.)(HC)
S. 147 : Reassessment – Cash credits – Assessing Officer cannot reopen the assessment 1806
on the basis of information that huge cash deposits were made in the bank account
of the assessee without examining whether such deposits were reflected in the return
of income. [S. 68, 143(1)]
The assessee filed return of income declaring income of ` 36,02,307. The return was
processed under section 143(1). Subsequently, the AO reopened the assessment based
on the information received from Enforcement Directorate (ED) that there have been
cash deposits of ` 3,23,00,550 and in the investigation carried out by ED, assessee failed
to explain such deposits to them. The assessee explained that it acts as an agent of an
airline and cash deposits were from the sale of tickets which were duly disclosed in the
books of accounts. The AO rejected the explanation and assessed the cash deposits as
undisclosed income. The CIT(A) confirmed the order of the AO however, the Tribunal
reversed the order of CIT(A) and quashed the reassessment for want of Jurisdiction.
On appeal to the High Court, it was held that AO failed to examine whether mere
information received from ED provided him the vital link to form the ‘reason to believe’.
Further, mere information that huge cash deposits were made in the bank accounts
could not give the AO prima facie belief that income has escaped assessment. The AO
is required to form prima facie opinion based on tangible material which provides the
nexus or the link having reason to believe that income has escaped assessment. The AO
was also required to examine whether the cash deposits were disclosed in the return of
income to form an opinion that income has escaped assessment. (AY. 2002-03)
CIT v. Indo Arab Air Services (2015) 64 taxmann.com 257 / (2016) 130 DTR 78 / 283
CTR 92 (Delhi)(HC)
S. 147 : Reassessment – Report of DVO – Could not be made sole basis to reopen 1807
assessment without verification of facts to support conclusion of DVO [S. 69, 80IB(10),
148]
During the assessment proceedings for subsequent year (i.e. AY 2011-12), the AO noticed
that the cost of construction claimed by the assessee for the project appeared to be less
in comparison to similar projects run by other assessees. He, therefore, made a reference
to the DVO for determining the cost of construction of the project of the Assessee.
The DVO determined the cost of construction of the entire project of the Assessee at
higher figure (report was for the period AY 2007-08 to AY 2012-13). On the basis of
the aforesaid report of the DVO, the AO formed the belief that the assessee had under-
reported the cost of investment made by it in the ongoing project and artificially inflated
the profit from the project as it was getting benefit of deduction under section 80-IB(10).
He, therefore, reopened the assessment for the year under consideration.
The High Court held that except for the report of the DVO, there was no tangible
material for the Assessing Officer to form the belief that income chargeable to tax has
589
Reassessment S. 147
escaped assessment. Following the ruling of ACIT v. Dhariya Construction Co. (2010) 328
ITR 515 (SC) wherein it was held that the opinion of DVO per se is not an information
for the purpose of reopening assessment under section 147 of the Act, the High Court
held, very assumption of jurisdiction under section 147 of the Act on the part of the
Assessing Officer by issuing the impugned notice under section 148 of the Act is
without authority of law, and hence, the impugned notice cannot be sustained. Further it
was held that there was no profit during the year and deduction under section 80IB(10)
has not been claimed by Assessee and hence objection of department on this ground in
incorrect. Thus writ petition filed by the Assessee is allowed. (AY. 2007-08)
Aavkar Infrastructure Company v. Dy. CIT (2016) 238 Taxman 644 / 136 DTR 405 / 290
CTR 413 (Guj.)(HC)
1808 S. 147 : Reassessment – Gift of shares to sister company – Reasons for reopening
only contained the transaction and nothing more – Held, no live nexus between the
transaction and the fact that income has escaped assessment – Reassessment quashed.
[S. 47, 148]
Assessee had transferred shares, having huge market value, without consideration to its
sister concern. Intimation u/s. 143(1) was issued accepting the transaction and there was
no assessment u/s. 143(3). AO issued notice u/s. 148. Reasons supplied by the AO for
reopening of assessment merely mentioned the transaction and his opinion that he has
reason to believe that income has escaped assessment. High Court held that formation
of belief by the AO must be prima facie and at the stage when the Court was testing
validity of such a notice; it would not be necessary for the AO to conclusively establish
that the income chargeable to tax had escaped assessment. High Court also held that
there was no live nexus between the transaction and the fact that income has escaped
assessment, since gift of shares to sister concern did not attract capital gain by virtue of
section 47(iii). Accordingly, it was held that, reasons recorded by the AO to form belief
that the income chargeable to tax had escaped assessment lacked validity. (AY. 2010-11)
Prakriya Pharmacem v. ITO (2016) 238 Taxman 185 (Guj.)(HC)
1809 S. 147 : Reassessment – Amalgamation of companies – Notice of reassessment
served on amalgamated company – Not proper service on amalgamating company –
Consequent assessment order passed without jurisdiction and liable to be set aside.
[S. 144, 148]
Order treating amalgamated company as agent of amalgamating company struck
down and order of court attaining finality. The Assessing Officer issued the notice of
reassessment on amalgamated company and passed order u/s. 144. On writ, allowing the
petition the Court held that, notice of reassessment served on amalgamated company
is not proper service on amalgamating company, consequent assessment order passed
without jurisdiction and liable to be set aside. (AY. 2005-06)
Techpac Holdings Ltd. v. Dy. CIT (2016) 382 ITR 474 / 238 Taxman 542 / 286 CTR 412 /
135 DTR 322 (Bom.)(HC)
590
S. 147 Reassessment
S. 147 : Reassessment – Petition filed after almost a year of issuance of the show-cause 1810
notice when reopening proceedings were at final stage, held Writ is not maintainable.
[S.148, Constitution of India, Art.226]
Assessee filed a special appeal against the order disposing the writ petition by the High
Court vide order dated 9th February, 2015. The assessee had filed a Writ Petition on
4th March, 2014 after almost a year from the show cause notice which was served
on 14th March, 2013. Assessee delayed the reassessment proceedings and filed the its
objections on 12th February, 2014 after which assessment order was passed by the AO
on 13th March, 2014. High Court Single Judge dismissed the writ petition filed after
almost a year, as Assessee wanted just to defer the proceedings and alternate statutory
remedy of appeal was available to Assessee.
Shiv Mahima Township (P.) Ltd. v. ITO (2016) 385 ITR 609 / 133 DTR 87 / 286 DTR 222
(Raj.)(HC)
S. 147 : Reassessment – Notice issued after death of assessee returned unserved notice 1811
sent to legal heir after limitation period was held to be not valid. [S.148, 149,159]
Held the limitation for issuance of the notice under section 147 read with section 148
of the Act was March 31, 2015. On March 27, 2015, when the notice was issued, the
assessee was already dead. If the Department intended to proceed under section 147
of the Act, it could have done so, prior to March 31, 2015 by issuing a notice to the
legal heirs of the deceased. Beyond that date, it could not proceed in the matter even
by issuing notice to the legal heirs of the assessee. Thus the proceedings under section
147 read with 148 of the Act against the petitioner were wholly misconceived and were
to be quashed. (AY. 2008-09)
Vipin Walia v. ITO (2016) 382 ITR 19 / 238 Taxman 1 / 141 DTR 36 (Delhi)(HC)
S. 147 : Reassessment – Notice issued after it had amalgamated with petitioner 1812
company and was no longer in existence was held to be invalid. [S. 148, Companies
Act, 1956, S. 394]
Merger of assessee with petitioner-company under sanctioned scheme of amalgamation.
Assessee ceasing to exist on amalgamation. Notice for reassessment issued to assessee
was held to be invalid. (AY. 1989-90 to 1993-94).
Rustagi Engineering Udyog P. Ltd. v. DCIT (2016) 382 ITR 443 (Delhi)(HC)
S. 147 : Reassessment – Processing the assessment under section 143(1)(a) does not 1813
result in to an assessment and thus provision of section 151(1) are not attracted –
Reassessment was held to be valid [S. 143(1)(a), 148, 151(1)]
Intimation issued pursuant to earlier notice for reassessment is not an assessment thus
no proceedings was pending, thus fresh notice issued pursuant to information is valid.
No sanction required for issue of notice hence reassessment was held to be valid. (AY.
1991-92)
Ranjeet Singh v. CIT (2016) 382 ITR 409 / 238 Taxman 552 (P&H)(HC)
591
Reassessment S. 147
1814 S. 147 : Reassessment – Writ petition against notice of reassessment – Maintainable
[S. 148 Constitution of India, Art. 226]
Exercise of extraordinary jurisdiction of the High Court under article 226 of the
Constitution is available where the petitioner assails action of the authorities on
the following grounds: (i) as being without jurisdiction, (ii) as being in violation of
principles of natural justice, (iii) as being without authority of law, and (iv) where the
validity or vires of the statutory provision is under challenge. Held, that the writ petition
against the notice of reassessment was maintainable. Decision of the single judge of the
Karnataka High Court in Dell India P. Ltd. v. Joint CIT (LTU) [2015] 5 ITR-OL-171 (Karn.)
affirmed. (AY. 2009-10)
JCIT v. Dell India P. Ltd. (2016) 382 ITR 310 / 287 CTR 695 (Karn.)(HC)
1815 S. 147 : Reassessment – Assessing Officer raising query in original assessment and
assessee clarifying it in writing – Reopening of assessment based on change of opinion,
held to be not permissible. [S.143(3), 148]
Held, dismissing the appeal, that the original assessment was framed under section
143(3) of the Act and while framing original assessment, a specific query was raised
by the Assessing Officer and was clarified by the assessee in writing. It was not a
case where relevant material was not disclosed by the assessee in the first round of
assessment. Thus the reopening of the assessment by the Assessing Officer for the AY
2005-06 was based on a change of opinion, which was impermissible in law.(AY. 2004-
05, 2005-06)
CIT v. Central Warehousing Corporation Ltd. (2016) 382 ITR 172 (Delhi.)(HC)
1816 S. 147 : Reassessment – Issue on which reasons based considered in original
assessment – Satisfaction cannot be outsourced or arrived at on the basis of directions
of his superiors – Obligation of assessee only to disclose primary facts necessary for
assessment – Assessee disclosing truly and fully all material facts – Reopening of
assessment was held to be not warranted. [S.80IA, 143(3), 148]
Held, the necessary enquiry was made into the profits claimed by the eligible unit for
the purpose of the benefit under section 80-IA of the Act during the regular assessment
proceedings. It was noticed from those records that the assessee had claimed excess
profits in respect of its power generating units. The obligation of the assessee under the
Act was only to disclose the primary facts necessary for assessment. The Commissioner
(Appeals) and the Tribunal came to the conclusion that in view of the fact that the
Assessing Officer himself had not accepted the audit objection, there could be no
reason for him to believe that income chargeable to tax had escaped assessment. The
condition precedent for reason to believe that income chargeable to tax had escaped
assessment was not satisfied. The notice for reopening was without jurisdiction. The
application of law and the determination of the market value of the electricity sold by
the eligible units under section 80-IA to the other units of the assessee was a subject
matter of enquiry by the Assessing Officer while passing an order under section 143(3)
of the Act in regular assessment proceedings. Thus, there was no failure on part of the
assessee to disclose truly and fully all material facts which would warrant reopening of
the assessment. (AY. 2004-05)
CIT v. Reliance Industries Ltd. (2016) 382 ITR 574 (Bom.)(HC)
592
S. 147 Reassessment
S. 147 : Reassessment – Notice based on review of assessment order by Commissioner 1817
was held to be not valid – Notice cannot be improved by affidavits and other reasons.
[S. 14A, 143(3), 148]
In the original assessment proceedings there was complete disclosure made by the
assessee of the relevant particulars. The Revenue had been unable to counter the
assertion made by the assessee that the investment was in mutual funds and made
under the growth plan scheme that did not yield any exempt income. The assessee
made disclosure in schedule 15 to the profit and loss account, under the head “Other
income” of the dividend earned during the relevant previous year. The financial
expenses incurred by the assessee were reported in schedule 20 to the profit and loss
account. Even as regards the loss on account of foreign exchange fluctuation, there
was complete disclosure of all the relevant facts by the assessee during the original
assessment proceedings. The return was picked up for scrutiny under section 143(3) and
in the balance-sheet accounts (together with notes) rendered by the assessee, there was
sufficient disclosure on this aspect. Schedule 22 to the notes of accounts had a separate
disclosure under the heading. The notice under section 148 was not valid. (AY. 2008-09)
Munjal Showa Ltd. v. Dy. CIT (2016) 382 ITR 555 / 239 Taxman 239 / 137 DTR 231
(Delhi)(HC)
S. 147 : Reassessment – No contention that Assessing Officer had no reason to believe 1818
income had escaped assessment – Challenge after order of reassessment was passed
that sanction for notice had been accorded mechanically – Mere fact that reasons
had not been mentioned in order of sanction would not render notice invalid –
Reassessment was held to be valid. [S. 148, 151(2)]
Dismissing the appeal of the assessee the Court held that no prior assessment had
been done for three assessment years under consideration. Hence the Assessing Officer
before issuing notice under section 148 of the Income-tax Act, 1961, had to obtain
sanction under section 151(2) of the Act from the competent authority. The only
contention raised by the assessee in the appeal was that the Additional Commissioner
while according his approval under section 151(2) of the Act did not apply his mind
and mechanically granted sanction. The assessee had not contended that the reasons
cited by the Assessing Officer for initiating reassessment proceedings under section
147 were irrelevant or that the Assessing Officer had no reason to believe that income
chargeable to tax had escaped assessment. The Tribunal moreover had found that the
assessee without objecting to the validity of the notice filed his return in compliance
therewith and participated in the reassessment proceedings. It was only after receiving
the assessment order that the assessee objected to the validity of the notice first before
the Commissioner (Appeals) and then before the Tribunal. The mere fact that the
Additional Commissioner did not record his satisfaction in so many words should not
render invalid the sanction granted under section 151(2) when the reasons on the basis
of which sanction was sought for could not be assailed. Even an appellate authority is
not required to give reasons when it agrees with the finding unless statute or rules so
require. The notice and consequent reassessment were valid. (AY. 1990-91, 1991-92,
1992-93)
Prem Chand Shaw (Jaisal) v. ACIT (2016) 383 ITR 597 / 238 Taxman 423 / 286 CTR 252/
135 DTR 172 (Cal.)(HC)
593
Reassessment S. 147
1819 S. 147 : Reassessment – Though assessee claims that she is a non-resident & that onus
is on the revenue to show that the money in the HSBC Geneva account is taxable
in India, the non-cooperation with the revenue by signing the consent waiver form
shows that she has something to hide and makes it an unfit case for exercise of writ
jurisdiction.[S. 148, 149(1)(c)]
Dismissing the petition the Court held that (i) During the course of the hearing of the
Reply of the Revenue it was pointed out to us that despite the revenue’s request, the
Petitioner had failed to sign a Consent Waiver Form (“the Waiver”) which would have
enabled HSBC to provide information about the Account. According to the petitioner
the Waiver was sought only on 30th October, 2015 i.e., much after the issue of the
impugned notice on 31st March, 2015 and also after filing of this Petition in Court
on 30th October, 2015. In any case, we asked the Petitioner whether she is now ready
to sign the Waiver. At the time of the rejoinder we were informed that the Petitioner
is willing to sign the Consent Waiver Form with a modification-namely as alleged
beneficiary rather than holder or beneficiary of the account in HSBC, Geneva.
(ii) However, on enquiry by the Revenue from HSBC, Geneva, it was learnt that a
modified Consent Waiver Form would not enable the bank to give copies of the bank
statement of A/c. No. 5091404580 since the Waiver would have to be provided without
modifications.
(iii) We notice that the principal contention of the Petitioner before us has been that
she is non-resident and it is only her income which is received or accrued or arising
in India which can be brought to tax under the Act. Thus, it is submitted that it is
for the revenue to establish that the income had accrued or arisen in India which was
lying on 26th March, 2006 in A/c. No. 5091404580 in HSBC, Geneva. We find that the
Petitioner and/or her uncle – Dilip Mehta i.e. Executor of the Estate of late Ramniklal
N. Mehta who could probably amongst others be able to produce copies of the bank
statement either by giving a Consent Waiver Form to the Income Tax Department or
in the alternative Mr. Dilip Mehta could instruct the Director of M/s. White Cedar to
apply for and furnish to him copies of the bank statement in A/c. No. 5091404580
of HSBC,Geneva. The fact that it is within the authority/power of Mr. Dilip Mehta to
instruct M/s. White Cedar is evident from the letter dated 14th. August 2014 addressed
by HSBC Bank, Geneva to M/s. Red Oak Operation Ltd. which has been taken on record
and marked X for identification. This bank statement if obtained from HSBC, Geneva,
would reveal and/or possibly give clues as to the source of amounts deposited in the
Account No. 5091404580 of HSBC. Neither the petitioner nor her uncle i.e. Executor
of the Estate of late Ramniklal N. Mehta is ready to obtain the necessary statement
either directly or through M/s. White Cedar from HSBC, Geneva in respect of A/c. No.
5091404580 by exercising or causing to be exercised the limited authority to instruct
White Cedar to apply for and obtain the requisite information.
(iv) In the normal course of human conduct if a person has nothing to hide and serious
allegations /questions are being raised about the funds a person would make available
the documents which would put to rest all questions which seem to arise in the mind
of the Authorities. The conduct on the part of the petitioner and her uncle, in not being
forthcoming, to our mind leads us to the conclusion that this is not a fit case where
we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders
594
S. 147 Reassessment
passed by the authorities under the Act. If a person has nothing to hide, we believe the
person would have cooperated in obtaining the Bank Statements. (AY. 2006-07)
Soignee R. Kothari v. DCIT (2016) 386 ITR 466 / 285 CTR 230 / 134 DTR 193 (Bom.)(HC)
S. 147 : Reassessment – Non-residents – In the absence of taxable income, notice for 1820
reassessment was held to be not valid. [S. 44BBA, 148]
High Court held that where there is no income, section 44BBA cannot be applied to
bring to tax the presumptive income constituting 5% of the gross receipts in terms of
section 44BBA(2) and as the assessee is not having the taxable income reassessment was
held to be not valid.(AY. 1989-90 to 1993-94)
DIT v. Royal Jordanian Airlines (2016) 383 ITR 465 / 236 Taxman 10 / 129 DTR 364 /
287 CTR 407 (Delhi)(HC)
S. 147 : Reassessment – Permanent Establishment (PE) – If the alleged PE has been 1821
assessed on ALP basis in terms of Article 7, no income has escaped escapement so
as to justify issue of reassessment notice – DTAA – India – USA [S. 148, Art. 5, 7, 11]
Allowing the petition the Court held that even if the subsidiary of a foreign company is
considered as its PE, only such income as is attributable in terms of paragraphs 1 and
2 of Article 7 can be brought to tax. In the present case, there is no dispute that Adobe
India – which according to the AO is the assessee’s PE – has been independently taxed
on income from R&D services and such tax has been computed on the basis that its
dealings with the assessee are at arm’s length (that is, at ALP). Therefore, even if Adobe
India is considered to be the assessee’s PE, the entire income which could be brought
in the net of tax in the hands of the assessee has already been so taxed in the hands of
Adobe India. There is no material that would even remotely suggest that the Assessee
has undertaken any activity in India other than services which have already been
subjected to ALP scrutiny/adjustment in the hands of Adobe India. Thus, in our view,
even if the AO is correct in its assumption that Adobe India constituted the Assessee’s
PE in terms of Article 5(1), 5(2)(l) or 5(5) of the Indo-US DTAA, the facts in this case
do not provide the AO any reason to believe that any part of the Assessee’s income had
escaped assessment under the Act. (AY. 2004-05, 2005-06, 2006-07)
Adobe Systems Incorporated v. ADIT (2016) 137 DTR 255 / 240 Taxman 353 / 292 CTR
407 (HC)(Delhi)
S. 147 : Reassessment – AO can form reasons to believe that income has escaped 1822
assessment by examining the very return and/or the documents accompanying the
return. It is not necessary in such a case for the AO to come across some fresh
tangible material to form ‘reasons to believe’ that income has escaped assessment.[S.
143(1), 148]
Dismissing the petition the Court held that where reopening is sought of an assessment
in a situation where the initial return is processed under Section 143 (1) of the Act, the
AO can form reasons to believe that income has escaped assessment by examining the
very return and/or the documents accompanying the return. It is not necessary in such a
case for the AO to come across some fresh tangible material to form ‘reasons to believe’
that income has escaped assessment. In the assessment proceedings pursuant to such
595
Reassessment S. 147
reopening, it will be open to the Assessee to contest the reopening on the ground that
there was either no reason to believe or that the alleged reason to believe is not relevant
for the formation of the belief that income chargeable to tax has escaped assessment.
(AY. 1999-2000)
Indu Lalta Rangwala v. DCIT (2016) 384 ITR 337 / 136 DTR 289 / 286 CTR 474 (Delhi)
(HC)
1823 S. 147 : Reassessment – Limitation – ITO who is not the Assessing Officer of the
assessee, not empowered to reopen the assessment. [S. 148, 149(1)]
The time limit for reopening of the assessment under section 147 of the Act in the
assessee’s case was 31st March 2012. The extended period of limitation in terms
of section 149(1)(b) of the Act was 31st March 2014 (i.e. 6 years from end of the
assessment year). The DCIT – Circle 39(1) was the Assessing Officer of the assessee and
had the jurisdiction over this case. However on 14th March 2014 the ITO Ward 39(2)
issued a notice to the assessee under section 148 of the Act. The notice of reopening
was issued by ITO Ward 39(2) who was not the Assessing Officer of the assessee and
this single fact in itself vitiates the reopening of the assessment. Realising the mistake
the Assessing Officer (who had the jurisdiction over the Assessee) issued a notice dated
23rd June 2014 under section 148 of the Act but it was beyond the deadline of 31st
March 2014 under section 149(1)(b) of the Act.
One of the main points urged in the present petition is that the reopening of the
assessment sought to be made under Section 148 of the Act is bad in law since the
notice had been issued and the reasons for reopening had been recorded by the ITO
Ward 39(2), who was not the Assessing Officer as far as petitioner is concerned.
The High Court held that it was only the Assessing Officer who has issued the original
assessment order dated 13th April 2009 for AY 2007-08 under Section 143(3) of the
was empowered to exercise powers under Section 147/148 to re-open the assessment.
This was because he alone would be in a position to form reasons to believe that some
income of that particular AY had escaped assessment. Further provisions of section
151 of the Act required prior approval of CIT if he feels that the assessment order is
prejudicial to the interest of Revenue. However in any event ITO who has not passed
the original order cannot reopen the assessment.
Thus the writ petition filed by the Assessee is allowed. (AY. 2007-08)
Dushyant Kumar Jain v. CIT (2016) 381 ITR 428 / 237 Taxman 646 / 139 DTR 209 / 288
CTR 124 (Delhi)(HC)
1824 S. 147 : Reassessment – Within four years – Issue of share capital at huge premium
– Reopened on the ground that excess premium was cash credit and had escaped
assessment – Held, not necessary to have some material outside or extraneous to the
original records – Held, reasons not perverse to terminate the assessment proceedings
at this stage. [S. 68, 143(1)]
The assessee company had filed nil return which was accepted u/s. 143(1). Subsequently,
the AO reopened the assessment on the ground that the assessee had issued shares at
huge premium and therefore, he had reason to believe that said excess premium was
unexplained cash credit which had escaped assessment. Held, where the return has been
596
S. 147 Reassessment
accepted u/s. 143(1), then the contention that it was necessary to have some material
outside or extraneous to the original records cannot be accepted. Further, it was held that
prima facie the facts appeared to be glaring and it would not be proper to terminate the
assessment proceedings at this stage. Whether the assessee would be able to discharge
the minimal burden of establishing identity, source and creditworthiness or whether
the assessee company had started its operations cannot be gone into at this stage. The
assessee can present its case before the AO during the assessment proceedings. (AY.
2011-12)
Olwin Tiles (India) (P.) Ltd. v. Dy. CIT (2016) 382 ITR 291 / 237 Taxman 342 / 283 CTR
200 / 13O DTR 209 (Guj.)(HC)
S. 147 : Reassessment – No addition on the issues mentioned in “reason to believe” 1825
– AO is not permitted to bring to tax other issues which did not form part of
reasons recorded, but came to his notice subsequently in the course of reassessment
proceedings. [S. 11,148]
In the reassessment order, the AO brought to tax escaped income relating to the cost
of construction on the basis of report of the DVO; but there is no adverse finding on
undisclosed investment of the funds or payment made to various parties or denial of
benefit u/s. 11 of the Act which he had considered to have escaped assessment in the
reasons recorded while initiating proceedings u/s. 147 of the Act.
The CIT(A) confirmed the action of the AO, however, the Tribunal reversed the findings
of the AO.
On further appeal, the HC held that the assumption of jurisdiction u/s. 147 of the Act,
is the reason to believe that certain income of the assessee has escaped assessment or
reassessment. However, if in the course of proceedings u/s. 147 of the Act, the AO came
to the conclusion that the income which formed his “reason to believe”, did not escape
assessment, then, the AO would not have any jurisdiction, to tax any other income
as having escaped assessment and which may come to his notice subsequently in the
course of proceedings u/s. 147.
Dy. CIT v. Takshila Educational Society (2016) 131 DTR 332 / 284 CTR 306 (Pat.)(HC)
S. 147 : Reassessment – Jurisdiction – Participated in the proceedings – Writ is not 1826
maintainable. [S.148, Constitution of India, Art. 226]
If the assessee responds to the S. 142(1)/ 143(2) notices, it means that he has submitted
to the AO’s jurisdiction and is estopped for filing a writ Petition to challenge the same.
The fact that the jurisdiction is challenged while participating in the proceedings is
irrelevant. Petition of the assessee was dismissed. (AY. 2008-09)
Amaya Infrastructure Pvt. Ltd. v. ITO(2016) 383 ITR 498 / 140 DTR 19 / 288 CTR 340
(Bom.)(HC)
S. 147 : Reassessment – Even when return of income is processed under section 143(1), 1827
reassessment can be initiated only if there is tangible material. [S. 40(a)(i), 143(1)]
The assessee filed return of income declaring loss of ` 96,19,890. The return of income
was processed under section 143(1) and refund of ` 20,16,957 was granted. The
assessing officer sought to reopen the assessment on the ground that management fees
597
Reassessment S. 147
paid to a foreign company is to be disallowed under section 40(a)(i) as reported in the
Tax Audit report annexed to the return of income. The assessee filed objection against
initiation of reassessment proceedings which were not disposed off by the Assessing
Officer and order was passed making disallowance under section 40(a)(i). The CIT(A)
upheld the initiation of reassessment proceedings but, deleted the addition made by the
Assessing Officer. On appeal, the Tribunal quashed the reassessment proceeding under
section 147 on the ground that there was no tangible material. The High Court held
that reassessment proceeding was based on the Tax Audit report which was filed with
the return of income therefore, there was no tangible material to show escapement of
income. It was also held that even in a case where return was processed under section
143(1), reassessment proceeding can be initiated only if “reason to believe” exists as
laid down by Supreme Court in CIT v. Kelvinator of India Ltd. (320 ITR 561)(SC). (AY.
2003-04)
PCIT v. Tupperware India (P.) Ltd. (2016) 236 Taxman 494 / 284 CTR 68 (Delhi)(HC)
1828 S. 147 : Reassessment – An assessment cannot be reopened for the purpose of making
a fishing and roving enquiry. [S.148]
Allowing the appeal the Court held that Sections 147/148 of the Act is not meant for
reopening an already concluded assessment by first issuing notice and then proceeding
to investigate and find out if there was any lacuna in the accounts. If such further
investigation, by reopening a concluded assessment, is permitted, it, would give rise
to fishing and rowing enquiries, because, in every case, the Assessing Officer can then
issue notice for the purpose of investigation, and thus reopen any concluded assessment.
Reassessment was quashed. (ITA No. 795/2009, dt. 24.08.2015) (AY. 2004-05)
C. M. Mahadeva v. CIT (Karn.)(HC); www.itatonline.org
1829 S. 147 : Reassessment – Change of opinion Method of accounting – Reopening on
factually erroneous premise is not permissible. [S.148]
Allowing the petition the Court held that none of the objections raised by the assessee
was adequately dealt with by the AO. Court also held that since the action of the
Revenue was based on a factually erroneous premise, the Court is of the view that the
reopening of the assessments for the said AYs is not sustainable in law. The Court is
also satisfied that the requirement of the law, as explained by the Court in Commissioner
of Income Tax. v. Kelvinator of India Limited (2010) 320 ITR 561 (SC), and reiterated in
the later decisions, has not been fulfilled in the present case. (AY. 2006-07, 2007-08,
2008-09, 2009-10)
Dr. Ajit Gupta v. ACIT (2016) 383 ITR 361 (Delhi)(HC)
1830 S. 147 : Reassessment – Change of opinion – Claim for exemption granted after
considering material – Subsequent reassessment proceedings on ground excess
exemption was granted – Reassessment was held to be not valid. [S.10A, 148]
Dismissing the appeal of revenue the Court held that it could be seen from the original
assessment records that the claim of the assessee u/s. 10A was thoroughly scrutinised,
the Assessing Officer had examined the claim of expenditure incurred in foreign
currency for providing technical services allocating the sum of ` 38,51,45,781 between
598
S. 147 Reassessment
the five software technology park units in the ratio of the export sales. In fact, the
Assessing Officer had raised certain queries during the assessment proceedings and
a detailed reply had been given by the assessee. The Tribunal was fully justified in
arriving at the conclusion that the reopening of assessment was by change of opinion.
The reassessment was not valid. (AY. 2003-04)
CIT v. Hewlett-Packard Globalsoft P. Ltd. (2015) 127 DTR 281 / (2016) 380 ITR 386 (Karn.)
(HC)
S. 147 : Reassessment – Non disposal of objections – Providing the assessee with the 1831
recorded reasons towards the end of the limitation period and passing a reassessment
order without dealing with the objections results in gross harassment to the assessee
which the Pr. CIT should note & remedy. [S. 144C, 148]
(i) This passing of the draft assessment order on 30th March, 2015 was in the face
of the decision of the Supreme Court in GKN Driveshafts (India)Ltd v. Income Tax
Officer and Others reported in 259 ITR 19 (SC), wherein it has been laid down that
whenever a reopening notice is issued under section 148 of the Act, the Assessing
Officer was to make available to the assessee, on request, a copy of the reasons
recorded while issuing the notice for reopening the Assessment. The assessee is
then entitled to file its objection to the grounds in support of the reopening notice
and the Assessing Officer is required to dispose of the assessee’s objection to the
reasons recorded by a speaking order. It is only if the Assessing Officer rejects the
objection that he can proceed with the Assessment proceedings of the reopened
Assessments.
(ii) In the present case, as the issue involves the provisions with regard to transfer
pricing cases, the period of limitation to dispose of an Assessment consequent
to reopening notice as provided in 4th proviso to sub-section(2) of section 153 of
the Act is two years from the end of the financial year in which the reopening
notice was served. In this case, the impugned reopening notice was issued on 6th
February, 2013 and the reasons in support were supplied only on 19th March,
2015. This when the Revenue was aware at all times that the period to pass an
order of reassessment on the impugned reopening notice dated 6th February 2013
would expire on 31st March, 2015. However, there is no reason forthcoming on the
part of the Revenue to satisfactorily explain the delay. The only reason made out
in the affidavit dated 3rd September, 2015 by the Assessing Officer was that the
issue was pending before the Transfer Pricing Officer (TPO) and it was only after
the TPO had passed his order on transfer pricing were the reasons for reopening
provided to the Petitioner. We are unable to understand how the TPO could at all
exercise jurisdiction and enter upon enquiry on the reopening notice before the
same is upheld by an order of the Assessing Officer passed on objections. Besides
the recording of reasons for issuing the reopening notice is to be on the basis of
the Assessing Officer’s reasons. The TPO’s reasons on merits much after the issue
of the reopening notice does not have any bearing on serving the reasons recorded
upon the party whose assessment is being sought to be reopened.
(iii) One more peculiar fact to note is that in the affidavit dated 10th July, 2015 filed
by one Prabhakar Ranjan on behalf of the Revenue it is stated that the Assessing
599
Reassessment S. 147
Officer was under a bona fide impression that the TPO would pass an order in
favour of the assessee. In fact, if that be so, we are unable to understand how
the assessing officer could have any reason to believe that income chargeable to
tax has escaped assessment. Be that as it may, this petition was adjourned from
time to time to enable the revenue to file the necessary affidavits explaining their
contention.
(v) In fact, on 23rd December 2015 the revenue again sought time. At that stage, we
indicated that in view of the gross facts of this case, the Principal Commissioner of
Income Tax would take serious note of the above and after examining the facts, if
necessary, take appropriate remedial action to ensure that an assessee is not made to
suffer for no fault on its part. This is particularly so as almost the entire period of two
years from the end of the financial year in which the notice is issued was consumed
by the Assessing Officer in failing to give reasons recorded in support of the impugned
notice. Nevertheless, the Assessing Officer proceeds to pass a draft Assessment order
without dealing with the objections filed by the petitioner. We could have on that
date or even earlier passed an order setting aside the draft assessment order dated
30th March 2015 as it was passed without disposing of the objections. Thus, clearly
without jurisdiction. However, we were of the view that although this appears to be a
gross case of harassing an assessee, the Principal Commissioner would take note and
adopt remedial action / proceedings. (AY. 2007-08)
Bayer Material Science Pvt. Ltd. v. DCIT (2016) 382 ITR 333 / 133 DTR 53 / 237 Taxman
723 (Bom.)(HC)
1832 S. 147 : Reassessment – Reason to believe – It is open to the assessee to challenge a
notice issued u/s. 148 as being without jurisdiction for absence of reason to believe
even in case where the assessment has been completed earlier by Intimation u/s.
143(1) of the Act. [S. 143(1), 148]
The assessee filed a Writ Petition to challenge a notice issued u/s. 148 in a case where
only an intimation u/s. 143(1) had been passed. The Department contented that the Writ
Petition was not maintainable in view of the judgment of the Supreme Court in Dy. CIT
v. Zuari Estate Development and Investment Co. Ltd. (2015) 373 ITR 661 where the order
of the Bombay High Court in Zuari Estate Development Co. Ltd. v. Dy. CIT (2004) 271
ITR 269 had been set aside. The Supreme Court held that where the original Return has
been accepted by Intimation under Section 143(1) of the Act, there could be no change
of opinion. Further, it was contended that the Supreme Court impliedly held that in
such cases where assessment is completed by Intimation under Section 143(1) of the
Act, there is no requirement for the Assessing Officer to have reason to believe that
income chargeable to tax has escaped assessment, so as to exercise jurisdiction under
Section 148 of the Act. HELD by the Bombay High Court:
(i) The Apex Court in ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500,
had an occasion to deal with identical facts, namely reopening Notices issued
under Section 148 of the Act where assessment is completed earlier by intimation
under Section 143(1) of the Act. In the above case, the Apex Court held that a
Notice for reopening an assessment under Section 148 of the Act could only be
justified if the Assessing Officer has reason to believe that income chargeable to
600
S. 147 Reassessment
tax has escaped assessment. This decision of the Supreme Court in Rajesh Jhaveri
Stock Brokers P. Ltd. (Supra) has not been disturbed by the Apex Court in Zuari
Estate Development and Investment Co. Ltd. (Supra). In fact, the Supreme Court
in Zuari Estate Development and Investment Co. Ltd. (Supra) makes a specific
reference to its decision in Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) to hold that
where the assessment has been completed by intimation under Section 143(1) of
the Act, there can be no question of change of opinion.
(ii) The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra)
has not dealt with the issue whether before invoking Section 148 of the Act,
the Assessing Officer must have reason to believe that income chargeable to tax
has escaped assessment, where the original assessment has been completed by
Intimation under Section 143(1) of the Act. The Revenue is trying to infer that
because the Apex Court in Zuari Estate Development and Investment Co. Ltd.
(Supra) has set aside the order of this Court and restored the issue to be decided
on merits by the Tribunal, it must be inferred that the Apex Court had come to
the conclusion that reason to believe was not necessary for issuing reassessment
Notices where the regular assessment was completed under Section 143(1) of the
Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the
Apex Court in the above case had come to the conclusion that there is reason to
believe that income had escaped assessment and consequently restored the issue
to the Tribunal to decide the reassessment proceedings on merits.
(iii) It is settled position in law that the decision of the Court has to be read in
the context of the facts involved therein and not on the basis of what logically
flows therefrom as held by the Supreme Court in Ambica Quarry Works v. State
of Gujarat, 1987(1) SCC 213. The Apex Court in Zuari Estate Development and
Investment Co. Ltd. (Supra) not having dealt with the issue of reason to believe
that income chargeable to tax has escaped assessment on the part of the Assessing
Officer in cases where regular assessment was completed by Intimation under
Section 143(1) of the Act, it would not be wise for us to infer that the Supreme
Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has held that
the condition precedent for the issue of reopening notice namely, reason to believe
that income chargeable to tax has escaped assessment, has no application where
the assessment has been completed by Intimation under Section 143(1) of the Act.
The law on this point has been expressly laid down by the Apex Court in the case
of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) and the same would continue to
apply and be binding upon us. Thus, even in cases where no assessment order
is passed and assessment is completed by Intimation under Section 143(1) of
the Act, the sine qua non to issue a reopening notice is reason to believe that
income chargeable to tax has escaped assessment. In the above view, it is open
for the petitioner to challenge a notice issued under Section 148 of the Act as
being without jurisdiction for absence of reason to believe even in case where the
Assessment has been completed earlier by Intimation under Section 143(1) of the
Act. (AY. 2010-11)
Khubchandani Healthparks Pvt. Ltd. v. ITO (2016) 384 ITR 322 (Bom.)(HC)
601
Reassessment S. 147
1833 S. 147 : Reassessment – The reopening of the assessment is not valid if the reasons
recorded are incoherent and do not indicate what the basis for reopening. [S. 143(1),
148]
(i) A plain reading of the reasons recorded for reopening reveals that the reasons
are totally incoherent. In fact, a plain reading of it gives rise to doubts whether
some lines have gone missing or some punctuation marks have been left out.
Grammatically also the reasons recorded make little sense. However, this is the
least of the problems. Essentially, the reasons recorded do not indicate what the
basis for the reopening of the assessments is;
(ii) Under Section 147(1) of the Act, the reasons recorded for reopening an assessment
should state that the Assessee had failed to disclose fully and truly all the material
facts necessary for his assessment in the returns as originally filed and the reasons
recorded should provide a live link to the formation of the belief that income has
escaped assessment (Madhukar Khosla v. Assistant Commissioner of Income Tax
(2014) 367 ITR 165 (Del.);
(iii) It is well-settled that the reasons recorded for reopening the assessment have
to speak for themselves. They have to spell out that (i) there was a failure of
the assessee to disclose fully and truly all the material facts necessary for the
assessment and (ii) the reasons must provide a live link to the formation of the
belief that income had escaped assessment. These reasons cannot be supplied
subsequent to the recording of such reasons either in the form of an order rejecting
the objections or an affidavit filed by the Revenue (Northern Exim (P) Ltd. v. DCIT
[2013] 357 ITR 586 (Del.) referred);
(iv) Even otherwise even the above reasons given subsequently do not satisfy the
jurisdictional requirements of Section 147(1) of the Act inasmuch as they do not
indicate that there was a failure by the Assessee to disclose fully and truly all the
material facts necessary for the assessment. The reasons also do not provide a live
link to the formation of the belief that income had escaped assessment. (WP No.
8994/2014 & CM 20547/2014, dt. 18.02.2016)(AY. 2007-08 to 2012-13)
Sabharwal Properties Industries Pvt. Ltd. v. ITO (2016) 382 ITR 547 (Delhi)(HC)
Sabharwal Apartments Pvt. Ltd. v. ITO (2016) 382 ITR 547 (Delhi)(HC)
1834 S. 147 : Reassessment – After the expiry of four years – Query raised during the course
of original assessment proceedings – Assessment order under section 143(3) passed
after considering the assessee’s reply – Notice issued under s.148 to examine the same
amounts to change of opinion – Reassessment was held to be not valid. [S.148]
AO having raised specific query regarding the interest paid by the assessee on the
secured loan and passed the assessment order under S.143(3) after considering the
replies of the assessee, reassessment proceedings initiated by the AO after the expiry of
four years from the end of the relevant assessment year is based on change of opinion.
(AY. 2002-03)
ACIT v. Tata Consultancy Services Ltd. (2016) 130 DTR 90 (Mum.)(Trib.)
602
S. 147 Reassessment
S. 147 : Reassessment – After the expiry of four years – Reopening cannot be based on 1835
same material as was considered by AO in course of original assessment proceeding.
[S.148]
Allowing the appeal of the assessee, the Tribunal held that no reopening on reason to
suspect, belief cannot be based on same material as was considered by AO in course of
original assessment proceeding. (AY. 2005-06)
Fibres and Fabrics International P. Ltd. v. Dy. CIT (2016) 48 ITR 46 (Bang.)(Trib.)
S. 147 : Reassessment – After the expiry of four years – Details of commission and 1836
professional charges available at original assessment – Reassessment invalid. [S. 148]
The Assessing Officer issued notice under section 148 of the Act on the ground that
in terms of the Explanation to subsection (2) of section 9 inserted by the Finance Act,
2010, with retrospective effect from June 1, 1976, the income of a non-resident would
be deemed to accrue or arise in India under clause (v), (vi) or (vii) of subsection (1) of
section 9 and to be included in the total income of nonresident and since the assessee
had not deducted tax at source on certain payments towards expenditure incurred in
foreign currency, the income had escaped the assessment. The Tribunal held that the
notice was issued after four years. Therefore, to confer jurisdiction under section 147
the Assessing Officer has to satisfy two conditions simultaneously: (i) he must have
reason to believe that income chargeable to tax has been underassessed, and (ii) he must
have reason that such underassessment had occurred by reason of either omission or
failure on the part of the assessee to make its return of income or to disclose fully and
truly all material facts necessary for its assessment for that year. When the assessee had
submitted all details of payment of commission, professional fees and others, before the
Assessing Officer at the time of original assessment u/s. 143(3), there was no failure
on the part of the assessee to disclose all facts truly and fully for its assessment and
the reasons recorded by the Assessing Officer that there was failure on the part of the
assessee to disclose all facts truly and fully for reopening the assessment after four years
from the end of relevant assessment year were not justified. (AY 2005-06)
Brakes India Ltd. v. DCIT (2016) 46 ITR 212 (Chennai)(Trib.)
S. 147 : Reassessment – After the expiry of four years – No indication in reasons 1837
recorded about failure on part of assessee to disclose fully and truly all material facts
necessary for assessment – reassessment not valid [S. 148]
The original assessment of the assessee were completed under Section 143(3) of the Act.
After a period of 4 years from the end of assessment years, the AO issued notices under
Section 148 of the Act to the assessee and passed reassessment orders on the ground
that the assessee had obtained accommodation entries on bogus purchases of software.
On appeal to Tribunal, it was held that there was no allegation by the AO in the reasons
recorded that the escapement of income had occurred by reason of failure on the part
of the assessee to disclose fully and truly all material facts necessary for its assessment.
In the absence of that finding, the AO’s action was wholly without jurisdiction. The
genesis of the reassessment proceedings is the reasons to be recorded and in compliance
with the first proviso to Section 147, such reasons to believe must comprise the specific
603
Reassessment S. 147
mention of the assessee’s failure to disclose fully and truly all material facts necessary
for assessment for the relevant assessment year. (AY. 2006-07, 2007-08)
Apeejay Education Society v. ACIT (2016) 47 ITR 33 (Amritsar)(Trib.)
Rajeshwari Sangeet Academy v. ACIT (2016) 47 ITR 33 (Amritsar)(Trib.)
1838 S. 147 : Reassessment – After the expiry of four years – Full and true disclosure made
during assessment proceedings – No failure on part of assessee – Reopening assessment
held not valid. [S. 40(a)(ia), 148]
During the year under consideration, the assessee had made payments in foreign
currency towards interest, professional fees and others paid to non-residents. The said
payments were claimed as expenditure. In the regular assessment under Section 143(3),
the details of payments made were furnished. The AO after examining all, disallowed
machinery charges by invoking provisions of Section 40(a)(i) but allowed others.
The other payments which were allowed earlier were disallowed in the reassessment
proceedings vide order under Section 147 in view of restrospective amendment in
Section 9(2) which taxed any services provided by non-residents in India. On appeal
to Tribunal, it was held that assessee having submitted all details of payments of
commission, professional fees and other expenses made to non residents in foreign
currency at the time of original assessment, there was no failure on part of assessee
to disclose all facts fully and truly for its assessment and therefore the assessment
could not be reopened beyond 4 years from the end of the relevant assessment year
on the ground that the said payments were taxable in view of retrospective operation
of Explanation below Section 9(2) and consequently the payments were liable to be
disallowed under Section 40(a)(i). (AY 2005-06, 2008-09, 2009-10)
Brakes India Ltd. v. DCIT (2016) 176 TTJ 716 / 140 DTR 207 (Chennai)(Trib.)
1839 S. 147 : Reassessment – After the expiry of four years – Audit objection – No
independent mind – Reassessment was quashed. [S 10A, 148]
On appeal, the Tribunal held that the assessee had truly and fully disclosed all the
material facts in the return and also during the assessment proceedings with respect
to material and relevant facts concerning setting up and commencement of operations
and its claim of deduction which had been duly considered while framing the original
assessment and granting deduction. The proceedings u/s. 147 and 148 initiated against
the assessee need to be dropped as the proceedings were not validly initiated but
merely on a change of opinion based upon the audit objections and the AO has not
independently applied his mind before reopening the proceedings. As the proceedings
were initiated after four years from the end of the relevant AY. and the proviso to
section 147 was applicable. The assessee was not hit by section 10A(2) as it could
not be said that it was formed by splitting up or reconstruction of business already
in existence nor was it brought on record that there was transfer to a new business of
machineries or plant previously used for any purpose. Circular No.1 of 2005 issued in
the context of section 10B supported the stand of the assessee. Thus, the assessee was
entitled to deduction u/s. 10A (AY. 2006-07)
Prothious Engineering Services Pvt. Ltd. v. ITO (2016) 46 ITR 438 (Mum.)(Trib.)
604
S. 147 Reassessment
S. 147 : Reassessment – Commissioner simply put ‘approved’ and signed report giving 1840
sanction to reopen assessment – Does not amount to recording of proper satisfaction
in terms of section 151(1) – Re-assessment proceedings was quashed – Order passed
with in four weeks of rejection was held to be invalid. [S. 148, 151(1)]
Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are,
therefore protected by safeguards against unnecessary harassment of the assessee. They
are sword for the Revenue and shield for the assessee. Section 151 guards that the
sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has
good and adequate reasons to invoke the provisions of Sec. 147. The superior authority
has to examine the reasons, material or grounds and to judge whether they are sufficient
and adequate to the formation of the necessary belief on the part of the assessing
officer. If, after applying his mind and also recording his reasons, howsoever briefly, the
Commissioner is of the opinion that the AO’s belief is well reasoned and bonafide, he
is to accord his sanction to the issue of notice u/s. 148 of the Act. In the instant case,
from the perusal of the order sheet which is on record it is seen that the Commissioner
has simply put “approved” and signed the report thereby giving sanction to the AO.
Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore,
it cannot be said that the Commissioner has accorded sanction after applying his mind
and after recording his satisfaction. The reassessment order was quashed. Order passed
with in four weeks of rejection was held to be invalid. (AY. 2003-04)
Hirachand Kanuga v. DY. CIT (2015) 68 SOT 205 (URO)(Mum.)(Trib.)
S. 147 : Reassessment – Reasons cannot be based on mere doubts or to verify the facts 1841
– Reassessment was quashed. [S. 148]
Allowing the appeal of assessee the Tribunal held that reopening opens a “Pandora’s box”
and cannot be done in a casual manner. The reasons cannot be based on mere doubts
or with a view to verify basic facts. If the AO takes the view that the income referred to
in the reasons has not escaped assessment, he loses jurisdiction to assess other escaped
income that comes to his notice during reassessment. (AY. 2006-07 & 2007-08)
Shipping Torm India Pvt. Ltd. v. ITO (2017) 145 DTR 152 / 183 TTJ 145 (Mum.)(Trib.)
S. 147 : Reassessment – HUF is not in existence – Reassessment based on return of an 1842
individual is held to be bad in law. [S. 2, 148, 292B]
Allowing the appeal of the assessee, the Tribunal held that where the HUF was not in
existence, initiation of reassessment proceedings based on the return of income is held
to be bad in law. (AY. 2007-08)
Dnyaneshwar Govind Kalbhor (HUF) v. ACIT (2016) 161 ITD 243 / (2017) 183 TTJ 203 /
(2017) 151 DTR 21 (Pune)(Trib.)
S. 147 : Reassessment – Capital gains – Transfer of land to developer – Reassessment 1843
was held to be justified. [S. 45, 148]
Tribunal held that in return of income, assessee did not disclose capital gains arising from
transfer of land to developer and it was only because of search conducted on developer
that Assessing Officer came to know same, reassessment was proper. (AY. 2005-06)
Essae Teraoka Ltd. v. DCIT (2016) 157 ITD 728 (Bang.)(Trib.)
605
Reassessment S. 147
1844 S. 147 : Reassessment – Deposit of cash in savings bank account – Power to call
information – Notice u/s. 133 cannot be sent if no proceeding was pending –
Reassessment was held to be bad in law. [S. 133, 148]
Assessee deposited cash in his savings bank account but did not file return of income.
AO sent a letter of inquiry to assessee to verify source of said cash deposit. In absence
of any response, AO formed belief that income of assessee had escaped assessment and,
consequently, assessed such cash deposits. On appeal allowing the appeal, the Tribunal
held that; The AO has sent an invalid letter of enquiry as no proceeding was pending
before him and, consequently, it was not obligatory on assessee to respond. Therefore,
assessee’s non-response could not constitute material to form belief of escapement
of income. AO proceeded on fallacious assumption that bank deposits constituted
undisclosed income, over-looking fact that source of deposits need not necessarily be
income of assessee and, therefore, action of AO not justified. (AY. 2006-07)
Amrik Singh v. ITO (2016) 159 ITD 329 / 181 TTJ 95 (Asr.)(Trib.)
1845 S. 147 : Reassessment – Value determined by the valuation cell and the income
disclosed – Reassessment was held to be valid. [S. 148]
The Tribunal held that there is difference between the value determined by the
valuation cell and the income disclosed by the assessee and a person of ordinary
prudence would have believed that income has escaped assessment. At the time of
recording of the reasons, only prima facie satisfaction of the AO is necessary. Therefore,
the initiation of proceedings under section 147 is valid. (AY. 2007-08)
Banwarilal Jain v. ITO (2016) 181 TTJ 341 (Luck.)(Trib.)
1846 S. 147 : Reassessment – Cash credits – Bank deposits – Mere deposits in the banks
cannot be presumed as undisclosed income hence reassessment was held to be bad in
law. [S. 68, 131, 133, 148]
Allowing the appeal of the assessee, the Tribunal held that mere deposits in the banks
cannot presumed as undisclosed income hence reassessment was held to be bad in law.
The AO’s fallacious assumption that bank deposits constituted undisclosed income,
over-looking fact that source of deposits need not necessarily be income of assessee and,
therefore, action of Assessing Officer was not justified. (AY. 2006-07)
Gurpal Singh v. ITO (2016) 159 ITD 797 (Amritsar)(Trib.)
1847 S. 147 : Reassessment – Mere fact that huge cash withdrawal from bank for purchase
which was very much doubtful, could not be a ground for reopening assessment.
[S. 69, 148]
Dismissing the appeal of the Revenue, the Tribunal held that in reasons recorded in
reopening of assessment was mere suspicion or apprehension from fact that assessee
did make cash withdrawal from bank but same did not indicate escapement of income,
reopening of assessment was held to be bad in law. (AY. 2007-08)
ITO v. Amit K. Shah (2016) 159 ITD 767 (Ahd.)(Trib.)
606
S. 147 Reassessment
S. 147 : Reassessment – In original assessment due to oversight and inadvertence or 1848
a mistake committed by ITO, AO has jurisdiction to re-open assessment, however on
merit allowed as revenue expenditure. [S. 37(1), 145, 148]
Assessee filed return and the assessment was completed accepting the income returned.
Subsequently, AO found that an amount was included as expenditure on replacement
of tools which requires be disallowing and capitalizing. Therefore, the assessment was
re-opened by issue of notice u/s. 148. The ITAT has taken a view that after amendment
to s. 147 w.e.f. 1-4-1989, where an income liable to be taxed has escaped assessment in
original assessment due to oversight and inadvertence or a mistake committed by ITO,
the AO has jurisdiction to re-open assessment. However on merits allowed as revenue
expenditure. (AY. 2008-09 2009-10)
Ucal Machine Tools (P.) Ltd. v. ITO (2016) 159 ITD 1061 (Chennai)(Trib.)
S. 147 : Reassessment – Reassessment to cancel registration could not be initiated if 1849
registration was granted prior to initiation of reassessment. [S.11, 12A]
When reassessment was pending, registration was granted to assessee on 5-3-2010
with effect from 1-4-2008. Benefit of S. 11 and 12 could not be denied to assessee
as registration was granted to assessee with effect from 1-4-2008, i.e., date prior to
initiation and completion of assessment proceedings. Assessee eligible for exemption
u/s. 11. (AY. 2004-05 to 2007-08)
ACIT v. Shushrutha Educational Trust (2016) 161 ITD 565 (Bang.)(Trib.)
S. 147 : Reassessment – Notice to HUF which is not in existence was held to be bad 1850
in law [S.4, 148, 292B]
The Tribunal held that notice was issued and addressed to HUF which was not
in existence and if suffers from multifaceted defects of cardinal active in serious
transgression of statutory requirements. Thus, the notice is not sustainable in law and
other grounds of assessee infructuous and appeal by revenue is academic. (AY. 2007-08)
Dnyaneshwar Govind Kalbhor (HUF) v. ACIT (2017) 161 ITD 243 / 183 TTJ 203 (Pune)
(Trib.)
S. 147 : Reassessment – Service of notice – Affixture at a wrong address – Absence of 1851
valid service of notice, reassessment was held to be bad in law. [S. 148]
Tribunal held that the notice under section 148 by affixture at a wrong address where
the assessee was not residing, it cannot be said that notice under section 148 was served
upon the assessee and therefore the reassessment proceedings were invalid and bad in
law. (AY. 2006-07)
ITO v. Om Prakash Kukreja (2016) 159 ITD 190 / 178 TTJ 1 / 134 DTR 208 (Chd.)(Trib.)
S. 147 : Reassessment – Change of opinion – Judgment of Supreme court was already 1852
available at the time when original assessment was made – Reassessment was held to
be not valid. [S. 148]
The Tribunal held that the assessment made under section 143(3) could not be reopened
simply by relying on a ruling of the Supreme Court which was already available at the
time when the AO made the original assessment. (AY. 2007-08)
Sanwar Mal Jangid v. ITO (2016) 178 TTJ 25 (UO)(Jodh)(Trib.)
607
Reassessment S. 147
1853 S. 147 : Reassessment – Within four years – Since, it was held that assessee was
required to be treated as registered trust w.e.f. 1.4.2007, therefore, second proviso
to sub-section (2) of section 12A was necessary to consider, then it was clear that
reopening u/s. 147/148 was not permitted. [S. 12A, 148]
Allowing the appeal the Tribunal held that Since it was held that reopening u/s.
147/148 was bad in law, therefore, it was not find appropriate to examine other grounds
mentioned by assessee as other grounds originated from reopening of assessment
proceedings. Since it was held that reopening was bad in law, therefore, all the other
grounds were also decided in favour of assessee and against revenue. (AY. 2007-08)
Shyam Mandir Committee, Khatushyamji v. ACIT (2016) 138 DTR 367 / 179 TTJ 752
(Jaipur)(Trib.)
1854 S. 147 : Reassessment – Within four years – No fresh tangible material in possession
of AO when recording reasons – Reassessment not valid [S. 148]
The assessee’s case was reopened under Section 147 and the AO framed reassessment
under Section 143(3) r.w.s. 147. The CIT(A) confirmed the reassessment and even
upheld the disallowances made by AO. On appeal to Tribunal, it was held that the
‘reasons’ recorded by the AO revealed that at the time of recording them the AO had
examined the original assessment records and no fresh material had come in possession
of the AO. The Department could not point out any fresh material available with the AO
at the time of reopening of the case of the assessee. Thus, there being no fresh material
with the AO for reopening, the case of reopening was not permissible. (AY 2006-07)
Motilal R. Todi v. ACIT (2016) 47 ITR 149 (Mum.)(Trib.)
1855 S. 147 : Reassessment – AO objects to audit objections – later reopens the assessment
– No reason to believe that income had escaped assessment – Reopening was held to
be invalid [S. 148]
The AO recorded reasons pursuant to an audit objection and reopened assessee’s
assessment. However, the AO replied to the audit objection stating that the issue was
debatable in nature. The AO replied that in principle the objections raised by the
audit were not acceptable. However, still the AO proceeded to reopen the assessment.
On appeal to Tribunal, it was held that once the AO himself disagreed with the audit
objections, reopening could not be done. The requirement of law for reopening of the
case is that the AO should be in a position to form a belief about escapement of income.
Although, at the stage of reopening, the belief need not be conclusive, but it was equally
expected that the position of law should be clear in the mind of the AO, at least prima–
facie. The belief need not be conclusive but it should be firm and clear. No belief can
be formed out of confusion and doubtful thoughts. (AY 2001-02, 2002-03)
Sunil Gavaskar v. ITO (IT) (2016) 47 ITR 243 / 177 TTJ 500 / 134 DTR 113 (Mum.)(Trib.)
1856 S. 147 : Reassessment – Within four years – Procedure – Reasons for reassessment
must be furnished to assessee before completion of reassessment – Copy of reasons not
provided despite multiple requests by assessee – Reassessment held invalid. [S.148]
During the course of reassessment proceedings, the assessee made several requests to
the AO to provide the copy of reasons but the same was not provided. The AO passed
608
S. 147 Reassessment
the order making addition on account of transfer of trade mark. On appeal to Tribunal,
it was held that it is mandatory on the part of the AO to provide the assessee with a
copy of reasons and to meet the objections filed by the assessee thereto, if any, before
he could frame the reassessment order. If the reasons were not furnished by him to
the assessee before completion of reassessment proceedings, the reassessment order
could not be upheld. It further held that the undisputed fact were that no reasons were
available in the assessment record and there was nothing on record to show that the
certified copy of reasons was ever provided to the assessee, despite the request made
by the assessee before the AO, more than once. Thus the reopening was invalid and
the consequent reassessment order as framed by the AO was also illegal and liable to
be set aside. (AY. 2001-02)
Muller and Philips (India) Ltd v. ITO (2016) 47 ITR 69 (Mum.)(Trib.)
S. 147 : Reassessment – Reopening on basis of same set of facts available at time of 1857
original assessment – change of opinion – No failure on part of assessee to disclose
facts – reassessment was held to be invalid [S. 148]
The assessee challenged the additions on account of GPF contribution, prior period
expenditure and disallowance of miscellaneous expenditure before CIT(A) alongwith
the ground of reassessment. The CIT(A) rejected the assessee’s ground pertaining to
initiation of reassessment proceedings and upheld the disallowances. On appeal to
Tribunal, it was held that reassessment proceedings were initiated by AO on the same
set of facts as available at the time of original assessment proceedings. It was a case
of change of opinion on the material which was already available on record at the
completion of the original assessment. There was no new tangible material but simply
a fresh scrutiny of assessment records and documents. There was no failure on the part
of assessee to disclose fully and truly all material facts. The reassessment was invalid.
(AY. 2002-03)
Uttaranchal Jal Vidyut Nigam Ltd. v. ACIT (2016) 47 ITR 198 (Delhi)(Trib.)
S. 147 : Reassessment – Reopening on the basis of statement given to police under 1858
section 161 of Criminal Procedure Code, 1973 – Unjustified. [S. 69C]
Statement recorded by Police Officer under section 161 of Code of Criminal Procedure,
1973, is neither given ‘on oath’ nor it is tested by cross examination. Therefore, such a
statement cannot be treated as substantive evidence to reopen assessment proceedings.
(AY. 2006-07)
Subhash Chander Goel v. ITO (2016) 156 ITD 808 / 177 TTJ 353 / 137 DTR 22 (Chd.)
(Trib.)
S. 147 : Reassessment – Change of opinion – Reassessment was held to be bad in law. 1859
The Tribunal held that no fresh facts came to the knowledge of AO justifying a fresh
initiation of action under section 147. Therefore, the assumption of jurisdiction under
section 147 is bad in law. (AY. 2003-04, 2008-09, 2009-10)
C. J. International Hotels Ltd. v. Dy. CIT (2016) 177 TTJ 124 / 133 DTR 81 (Delhi)(Trib.)
609
Reassessment S. 147
1860 S. 147 : Reassessment – Assessing Officer in issuing notice u/s. 148 within time limit
available for issue of notice u/s. 143(2) was not as per law – Reassessment proceedings
was quashed. [S. 143(1), 143(2), 148]
For AY. 2002-03, assessee filed original return of income on 31-10-2002. Later on
31-3-2004, it filed revised return which was processed u/s. 143(1). Subsequently AO.
issued notice u/s. 148 on 28-5-2004. Assessee raised objection with regard to issue
of notice u/s. 148 instead of issuing same u/s. 143(2). Time available with AO. for
issuing notice u/s. 143(2) was up to 31-3-2005. Therefore, act of AO in issuing notice
u/s.148 within time limit available for issue of notice u/s. 143(2) was not as per law.
Reassessment proceedings was quashed. (AY. 2002-03)
Vardhman Holdings Ltd. v. ACIT (2016) 158 ITD 843 (Chd.)(Trib.)
1861 S. 147 : Reassessment – On basis of suspicion and non-existent and incorrect facts
hence were held to be invalid. [S. 143(1)]
AO processed u/s. 143(1) returns of income filed by assessee for AY. 2001-02 to 2003-
04 and subsequently he reopened said assessments on sole basis that assessee had not
filed returns for years preceding to AY. 2004-05. Reopening of assessment was only on
basis of suspicion and non-existent and incorrect facts hence was held to be invalid.
(AY. 2001-02 to 2003-04)
Baba Kartar Singh Dukki Educational Trust v. ITO (2015) 171 TTJ 25 / (2016) 158 ITD
965 (Chd.)(Trib.)
1862 S. 147 : Reassessment – The AO is duty bound to provide to the assessee the reasons
recorded for reopening the assessment within a reasonable time. Failure to do so
renders the reassessment order unsustainable in law. [S.148]
Allowing the appeal of assessee the Tribunal held that the Hon’ble Apex Court in
GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19 has held that “it is clear that the
completion of assessment/ reassessment without furnishing the reasons recorded by the
AO for initiation of proceedings under section 147/148 of the Act is not sustainable
in law as it is incumbent on the AO to supply them within reasonable time. We note
that on the anvil of this judgment, on the request of the Assessee, the AO is bound to
furnish the reasons recorded for initiation of proceedings under section 147 of the Act
within a reasonable period of time so that the assessee could file its objections thereto
and the AO was to dispose of the same by passing a speaking order thereon, which the
AO has not done. We also note that even as per the rules of natural justice, the assessee
is entitled to know the reasons on the basis of which the AO has formed an opinion
that income assessable to tax has escaped assessment. The furnishing of reasons to the
assessee is to enable/facilitate it to present its defence and objections to the initiation
of proceedings under section 147/148 of the Act. Therefore, we are of the considered
opinion that there was no justifiable reasons for the AO to deprive the assessee of the
recorded reasons by him for initiating proceedings under section 147/148 of the Act.
Therefore, in our considered opinion, the reopening in question is not sustainable in
the eyes of law. Accordingly, we allow the assessee’s appeal on legality aspect without
proceeding to adjudicate on merits by quashing the assessment order. (ITA No. 6611/
Del/2013, dt. 03.06.2016)(AY. 2001-02)
Inderjeet Singh Sachdeva v. DCIT (Delhi)(Trib.), www.itatonline.org
610
S. 147 Reassessment
S. 147 : Reassessment – Non-furnishing by the AO of reasons recorded for reopening 1863
the assessment, renders the reopening void. [S.148]
Despite repeated letters requesting to provide copy of the reasons recorded or the
grounds on which the assessment was reopened, no such reasons were provided to the
assessee. We find that the DR could not substantiate whether any reasons were provided
by the Assessing Officer to the assessee and merely relying on the fact that general
practice was followed in Department of supplying reasons, it cannot be presumed that
reasons were supplied in the case of the assessee. On the other hand, the assessee has
filed evidences in support of its claim of request for providing grounds of initiation of
the reassessment proceedings in almost every submission made before the Assessing
Officer. Therefore, in our considered view, the Assessing Officer has not complied with
the direction of the Hon’ble Supreme Court in the case of GKN Driveshaft (India) limited
v. CIT (2003) 259 ITR 19 (SC) providing reasons for reassessment within a reasonable
time, and therefore respectfully following the decisions cited above, the reassessment
completed by the Assessing Officer under section 147 of the Act cannot be sustained
in the case of the assessee and quashed. (ITA No. 2205/Del/2015, dt. 16.05.2016)(AY.
2006-07)
Ujagar Holding Pvt. Ltd. v. ITO (Delhi)(Trib.), www.itatonline.org
S. 147 : Reassessment – Absence of new tangible material, reassessment was held to 1864
be not valid. [S. 148]
AO having issued notice u/s. 148 on the basis of the recommendation of the Addl. DIT
(Inv.) and relying on the contents of the very same flowchart of manufacturing process
which was produced by the assessee during the original assessment, there was no new
tangible material to form reason to believe that income had escaped assessment and,
therefore, reopening of assessment is vitiated on this count. Further, assessment made
u/s. 143(3) could not be reopened after expiry of four years form the end of the relevant
assessment year, since all the material facts were fully and truly disclosed during
the original assessment u/s. 143(3) and the issue of deduction u/s. 80IC was subject
matter of assessment proceedings as well as revisional proceedings u/s. 264 impugned
reassessment is based upon change of opinion on the same set of facts which is not
permissible. (AY. 2004-05)
Dy. CIT v. Dharampal Satyapal Ltd. (2016) 130 DTR 241 / 175 TTJ 663 (Delhi)(Trib.)
S. 147 : Reassessment – Within four years – No reassessment on mere change of 1865
opinion as the assessee had submitted all relevant details at the time of assessment
and genuineness of transaction was not doubted by the AO. [S.143(3)]
After the original assessment was completed u/s. 143(3), it was reopened based on
information received from the Investigation Wing of the Income-tax department
pursuant to a search at the premise of an individual that the Assessee has received
accommodation entries as share application money. On appeal, the Tribunal quashed
the reassessment on the basis that the Assessee had disclosed all relevant facts to the
AO during the course of assessment and the reassessment was simiplicitor based on
a change of opinion. Based on the confirmation of the parties, the genuineness of the
transaction was not doubted by the AO. Further, the AO had appended a note to the
611
Reassessment S. 147
order u/s. 143(3) that the investments in the company had been considered and passed
on the respective AOs. (AY. 2009-10)
A.P. Refinery P. Ltd. v. Addl. CIT (2016) 45 ITR 724 (Chd.)(Trib.)
1866 S. 147 : Reassessment – There has to be tangible material to reopen the assessment –
Reassessment was held to be bad in law. [S. 80IC, 143(1), 148]
Tribunal held that though in case of section 143(1)(a), any argument of it being illegal
because of change of opinion is not sustainable, however, there has to be some tangible
material in possession of Assessing Officer to reopen such cases. (AY. 2011-12)
Amit Engineers v. ACIT (2016) 156 ITD 556 (Chd.)(Trib.)
1867 S. 147 : Reassessment – Approval from prescribed authority was not obtained for
earlier years – Reassessment was held to be valid. [S. 10(23C), 143(1), 148]
Assessee had furnished return of income declaring loss of ` 33,60,746/-. The return was
processed under section 143(1) of the Act and no scrutiny assessment under section
143(3) of the Act was completed against the assessee for captioned assessment year.
AO recorded reasons for reopening the assessment on the ground that deduction under
section 10(23C)(vi) of the Act was claimed by the assessee in the return of income, which
was not allowable to the assessee in the absence of certificate issued for recognizing the
assessee under section 10(23C)(vi) of the Act. In view of no assessment being completed
under section 143(3) of the Act, we find merit in the order of CIT(A) in holding that
the reopening of assessment was valid, in view of the ratio laid down by the Hon’ble
Supreme Court in Rajesh Jhaveri Stock Brokers (P.) Ltd 291 ITR 500. Reasons recorded
by the AO for reopening the assessment pursuant to assessment being completed in the
hands of assessee relating to assessment year 2006-07, wherein it came to the knowledge
of the Assessing Officer that the assessee has no approval from the prescribed authority
for availing the said exemption under section 10(23C)(vi) of the Act and in view of the
material which had come to the notice of Assessing Officer on a later date, there were
appropriate reasons with the Assessing Officer for formation of belief that the income had
escaped assessment for the year for issue of notice under section 148 of the Act. Since all
the conditions necessary for reopening of the assessment were attracted, we uphold the
recording of reasons under section 147 of the Act and thereafter, issue of notice under
section 148 of the Act as both legal and valid. (AY. 2002-03, 2004-05 to 2007-08)
Mercedes Benz Education Academy v. ITO (2016) 156 ITD 488 / 176 TTJ 365 / 131 DTR
302 (Pune)(Trib.)
1868 S. 147 : Reassessment – Reassessment based on an illegal TPO’s order is void ab initio
and hence liable to be quashed. [S. 143(2), 148]
The AO could not pass a draft assessment order pursuant to the order of the TPO since no
notice u/s. 143(2) was issued to the Assessee. Subsequently, the AO treated the order of the
TPO as information and sought to reopen the assessment by issuing a notice u/s. 148. The
ITAT quashed the reassessment on the basis that the reference to the TPO was illegal since
no notice u/s. 143(2) was issued by the AO. Consequently, the order of the TPO pursuant
to an illegal reference cannot be used in the reassessment proceedings. (AY. 2010-11)
Bucyrus India P. Ltd. v. DCIT (2016) 45 ITR 216 / 176 T TJ 774 / 140 DTR 202 / 65
taxmann.com 53 (Kol.)(Trib.)
612
S. 147 Reassessment
S. 147 : Reassessment – Book profit – Foreign exchange fluctuation gains – 1869
Computation was available on record – No new tangible material – Reassessment was
bad in law. [S. 4, 115JB, 143(1), 148]
Tribunal held that; where reassessment was initiated on ground that assessee had
excluded foreign exchange fluctuation gains while computing total income while, in
fact, same computation was available on record during assessment, reassessment was
bad. (AY. 2004-05, 2005-06)
Sabic Research & Technology (P.) Ltd. v. ITO (2016) 156 ITD 327 (Ahd.)(Trib.)
S. 147 : Reassessment – Search – Where the AO detects incriminating material in 1870
search has to be processed only u/s. 153C and not u/s. 147. A notice u/s. 148 to assess
such undisclosed income is void ab initio. [S. 148, 153C]
Allowing the appeal the Tribunal held that;On having gone through the decisions cited
above especially the decision of Amritsar Bench in the case of ITO v. Arun Kumar
Kapoor (2011) 140 TTJ 249 (Amritsar)(Trib.), we find that in that case as in the present
case before us, reassessment was initiated on the basis of incriminating material found
in search of third party and the validity of the same was challenged by the assessee
before the Learned CIT(Appeals) and the Learned CIT(Appeals) vitiated the proceedings.
The same was questioned by the Revenue before the ITAT and the ITAT after discussing
the cases of the parties and the relevant provisions in details has come to the conclusion
that in the above situation, provisions of S.153C were applicable which excludes the
application of sections 147 and 148 of the Act. The ITAT held the notice issued under
S.148 and proceedings under sec. 147 as illegal and void ab initio. It was held that
Assessing Officer having not followed procedure under S. 153C, reassessment order was
rightly quashed by the CIT(Appeals). In the present case before us, it is an admitted fact,
as also evident from the reasons recorded and the assessment order that the initiation
of reopening proceedings was made by the Assessing Officer on the basis of information
received from the Directorate of Income-tax (Inv.) on the basis of search & seizure
operation conducted at the premises of Rock Land Group of Cases and the documents
related to the assessee found during the course of search were made available to the
Assessing Officer of the present assessee. We thus respectfully following the decision
of Co-ordinate Bench of the ITAT in the case of ACIT v. Arun Kapur (2011) 140 TTJ 249
(Amritsar) hold that provisions of S. 153C of the Act were applicable in the present
case for framing the assessment, if any, which excludes the application of S. 147 of the
Act, hence, notice issued under S. 148 of the Act and assessment framed in furtherance
thereto under S.147 read with section 143(3) of the Act are void ab initio.(ITA No. 2430/
Del/2015, dt. 20.05.2016)(AY. 2007-08)
Rajat Saurabh Chatterji v. ACIT (Delhi)(Trib.), www.itatonline.org
S. 147 : Reassessment – Notice is issued in a mechanical manner, based on information 1871
received from another AO, and sanction is accorded by the CIT in a mechanical
explained – Reassessment was held to be bad in law. [S. 148, 151]
After going through the reasons recorded by the Assessing Officer for reopening and
the approval thereof by the Addl. CIT we are of the view that AO has not applied his
mind so as to come to an independent conclusion that he has reason to believe that
613
Reassessment S. 147
income has escaped during the year. In our view the reasons are vague and are not
based on any tangible material as well as are not acceptable in the eyes of law. The AO
has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly
received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping
in view of the facts and circumstances of the present case and the case law applicable
in the case of the assessee, we are of the considered view that the reopening in the case
of the assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed.
Even otherwise, a perusal of the above demonstrates that the Addl. CIT has written
“Approved” which establishes that he has not recorded proper satisfaction / approval,
before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically
issued notice u/s. 148 of the Act, on the basis of information allegedly received by him
from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the
facts and circumstances of the present case and the case law applicable in the case
of the assessee, we are of the considered view that the reopening in the case of the
assessee for the Asstt. Year in dispute is bad in law and deserves to be quashed.( ITA
No. 5128/del/2015, dt. 22.04.2016)(AY. 2006-07)
Banke Bihar Properties Pvt. Ltd. v. ITO (Delhi)(Trib); www.itatonline.org
1872 S. 147 : Reassessment – Issue concluded in original assessment proceedings cannot be
re-agitated during course of reassessment proceedings. [S.148]
The additional claim on account of loss on sale of securities was made only in the
return of income filed in response to the notice u/s.148. The additional claim was
obviously not made in the original assessment proceedings nor sought to be re-
considered by the AO during the course of re-assessment proceedings. Even assuming
that it was only readjustment of a claim already made, such readjustment was not
possible in the proceedings of reassessment.(AY. 2007-08)
Karnataka State Co-operative Apex Bank Ltd. v. Dy. CIT (2016) 46 ITR 728 (Bang.)(Trib.)
1873 S. 147 : Reassessment – Within four years – Search operations in premises of
third person – Documents found belonging to third person and not to assessee –
Reassessment was held to be justified. [S. 148, 153C]
The condition precedent for issuance of notice u/s. 153C was not fulfilled. The
re-opening of the assessment was done within the limitation period and there was no
specific evidence in corroboration with regard to the contention that no sanction taken
from the authorities. Therefore, the reopening of the assessment was rightly done u/s.147
of the Act. (AY. 2003-04)
Yamuna Estate P.Ltd. v. ITO (2016) 45 ITR 517 (Mum.)(Trib.)
1874 S. 147 : Reassessment – No information about any bogus gift – No tangible material
to justify income chargeable to tax had escaped assessment – Reassessment was held
to be invalid. [S. 69A, 148]
The AO reopened the assessment u/s. 147 of the Act on the ground that the assessee
had shown a gift of ` 21 lakhs from two persons and since they did not have any
blood relationship with the assessee nor was there any occasion for the gift. He made
and addition on account of income from undisclosed sources u/s. 69A of the Act. The
CIT(A) confirmed this.
614
S. 147 Reassessment
On appeal, the Tribunal held that the reasons recorded did not clarify how there was
a failure on the part of the assessee to disclose fully and truly all material facts. There
was no material available with the AO of the donors to give any information to the AO
of the assessee to make out a case of escapement of income in the case of the assessee.
A valid reopening of assessment had to be based only on tangible material to justify
the conclusion that there was escapement of income. The AO had not validly assumed
jurisdiction under section 147 and 148 of the Act for reopening of the assessment. The
addition was to be deleted. (AY. 2005-06)
Sarika Jain (Smt.) v. ITO (2016) 46 ITR 246 (Chd.)(Trib.)
Vikram Jain and Sons, HUF v. ITO (2016) 46 ITR 246 (Chd.)(Trib.)
Santosh R. Jain (Smt.) v. ITO (2016) 46 ITR 246 (Chd.)(Trib.)
S. 147 : Reassessment – Reopening in the absence of fresh material and merely on 1875
change of opinion is not permissible. [S.148]
“Therefore, we are of the considered view that assessee had made full and true
disclosure during the original assessment proceedings. We are also of the view that
reopening had been done merely on change of opinion in as much as that in the original
assessment made u/s. 143(3) of the I.T. Act. We also find that AO has no fresh material
to form his opinion regarding escapement of assessment and he has also not found any
tangible material to record the reasons for reopening of the assessment of the assessee.
It is a settled law that merely change of opinion is not permissible under the law.”(ITA
No. 4086/Del/2013, dt. 30.03.2016) (AY. 2004-05)
Vijay Power Generators Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org
S. 147 : Reassessment – Reopening of assessment is not permissible in the absence of 1876
“fresh tangible material” – Reassessment was quashed. [S.148]
Allowing the appeal the Tribunal held that in the present case, it was noticed by us that the
case of the assessee is that there was no fresh tangible material in the possession of AO at
the time of recording of impugned reasons. A perusal of the ‘Reasons’ recorded by the AO
in this case reveals that at the time of recording of these ‘Reasons’ the AO had examined
original assessment records only and no fresh material had come in the possession of the
AO. In response to our specific query also, Ld DR could not point out any fresh material
available with the AO at the time of reopening of the case of the assessee. Thus, assertion of
the assessee that there was no fresh material with AO for reopening of this case, remained
uncontroverted. Under these facts and circumstances, let us now examine settled position
of law on this issue. It has been held in various judgments coming from various courts
that availability of fresh tangible material in the possession of AO at the time of recording
of impugned reasons is a sine qua none, before the AO can record reasons for reopening
of the case. We begin with the judgment of Hon’ble Supreme Court in the case of CIT v.
Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment,
the AO should have in its possession ‘tangible material’. The term ‘tangible material’ has
been understood and explained by various courts subsequently. There has been unanimity
of the courts on this issue that in absence of fresh material indicating escaped income, the
AO cannot assume jurisdiction to reopen already concluded assessment. (ITA No. 5858 &
5859/Mum/2012, dt. 28.10.2015) (AY. 2005-06, 2006-07)
Golden Tobacco Limited v. DCI (Mum.)(Trib.); www.itatonline.org
615
Reassessment S. 147
1877 S. 147 : Reassessment – On the wrong and invalid assumption of jurisdictional and all
subsequent proceedings is pursuance thereto can’t be held as sustainable and valid,
hence the same deserve to be quashed and we quash the same. [S.148]
When we logically analyse the facts of the case, specially averments of the AO in the
reasons recorded, then we note that in the operative paragraph the AO has held that
“since the expenditure of ` 2,47,468/- were incurred by the assessee through credit card
remained unexplained, I have reason to believe that income to the tune of ` 2,47,468/-
has escaped assessment”. This conclusion of the AO is factually baseless as this issue
was posed to the assessee by DCIT, Bangalore replying to his notices and the ld. DR has
not disputed that copies of the said notices and reply was filed before the AO on the
assessment record. In this situation it was on the AO to peruse the relevant assessment
record of AY 2005-06 which forming reason to believe and thus it is safely presumed
that the AO initiated reassessment proceedings u/s. 147 of the Act and issued notice
u/s. 148 of the Act without application of mind working in a mechanical manner and
thus the same are not sustainable in the facts and on law. Respectfully following the
dicta laid down by jurisdictional High Court in the case of CIT v. G & G Pharma we
are inclined to hold that the AO issued notice u/s. 148 of Act on the wrong and invalid
assumption of Jurisdictional and all subsequent proceedings is pursuance thereto can’t
be held as sustainable and valid hence, the same deserve to be quashed and we quash
the same. It is ordered accordingly. (ITA No. 7/Del/2013, dt. 19.02.2016)(AY 2004-05)
Suresh M. Bajaj v. ITO (Delhi)(Trib.); www.itatonline.org
1878 S. 147 : Reassessment – If AO does not make any addition for the reason stated
for reopening, he cannot add any other income holds good even for years when
Explanation 3 to s. 147 is operative. [S.148]
Allowing the appeal of assessee the Tribunal held that the argument of the Ld. DR that
the ratio propounded in Jet Airways India v. CIT 331 ITR 236 and Ranbaxy Laboratories
Ltd. v. CIT (2011) 336 ITR 136 does not apply since those cases related to assessment
years when Explanation 3 to section 147 was not on the statute, we find has not
merit since in the above mentioned decisions the Court has interpreted the provision
of section 147 on first principle to hold that only if addition are made on account of
income which the AO had reason to believe had escaped assessment that any other
addition can be made. It is not Explanation 3 which had been interpreted in favour of
the assessee in these cases. In fact we find that Explanation 3 empowers AO’s to make
assessment on any matter which comes to their notice during assessment proceedings.
But the same along with section 147 has been interpreted as stated above. Therefore, the
presence or absence of Explanation 3 to section 147 does not nullify the interpretation
given by the courts in the above stated judgments. Further the argument of the Ld. DR
that the reason is not rendered invalid merely because no addition has been made on
account of incomes which the AO had reason to believe had escaped assessment, is also
of no consequence, since as is evident from the order cited above, the courts have not
held the reasons to be invalid in such cases and quashed the proceedings. The validity
of the reasons had not been in issue in these cases, but the courts have interpreted
the provisions of section 147 on first principles and held that the AO had no power to
assess any other income to tax unless addition is made of income which he had reason
to believe had escaped assessment.
616
S. 149 Reassessment
(ii) Respectfully following the above judgments, we hold that in the absence of any
addition having been made on incomes which the AO had reason to believe had escaped
assessment, no addition of any other income could have been made and that the AO
had exceeded his jurisdiction in passing the impugned order u/s 147. The same is liable
to be quashed. We quash accordingly. (ITA No.134/Ag/2014, dt. 05.04.2016)(AY. 2003-04)
Anugrah Varhney v. ITO (Agra)(Trib.); www.itatonline.org
S. 148. Issue of notice where income has escaped assessment.
S. 148 : Reassessment – Notice affixed on the door of the place of business after the 1879
assessee refusing to accept the Notice is a valid service of Notice – Assessing Officer
must supply information demanded by the assessee. [S. 143(2), 147, 282, Order V, Rule
17 & 18 of CPC, 1908]
Assessee was a Doctor by Profession. A Notice under section 148 was issued by the
Assessing Officer which returned unserved. Thereafter, the Assessing Officer deputed
2 Inspectors to make Personal service of the Notice upon the assessee. The Inspectors
went to the assessee’s residence however, the assessee had gone to his clinic. The
Inspectors followed the assessee to his clinic and made efforts to serve the Notice on
him personally. However, the assessee refused to accept the Notice and left the Clinic
citing emergency call as a reason. Thereafter, the Inspectors tried to serve the Notice on
the staff in the Clinic but, nobody accepted the Notice. Finally, the Inspectors affixed
the Notice on the door of the Clinic. Later on, the assessee received Notice under
section 142(1) requesting submission of certain details. The assessee challenged the
reassessment proceeding in a Writ Petition on the ground that no valid Notice has been
served on him. The High Court held that when Notice cannot be served on the assessee,
it must be affixed at some conspicuous part of the residence or place of business as per
Order V, Rule 17 & 18 of CPC, 1908. Therefore, Notice affixed by the Inspector on the
door of the clinic was a valid service. Court also held that the Assessing Officer must
supply information demanded by the Assessee. Compliance with notice u/s. 143(2) is
not necessary. (AY. 2008-09)
Sheo Murti Singh (Dr.) v. CIT (2016) 383 ITR 174 / 236 Taxman 405 (All.)(HC)
S. 149. Time limit for notice.
S. 149 : Reassessment – Time limit – Provision at relevant time was ten years – Notice 1880
could be issued on or before 31-5-2001 – Notice issued on 11-4-2001 – Not barred by
limitation. [S.147, 148/150(1)]
Court held that the dispute related to the AY. 1992-93 and under the then existing
provision u/s. 149 the period of limitation was ten years. Accordingly, the reassessment
notice could be issued on or before May 31, 2001. The notice u/s. 148 issued on April
11, 2001 was within the period of limitation. (AY. 1992-93)
CIT v. Hemkunt Timbers Ltd. (2016) 380 ITR 658 / 283 CTR 1 / 67 taxmann.com 231
(All.)(HC)
617
Assessment S. 150
S. 150. Provision for cases where assessment is in pursuance of an order on appeal,
etc.
1881 S. 150 : Assessment – Order on appeal – Reassessment – In respect of any assessment
year wherein further proceedings are barred by limitation, assessment cannot be
reopened merely by virtue of an opinion expressed by any higher forum at a later
date, i.e., subsequent to date of limitation period. [S. 147, 148]
The ITAT held that noticed from the observations made by the Tribunal, while disposing
of the appeals for assessment years 2003-04 and 2004-05, a casual observation was
made to deal with the issue before them as to whether the capital gains is attracted in
assessment year 2003-04 and 2004-05; but there is no specific finding or direction that
it is assessable to tax in assessment year 2001-02. Even if it is assumed that there is
a finding or direction, in respect of any assessment year wherein further proceedings
are barred by limitation, the same cannot be reopened merely by virtue of an opinion
expressed by any higher forum at a later date i.e. subsequent to the date of limitation
period. In fact, the judgments of the Apex Court are also on the same lines. Reopening
of assessment is bad in law since the proceedings u/s 148 are sought to be initiated by
issuing a notice after the period of limitation. (AY. 2001-02)
Emgeeyar Pictures (P.) Ltd. v. DCIT (2016) 159 ITD 1 / 138 DTR 20 / 179 TTJ 383 (TM)
(Chennai)(Trib.)
S. 151. Sanction for issue of notice
1882 S. 151 : Reassessment – Sanction for issue of notice–Return processed u/s. 143(1)(a)
in pursuance of notice u/s. 147 – Held, not an assessment – Held, provision of section
151(1) not attracted. [S. 143(1)(a), 147, 148]
The assessee, an individual, did not file return for the relevant year. A notice was
issued u/s. 148 to tax certain interest income. In response to said notice, the assessee
filed his return. An intimation under section 143(1)(a) was issued. AO subsequently
issued another notice u/s. 148 for the purpose of bringing to tax certain amount received
as commission. Assessee challenged such reopening on the ground that pursuant to
the first notice issued u/s. 148, intimation was issued by the AO u/s. 143(1)(a) which
constituted assessment and therefore, in the light of specific provisions of section 151(1),
no notice could be issued u/s. 148 unless the CCIT or CIT was satisfied that it was a
fit case for issue of such a notice. High Court held that intimation issued u/s. 143(1)
(a) was not an assessment and therefore, provisions of section 151(1) are not attracted.
(AY. 1991-92)
Ranjeet Singh v. CIT (2016) 382 ITR 409 / 238 Taxman 522 (P&H)(HC)
1883 S. 151 : Reassessment – Sanction for issue of notice – Mechanical grant of approval
by affixing signature without recording any satisfaction – Held, mere fact that the
Additional Commissioner did not record his satisfaction in so many words would not
render invalid the sanction granted u/s. 151(2) when the reasons on the basis of which
sanction was sought for was not challenged. [S. 147, 148]
The assessee a proprietorship concern was engaged in the business of trading in various
goods. AO issued notice u/s 148 for reopening of assessments in respect of AY 1990-
618
S. 152 Assessment
91, 1991-92 and 1992-93. AO obtained approval of the Additional Commissioner u/s.
151(2) by order and thereafter issued notice u/s. 148. Assessee challenged the notice
on the ground that Additional Commissioner mechanically granted approval by affixing
his signature without recording any satisfaction. High Court held that assessee had not
contended that the reasons cited by the AO for initiating reassessment proceedings u/s
147 were irrelevant or that the AO had no reason to believe that income chargeable
to tax had escaped assessment, therefore, mere fact that the Additional Commissioner
did not record his satisfaction in so many words would not render invalid the sanction
granted u/s 151(2) when the reasons on the basis of which sanction was sought for was
not assailed. (AY. 1990-91 to 1992-93)
Prem Chand Shaw (Jaisal) v. ACIT (2016) 383 ITR 597 / 238 Taxman 423 / 286 CTR 252
/ 135 DTR 172 (Cal.)(HC)
S. 151 : Reassessment – Sanction for issue of notice – Notice was issued after obtaining 1884
the sanction of the Commissioner, instead of Joint Commissioner of Income tax –
Reassessment was held to be void ab-initio. [S. 147, 148]
Allowing the appeal of assessee following the ratio in Ghansham K. Khabrani v.
ACIT (2012) 346 ITR 443 (Bom.)(HC), the court held that, on the facts of the case the
notice was issued after obtaining the sanction of the Commissioner, instead of Joint
commissioner of Income tax hence, reassessment was held to be void ab initio. (AY.
2002-03)
Purse Holdings India P. Ltd. v. ADDIT(IT) (2016) 143 DTR 1 (Mum.)(Trib.)
S. 151 : Reassessment – Sanction for issue of notice – Non application of mind – 1885
Reassessment was held to be bad in law. [S. 147,148]
Addl. CIT and the CIT having simply written “Yes. I am satisfied” on the same day
while according sanction under s. 151, it does not in any manner shed any light as to
whether there was any application of mind at all by the two senior officers. Therefore,
sanction granted by the CIT is invalid and consequently, the notice u/s. 148 issued by
the AO is bad in law. (AY. 2004-05).
Dy. CIT v. Dharampal Satyapal Ltd. (2016) 130 DTR 241 / 175 TTJ 217 (Delhi)(Trib.)
S. 152 : Other provisions.
S. 152 : Assessment – Reassessment not resulting in assessment of higher income – 1886
Assessed book profit – Reassessment notice not valid. [S. 115JB, 147, 148]
Allowing the petition the Court held that having regard to the fact that even if the entire
amount which was proposed to be added by the AO were sustained, there would be
no addition to the tax liability of the assessee and the assessee would still be governed
by the provisions of section 115JB of the Act and assessed on the same book profits, it
could not be said that there was sufficient material before the AO to form the belief that
income chargeable to tax has escaped assessment. The notice issued under section 148
of the Act, therefore, could not be sustained by virtue of section 152(2). (AY. 2011-12)
Motto Tiles P. Ltd. v. ACIT (2016) 386 ITR 280 / 73 taxmann.com 176 (Guj.)(HC)
619
Assessment S. 153
S. 153. Time limit for completion of assessment, reassessment and recomputation.
1887 S. 153 : Assessment – Limitation – Draft assessment order – Where inspecting
Assistant Commissioner did not exercise power of Income tax Officer but only issued
instructions on basis of which Assessing Officer completed the assessment, period in
which said Commissioner issued instructions would be excluded while counting period
of limitation to complete assessment. [S. 125A, 143(3), 144A, 144B]
The Assessing Officer has passed the draft assessment order within the period of
limitation. He forwarded the draft assessment order to Assistant Commissioner who
in turn has given instructions to the Assessing Officer. The Assessing Officer passed
the order as per the instructions. The total period in which the Inspecting Assistant
Commissioner issued instructions exceeded said stipulated period. The Assessee
contended that the order passed was beyond period of limitation. The Tribunal
negatived the order of the Assessing Officer. On reference High Court also affirmed
the order of Tribunal. On revenue’s appeal before the Supreme Court, allowing
the appeal the Court held that where Inspecting Assistant Commissioner though
authorised has not exercised power or performed functions of Income-tax Officer,
Income-tax Officer can invoke procedure. In such case period during which draft
assessment was forwarded to Inspecting Assistant Commissioner till date of receipt
of instructions from him is to be excluded in reckoning limitation. (AY. 1977-78,
1981-82)
CIT v. Saurasthra Cement & Chemical Industries Ltd. (2016) 384 ITR 186 / 239 Taxman
499 / 286 CTR 345 (SC)
Saraya Sugar Mills P. Ltd. v. CIT (2016) 384 ITR 186 / 239 Taxman 499 / 286 CTR
345(SC)
Editorial: Arising out of decision of Gujarat High Court dt. 20-01-2005 and CIT v. Saraya
Sugar Mills (P) Ltd (2011) 336 ITR 572 (All)(HC). Decision in CIT v. Saurashtra Cement &
Chemical Industries Ltd. (2005) 274 ITR 327 (Guj.)(HC) is reversed. Section 125A, which
provided for concurrent jurisdiction of Inspecting Assistant Commissioner and Income Tax
Officer had been omitted vide the Direct Tax laws (Amendment) Act, 1972 and section
144B which provided for reference to Deputy Commissioner in certain cases had been
omitted vide said Act with effect from 1-4-1989.
1888 S. 153 : Assessment – limitation – Enquiry before assessment – Special audit – Stay
– Interim injunction – Assessment completed beyond statutorily prescribed period –
Barred by limitation. [S. 142(2A]
Dismissing the appeal of revenue, the Court hold that the assessment was barred by
limitation. The time limit available to the Assessing Officer under section 153 of the Act
was a period of 17 days. Even if it was assumed that he had 60 days’ time under the
Explanation to sub-section (4) of section 153, the assessment ought to have been completed
on January 25, 2003, whereas it was completed only on March 31, 2003. The Department
had not been able to find any fault with the view taken by the Tribunal.(AY. 1988-89)
CIT v. Bata India Ltd. (2016) 385 ITR 539 / (2017) 152 DTR 145 (Cal.)(HC)
620
S. 153A Assessment
S. 153 : Assessment – Reassessment – Limitation – Limitation for the purpose of section 1889
153 shall start from the end of the year in which the notice is served on the assessee
and not from the end of year in which it is issued. [S. 147, 148]
A notice u/s. 148 for AY 1959-60 dated 23-1-1965 was issued to the assessee. The said
notice was served on the assessee only in September 1965. The provisions of section
153(2) at the relevant time prescribed limitation of four years for making assessment
from the end of assessment year in which notice u/s. 148 was served upon assessee. The
assessment order came to be passed on 18-3-1970. Held, time limit for completion of
assessment was four years from the end of the year in which notice was served and not
the year in which it was issued. Accordingly, reassessment held to be valid.)(AY. 1959-60)
R.B. Shreeram Durgaprasad v. CIT (2016) 237 Taxman 189 / 137 DTR 332 / 287 CTR 228
(Bom.)(HC)
S. 153 : Assessment – Reassessment – Limitation – When the Tribunal has set aside 1890
the matter, limitation for completion of assessment under section 153(2A) would apply.
Reassessment was held to be nullity [S. 153(2A), 254(1)]
The original assessment of assessee was completed under section 143(3) determining
certain income. On first appeal, the assessee was granted partial relief. Both assessee as
well as the revenue preferred further appeal before the Tribunal and the Tribunal vide
its order dated 28-9-2007 had restored the two additions made by the Assessing Officer
to the file of the Assessing Officer for fresh decision. Fresh assessment order was passed
by the Assessing Officer on 25-3-2009 repeating the same additions as were made in the
original assessment. On appeal, the assessee contended that the fresh assessment pursuant
to Tribunal’s order should have been framed by the Assessing Officer on or before 31-12-
2008 in terms of section 153(2A) and since the assessment was framed on 25-3-2009, the
same was barred by limitation. The Assessing Officer, on the other hand, contended that
the Tribunal had only restored the assessment to the file of the Assessing Officer and not
set aside the same. According to him, restoration has a meaning different from the meaning
of the expression ‘set aside’ and, hence, it is outside the ambit of limitation prescribed in
section 153(2A). Order of AO was affirmed by CIT(A). On appeal allowing the appeal the
Tribunal held that when Tribunal asked Assessing Officer to determine total income by
redeciding issues involved in additions made therein, it implied indisputably a mandate for
fresh determination of total income and in such case limitation for completion of assessment
under section 153(2A) would apply. Reassessment was held to be nullity. (AY. 2004-05)
DCIT v. Sanjay Jaiswal (2016) 158 ITD 397 (Kol.)(Trib.)
S. 153A. Assessment in case of search or requisition.
S. 153A : Assessment – Search and seizure – Statements were made under oath and 1891
were part of record and continued to be so, their probative value is undeniable, hence
additions based on the same ought to be sustained. [S.139(1)]
Dismissing the appeal of the assessee, the Court held that assessee’s submissions was
that statements were not recorded during search but later and that they couldn’t be
considered of any value. The High Court observed that the search was conducted on
22-3-2006 and various materials i.e. documents, agreements, invoices and statements in
621
Assessment S. 153A
form of accounts and calculations were seized and assessee’s sons recorded statements
under oath. Assessee too made her statement under oath, admitting that though returns
were filed ostensibly on her behalf, she was not in control of business. Assessee and
all other family members made short statements and endorsed statements under oath.
These statements under oath were part of record and continued to be so and hence,
their probative value was undeniable. High Court observed that because of search and
seizure that occurred it was noticed that assessee had undeclared income and hence
it was held that assessee’s argument that they could not be acted upon or given any
weight was insubstantial and meritless. Hence, the question of law was decided against
the Assessee and in favour of the Department. (AY. 1998-99)
Dalmia Cement (Bharat) Ltd. v. CIT (2016) 137 DTR 217 (Delhi)(HC)
1892 S. 153A : Assessment – Search – Assessment finalised before date of search – No
incriminating material found during search – Allowance of special deduction in initial
assessment cannot be disturbed. [S. 80-IA, 132]
Dismissing the appeal of revenue the Court held that; Assessment was finalised before
date of search and no incriminating material found during search, therefore, allowance
of special deduction in initial assessment cannot be disturbed.(AY. 2004-05, 2005-06)
PCIT v. Desai Construction P. Ltd. (2016) 387 ITR 552 (Guj.)(HC)
1893 S. 153A : Assessment – Search – Return must be filed even if no incriminating material
discovered during search – Estimation was held to be proper – Gift from relatives
cannot be assessed as undisclosed income. [S. 132]
Court held as under (1) Return must be filed even if no incriminating material
discovered during search. (ii) Additions made by Assessing Officer for assessment years
2002-03 to 2005-06 and 2008-09 on basis of estimation of consultation fees restored-
Tribunal’s direction to Assessing Officer to calculate cost of lens at 30 per cent of sale
value was held to be proper. (iii) Directions by Tribunal to Assessing Officer to make
additions on estimation basis and directions by Tribunal to Assessing Officer to reduce
disallowance from 80 per cent to 30 per cent.(iv) Gifts from close relatives, burden
of proof of source and creditworthiness discharged by assessee, deletion of additions
proper. (v) Cash flow statement of relative not reflecting cost of item. Additions made
by Assessing Officer restored. (vi) Addition of difference in cost of construction by
Assessing Officer restored. (AY. 2002-03 to 2008-09)
CIT v. Dr. P. Sasikumar (2016) 287 ITR 8 (Ker.)(HC)
1894 S. 153A : Assessment – Search – Assessment on basis of statement of third person
was held to be not valid without any incriminating found in the course of search
proceedings. [S. 132, 132A]
Dismissing the appeal of the revenue, the Court held that it was not the case of the
Revenue that any incriminating material in respect of the assessment year under
consideration was found during the course of search. When the notice came to be
issued under section 153A of the Act, the assessee filed its return of income. Much
later, when the time limit for framing the assessment as provided under section 153
was about to expire, the notice had been issued seeking to make the proposed addition
of ` 11,05,51,000/- not on the basis of material which was found during the course of
622
S. 153A Assessment
search, but on the basis of a statement of another person. The Tribunal was correct in
deleting the addition. (AY. 2006-07)
PCIT v. Saumya Construction P. Ltd. (2016) 387 ITR 529 (Guj.)(HC)
S. 153A : Assessment – Search – Seized material was destroyed in fire that took place 1895
at revenue’s premises – Assessment made relying on some information not unearthed
during search, assessment was held to be bad in law.
Dismissing the appeal of the revenue, the Court held that the AO framed the
assessments under section 153A relying on some information not unearthed during the
search. Further, whatever was recovered during the search having been destroyed in
a fire was not available with the Assessing Officer when the framed the assessments.
Consequently, the assessment orders passed with reference to section 153A(1) were
unsustainable in law. (AY. 2004-05 2005-06)
CIT v. MGF Automobiles Ltd. (2015)63 taxmann.com 137 (Delhi)(HC)
Editorial: SLP was granted to the revenue, CIT v. MGF Automobiles Ltd. (2016) 241
Taxman 440 (SC)
S. 153A : Assessment – Search and seizure – No assessments pending at time of 1896
initiation of proceedings – Finding by Tribunal that no incriminating evidence found
during course of search – Finalised assessment or reassessment shall not abate. [S. 132]
Once an assessment was not pending but had attained finality for a particular year, it
could not be subject to proceedings under section 153A of the Act, if no incriminating
materials were gathered in the course of the search or during the proceedings under
section 153A, which were contrary to and were not disclosed during the regular
assessment proceedings. (AY. 2005-06)
CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom)(HC)
Editorial : SLP was granted to the Department, CIT v. Gurinder Singh Bawa (2016) 383
ITR 7 (St.)
S. 153A : Assessment – Assessment in case of search – Limitation – No mandatory 1897
requirement of issuance of notice under section 143(2) in respect of search assessment
proceedings – Notices under sections 142(1) and 143(2) issued beyond period of six
months – Will not invalidate assessment [S. 142(1), 143(2), 153A]
Consequent to a search and seizure carried out at the premises of the assessee, notice
under section 153A of the Act, for the Assessment Year 2004-05 was issued to the
assessee on December 5, 2008 and in compliance therewith, the assessee filed a return
of income on January 30, 2009. Thereafter, notices under sections 142(1) and 143(2)
of the Act were issued to the assessee on June 10, 2010, i.e., beyond a period of six
months. The Assessing Officer passed an assessment order. Penalty proceedings were
also ordered to be carried out. The Commissioner (Appeals) allowed partial relief to the
assessee. Before the Tribunal, the assessee contended that the stipulated time period for
service of notice under section 143(2) of the Act would also be applicable in respect of
assessment framed under section 153A of the Act. The Tribunal rejected the contention
of the assessee and confirmed the decision of the Commissioner (Appeals). On appeal:
Held, dismissing the appeal, that the order of the Tribunal was justified. (AY. 2004-05)
Tarsem Singla v. DCIT (2016) 385 ITR 138 (P&H)(HC)
623
Assessment S. 153A
1898 S. 153A : Assessment – Search – Once notice is issued under section 153A – Return
must be filed even if no incriminating documents discovered during search [S. 132].
Allowing the appeal of revenue, the Court held that once a notice is issued u/s. 153A(1)
and the Assessing Officer has required the assessee to furnish return for a period of six
assessment years as contemplated under clause (b) then the assessee has to furnish all
details with respect to each assessment year since it is treated as a return filed under section
139. Even if no documents are unearthed or any statement made by the assessee during
the course of search under section 132 and no materials are received for the period of six
years, the assessee is bound to file a return, is the scheme of the provision. Even though the
second proviso to section 153A speaks of abatement of assessment or reassessment pending
on the date of the initiation of search within the period of six assessment years specified
under the provision that will also not absolve the assessee of his liability to submit returns
as provided under section 153A(1)(a). (AY. 2002-03 to 2008-09)
CIT v. St. Francis Clay Décor Tiles (2016) 385 ITR 624 / 240 Taxman 168 / 137 DTR 340
/ 287 CTR 187 (Ker.)(HC)
1899 S. 153A : Assessment – Search – No incriminating material found for particular year
– Assessment is not permissible.
Dismissing the appeal of revenue, the Court held that the Tribunal was right in holding
that there had to be incriminating material recovered during the search qua the assessee
in each of the years for the purposes of framing an assessment under section 153A of
the Act. (AY. 1998-99, 1999-2000)
PCIT v. Mitsui and Co. India P. Ltd. (2016) 384 ITR 360 (Delhi)(HC)
1900 S. 153A : Assessment– Search – Limitation – Assessment to be completed within
sixty days from date on which special auditor’s report due – Assessment order dated
27-4-2007 served on assessee on 30-4-2007 – No proof to establish that order issued
beyond control of authority within period of limitation being 29-4-2007 – Assessment
was held to be barred by limitation. [S. 142(2A), 142(2C)]
Held, dismissing the appeals, that the period prescribed under law being sixty days, the
assessment orders were required to be issued on or before March 26, 2007 considering
sixty days from January 27, 2007, the due date for the special auditor’s report as
specified under section 142(2C) of the Act. The assessment orders were dated April 27,
2007. The due date for submission of the special audit report upon second reference of
the Commissioner dated December 18, 2006 being February 28, 2007, the assessment
orders were to be issued on or before April 29, 2007. Copies of the assessment orders
were served on the assessee on April 30, 2007. The Department was unable to prove
from the records that the assessment orders were despatched on April 27, 2007 nor was
the despatch register produced to establish that the orders were complete and effective,
i.e., issued beyond the control of the authority within the period of limitation being
April 29, 2007. Admittedly, the assessment orders were served on the assessee on April,
30, 2007. The assessment orders were barred by limitation. (AY 2001-02 to 2005-06)
CIT v. B. J. N. Hotels Ltd. (2016) 382 ITR 110 (Karn.)(HC)
624
S. 153A Assessment
S. 153A : Assessment – Search – If the assessee stands amalgamated with another Co., 1901
it ceases to exists and all proceedings of search u/s. 132, notice and assessment u/s.
153C on the assessee are a nullity and void ab initio. [S. 132, 153C]
(i) The Assessee which was initially incorporated on 1st January, 1999 merged with
M/s. B. S. Infratech Pvt. Ltd. with effect from 1st April, 2008 by the order of the
Court. A search took place on 20th October, 2008 in the cases of Mr. B. K. Dhingra,
Smt. Poonam Dhingra and M/s Madhusudan Buildcon Pvt. Ltd. On the basis that
in the course of search certain documents belonging to the assessee company
were found, notice was issued to the assessee under Section 153C (1) on 10th
September, 2010. Therefore, not only on the date on which notice was issued but
even on the date of the search, the Assessee had ceased to exist in the eyes of law.
(ii) In identical circumstances, in cases arising out of the same search, this Court
has by its order dated 19th August, 2015 in the Revenue’s appeals ITA Nos.582,
584, 431, 533, 432 & 433 of 2015 (Pr. Commissioner of Income Tax (Central-II) v.
Images Credit And Portfolio Pvt. Ltd.) and order dated 29th September, 2015 in ITA
Nos.745, 746,748, 749 and 750/2015 (Pr. Commissioner of Income Tax (Central-2) v.
M/s Mevron Projects Pvt. Ltd.) invalidated the assessment proceedings against the
Assessee in those cases which, on account of having merged with another entity
with effect from a date anterior to the search, also no longer existed on the date of
search, on the date of the issue of notice and consequent assessment order passed
under Section 153 C of the Act is nullity and void ab initio. (ITA Nos.365, 366,
367, 368, 371 & 372 of 2013, dt. 15.10.2015)
CIT v. Indu Surveyors & Loss Assessors Pvt. Ltd. (Delhi)(HC); www.itatonline.org
S. 153A : Assessment – Search – Assessment cannot be made for the AYs in which 1902
incriminating material is not recovered even though incriminating material may be
recovered for other years in the block of 6 years.
The High Court had to consider whether there had to be incriminating material
recovered during the search qua the assessee in each of the years for the purposes of
framing an assessment under Section 153A of the Act. HELD by the High Court:
(i) It is not in dispute that in respect of the assessee for the AYs in question the initial
assessment proceedings took place under Section 143(3) of the Act. Thereafter
they were sought to be reopened by issuing notice under Section 147 of the Act
and re-assessment orders were passed under Section 147 read with Section 143(3)
of the Act. During both the aforementioned proceedings the question whether the
gold and silver utensils were the capital assets or personal effects of the Assessee
was examined. They were held not to be the personal effects.
(i) It has been noticed by the ITAT in the impugned order that for the AYs in question
no incriminating material qua the assessee was found. In that view of the matter,
and in light of the decision of this Court in CIT v. Kabul Chawla (2016) 380 ITR
573 (Delhi), the Court is of the view that the impugned order of the ITAT suffers
from no legal infirmity and no substantial question of law arises for determination.
(AY. 1998-99, 1999-2000)
Pr. CIT v. Lata Jain (Ms.) (2016) 384 ITR 543 (Delhi)(HC)
625
Assessment S. 153A
1903 S. 153A : Assessment – Search – No incriminating evidence related to share capital issued
found during course of search – Deletion of addition was held to be justified. [S.68]
Held, dismissing the appeal, that the order of the Commissioner (Appeals) revealed
that there was a factual finding that no incriminating evidence related to share capital
issued was found during the course of search as was manifest from the order of the
Assessing Officer. Consequently, it was held that the Assessing Officer was not justified
in invoking section 68 for the purposes of making additions on account of share capital.
There was nothing to show that the factual determination was perverse. (AY. 2002-03)
PCIT v. Kurele Paper Mills P. Ltd. (2016) 380 ITR 571 (Delhi)(HC)
Editorial: The Supreme Court has dismissed the special leave petition filed by the
Department against this judgment [2016] 380 ITR 64 (St.)
1904 S. 153A : Assessment – Search – Accounts which were duly verified during regular
assessment of assessee could not be re-appreciated merely because further a search
was conducted in premises of assessee as same would amount to reopening of
concluded assessment. [S.143(1)]
Assessments had been completed under section 143(3) and under section 143(1). Thereafter,
a search was conducted in the premises of the assessee. The AO made certain additions
after holding that the accounts of the assessee did not tally with the corresponding accounts
of the creditors and debtors. The CIT(A) allowed the assessee’s appeal, after concluding that
no incriminating documents were found during the course of search, on the basis of which
additions had been made by the AO. This finding was upheld by the Tribunal.
On appeal, the High Court observed that there were specific findings of fact recorded
by both the CIT(A) and the Tribunal that there were no incriminating documents found
during the course of search, on the basis of which the additions had been made by
the AO and that the accounts were submitted by the assessee at the time of regular
assessment which were duly verified and accepted by the AO. In the absence of any
incriminating documents having been found, if the assessment was allowed to be
reopened the same would amount to the revenue getting a second opportunity to reopen
a concluded assessment, which is not permissible. The High Court held that, merely
because a search was conducted in the premises of the assessee, would not entitle the
revenue to initiate the process of reassessment, for which there was a separate procedure
prescribed in the statute. It was only when the conditions prescribed for reassessment
were fulfilled that a concluded assessment could be reopened. The very same accounts
which were submitted by the assessee, on the basis of which assessment had been
concluded, could not be re-appreciated by the AO merely because a search had been
conducted in the premises of the assessee. (AY. 2005-06 to 2008-09)
CIT v. Lancy Constructions (2016) 237 Taxman 728 (Karn.)(HC)
1905 S. 153A : Assessment – Search – Assessments completed on date of search – No
incriminating materials found during search – Block assessment was held to be not
valid. [S. 132]
(i) Once a search takes place u/s. 132 of the Act, notice u/s. 153A(1) will have to be
mandatorily issued to the person in respect of whom search was conducted requiring
him to file returns for six AYs immediately preceding the previous year relevant to the
AY in which the search takes place. (ii) Assessments and reassessments pending on
626
S. 153A Assessment
the date of the search shall abate. In so far as pending assessments are concerned, the
jurisdiction to make the original assessment and the assessment u/s. 153A merges into
one. (iii) The Assessing Officer will exercise normal assessment powers in respect of the
six years previous to the relevant AY in which the search takes place. The Assessing
Officer has the power to assess and reassess the “total income” of the six years in
separate assessment orders for each of the six years. In other words, there will be only
one assessment order in respect of each of the six AYs in which both the disclosed
and the undisclosed income would be brought to tax. (iv) Although section 153A does
not say that additions should be strictly made on the basis of evidence found in the
course of the search, or other post-search material or information available with the
Assessing Officer which can be related to the evidence found, it does not mean that the
assessment can be arbitrary or made without any relevance or nexus with the seized
material. Assessment has to be made under this section only on the basis of the seized
material. (v) In the absence of any incriminating material, the completed assessment
can be reiterated and the abated assessment or reassessment can be made. (vi) Only
one assessment shall be made separately for each AY on the basis of the findings of
the search and any other material existing or brought on the record of the Assessing
Officer. (vii) Completed assessments can be interfered with by the Assessing Officer
while making the assessment u/s. 153A only on the basis of some incriminating material
unearthed during the course of search or requisition of documents or undisclosed
income or property discovered in the course of search which were not produced or not
already disclosed or made known in the course of original assessment. (AY. 2002-03,
to 2006-07)
CIT v. Kabul Chawla (2015) 281 CTR 45 / 126 DTR 130 / 234 Taxman 300 (2016) 380
ITR 573 (Delhi)(HC)
S. 153A : Assessment – Search – Agricultural income – Additional income was not 1906
supported by any evidence hence the addition as undisclosed income was held to be
justified. [S. 139]
Return u/s. 153A showed higher income from agriculture as compared to return u/s.
139. Consequently, AO made addition of ` 5,50,000 on account of agricultural income.
CIT(A) denied deletion of addition made by AO on account of agricultural income
as difference in such income between two returns were not reconciled through any
evidence on record. The ITAT upheld the addition of amount as agricultural income as
such increase in return filed u/s. 153A was not supported by any evidence or material
on record and no plausible explanation was given. (AY. 2008-09)
Naresh Chauhan v. Dy. CIT (2016) 48 ITR 1 (Chd.)(Trib.)
S. 153A : Assessment – Search – Onus was on the assessee to provide that he had not 1907
received payments even if no inquiry was made in the case of the brother – Addition
was held to be justified – Assessment only on the basis of material recovered during
search and addition on the basis of DVO’s report without incriminating material found
during the search was not permissible. [S.132(4)]
During the course of search, loose papers were found. As per these documents a sum
of ` 1.05 crores was to be paid by Shri Ramesh S. Kasat to the assessee and when
this document was confronted to the son of assessee, while recording his statement
627
Assessment S. 153A
under section 132(4) of the Act, he admitted ` 75 lakhs as undisclosed income. The
statement suggested the execution of this documents, and fulfilment of the obligations
for the purpose of this document. No weightage could be given to a simple denial of
the assessee vis-à-vis the evidence which suggested that the transactions were performed
in compliance with the documents. The assessee contended that no inquiry was made
in case of his brother. Even if no inquiry was made in the case of the assessee’s
brother the assessee would not discharge his onus to prove that in compliance with the
document, he had not received the payments Thus, there was no reason to interfere in
the concurrent finding of the Departmental authorities and in the addition confirmed by
the Commissioner (Appeals) to the extent of ` 75 lakhs. Addition on the basis of DVO’s
report without incriminating material found during the search was not permissible. (AY.
2004-05)
Champaklal S. Kasat v. DCIT (2016) 50 ITR 465 (Ahd.)(Trib.)
1908 S. 153A : Assessment – Search – Even in a case where only a S. 143(1) assessment is
made, additions cannot be made without the backing of incriminating material if the
S.. 143(1) assessment has not abated. [S. 143(1)]
Allowing the appeal of assessee, the Tribunal held that ;even in a case where only
a s. 143(1) assessment is made, additions cannot be made without the backing of
incriminating material if the s. 143(1) assessment has not abated. (ITA No. 638/
Mum/2011, dt. 31.08.2016) (AY. 2002-03 to 2005-06)
Anil Mahavir Gupta v. ACIT (Mum.)(Trib.); www.itatonline.org
1909 S. 153A : Assessment – Search – No incriminating documents found – Additions was
to be deleted. [S. 132]
Dismising the appeal of revenue, the Tribunal held that in the absence of any
incriminating material found during the course of the second search. The concluded
assessment of the assessee could not be disturbed on the same set of material facts
as prevailing when the assessment was framed under section 153A read with section
143(3) in pursuance of the first search. The additions made by the Assessing Officer to
be deleted. (AY. 2007-08 to 2009-10)
DCIT v. Himanshu B. Kanakia (2016) 46 ITR 756 (Mum.)(Trib.)
1910 S. 153A : Assessment – Search – Notice – issued for the Assessment Year which has
been completed – No incriminating material found during the course of search action
– Assessment under section 153A had to be made only as per original assessment
which was made under section 143(1) or under section 143(3).[S. 132, 143(1), 143(3)]
Where pursuant to search proceedings, notice under section 153A was issued, since
assessment in respect of some assessment years covered by said notice had already
been completed and, moreover, no incriminating material was found during search,
assessment for those assessment years could be made only as per original assessment
under section 143(1) or 143(3). (AY. 2005-06 to 2011-12)
Om Shakthy Agencies (Madras) (P.) Ltd. v. Dy. CIT (2016) 157 ITD 1062 / 177 TTJ 419
(Chennai)(Trib.)
628
S. 153A Assessment
S. 153A : Assessment – Search – An assessment made u/s. 153A only on the basis of 1911
pre-search enquiries and because the parties did not appear in response to S.133(6)
summons is not valid if no incriminating material was found in search. S. 143(1)
Intimation is deemed to be a completed assessment if no notice u/s. 143 (2) has been
issued prior to the date of search – Addition was deleted. [S. 143(1)]
We are of the considered view that completed assessment interfered with by the AO
u/s. 153A and confirmed by the ld. CIT (A) are not sustainable in the eyes of law for
the following reasons: –
(i) that in the instant case, undisputedly the AO has not made assessment on the basis
of incriminating material unearthed during search and seizure operation conducted
u/s. 132 rather proceeded u/s. 153A of the Act on the basis of some pre-search
enquiries to make an addition as has specifically been recorded in para 6 of the
assessment order that, “Pre-search enquiries revealed that M/s. Jaipuria Infrastructure
Developers Pvt. Ltd., the flagship company involved in the real estate business of the
S.K. Jaipuria group is indulged in inflating the cost of the project by debiting bogus
expenses by raising bills from the non-existing parties or the entry providers.”
(ii) that the ratio of the judgment in case of CIT v. Kabul Chawla 380 ITR 173 (Del.) is
required to be extracted by perusing the judgment in entirety and not by picking
up the favourable sentences and by ignoring the unfavourable one. Highlighted
portion of paras 37 (iv), (v), (vi) & (vii) of Kabul Chawla (supra) is crux of the issue
involved which is applicable to the facts and circumstances of the case;
(iii) that the ratio of the judgment Kabul Chawla (supra) is that in all circumstances,
completed assessment can be interfered with by the AO u/s. 153A only on the
basis of incriminating material unearthed during the course of search;
(iv) that not only this, the addition in this case has been made by the AO u/s. 153A
on the sole ground that assessee has failed to produce the parties with whom the
assessee company has transacted during the year under assessment who have failed
to turn up despite the issue of notice u/s. 133 (6) of the Act;
(v) that the contention of the ld. DR that the assessment qua the AY 2006-07 was pending
as on date of search as mere issuances of acknowledgement by the ministerial staff
does not imply that assessment has been completed, is not tenable in the face of
undisputed fact that when within the prescribed period, no notice u/s. 143 (2) has
been issued prior to the date of search, assessment is deemed to be completed;
(vi) that there is not an iota of material with the AO to initiate proceedings u/s. 153A
what to talk of incriminating seized material;
(vii) that the ld. CIT(A) affirmed the assessment order by relying upon the decisions
relied upon by Hon’ble jurisdictional High Court in the case cited as Filatex India
Ltd. v. CIT-IV – (2014) 49 taxmann.com 465 (Delhi) which has been distinguished
in the Kabul Chawla (supra) on the ground that in the said case, there was
some material unearthed during the search whereas in the instant case there is
admittedly no incriminating material unearthed during the search to proceed u/s.
153A. (ITA Nos.5522 & 5523/Del./2015, dt. 27.06.2016)(AY. 2006-07, 2007-08)
Jaipuria Infrastructure Developers v. ACIT (Delhi)(Trib.); www.itatonline.org
629
Assessment S. 153A
1912 S. 153A : Assessment – Search – Not issued notice within prescribed limit – Absence
of incriminating material, order was held to be bad in law. [S. 143(2)]
AO having not issued notice u/s. 143(2) within the prescribed time limit pursuant to
the return filed by the assessee under s. 139(1), no proceeding was pending before the
AO on the date of initiation of search which had abated, and the Revenue authorities
having found no incriminating document during the course of search, the impugned
order passed u/s. 153A r.w.s. 143(3) is void ab initio. (AY. 2008-09)
Jadau Jewellers & Manufacturers (P) Ltd. v. ACIT (2016) 130 DTR 17 / 175 T TJ 344
(Jaipur)(Trib.)
1913 S. 153A : Assessment – Search – Income of any other person – No satisfaction recorded
by AO in respect of whom the search was conducted prior to issuing notice – Notice
and assessment against the assessee was not valid. [S. 153C, 292B]
In the absence of satisfaction by the AO of the person in respect of whom search was
conducted, the AO of the assessee would not get any jurisdiction to issue such notice.
Accordingly, notice u/s. 153C issued by the AO of the person in respect of whom search
was conducted lacked jurisdiction and this was not curable by virtue of the provisions
of section 292B.(AY. 2003-04 to 2008-09)
Parshwa Corporation and others v. Dy. CIT (2016) 46 ITR 266 / 178 TTJ 394 (Ahd.)(Trib.)
1914 S. 153A : Assessment – Search – Assessment made u/s. 143(1) can be said to have
abated in the absence of incriminating material. [S. 143(1)]
Allowing the appeal of assessee the Tribunal held that assessment made u/s. 143(1) can
be said to have abated in the absence of incriminating material. (ITA No. 173 to 177/
Mum/2015, dt. 31.12.2015) (AY. 2005-06 to 2009-10)
Ideal Appliances Co. Pvt. Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org
S. 153C : Assessment of income of any other person.
1915 S. 153C : Assessment – Income of any other person – Search Recording of satisfaction
is mandatory – Matter was remanded back to Tribunal. [S. 158BC]
Allowing the appeal the Court held that in accordance with Circular No. 24 of 2015, dated
December 31, 2015 at the time of or along with the initiation of proceedings against the
assessee under section 153C of the Income-tax Act, 1961, or in the course of assessment
proceedings under section 158BC of the Act or immediately after the assessment proceedings
are completed under section 158BD of the Act recording of satisfaction is required. Further,
even in respect of “all other persons than the searched person such recording of satisfaction
by the Assessing Officer is required”. The circular further states that, if in the pending
matters, the guidelines laid down by the Supreme Court of recording of satisfaction note is
not met, such litigation should be withdrawn or not pressed or the appeal should also not
be filed. The effect would be that, the requirements of recording of satisfaction for exercise
of power under section 153C is a mandatory requirement and cannot be given a go-by,
either at the stage of initiation or during the course of assessment or at the conclusion of
the assessment. Court held that as there was no examination by the Tribunal on the aspect
of satisfaction note. The Tribunal should examine the aspects of satisfaction note if any, and
630
S. 153C Assessment
whether it could be termed sufficient compliance or not for the assessment to be initiated
or to be made or finalized under section 153C of the Act. If need arose, the Tribunal may
also examine the assessment made on its merits.
Arihant Aluminium Corporation v. ACIT (2016) 388 ITR 450 / 69 taxmann.com 286 (Karn.)(HC)
S.153C : Assessment – Income of any other person – Search – Finding that assessee 1916
had adequate explanation for discrepancy in stock and advances, additions was held
to be not valid. [S.132, 143(3)]
Dismissing the appeal of revenue, the Court held that; finding that assessee had
adequate explanation for discrepancy in stock and advances, additions was held to be
not valid. (AY. 2006-07)
CIT v. N.G. Jewellers (2016) 389 ITR 403 (Raj.)(HC)
S. 153C : Assessment – Income of any other person – Search – Satisfaction that 1917
incriminating material belonged to third person must be recorded – No incriminating
material found – Provisions cannot be invoked. [S. 132, 132A, 133A, 153A]
Dismissing the appeal of the revenue, the Court held that; incriminating material in
the seized material was a pre-requisite before power was exercised under section 153C
read with section 153A of the Act. The Department had not shown any incriminating
material unearthed either during the search or during the requisition or even during
the survey which was or might be relatable to the assessee. The Assessing Officer had
made disallowances of the expenditure, which were already disclosed, for one reason
or the other, but such disallowances were not contemplated by the provisions contained
under section 153C read with section 153A. The disallowances were upheld by the
Commissioner (Appeals) and that there was no infirmity in the order of the Appellate
Tribunal deleting the disallowances. (AY. 1998-99, 1999-2000, 2001-02, 2002-03, 2003-04)
CIT v. Veerprabhu Marketing Ltd. (2016) 388 ITR 574 / 73 taxmann.com 149 / (2017) 149
DTR 87 / 294 CTR 103 (Cal.)(HC)
S. 153C : Assessment – Income of any other person – Search – Cheque book seized – No 1918
other evidence of undisclosed income – Proceedings was held to be not valid. [S. 132]
Dismissing the appeal of the revenue the Court held that Since the only document
seized during the search was a cheque book pertaining to assessee which reflected the
issue of cheques during the period and there was no other evidence of undisclosed
income, the proceedings under section 153C were not valid. (AY. 2003-04 to 2008-09)
CIT v. Refam Management Services P. Ltd. (2016) 386 ITR 693 (Delhi)(HC)
S. 153C : Assessment – Income of any other person – Search and seizure – Satisfaction – 1919
No incriminating materials found – Assessment was held to be not valid. [S. 132, 158BD]
Held, one of the conditions precedent for invoking a block assessment pursuant to
a search in respect of a third party under section 158BD of the Act, i.e., recording
satisfaction that undisclosed income belongs to the third party, which was detected
pursuant to a search had not been complied with. Though documents belonging to the
assessee were seized at the time of search operation, there was no incriminating material
631
Assessment S. 153C
found leading to undisclosed income. Therefore, assessment of income of the assessee
was unwarranted. (AY. 2004-05 to 2008-09)
CIT v. IBC Knowledge Park P. Ltd. (2016) 385 ITR 346 / 287 CTR 261 / 69 taxmann.com
108 (Karn.)(HC)
1920 S. 153C : Assessment – Income of any other person – Absence of incriminating
material – Search material – Assessment of third person cannot be made. [S. 132,
153A]
Absence of incriminating material Search material Assessment of third person cannot be
made. Recording of satisfaction by AO having jurisdiction over third person in respect
of search conducted that such money, asset or valuables belonged to third person is
required (AY. 2001-02 to 2007-08)
CIT v. Promy Kuriakose (2016) 386 ITR 597 / (2017) 148 DTR 287 / 293 CTR 440 (Ker.)(HC)
1921 S. 153C : Assessment – Income of any other person – Search – Assessing Officer of
a person searched, under section 153A, is required to record satisfaction that assets/
documents found during search belong to the other person before handing over the
documents to the Assessing Officer of that other person. [S. 153A]
A search was conducted on group companies of the assessee. During the course of
search, copies of resolutions, affidavits, counter foils of Income-tax returns, Share
application forms pertaining to the assessee were found by the Assessing Officer of a
person searched under section 153A of the Act. The Assessing Officer of the person
searched and the assessee was same therefore, notice under section 153C of the Act
was issued by the Assessing Officer and assessment was completed after making
addition under section 68 of the Act. The Assessee challenged the jurisdiction to
make assessment under section 153C of the Act before CIT(A) however, it was rejected
by him. On appeal to the Tribunal, assessment under section 153C was quashed on
the ground that satisfaction was not recorded by the Assessing Officer of the person
searched, under section 153A, that the documents found during the search belong to
the assessee before handing over the same to the assessee. The High Court held that
satisfaction by the Assessing Officer of the person searched under section 153A is sine
qua non for initiation of proceedings under section 153C. The High Court further held
that section 153C is not attracted where documents pertaining to the other person is
found, it is attracted only in case where documents belonging to the other person is
found. It was held that satisfaction must be recorded by the Assessing Officer even if
the Assessing Officer of the person searched under section 153A and a person sought to
be assessed under section 153C is the same. (AY. 2003-04 to 2005-06, 2008-09, 2009-10)
PCIT v. Nikki Drug & Chemicals (P.) Ltd. (2016) 386 ITR 680 / 236 Taxman 305 / 129 DTR
393 / 293 CTR 398 (Delhi)(HC)
1922 S. 153C : Assessment – Income of any other person – Search – No satisfaction recorded
before initiating proceedings – Assessment was held to be not valid.
Held, the order passed by the Tribunal, the final fact finding authority, clearly states
that no satisfaction note had been recorded before initiating the proceedings u/s. 153C.
When no satisfaction was recorded the requirement of section 153C was not satisfied.
Therefore, there was no reason to interfere with the order passed by the Tribunal, which
632
S. 153C Assessment
had not sustained the proceedings u/s. 153C for the reason that there was no satisfaction
at any stage. (AY. 2002-03, 2006-07)
CIT v. Madhu Keshwani (Smt.)(2016) 380 ITR 566 (All.)(HC)
CIT v. Nirmala Keshwani (Smt.)(2016) 380 ITR 566 (All.)(HC)
CIT v. Nisha Keshwani (Smt.)(2016) 380 ITR 566 (All.)(HC)
S. 153C : Assessment – Income of any other person – Search – Affidavits of person 1923
in respect of whom search conducted that documents belonged to him – No other
evidence of undisclosed income – Proceedings was held to be not valid.[S. 132, 153A]
It was not disputed that the hard disk did not contain any incriminating material as the
data on the hard disc only supported the return filed by the assessee. This apart, as the
hard disc did not belong to the assessee, proceedings u/s. 153C could not be initiated
on the basis of the disk. Thus, the provisions of section 153C, which are to enable an
investigation in respect of the seized asset, could not be resorted to. The Assessing
Officer had no jurisdiction to make the reassessment u/s. 153C. (AY. 2003-04 to 2008-09)
CIT v. RRJ Securities Ltd. (2015) 62 taxmann.com 391 / (2016) 380 ITR 612 / 282 CTR
321 (Delhi)(HC)
S. 153C : Assessment – Income of any other person – Search – Limitation starts from 1924
date on which assets or documents received by Assessing Officer of third person –
Limitation will start on date of recording of satisfaction that incriminating material
belonged to third person – Satisfaction recorded on 8-9-2010 – Assessments for AYs
2003-04 and 2004-05 was held to be barred by limitation.[S.132, 153A]
Dismissing the appeal of revenue the Court held that; in any case the date of recording
of satisfaction u/s. 153C was September 8, 2010. The assessments made in respect of
the AYs 2003-04 and 2004-05 would be beyond the period of six Assessment Years. The
assessments for the AYs 2003-04 and 2004-05 were outside the scope of section 153C
and the Assessing Officer had no jurisdiction to make an assessment of the assessee’s
income for those years. (AY. 2003-04 to 2008-09)
CIT v. RRJ Securities Ltd. (2015) 62 taxmann.com 391 / (2016) 380 ITR 612 / 282 CTR
321 (Delhi)(HC)
S. 153C : Assessment – Income of any other person – Share premium – An order 1925
passed without obtaining the approval of the JCIT is without jurisdiction and void [S.
132, 153A, 153D, 158BD]
Allowing the appeal the Tribunal held that an order passed without obtaining the
approval of the JCIT is without jurisdiction and void. (ITA No. 926 to 931/mum/2013,
dt. 30.09.2016)(AY. 2002-03 to 2007-08)
HiKlass Moving Picture Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 153C : Assessment – Income of any other person – Search – No addition in case 1926
incriminating material is not found by the AO.
A search was conducted in the premises of Mr. Prakash H. Savla where documents
relating to the firm Mahavir Builders was found. Subsequently, Mr. Prakash H. Savla
and the assessee’s husband gave certain declarations offering undisclosed income of
connected persons, including the assessee, on account of undisclosed share purchase
633
Assessment S. 153C
transactions. The declaration relating to the assessee pertained to AY 2007-08. Notice
u/s. 153C was issued, pursuant to which return of income for AY 2009-10 was
filed by the assessee. The AO made an addition on account of gift received by the
assessee and also treated long term capital gains as income from other sources. The
ITAT held that addition was made in the absence of any adverse material which was
impermissible. The Tribunal thus deleted the addition made by the AO on the basis that
no incriminating material was found by the AO on said issue, relating to the Assessee.
(AY. 2003-04, 2005-06 to 2008-09)
Chhaya P. Gangar (Ms.) v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
1927 S. 153C : Assessment – Income of any other person – Search – Income declared in
partnership firm – addition deleted.
An addition was also made by the AO on the basis of books of entry of Vividham
Sweets and Snacks Shop. The AO assumed that Vividham had paid rent to the Assessee.
The ITAT deleted the addition since the rental income was offered to tax and declared
in the return of income of the partnership firm. (AY. 2003-04, 2005-06 to 2008-09)
Chhaya P. Gangar (Ms). v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
1928 S. 153C : Assessment – Income of any other person – Search – Telescoping denied –
Nexus not proved
During the course of search certain print outs from accounting software were found
and seized, showing that in the ledger account under the name of commission and
brokerage, there was an entry of cash received of ` 6 lakhs in the books of account of
the assessee. The assessee submitted that this entry had already been considered in
the offer of income made by the assessee for an aggregate amount of ` 30 lakhs, and,
therefore, it should be adjusted against that. The Assessing Officer was not satisfied
with the explanation and made the addition. The Commissioner (Appeals) granted the
benefit of telescoping. On appeal, the ITAT held that in the assessment proceedings
before the Assessing Officer, the assessee claimed that the entry of commission and
brokerage of ` 6 lakhs received in cash was covered in the declaration made on account
of amount spent on renovation of house of the assessee. This claim was not accepted
by the Assessing Officer on the ground that no correlation could be shown between the
two by the assessee. But the Commissioner (Appeals) accepted it and granted the benefit
of telescoping. No reasoning had been given by the Commissioner (Appeals) as to how
and in what manner the amount of ` 6 lakhs earned on account of some brokerage
and commission was covered within the offer of ` 30 lakhs made by the assessee. The
Commissioner (Appeals) had discussed in detail the entire law on telescoping but failed
to discuss how and in what manner, the amount was covered in the income offered by
the assessee. The contention of the Revenue that the assessee was not able to establish
any nexus between the two amounts was justified. (AY. 2003-04, 2005-06 to 2008-09)
Chhaya P. Gangar (Ms.) v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
1929 S. 153C : Assessment – Income of any other person – Search – Loose document –
jottings found – AO not made any efforts to contact the said party – addition deleted
There were certain jottings on a document found during the course of search. The
assessee explained that he did not know Arunbhai whose name was mentioned in
634
S. 153C Assessment
the seized document, and that he had nothing to do with this document. But the
Assessing Officer made addition. On the ground that the assessee failed to produce
Arunbhai before the Assessing Officer for his examination and also failed to submit any
documentary evidence to explain the entry, the Commissioner (Appeals) confirmed the
addition. The ITAT held that the document was dumb and half a speaking document.
Before it could be used for making addition in the hands of the assessee, there was a
legal obligation on the Assessing Officer to make it a fully speaking document since he
wanted to make addition on the basis of the document. There were no indications or
observations in the assessment order showing whether the Assessing Officer made any
efforts to contact Arunbhai. There was no mention in the assessment order whether he
asked the assessee to produce Arunbhai, whether the amount had been received or given
or whether the amount shall be received or shall be given, whether it was income or
expense. Nothing emerged from the perusal of the document, and, therefore, no addition
could have been made simply relying on the document that too without bringing any
material on record to explain and substantiate the document. (AY. 2003-04, 2005-06 to
2008-09)
Chhaya P. Gangar (Ms.) v. DCIT (2016) 47 ITR 328 (Mum.)(Trib.)
S. 153C : Assessment – Income of any other person – Search – Client code 1930
modifications
The assessee was carrying out the business of trading in shares and investments. The
assessee was engaged in commodity transactions through its broker, Kunwarji. Pursuant
to a search and seizure action carried out in the premises of the Kunwarji group, the
computer data belonging to the assessee was seized. The Assessing Officer held that
Kunwarji had carried out client code modifications in active connivance with the
assessee which had resulted in diversion of profits of the assessee to other persons.
The Assessing Officer thereafter worked out the difference of profits as indicated by the
assessee in the books of account and as worked out by reversing the effect of the client
code modification, and treated the difference worked out by him as suppressed profit
of the assessee. The Commissioner (Appeals) deleted the additions holding that the
client code modifications were negligible in number compared to the total quantum of
trades carried out by the assessee and the addition was in the nature of notional income
made by assumptions and without basis. On appeal, ITAT held that the Commissioner
(Appeals) while deleting the addition had relied on the decision in the case of Asst.
CIT v. Kunvarji Finance Pvt. Ltd. [2015] 40 ITR (Trib.) 64 (Ahd.) and the order of the
Commissioner (Appeals) in that case was upheld by the co-ordinate Bench of the
Tribunal. The Revenue had not brought any distinguishing feature between the case of
the assessee and that of Kunvarji Finance Pvt. Ltd. Therefore, no interference was called
for in the order of the Commissioner (Appeals). (AY. 2005-06, 2007-08)
ACIT v. Amar Mukesh Shah (2016) 46 ITR 234 (Ahd.)(Trib.)
635
Assessment S. 153C
1931 S. 153C : Assessment – Income of any other person – Search – Once the assessee has
submitted necessary documents to prove the bona fides of transactions entered into
by him, the onus lies on the AO to prove that the claim of the Assessee is factually
incorrect. Mere baseless statements will not discharge the onus cast upon the AO.
The assessee was engaged in the investments in capital market. Consequent to a search
conducted, the AO issued a notice u/s. 153C and made an addition u/s. 68 on the basis
that the Assessee did not have sufficient income or the bank accounts indicated credits
and debits in rapid succession leaving little balance for investment. The CIT(A) deleted
the addition. On further appeal, the ITAT held that the assessee had submitted necessary
evidence to establish bona fides of transaction, but the AO had not discharged the onus
which was on him to prove that the claim of the Assessee was factually incorrect.
Though it was part of their duty to ensure that no tax which was legitimately due from
the assessee remained unrecovered, at the same time they would not act in a manner as
might indicate that scales were weighed against the assessee. (AY. 2006-07)
ACIT v. Goodview Trading P. Ltd. & Goodview Trading P. Ltd. v. ACIT (2016) 47 ITR 555
(Delhi)(Trib.)
1932 S. 153C : Assessment – Income of any other person – Search – Notice issued under
section 153C without recording any satisfaction that the seized document belong to
the assessee – Notice not valid.
Once it is not the case of Department that documents in question were not belonging
to person who was searched, provisions of S. 153C could not be invoked. (AY. 2010-11)
Fiberfill Engineers v. ACIT (2016) 177 TTJ 556 / 138 DTR 57 (Delhi)(Trib.)
1933 S. 153C : Assessment – Income of any other person – Search – Satisfaction was not
recorded hence the order was held to be bad in law. [S. 132(4A, 133A]
No satisfaction was recorded before issue of notice hence the order was held to be bad
in law. (AY. 2007-08, 2008-09, 2009-10, 2010-11)
Super Malls Pvt. Ltd. v. Dy. CIT (2016) 176 TTJ 563 / 132 DTR 48 (Delhi)(Trib.)
636
S. 154 Rectification of mistake
S. 154 : Rectification of mistake.
S. 154 : Rectification of mistake – Notice cannot be issued for rectification in respect 1934
of an issue which is allowed by the appellate authorities and the same is accepted by
the Department. [S. 80HHC]
The High Court quashed the rectification notice issued by the Assessing Officer under
section 154 of the Act seeking to disallow the deduction under section 80HHC which
was allowed by the Commissioner of Income Tax (Appeals) for the reason that the order
of the Assessing Officer is merged with that of Commissioner of Income Tax (Appeals)
and also for the reason that the issue involved was a debatable one. (AY. 1992-93)
IPCA Laboratories Ltd. v. Rajaram, DCIT (2016) 140 DTR 89 (Bom.)(HC)
S. 154 : Rectification of mistake – Assessing Officer being statutorily bound to comply 1935
with provisions of sub-section (5) of section 154 cannot refuse to give effect to order
passed by Commissioner (Appeals). [S. 40(a)(ia), 245]
Allowing the appeal the Court held that pursuant to the order dated 5-9-2013, the
Assessing Officer has neither given effect to such order as contemplated under sub-
section (5) of section 154 nor has he made any adjustment after prior intimation to the
assessee under section 245. The reason for non-compliance with the mandate of the
provisions of sub-section (5) of section 154 is nothing but an adamant attitude of the
Assessing Officer. It may be that the Assessing Officer is aggrieved by the order passed
by the Commissioner (Appeals) and may have preferred an appeal before the Tribunal.
Nonetheless, as on date, such order is in operation, as the same has not been stayed
by the Tribunal or any other court of competent jurisdiction. Under the circumstances,
the Assessing Officer is statutorily bound to give effect to the said order. (AY. 2005-06)
R.G. Gurjar v. ITO (2016) 387 ITR 696 / 240 Taxman 273 (Guj.)(HC)
S. 154 : Rectification of mistake – Long term capital gains – Agricultural land – Not a 1936
case of rectification – Assessee should have filed revised return or revision application.
[S. 45, 139, 264]
Assessee claiming to have mistakenly declared long-term capital gains on transfer
of agricultural land. Assessee has filed Rectification Application. Dismissing the
petition the Court held that, facts of the case does not fall as mistake for rectification.
Submission of corroborating evidence with Rectification Application requiring
investigations and verifications hence the assessee should have filed revised return or
sought revision before Commissioner. (AY. 2008-09)
Satbir Nijjer v. CIT(A) (2016) 383 ITR 71 / 139 DTR 138 / 288 CTR 96 (P&H)(HC)
S. 154 : Rectification of mistake – Lease income assessed as income from financing 1937
transaction – No appeal against such assessment or disallowance of depreciation –
Earlier application for rectification given up – Application to delete income from lease
was held to be not valid. [S.154(IA), 254(2)]
The lease income was assessed as income from a financial transaction and upheld by
the High Court. A plea for rectification for deletion of income from lease was raised
before the High Court but not pursued. Subsequently, an application was made for
rectification u/s. 154(1A) and also u/s. 254(2). The applications were rejected by the
637
Rectification of mistake S. 154
Tribunal. Held, that at the initial point of time, it was well within the assessee's
knowledge that the income, though not treated as an income from lease, was treated as
income from finance transaction in respect of the same party. Therefore, the new plea
taken by the assessee that consequent to the disallowance of depreciation, the income
should also be deleted, had no basis. The case did not fall within the scope of section
154(1A) warranting rectification as envisaged in the provision.(AY. 1993-94 to 1996-97)
Indus Finance Corporation Ltd. v. CIT (2015) 63 taxmann.com 244 / (2016) 380 ITR 504
/ 136 DTR 118 (Mad.)(HC)
Editorial: SLP of assessee is dismissed Indus Finance Corporation Ltd v. CIT (2017) 246
Taxman 222 (SC)
1938 S. 154 : Rectification of mistake – Commissioner (Appeals) and Tribunal failing to
adjudicate issue of jurisdiction u/s. 154 – Matter remanded to Commissioner (Appeals)
to decide issue afresh. [S.54, 54F, 54EC]
The assessee sold certain shares and computed capital gains and claimed deduction
u/s. 54. The Assessing Officer, without noticing that the capital asset which had been
transferred was not a long-term capital asset, allowed the claim of deduction u/s. 54.
On finding that the assessee had made and been allowed a wrong claim u/s. 54, the
Assessing Officer issued a notice u/s. 154. The assessee accepted the mistake crept in the
order of assessment and filed a revised computation claiming the benefit u/s. 54F and
section 54EC. The Assessing Officer allowed the proportionate investment and taxed the
remaining sale consideration. The Commissioner (Appeals), on considering the appeal
filed against the regular assessment, against the disallowance of interest claimed on the
loans borrowed from the banks and other institutions, granted relief to the assessee. As
regards the appeal against the order u/s. 154, he failed to consider the issue on the merits
but allowed the appeal with an observation that in view of the finding given in the main
appellate order it became consequential in nature and, accordingly, the appeal as regards
section 154 succeeded. As regards the order u/s. 154, the Tribunal rejected the appeal filed
by the Revenue and allowed the cross-appeal filed by the assessee on the jurisdiction of
the Assessing Officer u/s. 154 holding that no challenge was made by the Revenue as
regards the order of the Commissioner (Appeals) on the issue of section 154. On appeal:
Held, allowing the appeal, that with regard to the appeal filed u/s. 154 no reasons
were assigned by the Commissioner (Appeals). On this issue, appeals were filed by the
Revenue before the Tribunal including the grounds of appeal on the issue of section
154. Cross-objections were filed by the assessee on this issue. Thus, it was manifest
that the Commissioner (Appeals) and the Tribunal failed to adjudicate the matter in a
right perspective. The finding given on the proceedings u/s 154 was perverse and not
sustainable. The matter was remanded to the Commissioner (Appeals) to adjudicate on
the issue of section 154 in accordance with law after hearing the parties.(AY. 2002-03)
CIT v. Pradeep Kar (2016) 380 ITR 121 (Karn.)(HC)
1939 S. 154 : Rectification of mistake – Merely on the basis of admission the assessee cannot
be held to be liable to deduct tax at source, without examining the provisions, order
was set aside. [S.194C, 201(1), 201(IA)]
Allowing the appeal of the assessee, the Tribunal held that assessee had not incurred
any amount towards building constructions for year under consideration and AO,
638
S. 154 Rectification of mistake
without examining applicability of provisions of s. 194C, merely on basis of admission
of assessee that there was lapse in TDS Compliance in respect of building construction,
held assessee as assessee in default u/s. 201(1) and 201(1A), said mistake being a
mistake apparent from record, needed to be rectified. (AY 2010-11)
Sri Chaitanya Educational Society v. ITO (2016) 159 ITD 763 (Visakh.)Trib.)
S. 154 : Rectification of mistake – Once the appellate authority has decided an issue, 1940
the AO can no longer rectify or reopen the same issue under proceedings u/s. 154. [S.
115JB]
The Assessee is a company paying tax u/s. 115JB. The provision of bad debts claimed by
it was added back by the AO in his order u/s. 143(3), which was subsequently deleted
by the CIT(A). The Finance (No. 2) Act, 2009 introduced a retrospective amendment of
increasing the book profit by any provision on account on diminution in value of any
asset. The AO sought to make the addition of the provision for bad debts vide rectifying
his order u/s. 154. On appeal, the ITAT quashed the order of the AO and held that
once the matter has been decided in appeal proceedings, then the order u/s. 154 can
be passed only by the authority passing such appellate order and the AO can no longer
reopen or rectify the issue u/s. 154. (AY. 2004-05 to 2006-07)
NHPC Ltd. v. ACIT (2016) 47 ITR 561 (Delhi)(Trib.)
S. 154 : Rectification of mistake – Tax cannot be levied on assessee at a higher amount 1941
or at a higher rate merely because assessee, under a mistaken belief or due to an
error, offered income for taxation at that amount or that rate. [S.4]
Assessee filed an application seeking rectification of assessment order on ground that in
computing income, incorrect figures of net profit and depreciation had been picked up
from profit and loss account. Assessing Officer rejected said application on ground that
assessee itself had computed income on basis of incorrect figures. CIT(A), allowed the
claim of assessee. On appeal dismissing the appeal of revenue the Tribunal held that
tax cannot be levied on assessee at a higher amount or at a higher rate merely because
assessee, under a mistaken belief or due to an error, offered income for taxation at that
amount or that rate. Order of CIT(A) was upheld. (Dattatraya Gopal Bhotte v. CIT (1984)
150 ITR 460 (Bom.)(HC) (AY. 2008-09)
ACIT v. Rupam Impex (2016) 157 ITD 360 (Rajkot)(Trib.)
S. 154 : Rectification of mistake – Pension fund would continue to be governed by 1942
provisions of section 44 irrespective of fact it is exempted or not; therefore, even
after insertion of section 10(23AAB), while determining actuarial valuation surplus
from insurance business under section 44, loss incurred from pension fund has to be
excluded – Non-consideration of subsequent decision of Apex Court or jurisdictional
High Court could give rise to a mistake apparent record where an order is inconsistent
therewith. [S. 10(23AAB), 44]
Assessee moved the application under section 154 and claimed that there was a mistake
in reducing the loss of its pension business as it was also a part of its business and thus
liable to be taken into account in computing income from the same under section 44
read with First Schedule thereto. AO rejected the application. CIT(A) affirmed the order
639
Rectification of mistake S. 154
of AO. On appeal Tribunal held that pension fund would continue to be governed by
provisions of section 44 irrespective of fact it is exempted or not; and, therefore, even
after insertion of section 10(23AAB), loss incurred from pension fund has to be excluded
while determining actuarial valuation surplus from insurance business. The Tribunal
also held that non-consideration of subsequent decision of Apex Court or jurisdictional
High Court could give rise to a mistake apparent record where an order is inconsistent
therewith. (AY. 2009-10)
Sunlife Insurance Company Ltd. v. Jt. CIT (2016) 157 ITD 16 (Mum.)(Trib.)
1943 S. 154 : Rectification of mistake – Set off of unabsorbed losses – Rectification order
was held to be bad in law. [S. 32]
Dismissing the appeal of revenue the Tribunal held that as issue of set off of unabsorbed
depreciation pertaining to assessment year 1996-97 and earlier years was subject matter
of huge debate, it could not be subject matter of rectification proceedings.(AY. 2007-08)
Dy. CIT v. India Jute & Industries Ltd. (2016) 156 ITD 912 (Kol.)(Trib.)
1944 S. 154 : Rectification of mistake – Additional depreciation – View once allowed by the
AO could not be rectified by him if the issues is debatable. [S. 32(1)(iia)]
The assessee installed and put to use power generating captive units which was used
for manufacturing of cement. Additional depreciation u/s. 32(1)(iia) claimed by the
assessee was allowed by the AO in the original assessment. The AO sought to disallow
the claim for depreciation vide rectification order u/s. 154 on the basis that electricity
was not an “article” or “thing” that could be manufactured or produced. The ITAT held
that the issues was debatable and the view taken by the AO could not be revised u/s.
154. (AY. 2007-08, 2008-09)
DCIT v. J.K. Cement (2016) 45 ITR 50 (Luck)(Trib.)
1945 S. 154 : Rectification of mistake – Depreciation – Asset put to use – Debatable issue –
Rectification order by the AO was held to be not justified. [S. 32]
Allowing the appeal of assessee the Tribunal held that, in respect of rejecting assessee’s
claim for excessive depreciation, issue as to when assets were actually put to use during
relevant year was a debatable issue and, thus, rectification order passed by Assessing
Officer in respect of said issue was not sustainable. (AY. 2007-08)
S.R. Industries Ltd. v. ACIT (2016) 156 ITD 384 (Chd.)(Trib.)
1946 S. 154 : Rectification of mistake – Carry forward and set off of loss – CIT(A) justified
in directing the AO to allow carry forward and set off loss in rectification under Sec
154 where it could not be claimed due to technical default. [S. 72, 143(1)]
Assessee had filed its return of income within due date, which was processed under Sec
143(1), but later on detection of mistake in its return, filed a Rectification Application
under Sec 154 before the AO stating that losses of earlier year which had to be brought
forward from earlier years to be set off against income for the impugned assessment
year. Assessee claimed that although proper mention regarding brought forward losses
was made in the return in the schedule for carry forward of losses but the amount
had been inadvertently omitted to be mentioned in the Brought forward of losses
640
S. 158BB Block assessment
schedule. Since the software used for automatic processing of returns did not take care
of necessary adjustment under Sec. 143(1)(a)(ii) it was a mistake apparent from record.
AO however rejected the application of the assessee stating that the assessee had not
mentioned the brought forward losses to be carried forward in the returns of previous
two years and also that it was a settled position of law that is an assessee does not
claim brought forward loss in return of income filed by due date, the loss will not be
allowed to be carried forward to the future. CIT(A) observed that it was an undisputed
fact that the assessee company had genuinely accumulated losses and had technically
fulfilled the condition of filing the return before due date. CIT(A) directed the AO to
modify the order u/s. 154 and allow appropriate relief to the assessee. Tribunal upheld
the order of the CIT(A) stating that relied and rectification claimed by the assessee was
bona fide and legal claim of the assessee could not be denied because of some technical
fault. (AY. 2008-09)
ACIT v. Mangalam Timber Products Ltd. (2016) 176 TTJ 21 (UO)(Ctk.)(Trib.)
S. 154 : Rectification of mistake – Interest on refunds – Delay in claiming exemption 1947
under section 10(23G) – By itself cannot lead to delay attributable to assessee – Non-
disallowance of interest under Section 244A for such delayed period – Not mistake
apparent from record [S. 10(23G) 244A]
The assessee was a non- resident. It received notice under Section 154 pertaining to
non-disallowance of interest under Section 244A on the ground that the delay was
attributable to the assessee. The ITAT held that the delay in making of the claim under
Section 10(23G) could not lead to the conclusion that the delay was attributed to the
assessee. Further non-disallowance of interest under Section 244A for such delayed
period was not mistake apparent from record. (AY. 2002-03)
DBS Bank Ltd. v. DDIT (2016) 157 ITD 476 / 176 TTJ 293 (Mum.)(Trib.)
S. 154 : Rectification of mistake – Intimation – Once matter is taken up for scrutiny 1948
rectification order passed under section 143(1)(a) has no validity in the eyes of law.
[S. 143(1)(a)]
The Tribunal held that once the matter is taken up under scrutiny assessment by issuing
a notice under section 143(2) then the earlier rectification order passed under section
154 on intimation under section 143(1)(a) has no validity in the eyes of law. (AY. 1996-
97 to 1998-99)
ICI India Ltd. v. Dy. CIT (2016) 175 TTJ 217 (Kol.)(Trib.)
S. 158BB. Computation of undisclosed income of the block period.
S. 158BB : Block assessment – Statements recorded prior to search would not amount 1949
to disclosure of income – Unearthed money during search and subsequent enquiries
would be undisclosed income. [S. 131, 132(4), 158(b)]
Allowing the appeal of revenue, the Court held that that where the assessee had never
filed their regular returns of income, amount found deposited in their bank accounts
which were unearthed during the course of search, would be treated as undisclosed
income. Merely a statement was recorded u/s. 131 prior to search giving details of such
641
Block assessment S. 158BC
bank accounts, would not amount to disclosure of income. On Special leave petition,
the Supreme Court affirmed the findings of the High Court. (BP 1-4-1986 to 26-4-1996)
Shibu Soren v. CIT (2016) 239 Taxman 512 (SC)
Editorial: Refer CIT v. Shailendra Mahto (2016) 372 ITR 257 (Delhi)(HC)
S. 158BC. Procedure for block assessment.
1950 S. 158BC : Block assessment – Addition can be only on basis of materials found in
search, additions based on subsequent enquiry was held to be not permissible. [S.132]
The AO made certain additions in the block assessment order. The Tribunal deleted
the additions on the ground that the additions could have been made only in a regular
assessment and not in the block assessment proceedings since they did not arise from
the material unearthed during the course of search. On appeal: Held, dismissing the
appeal, that there was no legal infirmity in the order of the Tribunal deleting the
additions. The Department was not able to dispute that the additions made by the AO
were not on account of any material unearthed during the search but as a result of
enquiry made subsequently.
CIT v. Pooja Forge Ltd. (2016) 389 ITR 382 (Delhi)(HC)
1951 S. 158BC : Block assessment – Inadvertent error in the notice which does not causing
prejudice to the assessee do not render notice or block proceedings void. [S. 132,142]
Dismissing the appeal of assessee the Court held that even though the notice did
not specify the block period, that would not render the notice void. It was not the
assessee’s case that there was any search and seizure operation other than the one
conducted on June 6, 1997. That being the case, the block period also was obvious. It
was as stipulated in section 158B(a) which as it stood at the relevant time provided that
unless otherwise required “block period” means the period comprising previous years
relevant to the 10 assessment years preceding the previous year in which the search
was conducted under section 132. It was a mere technicality and the assessee was not
prejudiced in any manner whatsoever.
Surjeet Bahadur Khurania v. CIT (2016) 389 ITR 211 / 75 taxmann.com 229 / (2017) 292
CTR 491 (P&H)(HC)
1952 S. 158BC : Block assessment – Jewellery found during search – Explanation filed much
later and figures given in explanation not matching jewellery found in assessee’s
possession, addition to income was held to be justified.
Held, dismissing the appeal, that the explanation that was sought to be raised belatedly
at the time of hearing by the assessee ought to have been given at the time of filing of
the block returns. At the relevant time, when block returns in question were being filed
on a manual basis it was certainly open to the assessee to have added any explanation
by way of a separate statement or note attached, which had not been done. Even
otherwise, if such a plea were taken to be correct, then immediately after filing of the
block return such an explanation could have been submitted before the Department
whereas in this case the stand was taken much later by getting the affidavits from
the brothers-in-law. As a matter of fact, none of the figures given even in the belated
642
S. 158BC Block assessment
explanation matched with the gold jewellery actually found in the assessee’s possession.
The assessee had been unable to show how the findings of the lower appellate
authorities were perverse. The addition was justified.
Amita Kochar v. ACIT (2016) 389 ITR 345 (Patna)(HC)
S. 158BC : Block assessment – Undisclosed income – Assessee eligible for benefit of 1953
section 158BE. [S.158BE]
Dismissing the appeal of revenue, the Court held that; the Tribunal was right in relying
on section 158BE introduced by section 65 of the Finance Act, 2002, which was a
declamatory enactment. The assessee was eligible for the benefit of section 158BE of
the Act. The sum of ` 5,52,876 could not be treated as the undisclosed income of the
assessee.
CIT v. K. Ravikumar (2016) 388 ITR 233 (Ker.)(HC)
S. 158BC : Block assessment – Undisclosed income – Voluntary disclosure of income 1954
under Scheme accepted as correct and genuine, income cannot be assessed again. [S.
132, Voluntary Disclosure of Income Scheme, 1997]
Dismissing the appeal of the Revenue, the Court held that in view of the fact that the
declaration under the Voluntary Disclosure of Income Scheme by the assessee’s wife
was accepted by the Department as correct and genuine, the income could not have
been added once again in the hands of the assessee. The voluntary disclosure of income
scheme by the company was also accepted by the Department.
CIT v. Rajeev Gupta (2016) 389 ITR 456 (All.)(HC)
S. 158BC : Block assessment – Surrender of income – Addition was held to be justified. 1955
Allowing the appeal of revenue the Court held that the Tribunal was wrong in
concluding that the opinion of the Commissioner (Appeals) was based only on
presumption, which could be evident from the relevant questions and answers made by
the assessee in the assessment order. Therefore, the order of the Appellate Tribunal was
to be set aside to this extent and addition of ` 3,85,000 was to be restored.
CIT v. K. Ravikumar (2016) 388 ITR 233 (Ker) (HC)
S. 158BC : Block assessment – Agricultural income – Failure to produce supportive 1956
evidence, addition was held to be justified.
Assessee declaring income from sale of property, credit and agriculture. Findings of
the Tribunal that sale was not genuine. Creditors had no capacity to lend money.
Agricultural land leased out and bearing no income. Agricultural trust land bearing
only small income after meeting expenses. Tribunal has deleted the addition. On appeal
allowing the appeal of revenue the Court held that a burden upon assessee to prove
income accumulated out of agricultural income from trust lands by producing supportive
documents. On facts failure by assessee to prove source of income, income to be treated
as undisclosed income.
CIT v. Sundaramoorthy (HUF) (2016) 388 ITR 154 (Karn.)(HC)
CIT v. K.Sundaramoorthy (2016) 388 ITR 154 (Karn.)(HC)
643
Block assessment S. 158BC
1957 S. 158BC : Block assessment – Notice is mandatory – Notice must give assessee not less
than fifteen days to submit return – Asking assessee to furnish return within fifteen
days is held to be not valid. [S. 132]
Dismissing the appeal of revenue the Court held that while block assessment was to
be made, the Assessing Officer had knowledge about the statutory provision and while
issuing notice he should have mentioned in it about his source of power and should
have referred to the time which is required to be given for the purpose of filing of
return under section 158BC of the Act. The words mentioned in the notice were “within
fifteen days” whereas the provision mandates the time of “not less than fifteen days”.
The notice was not valid.
CIT v. Amit K. Jain alias Anil K. Jain. (2016) 388 ITR 113 / (2017) 148 DTR 110 / 293
CTR 185 (Guj.)(HC)
1958 S. 158BC : Block assessment – Search and seizure – Names of assessees not found in
warrant, hence the notice issued was held to be illegal.[S. 132]
Dismissing the appeals of the revenue the Court held that the search should be carried
out under section 132(1) in the name of a person before invoking the provision of
section 158BC. All the family members were separate assessable legal entities under
the Act and in a case where search warrant was issued in the name of G and family, it
could not be stretched to cover all the family members, namely spouse and children.
It was to be in the name of a specific person to initiate proceedings. When a search
action under section 132(1) was to be person specific and when admittedly the names of
the assessees did not figure in the warrant, the Assessing Officer had no jurisdiction to
issue notice under section 158BC of the Act and thus the issuance of notice was illegal.
CIT v. Surbhi Goel (Mrs.) (2016) 387 ITR 575 / 243 Taxman 539 / 290 CTR 14 (Raj.)(HC)
CIT v. Umesh Goel (Smt.) (2016) 387 ITR 575 / 243 Taxman 539 / 290 CTR 14 (Raj.)(HC)
1959 S. 158BC : Block assessment – Loans accepted – Addition cannot be on account of
repayment – Purchase of property – Addition on basis of bills relating to construction
prior to date of purchase was held to be not justified. [S.131]
Allowing the appeal the Court held that it was a case of refund of loan given to persons
who were known to the assessee and they had income and capacity to pay, which re-
payment was also not only affirmed by them in the affidavit but further asserted during
the course of examination by the Income-tax Inspector at the stage of remand report
as also during section 131 proceedings. Having accepted one part of the transaction
regarding the loan having been given by the assessee, it was not open to the Revenue
to have so lightly disbelieved the other part of the transaction. The additions was held
to be not justified. As regards the additions pertained to the assessment years 1994-95
and 1995-96 during which time the property in question had not been purchased by
the assessee and there was no occasion to make investment in construction including
electrical works, purchase of sanitary ware and hardware fittings, etc. The addition was
not justified.
Dr. Pravan Prakash v. CIT (2016) 387 ITR 458 (Patna)(HC)
644
S. 158BC Block assessment
S. 158BC : Block assessment – Non-disclosure of giving of loan and interest received 1960
on the said loan not been disclosed to authorities – Interest accrued on loan given
– Assessee cannot establish the method of accounting followed by it, order of the
Tribunal was affirmed. [S. 4, 5, 132]
Dismissing the appeal of the assessee, the Court held that loan agreement was found
during the search operation and prior to search, revenue was unaware of the loan
agreement and interest accrued thereon and hence interest amount earned on loan was
chargeable to tax in the block assessment period as undisclosed income. Further, High
Court held that the assessee have not established before the authorities that they were
following cash system of accounting. At no stage, it was brought to the notice that loan
was given to Mr & Mrs. K and interest to be received has not been disclosed before
any of the authorities. Further, in fact the best evidence which could be produced by
the assessee was the evidence of Mr. & Mrs. K to point out that they have not paid any
interest during the period under consideration for the loan. However, the assessee did
not choose to produce them as witnesses and or any evidence from them indicating that
no interest has been paid by them.
Pragna R. Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC)
Priti Paras Shah v. Dy. CIT (2016) 282 CTR 291 (Bom.)(HC)
S. 158BC : Block assessment – Though material found during course of search 1961
assessment was held to be valid. [S. 132]
The entire deposits in the bank accounts of these parties were treated as assessee’s
income on protective basis. On appeal, the High Court distinguished the case of NR
Paper & Boards Ltd. (234 ITR 733) (Guj), where issue was whether after making of block
assessment, regular assessment is barred or prohibited by law and held that the said
case was not applicable to the facts of the present case. The court held that the said
decision shall therefore not be applicable on the facts and circumstances of the present
case and ruled in favour of revenue on this issue by upholding the assessment made
under section 158BC of the Act despite the fact that in the proceedings under section
132 of the Act, no material was found in relation to the concerned parties.
N. K. Industries Ltd. v. Dy.CIT (2016) 142 DTR 162 / 72 taxmann.com 289 / (2017) 292
CTR 354 (Guj.)(HC)
S. 158BC : Block assessment – Notice could not be issued when no incriminating 1962
materials are found during the course of the search. [S. 132, 158BC]
The High Court held that the notice under section 158BC could not have been issued
when the search was conducted under mistaken identity and no incriminating material
was found during the course of the search as evident from the appraisal report.
Dr. Gautam Sen v. CCIT (2016) 289 CTR 478 /142 DTR 220/ 74 taxmann.com 128. (Bom.)
(HC)
S. 158BC : Block assessment – Undisclosed income – Books of account not reflecting 1963
investment – Failure by assessee to prove non-materialisation of transaction and return
of money from vendor – Addition made on undisclosed income proper.
Held, dismissing the appeal, that the assessee did not dispute that the amount which
appeared to be invested for the purpose of buying land was not debited to the books of
645
Block assessment S. 158BC
account of the assessee. Even assuming that the money was paid by its sister concern,
the assessee should have credited the account of B and debited the account of the seller
of the land. This was not done. If the transaction did not fructify, the money paid to the
seller of the land was to be recovered and if it was not recovered from the vendor the
amount continued to be spent on behalf of the assessee, for which the assessee received
benefit. The assessee failed to produce evidence on the fact whether the sum was
recovered from the vendor. Therefore, the Tribunal was right in affirming the addition.
Laxmi Business Promotions P. Ltd. v. CIT (2016) 386 ITR 558 (Cal.)(HC)
1964 S. 158BC : Block assessment – Search – Survey – assessee himself admitted that
undisclosed income reflected in block return related to transactions recorded in
documents found in course of survey, addition made on basis of return so filed
deserved to be confirmed – Estoppel – Assessee can waive benefit conferred by statute.
[S. 132, 133A, 158BB]
Allowing the appeal of revenue, the Court held that where pursuant to search
proceedings, a survey was also carried out at another premises held by assessee in
capacity of a director, in view of fact that in block assessment proceedings assessee
himself admitted that undisclosed income reflected in block return related to
transactions recorded in documents found in course of survey, addition made on basis
of return so filed deserved to be confirmed. Assessee can waive benefit conferred by
statute. (AY. 2006-07)
CIT v. Harsh Kochar, Bahrat Ice Factory (2016) 287 CTR 63 / 69 taxmann.com 322 / 136
DTR 393 / (2017) 390 ITR 385 (Patna)(HC)
1965 S. 158BC : Block assessment – No incriminating documents were found in the course
of search – The Officers cannot act on their whim and fancy – Chief CIT directed to
pay costs to the assessee. [S. 132]
Allowing the petition the Court held that the action of the revenue in issuing s. 158BC
notice despite the appraisal report clearly stating that no incriminating material was
found is highly deplorable as it amounts to harassment of the taxpayer. The Officers
cannot act on their whim and fancy. The Dept should adopt a standard operating
procedure (SOP) to provide adequate safeguards before issuing notices under Ch. XVIB.
The revenue i.e. the jurisdictional Chief Commissioner of Income Tax (Respondent No.1)
is directed to pay the costs of ` 20,000/to the Petitioner within four weeks from today.
(WP No. 1344 of 2000, dt. 14.09.2016)
Dr. Gautam Sen v. CCIT v. (Bom)(HC), www.itatonline.org
1966 S.158BC : Block assessment – Limitation – Period reckoned from date of conclusion
of search – Restraint order not extended and no action taken pursuant to search after
three months – Search to be taken to have been concluded on expiry of restraint order
– Visit of officers to assessee’s premises two years later to record conclusion of search
not material – Period of limitation to pass assessment order not to be reckoned from
such date – Assessment barred by limitation.
Pursuant to a search and seizure in the premises of the assessee, a restraint order
was issued on October 15, 1998 for a period of sixty days, which was later extended
646
S. 158BC Block assessment
for another thirty days up to January 15, 1999. Thereafter, it was not extended. On
November 21, 2000, the Department called on the assessee at his premises for the
purpose of recording that the search was at an end. The Tribunal held that the period
of limitation of two years for passing the assessment order was not to be reckoned from
November 21, 2000. On appeal held, dismissing the appeal, that the Tribunal’s order
was unimpeachable. The restraint order was not extended by the Department after
January 15, 1999, after a period of three months, which meant that the search was also
abandoned and had ended. The search did not stand revived when the officers of the
Department called at the house of the assessee merely for the purpose of recording that
the search was at an end almost after two years. The order of assessment was passed
beyond the limitation period of two years after the conclusion of the search.
CIT v. Ritika Ltd. (2016) 384 ITR 434 (Cal.)(HC)
S. 158BC : Block assessment – Assessee’s failure to cross-examine the witness during 1967
the search proceeding would not preclude AO to make a block assessment. [S. 132(4),
132(4A), 158BH]
During the course of search conducted at the office premises of the assessee and a
hotel room various incriminating documents and cash were found and seized. After
taking into consideration, the explanations offered by the assessee company, the
sworn statements of the occupant at the hotel room and vice president of the assessee
company, undisclosed income was computed by the AO.
On appeal, the CIT(A) allowing the appeal held that the order of the assessment passed
pursuant to the search was not in accordance with law and therefore directed to treat
the undisclosed income as NIL. However, the ITAT interfered with the finding of the
CIT(A) and allowed Revenue’s appeal. Before the HC, the assessee contented that during
the search proceedings, the appellant was not provided with sufficient opportunity for
cross-examination of the witnesses whose sworn statements were recorded by the AO
and therefore the acceptance of evidence and presumptions made as contemplated u/s.
132(4) and 4(A) respectively, could not be sustained under law. The HC dismissing the
appeal, held that the assessee was free and open to make a demand/request for cross-
examination of the witness at the time when the proceedings were pending before the
AO. However, in the instant case, no such request was made by the assessee. Further, in
view of the introduction of s. 158BH, sub-section (4) and (4A) of s. 132 are applicable to
the matter of conducting the assessment by the AO and therefore there is no illegality
or infirmity on the part of the AO to have taken into account the sworn statement of
witnesses taken on oath during the search proceedings. (BP1 April, 1996 to 9 Oct., 2002)
Bhagheeratha Engineering Ltd. v. ACIT (2015) 379 ITR 244 / 127 DTR 245 / (2016) 282
CTR 209 (Ker.)(HC)
S. 158BC : Block assessment – Survey – No search action – Block assessment is bad 1968
in law. [S. 132, 133A. 158BD]
Allowing the appeal the Court held that this was a case of survey under section 133A
of the Act, as was evident from the document, and the question of making a block
assessment, invoking the provisions of sections 158BC did not arise, as there was no
search in terms of section 132. (BP. 1986-87 to 1995-96)
Rajkumari Chandak (Smt.) v. ACIT (2016) 382 ITR 312 (Mad.)(HC)
647
Block assessment S. 158BC
1969 S. 158BBC : Anonymous donations – Amount received in charity boxes installed at
different places was held to be not taxable. [S. 2(24)(iia), 12AA]
Dismissing the appeal of the revenue, the Tribunal held that; Amount received in charity
boxes installed at different places was held to be not taxable. (AY. 2010-11, 2011-12)
Dy. CIT v. All India Pingalwara Cahritable Society (2016) 158 ITD 410 / 178 TTJ 602 /
47 ITR 1 (Amritsar)(Trib.)
S. 158BD. Undisclosed income of any other person.
1970 S. 158BD : Block assessment – Undisclosed income of any other person – Preparation
of satisfaction note depends on facts of each case, which must be prepared as soon as
practically possible and without undue delay after the proceedings are completed u/s.
158BC of the searched person. [S. 158BC]
The AO carried out a search operation u/s. 132 and held that the sales recorded in
the documents seized were not recorded by the assessee in the books of account and
therefore made an addition to the total income. The CIT(A) accepted the assessee’s
contention that the amount surrendered during the survey carried out u/s. 133A
included the unaccounted sales transactions.
Before the Tribunal, the assessee contended that the AO lacks the jurisdiction to make
the impugned assessment as the department had not recorded the satisfaction note that
the undisclosed income pertains to a person other than the person searched before or
at the time of assessment of the person searched u/s. 158BC, which is a requirement for
initiating proceedings u/s 158BD. The Tribunal held that the satisfaction note recorded
was beyond the period prescribed by law and therefore allowed the appeal of the
assessee.
On revenue’s appeal, the HC held that as per the Supreme Court decision in CIT v.
Calcutta Knitwears (2014) 267 CTR 105 (SC), the satisfaction note could be prepared at
any of the following stages: (a) either at the time of initiating proceedings u/s. 158BC
against the searched person (b) during the stage of assessment proceedings u/s. 158BC
(c) immediately after the completion of assessment proceedings u/s. 158BC of the
searched person. Accordingly, the HC held that as there is no outer limit specified for
the words ‘immediately after’, it will depend upon the facts of the case and it cannot be
read as the very next moment or the very next day. Since in the given case, the AO had
issued notices to about 70 persons and had taken action against them, which involved
enormous paperwork, a period of three and a half months taken to record satisfaction
can be held to be reasonable.
CIT v. Arora Fabrics (P.) Ltd. (2016) 131 DTR 308 / 284 CTR 293 (P&H)(HC)
CIT v. Calcutta Knitwears (2016) 131 DTR 308 / 284 CTR 293 (P&H)(HC)
CIT v. Rajan Knit Fab. (P.) Ltd. (2016) 131 DTR 308 / 284 CTR 293 (P&H)(HC)
CIT v. Mridula Prop. Dhruv Fabrics (2015) 234 Taxman 245 / (2016) 131 DTR 308 / 284
CTR 293 (P&H)(HC)
648
S. 158BE Block assessment
S.158BE. Time limit for completion of block assessment.
S. 158BE : Block assessment – Search and seizure – Limitation – Time during which 1971
interim order of High Court in force to be excluded – Time to be reckoned from date
of last panchnama – Review petition was dismissed. [S. 132, 142(2A)]
On a petition for review of the decision of the Supreme Court VLS Finance Ltd. v. CIT
([2016] 384 ITR 1) to the effect (a) that the period between August 24, 2000, i.e. the
date on which the interim order was passed by the High Court staying the direction
for special audit under section 142(2A), and December 15, 2016, i.e., when the High
Court passed the order setting aside the direction for special audit, should be excluded
in counting the period of limitation for concluding the block assessment, and (b) that
the limitation should be counted from the last date of search when the search operation
completed, i.e. August 5, 1998, and that therefore, the assessment was within time. The
Supreme Court dismissed the review petition.
VLS Finance Ltd v. CIT (2016) 386 ITR 407 / 142 DTR 318 / 289 CTR 656 / (2017) 81
taxmann.com 358 (SC)
Editorial: VLS Finance Ltd v. CIT (2016) 384 ITR 404 / 239 Taxman 404 / 286 CTR 146
(SC) is affirmed.
S. 158BE : Block assessment – Time limit – Last panchanama drawn on 5-8-1998 – A 1972
search under section 132 of the Act, will conclude in the day the last panchanama is
drawn. The limit for making of an order under section 158BC read with section 158BE
will start from last panchanama. [S. 132, 158BC]
Supreme Court held that the appellants never challenged subsequent visits and searches
of their premises by the respondents on the ground that in the absence of a fresh
authorisation those searches were illegal, null and void. The revenue authorities visited
and searched the premises of the appellants for the first time on 22nd June, 1998. In
the panchanama drawn on that date, it was remarked ‘temporarily concluded’, meaning
thereby, according to the revenue authorities, search had not been concluded. For this
reason, the respondent authorities visited many times on subsequent occasions and
every time panchanama was drawn with the same remarks, i.e. ‘temporarily concluded’.
It is only on 5th August, 1998 when the premises were searched last, the panchanama
drawn on that date recorded the remarks that the search was ‘finally concluded’.
Thus, according to the respondents, the search had finally been completed only on
5th August, 1998 and panchanama was duly drawn on the said date as well. The
appellants, in the writ petition filed, had nowhere challenged the validity of searches
on the subsequent dates raising a plea that the same was illegal in the absence of any
fresh and valid authorisation. On the contrary, the appellants proceeded on the basis
that search was conduced from 22nd June, 1998 and finally concluded on 5th August,
1998. On the aforesaid facts and in the absence of any challenge laid by the appellants
to the subsequent searches, we cannot countenance the arguments of the appellants
that limitation period is not to be counted from the last date of search when the search
operation completed, i.e. 5th August, 1998. Therefore, this issue is also decided in
favour of the respondents. (AY. 1994-95 to 1998-99)
VLS Finance Ltd. v. CIT (2016) 384 ITR 1 / 286 CTR 146 / 134 DTR 305 / 239 Taxman 404 (SC)
Editorial: Decision in VLS Finance Ltd. v. CIT (2007) 289 ITR 286 (Delhi)(HC) is affirmed.
649
Block assessment S. 158BE
1973 S. 158BE : Block assessment – Time limit – A panchanama for purposes of opening a
locker and vacating S. 132(3) prohibitory orders does not amount to conclusion of the
search for purposes of extending limitation for passing the block assessment order .[
S. 132. 158BC]
Allowing the appeal of assessee the Tribunal held that; a panchanama for purposes
of opening a locker and vacating S. 132(3) prohibitory orders does not amount to
conclusion of the search for purposes of extending limitation for passing the block
assessment order.(ITA No. 05/Mum/2004, dt. 15.09.2016)
Rajendra Agarwal v. DCIT (Mum.)(Trib.), www.itatonline.org
S. 158BFA. Levy of interest and penalty in certain cases.
1974 S. 158BFA : Block assessment – Interest – Levy of interest cannot be adjusted from
seized cash lying in personal deposit account. [S. 132, 158BC]
Dismissing the appeal of assessee the Court held that the cash seized during the course
of search remained without earning interest when the Commissioner deposited it in the
personal deposit account. Therefore, the levy of interest could not be adjusted from the
seized amount lying in the personal deposit account in the absence of provision to grant
such claim. Therefore, there was no need to interfere with the order of the Tribunal.
Ashok Kumar Sethi v. Dy. CIT (2016) 387 ITR 375 / (2017) 244 Taxman 174 (Mad.)(HC)
650
S. 163 Representative assessees
CHAPTER XV
LIABILITY IN SPECIAL CASES
S. 159. Legal representatives.
S. 159 : Legal representatives – Proceedings initiated on a dead person is nullity and 1975
are different from proceedings initiated on an alive person which continues after death
of person. Service and Participation in such proceedings by legal heir does not save
it from nullity. [S. 263, 292BB]
The Assessment was completed during the life time of Assessee however after his death
notice under section 263 was issued in his name. Such notice returned with remarks
“assessee deceased”. Subsequently the same notice was served upon the legal heir of
assessee who participated in the proceedings and the Assessment was set aside by
CIT. The order under section 263 was challenged in Tribunal and it was quashed on
the ground that order passed against a deceased person is null and void. On appeal
by revenue, the High Court held that where proceedings are initiated against an alive
person and continues after the death who dies by putting his legal heirs on notices
would be saved but proceedings initiated after death would be nullity. Moreover, section
292BB would not be applicable in the case since the legal heir has appeared in the case
and not assessee which is a pre-condition. Also held that as per section 159 the death
of a person does not absolve the legal heirs of liability crystallised during lifetime of
Assessee but not on liability arisen after the death. (AY. 2009-10)
CIT v. M. Hemanathan (2016) 384 ITR 177 / 239 Taxman 533 / 133 DTR 226 / 285 CTR
182 (Mad.)(HC)
S. 159 : Legal representatives – Executors – Legal representatives – Income earned, 1976
till death to be assessed in the hands of legal representatives and after death till
distribution in the hands of the executors. [S. 168]
Tribunal held that income earned by the by deceased up to date of his death is
chargeable in the hands of legal representatives and thereupon income arising from the
estate of the deceased after death up to date of complete distribution is chargeable to
tax in the hands of the executors on year to year basis. (AY. 1992-93)
B. D. Gupta & Sons v. ITO (2015) 70 SOT 16 (Delhi)(Trib.)
S. 163. Who may be regarded as agent.
S. 163 : Representative assessees – Agent – Non-resident – When AO brings to tax an 1977
income in hands of assessee, representative assessee loses his right to tax same income
in hands of principal
Assessee was a public sector undertaking engaged in business of civil aviation. It had
entered into a wet lease agreement, with a company namely Carbijet Inc. based in West
Indies. In terms of agreement, Carbijet Inc. gave 3 aircrafts to assessee on wet lease.
Subsequently, said agreement was terminated and matter was subjected to litigation
before International Arbitral Tribunal London. IATL passed an award as per which
assessee had to pay compensation to Carbijet Inc. the AO held that said compensation
651
Representative assessees S. 164
was revenue receipt in nature and it was taxable in year in which right to receive said
income crystallized. Accordingly, said amount was brought to tax in hands of assessee,
as a representative assessee of Carbijet Inc. AO taxed said amount in hands of Carbijet
Inc. also on very next day CIT(A) opined that same income could not be assessed in
hands of non-resident and simultaneously through its agent i.e. representative assessee.
He concluded that income in question was not required to be assessed in hands of
assessee. The Honourable ITAT in terms of section 163 observed that when AO taxes
income in hands of assessee directly, he loses his right to tax same income in hands
of agent, and vice versa. Therefore, when AO exercised his option to bring income to
tax in hands of assessee in capacity of representative assessee, he was legally functus
officio so far as assessment of same income in hands of Carbijet Inc. was concerned. In
favour of revenue. (AY. 2000-01)
Dy. DIT (IT) v. Air India Ltd. (2016) 158 ITD 555 / 178 TTJ 121 / 135 DTR 153 (Mum.)
(Trib.)
S. 164. Charge of tax where share of beneficiaries unknown.
1978 S. 164 : Representative assessees – Charge of tax – Beneficiaries unknown – Provision
is applicable only when income is found to be not eligible for exemption u/s. 11 and
12. [S. 11, 12]
S. 164(2) stipulates status in which income is assessable and provision is applicable
only when income is found to be not eligible for exemption u/s. 11 and 12. The status
of the assessee trust will be Artificial Juridical person (APJ) and not an AOP. (AY. 2004-
05 to 2007-08)
ACIT v. Shushrutha Educational Trust. (2016) 161 ITD 565 (Bang.)(Trib.)
S. 166. Direct assessment or recovery not barred.
1979 S. 166 : Representative assessees – Direct assessment or recovery not barred – Trusts
– Once AO had exercised option to assess trust, same income could not be assessed in
hands of beneficiary of trust. [S. 143(1), 143(2)]
Tribunal held that once AO had exercised option to assess trust, same income could not
be assessed in hands of beneficiary of trust. However since intimation u/s. 143(1) was
issued to trust after commencement of proceedings u/s. 143(2) on beneficiary, it could
definitely be said that option stood exercised by AO to assess beneficiary and not trust.
Thus AO had power to assess assessee on amounts received by him from trust as a
beneficiary therein. (AY. 2008-09)
Sharon Nayak (Mrs.) v. Dy. CIT (2016) 159 ITD 143 (Bang.)(Trib.)
652
S. 172 Shipping business
S. 172. Shipping business of non-residents.
S. 172 : Shipping business – Non-resident – Shipping companies assessed u/s. 172 are 1980
not subject to deduction at source obligations u/s. 195 – Demurrage charges paid by
Indian Company to foreign company was held to be not liable to deduct tax at source.
[S. 40(a)(ia), 44B, 195]
As a Division Bench of the Bombay High Court was unable to agree with the view
taken in Commissioner of Income-tax v. Orient (Goa) Private Limited 325 ITR 554, the
Full Bench had to consider the question “Whether, while dealing with the allowability
of expenditure under section 40(a)(i) of the Income Tax Act, 1961, the status of a person
making the expenditure has to be a non-resident before the provision to section 172 of
the Act can be invoked?” HELD by the Full Bench overruling CIT v. Orient (Goa) Private
Limited 325 ITR 554:
(i) A bare perusal of s. 44BB indicates as to how this provision covers the case of an
assessee who is a non-resident and engaged in the business of operation of ships.
That stipulates a sum equal to 7% of the aggregate ½ of the amount specified in
sub-section (2) of section 44B as deemed to be profits and gains of such business
chargeable to tax under the head “Profits and Gains of Business or Profession”.
It is the explanation which refers to the demurrage and for the purpose of sub-
section (2) of section 44B. It clarifies that the amount paid or payable or received
or deemed to be received, as the case may be, by way of demurrage charges or
handling charges or any other amount of similar nature shall for the purposes
of sub-section (1) deemed to be the profits and gains of the business, namely,
shipping business chargeable to tax under that head. The amounts which are
paid or payable whether in or out of India to the assessee or to any person on his
behalf on account of carriage of passengers, livestock, mail or goods shipped at a
port in India and the amount received was deemed to be received in India by or
on behalf of the assessee on account of the carriage of passengers, livestock, mail
or goods shipped at any port outside India shall be deemed to be the profits and
gains. On that the tax is payable by virtue of subsection (1) of section 172. That
has to be levied and recovered in terms of the sub-sections of section 172 of the
Income Tax Act. Once section 172 falls in Chapter XV titled as Liability in Special
Cases – Profits of Non-residents, then section 172 is referable to section 44B. Both
provisions open with a non-obstante clause and whereas section 44B enacts special
provisions for computing profits and gains of shipping business in case of non-
residents section 172 dealing with shipping business of non-residents is enacted
for the purpose of levy and recovery of tax in the case of any ship belonging to or
chartered by a non-resident operated from India. These sections and particularly
section 172 devise a scheme for levy and recovery of tax. The sub-sections of
section 44B denote as to how the amounts paid to or payable would include
demurrage charges or handling charges or any other amount of similar nature. The
sub-sections of section 172 read together and harmoniously would reveal as to how
the tax should be levied, computed, assessed and recovered. Therefore, there is no
warrant in applying the provisions in chapter XVII for collection and recovery of
the tax and its deduction at source vide section 195.
653
Shipping business S. 172
(ii) To our mind, the Division Bench judgment in Commissioner of Income-tax v. Orient
(Goa) Pvt. Ltd. seen in this light does not, with greatest respect, take into account
the scheme and setting as understood above. There need not be apprehension
because there is no escape from the levy and recovery of tax. The tax has to be
levied and collected. The ship cannot leave the port or if allowed to leave any
port in India, it must either pay or make arrangement to pay the tax. Hence, the
apprehension of avoidance or evasion both are taken care of by the legislature.
That is how advisedly the legislature cast the obligation to deduct tax at source on
the person responsible to make payment to a non-resident in shipping business.
(iii) The resident assessee contended before the Division Bench in Orient (Goa) (supra)
as well as the Division Bench which made the referring order that section 172
of the Income-tax Act has a bearing and an important one on the obligation to
deduct tax at source. Therefore, it is the recipient’s position and the perspective in
which the recipient’s income would be taxed will have to be borne in mind. The
non-resident shipping company in respect of its’ income would be in a position
to rely upon section 44B and consequently section 172. However, we do not see
how there is an obligation to deduct tax at source on the resident assessee/Indian
company before us. While computing the income of the non-resident Indian/
foreign company, assistance can be derived by such non-residents from section
44B if they are in shipping business. It would also be in a position to rely upon
section 172 but the responsibility of the person making payment to a non-resident
in sub-section (1) of section 195 cannot be avoided in the manner set out in other
cases. The scheme as above operates only to cases covered by section 172 of the
IT Act and none else. (AY. 1999-2000)
CIT v. V. S. Dempo & Co Pvt. Ltd. (2016) 381 ITR 303 / 131 DTR 217 / 284 CTR 1 / 238
Taxman 91 (FB) (Bom.)(HC)
Sesa Goa & Co Ltd. v. CIT (2016) 381 ITR 303 / 131 DTR 217 / 284 CTR 1 / 66 taxmann.
com 93 (FB) (Bom.)(HC)
1981 S. 172 : Shipping business – Non-residents – Slot hire is also entitled to treaty
protection under Article 8 from source taxation of income arising from transportation
of goods by operation of ships in international traffic, irrespective of whether or not
such ships were owned or chartered by assessee – DTAA-India-Indonesia. [Art. 8]
The Assessing Officer held that benefit of DTA agreement is not available, to the slot
charter or to those who had just loaded a few containers on board, since the vessel was
neither owned or chartered by them. On appeal allowing the appeal of the assessee, the
Tribunal held that; slot hire facility is an integral part of contract for carriage of goods
by sea and, thus, such an activity is also entitled to treaty protection under article 8
from 'source taxation' of income arising from transportation of goods by operation of
ships in international traffic, irrespective of whether or not such ships were owned or
chartered by assesse. (AY. 2012-13)
K. Cargo Global Agencies, Indonesia v. ITO (2016) 159 ITD 1042 (Ahd.)(Trib.)
654
S. 179 Private company
S. 172 : Shipping business – Non-residents – Freight income from operation of ships 1982
in international traffic, was taxable only in Singapore – AO is directed not to tax such
income in India.
Assessee did business and was tax resident of Singapore. Revenue Authority of
Singapore confirmed that, in the case of assessee, “freight income has been regarded as
Singapore sourced income and brought to tax on an accrual basis (and not remittance
basis) in the year of assessment”. The assessee had also filed a confirmation from
its public accountant that the freight earned on X’s sailing from Sikka port has been
included in the global income offered to tax by the company in Singapore. Tribunal
held that the provisions of Article 24 cannot be put into service as this provision can
only be triggered when twin conditions of treaty protection, by low or no taxability, in
the source jurisdiction and taxability on receipt basis, in the residence jurisdiction, are
fulfilled. There was nothing on the record to suggest that the freight receipts of ASPL-S
were taxed only on receipt basis in Singapore. There was reasonable evidence to show
that such an income was taxable, on accrual basis, in the hands of the assessee. Only
reason for declining treaty benefits was the application of Article 24 and there was no
other dispute on the claim of treaty protection of shipping income under Article 8(1)
(Profits derived by an enterprise of a Contracting State from the operation of ships or
aircraft in international traffic shall be taxable only in that State). Entire freight income
of the assessee, which was only from operation of ships in international traffic, was held
to be taxable only in Singapore. Court directed the AO not to tax assessee’s income in
India. (AY. 2011-12)
Alabra Shipping Pte. Ltd. v. ITO (2016) 175 TTJ 359 / 129 DTR 43 (Rajkot)(Trib.)
S. 179. Liability of directors of private company in liquidation.
S. 179 : Private company – Liability of directore – Notice upon director calling for proof 1983
that company is public limited company – For lifting the corporate veil the revenue
ought to have prima facie sufficient material – Order was set aside. [S. 158BC]
Allowing the petition the Court held that admittedly the company in question was a
public limited company. Ordinarily, therefore in terms of section 179, the director of
such a company would not be answerable for unpaid taxes of the company. Although
the Court in the case of Pravinbhai M. Kheni v. Asst. CIT had recognised limited
exceptions under which it may be possible for the Revenue to apply section 179 to the
directors of a public limited company by lifting the corporate veil, certain safeguards
had been provided to avoid any possible misuse of such powers. The Department had
instead of confronting the petitioner with the necessary material and asking him to
show cause why the corporate veil should not be lifted and section 179 be applied to
him, issued a notice and called upon the petitioner to substantiate the claim that the
company was a public limited company. The Department ought not to have questioned
such a basic fact. If the Department had wanted to apply the principle of lifting the
corporate veil in the context of section 179, it ought to have prima facie sufficient
material to confront the assessee on the issue calling upon him to show cause why such
powers should not be invoked. The Department was at liberty to take fresh proceedings
by issuing appropriate notice, if it so desired.
Paras S. Savla v. ACIT (2016) 389 ITR 336 / 244 Taxman 17 (Guj.)(HC)
655
Deduction at source S. 190
CHAPTER XVII
COLLECTION AND RECOVERY OF TAX
S. 190. Deduction at source and advance payment.
1984 S. 190 : Deduction at source – Capitalized expenditure – Once an expenditure had
been capitalized, there would be no requirement for deducting TDS
Payment on hoarding and display expenses, the CIT(A) has directed the AO to remove
the expenditure which has been capitalized by the assessee in its books of account.
The ITAT held that Once an item of expenditure has been capitalized then there is no
requirement for deducting the TDS.
DCIT v. Laqshya Media (P.) Ltd. (2016) 160 ITD 35 / 182 TTJ 318 (Mum.)(Trib.)
S. 191. Direct payment.
1985 S. 191 : Collection and recovery – Direct payment – Interest payable for failure to
deduct tax at source. [S. 192, 201(1)]
Tribunal held that if deductee has paid tax directly but does not absolve assessee from
payment of interest under section 201(1A). Explanation to section 191 saves the assessee
from not being assessee in default under section 201(1). Any shortfall in deduction of TDS
on payment of salary/pension can be deducted at end of financial year, interest would be
payable from first day of April subsequent year. Matter was remanded. (AY. 2010-11, 2011-12)
ACIT v. Andhra University (2016) 158 ITD 389 (Visakha)(Trib.)
B. Deduction at source
S. 192. Salary.
1986 S. 192 : Deduction at source – Salary – Perquisites – Medical allowances –
Reimbursement of medical expenditure actually incurred by employee on himself or
his family or upto a ceiling of ` 15,000 would not be included in term 'perquisite'. [S.
2(24), 17(2)]
Dismissing the appeal of the Revenue, the Court held that reimbursement of medical
expenditure actually incurred by employee on himself or his family or upto a ceiling
of ` 15,000 would not be included in term 'perquisite', hence the assessee is not liable
todeduct tax at source.
CIT v. Gujarat Alkalies & Chemicals Ltd. (2016) 242 Taxman 125 (Guj.)(HC)
1987 S. 192 : Deduction at source – Salary – Government need not deduct TDS on payment
of salary to Prest/Nuns where their entire salary has to be paid directly to Congregation/
Diocese and which has already been exempted from payment of income tax
Allowing the petition the Court held that Government need not deduct TDS on payment
of salary to Prest/Nuns where their entire salary has to be paid directly to Congregation/
Diocese and which has already been exempted from payment of income tax.
Correspondent Holy Cross Primary School v. CBDT (2016) 388 ITR 162 / 240 Taxman 395/
141 DTR 257 / 289 CTR 293 (Mad.)(HC)
656
S. 192 Deduction at source
S. 192 : Deduction at source – Perquisite – Free airline tickets provided to employees 1988
of assessee by other airlines – Cannot be considered a perquisite provided by assessee
– No tax is deductible at source. [S. 15, 17]
The Assessing Officer treated as perquisite the free inter-airline tickets provided to
the employees of the assessee by other airlines. He held the assessee liable for short
deduction of tax at source. The Commissioner allowed the assessee's appeal and the
Tribunal concurred with the findings of the Commissioner (Appeals). On appeal. Held:
dismissing the appeal, that the Tribunal did not commit any error in deleting the
addition made to the income of the assessee. The Department was unable to explain
how the free air tickets provided to the employees of the assessee by some other airlines
could be treated as perquisites provided by the assessee. (AY. 1993-94)
CIT v. Air France (2016) 384 ITR 142 (Delhi)(HC)
S. 192 : Deduction at source – Payments by hospital to doctors – Professional doctors 1989
not entitled to benefits allowed to salaried doctors – Not employees of hospital but
independent professionals – Payments to doctors not salary but professional charges
and tax deductible at source accordingly. [S. 194J, 201(1), 201(IA)]
Held, professional doctors were not entitled to leave travel concession, concession in
medical treatment of relatives, provident fund, leave encashment and retirement benefits
like gratuity. They were required to follow defined procedure to maintain uniformity in
action and administrative discipline but this did not mean that they became employees
of the hospital. Further, the Department had not taxed the payments received by any of
the doctors from the hospital under the head "Income from salary". The Tribunal held
that there did not exist employer-employee relationship between the hospital and the
persons providing professional services. The Tribunal, after considering the agreement in
its entirety, concluded that it was not a case of employer-employee relationship between
the hospital and the doctors. Therefore, the income of the doctors was not salary but
professional charges and taxable accordingly. (AY 2009-10)
CIT (TDS) v. Ivy Health Life Sciences P. Ltd. (2016) 380 ITR 242 / 236 Taxman 292 / 286
CTR 313 / 133 DTR 169 (P&H) (HC)
Editorial : Order in Deputy CIT (TDS) v. Ivy Health Life Sciences P. Ltd. (2012) 20 ITR
(Trib) 179 (Chandigarh) is affirmed.
S. 192 : Deduction at source – Salaries – Provident fund withdrawals – Withdrawals 1990
from Employees Provident Fund account by employees within five years of rendering
continuous service with their employer are liable to TDS in terms of rule 10 of Part
A of Fourth Schedule to Act. [S. 10(11), Employees Provident Fund and Miscellaneous
Provisions Act, 1952]
Tribunal held that Employees Provident Fund and Miscellaneous Provisions Act, 1952, is
covered under Fourth Schedule to Act being a recognised provident fund and, therefore,
withdrawals from EPF account by employees within five years of rendering continuous
service with their employer are liable to TDS in terms of rule 10 of Part A of Fourth
Schedule to Act. (AY. 2011-12 to 2013-14)
Employees Provident Fund Organization v. Dy. CIT (2016) 160 ITD 611 / 181 TTJ 494
(Delhi)(Trib.)
657
Deduction at source S. 192
1991 S. 192 : Deduction at source – Salary – Leave travel concession – Foreign travel
employee can't claim LTC exemption to extent of travel exp. in India – Liable to deduct
tax at source. [S. 10(5)]
Tribunal held that Leave Travel Concession (LTC) paid by assessee to employees
involving foreign travel as well would not qualify for exemption under section 10(5)
and, accordingly, assessee was liable to deduct TDS on such payment of Leave Travel
Concession (LTC.). (AY. 2012-13)
State Bank of India v. DCIT (2016) 158 ITD 194 (Luck.)(Trib.)
1992 S. 192 : Deduction at source – Salary – Inhouse consultant doctors in a hospital were
under supervision and control of hospital authorities and paid fixed remuneration,
services rendered by doctors was in nature of employee and, thus, TDS was to be
deducted as salary. [S. 28(i), 194J]
Assessee hospital was employing inhouse consultant doctors. Even though inhouse
consultant doctors declared their income under head 'professional charges', they were
paid fixed remuneration and their working conditions were under supervision and
control of hospital authorities. Services rendered by in house consultant doctors were
in nature of employee and, thus, fixed remuneration paid to them would be subjected
to TDS u/s. 192. (AY. 2011-12 to 2013-14)
Hosmat Hospital (P.) Ltd. v. ACIT (2016) 160 ITD 513 (Bang.)(Trib.)
S. 194A. Interest other than “Interest on securities”
1993 S. 194A : Deduction at source – Interest other than interest on securities –
Compensation for acquisition of land – Failure of High Court to give reasons – Matter
remanded.
On appeal against the judgment of High Court, holding that Tribunal was not justified
in affirming the order of the appellate authority holding that there was no liability on
the appellant to deduct tax at source on the interest payable for belated payment of
compensation for land acquired and that section 194A of the Act was not applicable to
such payment and restoring the order of Tax Recovery Officer. The Apex Court held that
since the High Court had not recorded reasons, in its order, its orders were set aside
and remanded to High Court for decision afresh giving detailed reasons after hearing
counsel of parties. (AY. 2002-03)
Commissioner, Belgaum Urban Development Authority v. CIT (2016) 382 ITR 8 / 243
Taxman 237 / 136 DTR 96 / 286 CTR 371 (SC)
1994 S. 194A : Deduction at source – Interest other than interest on securities – Capital
gains – Interest – Assessable as capital gains – Tax is not deductible at source on such
interest [S. 45, 56, Land Acquisition Act S. 28]
Allowing the appeal the Court held that the Assessing Officer was not justified in
deducting tax at source under section 194A of the 1961 Act in respect of such interest.
The assessee was, therefore, entitled to refund of the amount wrongly deducted under
section 194A of the 1961 Act. Followed, CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC)
Movaliya Bhikhubhai Balabhai v. ITO (TDS) (2016) 388 ITR 343 / 70 taxmann.com 45
(Guj.)(HC)
658
S. 194A Deduction at source
S. 194A : Deduction at source – Interest other than interest on securities – A 1995
co-operative bank was not required to deduct tax on interest on time deposits of its
members paid or credited before 1-6-2015
Dismissing the appeal of the revenue, the Court held that a co-operative bank was not
required to deduct tax on interest on time deposits of its members paid or credited
before 1-6-2015.
CIT v. Shri Basaveshwara Sahakari Bank. (2016) 242 Taxman 411 (Karn.)(HC)
S. 194A : Deduction at source – Interest – No liability to deduct tax on interest to 1996
members paid or credited before 1-6-2015.
Dismissing the appeal of revenue the Court held that the provisions of section 194A(3)
(v) of the Income-tax Act, 1961, have been amended so as to expressly provide that the
exemption provided from deduction of tax from payment of interest to members by a
co-operative society under section 194A(3)(v) of the Act shall not apply to the payment
of interest on time deposits by co-operative banks to their members. As this amendment
is effective from the prospective date of June 1, 2015, the co-operative bank shall be
required to deduct tax from the payment of interest on time deposits of its members, on
or after June 1, 2015. Hence, a co-operative bank was not required to deduct tax from
the payment of interest on time deposits of its members paid or credited before June 1,
2015. (AY. 2009-10)
CIT v. Shri Siddeshwar Co-Operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588
(Karn.)(HC)
CIT v. Sindagi Urban Co-operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588
(Karn.)(HC)
S. 194A : Deduction at source – Interest – Co-operative bank – Tax not deductible at 1997
source on interest on time deposits of members paid or credited before 1-7-2015. [S.
192A(3)(v)]
Dismissing the appeal of revenue, the Court held that the provisions of section 192A(3)
(v) of the Income-tax Act, 1961, have been amended so as to expressly provide that the
exemption provided from deduction of tax from payment of interest to members by a
co-operative society under section 194A(3)(v) of the Act shall not apply to the payment
of interest on time deposits by co-operative banks to their members. As this amendment
is effective from the prospective date of June 1, 2015, the co-operative bank shall be
required to deduct tax from the payment of interest on time deposits of its members,
on or after June 1, 2015. Hence, a co-operative bank was not required to deduct tax
from the payment of interest on time deposits of its members paid or credited before
June 1, 2015.
CIT v. National Co-op. Bank Ltd. (2016) 387 ITR 702 (Karn.)(HC)
S. 194A : Deduction at source – Interest other than interest on securities – Insurance 1998
company deducted tax at source while depositing compensation in favour of claimant,
Motor Accident Claims Tribunal had committed no error in insisting on insurance
company in making good shortfall.
The Court held that the case of credit of interest on compensation awarded by the
Claims Tribunal falls in the exclusion clause contained in sub-section (3) of section
659
Deduction at source S. 194A
194A and it prima facie appears that the ceiling of ` 50,000 per annum for such
exclusion is now done away with in case of crediting of interest on compensation
awarded by the Claims Tribunal while retaining such limit in cases of payment
of interest on such compensation. The Court held that looked from any angle, the
insurance-company was not justified in deducting tax at source while depositing
the compensation in favour of the claimants. It therefore, cannot avoid liability of
depositing such amount with the Claims Tribunal. The Court concluded that the
insurance company should have properly advised itself before effecting tax at source
on the ground that the judgment of the Court in case of Smt. Hansagauri Prafulchandra
Ladhani v. Oriental Insurance Co. Ltd. (2007) 2 GLR 291 was no longer good law in
view of the statutory amendments. Not having done that, the only course left open to
the insurance-company would be to approach the Income-tax department for refund, as
may be advised. Thus, the Court ruled in favour of the claimant.
New India Insurance Co. Ltd. v. Bhoyabhai Haribhai Bharvad (2016) 242 Taxman 415
(Guj.)(HC)
1999 S. 194A : Deduction at source – Interest – Exclusion from provision – Interest paid
to corporation established by State Act – Noida constituted under State Act – Tax not
deductible at source on interest paid to Noida.
As per section 194A(3), income credited or paid to the Life Insurance Corporation of
India established under the Life Insurance Corporation Act, 1952 or the Unit Trust of
India established under the Unit Trust of India Act, 1963 are exempted from payment
of tax at source. The State Government has issued a notification under the proviso to
clause (1) of Article 243Q of the Constitution providing that having regard to the size of
Noida which has been declared to be an Industrial Development Area, Noida would be
an "Industrial Township" with effect from the date of publication of the notification. This
clearly means that instead of Municipal Corporation providing services, Noida would
provide the said services and if that be so, then Noida owes its existence to an Act of
the State. Hence, tax is not deductible on interest paid to Noida. (AY. 2006-07, 2007-08)
CIT (TDS) v. Canara Bank (2016) 386 ITR 504 / 240 Taxman 249 / 289 CTR 75 / 141
DTR 73 (All.)(HC)
2000 S. 194A : Deduction at source – Failure to deduct – Payment of interest to entities
exempted from tax – No tax need be deducted at source. [S. 10(23C)(iv), 194H, 201(1)
201(IA)]
If an organisation was exempted from payment of tax there was no need for deduction
of tax at source by the assessee. Hindustan Coca Cola Beverage P. Ltd. v. CIT (2007) 293
ITR 226 (SC) followed. (AY. 2012-13)
CIT (TDS) v. Canara Bank (2016) 386 ITR 229 (P&H)(HC)
2001 S. 194A : Deduction at source – Interest other than interest on securities – Interest
received under section 28 of the Land Acquisition Act, 1894 is in the nature of
enhanced compensation and not interest as envisaged under section 194A [S. 56(2)
(vii), 57(iv), 197, Land Acquisition Act, 1894, S. 28]
Assessee’s agricultural lands were acquired and the assessee received additional
compensation under an award under the Land Acquisition Act, 1894. Pursuant to the
660
S. 194A Deduction at source
Award, the payer submitted a statement showing the amount of interest as payable
under section 28 of the 1894 Act and also the amount of TDS to be deducted as per S.
194A. Assessee made an application to the AO u/s. 197(1) for deciding the tax liability
of interest and for issuance of nil tax liability certificate. AO rejected the application
on the ground that the interest amount on delayed payment of compensation is taxable
u/s. 57(iv) r/w S. 56(2)(viii) of the Act. HC held that the interest under section 28 of the
1894 Act was in the nature of enhanced compensation and would not fall within the
ambit of the expression ‘interest’ as envisaged under section 145A(b). HC held that the
payer was therefore not justified in deducting tax under section 194A.
Movaliya Bhikhubhai Balabhai v. ITO (2016) 138 DTR 223 / 70 taxmann.com 45 (Guj.)
(HC)
S. 194A : Deduction at source – Interest other than interest on securities – Amendment 2002
made to section 194A(3)(v) has prospective effect from 1-6-2015.
The High Court held that the issue is squarely covered by Division Bench ruling in case
of Bagalkot District Central Co-op Bank (ITA No. 100116/2014 dated 16 December 2015)
which had reference of Circular No. 19 of 2015 dated 27 November 2015. The circular
held that amendment made to section 194A(3)(v) will have prospective effect form 1
June 2015. Hence a co-operative bank was not required to deduct tax from the payment
of interest on time deposits of its members paid or credited before 1 June 2015. Thus
the High Court dismissed the revenues appeal stating no substantial question of law
arises. (AY. 2009-10, 2010-11)
CIT v. Shri Siddeshwar Co-operative Bank Ltd. (2016) 388 ITR 588 / 240 Taxman 588
(Karn) (HC)
S. 194A : Deduction at source – Interest – Motor Vehicles Act – Compensation awarded 2003
by Motor Vehicle Accident claims Tribunal and interest accruing therein are not
incomes, hence such amounts cannot be subjected to tax deduction at source.
The compensation awarded by the Motor Accident Claims Tribunal or the interest
accruing thereon cannot be subjected to deduction of tax at source and since the
compensation and the interest awarded therein do not fall under the term "income" as
defined under the Act.
Managing Director, Tamil Nadu State Transport Corpn (Salem) Ltd. v. Chinnadurai (2016)
385 ITR 656 / 240 Taxman 162 / 142 DTR 65 / 290 CTR 297 (Mad.)(HC)
S. 194A : Deduction at source – Interest other than interest on securities – Discounting 2004
charges cannot be termed as “interest” – Not liable to deduct tax at source [S. 40(a)
(ia)]
Dismissing the appeal of revenue the Court held that the term sheet issued by GTFL
showed that interest @ 13% would be charged on the loan advanced to the assessee.
This is difference from the factoring charges @ 10% payable to GTFL. The AO had
no factual basis to treat the impugned amount as “interest”. Thus, no disallowance is
warranted u/s. 40(a)(ia) of the Act. (AY. 2009-10)
PCIT v. M Sons Gems N Jewellery (P.) Ltd. (2016) 239 Taxman 530 (Delhi)(HC)
661
Deduction at source S. 194A
2005 S. 194A : Deduction at source – Interest other than interest on securities – Contingent
payments – No liability to deduct tax, if income did not accrue to the supplier. [S.
201(IA)]
The assessee Company being an undertaking of the Government of Karnataka purchased
power after entering into power purchase agreements. For such purchases when there
was a delay in payment, the assessee paid interest to suppliers. During the 3 years
under consideration, the assessee had created a provision for the interest amount and
treated the same as expenditure to arrive at the profit but while filing the return the
Assessee did not treat the interest as expenditure. As these were book entries towards
contingent interest payable for the first 2 years, corresponding reversal entries were
made in the books indicating that the provision towards contingent interest would never
be paid. However in the third year the said amount though was treated as expenditure
in the profit and loss account was not excluded while arriving at the taxable income in
the return of income.
The AO held that the assessee was liable to deduct tax at source on the amount of
provision made towards likely interest payable and treated the assessee as in default
and invoked the provisions of section 201 and 201(1A) of the Act. The same was upheld
by the CIT(A) and the Tribunal. Aggrieved the assessee filed an appeal before the High
Court.
The High Court after examining the applicability of section 194A of the Act to the
present case held that the section mandates the tax deductor to deduct income tax on
‘any income by way of interest other than income by way of interest on securities’. The
phrase ‘any income’ and ‘income tax thereon’ if read harmoniously, it would indicate
that the interest which finally partakes the character of income, alone is liable for
deduction of the income tax on that income by way of interest. If the said interest is
not finally considered to be an income of the deductee, as per reversal entries of the
provision in the present case, Section 194A(1) of the Act would not be made applicable.
In other words, if no income is attributable to the payee, there is no liability to deduct
tax at source in the hands of the tax deductor. In view of the admitted fact that interest
being not paid to the suppliers being reversed in the books of accounts, High Court was
of the opinion that there would be no liability to deduct tax as no income accrued to
the suppliers. (AY. 2005-06 to 2007-08)
Karnataka Power Transmission Corporation Ltd. v. CIT (TDS) (2016) 383 ITR 59 / 238
Taxman 287 / 139 DTR 33 / 288 CTR 77 (Karn.)(HC)
2006 S. 194A : Deduction at source – Interest payable by co-operative society carrying on
banking business – No liability to deduct tax at source on interest prior to 1-6-2015 –
Amendment, w.e.f. 1-6-2015 is prospective in operation.
Held, that for financial years 2008-09 to 2014-15 the assessee, a co-operative society
carrying on banking business with the approval of the Reserve Bank of India, was
not liable to deduct tax under section 194A on the interest paid to its members. The
memorandum explaining the amendment stated that it was proposed to amend the
provisions of section 194A of the Act to expressly provide from the prospective date
of June 1, 2015 that the exemption provided from deduction of tax from payment
of interest to members by a co-operative society under section 194A(3)(v) of the Act
662
S. 194A Deduction at source
shall not apply to the payment of interest on time deposits by co-operative banks to
their members. Apart from the fact that the express language of section 194A after
amendment does not indicate any retrospectivity, the note explaining the clauses goes
one step further in making it clear that it was intended to have prospective effect from
June 1, 2015. (AY. 2008-09 to 2014-15)
Coimbatore District Central Co-op. Bank Ltd v. ITO (2016) 382 ITR 266 / 137 DTR 193 /
288 CTR 53 (Mad.)(HC)
S. 194A : Deduction at source – Interest other than interest on securities – Charge of 2007
income-tax – Compensation awarded by Motor Accident Claims Tribunal and interest
accruing thereon is not subject to deduction of tax at source – CBDT Circular dated
14.10.2011 is not good law. [S. 4, 156]
Dismissing the revision petition the Court held that Compensation awarded by the Motor
Accident Claims Tribunal, and interest accruing thereon, is to ameliorate the sufferings
of the victims and does not have the character of "income". If there is a conflict between
a social welfare legislation and a taxation legislation, the social welfare legislation will
prevail since it subserves larger public interest. CBDT Circular dated 14.10.2011 is
not good law. If there is a conflict between a social welfare legislation and a taxation
legislation, then, this Court is of the view that a social welfare legislation should prevail
since it subserves larger public interest. The Motor Vehicle Act is one such legislation
which has been passed with a benevolent intention for compensating the accident
victims who have suffered bodily disablement or loss of life and the Income Tax Act
which is primarily intended for Tax collection by the State cannot put spokes in the
effective and efficacious enforcement of the Motor Vehicles Act. In fact, if one might
deeply analyse, it could be seen that there is no direct conflict between any provisions
of the Income-tax Act and the Motor Vehicles Act and it is only by the interpretation
of the provisions the concept of compulsory payment of TDS has crept into the realm
of compensation payment in Motor Vehicle Accident cases. Hence the compensation
awarded or the interest accruing therein from the compensation that has been awarded
by the Motor Accident Claims Tribunal cannot be subjected to TDS and the same cannot
be insisted to be paid to the Tax Authorities since the compensation and the interest
awarded therein does not fall under the term ‘income’ as defined under the Income Tax
Act, 1961. (CRP(PD) No. 1343 of 2012 and M. P. No. 1 of 2012, dt. 02.06.2016)
Tamil Nadu State Transport Corporation (Salem) Ltd. v. Chinnadurai (Mad.)(HC); www.
itatonline.org
S. 194A : Deduction at source – Interest – Insurance company – Death or injury – 2008
Compensation – Not a business transaction or a receipt of any charges on account of
services rendered by any other party – Insurance company not required to deduct tax
at source.
Compensation received under the Motor Vehicles Act is either on account of loss of
earning capacity on account of death or injury or on account of pain and suffering
and such receipt is not by way of earning or profit. Award of compensation is on the
principle of restitution to place the claimant in the same position in which he would
have been had the loss of life or injury has not been suffered.
663
Deduction at source S. 194A
Held, the payment of compensation on account of death and injury is not a business
transaction or a receipt of any charges on account of services rendered by any other
party. Thus, in such cases, the insurance company is not liable to impose tax deduction
at source. The orders calling upon the insurance company to pay the tax deducted at
source/deduct tax at source on the interest part, were not sustainable and were set aside.
National Insurance Co. Ltd. v. Ritu Kunawar and Ors. (2016) 380 ITR 467 / 282 CTR 597
/ 129 DTR 418 (P&H)(HC)
New India Assurance Co. Ltd. v. Sudesh Chawala and Ors. (2016) 380 ITR 467 / 282 CTR
597 / 129 DTR 418 (P&H)(HC)
New India Assurance Co. Ltd v. Sunita Sharma and Ors. (2016) 380 ITR 467 / 282 CTR
597 / 129 DTR 418 (P&H)(HC)
2009 S. 194A : Deduction at source – Interest – Failure to deduct tax at source – Penalty –
Tax not deductible at source on payments of interest to societies notified in terms of
section 194A(3) – Penalty not leviable in such cases. [S. 201(1), 271C]
In the case of three societies, i. e. Haryana Rural Roads and Infrastructure Development
Agency, Punjab ICT Education Society and Haryana State Council for Science and
Technology, the assessee was not liable to deduct tax at source on interest paid to the
parties in view of the provisions of section 194A(3)(iii)(f) of the Act. In the case of Shri
Aurobindo Society, the Commissioner (Appeals) noticed that the exemption certificate
under section 80G(5)(vi) of the Act was valid for the AY. 2011-12 and a copy of its
return of income where the total income declared was 'nil', was also filed and, therefore,
the assessee had a reasonable cause for failure to deduct tax at source under section
201(1) of the Act. Accordingly, the Commissioner (Appeals) cancelled the penalty levied
by the Department under section 271C of the Act. The Tribunal was right in confirming
the order. No penalty was leviable under section 271C of the Act. (AY. 2011-12)
CIT (TDS) v. State Bank of Patiala (2016) 386 ITR 533 (P&H)(HC)
S. 194C. Payments to contractors.
2010 S. 194C : Deduction at source – Contractors – Supply of sugar cane by farmers at gate
of factory of assessee was a part of sale transaction and, therefore, assessee was not
liable to deduct tax at source.
During year, assessee, a manufacturer of sugar, made payments to transporters and did
not deduct tax at source on said payments. Both Assessing Officer and Commissioner
(Appeals) held that assessee was liable to deduct tax at source under section 194C on
above payments. Tribunal held that assessee was not liable to deduct tax at source
on aforesaid payments. High Court held that in view of an earlier decision of Gujarat
High Court made in Tax Appeal No. 211 of 2006, dated 1-12-2014, wherein it had been
held that supply of sugar cane by farmers at gate of factory of assessee was a part of
sale transaction and, therefore, assessee was not liable to deduct tax at source, order of
Tribunal deserved to be confirmed. (AY. 2003-04)
CIT v. Khedut Sahakari Khand Udyog Mandi Ltd. (2016) 76 taxmann. com 117 (Guj.)(HC)
Editorial : SLP filed against order was dismissed, ACIT v. Khedut Sahakari Khand Udyog
Mandi Ltd. (2016) 243 Taxman 522 (SC)
664
S. 194C Deduction at source
S. 194C : Deduction at source – Contractors – Failure to deduct – Matter remitted to 2011
Assessing Officer to ascertain veracity of factual matrix. [S. 201(1)]
The assessee, a university, entered into a memorandum of agreement with the Greater
Ludhiana Area Development Authority for the supervision of its building projects
on its behalf. Interest bearing advance paid by assessee to development authority
for supervising construction work. The assessee contended that tax paid on interest
on advance and deducted at source from payments to contractors and deposited by
development authority. Matter remitted to Assessing Officer to ascertain veracity of
factual matrix. (AY. 2009-10)
Guru Angad Dev Veterinary Agricultural Science Universtity v. CIT (2016) 387 ITR 670
(P&H)(HC)
S. 194C : Deduction at source – Contractors – Payments for construction, erection & 2012
commissioning etc of plants cannot be regarded as technical services. [S. 9(1)(vii),
194J]
Dismissing the appeal of the revenue the Court held that payments for construction,
erection & commissioning etc of plants cannot be regarded as payments for technical
services. Assessee rightly deducted the tax at at source as contract. The assessee was
not liable to deduct tax at source u/s. 194J. (AY. 2012-13)
PCIT v. Bharat Heavy Electricals Ltd. (2017) 145 DTR 96 / 291 CTR 161 (P&H)(HC)
S. 194C : Deduction at source – Contractors – Works contract – Contractor purchasing 2013
material from person other than customer – Tax not deductible at source. [S. 194J]
If a person executing the work purchases the materials from a person other than the
customer, it would not fall within the definition of "work" under section 194C. (AY. 2008-09)
CIT v. Executive Engineer, O and M Division, (GESCOM) (2016) 386 ITR 438 (Karn.)(HC)
Editorial : SLP was to the Department CIT v. Executive Engineer, O and M Division,
(GESCOM) (2016) 384 ITR 123 (St.)
S. 194C : Deduction at source – Contractors – Collection of toll fee – Justified in 2014
deducting the tax as contractor. [S. 194H]
Dismissing the appeal of the Revenue, the Tribunal held that; Assessee carried out
development and maintenance work of highways, entered into contract with collection
agencies for collection of toll fee, since it was merely a contract for supply of labour
for execution of work, assessee was justified in deducting tax at source u/s. 194C while
making payments to collection agencies. (AY. 2009-10)
Dy. CIT v. Project Director, NHAI (2016) 159 ITD 367 (Visakh.)(Trib.)
S. 194C : Deduction at source – Contractors/sub-contractors – Authorised Service 2015
Stations- Payment received by dealers from vehicle owners on providing services
against service coupons, would be liable to deduct tax at source.
Dismissing the appeal of the assessee, Payment received by dealers from vehicle owners
on providing services against service coupons, would be liable to deduct tax at source.
(AY. 2007-08, 2008-09)
Mahindra Navistar Automotives Ltd. v. Dy. CIT (2016) 159 ITD 123 / 181 TTJ 271 / (2017)
148 DTR 355 (Mum.)(Trib.)
665
Deduction at source S. 194C
2016 S. 194C : Deduction at source – Contactors – Film-negative printing does not involve
any technical or professional service hence TDS would be deducted as contractor. [S.
194J, 201]
Dismissing the appeal of the revenue, the Tribunal held that process of making prints of
negatives did not involve any technical or professional service, same would be covered
u/s. 194C and not u/s. 194J. (AY. 2005-06)
Dy. CIT v. Yash Raj Films (P.) Ltd. (2016) 160 ITD 626 (Mum.)(Trib.)
2017 S. 194C : Deduction at source – Contactors – Use of infrastructure facility of BRPL
as loading facility provided by BRPL as it was not possible for assessee to purchase
products without availing infrastructure facility, payment was not liable to deduction
of tax at source, payment was a part of the price. [S. 194I, 201]
Assessee-company used infrastructure facility of BRPL as loading facility provided
by BRPL as it was not possible for assessee to purchase products without availing
infrastructure facility. The AO held that the payment was liable to deduct tax at source
u/s 194C. On appeal CIT(A) dismissed the appeal of the assessee. On appeal to Tribunal,
the Tribunal held that method for payment of infrastructure facility and entering
into a separate agreement for availing loading facility could not be sole basis to treat
transaction independent from purchase and, thus, loading charges would not be covered
under section 194C. It is part of the purchase price. (AY. 2002-03 to 2004-05)
Indian Oil Corporation Ltd. v. DCIT (2016) 161 ITD 131 / (2017) 183 TTJ 624 / 147 DTR
77 (Kol.)(Trib.)
2018 S. 194C : Deduction at source – Contractors – While making reimbursement of cost of
materials supplied is not liable to deduct tax at source.
Contract with a party to supply labourers for construction of flats, assessee procurred
materials also through said contractor without any profit markup, it could not be a case
of composite work contract not required to deduct TDS while making reimbursement of
cost of materials supplied. (AY. 2008-09)
Dhanashekar Muniswamy v. ACIT (2016) 161 ITD 366 (Bang.)(Trib.)
2019 S. 194C : Deduction at source – Contractors – payment for clearing and forwarding
agents – whether payment to professionals u/s. 194J [S. 194J]
The assessee entered into an agreement with clearing and forwarding agents at various
ports in India and based on that agreement, the clearing and forwarding agents provided
services such as receiving of goods, arranging labour, maintenance of records and
submission of various documents to the customs authorities. The Assessing Officer
treated the services as professional services covered under section 194J and held that tax
at 10 percent was to be deducted at source and treated the assessee as in default under
section 201(1) and levied interest under section 201(1A) for short deduction of tax at
source. The Tribunal held that the clearing and forwarding agencies were independent
contractors, and the payment to them pursuant to the agreement entered into with them
was subject to tax deduction at source under section 194C and not section 194J. (AY.
2009-10 to 2012-13)
Gujarat Ambuja Exports Ltd. v. DCIT (2016) 46 ITR 519 (Ahd.)(Trib.)
666
S. 194C Deduction at source
S. 194C : Deduction at source – Contractors – Matter was remitted back for 2020
redetermination.
Commissioner (Appeals) did not adjudicate plea of assessee raised for first time that he
was an individual builder-developer and thus was not liable to deduct TDS on labour
charges, matter was liable to be remitted back for redetermination. (AY. 2007-08)
Vasant J. Khetani v. JCIT (2016) 158 ITD 339 / 179 TTJ 475 / 138 DTR 265 (Mum.)(Trib.)
S. 194C : Deduction at source – Contractors – Assessee deducted TDS under wrong 2021
provision in earlier assessment years which was accepted by revenue without
verification, principle of consistency could not be applied to continue application of
such wrong provision in later years – TDS is to be deducted under section 194J. [S.
194J]
The assessee was engaged in business of distribution of TV channels from its own DTH
network. It obtained rights from TV channels to distribute their programs to the ultimate
viewers. It made payments thereto after deducting TDS u/s. 194C. The A.O. held that
assessee paid licence fee to TV channels which was in the nature of royalty covered
under Explanation 2(v) of section 9(1)(vi) and as such, TDS was to be deducted u/s. 194J.
Applicability of correct TDS provision was in question. Assessee argued that it made
payments in past also after deducting TDS u/s. 194C, which view had not been disturbed
by revenue therefore same view should be followed for assessment year in question as
well. Issue was not examined in earlier years and assessee's contention was accepted
without verification. Non-examination of issue in earlier years could not give license to
assessee to claim in later years that correctly applicable section be put under carpet and,
therefore, a wrong provision could not be applied in garb of consistency. (AY. 2009-10)
Dish TV India Ltd. v. ACIT (2016) 157 ITD 1096 / 177 TTJ 752 / 134 DTR 81 (Delhi)(Trib.)
S. 194C : Deduction at source – Contractors – Payment to music group – Cannot be 2022
considered as professional services – Deduction of tax at source as contractor was
held to be justified. [S. 194J]
The Tribunal held that live performance given by a music troupe at the assessee’s hotel
cannot be considered as professional services as defined in section 194J. There was
no production of any cinematography film during the performance by the group and
therefore provisions of section 194J are not applicable, ex-consequent deduction of tax
at source under section 194C is in order. (AY. 2006-07, 2007-08)
C. J. International Hotels Ltd. v. Addl. CIT (2016) 158 ITD 287 / 177 TTJ 447 / 137 DTR
289 (Delhi)(Trib.)
S. 194C : Deduction at source – Contractor – Transportation of goods and container – 2023
Tax was rightly deducted as contractor. [S. 194I]
Where assessee-company, engaged in business of cargo handling, made payments
for transportation of goods to transporter which also supplied containers, since use
of containers was only incidental to transporting of cargo, assessee was justified in
deducting tax at source under section 194C from payments in question. Provision of
section 194I can not be invoked. (AY. 2009-10)
ACIT v. Pushpak Logistics (P.) Ltd. (2016) 157 ITD 471 (Rajkot)(Trib.)
667
Deduction at source S. 194C
2024 S. 194C : Deduction at source – Contractors – Maintenance Charges – Tax is deductible
as per section 194C and under section 194J. [S. 194J]
Allowing the appeal of assessee the Tribunal held that where assessee was running
diagnostic laboratories and it paid routine maintenance charges to professionals for
maintaining medical equipments and deducted tax at source under section 194C, it had
not committed any default by deducting tax at source under section 194C. (AY. 2010-11)
DDRC SRL Diagnostic (P.) Ltd. v. ITO (2016) 157 ITD 92 / 135 DTR 107 / 178 TTJ 281
(Mum.)(Trib.)
S. 194H. Commission or brokerage.
2025 S. 194H : Deduction at source – Commission or brokerage – Trade discount – Incentive
given only to promote sales is not commission, hence not liable to deduct tax at
source. [S. 201(1)]
Dismissing the appeal of revenue the Court held that it was evident that beer was sold
by the assessee to the Corporation, and the Corporation, in turn, sold the beer purchased
by it from the assessee, to retail dealers. The two transactions were independent of each
other, and were on a principal-to-principal basis. No services were rendered by the retail
dealer to the assessee, and the incentive given by the assessee to the retailers as trade
discount was only to promote their sales. The Tribunal rightly held that in the absence
of a relationship of principal and agent, and as there was no direct relationship between
the assessee and the retailer, the discount offered by the assessee to the retailers could
only be treated as sales promotion expenses, and not as commission, as no services were
rendered by the retailers to the assessee. (AY. 2008-09 to 2010-11)
CIT (TDS) v. United Breweries Ltd. (2016) 387 ITR 150 / 293 CTR 500 / 80 taxmann.com
123 (T & AP)(HC)
2026 S. 194H : Deduction at source – Commission or brokerage – Guarantee fee paid to
bank is not in nature of commission or brokerage under ambit of s. 194H as there
exists no principal-agent relationship hence not liable to deduct tax at source.
Assessee sought its banks to issue guarantee in its favour for which bank had charged
certain amount as 'guarantee fee. Contract of guarantee did not give rise to principal-
agent relationship; therefore, consideration received by bank could not be treated as
commission. (AY. 2010-11)
DCIT v. Laqshya Media (P.) Ltd. (2016) 160 ITD 35 / 182 TTJ 318 (Mum.)(Trib.)
2027 S. 194H : Deduction at source – Commission or brokerage – Bank guarantee – No
principal-agent relationship between assessee and bank issuing bank guarantee on
behalf of assessee, transaction between them is not liable to deduct tax at source.
Bank issues bank guarantee on behalf of assessee, there is no principal-agent
relationship between bank and assessee and, therefore, assessee is not required to deduct
tax at source u/s. 194H from payment of bank guarantee commission made to bank. (AY.
2011-12)
Efftronics Systems (P.) Ltd. v. (2016) 161 ITD 688 (Visakh.)(Trib.)
668
S. 194I Deduction at source
S. 194H : Deduction at source – Commission or brokerage – Director's remuneration 2028
– Did not amount to 'commission or brokerage requiring deduction of tax at source
under section 194H.
Payment made by assessee-company to its non-executive directors for giving suggestions
for better performance of company, did not amount to 'commission or brokerages'
requiring deduction of tax at source under section 194H. (AY. 2007-08 to 2010-11)
Dy. CIT v. Kirloskar Oil Engine Ltd. (2016) 158 ITD 309 (Pune)(Trib.)
S. 194H : Deduction at source – Commission or brokerage – Sub-brokerage on security 2029
transactions – TDS liability on payment of commission and brokerage, specific
provision of s. 194H would be attracted – not provision of s. 194J; however, in view
of Expl. 1 to S. 194H tax is not deductible at source in respect of sub-brokerage paid.
[S. 194J]
Assessee Company was a stock broker and had entered into an agreement with SHCL,
a holding company, for conducting business as sub-broker and had paid sub-brokerage
to it. AO opined that sub-brokerage payment would attract provisions of S. 194J since
payment was made to holding company, which would fall under head 'fees for technical
services' and as tax had not been deducted at source sub-brokerage paid as such was
to be disallowed. Since provisions of s. 194H are specific provision dealing with
commission and brokerage, same would be attracted to payments made for sub-brokerage
and not provisions of S. 194J; however, under Explanation 1 to S. 194H transactions in
securities is exempt and no tax was deductible in respect of sub-brokerage paid. (AY.
2011-12)
SHCIL Services Ltd. v. Dy. CIT (2016) 158 ITD 1006 / 181 TTJ 408 (Mum.)(Trib.)
S. 194H : Deduction at source – Commission or brokerage – Discount – Matter 2030
remanded.
Tribunal held that where assessee was running diagnostic laboratories and it had given
discount to hospitals in respect of testing charges received by it and Assessing Officer
held that discount given was in nature of commission liable for deduction under
section 194H, since nature of relationship between assessee and hospitals had not been
examined by considering basic facts, matter required fresh examination. (AY. 2010-11)
DDRC SRL Diagnostic (P.) Ltd. v. ITO (2016) 157 ITD 92 / 135 DTR 107 / 178 TTJ 281
(Mum.)(Trib.)
S. 194I. Rent.
S. 194I : Deduction at source – Rent – Non-refundable upfront Lease premium paid 2031
does not take the character of rent and therefore, section 194-I is not attracted.
The High Court held that one time non refundable upfront charges paid by the assessee
was not (i) under the agreement of lease, and (ii) merely for the use of the land. The
payment was made for a variety of purposes such as (i) becoming a co-developer,
(ii) developing a Product Specific Special Economic Zone, and (iii) for putting up an
industry in the land. The lessor as well as the lessee intended to treat the lease virtually
669
Deduction at source S. 194I
as a deemed sale giving no scope for any confusion. In such circumstances, the upfront
payment made by the assessee for the acquisition of leasehold rights over an immovable
property for a long duration of time say 99 years could not be taken to constitute rental
income at the hands of the recipient obliging the assessee to deduct tax at source under
section 194-I.
Foxconn India Developer (P) Ltd. v. ITO (2016) 288 CTR 173 / 239 Taxman 513 (Mad.)
(HC)
2032 S. 194I : Deduction at source – Rent – Onetime non-refundable upfront payment for
the acquisition of leasehold rights for a period of 99 years as a co-developer cannot
constitute rent for deduction of tax at source. [S. 201]
Allowing the appeal of assessee the Court held that the upfront charges paid by
assessee was not merely for use of land but for a variety purposes such as (i) becoming
a co-developer, (ii) developing a project and (iii) putting up an industry on the land,
and therefore upfront payment made for the acquisition of leasehold rights over an
immovable property could not be treated as rental income at the hands of the lessor,
obliging the lessee to deduct tax at source.
Foxconn India Developer (P.) Ltd. v. ITO (2016) 239 Taxman 513 / 288 CTR 173 / 135
DTR 185 (Mad.)(HC)
2033 S. 194I : Deduction at source – Rent – Amount paid by joint venture company to
Government for lease of land is not mere lease, hence not liable to deduct tax at
source. [S. 201]
Allowing the appeal of the assessee, the Court held that;
that though the amount of ` 1412 crores was paid actually by the lessee to the lessor,
it was not paid merely for the purpose of retaining the lease for a period of 99 years.
The amount paid was actually determined in an open competitive bidding that took
place even before the joint venture company was born. T, which was the joint venture
partner, offered this amount for getting the benefit of entering into a joint venture
agreement with TIDCO, the benefit of which would spill over to joint venture company
in the form of a 99 years lease. The date on which the amount was quantified, the
manner in which the amount was quantified and the method of selection of the joint
venture partner were the crucial determining factors to understand that the amount
could never constitute rent. To put it differently, a premium or rent irrespective of how
it was treated, could be decided only after an agreement for lease was finalised. If an
amount had to be determined even before an agreement for lease was finalised, it would
never form part of the rental income. On the facts there was no dispute that even at the
time when the alienation was made by the Government, the amount determined by the
parties was agreed to be paid to the Government. The method of determination of the
amount and the method of choosing the lessee alone were left to TIDCO. But TIDCO
was obliged to retain only a sum of ` 50 per sq. ft. and pass on the balance amount to
the Government. Therefore, the amount liable to be passed on to the Government could
not be consideration paid to TIDCO, which was the lessor. It was consideration paid to
670
S. 194I Deduction at source
the Government. Once it was understood to be a consideration paid to the Government,
the question of deducting tax at source did not arise.
TRIL Infopark Ltd v. ITO (TDS) (2016) 385 ITR 465 / 288 CTR 188 / 138 DTR 201 / 70
taxmann. com 44 (Mad.)(HC)
Editorial : Order of the Appellate Tribunal in TRIL Infopark Ltd. v. ITO (TDS) (2015) 44
ITR 139 (Chennai)(Trib.) reversed.
S. 194I : Deduction at source – Rent – Constitutional validity – Provision valid – Does 2034
not contravene Article 14 or 19 of – Constitution of India – Room charges of hotel
including charges for amenities constitutes rent – Circulars – Circular No. 715 of 1995
and 5 of 2002 do not expand scope of section 194-I – Circulars not ultra vires Act
– Interpretation of taxing statutes – Contextual interpretation. [Constitution of India,
Arts. 14, 19, 366 (29A)]
The word "rent" in section 194I of the Income-tax Act, 1961, has to be interpreted
widely and not confined to payments received towards a "lease, sub-lease or tenancy"
or transactions of such like nature. Given the context of the provision which is intended
to cover a wide range of transactions as is evident from the words "any other agreement
or arrangement" it is evident that the principles of ejusdem generis or noscitur a sociis
cannot be invoked to narrow the scope of those words. The words "any payment"
occurring in definition of "rent" in the Explanation to section 194I is also indicative of
the legislative intent to accord the widest possible meaning to the payment received
as a result of any of the underlying transactions envisaged in that provision. After the
forty-sixth amendment to the Constitution which inserted article 366(29A) the "dominant
purpose" test cannot form the sole basis for determining whether the payment received
as consideration for the transfer of the right to use or enjoy a property is "rent". The
context in which the word has been used, the particular statute in which it occurs
and the legislative intent have to be taken into consideration in examining whether a
narrower or a wider meaning has to be given to the word. Even where the room charges
collected by a hotel from its customer are not confined to the use of the space but to a
host of facilities and amenities such payment would still fall within the ambit of "rent"
under section 194-I of the Act.
The applicability of section 194-I does not depend upon whether the income of the
hotel from room charges is assessed under "profits and gains of business or profession"
or "income from house property". Section 194-I is applicable at the time of payment of
rent or at the time of crediting such amount to the payee, if the other conditions laid
down under the provision are fulfilled. It is for the assessee to decide whether it seeks
to retain the hotel as an investment or as a business asset. The income therefrom could
be taxed as business income if it is exploited as a business asset. Rental income can also
be taxed under the head "Income from other sources". This, however, does not affect
the Constitutional validity of the provision or the liability of the person (other than an
individual or Hindu undivided family) making payment to deduct tax at source at the
time of making such payment.
No artificial distinction is being sought to be drawn between individual guests of a
hotel, on the basis whether they are Indians or foreigners. Where the payment on behalf
of the foreigner is made by a tour operator, such payment would fall within the ambit
671
Deduction at source S. 194I
of section 194-I and that is a reasonable classification based on intelligible differentia
as to the entity making payment. Section 194-I obliges the person making the payment,
who is neither an individual nor a Hindu undivided family, to deduct tax at source at
the prescribed rates, deposit it under Rule 30 of the Income-tax Rules, 1962 and issue
certificate of deduction of tax at source to the hotel concerned under Rule 31 of the
Rules. In terms of section 199 such deduction is treated as payment of tax on behalf
of the hotel and credit is given in the assessment to the hotel for the tax deducted at
source on the production of the certificate furnished under section 203. Consequently,
the hotel does not suffer any prejudice or inconvenience. Further, the hotel can under
section 197 of the Act apply to have the tax deducted at source at a lower rate. There
is nothing either arbitrary or unreasonable so as to attract Articles 14 or 19(1)(g) of the
Constitution.
No portion of either Circular No. 715 of 1995 dated August 8, 1995 or Circular No.
5 of 2002 dated July 30, 2002 can be said to be prejudicial to hoteliers. There is no
vagueness as to what constitutes hotel accommodation taken on "regular basis". In order
to remove any ambiguity that may attach to that term, the subsequent Circular dated
July 30, 2002 was issued. Far from expanding the scope of section 194-I they serve to
lend further clarity to the scope and ambit of the provision and therefore, cannot be
held to be ultra vires the Act.
Apeejay Surrendera Park Hotels Ltd v. UOI (2016) 383 ITR 697 / 134 DTR 169 / 287 CTR
161 (Delhi)(HC)
Federation of Hotel and Restaurant Association of India v. UOI (2016) 383 ITR 697 / 134
DTR 169 / 287 CTR 161 (Delhi)(HC)
2035 S. 194I : Deduction at source – Rent – Compensation to slum developers due to its
failure to provide alternative accommodation during period of construction, said
payment not being in nature of 'rent', did not require deduction of tax at source. [S.
40(a)(ia)
Allowing the appeal of the assessee, the Tribunal held that compensation paid to slum
developers due to its failure to provide alternative accommodation during period of
construction, said payment not being in nature of 'rent', did not require deduction of
tax at source under section 194-I (AY. 2010-11)
Sahana Dwellers (P.) Ltd. v. ITO (2016) 158 ITD 78 / 180 TTJ 139 (Mum.)(Trib.)
S. 194-IA. Payment on transfer of certain immoveable property other than agricultural
land.
2036 S. 194-IA : Deduction at source – Payment on transfer of immovable property
– Immovable property acquired in auction – Entire Payment made before the
introduction of section – Sale Certificate issued after the introduction of section – Held,
no liability on the assessee to deduct TDS.
Assessee purchased a property from the bank in an auction. In March, 2012, assessee
made payment to the bank. On 1-6-2013, section 194-IA was introduced providing for
deduction of TDS on payment for purchase of immovable properties. In September,
2013, the bank executed sale certificate in favour of the assessee which was thereafter
672
S. 194J Deduction at source
presented for registration to the Sub-registrar. Sub-Registrar, in view of section 194-IA,
issued an endorsement intimating the assessee that registration could be completed
only on production of proof of deduction of TDS. Held, when the assessee had paid
the amount to the transferor, there was no obligation in law on the assessee to deduct
the TDS u/s. 194-IA. Held, sale certificate should be registered without insisting upon
deduction of TDS u/s. 194-IA.
Shubhankar Estates (P.) Ltd. v. Senior Sub-Registrar (2016) 237 Taxman 731 / 136 DTR
61 (Karn.)(HC)
S. 194J. Fees for professional or technical services.
S. 194J : Deduction at source – Fees for professional or technical services – Payment 2037
made by assessee, a mobile service provider company, to another mobile service
provider Company for utilization of roaming mobile data and connectivity could not
be termed as technical service and, therefore, no TDS was deductible. [S. 201]
Dismissing the appeal of the revenue, the Court held that the contention of the
Department is not only misconceived, but is non-existent because the subject matter of
the present appeals is not roaming services provided by mobile service provider to its
subscriber or customer, but the subject matter is utilization of the roaming facility by
payment of roaming charges by one mobile service provider Company to another mobile
service provider Company. Hence, the observations made are not of any help to the
Department. As such, whether use of roaming service by one mobile service provider
Company from another mobile service provider Company, can be termed as 'technical
services' or not, is essentially a question of fact. The Tribunal, after considering all
the material produced before it, has found that roaming process between participating
entities is fully automatic and does not require any human intervention. In view of the
above, the High Court dismissed the appeals filed by the Department. (AY. 2005-06 to
2012-13)
CIT v. Vodafone South Ltd. (2016) 142 DTR 19 / 241 Taxman 497 / 290 Taxman 436
(Karn.)(HC)
S. 194J : Deduction at source – Fees for professional or technical services – Purchasing 2038
and selling electricity – Transmission of electricity by State Power Transmission
Corporation is not technical services hence tax is not deductible on amount paid for
such transmission. [S. 40(a)(ia)]
Dismissing the appeal of the revenue the Court held that the provisions of section 194J
of the Act were not attracted and the assessee was not liable to deduct the tax at source
from the payments of transmission charges made by it to the Corporation and State load
dispatching centre and therefore, the additions made by the assessing authority in the
returned income of the assessee on this account were rightly set aside by the Income-tax
Appellate Tribunal. (AY. 2009-10)
CIT v. Gulbarga Electricity Supply Company Ltd. (2016) 387 ITR 484 / 76 taxmann. com
244/ 142 DTR 97 (Karn.)(HC)
673
Deduction at source S. 194J
2039 S. 194J : Deduction at source – Fees for professional or technical services – Bill
management services – Not professional services – Section 194J not applicable –
Amount paid covered by section 194C. [S. 194C]
In respect of payments made by the assessee towards bill management services, the
services rendered by the agencies engaged by the assessee at several places were not
professional services, and, therefore, section 194J was not attracted. The demand towards
short deduction of tax deducted at source and interest was improper and the contract
was rightly held to be a service contract by the Tribunal. It was a contract covered
under section 194C of the Act. (AY. 2008-09)
CIT v. Executive Engineer, O and M Division, (GESCOM) (2016) 386 ITR 438 (Karn.)(HC)
Editorial : SLP is granted to the Department CIT v. Executive Engineer, O and M Division,
(GESCOM) (2016) 384 ITR (St.) 123-Ed.
2040 S. 194J : Deduction at source – Fees for professional or technical services – Purchase
of power and transmission to consumer – No rendering of technical services – Not
liable to deduction at source. [S. 194I]
Section 194J was not applicable on transaction of transmission of electricity from the
generation point to the consumers through a transmission network was in the nature of
technical services attracting section 194J of the Act. (AY. 2006-07 to 2011-12)
CIT v. Gulbarga Electricity Supply Co. Ltd. (2016) 386 ITR 622 / 69 taxmann.com 252
(Karn.)(HC)
2041 S. 194J : Deduction at source – Fees for professional or technical services – Programme
support services – Revenue shared – Not payments for technical services rendered –
Not liable to deduct tax at source.
Dismissing the appeal of revenue, the court held that the assessee imparting computer
education to Government employees and students through franchises. Franchisees under the
agreement remitting entire fees collected from students to assessee and the assessee sharing
with franchisees and programme support centres. Contract not in the nature of service
provider or service receiver. Payment shared is not payments for technical services rendered.
Tax is not deductible at source on payments by assessee to Franchisees. (AY. 2009-10)
CIT (TDS) v. Rajasthan Knowledge Corporation Ltd. (2016) 385 ITR 427 / 141 DTR 249
(Raj.)(HC)
2042 S. 194J : Deduction at source – Fees for professional or technical services – Supply of
ready study data by a foreign company to its subsidiary cannot be technical services
to resident – Not liable to deduct tax at source. [S. 9(1)(vii), 201(IA)]
The parent company (non-resident) had purchased technical data from a foreign
company which was subsequently supplied to its subsidiary in India, i.e. the assessee.
The amount was recovered by the parent company from the assessee company in the
subsequent year. The AO treated this amount liable for TDS under section 194J of the
Act. The CIT(A) confirmed the AO’s action.
On appeal before the Tribunal, it was held that the assessee was merely supplied with
ready study data and no services were rendered by the parent company to the assessee
and thus payment made on such services which are reimbursement of expenses did not
attract TDS. Aggrieved the revenue was in appeal before the High Court.
674
S. 194J Deduction at source
The High Court held that no services were rendered by the parent company to the
Assessee so as to be construed as technical services rendered to a resident under
section 194J of the Act. As the sum paid is not chargeable to tax as per Explanation
2 to Section 9(1)(vii) of the Act, therefore the Assessee is not liable to deduct TDS on
such payments. The Revenue’s appeal was dismissed by the High Court. (AY. 2008-09,
2009-10)
CIT v. Heramec Ltd. (2016) 238 Taxman 519 (AP&T)(HC)
S. 194J : Deduction at source – Fees for professional or technical services – Since there 2043
was neither transfer of any technology nor any service attributable to a technical
service was offered, tax was not required to be deducted at source under sec. 194J
while making payment of transmission charges. [S. 201(1)]
The assessee was a State owned company engaged in the business of buying and selling
electricity. It purchased electricity from State owned generators like KPCL and NTC.
The power was transmitted from the generation point to the consumers through the
transmission network of KPTCL. No tax was withheld on the transmission charges and
therefore the AO held that the assessee was in default under section 201(1).
In appellate proceedings, the assessee brought to the notice of the Commissioner
(Appeals) that the payee namely the KPTCL had paid the taxes due on its income.
Thus, the assessee urged that no demand could be raised against it. The Commissioner
(Appeals) accepted assessee's explanation. Accordingly, the appeal was allowed in
part and the Assessing Officer was directed to afford an opportunity to the assessee
to furnish proof of payment of taxes by the payees and thereafter work out interest
under section 201(1A) from the date of remittance of TDS till the date of filing of the
return by the payee. The order passed by the Commissioner (Appeals) was challenged
by both the assessee as well as revenue. The assessee was aggrieved by the order of the
Commissioner to the extent that it had been rendered liable to pay interest. Revenue was
aggrieved by the order passed by the Commissioner against a finding that no demand
could be visualized under section 201 when the assessee would satisfy the authorities
below that the taxes were paid by the payee. The Tribunal dismissed both appeals.
The High Court held that the provision of section 194J would come into play only when
there is payment of fee for availing technical services. It was apparent from perusal
of transmission agreement that there was no mention of any offer with regard to any
‘technical services’ by the KPTCL. There was neither transfer of any technology nor any
service attributable to a technical service offered by the KPTCL and accepted by the
assessee. Therefore, application of section 194J to the facts of the case by the revenue
is misconceived. (AY. 2007-08 to 2010-11)
CIT v. Hubli Electric Supply Co. Ltd. (2016) 386 ITR 271 / 237 Taxman 7 / 136 DTR 105/
287 CTR 443 (Karn.)(HC)
S. 194J : Deduction at source – Fees for professional or technical services – Payment 2044
to Stock Exchange they are not for technical services rendered but are in nature of
payments for facilities provided by Stock Exchange, not liable to deduct tax at source.
Allowing the appeal of the assessee the Tribunal held that; TDS is not deductible on
payment of transaction charges by members to Stock Exchange u/s. 194J as they are not
675
Deduction at source S. 194J
for technical services rendered but are in nature of payments for facilities provided by
Stock Exchange. (AY. 2009-10)
Fiduciary Shares & Stock (P.) Ltd. v. ACIT (2016) 159 ITD 554 / 181 TTJ 750 (Mum.)(Trib.)
2045 S. 194J : Deduction at source – Fees for professional or technical services – No master
and servant relation ship – Payments to retainer doctors would be subject to TDS
under section 194J and not under section 192. [S. 192, 201(1), (201(IA)]
Dismissing the appeal of the revenue, the Tribunal held that; Payments to retainer
doctors would be subject to TDS under section 194J and not under section 192. There
is no master and servant relationship. (AY. 2013-14)
ACIT v. Fortis Healthcare Ltd. (2016) 157 ITD 746 (Chd.)(Trib.)
2046 S. 194J : Deduction at source – Fee for professional or technical services – Mere use
of technology would not make any service managerial/technical or consultancy service
hence cannot be considered as managerial or technical services. [S. 194C, 201]
Assessee was providing banking services in extreme rural areas through its network
of agents, through whom the customers could do banking business by use of device
called 'Point of Transaction Machine (POT)'. The AO held that TDS was to be made
as per S. 194J and not as per S. 194C, and also levied interest u/s. 201. CIT(A) held
that service availed by the assessee were in the nature of a contract and that there
was no acquisition of technical know how by the assessee. Dismissing the appeal
of the Revenue, the Tribunal held that; S. 194J would be applicable only if any
managerial, technical or consultancy services are provided to an assessee and mere use
of technology would not make any service managerial/technical or consultancy service.
Since there was no specific skill required to provide said services, services rendered by
service providers were not in nature of managerial, technical or consultancy services
and mere use of technology would not make it technical services and thus S. 194J were
not applicable. (AY. 2011-12)
ITO v. Fino Fintech Foundation (2016) 159 ITD 743 (Mum.)(Trib.)
2047 S. 194J : Deduction at source – Fees for professional or technical services –
Remuneration paid to a visiting doctor was variable with number of patients attended
by him, payment would be subject to TDS u/s. 194J and not as salary. [S. 192]
Tribunal held that remuneration paid to visiting doctors was variable with number of
patients attended by them. The payments made to them would be subjected to TDS
under section 194J. (AY. 2011-12 to 2013-14)
Hosmat Hospital (P.) Ltd. v. ACIT (2016) 160 ITD 513 (Bang.)(Trib.)
2048 S. 194J : Deduction at source – Fee for professional or technical services – Director's
remuneration – Clause (ba) inserted in sub-section (1) of section 194J is enforceable
with effect from 1-7-2012, it would have no application to assessee's case. [S. 201,
201(IA)]
The assessee-company was engaged in the business of manufacturing and sale of
generating sets bimetal strips and bearings, engine valves, castings etc. During relevant
year, assessee made payments to non-executive directors. The AO opined that payments
676
S. 194J Deduction at source
made to the non-executive Directors fell within the definition of 'commission or
brokerage' as defined in Explanation (i) to s. 194H and, thus the assessee should have
deducted TDS while making said payments. Since assessee failed to deduct tax at source
while making payments in question, the Assessing Officer treated assessee to be assessee
in default in terms of section 201(1) and 201(1A).
The provisions relating to deduction of tax at source on payment of fee for professional
or technical services are contained in s. 194J. The provisions of s. 194J have been
amended by the Finance Act, 2012 with effect from 1-7-2012 vide which clause (ba)
has been inserted in sub-section (1) of section 194J. The provisions of newly inserted
clauses are enforceable with effect from 1-7-2012, therefore, it will have no application
in the assessment years under appeal. (AY. 2007-08 to 2010-11)
Dy. CIT v. Kirloskar Oil Engine Ltd. (2016) 158 ITD 309 (Pune)(Trib.)
S. 194J : Deduction at source – Fees for professional or technical services – TV 2049
programmes – Payment to TV channels to receive their programs for further telecasting
TDS was to be deducted u/s. 194J. [S. 194C]
Assessee made payment to TV channels to receive their programs so that it can
distribute same to its viewers through its own DTH network. It deducted TDS u/s. 194C.
A.O. held that assessee paid license fee to TV channels which was in nature of royalty
covered under Explanation 2(v) of s. 9(1)(vi) and, thus, TDS was to be deducted u/s.
194J. S. 194C would be attracted when payment was made for carrying out work of
broadcasting and telecasting and since assessee did not make payments to TV channels
for telecasting rather it telecasted TV programs on its own, TDS was not to be deducted
u/s. 194C. Payment was made to TV channel for transfer of intellectual property rights in
programs to be used by assessee in connection with television which was covered under
Explanation 2(v) of s. 9(1)(vi) and thus TDS was to deducted u/s. 194J. (AY. 2009-10)
Dish TV India Ltd. v. ACIT (2016) 157 ITD 1096 / 177 TTJ 752 (Delhi)(Trib.)
S. 194J : Deduction at source – Fees for professional or technical services – 2050
Secondment charges – Reimbursement of salary of seconded employees to AE couldn't
be treated as 'FTS' to attract TDS. [S. 40(a)(ia)]
Under secondment agreement, employees of other company BG were seconded to
assessee to do technical work. Salary to said employees was being paid by BG and
was recoverable from assessee on cost to cost basis. BG had deducted TDS on salary
paid to seconded employees. AO disallowed such payments u/s. 40(a)(ia) on ground
that assessee had not deducted TDS there from u/s. 194J. Since services of employees
had been seconded to assessee and assessee was to reimburse their emoluments it was
assessee which for all practical purposes was employer and, therefore, salary reimbursed
to BG could not be considered as 'fees for technical services' for purpose of S. 194J.
(AY. 2009-10)
Dy. CIT v. Mahanagar Gas Ltd. (2016) 158 ITD 1016 (Mum.)(Trib.)
677
Deduction at source S. 194J
2051 S. 194J : Deduction at source – Fees for professional or technical services – Support
services of assessee involving identification of customers to whom services to be
rendered – Payments made by assessee liable to tax deduction. [S. 194C, 201(1),
201(1A)]
The services of the most of the personnel of the assessee were provided by outsourcing
agencies. The work relating to front office management, liaison work, data entry
was being manned by the outsourced personnel. The assessee made payments for
three kinds of service. They were support services such as field activations, vendor
payment queries, entering receipts into SAP and field verification, customer support
services such as tele-calling for bill payments, tele-calling for new activations and
housekeeping services. The assessee was deducting tax at the rate of 2% u/s. 194C
of the Act on the payments made for their services. The AO held that the provision
of services of technical or other personnel for rendering managerial, technical or
consultancy services would be treated as technical services and would attract TDS at
the rate of 10% and therefore the assessee was in default. The CIT(A) held that the
payments made towards housekeeping shall be subject to TDS u/s. 194C and with
respect to other support services the assessee would be covered for tax deduction
at source u/s. 194J. On appeal, the tribunal concurred with the view of CIT(A). (AY.
2013-14 & 2014-15)
Vodafone Cellular Ltd. v. Dy. CIT (2016) 45 ITR 333 / 177 T TJ 105 / 134 DTR 52
(Chennai)(Trib.)
S. 194LA. Payment of compensation on acquisition of certain immovable property.
2052 S. 194LA : Deduction at source – Compensation on acquisition of certain immovable
property – Non-resident – Though the assessee had not made application it can
contend in the assessment proceedings that they are not liable to deduct tax at source.
For the purpose of section 194LA, the agricultural land is supposed to be understood
in general sense and not as per section 2(14). [S. 2(14), 195, 197]
The High Court held that there is no liability to deduct tax at source if the land is
an agricultural land and the same has to be understood in general sense and reliance
cannot be placed upon section 2(14) of the Act for the same. It was also held that no
application could have been made by the assessee too as he was under the belief that
the income is not chargeable to tax at all. (AY. 2005-06)
Land Acquisition Collector v. Addl. CIT (2016) 242 Taxman 389 (P&H)(HC)
2053 S. 194LA : Deduction at source – Compensation on acquisition of certain immovable
property – Building in agricultural land – Compensation on their acquisition would
be liable to deduct tax at source. Compensation for trees was held to be part of
agricultural land and not liable to deduct tax a source. [Land Acquisition Act, 1894]
Allowing the appeal partly in favour of revenue, the Court held that buildings
in agricultural land, which did not form part of agricultural land or at any rate
had not been shown in nature of small farm houses or go-downs for agricultural
operations, compensation on their acquisition would be liable to deduct tax at source.
678
S. 195 Deduction at source
Compensation for trees was held to be part of agricultural land and not liable to deduct
tax a source. Partly in favour of revenue (AY. 2008-09)
CIT v. Special Land Acquisition Officer. (2016) 242 Taxman 398 (Guj.)(HC)
Editorial : SLP is granted to the revenue, CIT v. Special Land Acquisition Officer (2017)
245 Taxman 271 (SC).
S. 195. Other sums.
S. 195 : Deduction at source – Non-resident – Fees for technical services- Protocol to 2054
Agreement – Not liable to deduct tax at source – DTAA-India-United Kingdom [S. 90,
Art. 13(4)]
Allowing the petition the Court held that the definition of "fees for technical services"
occurring in article 13(4) of the Double Taxation Avoidance Agreement between India
and the United Kingdom clearly excludes managerial services. What was being provided
by the non-resident to the assessee in terms of the management services agreement were
managerial services. It was plain that once the expression "managerial services" was
outside the ambit of "fee for technical services", the question of the assessee having to
deduct tax at source from payments for the managerial services, would not arise. The
payment made by the assessee to the non-resident for the managerial services provided
by the latter could not be taxed as fees for technical services and the payments were
not liable to withholding of tax under section 195.
Steria (India) Ltd. v. CIT (2016) 386 ITR 390 / 241 Taxman 268 / 288 CTR 694 / 140 DTR
64 (Delhi)(HC)
Editorial : Ruling in Steria (India) Ltd, In re (2014) 364 ITR 381 (AAR) reversed.
S. 195 : Deduction at source – Non-resident – If no income accrues or arises to non- 2055
resident in India – No liability to deduct tax. [S. 9(1)(vii), 40(a)(i)]
The assessee was appointed as the arranger by the State Bank of India (SBI) for
mobilizing its Indian Millennium Deposits (IMDS). In turn the assessee was entitled to
appoint sub-arrangers within and outside India. The assessee in turn received arranger
fees and commission and it in turn paid sub-arranger the sub-arranger’s commission.
The assessee had failed to deduct tax at source on the sub-arrangers commission paid
and hence the AO invoked the provisions of section 40(a)(i) of the Act and thereby
disallowed the expenditure. On appeal the CIT(A) held that the amount paid to the non-
resident sub-arranger was in the nature of commission/brokerage and not in the nature
of fees for technical services in terms of section 9(1)(vii) of the Act.
The Revenue filed an appeal before the Tribunal wherein the Tribunal analysed the
nature of services provided by the assessee. In this regard, the Tribunal examined
whether the services provided by the assessee were managerial, technical or consultancy
in nature. The Tribunal held that the services provided by the Assessee were neither of
the three and hence upheld the order of the CIT(A). Aggrieved Revenue filed an appeal
before the High Court.
The High Court held that the need to deduct tax would arise if the non-resident would
earn any income chargeable to tax in India. Further the High Court also held that the
services provided by the assessee did not fall under the category of Explanation 2 to
679
Deduction at source S. 195
section 9(1)(vii) of the Act and hence the assessee was not required to deduct tax at
source under section 195 of the Act.
DIT(IT) v. Credit Lyonnais (2016) 238 Taxman 157 (Bom.)(HC)
2056 S. 195 : Deduction at source – Non-resident – Royalty – Payments for import of
software – Not royalty – Tax not deductible at source on such payments. [S. 9(1)(vi),
40(a)(i)]
Payments made for import of software do not constitute royalty within the meaning of
section 9(1)(vi). They cannot be disallowed under section 40(a)(i) because the assessee
failed to deduct tax at source on such payments. (AY. 2001-02 to 2004-05)
Dy. CIT v. Wipro Ltd. (2016) 382 ITR 179 / 236 Taxman 209 / 282 CTR 346 (Karn.)(HC)
Editorial : SLP was granted, CIT v. Wipro Ltd. (2016) 240 Taxman 299 (SC)
2057 S. 195 : Deduction at source – Non-resident – Royalties – Mere passing of project
specific architectural drawings & designs with measurements did not amount to
'making available' technical knowledge, know-how or process hence not liable to
deduct tax at source – DTAA-India-USA. [S. 9(1)(i), Art. 12]
Allowing the appeal the Tribunal held that mere passing of project specific architectural
drawings & designs with measurements did not amount to 'making available' technical
knowledge, know-how or process hence not liable to deduct tax at source. Moreover,
where total stay of employees/executives of US company in India was 5 days only, it
could be safely concluded that said company had no Permanent Establishment in India.
(AY. 2008-09, 2009-10)
Gera Developments (P.) Ltd. v. Dy. CIT (2016) 160 ITD 439 / 181 TTJ 510 / 52 ITR 1 (Pune)
(Trib.)
2058 S. 195 : Deduction at source – Non-resident – Sale proceeds of land payable to non-
resident – Not liable to deduct tax at source – DTAA-India-USA [S. 201, Art. 26]
Assessee had entered into a collaboration agreement with the 3 co-owners one of which
was non-resident. AO had noticed that the assessee made payments to power of attorney
holder of the non-resident without deduction of tax thereon. Consequently, proceedings
under section 201 were initiated against the assessee. Commissioner (Appeals) upheld
the contention of assessee that in view of non-discrimination clause in article 26 of the
DTAA between India and USA, the assessee was not obliged to deduct tax at source
under section 195 in, as there is no provision in the Income-tax Act, requiring a resident
to deduct tax at source from sale proceeds of land payable to any other resident. On
appeal by department held that the reasoning given by Commissioner (Appeals) with
reference to Article 26 of the DTAA between India and USA is fully justified because
there is no provision in the Act requiring a resident to deduct tax at source from sale
proceeds of land payable to any other resident and, therefore, in view of Article 26(4),
the assessee could not be burdened with the requirement of TDS in case of payment
to non-resident as Article 26 provides that the provisions of section 195 are not
applicable on the reasoning that provisions of section 195 are applicable only when
some remittance is required to be made from India to an outside country. (AY. 2006-07)
ITO v. Santur Developers (P.) Ltd. (2015) 70 SOT 475 (Delhi)(Trib.)
680
S. 195 Deduction at source
S. 195 : Deduction at source – Non-resident – Fee for technical services – Since 2059
services were intrinsically connected to sale of goods, same could not be treated as
FIS or FTS and they would constitute part of business income – Not liable to deduct
tax at source – DTAA-India-China. [S. 9(1)(i), Art. 5, 12].
Assessee, Indian company entered into Specific Purchase Contract with Chinese
Company for supply of cranes and Service Contracts for rendering installation and
commissioning services in relation to such cranes according to which Chinese company
transported cranes to designated site, provided installation and commissioning services
as also after sales services and spare parts, since services were intrinsically connected to
sale of goods, same could not be treated as FIS or FTS and they would constitute part
of business income. Not liable to deduct tax at source. (AY. 2008-09)
Gujarat Pipavav Port Ltd. v. ITO (IT) (2016) 158 ITD 687 / 180 TTJ 354 / 140 DTR 1(Mum)
(Trib.)
S. 195 : Deduction at source – Non-resident – Royalty – Copy right – (i) Purchase of 2060
a licence to use shelf/shrink-wrapped software is purchase of a “product” and not a
“copyright” and not liable to deduct tax at source. [S. 9(1)(v), 9(1)(vi)]
Dismissing the appeal of the revenue, the Tribunal held that (i) Purchase of a licence
to use shelf/shrink-wrapped software is purchase of a “product” and not a “copyright”,
(ii) The retrospective insertion of Explanation 4 to s. 9(1)(vi) to include “software” in
the definition of “royalty” does not apply to DTAAs, (iii) In view of the conflict of
views amongst the High Courts, the view in favour of the assessee should be followed,
(iv) An obligation to deduct TDS u/s. 195 cannot be imposed by the retrospective
insertion of Explanation 4 to s. 9(1)(vi), (v) As payments for software were not “royalty”
at the time of payment, the assessee cannot be held to be in default for not deducting
TDS. (AY. 2006-07, 2007-08)
DDIT v. Reliance Industries Ltd. (2016) 159 ITD 208 / 180 TTJ 22 (Mum.)(Trib.)
S. 195 : Deduction at source – Non-resident – Settlement amount payable by Applicant 2061
to QSF – Pursuant to the final judgment of the US Court – Not regarded as sum
chargeable to tax in hands of QSF.
The applicant is an Indian company whose shares are listed on Bombay Stock Exchange
(BSE) and National Stock Exchange (NSE). It's American Depository Shares (ADS) were
listed in the New York Stock Exchange (NYSE).
A number of suits were filed against the Indian company as well as its auditors in
various jurisdictions in the US, for claiming damages. The suits were consolidated and
a consolidated ‘Class Action Complaint’ was filed for alleged violation of the Securities
Exchange Act of US.
The US court passed a preliminary order approving the settlement and later the US
court passed a final judgment in this regard. Under the terms of the settlement, Indian
Company had first to deposit the agreed amounts in a segregated account in India.
Thereafter, the amount deposited by would be transferred to an initial escrow account
in New York. After the approval of the settlement, the amount had to be transferred
from the initial escrow account to the final escrow account to be treated as Qualified
Settlement Fund (QSF). Thereafter, it had to be distributed to the qualified claimants in
681
Deduction at source S. 195
the class action, after deducting the expenses including legal fees incurred and meeting
the tax liability, if any.
Before actual transfer of the funds, the applicant approached the AAR for a ruling on
whether the settlement amount payable under the stipulation to the QSF was liable to
TDS under section 195 of the Act.
Ruling in favour of the Revenue, AAR held that the settlement amount constituted
‘income from other sources’ in the hands of QSF, under Article 23(3) of the Indo-US
DTAA. Thus, the 3 applicants were required to withhold tax under section 195 of the
Act, before the fund was distributed. Having held that the income arose in India and
observing that the Lead Counsel was a resident of the USA, the AAR held that the
receipts under class action suit were squarely covered by Article 23(3) of the Indo-US
DTAA.
Against the aforesaid AAR, a writ was filed before Delhi HC. HC had set-aside the
above AAR ruling and remanded matter back to AAR to firstly examine whether the
aforementioned receipts were in nature of revenue or capital and then determine
chargeability under the Act.
Further AAR rejected Revenue’s stand that amount was taxable under the head ‘income
from other sources’. AAR noted that Section 56(1) contemplates only such source which
does not specifically fall under any one of other four heads of income. AAR held that
the income in the nature of settlement amount in lieu of surrender of ‘right to sue’ was
not covered in this section.
Thus AAR disagreed with earlier AAR ruling in applicant’s case and held that amount
was not taxable under section 56 of the Act. However, as TDS under section 195 of the
Act was already deducted pursuant to co-ordinate bench order, AAR clarified that the
remedy for this was available in Income-tax Act for the payee to claim refund and for
that appropriate action will have to be taken.
Lead Counsel of Qualified Settlement Fund (QSF). In RE (2016) 381 ITR 1 / 237 Taxman
667 / 283 CTR 361 / 130 DTR 369 (AAR)
2062 S. 195 : Deduction source – Penalty paid to Government of USA pursuant to order of
court in USA for violations of securities law in that country – No tax liability – No
tax required to be deducted at source.
That unless the payment made attracts tax under the law in India, there would be no
liability to deduct tax u/s. 195 of the Act. A penalty ordered by the U. S. court can
never attract any tax nor would such a payment made by the applicant attract any tax
liability. The payment being penalty as ordered by the court of competent jurisdiction
could never attract any such tax liability. Hence, the applicant would not be required
to deduct any such amount u/s. 195.
Satyam Computer Services Ltd., In re (2016) 380 ITR 189 / 236 Taxman 199 / 282 CTR
41 (AAR)
682
S. 196C Deduction at source
S. 196. Interest or dividend or other sums payable to Government, Reserve Bank or
certain corporations.
S. 196 : Deduction at source – Provision not applicable – Payable to Government – 2063
Non-deduction of tax at source. [S. 196(i)]
The assessee had obtained a loan from Punjab Agro Industrial Corporation (PAIC). The
assessee had made a provision for interest payment to the extent of ` 48,00,000/- in its
books, however no payment was made. No tax was deducted at source in respect of the
provision made in the books. The AO passed the order under section 201(1)/201(1A)
holding the assessee as assessee-in-default and consequently raised a demand of TDS
and also interest. It was the submission of the assessee that the no tax was required
to be deducted as the payment is made to the Government as the corpus of PAIC was
formed by the Government from which payment was made. The assessee had relied
upon a certificate from PAIC to that extent which also said that the income from the
corpus belongs to the Government. The contentions were rejected both by the CIT(A)
and ITAT. On appeal, it was held by the High Court that the certificate relied upon by
the assessee is a self-serving certificate not substantiated by any other corroborative
evidence. Therefore, it was held that it cannot be said that the payment was made to the
Government and therefore, section 196(i) was held not to be applicable. (AY. 2008-09)
Council for Citrus and Agri Juicing in Punjab v. CIT (TDS) (2016) 236 Taxman 489 (P&H)(HC)
S. 196C. Income from foreign currency bonds or shares of Indian company.
S. 196C : Deduction at source – Income from foreign currency bonds or shares of 2064
Indian company – Interest paid on FCCBs issued by it to bond holders outside India
– Not liable to deduct tax at source – DTAA-India-UK. [S. 9(1)(v)(b), 115AC, 201(1),
201(IA), Art. 5(2), 12]
Assessee, an Indian company, issued FCCBs to non-residents and utilized proceeds
of said FCCBs for acquisition of foreign subsidiaries outside India. Assessee remitted
interest on said FCCBs to foreign bond holders but did not deduct TDS on same. AO
held that the income of bond-holders was liable to TDS under section 196C accordingly
passed an order invoking provisions of section 201(1)(IA). On appeal CIT(A) held that
interest paid by assessee on its FCCBs is covered by exception to section 9(1)(v)(b) and
consequently, it fell outside ambit of deemed income arising and accruing in India and
as a result out of section 5. On appeal the Tribunal held that dismissing the appeal of
revenue the Tribunal held that where assessee-company paid interest on FCCBs issued
by it to bond-holders outside India, said income squarely fell under exclusion clause
of sub-section (1)(v)(b) of section 9, and, consequently, it could not fall within ambit of
section 5(2). (AY. 2005-06, 2007-08, 2010-11)
Suzlon Energy Ltd. v. ACIT (2016) 156 ITD 7 (Ahd.)(Trib.)
683
Deduction at source S. 197
S. 197. Certificate for deduction at lower rate.
2065 S. 197 : Deduction at source – Application for certificate of deduction at lower rate –
Payer cannot be treated as assessee in default for non deduction of tax at source as
lng as certificate issued is in force. [S. 195, 201]
Dismissing the appeal of the revenue, the Court held that there is no obligation on part
of payer to pay tax as long as certificate issued is in force and not cancelled, hence the
payer cannot be treated as assessee in default. (AY. 2003-04, 2004-05)
CIT v. Bovis Lend Lease (India) (P.) Ltd. (2012) 208 Taxman 168 (Karn.)(HC)
Editorial : SLP of revenue is dismissed; CIT v. Bovis Lend Lease (I) Ltd. (2016) 241
Taxman 312 (SC)
2066 S. 197 : Deduction at source – Application for certificate of deduction at lower rate –
Amendment with effect from 1-4-2011 – AO entitled to issue certificate if tax liability
of person justifies deduction of tax at lower rate or no deduction – Direction to
assessee to move competent authority.
Allowing the petition, the Court held that the exemption for the deductor not to deduct
tax in terms of Rule 28AA of the Rules was to be considered by the competent authority.
Substantial change was made in Rule 28AA of the Rules and the AO was entitled to
issue a certificate if the tax liability of the person justified deduction of tax at lower
rate or no deduction of tax. The earlier restriction imposed under Rule 28AA of the
Rules was taken away by the present amendment. Therefore, it was for the assessee who
was involved in such transactions to approach the AO concerned and seek necessary
concession in terms of Rule 28AA of the Rules.
Central Advertising Agency v. UOI (2016) 389 ITR 320 (Ker.)(HC)
S. 199. Credit for tax deducted.
2067 S. 199 : Deduction at source – Joint venture – Credit for tax deducted – Assessee got
civil contract work from State Government – Awarded same to sub-contractor without
margin – No contract between State Government and sub-contractor – Income from
contract assessable in assessee's hands – Credit for TDS to assessee and not to sub-
contractor. [S. 194C, R. 37BA]
The assessee was a joint-venture executing civil contract works which was received from
State Government. Subsequently, those contracts were sub-contracted on a back to back
basis without any margin. TDS deducted by State Govt. thereon was claimed by assessee
in return of income. AO opined that since the contract was further subcontracted, no
real work was carried on by the assessee; no income had accrued to it and, thus, credit
for TDS was not allowable in hands of assessee. On Writ, the High Court held that
legal contract was between assessee and State Government and the income was also
assessable in hands of assessee, credit of tax should also be given to assessee and not
to sub-contractor (AY. 2010-11 to 2012-13)
IVRCL-KBL(JV) v. ACIT (2016) 386 ITR 564 / 239 Taxman 152 / 133 DTR 234 / 289 CTR
111 (T& AP)(HC)
684
S. 201 Deduction at source
S. 199 : Deduction at source – Credit for tax deducted – Assessee following cash 2068
system of accounting, would be entitled to credit of entire amount of TDS being offered
as income in year of deduction [S. 145, 198, R. 37BA]
Allowing the appeal of the assessee, the Tribunal held that the assessee following cash
system of accounting, raised invoice on his client for services. Said client deposited
TDS to credit of account of assessee and issued a certificate of TDS to assessee. TDS
deducted by deductor on behalf of assessee and offered as income was to be allowed as
credit in year of deduction of tax deducted at source. (AY. 2011-12)
Chander Shekhar Aggarwal v. ACIT (2016) 157 ITD 626 (Delhi)(Trib.)
S. 200A. Processing of statements of tax deducted at source.
S. 200A : Deduction at source – Processing of statements of tax deducted at source – 2069
Shortfall – Non-resident eligible for DTAA benefit – No scope for deduction of tax at
source at 20 per cent even though PAN of non-resident recipients were not furnished
by assessee u/s. 206AA.
The assessee made payments to non-residents and deducted tax at source in accordance
with the provisions of DTAA. The AO made adjustment under section 200A on account
of short deduction of TDS in respect of payments to non-residents on the ground that
the assessee had not furnished PAN of non-resident recipients. On appeal to Tribunal,
it was held that the provisions relating to deduction at source have to be read along
with DTAA for computing the tax liability on the sum and therefore when the recipient
was eligible for the benefit of DTAA, there was no scope for deduction of tax at source
at 20% as provided under the provisions of Section 200A. It was beyond the scope of
provisions of Section 200A. (AY. 2011-12)
Wipro Limited v. ITO (IT) (2016) 47 ITR 404 (Bang.)(Trib.)
S. 201. Consequences of failure to deduct or pay.
S. 201 : Deduction at source – Levy of interest – No limitation prescribed for passing 2070
order – Order should be passed within four years. [S. 194I, 201(1), (201(IA)]
Though no period of limitation is prescribed for exercising power under section 201(1)
and (1A), still if such power is not exercised within a reasonable period, it would
become time-barred. The period of four years is reasonable. The court cannot legislate
but the AO also cannot be given unfettered powers, which he can exercise even beyond
the reasonable period of four years.
CIT(TDS) v. Anagram Wellington Assets Management Co. Ltd. (2016) 389 ITR 654 / 73
taxmann.com 164 (Guj.)(HC)
685
Deduction at source S. 201
2071 S. 201 : Deduction at source – Failure to deduct tax at source – Levy of interest –
No limitation provided prior to 1-4-2010 – Four years period from end of relevant
financial year would be a reasonable period for initiating action – Levy of interest
in respect of assessment year 2002-03 in the year 2008 was held to be barred by
limitation – Liability to pay interest under section 201(IA) would end on date when
such tax has been deposited by recipient, either by way of advance tax or along with
return of income. [S. 194I, 201(IA)]
Dismissing the appeal of revenue the Court held that admittedly, at the relevant time
relating to the assessment year 2002-03, there was no limitation provided for initiating
proceedings under section 201. In the case of K, the assessment for the relevant
assessment year 2002-03 was completed under section 143(3) of the Act on February
28, 2005, where the receipt of the amount from the assessee had been disclosed and
the requisite tax had presumably been paid by the recipient. The question of deduction
of tax at source or payment thereof was not raised by the Revenue at that time. In the
case of the assessee also, the assessment proceedings for the assessment year 2002-03
had again been completed, in which the payments made to K had been disclosed. The
question of not having deducted tax at source and deposited it with the Department,
was also not raised at that stage. The Tribunal had held that four years period would
be a reasonable period of time for initiating action. The Tribunal was correct in holding
that the order passed under section 201(1) and (1A) of the Act on January 28, 2008 for
the assessment year 2002-03, would be barred by limitation. Court also held that the
provision for payment of interest would arise from the date when it ought to have been
deducted, i.e., from the date of payment by the payer to the recipient. The liability to
pay interest would end on the date when such tax has been deposited by the recipient,
either by way of advance tax or along with the return of income. (AY. 2002-03)
CIT (TDS) v. Bharat Hotels Ltd. (2015) 64 Taxmann.com 325 / (2016) 384 ITR 77 / 288
CTR 682 / 140 DTR 95 (Karn.)(HC)
Editorial : Order of the Income-tax Appellate Tribunal in the case of Tax Recovery Officer
v. Bharat Hotels Ltd. (2009) 318 ITR 244 (AT)(Bang.) is affirmed.
2072 S. 201 : Deduction at source – Failure to deduct or pay – Deductees had filed their
returns and had paid tax in terms of assessment – Held, in view of proviso to section
201(1) if deductees have paid taxes on the amount on which deductors have failed
to deduct tax at source, demand raised consequent to 201(1) proceedings cannot be
enforced [S. 221, 226]
The assessee was a department of the State Government. It had made certain payments
to two Corporations, namely, BRPNNL and BSRDCL, on which it failed to deduct tax
at source. In 201(1) proceedings, the AO treated the assessee as assessee-in-default and
raised demand. Assessee filed an appeal before the CIT(A) and simultaneously filed an
application for stay of demand before the ACIT(TDS) and CIT(A). ACIT(TDS) rejected
the request for stay and attached the accounts of the assessee maintained with the
District Treasury Officer, for recovery of the whole amount in dispute. Assessee filed
a writ petition challenging the rejection of stay and attachment of its account. High
Court, after considering the Circular No. 275/201/95-IT(B) dated 29.01.1997, judgment
of the Hon’ble Supreme Court in case of Hindustan Coca Cola Beverage (P.) Ltd. v. CIT
686
S. 201 Deduction at source
(2007) 293 ITR 226 (SC) and the proviso to section 201(1), held that a person, who fails
to deduct, whole or part of the tax at source, shall not be deemed to be an assessee in
default if in respect of such tax, the deductee has furnished his return of income u/s
139 of the Act and, while furnishing the return, has taken into account such sum for
computing income in such return and has paid the tax due on the income declared by
him in such return. In view of the above conclusion, the High Court directed the CIT(A)
to take up the appeal at the earliest and if it was found that the taxes have been paid
by deductees, then to set aside the demand and to vacate the attachment of account.
(AY. 2012-13 to 2014-15)
Nai Rajdhani Path Pramandal v. CIT (TDS) (2016) 384 ITR 328 / 238 Taxman 281 (Patna)
(HC)
S. 201 : Deduction at source – Failure to deduct or pay – Time limit for passing order 2073
– Amendment by Finance (No. 2) Act, 2014 – increase in limitation period to 7 years
for passing order u/s. 201 – Held, not retrospective – Held, amendment will not apply
to those years, in whose case time limit for passing order u/s. 201 as on 1/10/2014
has expired as per the existing law – Held notices issued u/s. 201(1)/(1A) were to be
quashed. [S. 201(IA)]
The assessee was served with notices u/s. 201(1)/(1A) in December, 2014 in connection
with TDS proceedings concerning AY 2008-09 and 2009-10. The assessee contended that
section 201(3) inserted vide Finance (No. 2) Act, 2009 with effect from 1/4/2010 provided
period of limitation of two years from the end of financial year in which TDS statement
is filed since assessee regularly filed TDS statements, period for passing order u/s. 201(3)
for relevant assessment years expired on 31-3-2011/2012. Hence, assessee submitted that
the notices issued in December, 2014 were time-barred. AO held that the revised time
limit of 7 years prescribed by the Finance (No. 2) Act, 2014 shall apply. High Court held
that Finance Act, 2012 amended the provision of section 201(3) on 28/05/2012 and was
specifically made applicable retrospectively w.e.f. 11/4/2012, whereby limitation period
was substituted from four years to six years for passing orders where TDS Statement
had not been filed. However, section 201(3) as amended by Finance Act No. 2 of 2014,
as mentioned in the memorandum of the Finance Bill No. 2 of 2014 was stated to have
effect from 1/10/2014. Thus, it was held that wherever the Parliament/Legislature wanted
to make provisions applicable retrospectively, it had been so provided. High Court held
that proceedings for FYs 2007-08 and 2008-09 had become time barred and for the
aforesaid financial years, limitation u/s. 201(3)(i) had already expired on 31/03/2011
and 31/03/2012, respectively, much prior to the amendment in section 201 as amended
by Finance Act, 2014 and therefore right had accrued in favour of the assessee. It was
therefore held that notices issued u/s. 201(1)/(1A) were to be quashed. (AY. 2007-08,
2008-09)
Tata Teleservices v. UOI (2016) 385 ITR 497 / 238 Taxman 331 / 284 CTR 337 (Guj.)(HC)
687
Deduction at source S. 201
2074 S. 201 : Deduction at source – Failure to deduct or pay – Limitation – CBDT Circular
5/2010 for expanding time limit of pending cases cannot be interpreted to allow
declaration of assessee in default beyond 4 years prior to 31.03.2011. Circular No. 5
of 2010 [S. 201(1), 201(1A), 201(3)]
Proceedings under section 201 were initiated against assessee for non-deduction of
tax for four years prior to 31.03.2011 by declaring assessee as assessee in default.
Department relied on CBDT Circular 5 of 2010 interpreting that it clarifies that the
proviso to section 201(3) was meant to expand the time limit for completing the
proceedings and passing orders in relation to 'pending cases' has to be harmoniously
construed with section 201(3) to glean an intention to permit the department to initiate
cases four years earlier than 31-3-2011. On appeal High Court held that the circular is at
best an external aid and harmonious interpretation is not required thereof. Also Circular
gives an instance of contrary understanding of the legal position by the department
itself. The proviso to section 201(3) was meant to expand the time limit for completing
the proceedings and not to enable it to initiate proceedings to declare an assessee to
be an assessee in default for a period earlier than four years prior to 31st March, 2011.
(AY. 2003-04 to 2005-06)
Vodafone Essar Mobile Service Ltd. v. UOI (2016) 385 ITR 436 / 238 Taxman 625 / 285
CTR 48 / 133 DTR 57 (Delhi)(HC)
Tata Teleservices Ltd. v. ACIT (2016)385 ITR 436 / 238 Taxman 625 / 285 CTR 48 / 133
DTR 57 (Delhi)(HC)
2075 S. 201 : Deduction at source – Failure to deduct or pay – Limitation – The amendment
to s. 201(3) by FA 2014 to extend the time limit for passing s. 201 orders is prospective
and does not apply to cases which are already time-barred. A show-cause notice
involving a pure point of law can be challenged in a Writ Petition. [S. 201(3),
Constitution of India, Art. 226]
The High Court had to consider whether section 201(3) of the Income-tax Act as
amended on 1/10/2014 by Finance Act of 2014 would be applicable retrospectively or
prospectively and whether the said provision would be applicable with respect to the
proceedings under the Income Tax Act for A.Y. 2008-09 and 2009-2010, the proceedings
which had already become time barred in view of the provisions of section 201(3) of
the Act prior to amendment in section 201(3) of the Act by Finance Act 2014. HELD
by the High Court:
(i) Though the petitioners have challenged the impugned notices/summonses issued
under section 201 of the Income-tax Act and the revenue has raised objection
against the maintainability and/or entertainability of the present petitions against
the Show Cause Notice, it is required to be noted that in the present case, the
issue involved is pure question of law, more particularly as to whether, section
201(3) as amended by Finance Act (No. 2) 2014 would be applicable retrospectively
or not? Under the circumstances, when pure question of law is involved, petitions
cannot be dismissed solely on the ground that the present petitions are against
the Show Cause Notices (Harbanslal Sahnia and another Versus Indian Oil Corpn.
(2003) 2 SCC 107 (para 7) and Filterco and another v. Commissioner of Sales Tax,
Madhya Pradsesh and another, reported in (1986) 24 ELT 180 SC followed);
688
S. 201 Deduction at source
(ii) Section 201(3) of the Act as amended by Finance Act, 2012 amended on 28/5/2012
was specifically made applicable retrospectively w.e.f. 1/14/2012, whereby
limitation period was substituted from four years to six years for passing orders
where TDS Statement had not been filed. However, section 201(3) of the Act as
amended by Finance Act No.2 of 2014, as mentioned in the memorandum of
the Finance Bill No.2 of 2014 is stated to have effect from 1st October, 2014.
Thus, wherever the Parliament/Legislature wanted to make provisions applicable
retrospectively, it has been so provided. While making amendment in section
201(3) of the Act by Finance Act No.2 of 2014, does not so specifically provide that
the said amendment shall be made applicable retrospectively. On the other-hand,
it is specifically stated that the said amendment will take effect from 1/10/2014. As
observed hereinabove, in the present cases, limitations provided for passing order
under section 201(1) of the Act for AY. 2007-08 and 2008-09 had already been
expired on 31/3/2011 and 31/3/2012, respectively, i.e. prior to section 201(3) came
to be amended by Finance Act No.2 of 2014.
(iii) An accrued right to plead a time barred which is acquired after the lapse of the
statutory period is in every sense a right even though it arises under an Act which
is procedural. It is a right which is not to be taken away by conferring on the
statute a retrospective operation unless such a construction is unavoidable.
(iv) Considering the law laid down by the Hon’ble Supreme Court in the aforesaid
decisions, to the facts of the case on hand and more particularly considering the
fact that while amending section 201 by Finance Act, 2014, it has been specifically
mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering
the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred
and/or for the aforesaid financial years, limitation under section 201(3)(i) of the
Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to
the amendment in section 201 as amended by Finance Act, 2014 and therefore, as
such a right has been accrued in favour of the assessee and considering the fact
that wherever legislature wanted to give retrospective effect so specifically provided
while amending section 201(3) (ii) of the Act as was amended by Finance Act,
2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3),
as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively
and therefore, no order under section 201(i) of the Act can be passed for which
limitation had already expired prior to amended section 201(3) as amended by
Finance Act No. 2 of 2014. Under the circumstances, the impugned notices/
summonses cannot be sustained and the same deserve to be quashed and set aside
and writ of prohibition, as prayed for, deserves to be granted. (AY. 2007-08, 2008-
09)
Tata Teleservice v. UOI (2016) 385 ITR 497 / 132 DTR 1 / 284 CTR 337 / 238 Taxman
331 (Guj.)(HC)
Troikaa Pharmaceuticals Ltd. v. UOI (2016) 385 ITR 497 / 132 DTR 1 / 284 CTR 337 /
238 Taxman 331 (Guj.)(HC)
689
Deduction at source S. 201
2076 S. 201 : Deduction at source – Failure to deduct or pay – e-TDS return due to which
tax demand had became nil, which was not considered by the lower authorities,
matter was remanded. [S. 201(1), 201(IA)]
Tribunal held that, the lower authorities have not considered; e-TDS return due to which
tax demand had became nil, which was not considered by the lower authorities, matter
was remanded. (AY. 2008-09)
ACIT v. BA Continuum India P. Ltd. (2015) 40 ITR 149 / 70 SOT 332 (Hyd.)(Trib.)
2077 S. 201 : Deduction at source – Failure to deduct or pay – Proceedings were pending
as on date when proviso to section 201(3) was inserted by Finance Act No. 2 of 2009
with effect from 1-4-2010, hence the order was not barred by limitation. [S. 201(IA)]
Assessing Officer initiated proceedings under section 201/201(1A) on 9-2-2007 and
passed order on 10-3-2011 holding assessee to be assessee-in-default. Tribunal held that
since proceedings were pending as on date when proviso to section 201(3) was inserted
by Finance Act No. 2 of 2009 with effect from 1-4-2010, said proviso was clearly
applicable to assessee's case which mandates that order for financial year commencing
on or before first day of April 2007, may be passed at any time on or before 31-3-2011,
therefore assessment order passed on 10-3-2011 could not be regarded as barred by
limitation. (AY. 2005-06)
ITO v. Uttar Pradesh Financial Corporation (2016) 143 DTR 213 / 181 TTJ 927 (Luck.)
(Trib.)
2078 S. 201 : Deduction at source – Failure to deduct or pay – Wrong deduction – Assessee
deducted TDS under wrong provision resulting in lower deduction of tax but
deductee paid tax on such payments by including it in its income, assessee was not
to be treated as assessee-in-default although he would be liable for interest on such
payments.
The AO raised demand with interest for amounts on which assessee deducted TDS in
wrong provision resulting in lower deduction of tax. CIT(A) directed A.O. to reduce
demand and interest for amounts which were included by deductees in their incomes
and on which due taxes were paid. Assessee should not be held liable for amounts
which were taken into account for computing income and on which tax had been paid
by deductee. However, assessee would be liable to pay interest under sub-section (1A)
from date on which such tax was deductible to date of furnishing of return of income
by deductee. (AY. 2009-2010)
Dish TV India Ltd. v. ACIT (2016) 157 ITD 1096 / 177 TTJ 752 (Delhi)(Trib.)
2079 S. 201 : Deduction at source – Failure to deduct or pay – Bona fide belief that TDS not
deductible – Held liable to pay interest of non-deduction of tax at source. [S. 201(1A)]
Assessee hotel realized tips from its customers and paid the same to the employees
without deducting TDS. Since, the order passed by the AO(TDS) for all the years under
section 201(1) was waived by the CIT(A) but the assessee is liable for interest under
section 201(1A) in respect of non-deduction of tax at source from tips given to its staff.
(AY. 2006-07, 2007-08)
C. J. International Hotels Ltd. v. Addl. CIT (2016) 158 ITD 287 / 177 TTJ 447 / 137 DTR
289 (Delhi)(Trib.)
690
S. 206AA Requirement to furnish Permanent Account Number
S. 201 : Deduction at source – Failure to deduct or pay – Short deduction of tax – 2080
Recipients disclosing amount received from assessee in returns filed by them for relevant
AY – Assessee not treated as assessee in default – AO directed to verify whether taxes paid
by recipients – Assessee liable to pay interest till date of payment of taxes by recipients.
The AO found that the assessee had not deducted tax at appropriate rate. The CIT(A) held
that onus was on the assessee to satisfy the AO that tax had been duly paid by the recipients.
The confirmation issued by the recipient companies did not specify whether they had paid
taxes on the amounts received from the assessee. He therefore, upheld the action of the AO
in treating the assessee in default and raising the demand u/s. 201(1).
On appeal, the Tribunal held that it was clearly evident that recipient companies had admitted
the fact that the amounts received from the assessee which were subject to tax deduction at
source had been shown by them in the returns filed for the AY. Therefore, the assessee could
not be treated as an assessee in default. The AO was directed to verify whether tax had been
paid by the recipients in respect of the amount received by them from the assessee and if
upon such verification it was found that they had paid tax on the amount received by them
from the assessee, the assessee could not be treated as an assessee in default. However, the
assessee is liable to pay interest u/s. 201(1A) till the date of payment of taxes by the recipients
on the income received by them from the assessee. (AY. 2009-10)
Wockhardt Hospitals Ltd. v. ACIT(TDS) (2016) 46 ITR 259 (Mum.)(Trib.)
S. 206AA. Requirement to furnish Permanent Account Number.
S. 206AA : Requirement to furnish Permanent Account Number – Wrong submission 2081
of PAN – Raising the demand on deductor on failure to apply 20 per cent TDS rate as
payee furnished wrong PAN was held to be justified. [S. 194C]
Assessee made payments to different persons after deducting tax at source u/s. 194C.
One of recipient submitted wrong PAN to assessee, and due to such mistake, AO raised
a demand by applying 20% TDS rate in place of rate prescribed u/s. 194C. Tribunal held
that the assessee had failed to discharge its obligation to verify correct PAN and it was
only at time of processing of TDS return that department noticed submission of incorrect
PAN and thereafter raised impugned demand, this non obstante provisions contained in
s. 206AA(1) which override s. 194C. (AY. 2011-12)
Office of XEN, PHED v. ITO (2016) 161 ITD 373 / (2017) 183 TTJ 283 (Jaipur)(Trib.)
S. 206AA : Requirement to furnish Permanent Account Number – it is not automatic 2082
that a flat rate of 20 per cent shall be applied wherever PAN is not furnished – Matter
remanded. [S. 192]
Assessee-company deducted tax at source under section 192 in respect of salary of
employees who failed to furnish their correct PAN. Assessing Officer applied a flat rate
of 20 per cent as per section 206AA in respect of those cases and held assessee liable
for short deduction of TDS. On appeal Tribunal held that it is not automatic that a flat
rate of 20 per cent shall be applied wherever PAN is not furnished. In view of aforesaid
legal position, impugned order was to be set aside and, matter was to be remanded back
for disposal afresh. (AY. 2011-12, 2013-14)
Rashtriya Ispat Nigam Ltd. v. Add. CIT (2016) 157 ITD 366 / 176 TTJ 747 / 132 DTR 1
(Visakha)(Trib.)
691
Requirement to furnish Permanent Account Number S. 206AA
2083 S. 206AA : Requirement to furnish Permanent Account Number – S. 90(2) overrides
S. 206AA and so the assessee is required to deduct TDS as per the DTAA and not as
per s. 206AA. The issue is debatable and so cannot be rectified by the AO u/s. 200A
[S. 90(2)].
(i) Where the tax has been deducted on the strength of the beneficial provisions of
section DTAAs, the provisions of section 206AA of the Act cannot be invoked by
the Assessing Officer to insist on the tax deduction @ 20%, having regard to the
overriding nature of the provisions of section 90(2) of the Act. Section 206AA of
the Act does not override the provisions of section 90(2) of the Act and in the
payments made to non-residents, the assessee correctly applied the rate of tax
prescribed under the DTAAs and not as per section 206AA of the Act because the
provisions of the DTAAs was more beneficial.
(ii) The explanation below sub-section-1 of Section 200A of the IT Act, which clarifies
that in respect of deduction of tax at source where such rate is not in accordance
with provisions of this Act can be considered as an incorrect claim apparent from
the statement. However, in the case in hand, it is not a simple case of deduction
of tax at source by applying the rate only as per the provisions of Act, when the
benefit of DTAA is available to the recipient of the amount in question. Therefore,
the question of applying the rate of 20% as provided u/s. 206AA of the IT Act is
an issue which requires a long drawn reasoning and finding. Hence, we are of
the considered opinion, that applying the rate of 20% without considering the
provisions of DTAA and consequent adjustment while framing the intimation u/s.
200A is beyond the scope of the said provision. Thus, the AO has travelled beyond
the jurisdiction of making the adjustment as per the provisions of Section 200A of
the IT Act, 1961. (ITA No. 1544 to 1547/Bang/2013, dt. 12.02.2016) (AY. 2011-12)
Wipro Ltd. v. ITO (Bang.)(Trib.); www.itatonline.org
S. 206C. Profits and gains from the business of trading in alcoholic liquor, forest
produce, scrap, etc.
2084 S. 206C : Collection at source – Trading – Alcoholic liquor – Forest produce – Scrap –
Mere delay in furnishing Form 27C would not make assessee liable for non-collection
of TCS under section 206C(1A).
Dismissing the appeal of revenue the Court held that section 206C(1A) itself does not
provide for any time limit within which declaration in Form 27C is to be made. High Court
further held that the main thrust of sub-section (1A) of section 206C thus is to make a
declaration as prescribed, upon which, the liability to collect tax at source under sub-section
(1) would not apply. When there was no dispute about such a declaration being filed in a
prescribed format and there was no dispute about the genuineness of such declaration, mere
minor delay in filing the said declaration would not defeat the Assesse’s claim. Thus the
High Court dismissed the Department’s appeal and ruled in favour of the Assessee.
CIT(TDS) v. Siyaram Metal Udyog (P) Ltd. (2016) 240 Taxman 578 / 289 CTR 649 (Guj.)
(HC)
Editorial: SLP is granted to the revenue; CIT (TDS) v. Siyaram Metal Udyog (P) Ltd. (2017)
246 Taxman 376 (SC), CIT v. Siyaram Metal Udyog (P) Ltd. (2017) 245 Taxman 267 (SC)
692
S. 206C Collection of tax at source
S. 206C : Collection at source – Scrap – The words ‘waste and scrap’ in clause (b) to 2085
explanation to section 206C of the Act is a singular item – Assessee was not required
to collect tax a source on mere scrap as the same was not covered by clause (b) of
the Explanation to section 206C.
The assessee had made sales of scrap, however no tax was collected at source on sale
of scrap by the assessee. Therefore the Assessing Officer held that as a consequence of
non-compliance of provisions of section 206C of the Act, the assessee was liable to pay
tax and interest under section 206C(7) of the Act.
The Tribunal noted that the assessee is engaged in ship breaking activity and the items
in question are finished products obtained from the activity and constitute sizeable
chunk of production done by ship-breakers. Tribunal ruled in favour of the Assessee
treating the sale of scrap out of the scope of section 206C and hence it was not required
to collect tax at source. It was held that “waste and scrap” must be from manufacture
or mechanical working of material which is definitely not usable as such because of
breakage, cutting up, ware and to other reasons. The word “is” as used in the definition
of Scrap, in explanation to section 206C, is meant for singular term i.e. “waste and
scrap” and hence sale of scrap, which is not part of manufacturing activities would
not be regarded as ‘waste and scrap’ and thereby not liable for tax collection at source.
Aggrieved the Revenue filed an appeal before the High Court.
The High Court noted that the products may be commercially known as ‘scrap’ they are
definitely not ‘waste and scrap’, as such items are usable as such and therefore do not
fall within the definition of scrap as envisaged in the Explanation to section 206C(1) of
the Act. From plain reading of the explanation it is evident that any material which is
usable as such would not fall within the ambit of the expression “scrap” as envisaged
under the clause. High Court upheld the order of the Tribunal and dismissed the appeal
filed by the Revenue. (AY. 2005-06)
CIT v. Priya Blue Industries Pvt. Ltd. (2016) 381 ITR 210 / 237 Taxman 1 / 135 DTR 163/
286 CTR 210 (Guj.)(HC)
S. 206C : Collection of tax at source – Breaking ship – Dealer in scrap generated from 2086
breaking of ship is liable to deduct tax at source.
Tribunal held that assessee dealing in scrap generated from breaking of ship and had
purchased scrap, assessee would be liable to deduct tax at source on sale of scrap. It
was not necessary that such mechanical working (breaking of ship) should be carried
out by assessee himself. Since said material/goods came from breaking of ship and
these goods were sold to manufacturer/rerolling mills as scrap and goods (scrap) sold
by assessee could not be used as such without any modification by buyer, assessee was
liable to deduct tax at source. (AY. 2008-09, 2009-10)
Chandmal Sancheti v. ITO (2016) 160 ITD 313 / 181 TTJ 906 (Jaipur)(Trib.)
S. 206C : Collection of tax at source – No time limit is provided, for furnishing form, 2087
hence delay in filing declaration shall not be ground to deny benefit of declaration to
assessee. [R. 37, Form 27]
Tribunal held that appeal is continuation of assessment proceedings, thus, where
assessee had filed declaration at appellate stage in prescribed format by disclosing all
693
Collection of tax at source S. 206C
information under Form 27 r.w. rule 37 of rules, for non-collection of TCS, benefit of
declaration was to be given to assessee. Provision of sub-section (1A) of s. 206C does
not prescribe consequences of delayed filing of declaration and, therefore, assessee could
not have been penalized for delay in filing declaration. (AY. 2008-09, 2009-10)
Chandmal Sancheti v. ITO (2016) 160 ITD 313 / 181 TTJ 906 (Jaipur)(Trib.)
2088 S. 206C : Collection of tax at source – Interest – Where advance tax was deposited by
buyer, prior to due date of TCS, no interest would be chargeable.
Tribunal held that revenue was only entitled to recovery of interest on unpaid tax
amount/deposit/short tax deposited by buyer. Matter remanded back to verify date when
TCS was due by assessee/seller, date on which advance tax was paid/deposited by buyer
and in case advance tax was deposited prior to due date of TCS, no interest would be
chargeable; however if interest was paid after due date then interest shall be charged
for intermediary period. (AY. 2008-09, 2009-10)
Chandmal Sancheti v. ITO (2016) 160 ITD 313 / 181 TTJ 906 (Jaipur)(Trib.)
2089 S. 206C : Collection of tax at source – Scrap – Products obtained in course of ship
breaking activity were usable, they do not fall under the definition of scrap for the
purposes of tax collection at source.
The assessee contended that he had sold items which were reusable products in a
ship breaking activity and though the same were scarp by nomenclature, but in fact
the same was not scrap. Thus, he could not be held liable to tax under section 206C.
Allowing the appeal of the assessee, the Tribunal held that certain items generated out
of ship breaking activity might be known commercially as 'scrap' but they are not waste
and scrap. These items are reusable as such, and therefore, would not fall within the
definition of 'scrap' as envisaged in the Explanation to section 206C(1). (AY. 2011-12 to
2013-14)
Dhasawala Traders v. ITO (2016) 161 ITD 142 (Ahd.)(Trib.)
2090 S. 206C : Collection at source – Scrap – Seller is not required to collect tax at source
on sale of cotton waste, Maize husk and De-oiled cake as they are by-products of the
manufacturing process and could not be termed as “scrap”.
Dismissing the appeal of the revenue, the Tribunal held that the de-oiled cake was a
by-product and could not be categorised as scrap or waste and it had its own market
value. Generally, scrap was either thrown out or sold at a cheaper rate because it could
not be used as raw material for manufacture. In the case of a by-product, it had its own
market value and could be used as such. Therefore, de-oiled cake was not scrap within
the meaning of the Explanation to section 206C of the Act and sale thereof was not
liable to collection of tax at source.
DCIT v. Gujarat Ambuja Exports Ltd. (2016) 46 ITR 519 (Ahd.)(Trib)
2091 S. 206C : Collection at source – Trading – Definition of Scrap – By products not scrap
or waste
The assessee was a manufacturer and exporter of agrobased products. The assessee
extracted solvent from soya seeds, mustard seeds, castor seeds and cotton seeds during
694
S. 206C Collection of tax at source
which process it obtained deoiled cake which was mainly used as cattle feed. While
processing maize the assessee obtained maize husk. The Assessing Officer treated the
items such as cotton waste, maize husk and deoiled cake as scrap within the meaning
of section 206C of the Act and since no collection of tax at source was made in terms
of the provisions of section 206C of the Act on sale of cotton waste, maize husk and
deoiled cake, he treated the assessee as in default. The Commissioner (Appeals) held
that the byproducts could not be considered scrap or waste. The Tribunal held that
(i) that the deoiled cake was a byproduct and could not be categorised as scrap or
waste and it had its own market value. Generally, scrap was either thrown out or sold
at a cheaper rate because it could not be used as raw material for manufacture. In the
case of a byproduct, it had its own market value and could be used as such. Therefore,
deoiled cake was not scrap within the meaning of the Explanation to section 206C of
the Act and sale thereof was not liable to collection of tax at source.
(ii) That raw cotton was only a part of raw material which was of lower quality
from which the thin yarn could not be manufactured and such thick quality cotton
which would be separated at the initial warehousing stage and sold off to other yarn
manufacturers including that for export. Hence, such raw cotton would not arise from
manufacturing or mechanical working as it was a segregation of raw material.
(iii) That the manufacturing process suggested that the maize seeds were processed and
various products like maize starch, fibre and maize oil were produced. The percentage
of husk as a byproduct was close to 10 per cent and it was mainly used in poultry
farm, animal food and pharma industries. Since maize husk fibre itself was subjected
to various manufacturing stages and had enormous economic value, it could not be
considered as a waste or scrap within the manufacturing process. The maize husk was a
byproduct and could not be considered as scrap or waste as provided in the Explanation
to section 206C of the Act. (AY. 2009-10 to 2012-13)
Gujarat Ambuja Exports Ltd. v. DCIT (2016) 46 ITR 519 (Ahd.)(Trib.)
S. 206C : Collection at source – Liability incurred by purchaser – AO. verified and 2092
ensured that buyer of scrap from assessee-scrap importer had duly discharged tax
liability in respect of income earned in respect of goods in question, there could not
be any justification of recovering tax collectible at source by assessee.
TCS demands raised u/s. 206C are in nature of vicarious liabilities which survive
only as long as principal liability of taxpayer remains in existence; when principal tax
liability itself is extinguished, very raison d'etre of demand raised u/s. 206C ceases to
hold good in law. Where it was ensured that buyer of scrap from assessee-scrap importer
had duly discharged tax liability in respect of income earned in respect of goods in
question, there could not be any justification of recovering tax collectible at source by
assessee which was, in any event, adjustable against tax liability of buyer of scrap. (AY.
2010-11, 2011-12)
ITO v. Dudani Metal Agencies (2016) 157 ITD 1088 (Rajkot)(Trib.)
695
Collection at source S. 206C
2093 S. 206C : Collection at source – Toll plaza – Granting a project to develop a National
Highway to concessionaire on BOT (Build, Operate, Transfer) basis, received only a
payment of Re. 1 annually from concessionaire, on this very nominal and insignificant
amount provisions could not be applied.
Assessee (NHAI) granted a project to develop a National Highway to concessionaire (OPPL)
on BOT (Build, Operate, Transfer) basis. Cost of project was to be met by OPPL through
own finance and was to be recovered through collection of toll during period of lease. As
per agreement, fees payable by OPPL to NHAI was Re. 1 per year during term of agreement.
AO held that assessee was liable to collect TCS u/s. 206C on toll fees collected by OPPL.
When concessionaire had retained toll fees collected and it was under obligation to make
only payment of Re.1 annually to NHAI, then on this very minimal as well as insignificant
amount provisions of s. 206C(1C) could not be applied.(AY. 2009-10 to 2011-12)
ITO v. Project Director, National Highways Authority of India (2016) 158 ITD 994 / 181
TTJ 113/ 140 DTR 286 (Nag.)(Trib.)
S. 220. When tax payable and when assessee deemed in default.
2094 S. 220 : Collection and recovery of tax – Special Court (Trial of Offences Relating
to Transaction in Securities), matter was to be remanded back to Special Court to
consider revenue's objection that it had priority over said amount.
The Special Court (Trial of Offences relating to Transaction in Securities) directed
disbursement of certain sum from the attached account without hearing the case of
Revenue. Against such direction, revenue preferred a review application which was
dismissed by the Special Court without giving any reason or going through issue raised
by Revenue. The Revenue contended that it had priority over such amounts which were
directed to be disbursed. On second appeal, the SC opined that Special Court ought to
have dealt with review application of Revenue on merits and decide the issue by giving
detailed reason. Accordingly, the two orders of Special Court were set aside and the
matter remitted back to pass fresh orders after hearing both the sides.
ACIT v. Pallav Sheth (2016) 241 Taxman 13 (SC)
2095 S. 220 : Collection and recovery – Assessee deemed in default – Appeal pending – No
automatic stay – Application for stay must be filed – Court directed the CBDT to issue
direction. [S. 220(6), 246, 246A]
Court held that the assessee admittedly had filed an appeal with an application for
interim stay but the fact remained that the assessee had not approached the Assessing
Officer under section 220(6) for the exercise of his discretion to defer the recovery
proceedings. The scheme of the Act provides a specific remedy under section 220(6)
and that remedy having not been invoked by the assessee, did not entitle him to the
protection as had been prayed for on the ground of mere pendency of the appeal or till
the disposal of interim stay application.
By the court : It is however open to the Central Board of Direct Taxes to issue guidance
to the assessing authority to deal with matters during pendency of appeals filed under
sections 246 and 246A so that the recovery of revenue of direct taxes may not suffer a
setback and the assessee is equally relieved of unnecessary torture. (AY. 2012-13)
Uttar Pradesh Bhumi Sudhar Nigam Ltd. v. PCIT (2016) 387 ITR 268 (All.)(HC)
696
S. 220 Collection and recovery
S. 220 : Collection and recovery – Waiver application – Commissioner should consider 2096
the application in judicious manner, matter was set-aside with the direction that
waiver of interest was to be reconsidered. [S. 220(2A)]
On appeal, the High Court referred to the decision of Supreme Court in case of B.
M. Malani v. CIT (306 ITR 196) (SC) where it was clearly indicated that when an
application is considered under section 220(2A), it has to be considered in a judicious
manner. Relying on the said decision, the Court held that when the statutory authority
has been given the discretion to consider whether any of the conditions specified
under section 220(2A) has been complied with, it is for the said authority to take into
consideration all necessary materials which had been placed before it. Accordingly, the
court held that the matter requires reconsideration by the Commissioner and set-aside
the matter. In the result, the court set-aside the matter and restored it to the file of
Commissioner to reconsider the same.
V. M. Mathai v. CIT (2016) 242 Taxman 385 (Ker.)(HC)
S. 220 : Collection and recovery – Assessee deemed in default – Right to adjust refund 2097
was limited to the extent of 15% of demand as directed in stay petition as the appeal
is pending before the Commissioner of income tax (Appeals).
Allowing the petition the Court held that the assessee shall be entitled to a stay of the
demand subject to its depositing the instalments as required by the stay order and that
the future refunds can be adjusted only to the extent of the balance amount directed to
be paid as a condition for the stay.
Jindal Steel & Power Ltd. v. PCIT (2016) 290 CTR 342 / 143 DTR 185 / (2017) 391 ITR 42
/ 244 Taxman 3 (P&H)(HC)
S. 220 : Collection and recovery – Stay – When CIT(A) has taken the view in favour 2098
of assessee in earlier year stay of demand to be granted.
The High Court held that stay of demand is to be granted by the Assessing Officer
when, on merits, the Commissioner of Income-tax (Appeals) has taken a view in favour
of the assessee in assessee’s own case for the earlier assessment year. (AY. 2008-09,
2010-11, 2013-14)
Kalapet Primary Agricultural Co-op. Credit Society Ltd. v. ITO (2016) 241 Taxman 367
((Mad.)(HC)
S. 220 : Collection and recovery – Assessee deemed in default – Waiver of interest – 2099
Waiver cannot be granted unless all the conditions are satisfied. [S. 220(2A)]
The High Court refused to entertain the writ filed against the order of the Commissioner
of Income-tax refusing to grant waiver of interest on the ground that the conditions
prescribed therein are not satisfied and that there was nothing to place before authorities
concerned to show that it was a case of genuine hardship of Assessee. (AY. 1990-91)
Haji Ramzan & Sons v. CIT (2016) 242 Taxman 380 (All.)(HC)
697
Collection and recovery S. 220
2100 S. 220 : Collection and recovery – Assessee deemed in default – Stay – Assessing
Officer must consider all relevant factors and pass speaking order in stay proceedings
– High pitched assessment – No order by Assessing Officer in response to application
for stay – Rejection of further application by Principal Commissioner – Coercive
measures initiated during pendency of application for stay – Orders and coercive
measures was held to be not valid.
While the Assessing Officer had not passed any order on the applications made by the
assessee under section 220(6) including not informing the assessee that the application
was not being entertained, the Principal Commissioner had nowhere considered the
relevant factors having a bearing on the demand raised, nor had he made any reference
to the grounds stated by the assessee for keeping the demand in abeyance. Apart
from the fact that the application made under section 220(6) of the Act was required
to be decided by the Assessing Officer, even if the order passed by the Principal
Commissioner was treated to be the one under section 220(6) of the Act, it could not
be to meet the requirements laid down in Instruction No. 1914, dated February 2, 1993.
During the pendency of the stay application, which had been filed almost immediately
after the period stipulated in the notice under section 156 of the Act had expired, there
was no warrant for the Department to resort to drastic measures of making coercive
recovery without first taking a decision on the application under section 220(6) of
the Act. The action of the Department in attaching the bank accounts and flats of the
assessee, therefore, could not be sustained. (AY. 2011-12, 2012-13, 2013-14)
M.D. Infra Developers v. DCIT (2016) 385 ITR 82 / 240 Taxman 237 / 287 CTR 431 / 138
DTR 298 (Guj.)(HC)
2101 S. 220 : Collection and recovery – Assessee deemed in default – Stay Petition –
Strictures passed against unfair conduct of AO – AO acknowledges the application
for stay of penalty but refuses to acknowledge the stay application filed – Chief CIT
is directed to ensure such behavior is not repeated. High Court disposed the petition
directing the Revenue to nominate another AO to hear the stay application. [S. 220(6),
246]
AO in its Affidavit states that all stay applications are only to be filed with the ASK
Centre. AO refuses the assessee to give acknowledgement to stay application however,
accepts the application of stay for penalty. Subsequently, on service of writ petition on
23rd February, 2016 an immediate acknowledgement is given to the stay application
dt. 17th February, 2016 received by him on 18th February, 2016. High Court passed
strictures on such high-handed and unfair conduct of the AO and directed the CCIT to
ensure that such behaviour of civil servants is not acceptable. Addl. CIT was directed
to deal with the assessee’s stay application in accordance with law. (AY. 2012-13)
Piramal Fund Management (P.) Ltd. v. Dy. CIT (2016) 383 ITR 581 / 133 DTR 250 / 286
CTR 175 (Bom.)(HC)
2102 S. 220 : Collection and recovery – Assessee deemed in default – Reasoned order –
Application for waiver of interest-Rejection of application without giving reasons and
without considering contentions of assessee was held to be not valid.
The settled legal proposition is that an order itself shall contain reasons justifying
the decision taken and they cannot be supplemented by way of an affidavit. Held
698
S. 220 Collection and recovery
accordingly, that inasmuch as the order was bereft of any reasons and further it had
not dealt with the contentions raised by the petitioner in his application for waiver of
interest filed under section 220(2A) of the Act, the order could not be sustained. Matter
set aside to Commissioner to pass a reasoned order.
M. Bala Narasimha Reddy v. PCIT (2016) 382 ITR 307 (T&AP)(HC)
S. 220 : Collection and recovery – Assessee deemed in default – Order of Assessing 2103
Officer is unreasonably high pitched causing hardships to assessee – Assessee entitled
not to be treated as being in default in respect of amount in appeal. [S. 246A]
The individual filed the return which also included agricultural income, on which
exemption was taken, the same was rejected by the Assessing Officer and was treated
as regular income from undisclosed source. The assessee filed an appeal under section
246A of the Act which is still pending for adjudication. Since the CIT(A) did not have
the powers to grant stay against the recovery of disputed demand, the assessee filed a
writ petition in the High Court.
The Revenue contended that the assessee failed to prove that the agricultural activities
were carried by him. Mere proof of ownership was not adequate and the burden of
proving it genuine was on the assessee. Taking into the above considerations the
Revenue had asked to pay 50% of the disputed demand. The Revenue also contended
that the filing of appeal before the CIT(A) did not grant blanket stay to the assessee,
it also relied on the CBDT Instruction No. 1914 dated 2nd December 1993 which
superseded the CBDT Instruction No. 95 dated 21 August 1969 and said that the
Assessing Officer had used the discretion as per the new CBDT instruction.
The assessee argued that the current assessment by the Assessing Officer was high
pitched and this case fell within the ambit of sections 220(3) and 220(6) of the
Act which states that the assessee could before the expiry of the due date make an
application to extend the time of payment to instalments and the Assessing Officer
in his discretion treat the assessee as not being in default. Assessee also referred to
various case laws which held that if the Assessing Officer order was unreasonable high
pitched or caused genuine hardships to the assessee then the assessee could be treated
as assessee not being in default.
Thus the High Court held that the high pitched assessments made by Assessing Officer
were not unknown and would cause serious prejudice to the assessee and miscarriage
of justice. It was also held that the powers under sections 220(3) and 220(6) of the
Act were to be exercised in accordance with the CBDT Instruction No. 95 which was
binding on all the Assessing Officers. Hence the order passed by the Assessing Officer
was against the principles to the various judgments and the impugned order was set
aside and the Assessing Officer was directed to pass a suitable order after proving
opportunity to the assessee. (AY. 2012-13)
N. Jegatheesan v. Dy. CIT (2016) 388 ITR 410 / 237 Taxman 490 / 138 DTR 17 / 287 CTR
292 (Mad.)(HC)
Editorial : The recent office memorandum issued by the CBDT dated 29th February, 2016
modified the Instruction No. 1914 dated 2nd December, 1993
699
Collection and recovery S. 220
2104 S. 220 : Collection and recovery – Assessee deemed in default – Order of
Commissioner (Appeals) allowing registration to assessee firm was reversed by
Tribunal, benefit of waiver of interest in respect of section 220(2) would be allowed up
to period provided in this order of Tribunal and it could not be restricted up to date
of order of jurisdictional High Court in another case on similar issue.
Though the assessee firm was assessed as a 'registered firm' in earlier years, for the
assessment years 1991-92 and 1992-93, the assessee firm was assessed as unregistered.
On appeal, the CIT(A) allowed the appeal of assessee and directed the AO to allow
registration to the assessee for both the years. On further appeal, the Tribunal reversed
the order of the CIT(A) and restored the order of the Assessing Officer. On demand
raised under section 143(3), the assessee was made liable to pay interest under
section 220(2). The assessee filed petition under section 220(2A) for waiver of interest
demanded. The CIT(A) held that though the appeal filed by the Department was decided
by the Tribunal in its favour on 20-5-1998, the issue was already decided by this court
in Narayanan & Co. v. CIT (1997) 223 ITR 209 / (1996) 88 Taxman 299 by judgment
dated 14-3-1996. Accordingly, the CIT(A) held that the pendency of the Departments
appeal in the Tribunal against the assessee was only procedural matter and, therefore,
the assessee was entitled to waiver of interest only up to March, 1996 when Narayanan
& Co.'s case (supra) was decided.
On writ, the Single Judge set aside the view taken by the CIT(A). On appeal from the
writ order, Section 220(2A) contains three conditions, satisfaction of which are required
for the CIT(A) to reduce or waive the amount of interest, viz., (i) payment of such
amount would cause genuine hardship to the assessee (ii) default in the payment of
the amount on which interest is payable was due to circumstances beyond the control
of the assessee and (iii) that the assessee has co-operated in any enquiry relating to the
assessment or any proceedings for the recovery of any amount due from him. Reading
of the order shows that the CIT(A) himself has accepted the position that in the case of
the respondent, all the aforesaid conditions are satisfied. However, the CIT(A) limited
the benefit of waiver only up to March, 1996 and the reason thereof is that this Court
has, in Narayanan & Co.'s case (supra) decided the issue against the assessee therein
by judgment dated 14-3-1996 and that the case of the respondent is covered by that
judgment. Thus, though the CIT(A) has accepted that the three conditions provided
for in section 220(2A) are satisfied, he has chosen to limit the benefit of waiver to a
particular period. While examining the validity of that order, what is relevant to be
examined is whether the reason assigned by the CIT(A) for restricting waiver is valid or
not. On such examination, it is seen that in March, 1996, though this Court decided the
case of Narayanan & Co. (supra), the favourable appellate order obtained by the assessee
herein in an appeal filed by them, entitling them for assessment treating the firm as a
registered one, was remaining valid. That order was invalidated by the Tribunal only on
20-5-1998, in the appeal filed by the revenue. In other words, it was only on 20-5-1998,
the assessee became disentitled to assessment on the status of a registered firm. The fact
that this court has decided the issue in the case of Narayanan & Co. (supra) is of no
consequence at all till 20-5-1998 when the appeal was decided by the Tribunal. This,
therefore, shows that the reason which weighed with the CIT(A) to restrict the benefit
of waiver till March, 1996 is absolutely untenable. (AY. 1991-92, 1992-93)
CIT v. Muthappan Enterprises (2016) 237 Taxman 551 / 138 DTR 310 (Ker.)(HC)
700
S. 220 Collection and recovery
S. 220 : Collection and recovery – Assessee deemed in default – In a case where 2105
income of a local authority was assessed at nil in the past and the income was sought
to be taxed during the year solely on the basis of the proviso to section 2(15), demand
should be kept in abeyance at least till the disposal of the First Appeal. [S. (15)]
Assessee, an urban development authority, filed its return of income declaring its
income as 'Nil'. The Assessing Officer assessed the assessee’s income at ` 4,25,77,240
and raised a demand of ` 1,92,73,490. The assessee made an application under section
220(6) to the DCIT(E) for keeping the demand in abeyance till the final disposal of
the appeal before the CIT(A). The assessee was asked to pay the demand in 6 equal
installments. In a further application made to ACIT(E) and thereafter to CIT(E), the
installments payable were increased to 12 but the demand was not kept in abeyance.
The DCIT(E) attached the assessee’s bank accounts. The assessee agreed to make
payment under protest by way of instalments. The attachment of the bank accounts was
thereafter lifted. High Court observed that as the income of the petitioner was assessed
at nil in the past and that the income was sought to be taxed only by resorting to the
proviso to section 2(15), the lower authorities should have shown some restraint till
the issue was decided at least at the level of the first appellate authority. High Court
granted complete stay of balance demand as the assessee had already paid 25% of the
demand. (AY. 2012-13)
Jamnagar Area Development Authority v. Principal CIT (OSD) (E) (2016) 236 Taxman 484
(Guj.)(HC)
S. 220 : Collection and recovery – Assessee deemed in default – Stay on order 2106
disposing of a stay application has to objectively consider the prima facie case on
merits, financial hardship and balance of convenience and give reasons for the
rejection. [S. 220(6)]
Allowing the petition the Court held that an order disposing of a stay application has
to objectively consider the prima facie case on merits, financial hardship and balance
of convenience and give reasons for the rejection.
Maharashtra Industrial Development Corporation (MIDC) v. CIT (2016) 136 DTR 233 /
290 CTR 337 (Bom.)(HC)
S. 220 : Collection and recovery – Assessee deemed in default – Department was 2107
directed to redeposit moneys collected illegally by attachment of assessee’s bank
account during pendency of stay application. An order passed on a stay application
must give reasons for the refusal to stay the demand.
On writ the Court directed the department to redeposit moneys collected illegally by
attachment of assessee’s bank account during pendency of stay application. An order
passed on a stay application must give reasons for the refusal to stay the demand. (AY.
2009-10)
Khandelwal Laboratories Pvt. Ltd. v. DCIT (2016) 383 ITR 485 / 238 Taxman 620 / 285
CTR 178/ 133 DTR 253 (Bom.)(HC)
701
Collection and recovery S. 220
2108 S. 220 : Collection and recovery – Assessee deemed in default – Stay – Strictures
passed against high-handed and unfair approach of AO (IRS Officer) in refusing to give
an acknowledgement of stay application. Chief CIT directed to ensure such behaviour
is not repeated. Dept. directed to nominate another AO to hear stay application. [S.
220(6)]
Allowing the petition the Court held that; (i) We find this conduct on the part
of the Assessing Officer to accept a stay application and not immediately give
acknowledgement of its receipt is unacceptable. The least that is expected of a civil
servant is to be fair and civil. In the absence of the above, his conduct is not one
becoming of an Officer belonging to the prestigious Indian Revenue Service. The least
that is expected of an Officer is that when a person files an application/letter, which
is accepted by him, an acknowledgement should be forthwith given to the party filing
the application or letter. In case he refuses to accept the letter he should endorse on
the letter/application the reason why it is not being accepted with a line or two for the
refusal to accept. In case he does accept it and give an acknowledgment he can deal
with the applications/letters as is appropriate in accordance with law. We believe that
what has happened in this case is an aberration. However, the Chief Commissioner of
Income Tax would ensure that his Officers do not behave in such an high handed and
unfair manner, not expected of civil servants.
(ii) Be that as it may, the stay application is still pending decision. Normally, we would
have let the Assessing Officer decide the same. However, looking at the manner in
which the petitioner has been dealt with by the Assessing Officer in regard to its stay
application dated 17th February, 2016, it would be in the interest of justice that the
application for stay filed by the petitioner be heard by another Officer different from the
Assessing Officer i.e. respondent No.1 herein. The Officer to deal with the petitioner’s
stay application dated 17th July, 2016 is to be selected/nominated by the Revenue.(WP.
No. 526 of 2016, dt. 17.03.2016) (AY. 2012-13)
Pirmal Fund Management Pvt. Ltd. v. DCIT (Bom.)(HC); www.itatonline.org
S. 221 : Penalty payable when tax in default.
2109 S. 221 : Collection and recovery – Penalty – Tax in default – Deliberate and wilful
default in payment of tax – No sufficient and good cause established for not levying
penalty – Penalty was held to be payable.
Dismissing the appeal the Court held that the concurrent findings recorded by the
authorities had not been shown to be illegal or perverse in any manner warranting
interference by the Court, consequently no substantial question of law and as no
sufficient and good cause established for not levying penalty was established levy of
penalty was held to be justified. (AY. 2008-09)
Satbir Nijjer v. CIT(A) (2016) 383 ITR 71 / 288 CTR 96 / 139 DTR 138 (P&H)(HC)
2110 S. 221 : Collection and recovery – Penalty – Tax in default – Deposited TDS with
interest suo motu, levy of penalty was held to be not justified. [S. 201]
Allowing the appeal the Tribunal held that assessee had deposited TDS to Government
Treasury with a delay of 30 days along with interest thereon suo motu even before
any proceedings were initiated by Assessing Officer, there existed good and sufficient
702
S. 222 Collection and recovery
reasons to mitigate default in question and, therefore, levy of penalty was not justified.
(AY. 2012-13)
Kamlesh M. Kanungo HUF v. DCIT (2016) 160 ITD 331 / 182 TTJ 896 (Mum.)(Trib.)
S. 222. Certificate to Tax Recovery Officer
S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Merely because 2111
Department’s appeal was admitted in the High Court, assessee cannot be held as
assessee-in-default [S. 225]
The assessee filed writ petitions seeking direction of the Court to quash order of
attachment of immovable property passed by the Tax Recovery Officer and directed the
Tax Recovery Officer to pass appropriate orders for lifting the order of attachment of
the immovable property. The High Court held that merely because an appeal against
the order of the Tribunal, deleting the demand raised on the assessee, was admitted by
the High Court, it would not by itself make the assessee as an assessee-in-default. High
Court set aside the impugned order of attachment of immovable property of the assessee.
Thus, the Writ Petition of the assessee was allowed. (AY. 2009-10 to 2011-12)
Coromandel Oils (P) Ltd. v. TRO & Ors. (2016) 143 DTR 97 (2017) 244 Taxman 165 / 291
CTR 600 (Mad.)(HC)
S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – As per rules 60, 2112
61 of the said Schedule, petitioner cannot challenge the sale unless an application to
set aside the sale has been preferred and amount sought to be recovered is deposited
with the Recovery Officer – Held, petitioner did not satisfy the said condition and
made an application for deferment of sale – Held, not permissible. [Rules 15, 60, 61
of the Second Schedule of the Income-tax Act, 1961]
The Petitioner Company had defaulted in repayment of its dues to the bank. Suit was
filed in this respect. During the pendency of proceedings before the DRT, a settlement
was arrived at, on the basis of which the DRT disposed of the suit. However, the
petitioner did not honour the settlement so arrived at. Therefore, the Bank initiated the
recovery proceedings and obtained a Recovery Certificate from DRT. Such amount was
not paid by the petitioner. Accordingly, Recovery Officer auctioned off the mortgaged
property and the sale proceeds were deposited. Petitioner moved an application for
deferment of the said sale on the ground that one time settlement had been arrived at
between the petitioner and the bank. Recovery Officer rejected the said application as it
was filed after the confirmation of sale. Petitioner contended that Recovery Officer did
not follow provision of Rule 15(2) of Second Schedule to the IT Act, that when the sale
is adjourned for more than one month, then a fresh application of sale has to be issued.
High Court held that petitioner never challenged the sale of the mortgaged property and
the only challenge was against the rejection of application of deferment of sale. It was
also held that under Rules 60/ 61, a person interested in the property auctioned can
make an application for cancellation of the sale within 30 days of the sale subject to
amount sought to be recovered is deposited with the Recovery Officer, and since in the
present case, neither any such application was made, nor any amount was deposited,
the petitioner cannot invoke Rule 15(2).
Usha Offset Printers (P.) Ltd. v. Bank of Maharashtra (2016) 238 Taxman 363 (Bom.)(HC)
703
Collection and recovery S. 222
2113 S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Auction
proceedings were conducted in accordance with the established procedure hence
petition was dismissed – Incorrect valuation was kept open to be decided by the Tax
Recovery Officer.
Dismissing the petition the Court held that the Tribunal held that auction proceedings
were conducted in accordance with the established procedure. The Tribunal further
opined that the objection regarding correct valuation of the properties could still be
considered by the Recovery Officer, which had been kept open. The Tribunal, thus,
concluded that the appeal preferred by the assessee was premature and dismissed the
same being devoid of merits. As regards valuation the issue was left open before the
Tax Recovery Officer.
Centauto Automotives (P.) Ltd. v. Union Bank of India (2016) 236 Taxman 68 (MP)(HC)
2114 S. 222 : Collection and recovery – Certificate to Tax Recovery Officer – Quantum
appeal was decided in favour of assessee, attachment order was liable to be set aside.
[S. 225]
Since pursuant to Tribunal’s order in appellate proceedings, tax demand was reduced to
nil and, revenue did not file an appeal for staying of said order of Tribunal, impugned
order of attachment of properties was to be set aside. (AY. 2009-10)
Shangkalpam Industries (P.) Ltd. v. ITO (2016) 161 ITD 193 (Chennai)(Trib.)
S. 226 : Other modes of recovery.
2115 S. 226 : Collection and recovery – Modes of recovery – No bidder came forward to
purchase said properties. Rule 17 would not impose any restriction on bank from
participating in auction where there was no interested bidders. Auction sale in favour
of bank would not be vitiated. [Second Schedule, R. 17, 59]
The DRT directed the Recovery Officer to conduct a public auction. However, no bidders
came forward to purchase the properties. Hence the bank itself had offered to purchase
the properties at ` 43.10 lakhs and ` 33.10 lakh. The bank’s offer was accepted and the
said amount was deposited with Recovery Officer by the bank. The respondent moved to
DRT against the aforesaid sale of mortgaged properties. DRT dismissed the application.
On appeal, DRAT upheld the order passed by DRT. On appeal, High Court passed an
order to set aside the orders of the DRT and DRAT and remanded the matter to the DRT.
On appellant’s appeal to the Supreme Court: Rule 17 would not impose any restriction
on bank from participating in auction where there was no interested bidders. Auction
sale in favour of bank would not be vitiated. Accordingly, both the grounds relied upon
by the High Court to come to the impugned conclusion not having been found to be
acceptable, these appeals have to be allowed. And accordingly, set aside the order of
the High Court and allow these appeals.
ICICI Bank Ltd. v. Aburubam & Company (2016) 243 Taxman 72 (SC)
704
S. 234A Interest
S. 226 : Collection and recovery – Modes of recovery – Where revenue sought recovery 2116
of dues against assessee – Sick industry who put on sale its property, as scheme of
rehabilitation had expired, action of revenue was justified [Sick Industrial Companies
(Special Provisions) Act, 1985 (‘SICA’) S. 18(9), 18(12), 22]
On appeal before the Supreme Court, the Supreme Court held that the High Court
proceeded on a palpably wrong presumption that the sanctioned scheme was still under
operation and, therefore, bar under section 22 of the SICA applied. For this reason, it
directed that the only remedy left for the revenue was to approach the Board for lifting of
the bar under section 22 of the SICA. From the facts and events noted above, this surmise
and assumptions are clearly erroneous and contrary to record. It is to be seen that the
scheme had already expired and that the net worth of the company had turned positive
and it was no more a sick company. Thus, the revenue had right to recover arrears of
income tax after 2007. The issue on what would be quantum of dues that revenue has
to recover from the assessee is not decided in the present appeal and the parties are
permitted to approach the Board seeking clarification as to what was meant by the words
‘to consider’ i.e., whether the Board meant that it was mandatory on the part of the
revenue to waive the interest and penalty or it was only recommendatory and, therefore,
it was up to the revenue to agree or not to agree to the said request. The Income Tax
Department shall be entitled to take steps for attachment of the properties of the assessee,
including Mumbai unit as per the provisions of the Income-tax Act and shall be entitled
to sell the same. If there are any secured creditors in respect of these properties, such
attachment and sale shall be subject to the rights of those creditors. Out of the proceeds,
the principal amount of tax due to the Income-tax Department and even the admitted
excise dues shall be paid to the revenue. Insofar as payment of interest and penalty is
concerned, that would be dependent upon the decision which the Board would give.
DGIT v. GTC Industries Ltd. (2016) 240 Taxman 209 / 286 CTR 355 / 135 DTR 337 (SC)
S. 226: Collection and recovery – Modes of recovery – Cash credit account or term 2117
loan account cannot be attached for recovery of unpaid tax.
The High Court held that the cash credit account or term loan account cannot be
attached for recovery of unpaid tax as it is a case where the assessee has borrowed
money and therefore, it cannot be said that the amount is due from the bank to the
assessee in respect of such accounts. (AY. 2011-12)
Kaneria Granito Ltd. v. ACIT (2016) 241 Taxman 315 (Guj.)(HC)
S. 234A. Interest for defaults in furnishing return of income.
S. 234A : Interest – Default in furnishing return of income – Assessee has not 2118
established that non payment of tax was on account of unavoidable circumstances
hence rejection of waiver petition was held to be justified. [S.54F, 234B, 234C]
Chief Commissioner of Income-tax by impugned order rejected application for waiver of
interest levied under sections 234A, 234B and 234C. Dismissing the petition the Court held
that assessee has not established that non-payment of tax was on account of unavoidable
circumstances hence rejection of waiver petition was held to be justified. (AY. 1996-97)
Humayun Suleman Merchant v. CCIT (2016) 290 CTR 511 / 144 DTR 169 (2017) 244
Taxman 230 (Bom.)(HC)
705
Interest S. 234A
2119 S. 234A : Interest – Insolvency – Company in liquidation – Levy of interest under
sections 234A, 234B and 234C – Waiver of interest – Insolvency court has jurisdiction
to consider application. [S. 178, 234B, 234C]
The insolvency court has full power to decide (i) all questions of priorities and (ii) all
other questions whatsoever. The questions that could be decided by the insolvency court
could be of law or of fact. The question whether or not interest in certain circumstances
can be waived is not a matter covered by section 178, to enable the Department to take
advantage of the overriding effect conferred under sub-section (6). The official assignee
need not go before the Central Board of Direct Taxes praying for waiver of interest under
sections 234A, 234B and 234C of the Act. The insolvency court itself could consider
the question of waiver of interest in terms of the power conferred under section 7 of
the Provincial Insolvency Act, 1920 and in the light of the provisions of the Income-tax
Act, together with the quantum of funds available and the distribution already made.
Held, that the insolvent herself took out an application before the insolvency court for
a direction to the official assignee to set apart capital gains tax. By an order passed
by the court, the official assignee was directed to set apart 20% of the sale proceeds.
Hence, section 178(4) of the Act had been complied with by the official assignee. The
question of waiver of interest under sections 234A, 234B, 234C could be considered by
the Insolvency Court.
Official Assignee, High Court, Madras v. T.R. Bhuvaneswari (2016) 385 ITR 105 / 240
Taxman 266 (Mad.)(HC)
2120 S. 234A : Interest – Default in furnishing return of income – Self-assessment tax paid
before due date of filing of return – No interest is chargeable.
For the assessment year 2009-10, the assessee filed the return of income on November
30, 2009, whereas the due date for filing the return was September 30, 2009. The self
-assessment tax was paid on various dates amounting to ` 40 lakhs prior to the due
date for filing the return and an amount of ` 10 lakhs was paid on November 3, 2009,
subsequent to the due date for filing the return and the balance outstanding demand
was ` 9.6 lakhs. The Assessing Officer levied interest on the entire amount of tax under
section 234A of the Income-tax Act, 1961. The Commissioner (Appeals) and the Tribunal
confirmed this. On appeal:
Held, that the Circular No. 2 of 2015, dated February 10, 2015, by the Central Board
of Direct Taxes provided that no interest under section 234A of the Act was chargeable
on the amount of self-assessment tax paid by the assessee before the due date for filing
the return. The matter was to be remanded to the Tribunal to examine the issue in the
light of the judgment of the Supreme Court as well as the Circular No. 2 of 20151, dated
February 10, 2015. Matter remanded. (AY. 2009-10)
Suresh Sharma v. ACIT (2016) 383 ITR 44 / 68 taxmann.com 163 (Karn.)(HC)
706
S. 234B Interest
S. 234B. Interest for defaults in payment of advance tax.
S. 234B : Interest – Advance tax – Where receipt is by way of salary, TDS deductions 2121
u/s. 192 has to be made. No question of payment of advance tax can arise in cases
of receipt by way of ‘salary’. Consequently, S. 234B & 234C which levy interest for
deferment of advance tax have no application. [S. 192, 234C]
Allowing the appeal the Court held that where receipt is by way of salary, TDS
deductions u/s. 192 has to be made. Accordingly no question of payment of advance
tax can arise in cases of receipt by way of ‘salary’. Consequently, S. 234B & 234C which
levy interest for deferment of advance tax have no application. The appeals are allowed;
the order of the High Court so far as the payment of interest under Section 234B and
Section 234C of the Act is set aside. (AY. 1994-95)
Ian Peter Morris v. ACIT (2016) 389 ITR 501 / (2017) 244 Taxman 219 / 145 DTR 13 /
291 CTR 15 (SC)
Editorial : Decision of the Madras High Court in Ian Peter Morris v. ACIT, TC No. 225,
226 dt. 25-12-2012 was partly set aside.
S. 234B : Interest – Advance tax – Non-resident – ITAT remanded the matter to CIT(A) 2122
to follow the law laid down in case of DIT (IT) v. NGC Network Asia Ltd. [2009] 313
ITR 187 – Held, no substantial question of law. [S. 195, 260A]
Where the ITAT restored the matter to the file of the CIT(A) and for a decision in
accordance with the decision of the Hon’ble Bombay High Court in case of DIT (IT) v.
NGC Network Asia Ltd. [2009] 313 ITR 187, held no substantial question of law arose.
DIT v. Sumitomo Mitsui Banking Corpn. (2016) 242 Taxman 378 (Bom.)(HC)
Editorial : SLP of revenue was admitted; CIT v. Sumitomo Mitsui Banking Corpn. (2016)
242 Taxman 111 (SC)
S. 234B : Advance tax – Assessed on book profit – Interest is not leviable. [S.115J, 2123
234C]
Dismissing the appeal of revenue the Court held that no interest under sections 234B
and 234C of the Act, would be leviable when the income of the assessee was computed
invoking the provisions of section 115J. Since the assessee had claimed depreciation
in the profit and loss account on the basis of the Income-tax Rules, 1962, and not in
accordance with the Companies Act, 1956, the contention raised by the assessee had
been rightly accepted by the Commissioner (Appeals) and affirmed by the Tribunal and,
therefore, did not call for interference.
CIT v. Cornerstone Brands Ltd. (2016) 387 ITR 455 (Guj.)(HC)
S. 234B : Interest – Advance tax – Where assessment order was silent about charging 2124
of interest u/s. 234B & 234C but was computed in ITNS 150 Computation Form, said
interest can be charged, as ITNS 150 is an integral part of assessment order. [S. 234C,
263]
The AO completed the assessment u/s. 142(3) / 263, but the assessment order was silent
and didn’t speak about charging of any interest u/s. 234B & 234C. However, the interest
calculations u/s. 234B & 234C were shown vide ITNS 150 computation form, to compute
the final demand due from the assessee. The assessee challenged the said charge of
707
Interest S. 234B
interest u/s. 234B & 234C and also contended that the interest should have been charged
on the returned income and not on the assessed income.
On First Appeal, the CIT(A) referred to the retrospective amendment in the provisions
of S. 234B & 234C and held that interest was required to be levied in the assessment
order and as per the statute the said interest would be with reference to the assessed
income. On further appeal, the Tribunal reversed the CIT(A)’s Order and held that the
interest u/s. 234B & 234C are to be deleted as they couldn’t be charged in absence of
any assessment order.
On Revenue’s appeal, the HC held that as per the Explanation introduced by the
Finance Act, 2001 w.e.f. 1-4-1989, there is a clear distinction in the Income-tax Act in
the provisions of S. 234B & 234C. With regard to interest u/s. 234B, the calculation is
to be made not on the returned income but on the tax as may be finally assessed and
determined by the assessment and with regard to S. 234C, what is to be determined is
tax due on the returned income for the purpose of calculation of the shortfall in the
advance tax paid. The HC further relied on the Apex Court’s decision in the case of
CIT v. Bhagat Construction Co. Pvt. Ltd. (2015) 235 Taxman 135 and held that both the
provisions u/s 234B & 234C are mandatory and would apply automatically. Further, it
also added that the Tribunal should have held the computation sheet and demand notice
as integral parts of the assessment order and thus charging of the interest was legal and
valid. (AY. 1996-97)
CIT v. Natraj Engineers (P.) Ltd. (2016) 66 taxmann.com 48 / 286 CTR 103 (Patna)(HC)
2125 S. 234B : Interest – Advance tax – Levy of interest is mandatory and automatic even
though the same was not mentioned in the assessment order. [S. 156]
The assessee filed its return declaring certain taxable income. The Assessing Officer completed
assessment under section 143(3) determining taxable income at a higher amount. The CIT(A)
passed an order that so far as the charging of the interest under section 234B of the Act was
concerned, the same was consequential and, therefore, the AO would recalculate the interest
while giving effect to order passed by him. The Tribunal, however, held that as in the order
of assessment the Assessing Officer had not charged any interest under section 234B of the
Act, no such interest was chargeable.
On appeal by assessee, on the ground of levy of interest under section 234B of the Act, the
High Court after considering the totality of the facts and on conjoint reading of the provisions
of sections 143, 234B and 156 of the Act held that when levy of interest under section 234B
is mandatory and automatic and the same is on the difference between the advance tax paid
and assessed tax, AO has no discretion to levy any other interest other than provided under
section 234B. Thereafter, levy of interest under section 234 would be consequential and
amount of interest is required to be calculated arithmetically. Thus, even in absence of any
direction with regard to section 234B by the Assessing Officer while passing assessment order
under section 143(3), there can be demand and levy of interest under section 156 of the Act.
It would have been a different fact if the Assessing Officer had any discretion with respect to
rate of interest and/or to levy any interest considering the facts and circumstances of the case.
The High Court ruled in the favour of the Revenue. (AY. 1990-91)
ACIT v. Norma Detergent (P) Ltd. (2016) 386 ITR 56 / 238 Taxman 259 / 286 CTR 505 /
132 DTR 63 (Guj.)(HC)
Nirma Chemicals and works Pvt. Ltd. v. ACIT (2016) 286 CTR 505 / 132 DTR 63 (Guj.)(HC)
708
S. 234C Interest
S. 234B : Interest – Advance tax – Interest cannot be charged up to the date of 2126
revisional, appellate or rectification order. [S. 234B(4)]
The Assessing Officer charged interest under section 234B up to the date of the order
giving effect to Tribunal’s order. The High Court held that section 234B clearly states
that interest can be charged from 1st April of next financial year up to the date of
determination of income under section 143(1) and where regular assessment is made up
to the date of such regular assessment. It was also held that section 234B(4) only deals
with quantum of tax and does not extend the time period for imposition of interest.
Pr. CIT v. Applitech Solutions Limited (2016) 236 Taxman 602 (Guj.)(HC)
S. 234B : Interest – Advance tax – Intimation – Period already considered in issuing 2127
intimation under section 143(1), has to be excluded while calculating interest [S.
234B(3)]
Allowing the appeal of the assessee, the Tribunal held that processing under section
143(1) has to be considered as an assessment for purpose of levy of interest under
section 234B(3) and, thus, period already considered in issuing intimation under section
143(1), has to be excluded while calculating interest under section 234B(3). (AY. 2005-
06)
MBG Commodities (P.) Ltd. v. DCIT (2016) 50 ITR 129 / (2017) 163 ITD 130 (Hyd.)(Trib.)
S. 234B : Advance tax – Interest – Interest would be charged from end of relevant 2128
assessment year to date of ‘regular assessment’. [S. 143(1), 143(3), 147]
Tribunal held that intimation u/s. 143(1) is not an assessment, and assessment was made
for first time u/s. 143(3) r.w.s. 147 which would fit into Explanation 2 to S.234B(1).
Assessment made u/s. 143(3) on 27-6-2014 was to be regarded as ‘Regular Assessment’
for purpose of S. 234B and starting point for charging interest u/s. 234B would be
1-4-2011 i.e., end of relevant assessment year while end point be 27-6-2014. (AY. 2011-
12)
Nuts ‘n’ Spices v. ACIT (2016) 159 ITD 293 (Chennai)(Trib.)
S. 234B : Interest – Advance tax – No interest u/s. 234B in case of additions made 2129
consequent to retrospective amendments.
The AO made an addition to the income of the assessee consequent to a retrospective
amendment by the Finance (No. 2) Act, 2009. Interest u/s. 234B was levied on the
resultant tax liability. The ITAT held that no interest u/s. 234B can be levied on
additions made consequent to a retrospective amendment since the Assessee cannot
foresee such amendments while determining his tax liability. (AY. 2004-05 to 2006-07)
NHPC Ltd. v. ACIT (2016) 47 ITR 561 (Delhi)(Trib.)
S.234C. Interest for deferment of advance tax.
S. 234C : Interest – Deferment of advance tax – Interest u/s. 234C should be calculated 2130
on tax payable on returned income and not on revised computation of income filed
at the assessment.
The assessee, a Government company, filed its original return of income declaring a
total income of ` 495.03 crores and a refund of ` 6.12 crores subsequent to the audit
709
Fee S. 234E
of accounts by the CAG and adoption of the same in the AGM, a revised computation
of income along with audited accounts was filed during the course of assessment. In
the revised computation of income, the Assessee showed income of ` 228.83 crores
and claimed a refund of ` 95.15 crores. The Assessee mentioned that ` 56,87,807/-
was payable as interest u/s. 234C. The AO computed the income as per the revised
computation of income, but charged interest u/s. 234C of ` 62,13,902/- based on the
original return of income and not on the revised computation of income. The ITAT
held that interest u/s 234C is charged for deferment of advance tax. It is charged with
reference to tax due on returned income and not on revised computation of income filed
subsequently by the Assessee. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 234E. Fee for default in furnishing statements.
2131 S. 234E : Fee – Default in furnishing the statements – TDS deducted prior to 1-6-2015,
levy of fee was held to be not valid. [S. 200A, 271H]
Allowing the petition the Court held that ; as the amendment to S. 200A has come into
effect on 1.6.2015 and has prospective effect, no computation of fee for the demand or
the intimation for the fee u/s. 234E can be made for TDS deducted prior to 1.6.2015.
Hence, the demand notices u/s. 200A for payment of fee u/s. 234E is without authority
of law. (WP No. 2663-2674/2015, dt. 26.08.2016)
Fatheraj Singhvi v. UOI (Karn)(HC); www.itatonline.org
2132 S. 234E : Fee – Default in furnishing the statements – Provision imposing fees @ ` 200
per day for late filing of TDS return is Constitutionally valid – Constitutional validity
not amendable to challenge on the ground of provision being too onerous or statute does
not allow sufficient time or consideration of reasonable cause for violation of provision.
The Petitioner filed a writ petition, challenging the constitutional validity of S. 234E of
the Act on the ground that there is no provision for condonation of delay and also, the
reason given by the Central Government as well as the IT Department for insertion of
S. 200A do not justify the levy of fee u/s. 234E of the Act. Also, prior to amendment by
Finance Act, 2015, there were no provision for computation of fee and appeal.
The HC held that the constitutional validity is not amenable to be challenged on the
ground that the performance insisted upon by the statutory provision is too onerous
or that the statute does not leave sufficient time or does not allow reasonable cause to
be considered for violation of the provision. Further, the HC held that the levy of fee
of ` 200 per day on late filing of the TDS returns, is a compensatory fee and not in
the nature of penalty. It was also held that against levy of fee, though prior to Finance
Act, 2015 there was no provision for computation of fee and an appeal, but thereafter,
amendments have been made u/s. 200A, 246A and 272A and in view thereof, vires of
S. 234E cannot be challenged.
Dundload Shikshan Sansthan & Anr. v. UOI (2015) 235 Taxman 446 (2016) 131 DTR 382
/ 284 CTR 175 (Raj.)(HC)
710
S. 234E Fee
S. 234E : Fee – Default in furnishing the statements – Power to charge/collect fees 2133
u/s. 234E was vested with revenue only on substitution of clause (c) to s. 200A vide
Finance Act, 2015 w.e.f. 1-6-2015, hence prior to 1-6-2015 no fee could have been
levied u/s. 234E while issuing intimation u/s. 200A. [S.200A]
AO raised a demand by way of intimation u/s. 200A for levy of fees u/s. 234E for
delayed filing of TDS statement. Power to charge/collect fees as per provisions of S.
234E was vested with prescribed authority under Act only on substitution of clause (c)
to s. 200A by Finance Act, 2015 w.e.f. 1-6-2015. there was no enabling provision in S.
200A for raising demand in respect of levy of fees u/s. 234E and therefore, no levy of
fees u/s. 234E effected in course of intimation u/s. 200A at relevant point of time. (AY.
2013-14 to 2015-16)
Gajanan Constructions v. DCIT (2016) 161 ITD 313 (Pune)(Trib.)
S. 234E : Fee – Default in furnishing the statements – Prior to the amendment to s. 2134
200A w.e.f. 01.06.2015, the fee for default in filing TDS statements cannot be recovered
from the assessee – Deductor [S. 200A(1)]
Allowing the appeal of assessee the Tribunal held that prior to the amendment to s.
200A w.e.f. 01.06.2015, the fee for default in filing TDS statements cannot be recovered
from the assessee-deductor. (ITA No. 258/Coch/2016, dt. 09.09.2016) (AY. 2013-14)
Little Servants of Divine Providence Charitable trust v. ITO (Cochin)(Trib.); www.itatonline.
org
S. 234E : Fee – Default in furnishing the statements – Fee for late filing of TDS returns 2135
cannot be levied prior to 01.06.2015. [S.200A(3)]
Allowing the appeal the Tribunal held that the amendment to section 200A(1) of the Act
is procedural in nature and in view thereof, the Assessing Officer while processing the
TDS statements/returns in the present set of appeals for the period prior to 01.06.2015,
was not empowered to charge fees under section 234E of the Act. Hence, the intimation
issued by the Assessing Officer under section 200A of the Act in all these appeals does
not stand and the demand raised by way of charging the fees under section 234E of
the Act is not valid and the same is deleted. The intimation issued by the Assessing
Officer was beyond the scope of adjustment provided under section 200A of the Act
and such adjustment could not stand in the eye of law. (ITA No. 1292 & 1293/PN/2015,
dt. 23.09.2016) (AY. 2013-14)
Gajanan Constructions v. DCIT (Pune)(Trib.), www.itatonline.org
711
Refunds S. 237
CHAPTER XIX
REFUNDS
S. 237. Refunds.
2136 S. 237 : Refunds – Delay in filing refund application should be condoned, for an
assessee who has incurred huge losses and to whom the refund amount due, if not
refunded would cause genuine hardship. [S. 119]
Allowing the petition, the Court held that where an assessee, who is suffering huge
losses over a period of time and also not able to engage an accountant for preparing the
returns and filing the returns, it has to be assumed that they have a genuine hardship
and it can be redressed or avoided only on payment of amount which is legally due
to them. S. 119 states that when a Commissioner is given power to adjudicate the
issues relating to exemption, deduction, refund or any other relief, he should condone
the delay as such non-payment or non-granting of such relief would cause a genuine
hardship to such a person. (AY. 2004-05, 2005-06).
Beta Cashews & Allied Products (P.) Ltd. v. CIT (2016) 242 Taxman 373 / 289 CTR 564
(Ker.)(HC)
2137 S. 237 : Refunds – Delay in application for refund should be condoned where it is
demonstrated that assessee incurred huge losses and if amount is not refunded, its
losses would be much more than already computed. [S. 119, 237]
Petitioner Company was suffering from huge loss for a period of time and they were
not even in a position to engage a proper accountant for preparing the accounts and
filing the returns in time. This resulted in the Petitioner not approaching the competent
authority within time. Therefore Petitioner pleaded for condonation of delay for non
payment filing returns. Allowing the WP, the HC held that if the amount claimed was
not refunded, definitely assessee’s losses would be much more than what was computed
presently. In the said circumstances, it would have been appropriate for the CIT to have
condoned the delay. (AY. 2004-05, 2005-06)
Beta Cashew & Allied Products (P) Ltd. (2016) 139 DTR 233 / 242 Taxman 373 / 289 CTR
564 (Ker.)(HC)
2138 S. 237 : Refunds – Deduction at source – Exemption – Interest on foreign loan –
Payment of penal interest approved by Government and exempt – Assessee entitled to
refund of tax erroneously deducted thereon – Jurisdiction – Territorial jurisdiction –
Communication of order by Deputy Commissioner Mumbai – Central Board of Direct
Taxes passing order at Delhi – Part of cause of action arising within jurisdiction of
court at Delhi – Objection raised for first time at stage of argument – Objection not
sustainable. [S.2(28A), 10(15)(iv)(c), 195, Constitution of India, Art. 226]
On a writ petition, held, allowing the petition, (i) that the Central Board of Direct Taxes
did not give any opportunity to the assessee of being heard nor was the order directly
communicated to the assessee. The assessee became aware of the order only when a
copy thereof was enclosed with the letter of the Deputy Commissioner dated February
16, 1999. The ground on which the application for refund was rejected, i.e., that the
712
S. 244 Refunds
penal interest was paid by the assessee as a result of violation of the agreement and
was therefore, not exempt under section 10(15)(iv)(c) of the Act, was factually incorrect.
Clause 27 of the agreement itself provided for waiver in the event of default by SIFL
subject to certain conditions. The penal interest was imposed as part of the conditions
of the agreement itself. Therefore, the payment of penal interest could not be said to
be for breach of the terms of the conditions but in terms of the conditions imposed for
condoning such breach. The order therefore, proceeded on an erroneous interpretation
of the clauses of the agreement. The order rejecting the refund did not state that the
conditions contained in the Circular dated August 6, 1998 was not satisfied. Therefore,
the order rejecting the assessee’s application for refund was not sustainable.
(ii) That the objection regarding territorial jurisdiction was raised for the first time by
the Department at the stage of arguments and not in the counter affidavit filed by the
Department. The order passed by the Central Board of Direct Taxes at Delhi and a part
of the cause of action had arisen within the jurisdiction of the Delhi High Court. The
objection was to be rejected. The Deputy Commissioner was to pass appropriate orders
granting refund to the assessee with admissible interest. The decision of the Central
Board of Direct Taxes communicated to the assessee by its letter dated December 8, 1998
and further communicated by the Deputy Commissioner by the letter dated February
16, 1999 were quashed.
CEAT Ltd. v. CBDT (2016) 383 ITR 300/ 240 Taxman 147 / 286 CTR 225 / 135 DTR 50
(Delhi)(HC)
S. 244. Interest on refund where no claim is needed.
S. 244 : Refunds – Interest on refunds – Assessee becoming entitled to refund pursuant 2139
to assessment order – Refund adjusted against dues for succeeding AY after three years
– Entitled to interest on sum for period of delay. [S. 244(IA))
For the AY 1987-88, the assessee filed its return on the basis of self-assessment and
paid tax in a sum of ` 3,23,68,834 on September 12, 1987. Assessment was made under
section 143(3) of the Act pursuant to which an amount of ` 2,03,29,841 was found
refundable to the assessee. Instead of immediate refund of this amount, the Assessing
Officer ordered that the sum be adjusted against the demand for the year 1986-87. It
was ultimately adjusted on July 25, 1991. The assessee claimed interest for the period
from March 28, 1988 to July 25, 1991 but the claim was rejected by the Assessing
Officer. However, the Commissioner (Appeals) allowed the assessee’s appeal holding that
interest was payable on the sum under section 244(1A) of the Act. This was upheld by
the Appellate Tribunal as well as by the High Court. Held, affirming the decision of the
High Court, that the amount in question, though found refundable to the assessee, was
utilised by the Department and, therefore, interest was payable under section 244(1A)
of the Act. (AY. 1985-86 to 1987-88)
CIT v. Jyotsna Holdings P. Ltd. (2016) 382 ITR 451 / 238 Taxman 558 (SC)
Editorial : CIT v. Jyotsna Holdings P. Ltd. (2006) 284 ITR 121 (Delhi)(HC).
713
Interest on refunds S. 244A
S. 244A. Interest on refunds.
2140 S. 244A : Interest on refunds – Self assessment tax was paid and later on said amount
became refundable due to appellate proceedings, assessee was entitle to interest on
amount of interest. [S.140A, 156]
High Court held that the provisions under section 244A do not distinguish the cases
where payment is made on assessment under section 140A. The Explanation of section
244A(1) does not give room for an interpretation that if a person has paid money
otherwise than by way of demand under section 156, the assessee is not entitled to
interest on refund under section 244A and therefore, the assessee was entitled to interest
under section 244A on the amount of refund. (AY. 1991-92)
Rajaratna Mills Ltd. v. CIT (2015) 64 taxmann.com 89 (Mad.)(HC)
Editorial : SLP of revenue was admitted ; CIT v. Rajaratna Mills Ltd. (2016) 241 Taxman
313 (SC)
2141 S. 244A : Interest on refunds – Delay in filing return – Condonation of delay – Delay
attributable to assessee – Claim to interest on refund rightly rejected.
The liability to pay interest on refund arose from the date when the claim for refund
was made with all necessary particulars. Section 244A(2) imposed a restriction on
payment of interest when the procedure for refund was on account of the delay
attributed to the assessee. Admittedly, there was delay on the part of the assessee which
gave rise to a situation to condone it. Delay was condoned only for the purpose of
accepting the return. But it could not be stated that the delay was not attributable to the
assessee. Even where the delay was condoned, when it was attributable to the assessee,
there was justification on the part of the Commissioner to deny interest under section
244A(2). Therefore, the claim to interest was rightly rejected. (AY. 1997-98)
Pala Marketing Co-op. Society Ltd. v. CIT (2016) 389 ITR 304 / (2017) 291 CTR 116 (Ker.)
(HC)
2142 S. 244A : Interest on refunds – Delay in refund due to finalisation of returns and
process of curing defects in certificate for deducting tax – Delay attributable to
assessee – Refusal to pay interest by Department was held to be proper.
Delay in the proceedings resulting in refund was definitely with reference to the
finalisation of returns and not in regard to the proceedings for refund. Therefore,
the delay was attributable to the assessee. The obligation to provide a certificate for
deducting tax was on the deductor. If the defect was noticeable on receipt of the
certificate, it was for the deductee who made a claim on the basis of the certificate to
get the defects cured. Since substantial time had elapsed in curing the defects, the delay
was attributable to the assessee. When a statute in the form of section 244A(2) clearly
specified that interest need not be paid if the proceedings of refund were delayed for
reasons attributable to the assessee, no interference was warranted in the refusal of the
Department to pay interest.( AY 1995-96)
State Bank of Travancore v. CCIT (2016) 389 ITR 449 / 290 CTR 103 / (2017) 244 Taxman
222 (Ker.)(HC)
714
S. 244A Interest on refunds
S. 244A : Interest on refunds – Interest on refund could be withheld in terms of sub 2143
– Section (2) of section 244A, only if it was found that assessee was responsible for
causing any delay in proceedings which resulted into refund, assessee was entitled to
refund. [S. 154]
Allowing the petition, the Court held that Interest on refund could be withheld in terms
of sub-section (2) of section 244A, only if it was found that assessee was responsible
for causing any delay in proceedings which resulted into refund. Assessee was entitled
to refund. Part of period for which interest is due cannot be excluded in rectification
proceedings. (AY. 2008-09)
Ajanta Manufacturing Ltd. v. Dy. CIT (2016) 290 CTR 110 / 72 taxmann.com 148 / (2017)
391 ITR 33 (Guj.)(HC)
S. 244A : Interest on refunds – Interest under section 244A is payable on refund 2144
arising on account of Double Taxation Relief. [S.90]
During the assessment the Assessing Officer allowed interest under section 244A to
assessee at certain part of refund. However, according to him no interest under section
244A was allowable on DTAA relief under section 90 of the Act. On appeal the CIT(A)
and the Tribunal agreed with the assesse’s contention and allowed assessee interest
under section 244A of the Act.
Before the High Court, the Department contended that interest under section 244A of
the Act is only available on refunds arising out of tax paid/collected as advance tax or
TDS. Disregarding the Department’s contention the High Court held that the relief under
Section 90 of the Act is available in respect of the income tax which is payable both
in India as well as in the other Countries with which India has DTAA. Therefore, relief
under Section 90 of the Act is to be allowed while computing the tax liability in India
by virtue of credit being given to the extent that tax has been paid abroad. Therefore,
the tax payable is to be computed on the income to be assessed. Thereafter the credit
which is available to the assessee in view of DTAA is to be taken into account and if
there is any excess which the assessee has paid into the Indian Treasury, then, he is
entitled to the refund of the same which would also carry interest in terms of Section
244A of the Act. As a result the Department’s appeal was dismissed. (AY. 2003-04)
CIT v. Tech Mahindra Limited (2016) 240 Taxman 143 / 141 DTR 202 / 289 CTR 454
(Bom.)(HC)
S. 244A : Interest on refunds – Non-resident – Interest on income tax refund is a debt 2145
claim payable by revenue which shall be exempt in India – DTAA-India-Italy. [S. 90,
Art. 12]
On appeal : Held, allowing the appeal, that the law was well-settled by the Supreme
Court to the effect that refund due and payable to the assessee was a debt owed and
payable by the Revenue. Therefore, what was due as a refund to the assessee and
what was payable as interest on such refund were debt claims within the meaning of
Article 12(4) of the Double Taxation Avoidance Agreement between India and Italy,
consequently satisfying the parameters of Article 12(3)(a) according to which interest
arising in a contracting State will be exempt from tax in that State, if the payer of the
interest is the Government of that contracting State or a local authority. The payer of
715
Interest on refunds S. 244A
the interest was the Government of the Contracting State, namely, the Government of
India, and therefore, Article 12(6) of the Agreement had no application at all. (AY. 2000-
01, 2001-02, 2002-03)
Ansaldo Energia SPA v. CIT (IT) (2016) 384 ITR 312 / 240 Taxman 107 / (2017) 148 DTR
250 / 293 CTR 461 (Mad.)(HC)
Editorial: Orderin Ansaldo Energia SPA v. DDIT(IT) (2016) 48 ITR 572 (Chennai)(Trib.) is
reversed.
2146 S. 244A : Interest on refunds – Deductor claimed interest on refund – Held, interest on
such refund to be granted as the deductor is an assessee – Held, interest to be granted
from date of application for refund and not from the date of agreement waiving third
installment. [S. 2(7)(c), 163]
The deductor-company entered into an agreement with a German company for transfer
of technical know-how and was required to make the payment of technical know-
how fees in three instalments. The deductor-company deducted tax at source on all
the three instalments and deposited same in advance with department. Subsequently,
the German company was not able to fulfil its obligations and by agreement dated
1-7-1992 agreed to waive the third instalment. The deductor-company filed an
application for refund and same was granted. The deductor also made an application
for interest u/s. 244A on the said refund which was rejected by CCIT and CBDT on
the ground that deductor-company was not assessee in respect of this transaction and
therefore, not eligible for interest u/s. 244A. High Court held that deductor-company
was in fact the assessee by virtue of section 2(7)(b) r.w.s. 163. Further, it was held that,
deductor-company, on failure to deduct tax would have become assessee-in-default and
by that angle also deductor qualified as an assessee u/s. 2(7)(c). It was held that refund
granted by the CBDT would fall within the provisions of section 240. Further, the High
Court relied upon the judgment in case of Union of India v. Tata Chemicals Ltd. [2014]
6 SCC 335 for stating that even if there is no express statutory provision for payment of
interest on the refund of excess amount/tax collected by the revenue, the Government
cannot shrug off its apparent obligation to reimburse the deductor’s lawful monies with
the accrued interest for the period of undue retention of such monies. Further, if the
contention of the Revenue was accepted it would result in causing great hardship to the
honest taxpayers. Held, deductor-company eligible for interest u/s. 244A. However, such
interest accrued from the date of making application for refund of tax and not from the
date of agreement waiving third instalment, since the deductor-company did not make
any application for refund till 2 years after the agreement for waiver.
Sunflag Iron & Steel Co. Ltd. v. CBDT (2016) 387 ITR 674 / 238 Taxman 243 / 137 DTR
177 / 287 CTR 309 (Bom.)(HC)
2147 S. 244A : Interest on refunds – Interest is allowed on refund of excess payment on
self – Assessment of tax and Explanation to section 244A(1)(b) does not bar payment
of interest on such excess refund. [S. 140A,154]
The question before HC was whether Tribunal was justified in granting interest u/s.
244A(1)(b) on excess payment of self-assessment of tax in view of s. 244A(1)(b) r.w
Explanation thereto of the Act which provides that, date of payment of tax means date
716
S. 244A Interest on refunds
on and from which the amount of tax specified in the of notice of demand u/s. 156
is paid in excess of such amount. Another question before the Tribunal was whether
interest granted u/s. 244 can be withdrawn u/s. 154.
On analyzing various judicial precedents, the HC held that clause (b) of sub-s. (1) of s.
244A is residual in nature and provides for interest on refund of excess self-assessment
tax paid by the assessee. Further, the Explanation to s. 244A(1)(b) would have no
application since the tax in question was not paid consequent to any notice of demand
u/s. 156 but was paid u/s. 140A. Hence, according to mandate of s. 244A(1)(b) interest
is payable on refund of excess self-assessment tax from the date of payment of such tax
to the date when the refund is granted.
On the second question of law, the HC held that ‘mistake apparent from the record’ is
rectifiable u/s. 154. Thus, the pre-condition to invoke s. 154 is the presence of a mistake
and that the same must be apparent from the record. The power to rectify a mistake u/s.
154 does not extend to revision or review of the order and hence, interest granted u/s.
244A cannot be withdrawn u/s. 154.(AY. 1992-93, 1993-94)
CIT v. Birla Corporation Ltd (2016) 131 DTR 153/ 284 CTR 97 / 238 Taxamn 482 (Cal.)
HC)
S. 244A : Interest on refunds – Refund determined was less than 10 per cent of gross 2148
tax, assessee would be entitled to interest on amount of refund for period of delay.
[S. 143(1)]
Tribunal held that even where refund determined was less than 10 per cent of gross
tax, assessee would be entitled to interest u/s. 244A from date of passing of order u/s.
143(1) up to actual date of granting refund. (AY. 2009-10)
Rajashekhar Swaminathan Iyer v. Dy. CIT (2016) 160 ITD 638 (Mum.)(Trib.)
S. 244A : Interest on refunds – Interest cannot be denied to the assessee on account of 2149
delay in grant of refund. [S.154]
Tribunal held that where assessee was entitled to refund of TDS and proceedings
resulting in refund had been delayed on ground that relevant TDS certificate did not
bear stamp of company issuing such certificate, delay could not have been attributable
to assesse. Provisions of s. 244A(2) could not have been invoked by AO to deny interest
u/s. 244A(1) on account of delay in grant of refund. (AY. 2003-04)
Pfizer Corporation, Panama v. Dy. DIT (2016) 160 ITD 644 / 182 TTJ 902 (2017) 145 DTR
234 (Mum.)(Trib.)
S. 244A : Interest on refunds – Amount refunded to Assessee should be first adjusted 2150
against interest component and balance, if any, should be adjusted towards tax
component.
The assessee was entitled to refund from the AO while giving effect to the order of the
CIT(A); only part amount was refunded to it. The Assessee alleged that the Assessing
Officer ought to have adjusted the refund granted to the assessee first against interest
refund due and, thereafter, against the principal amount of tax refund due instead of
adjusting the same first against the principal (tax) refund due and keeping the interest
amount aside. The ITAT observed that where the amount of tax demanded is paid by the
717
Interest on refunds S. 244A
assessee it shall first be adjusted towards the interest payable and the balance, if any,
to the tax payable. No specific provision had been brought on the statute with respect
to the adjustment of refund issued earlier for computing the amount of interest payable
by the Department to the assessee on the amount of refund due to the assessee. Under
these circumstances, fairness and justice demands that the same principle should be
applied while granting the refund as had been applied while collecting the amount of
tax. (AY. 2002-03)
Union Bank of India v. ACIT (2016) 52 ITR 221 / (2017) 162 ITD 142 (Mum.)(Trib.)
2151 S. 244A : Interest on refunds – Self assessment tax – Refund of excess self – assessment
tax will not carry any interest from date of payment but it will carry interest from
date of processing of return under section 143(1) till date of granting of refund.
[S.140A, 143(1)]
Payment of excess self-assessment tax on being allowed credit for against tax payable
assumes character of tax paid upon processing of return for relevant year resulting in
refund and thus refund of excess self-assessment tax will not carry any interest from
date of payment but it will carry interest from date of processing of return under section
143(1) till date of granting of refund. (AY. 1994-95)
Raymond Ltd. v. Dy. CIT (2015) 173 TTJ 572 / 129 DTR 269 (Mum.)(Trib.)
S. 245. Set-off of refunds against tax remaining payable .
2152 S. 245 : Set-off of refunds against tax remaining payable – It was illegal and the
Department was not entitled to adjust the amount refundable to the assessee. [S. 240]
On a writ appeal: allowing the writ appeal, the Court held that the assessee was entitled
to the refund. The court had confirmed the orders of the appellate authorities deleting
the additions made on account of the surcharge on sales tax and turnover tax paid by
the assessee and entitling it to refund pertaining to the previous assessment years 2007-
08 to 2011-12. There had been no appeal against that judgment till date. Therefore, the
assessee’s total income could not have been determined by adding the surcharge on
sales tax and the turnover tax for the assessment year 2012-13. It was illegal and the
Department was not entitled to adjust the amount refundable to the assessee. (AY. 2012-13)
Kerala State Beverages (M&M) Corpn. Ltd. v. JCIT (2016) 388 ITR 600 / 142 DTR 134 /
293 CTR 581 / 79 taxmann.com 429 (Ker.)(HC)
Editorial: Decision of the single judge of the Kerala High Court in Kerala State Beverages
(M&M) Corporation Ltd. v. Joint CIT [2016] 386 ITR 148 (Ker) is reversed.
2153 S. 245 : Set off of refunds against tax remaining payable – Prior intimation to assessee
is mandatory.
The mandatory requirement of section 245, is that a prior intimation must be given to
the assessee if a refund is proposed to be adjusted against the arrears of tax.
Contrary to the mandate of section 245 of the Act, without any prior order or prior
intimation to the assessee, an adjustment of the refund against the arrears of tax was
made which was legally impermissible. (AY. 1991-92, 1995-96)
Sangam Theatre P. Ltd v. CIT (2016) 386 ITR 23 / 137 DTR 281 (Delhi)(HC)
718
S. 245 Set off of refunds against tax remaining payable
S. 245 : Set-off of refunds against tax remaining payable application for stay of 2154
demand allowed taking into account adjustment – Directions cannot be issued to grant
refund. [Constitution of India, Art. 226]
Once the order adjusting the refund had been issued and the appellate authority had
taken cognizance of the adjustment while granting stay, a direction to refund the
amount, as claimed, was not sustainable. Merely because there was some irregularity in
the procedure adopted by the Department, direction could not be issued to grant refund.
Although at the time when the order was passed on January 30, 2015, the refund was
not in existence and it came into effect only on February 6, 2015 and under normal
circumstances, stay could be obtained by remitting 15% of the amount demanded, the
provision would not apply when a right to set off was available to the Department under
section 245.
Kerala State Beverages (M&M) Corporation Ltd. v. JCIT (2016) 386 ITR 148 / (2017) 149
DTR 45 (Ker.)(HC)
S. 245 : Set off of refunds against tax remaining payable – Adjustment of refund 2155
without giving an opportunity was held to be bad in law – Directed the department
to refund the amount of refund adjusted with interest.
Approach of the department of setting off / adjusting refund against demand without
serving a prior s. 245 intimation to the assessee and without providing opportunity of
hearing to assessee & without arriving at a satisfaction to the effect that such adjustment
of refund can only be the mode of recovery of demand is bad in law. Dept directed to
refund the amount set off / adjusted together with interest. (AY. 2006-07)
Vijay Singh kadam v. CCIT (2016) 384 ITR 69 (Delhi)(HC)
719
Settlement Commission S. 245C
CHAPTER XIX-A
SETTLEMENT OF CASES
S. 245C. Application for settlement of cases.
2156 S. 245C : Settlement Commission – Settlement of cases – Search and seizure –
Pendency of proceedings – Order served – Rejection of application by Settlement
Commission was held to be not justified – Application for settlement was restored to
the file of Commission at stage of 245D(1) – Period of 14 days as provided in Section
245D(1), would run from date this order was first communicated by either of parties
to Commission. [S. 132, 153A, 245D(1)]
Consequent to search, notices were issued u/s. 153A to for AYs 2008-09 to 2013-14. In
response to notices returns were filed. As the assessments were pending the assessee
has filed application for settlement. Assessee sought to serve copy of application for
settlement filed by assessee with Commission for AYs 1998-99 to 2014-15 with AO along
with intimation in prescribed Form 34BA of IT Rules. However, AO did not accept copy
of application for settlement and returned it with handwritten endorsement. Assessee
sent copy of settlement application on which AO made endorsement along with
prescribed intimation in Form 34BA by speed post. Assessment orders for AYs. 2008-
09 to 2014-15 were issued and sent by Speed Post to assessee. Thereafter, assessee’s
application for settlement came up for admission before Commission for orders u/s.
245D(1). Commission passed order at stage of Section 245D(1) rejected application
for settlement on the ground that there was no pending assessment before AO when
application for settlement was filed with Commission. The assessee filed the writ
petition against the rejection order of the Settlement Commission. Allowing the petition
the Court held that the assessment order for purposes of Chapter XIX A of Act could be
said to have been made when it was served upon assessee concerned,keeping in view
object and purpose of introducing Chapter XIX A into Act i.e., Settlement provisions.
Therefore, order of Settlement Commission was quashed and set-aside. Application for
settlement was restored to the file of Commission at stage of 245D(1).
Yashovardhan Birla v. Dy. CIT (2016) 140 DTR 177 / 289 CTR 482 (Bom.)(HC)
2157 S. 245C : Settlement Commission – Settlement of cases – The return of income and
notice u/s. 148 were issued prior to the Black Money (Undisclosed Foreign Income
and Assets) and Imposition of Tax Act, 2015 coming into force, application submitted
by the assessee offering undisclosed foreign income and assets before Settlement
Commission were maintainable. [S. 148, 153C, 245BA, Black Money (Undisclosed
Foreign Income and Assets) and Imposition of Tax Act, 2015
Allowing the petition the Court held that ; the action of the Settlement Commission, held
that, the assessee had filed their return of income and notice was issued u/s. 148 of the
Act prior to the Black Money (Undisclosed Foreign Income and Assets) and Imposition of
Tax Act, 2015 coming into force w.e.f. 01-07-2015. Thus, the applications submitted before
the Settlement Commission were maintainable. (AY. 2005-06 to 2014-15)
Arun Mammen v. UOI (2016) 290 CTR 644 / 241 Taxman 135 / (2017) 391 ITR 23 (Mad.)(HC)
Kandathil M. Mammen v. UOI (2016) 290 CTR 644 / 241 Taxman 135 / (2017) 391 ITR
23 (Mad.)(HC)
720
S. 245C Settlement Commission
S. 245C : Settlement Commission – Full and true disclosure of income – Where 2158
assessee at time of settlement raised/revised offers of tax marginally in order to put
an end to entire dispute through settlement, it could not be said that original or initial
declaration was not true and full disclosure. [S.245D]
Dismissing the appeal of the Revenue High Court held that, the scope of inquiry,
whether by the High Court under Article 226 or by the Supreme Court under Article
136 was to see whether the order of the Commission was contrary to any of the
provisions of the Act and if so, apart from the ground of bias and malice which
constitute a separate and independent category as it prejudices the applicant. The Court
further held after relying upon the judgment of the Supreme Court in case of Ajmera
Housing Corpn v. CIT (326 ITR 642), that the revised offers of tax was in the nature of
spirit of settlement and cannot be seen in strict sense of abandoning initial disclosures
and replacing the same by fresh disclosures on the basis of such revised offers. What in
essence the assessee did was to raise their offers marginally to put an end to the entire
dispute through settlement or in the spirit of settlement as was referred to in the said
letter. Accordingly, the Court held that it cannot be accepted that there was no full and
true disclosure in the application.
CIT v. ITSC (2016) 241 Taxman 371 / 290 CTR 635 / (2017) 390 ITR 306 (Guj.)(HC)
S. 245C : Settlement Commission – For purpose of maintainability of a settlement 2159
application, a case would be pending only as long as order of assessment is not passed
and date of dispatch of service of order on assessee would not be material for such
purpose. [S. 153A, 245D]
On 7-1-2014, a search was conducted on the assessee. Thereafter, a notice under Section
153A of the Act was issued on 2-7-2014. The assessee filed the return of income in
response to such notice on 27-11-2014.
The AO passed the assessment orders for five assessment years in question on 15-3-2016
and the same were sent for service personally, by deputing an Inspector of his office, to
the partners of the assessee firm at its office on 15.3.2016. However, the partners refused
to receive the orders. A report to this effect was made by the Inspector and placed
before the AO, a copy of which was produced along with an affidavit.
On 16-3-2016, the assessee filed application for settlement before the Settlement
Commission. Before the settlement bare facts were that the order of assessment dated
15-3-2016 was served on the assessee on 21-3-2016. Thus, according to the assessee,
the application for settlement having already been filed on 16-3-2016 even before the
orders of assessment were served, such application before the Settlement Commission
would be maintainable. Even if such orders were passed on 15-3-2016, as contended
by the Department, since the same were not served on the assessee, the assessment
proceedings would be deemed to be pending and, therefore, application for settlement
would be maintainable.
However, according to the Department, as soon as the orders of assessment were passed.
Irrespective of dispatch of the orders of assessment or service thereof on the assessee,
application for settlement would not be maintainable.
The High Court held that for the purpose of application under Section 245C(1) of
the Act, a case would be pending only as long as the order of assessment is not
passed. Once the assessment is made by the Assessing Officer by passing the order of
721
Settlement Commission S. 245C
assessment, the case can no longer be stated to be pending. Application for settlement
would be maintainable only if filed before the said date. Date of dispatch of service of
the order on the assessee would not be material for such purpose. High Court dismissed
the petitions filed by the assessee. (AY. 2010-11 to 2014-15)
Shalibhadra Developers v. Secretary & Ors. (2016) 143 DTR 1 / (2017) 291 CTR 87 / 245
Taxman 160 (Guj.)(HC)
Shanti Buildcon v. Secretary & Ors. (2016) 143 DTR 1 / (2017) 291 CTR 87 / 245 Taxman
160 (Guj.)(HC)
2160 S. 245C : Settlement Commission – Filing of return is not mere technical requirement
– Mere fact that there were several partners and several firms belonging to assessee
group would not result in complexity of investigation especially when revenue had
clearly set out as to what was nature and circumstances of case – Rejection of the
petition was held to be justified. [S. 132, 158BC, 245D]
Dismissing the petition against the order of the Settlement Commission the Court
held that requirement to file return under clause (a) of proviso to section 245C(1) is a
pre-requisite to be entitled to file an application before Settlement Commission and it
cannot be reduced to an insignificant or a mere technical requirement. Mere fact that
there were several partners and several firms belonging to assessee group would not
result in complexity of investigation especially when revenue had clearly set out as to
what was nature and circumstances of case.
Dix Francis v. ITSC (2016) 289 CTR 404 / (2017) 391 ITR 401 / 244 Taxman 126 (Mad.)
(HC)
2161 S. 245C : Settlement Commission – Application by person related to applicant –
Meaning of “related party” – Effect of Explanation to section 245C(1) – Company
would be a related party only if a director of such company has a substantial interest
in applicant – Clubbing of shares were not permitted – Petition was dismissed.
Holding a substantial interest in the specified person, by a director of the applicant, is
a necessary qualifying condition. If the Legislature had intended to enlarge the ambit of
the qualifying condition by including a relative of the director it would have specifically
provided so. A company would not qualify as a related party merely because any
relative of one of its directors has a substantial interest in the specified person.
Beneficial owner of the share as referred to in Explanation (b)(A) refers to shares held
in a company by a person either in his own name or in the name of other persons.
A corporate entity is a separate legal entity. Merely because a director of the specified
person holds shares in a company which in turn holds shares in the company that
would not make the director the beneficial holder of the shares of the company and,
thus, qualify the applicant as a related party. The words used are “any director of such
company” and “any relative of such director”. Clubbing of shares were not permitted.
Petition of assessee was dismissed.
Rockland Hotels Ltd. v. ITSC (2016) 380 ITR 197 / 236 Taxman 160 / 282 CTR 142 (Delhi)
(HC)
722
S. 245D Settlement commission
S.245D. Procedure on receipt of an application under section 245C
S. 245D : Settlement Commission – Full and true disclosure of income – Marginal 2162
changes by assessee in the spirit of settlement – Initial disclosures being replaced by
fresh disclosures was held to be valid –Writ petition of revenue was dismissed. [S.
245C. Art. 226]
Dismissing the petition of revenue, the Court held that the revised offers of tax were in
the spirit of settlement and could not be seen in the strict sense as the initial disclosures
being replaced by fresh disclosures on the basis of such revised offers. What in essence
the assessee did was to raise its offers marginally to put an end to the entire dispute
through settlement. The order passed by the Settlement Commission was valid.
CIT v. ITSC (2016) 241 Taxman 371 / 290 CTR 635 / (2017) 390 ITR 306 (Guj.)(HC)
S. 245D : Settlement Commission – Rectification of mistake – Secretary, Settlement 2163
Commission cannot pass the rectification order – Order was passed not only without
hearing assessee, but also without recording any reasons as to why rectification
application made by petitioner was not being allowed in its entirety, same was
justified to be set aside. [S.245C, 245D(4), 245D (6B)]
Assessee filed application for rectification dated 23rd October, 2015 inter alia pointing
out circumstances which would make it impossible for them to comply with orders
dated 27th August, 2015 as rectified by order dated 20th October, 2015 (to illustrate his
properties being under attachment). It was this application for rectification which had
been disposed of by the Secretary of the Commission in his Communication dated 28th
December, 2015. The assessee filed the writ petition against the said order. Allowing
the petition the Court held that Secretary cannot dispose the application filed before
the settlement commission. It was for Commission to consider applications which were
filed before it seeking modification or rectification of orders passed by it and same could
not be outsourced by Commission to its Secretary. Omission was composed of persons
who were not only of highest integrity but also of outstanding ability having special
knowledge with regard to issues relating to direct taxes and business accounts. Due to
aforesaid abilities of members of Commission that had to be brought into play while
disposing of applications for Settlement made to the Commission as also applications of
rectification/modification of its orders. Admittedly this had not been done in this case as
assessee’s application for rectification had been disposed of by Secretary of Commission.
In the peculiar facts of case, orders dated 20th October, 2015 was set aside, being
order passed on Petitioner’s rectification application u/s. 245(D)(6B), as it was an order
passed not only without hearing assessee, but also without recording any reasons as to
why rectification application made by Petitioner was not being allowed in its entirety.
Accordingly the order was set aside.
Vinod R. Jadhav v. ITSC (2016) 144 DTR 112 / 290 CTR 674 (Bom.)(HC)
S. 245D : Settlement commission – Amount lying with the Department which was 2164
seized during the search operation should be taken into account when computing the
additional taxes to be paid under the amended S..245D(2D). [S. 245D(2D)]
The High Court held that the amount lying with the Department which was seized
during the search operation should be taken into account when computing the
723
Settlement commission S. 245D
additional taxes to be paid under the amended S.245D(2D) more particularly when the
Department has not returned the cash even after 12 years and the assessee was willing
to surrender the same.
Maheshbhai Shantilal Patel v. ITSC (2016) 241 Taxman 94 (Guj.)(HC)
2165 S. 245D : Settlement commission – Order of the Settlement Commission set aside as
the objections of the Revenue as per the report filed under section 245D(2C) of the Act
was not considered by the Settlement Commission. [S. 245D(2C)]
The High Court set aside the order of the Settlement Commission as the Commission
did not consider the report filed by the Commission as it had filed the same belatedly
and therefore, directed the Commission to decide the same after considering the report
of the Commissioner.(WP No. 26 of 2016 dt 28-4-2016) (AY. 2007-08 to 2014-15)
PCIT v. Income-tax Settlement Commission (2016) 386 ITR 456 / 240 Taxman 137 / 289
CTR 493 (Bom.)(HC)
2166 S. 245D : Settlement Commission – Settlement Commission accepting application and
further order for proceeding further – Finding that application was valid was tentative
– Writ would not issue to quash proceeding. [S. 245C, 245D(2C)]
The assessee having applied for settlement of the income for the AY 2013-14, the
Settlement Commission passed its first order dated January 28, 2015 under section
245D(1). and allowed the application to be proceeded further with. The Settlement
Commission thereafter passed another order dated March 23, 2015 under section
245D(2C) of the Act and allowed the application to proceed further from that stage. The
Income-tax Department challenged these orders on various grounds:
Held, that the findings of the Settlement Commission on the fulfilment of the
requirements of a valid offer were merely tentative and it would be open for the
Settlement Commission to examine these aspects before passing final order under sub-
section (4) of section 245D of the Act. The orders were not liable to be quashed. (SCA
NO 12209/15 dt. 8-12-2015)
PCIT v. Settlement Commission (2016) 386 ITR 660/ 65 taxmann.com 309 (Guj.)(HC)
2167 S. 245D : Settlement Commission – Adjudication is not required on Commissioner’
s report which is submitted in first instance objecting settlement application on the
ground that there was no full and true disclosure as Settlement Commission has
to pass final order after obtaining further report of Commissioner and after being
satisfied that there was full and true disclosure – Petition of revenue was dismissed.
[S. 245D(1), 245D(2C), 245D(4)]
The assessee filed an application for settlement of its case before the Settlement
Commission. The Settlement Commission proceeded with the application and called for
report from the Commissioner. The Commissioner, in the report, objected application
on ground that there was no full and true disclosure and requisite tax had also not
been paid. The Commissioner argued that the Settlement Commission was required to
adjudicate on objection filed by him. The Settlement Commission, however, chose to
proceed with further enquiry. On writ, the Commissioner contended that the Settlement
Commission could not assume jurisdiction to consider the application without
adjudicating his objection at admission stage itself.
724
S. 245D Settlement Commission
The High Court held that it was evident that the Settlement Commission was satisfied
that there was a full and true disclosure of the income which was not disclosed before
the AO in the application and the manner in which such income had been derived and
the additional income tax payable on such income.
Further, High Court held that even assuming that the Settlement Commission had
glossed over the initial report submitted by the Commissioner, as the procedure
contemplated a further report to be submitted by the Commissioner, after examination
of the annexure to the application, statements and other documents accompanying
such annexure and on the basis of a further enquiry, if any, all of which was not made
available to the Commissioner in the first instance, and the Settlement Commission
being in a position to still address the question whether a full and true disclosure
of the income which was not disclosed before the AO and being required to pass an
appropriate order, the Revenue could not be said to be prejudiced in any fashion.
Therefore, no procedural violation was caused by the Settlement Commission. It had
only taken a prima facie view that the application was not invalid. A final order will
necessarily have to be passed under section 245D(4) only after obtaining the report
of the Commissioner under Rule 9 and after being satisfied that there is full and true
disclosure by the applicant.
The High Court after relying on the decision of the Apex Court in case of Ajmera
Housing Corpn. (2010) 326 ITR 642 (SC), dismissed the petition of the Revenue. (AY.
2006-07)
CIT v. RNS Infrastructure Ltd. (2016) 238 Taxman 416 / 135 DTR / (2017) 292 CTR 507
370 (Karn.)(HC)
S. 245D : Settlement Commission – Full and true disclosure of income and manner 2168
in which such income derived – Self – assessment tax – Total income – Meaning of
– Additional tax – Special formula – Deeming fiction – Amount of tax calculated on
total income in application reduced by tax calculated on total income returned for
that year – Assessee not paying self – assessment tax in return u/s 153A and section
143(2) – Settlement application not valid. [S. 143(2), 153A, 245D(2C)].
Once an application is made by the assessee for settlement of his case, the different
stages before the Commission come with time frame. Even the final order which
the Commission may pass has a deadline beyond which if no order is passed, the
proceedings would abate. At a stage where the Commission is required to ascertain
where an assessee has paid the additional tax with interest thereon only upon which
application can be allowed to proceed further, no complex exercise or verification is
envisaged. If the concept of total income contained in the Act is imported as such a
stage, it can give rise to multiple disputes and lengthy debates with respect to the total
income of an assessee and whether full tax on such income has been paid or not. At
such a stage, the Legislature does not envisage the Commission to go into a complex
exercise of ascertaining the total income of the assessee and further ascertaining his
tax liability on such income. Therefore, the Legislature has provided for a simple
formula possible of a simple arithmetical application. In a given case, the assessee
may be entitled to a refund once the Commission passes its final order. Such isolated
case, however, would not govern the interpretation of sub-sections (1B) and (1C) of
725
Settlement commission S. 245D
section 245C. Any such interpretation would give rise to complex consideration by the
Commission of the assessee’s total income not as defined in sub-section (1B) to but as
otherwise understood and referred to in section 5. The Legislature never intended that
at the stage of ascertaining whether the assessee has deposited the additional tax on an
application made for settlement of the case, such complex exercise should be undertaken
by the Commission. Further, accepting any such interpretation would defeat the very
purpose of introducing the simplicity of computation of “total income” of an assessee
for the purpose of the provision and his liability to pay additional tax with interest
thereon. Subsequent to the search, the assessee filed the returns u/s. 139(1) and after the
issue of section 153A notices for the AYs 2006-07 to 2011-12, the assessee had offered
to tax the amount amounting to ` 34,74,47,123 which was the total amount admitted
u/s. 132(4) under the AYs 2007-08 to 2012-13. Therefore, the assessee had not paid the
self-assessment tax in the return u/s. 153A and section 143(2) for the AYs 2007-08 to
2012-13, the application was not valid and the order passed by the Commission was
liable to be quashed. (AY. 2006-07 to 2012-13)
CIT v. Kiti Construction Ltd. (2015) 280 CTR 73 / 124 DTR 289 / (2016) 380 ITR 82 (MP)
(HC)
2169 S. 245D : Settlement Commission – Department cannot challenge the interim order of
Settlement Commission where the Settlement Commission had valid jurisdiction – The
Department had the liberty to raise objections before the Settlement Commission. [S.
245D(1)]
A search and seizure operation was carried out at the business premises of assessee
company as well as the residential premises of the Directors of the assessee company.
During the pendency of assessment proceedings, the assessee-company filed application
before the Settlement Commission. The settlement application of the assessee-company
was admitted by an order passed u/s. 245D(1). The Department filed a writ petition
before the HC praying for quashment of order passed u/s. 245D(1) by the Settlement
Commission admitting assessee’s application. The High Court while dismissing the
appeal, held that:
Chapter XIX-A provides for a complete mechanism for dealing with settlement
applications and the said mechanism is complete code in itself.
Settlement Commission has a jurisdiction to provide for the terms of the Settlement
including demanding any tax, penalty or interest. The Commission has the
jurisdiction to examine as to whether any order has been obtained by way of fraud or
misrepresentation of the facts.
Department cannot challenge the interim order of Settlement Commission where the
Settlement Commission had valid jurisdiction.
The Department had the liberty to raise objections before the Settlement Commission.
(AY. 2007-08 to 2014-15)
CIT v. Asian Natural Resources India Ltd. (2015) 235 Taxman 419 / 117 DTR 426 / (2016)
282 CTR 569 (MP)(HC)
726
S. 245H Settlement Commission
S. 245F. Powers and procedure of Settlement Commission.
S. 245F : Settlement Commission – Does not have power to direct special audit under 2170
section 142(2A) of the Act – No power of regular assessment which vested in Assessing
Officer. [S. 142(2A), 245C]
Held, allowing the petition, (i) that the Commission did not engage itself in the process
of assessment and could not make an assessment order. The order that the Commission
makes u/s. 245D(4) was not in the nature of an assessment but by way of a settlement
and contains the terms of settlement. Thus, the powers which are vested in an income-
tax authority and could be exercised by the Commission are such which have a nexus
with the settlement proceedings which would not include the making of an assessment
under the Act.
(ii) That since the requirement of a special audit falls under the procedure for
assessment which is distinct and different from settlement proceedings, the Commission
would not have jurisdiction to direct a special audit as it does not have any nexus with
the settlement proceedings. All that the Commission is required to do in the course of
the settlement proceedings is to ensure that the assessee who has made the application
for settlement of his case has, inter alia, made a full and true declaration of his hitherto
undisclosed income and the manner in which it was derived. If the accounts put forth
by the assessee before the Commission are found by the Commission on the basis of
the available records or the reports of the Commissioner to be neither full nor true then
the only option available with the Commission is to reject the application for settlement
and relegate the assessee to the normal provisions of assessment under the Act. The
Commission could not, by itself, enter upon an assessment and step into the shoes of
an Assessing Officer for the purposes of making an assessment.
Chapter XIX-A provisions contemplate assessment by settlement and not by way of
regular assessment u/s 143(3) or “assessment” u/s. 143(1) or u/s 144 and Chapter XIX-A
is a code by itself.(AY 2004-05 to 2011-12)
Agson Global P. Ltd. v. ITSC (2016) 380 ITR 342 / 237 Taxman 158 / 282 CTR 441 / 130
DTR 1 (Delhi)(HC)
S. 245H. Power of Settlement Commission to grant immunity from prosecution and
penalty.
S. 245H : Settlement Commission – Power – Immunity from prosecution and penalty 2171
– Satisfaction of Settlement Commission that applicant co- operated in proceedings
and had made a full and true disclosure of income and sources of such income –
Taking a lenient view would defeat legislative intent – Settlement Commission noting
assessee’s extension of co – operation but failing to record its satisfaction in regard
to full and true disclosure of income – Matter remanded to Settlement Commission to
decide afresh. [S. 245C]
Held, that a perusal of the order of the Settlement Commission showed non-application
of mind by it to the mandatory requirement of recording its satisfaction that the
conditions prescribed under section 245H(1) of the Act were fulfilled. The Settlement
Commission had noted that the assessee had extended its co-operation in the hearing,
727
Settlement Commission S. 245HA
but failed to record its satisfaction that the assessee made a full and true disclosure
of its income and the source thereof. Further, the report submitted by the Department
was not discussed. The Settlement Commission was performing the important task
of exercising its discretionary powers under the mandate of section 245H(1) to grant
immunity from prosecution and penalty. The legislative object and purpose of vesting
it with such powers would be defeated if a lenient view was taken of the fulfilment of
the statutory requirements. The order of the Settlement Commission was set aside and
the matter was remanded to the Settlement Commission for decision afresh.
CIT v. BDR Builders and Developers Ltd. (2016) 385 ITR 111 (Delhi)(HC)
S. 245HA. Abatement of proceeding before Settlement Commission.
2172 S. 245HA : Settlement Commission – Change of law – Provision for abatement of
proceedings where no order passed by cut-off date – To be read down – Abatement
only where failure owing to reasons attributable to applicant. [S. 245C]
Following Union of India v. Gurmeet Kalra reported as Union of India v. Star Television
News Ltd. [2015] 373 ITR 528 (SC), it was held that only where the application for
settlement could not be disposed of for any reasons attributable on the part of the
applicant would proceedings abate u/s. 245HA(1)(iv). Settlement Commission directed to
consider whether the proceedings had been delayed on account of reasons attributable
to the applicant and if they were not, to proceed with the application as if not abated.
CIT v. Rajendra Kumar Verma (2016) 380 ITR 430 / 243 Taxman 172 / 135 DTR 244 /
286 CTR 343 (SC)
Editorial: Appeal from Rajendra Kumar Verma v. DG (Inv) (2012) 345 ITR 32 (All.)(HC)
728
S. 245R Advance rulings
CHAPTER XIX-B
ADVANCE RULINGS
S. 245R. Procedure on receipt of application.
S. 245R : Advance rulings – Issuance of notice under section 143(2) without any 2173
specific queries is not a bar on application for advance ruling.
Allowing the petition the Court held that; in the notice issued to the assessee under
section 143(2) of the Act, the Assessing Officer only stated that there were certain
points in connection with the return of income submitted by the assessee for the
assessment year 2012-13 on which the Assessing Officer would like some further
information. The notice did not address itself to any specific question. It did not
disclose application of mind to the returns, except the fact that it had conformed to
the instructions which compelled the Assessing Officer to issue a scrutiny notice on
account of the international transaction reported by the assessee. Such notices ipso facto
would not be sufficient to attract the automatic rejection of application under proviso to
section 245R(2). The assessee’s application for advance ruling was to be processed and
independently dealt with on its merits by the Authority for Advance Rulings.
Sage Publications Ltd. v. Dy. CIT(IT) (2016) 387 ITR 437 / 73 taxmann.com 85 (Delhi)(HC)
Editorial : SLP of revenue is dismissed Dy.CIT v. Sage Publications Ltd. UK. (2017) 246
Taxman 57 (SC)
S. 245R : Advance rulings – Mere issue of notice under section 143(2) without any 2174
specific queries – Would not bar an application for advance ruling. [S. 143(2)]
Notice that was issued to the assessee was a notice under section 143(2)(ii) of the Act
and not section 143(2)(i). The notice issued under section 143(2) by the Assessing
Officer on August 25, 2011 in relation to the return filed for the assessment year
2010-11 merely reproduced the language of section 143(2)(ii) of the Act. This notice
in any event, did not set out the opinion of the Assessing Officer that he considered
it necessary or expedient to issue such notice for any of the reasons specified in
section 143(2)(ii). Therefore, the issuance of the notice under section 143(2) would not
constitute a bar in terms of clause (i) to the first proviso under section 245R(2) of the
Act in as much as the notice did not refer to any particular “question” which could be
stated to be pending consideration.
Hyosung Corporation v. AAR (2016) 385 ITR 95 / 138 DTR 337 / 288 CTR 19 (Delhi)(HC)
S. 245R : Advance rulings – Mere notice under section 143(2) without any specific 2175
queries would not mean matter was pending before income – tax authorities – Such
notice would not bar an application for advance ruling. [S. 143(2)]
Mere issuance of a notice under section 143(2) to the assessee by merely stating that
there are certain points in connection with the return of income on which the AO
would like some information did not amount to the issues raised in the application
filed by the assessee before the Authority for Advance Rulings being already pending
before the Authority for Advance Rulings. Therefore, even in relation to the applications
for the assessment year 2013-14, it could not be said that on the date of filing of the
applications the issue raised therein was pending consideration before the income-tax
729
Advance rulings S. 245R
authorities. There was no statutory bar to the Authority for Advance Rulings considering
the applications.(AY 2012-13, 2013-14)
LS Cable and Systems Ltd. v. CIT (2015) 288 CTR 23 / (2016) 385 ITR 99 / 138 DTR 340
/ (2017) 78 taxmann.com 55 (Delhi)(HC)
2176 S. 245R : Advance rulings – Transaction designed prima facie for avoidance of income-
tax – Supreme court grants leave to appeal against the High Court’s order in the case
of Goodyear Tire & Rubber Co.
Assessee, a US company,proposed to transfer its 74% shareholding in an Indian
company, Goodyear India Ltd. to its 100% Singaporean subsidiary, Goodyear Orient
Company (Pte) Limited without consideration. Assessee filed an application before the
Authority for Advance Rulings (’AAR’) to ascertain the tax implications arising from
the above transaction. AAR held that there would be no tax liability in the hands of
the assessee or the Singapore company. AAR further held that even if the assessee had
received consideration, there would be no tax liability as the Indian company whose
shares were sold was a listed company and the capital gains would be exempt under
section 10(38) and therefore the said transaction cannot be said to be designed for
avoidance of tax. In a writ petition filed by the revenue authorities, the High Court
refused to interfere with the order of the AAR as no illegality was pointed out in the
AAR’s ruling. Supreme Court has granted leave to appeal against the High Court’s order.
DIT(IT) v. Goodyear Tire & Rubber Co. (2016) 236 Taxman 389 (SC)
2177 S. 245R : Advance rulings – A notice u/s. 143(2)(ii) cannot be issued in a routine,
casual or mechanical manner but after forming an opinion that it is “necessary or
expedient” to do so. A S. 143(2) notice in the standard form is not a bar u/s. 245R(2)
for admission of an AAR application for advance ruling. [S.143(2), Constitution of
India, Art. 14]
The challenge in the main petition was to an order dated 7th August 2013, passed
by the Authority for Advance Rulings (‘AAR’) whereby the Petitioner’s application for
determination of the question regarding taxability of its profits arising from offshore
supplies was rejected on the ground that the bar under clause (i) below the proviso to
Section 245R (2) of the Income-tax Act, 1961 (‘Act’) to the AAR allowing the application
stood attracted. It was held that once notice was issued to the petitioner under Section
143(2) of the Act, it should be construed that the question raised in the application
was a question that was ‘pending’ adjudication and therefore the aforementioned bar in
terms of clause (i) below the proviso to Section 245 R (2) of the Act could apply. HELD
by the High Court:
(i) Under Section 143(2)(ii) of the Act, an AO can serve on the assessee a notice
requiring him to attend his office and produce any evidence on which the assessee seeks
to rely in support of return if the AO “considers it necessary or expedient to ensure that
the assessee has not understated the income or has not computed excessive loss or has
not underpaid the tax in any manner’. Therefore, the scope of the enquiry that an AO
can undertake in terms of Section 143(2)(ii) is a wide ranging one. What is relevant for
the present case is that prior to issuance of the notice under Section 143(2)(ii) the AO
has to form an opinion that it is ‘necessary or expedient’ to ensure that an Assessee has
not (i) understated the income or (ii) has not computed excessive loss, or (iii) has not
730
S. 245R Advance rulings
underpaid the tax in any manner. The AO is, therefore, not expected to issue a notice
under Section 143 (2) (ii) in a routine or casual or mechanical manner.
(ii) Turning to the notice issued in the instant case to the Petitioner under Section 143(2)
(ii) of the Act, it is seen that it is in a standard format which merely states that “there
are certain points in connection with the return of income on which the AO would like
some further information.” In any event the question raised in the applications by the
Petitioner before the AAR do not appear to be forming the subject matter of the said
notice under Section 143 (2) (ii) of the Act. Consequently, the mere fact that such a
notice was issued prior to the filing of the application by the Petitioner before the AAR
will not constitute a bar, in terms of clause (i) to the proviso to Section 245-R (2) of the
Act, on the AAR entertaining and allowing the application.(AY. 2010-11)
Hyosung Corporation v. AAR (2016) 382 ITR 371 / 284 CTR 121 / 131 DTR 369 / 238
Taxman 401 (Delhi)(HC)
Editorial : SLP of revenue is dismissed, CIT v. Hyosung Corporation (2017) 244 Taxman
286 (SC)
731
Appeal Commissioner (Appeals) S. 246A
CHAPTER XX
APPEALS AND REVISION
S. 246A. Appealable orders before Commissioner (Appeals).
2178 S. 246A : Appeal Commissioner (Appeals) – Appealable orders – Assessment treating
assessee as resident – Dismissal of writ petition on ground of availability of remedy
of appeal – Appeal – Supreme Court – High Court failing to consider Explanation to
section 246 – Liberty to assessee to seek review – High Court to consider on merits.
[S. 246, Constitution of India, Art. 136]
Where, on a writ petition filed by the assessee challenging as without jurisdiction an
assessment by the Income-tax Officer for the assessment year 2013-14 treating him
as resident because he was a non-resident and could have been assessed only by the
Commissioner (International Taxation), the High Court dismissed the writ petition
on the ground that the assessee had an alternative remedy of filing an appeal under
section 246(1)(a), on appeal : Held, that the High Court having omitted to take note of
the Explanation under section 246, the assessee was to be granted liberty to approach
the High Court by way of a review petition which the High Court shall consider on the
merits.
Petition under Article 136 of the Constitution for special leave to appeal from the
judgment and order dated May 9, 2016 of the Allahabad High Court. (AY. 2013-14)
Abid Ali Khan v. ITO (2016) 389 ITR 82 / 144 DTR 372 / (2017) 291 CTR 312 (SC)
Editorial : The judgment of the High Court is reported as Abid Ali Khan v. ITO [2016] 389
ITR 80 (All) (HC), the assessee was to be granted liberty to approach the High Court by
way of a review petition which the High Court shall consider on the merits.
2179 S. 246A : Appeal – Commissioner (Appeals) – Powers – Power to admit additional
evidence – Revenue not able to disprove additional evidence – Decision based on
additional evidence was held to be valid. R.46A]
Exercise of power by the Commissioner (Appeals) under Rule 46A of the Income-tax
Rules, 1962, is to enable the appellate authority to pass orders for substantial cause
while entertaining additional evidence. The appellate authority is empowered to allow
additional evidence to do substantial justice between the parties. The appellate authority
may admit the evidence and decide the appeal. The appellate authority may keep the
appeal pending and direct the AO to ascertain the facts, essential for the purpose of
deciding the appeal and then, on the basis of the remand report, decide the appeal.
Where additional evidence is adduced, the other side has to be given an opportunity
to explain or rebut such additional evidence. It is also well-settled that if evidence has
been allowed to be let in, without objection, it will not be open to the party aggrieved
to raise any objection, as to its admissibility, at a subsequent stage.
CIT v. Sangu Chakra Hotels P. Ltd. (2016) 389 ITR 117 / 74 taxman.com 76 / (2017) 150
DTR 259 (Mad.)(HC)
732
S. 246A Appeal – Commissioner (Appeals)
S. 246A : Appeal – Commissioner (Appeals) – Intimation issued u/s. 200A is 2180
appealable. [S. 156, 200A, 234E]
Commissioner (Appeals) has held that the appeal is not maintainable against the order
of Assessing Officer passed while processing the TDS returns/statements and charging
of fees under section 234E of the Act. No appeal is provided against the intimation
issued under section 200A of the Act. Allowing the appeal the Tribunal held that
such intimation issued by the Assessing Officer after processing the TDS returns is
appealable. The demand raised by way of charging of fees under section 234E of the Act
is under section 156 of the Act and any demand raised under section 156 of the Act is
appealable under section 246A(1)(a) and (c) of the Act. (ITA No. 1292 & 1293/PN/2015,
dt. 23.09.2016) (AY.2013-14)
Gajanan Constructions v. DCIT (Pune)(Trib.); www.itatonline.org
S. 246A : Appeal – Commissioner (Appeals) – Appealable orders – Deduction at source 2181
– Order passed by A.O. u/s. 195(2) cannot be challenged before as there is a specific
provision u/s. 248 for filing appeal against such order. [S.195(2), 248]
In the appeal, the order appealed against was an order passed u/s. 195(2) against ONGC
requiring it to deduct tax at source on payments made to the assessee. There was no
final determination of liability under the Act as far as the assessee was concerned which
can only be determined when assessment is framed against the assessee. That besides,
there being a specific provision u/s. 248 for filing appeal against order passed u/s.
195(2), that too by payer/deductor of tax at source, the said order cannot be challenged
u/s. 246A by department. Therefore, the appeal filed by the assessee before the CIT(A)
against the order passed u/s. 195(2) in the case of ONGC was not maintainable. The
CIT(A) is not competent under the provisions of S. 246A to entertain such an appeal.
(AY. 2013-14)
DCIT v. Abu Dhabi Ship Building PJSC (2016) 159 ITD 438/ 138 DTR 124/ 179 TTJ 537
(Mum.)(Trib.)
S. 246A : Appeal – Commissioner (Appeals) – Additional evidence – Matter remanded 2182
to AO for admitting additional ground.
On appeal, the Tribunal held that the assessee was prevented by the reasonable cause
from making a claim before the AO during the assessment proceedings and had
accordingly raised an issue before the CIT(A). Therefore, the additional ground raised by
the assessee was admitted and the issue was remitted to the AO to consider and allow
the discount on debentures on proportionate basis. (AY. 2006-07 and 2007-08)
Rain Commodities Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
Rain Cements Ltd. v. Dy. CIT (2016) 46 ITR 1 (Hyd.)(Trib.)
733
Appeal Commissioner (Appeals) S. 248
S. 248. Appeal by a person denying liability to deduct tax in certain cases.
2183 S. 248 : Appeal – Commissioner (Appeals) – Denying liability to deduct tax – If
assessee had filed petition on or before date of hearing of Appeal, Appellate Authority
should not brush aside petition merely for reason that petition was not filed along
with appeal memo – If order of remittances for more than one financial year and
consolidated order is passed, then separate appeal shall be required to be filed for
each year. [S.195(2)]
If Assessee had filed petition on or before date of hearing of Appeal, Appellate Authority
should not brush aside petition merely for reason that petition was not filed along with
appeal memo.
The requirement of compliance of the condition of bearing of liability of TDS by
the payer is not required to be met for filing of appeal u/s. 248 with respect to the
remittances made prior to 01.06.2007.
If order of remittances for more than one financial year and consolidated order is
passed, then separate appeal shall be required to be filed for each year.
International Air Transport Association v. ADIT (2016) 140 DTR 225 / 179 TTJ 254 (Mum.)
(Trib.)
S. 249. Form of appeal and limitation.
2184 S. 249 : Appeal – Commissioner (Appeals) – Stay was not granted as the petitioner did
not come within the ambit of Instruction No. 1914. [S. 201, 220]
Dismissing the petition the Court held that petitioner did not come within the ambit of
Instruction No. 1914, it could not escape its liability to deposit entire tax liability before
admission of its appeal before CIT(A). (AY. 2011-12 to 2014-15)
Bank of Baroda v. ITO (2016) 288 CTR 478 / 73 taxmann.com 55 (Karn.)(HC)
2185 S. 249 : Appeal – Commissioner (Appeals) – Form of appeal and limitation –
condonation of delay of 175 days – delay was due to assessee waiting for outcome of
penalty proceedings – Delay can be condoned.
It has been held by the Appellate Tribunal that the matter of delay had to be considered
on human probabilities. The reason stated by the assessee was that he was waiting for
the outcome of the penalty proceedings. Whether a reasonable prudent person would
do so was to be considered, the inference of such delay had to be drawn on the basis
of circumstances available on record and conduct of the assessee. Considering the
surrounding circumstances and applying the test of human probabilities, the plea of the
assessee was genuine. (AY. 2010-11)
Ahmed Hussain (S. S. M.) v. ITO (2016) 48 ITR 417 (Chennai)(Trib.)
2186 S. 249 : Appeal – Commissioner (Appeals) – Form of appeal and limitation–Delay of
619 days in filing the appeal was condoned – Acceptance of explanation furnished
should be rule and refusal must be exception more so when no negligence or inaction
or want of bona fide could be imputed to defaulting party. [S. 246]
In appeal CIT(A) has condoned the delay of filing appeal of 619 days. Dismissing the
appeal of the revenue the Tribunal held that Apex Court in case of Ram Nath Sao v.
734
S. 250 Appeal – Commissioner (Appeals)
Gobardhan Sao reported (2002 (3) SCC 195 (Para 12), held that there could not be a
straightjacket formula for accepting or rejecting explanation furnished for delay caused in
taking steps. Courts should not proceed with tendency of finding fault with cause shown
and reject petition by slipshod order in over jubilation of disposal drive. Acceptance of
explanation furnished should be rule and refusal must be exception more so when no
negligence or inaction or want of bona fide could be imputed to defaulting party. While
considering matter, Courts should not lose sight of fact that by not taking steps within
time prescribed valuable right had accrued to other party which should not be lightly
defeated by condoning delay in a routine like manner. By taking a pedantic and hyper
technical view of matter, explanation furnished should not be rejected when stakes were
high and/or arguable points of facts and law were involved in case, causing enormous
loss and irreparable injury to party against whom lis terminates either by default or
inaction and defeating valuable right of such a party to have decision on merit. While
considering matter, Courts had to strike balance between resultant effect of order it was
going to pass upon parties either way. The CIT(A) after taking into consideration reasons
and circumstances causing delay had condoned delay. (AY. 2009-10)
Dy.DIT (IT) v. Bramhacorp Hotels & Resorts Ltd. (2015) 70 SOT 25 (Pune)(Trib.)
S. 250. Procedure in appeal.
S. 250 : Appeal – Commissioner (Appeals) – Cannot dismiss an appeal for non- 2187
prosecution and that he has to apply his minds to all the issue raised in the appeal.
[S. 246A, 251]
High Court held that from reading of sections 250 and 251, it was very clear that once
an appeal is preferred before the CIT(A), then in disposing off the appeal, he is obliged
to make such further inquiry that he thinks fit or direct the Assessing Officer to make
further inquiry and report the result of the same to him as found in section 250(4).
Further, section 250(6) obliges the CIT(A) to dispose of an appeal in writing after stating
the points for determination and then render a decision on each of the points which
arise for consideration with reasons in support. High Court also held that once an
assessee files an appeal u/s. 246A, it is not open to him as of right to withdraw or not
press the appeal rather the CIT(A) is obliged to dispose them on merits. Accordingly, it
was held that the CIT(A) cannot dismiss an appeal for non-prosecution and that he has
to apply his mind to all the issues which arise from the impugned order before him
whether or not the same had been raised by the appellant before him. (AY. 2006-07)
CIT v. Premkumar Arjundas Luthra (HUF) (2016) 240 Taxman 133 (Bom.)(HC)
S. 250 : Appeal – Commissioner (Appeals) – Recovery – Stay – Early hearing of appeal 2188
– Action of the assessee of filing writ petition to seek early hearing of appeal before
CIT(A), while simultaneously seeking adjournment before CIT(A) on frivolous grounds
is a “ delaying tactic” and an “abuse of the legal process”. Petition was dismissed and
the assessee was directed to pay the cost of ` 20,000. [S. 220(2), 220(6)]
Assessee has filed the petition against the stay of recovery. Assessee also moved petition
for an early hearing of appeal. The matter was fixed for hearing before the CIT(A) for
deciding the quantum appeal, however the assessee requested for adjournments, which
735
Appeal Commissioner (Appeals) S. 248
was granted. Before the Court it was argued that the stay may be granted. Dismissing
the petition the court held that action of the assessee of filing writ petition to seek
early hearing of appeal before CIT(A), while simultaneously seeking adjournment before
CIT(A) on frivolous grounds is a “delaying tactic” and an “abuse of the legal process”.
Petition was dismissed and the assessee was directed to pay the cost of ` 20,000.
Tulsidas Trading Pvt. Ltd. v. TRO (2016) 139 DTR 175 / 288 CTR 202 (Bom.)(HC)
2189 S. 250 : Appeal – Commissioner (Appeals) – Procedure – Additional evidences to be
admitted in case sufficient time was not given to the Assessee at the time of assessment
and the AO did not call for specific details.
The income of the assessee was assessed consequent to a search conducted in the
premises of Suresh Nanda group in Kolkata. Confirmation of parties was called upon
by the AO on 28-10-2009 and the first hearing was conducted on 17-11-2009. The last
hearing was on 11-12-2009 and the assessment order was passed on 29-12-2009, without
calling for any additional details. The assessee submitted confirmation of various parties
during the course of assessment. Pursuant to the AO’s order, the assessee filed additional
evidences which were accepted by the CIT(A). The Department filed an appeal and the
ITAT held that additional evidences warranted to be admitted by the CIT(A) since there
wasn’t sufficient time given to the assessee at the time of assessment. The AO did not
point out any deficiency in the documents submitted and the Assessee came to know
the mind of the AO regarding the non-satisfaction of evidences only upon receipt of the
order. (AY. 2007-08)
ACIT v. Vikrant Puri (2016) 47 ITR 708 (Delhi)(Trib.)
2190 S. 250 : Appeal – Commissioner (Appeals) – Procedure – Rule 46A of the Income Tax
Rules which regulates the admission of additional evidence by the CIT(A) cannot
override the principles of natural justice. [R.46A]
The assessee could collect various evidences only after passing of the assessment order.
According to the assessee, these additional evidences are vital documents which are
required to be considered in order to adjudicate the issue in a judicious manner. The
principle “Audi alteram partem”, i.e. no man should be condemned unheard is the basic
canon principles of natural justice and accordingly we find merit in the contentions of
the assessee that Rule 46A of the Income Tax Rules cannot over ride the principles of
natural justice. Hence we are of the view that the learned CIT(A) was not justified in
refusing to admit the various additional evidences furnished by the assessee. Since the
assessee was not given opportunity to contradict the findings given by the AO by not
admitting the additional evidences, we are of the view that the Ld. CIT(A) should re-
adjudicate all the issues afresh by admitting the additional evidences. (I.T.A. No.5138/
Mum/2015, dt. 06.04.2016)(AY. 2007-08)
Avan Gidwani v. ACIT (Mum.)(Trib.); www.itatonline.org
736
S. 251 Appeal – Commissioner (Appeals)
S. 251. Powers of the Commissioner (Appeals).
S. 251 : Appeal – Commissioner (Appeals) – Powers – Jurisdiction to go into issue and 2191
he could decide the status of assessee in appeal as appeal is continuation of original
proceedings. [S. 184]
Dismissing the petition the Court held that under section 251(1) of the Act, the
powers of the First Appellate Authority are coterminous with those of the Assessing
Officer and the appellate authority can do what the Assessing Officer ought to have
done and also direct him to do what he had failed to do. If the Assessing Officer had
erred in concluding the status of the assessee as a firm, it could not be said that the
Commissioner (Appeals) had no jurisdiction to go into the issue. The appeal was in
continuation of the original proceedings and unless fetters were placed upon the powers
of the Appellate Authority by express words, the appellate authority could exercise all
the powers of the original authority. The assessee was directed to extend its co-operation
to the authorities and not to protract the proceedings except for bona fide cause. (AY.
2012-13)
Megatrends Inc v. CIT (2016) 388 ITR 16 / 74 taxmann.com 197 / (2017) 149 DTR 113
(Mad.)(HC)
S. 251 : Appeal – Commissioner (Appeals) – Powers – Show-cause notice – AOP – 2192
Finding that firm cannot be partner in partnership contrary to law – Show-cause
notice liable to be set-aside. [S.4, 184, Constitution of India, Art. 226]
The assessee was assessed in the status of a partnership. The return of income
was processed and an order was passed. The assessee filed an appeal before the
Commissioner (Appeals) and during the pendency of the appeal, a show-cause notice
was issued by the Commissioner (Appeals) questioning the status of the assessee as a
partnership and calling upon the assessee to show-cause why its status should not be
changed to that of “association of persons”. The assessee challenged the notice in a writ
petition, which came to be dismissed directing the assessee to submit its explanation
and contest the show-cause notice on its merits rather than questioning it in a writ
proceeding. On appeal :
Held, allowing the appeal, that the Commissioner (Appeals) committed a fundamental
error in holding that only natural legal persons could be partners in a firm and this
led to the disallowance of an expenditure claimed towards remuneration and interest
paid to the partners. The finding that a firm could not be a partner in a partnership
was contrary to law. It was not necessary to go into the question of jurisdiction of the
Commissioner (Appeals) at this stage when the show-cause notice was wrong and liable
to be set aside. (AY. 2012-13)
Megatrends Inc. v. CIT (2016) 383 ITR 53 / 139 DTR 93 / 287 CTR 689 (Mad.)(HC)
Editorial : Decision of the single judge of the Madras High Court in Megatrends Inc. v. CIT
[2016] 382 ITR 13 / 238 Taxman 192 / 139 DTR 96 (Mad.) is set aside.
737
Appeal Commissioner (Appeals) S. 251
2193 S. 251 : Appeal – Commissioner (Appeals) – Powers – Power of enhancement – Show
cause notice issued intending to assess the assessee as AOP instead of Firm and for
disallowance of expenditure – Assessee filed a writ petition for quashing the notice –
Held, assessee can file explanation before the CIT(A) – writ not maintainable. [S. 4,
184]
The assessee was a partnership firm trading in stocks, shares, debentures,
manufacturing, buying, selling and transporting of various consumer and industrial
commodities. During the assessment proceedings, AO disallowed donations made u/s.
35(1)(ii)to the tune of ` 2,62,50,000/-. During the appellate proceedings, CIT(A) required
the assessee to show cause as to why the assessment of the assessee firm should not
be enhanced on two grounds viz., he required the assessee to show-cause as to why
the assessee should not be assessed as an AOP and not a firm by pointing out that a
partnership firm could not be a partner in a firm as indicated in the case of the assessee
and secondly he also called upon the assessee firm to show-cause as to why an amount
of ` 96,60,000/- may not be disallowed as expenditure. Against the said notice, the
assessee-firm filed a writ petition. High Court held that assessee can very well submit
their explanation and contest the same on merits before the CIT(A), and, therefore writ
was not maintainable. (AY. 2012-13)
Megatrends Inc. v. CIT (2016) 382 ITR 13 / 238 Taxman 192 / 139 DTR 96 / 287 CTR
689 (Mad.)(HC)
Editorial: Order of single judge was set aside in Megatrends Inc. v. CIT (2016) 383 ITR
53 / 139 DTR 93 (Mad.)(HC)
2194 S. 251 : Appeal – Commissioner (Appeals) – Powers – Power of enhancement. [S.
251(2)]
Assessment was completed by adding agricultural income. In appeal the CIT(A) further
directed AO to tax capital gains in respect of income earn by Assessee on sale of land
at Gurgaon. AO directed to compute commission earned by assessee in respect of both
sale as well as purchase of agricultural land carried out during year. The Tribunal held
that the CIT(A) acted beyond its power by directing AO to tax capital gains in respect
of sale of land at Gurgaon, though, there was no addition made by AO in assessment
order to that respect. Capital gain was independent and different source of income and
was not subject matter of appeal. In Shapoorji Pallonji Mistry v. CIT, Bombay High Court
had held that CIT(A) was not empowered to enhance income on an issue which was
not subject matter of assessment Delhi High Court in case of CIT v. Sardari Lal & Co.
held that CIT(A) could not touch upon an issue that did not arise from order of the
assessment and was outside the scope of the order of the assessment. The order of CIT
(A) does not sustain. Assessee appeal allowed accordingly. (AY. 2009-10)
Bikram Singh v. Dy. CIT (2016) 48 ITR 689 (Delhi)(Trib.)
2195 S. 251 : Appeal – Commissioner (Appeals) – Powers – Additional evidence – Admission
of additional evidence is to be allowed when evidence is relevant and goes to root of
matter. [S. 153A, R.46A]
Assessee availed unsecured loan from creditors, but failed to furnish any documents/
evidence to explain the source and the nature of the receipt in his income tax returns.
738
S. 251 Appeal – Commissioner (Appeals)
CIT(A) rejected application of assessee for admission of additional evidence under
Rule 46A as original return was filed in October, 2008, and return u/s. 153A was filed
in September, 2012, therefore, assessee had sufficient time to file the evidence before
AO. CIT(A) denied deletion of addition made by AO on account of agricultural income
as difference in such income between two returns were not reconciled through any
evidence on record. The ITAT held that evidence sought to be admitted being PAN
numbers and bank statements of creditors along with letters of creditors acknowledging
the loans were relevant and went to root of the matter, therefore, ought to have been
admitted as additional evidence. (AY. 2008-09)
Naresh Chauhan v. Dy.CIT (2016) 48 ITR 1 (Chd.)(Trib.)
S. 251 : Appeal – Commissioner (Appeals) – Powers – Interest on loan paid during the 2196
year can be claimed as an allowance before appellate authorities.
The assessee was a Government owned NBFC paid interest on bank loan. However,
deduction was not claimed in the return of income. A claim was made before the CIT(A)
which was rejected on the ground that no revised return was filed by the Assessee and
the claim was neither debited to P&L A/c nor was it allowed or disallowed u/s. 43B.
On appeal, the ITAT allowed the claim of the Assessee and held that irrespective of the
method of accounting and whether the amount was debited to P&L A/c or not, interest
and other expenses covered by s. 43B would be allowable only in the year of actual
payment and not in any other year. Further, the ITAT observed that a new claim can be
made before the appellate authorities and filing of revised return will not be necessary
to make a new claim. (AY. 2001-02, 2003-04 to 2008-09)
West Bengal Infrastructure Development Finance Corporation v. ACIT (2016) 45 ITR 285
(Kol.)(Trib.)
DCIT v. West Bengal Infrastructure Development Finance Corporation (2016) 45 ITR 285
(Kol.)(Trib.)
S. 251 : Appeal – Commissioner (Appeals) – Power to make enhancement and go 2197
beyond the subject matter of appeal.
CIT(A) has power of enhancement and can go beyond the subject matter of appeal. (AY.
2010-11)
Sundaram Medical Foundation v. Dy. CIT (E)-I (2016) 45 ITR 500 (Chennai)(Trib.)
S. 251 : Appeal – Commissioner (Appeals) – Additional evidence – Rule does not 2198
contemplate that the CIT(A) should call for objections before admitting the additional
evidence. [R. 46A]
It was held that Rule 46A does not contemplate a procedure whereby the CIT(A) should
first call for objections of AO regarding admissibility of the additional evidence and
again call for objections regarding the veracity and relevance of the additional evidence
once such evidence has been admitted. (AY. 2009-10)
ITO v. LGW Ltd. (2016) 130 DTR 201 (Kol.)(Trib.)
739
Appeal Commissioner (Appeals) S. 251
S. 253. Appeals to the Appellate Tribunal.
2199 S. 253 : Appellate Tribunal – Limitation – Filing of appeal before wrong forum on
Chartered Accountant’s advice does not justify three years delay – On facts the appeal
was dismissed.
Dismissing the appeal the Court held that ;Filing of appeal before wrong forum on
Chartered Accountant’s advice does not justify three years delay. On facts of the case
the delay was not condoned. (AY. 2006-07)
Inderchand D. Kochar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 / (2017) 145 DTR
223 / 291 CTR 572 (Mad.)(HC)
Ramesh Kumar Kochar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 (Mad.)(HC)
Sarala Kanwar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 (Mad.)(HC)
Suresh Kumar Kochar v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 (Mad.)(HC)
Anita Kochar (Smt.) v. ACIT (2016) 388 ITR 500 / 73 taxmann.com 96 (Mad.)(HC)
2200 S. 253 : Appellate Tribunal – Cross objection is not prescribed against appeal filed
under section 263 of the Act – Hence cross objection is not maintainable. [S. 253(4),
264]
The High Court has held that cross objections under section 253(4) can be filed only
in an appeal against order of the Deputy Commissioner–Appeals, the Commissioner of
Appeals, the Assessing Officer preferring an appeal in pursuance of the directions of
the Dispute Resolution Panel. In the instant case, the revenue has filed cross objections
under section 253(4) in an appeal preferred by the Assessee against the order of the
revisional authority exercising the powers under section 263. It was held that no such
cross objections are maintainable in terms of section 253(4) of Act and the High Court
dismissed the Revenue’s appeal. (AY. 2007-08)
CIT v. New Mangalore Port Trust (2016) 382 ITR 434 / 238 Taxman 397 / 283 CTR 342
(Karn.)(HC)
2201 S. 253 : Appellate Tribunal – Appeal filed by the assessee firm signed by manager –
Tribunal dismissed the appeal on preliminary issue of competence of manager to sign
appeal memos – Held, manager has no authority to file appeal – Held, Department
had also incorrectly accepted the return signed by the manager – Held, mistake was
rectified by filing fresh Form 36, matter remanded to be decided on merits. [R. 45 , 47]
Tribunal dismissed the appeal filed by the assessee firm on the technical ground that
the appeal memorandum had been signed by the manager of the firm and not by the
managing director or any of the partners. Assessee filed petition for restoration of the
appeal but same was also dismissed. Assessee went to the High Court. Department
argued that even at the time of filing of the appeal, the Tribunal had issued a defect
memo and that a query was also raised by the Tribunal, however, assessee emphasised
that manager is the competent person to sign the appeal memos. High Court held that
admittedly, manager was not the correct person to sign the appeal memo. High Court
also held that initial mistake is only on the part of the revenue, in accepting the return
of income filed by the manager, who is allegedly incompetent and, therefore, it would
have led the assessee to form an impression that when he is competent to file the return
740
S. 251 Appeal – Commissioner (Appeals)
of income, he would also be competent to sign the memo of appeal. Further, since the
assessee had filed revised Form 36, therefore the matter was set aside to the Tribunal to
decide on merits. (AY. 2003-04)
Singara Nilgiri Plantation Co. v. Dy. CIT (2016) 238 Taxman 613 / 138 DTR 139 (Mad.)
(HC)
S. 253 : Appellate Tribunal – Inordinate delay of 8 years in filing the appeal by 2202
department – No reasonable cause shown for not filing the appeal in time – Delay
not condonable.
Where there is nothing on record to show or even indicate that a decision was taken
by the Revenue to file the appeal but it was due to some other factors that the appeal
was not filed in time, there is no occasion to even examine reasonableness of the cause
of delay of almost eight years in filing of appeal and therefore, the said delay cannot
be condoned. Possibility of damage to the Revenue’s cause in other assessment years
cannot be reason enough to condone the delay.
ACIT v. YKK India (P) Ltd. (2016) 139 DTR 353 (Delhi)(Trib.)
S. 253 : Appellate Tribunal–Cross objections – Commissioner (Appeals) not 2203
adjudicating grounds relating to validity of reassessment proceedings for failure to
furnish reasons and merits of additions involved – Cross Objections cannot be filed
on such a ground – Assessee can appeal before Tribunal. [S. 143(2), 254(1)]
The Commissioner (Appeals) had quashed the reassessment proceedings on the
ground that the Assessing Officer had not issued notice under section 143(2). He
had not adjudicated the grounds relating to validity of the reassessment proceedings
for non-furnishing of reasons and other grounds on merits of the additions involved.
The Department filed appeal before Tribunal and the assessee filed cross-objections.
The Tribunal held that if the assessee was aggrieved by non-adjudication per se, the
assessee could come before the Tribunal only by way of an appeal and not by way of
cross objections. The Legislature has chosen to use the expression “against such order
or any part thereof” in section 253(4), which means that cross objections can be filed
with reference to the same ground of appeal which is adversely decided against the
assessee in appeal. If, there has been no adjudication on any of the grounds of appeal
raised before the Commissioner (Appeals), the cross objections cannot be filed on such
a ground though raised but not decided specifically. (AY. 2009-10)
DCIT v. Indo American Hybrid Seeds India P. Ltd. (2016) 52 ITR 201 (Bang.)(Trib.)
S. 253 : Appellate Tribunal – Delay of 338 days was not condoned as the explanation 2204
was vague.
In an affidavit, as a reason, the assessee attributed delay to an agricultural activity and
study of child. Tribunal held that the assessee’s explanation was vague, and thus, delay
could not be condoned. (AY. 2007-08, 2008-09)
J.N. Chandrashekar v. ITO (2016) 160 ITD 653 (Bang.)(Trib.)
741
Appeal Commissioner (Appeals) S. 251
2205 S. 253 : Appellate Tribunal – Order of Chief CIT rejecting application for exemption
was held to be appealable before Tribunal. [S. 10(23)(c)(vi)]
The CIT rejected application on ground that it was empowered to collect funds and
accept funds and it could manage other institutions as well.
Before the ITAT the revenue raised a preliminary objection that appeal filed by assessee
against the order passed by Chief Commissioner was not maintainable. ITAT held that S.
253 provides a right to the assessee to file appeal before the Tribunal against the orders
mentioned therein. (AY. 2013-14)
Dharmaj Kelvani Mandal v. CCIT (2016) 161 ITD 841 (Ahd)(Trib.)
2206 S. 253 : Appeal Tribunal – No need to file separate appeals. [S. 201(1), 201(1A)]
Tribunal held that there is no need to file separate appeals in respect of defaults under
section 201(1) & 201(1A) as there is no provision in the Act mandating the filing of
separate appeals either before CIT(A) or the Tribunal against the order covering defaults
under sub-section (1) or sub-section (1A) of section 201. (AY. 2006-07, 2007-08)
C. J. International Hotels Ltd. v. Addl. CIT (2016) 158 ITD 287 / 177 TTJ 447 / 137 DTR
289 (Delhi)(Trib.)
2207 S. 253 : Appellate Tribunal – In case of order passed by DRP, right to file an appeal
by department does not extend to a point decided either way by Assessing Officer/TPO
himself, which remains intact even after direction given by DRP. [S.144C]
Tribunal held that after the insertion/amendment by the Finance Act, 2012 of/to sub-
sections (2A) and (4) of section 253, the Department has acquired a right to file appeal
or cross-objection against the assessment order passed in pursuance of the direction
of the DRP to the extent it is aggrieved against such direction. It has no right to file
appeal or cross objection against the voluntary decision of the AO/TPO which was not
subject matter of any adverse direction by the DRP. It can be clarified here that what
has been prohibited against such an adverse position is the appellate recourse and not
other remedies, if any, available as per law de hors the appellate option. In so far as
the adverse direction given by the DRP is concerned, the Assessing Officer has now
got a right to assail its correctness before the Tribunal. Adverting to the facts of the
instant case, though the revenue had a right to file appeal or cross-objection against
the direction of the DRP in accepting the cash system of accounting followed by the
assessee, but it chose not to do so. Thus the doors of this route are foreclosed. (AY.
2011-12)
SIS Live v. ACIT (2016) 175 TTJ 643 / 131 DTR 221 (Delhi)(Trib.)
2208 S. 253 : Appellate Tribunal – Order passed by Commissioner (Appeals) on application
seeking stay of demand is not a final order and, thus, such an order is not appealable
before Tribunal [S.10(20), 250]
The assessee filed its return claiming income as exempt by virtue of it being a local
authority u/s. 10(20). The AO rejected the assessee’s claim and raised certain amount
of tax. Against said order, the assessee filed appeal before the CIT(A). During pendency
of appeal, assessee filed an application for stay of demand, CIT(A) rejected assessee’s
application.
742
S. 251 Appeal – Commissioner (Appeals)
In view of difference of opinion between the Members of the Tribunal on question
as to whether order passed dismissing assessee’s application for stay of demand was
an appealable order or not, matter was referred to the Third Member. S.250 provides
for procedure in appeal which envisages that the order of the CIT(A) disposing of the
appeal shall be in writing and shall state the point for determination, the decision
thereon and the reasons for the decision. But at the time of disposal of stay application,
neither the appeal of assessee was considered by the CIT(A) nor disposed of as
envisaged in the relevant provisions of law. It was only the first appellate authority
having passed the order, on the stay application moved by the assessee, against which
assessee has preferred appeals. It is not in dispute that powers to grant ancillary and
incidental relief is there but there should be appeal. ITAT held that order passed by
CIT(A) on application seeking stay of demand is not a final order and, thus, such an
order is not appealable before Tribunal. (AY. 2001-02, 2002-03, 2003-04 & 2006-07)
Rajya Krishi Utpadan Mandi Parishad v. ITO (2015) 153 ITD 101 / (2016) 158 ITD 71(TM)
(Luck)(Trib.)
S. 253 : Appellate Tribunal – Cross objection – Revenue appeal was dismissed because 2209
of low tax effect – Cross-objection cannot be dismissed in limine. [S 268A, ITAT R.
22, 27]
Tribunal held that where against order of Commissioner (Appeals), revenue filed appeal
before Tribunal and assessee also filed cross-objection and Tribunal dismissed appeal of
revenue because of low tax effect, cross-objection could not be dismissed in limine for
reason of dismissal of revenue’s appeal. (AY. 2010-11)
ACIT v. Ajay Kalia (2016) 157 ITD 187 / 135 DTR 147 / 178 TTJ 507 (Delhi )(Trib.)
S. 253 : Appellate Tribunal – Fee provided under section 253(6) was not paid by 2210
revenue hence the appeal of revenue was dismissed.[S. 144C, 253(6), 253(2A)]
Revenue has preferred appeals to the Tribunal against the order passed under section
253(2A) without payment of institution feany step to pay the fee. It was pointed out
at the time of filing of appeals but the revenue had not taken any step to pay the fee.
Therefore the appeal was posted for dismissal and the Commissioner posted for Tribunal
told that since the memorandum of appeal is not accompanied by the fee as prescribed,
there is no discretion to the Tribunal to accept memorandum of appeal filed, in violation
of the statutory provisions. Memorandum of appeals filed by the Revenue are hereby
rejected as not maintainable. (AY. 2010-11)
ACIT v. D. E. Shaw India Software (P) Ltd. (2016) 156 ITD 594 / 175 TTJ 492 / 129 DTR
199 (Hyd.)(Trib.)
ACIT v. Deloitte Consulting India (P) Ltd. (2016) 175 TTJ 492 / 129 DTR 199 (Hyd.)(Trib.)
ACIT v. Deloitte Support Services India (P) Ltd. (2016) 175 TTJ 492 / 129 DTR 199 (Hyd.)
(Trib.)
ACIT v. Deloitte Tax Services India (P) Ltd. (2016) 175 TTJ 492 / 129 DTR 199 (Hyd.)(Trib.)
Editorial : Law is amnded by the Finance Act, 2016, w.e.f 1-07-2012 retrospectively.
743
Appellate Tribunal S. 254(1)
S. 254. Orders of Appellate Tribunal
2211 S. 254(1) : Appellate Tribunal – Delay – Limitation – Order passed without considering
application and without condoning delay – Order without jurisdiction – Tribunal has
no jurisdiction to entertain appeal unless delay is condoned. [S. 253]
Allowing the petition the Court held that unless the delay in filing the appeal of the
Revenue had been condoned, the Tribunal had no jurisdiction, power or authority to
entertain the appeal and pass any effective order on it as no appeal could be deemed
to be pending before the Tribunal until the delay in filing it had been condoned. The
fact that the matter was within the knowledge of the assessee had no relevance. The
Tribunal was not correct in entertaining the appeal without considering the issue of
limitation and without condoning the alleged delay. That being the position since there
was an application for condonation of delay, which had not been considered by the
Tribunal and the final order had been passed allowing the appeal of the Revenue and
the order of the Tribunal being couched in a matter that the appeal of the assessee could
not be separated from the appeal of the Revenue, the order of the Tribunal was liable
to be quashed. Referred Noharlal Verma v. District Co-operative Central Bank Ltd. (2008)
14 SCC 445 (AY. 1995-96)
Md. Sayeed v. Dy. CIT (2016) 389 ITR 351 (Patna)(HC)
2212 S. 254(1) : Appellate Tribunal – Additional grounds – Assessee not pressing issue
before Commissioner (Appeals) – Appellate Tribunal allowing additional ground as
being question of law – No substantial question of law arose. [S. 260A]
Dismissing the appeal of revenue, the Court held that no error had been pointed out by
the Department in the Appellate Tribunal's order in allowing the additional ground of
appeal with regard to prepayment of deferred sales tax liability taken by the assessee
as purely a legal issue, though the assessee had not pressed the issue before the
Commissioner (Appeals). No substantial question of law arose for consideration.
CIT v. BEHR India Ltd. (No. 1) 389 ITR 419 (Bom.)(HC)
2213 S. 254(1) : Appellate Tribunal – Additional grounds – Question arising from facts
already on record of assessment proceedings – Tribunal can adjudicate – Matter
remanded. [R. 11, 29]
The usage of the words "pass such orders thereon as it thinks fit" in section 254(1) gives
wide powers to the Tribunal and such powers are not limited to adjudicating issues
arising from the order appealed from alone. Any interpretation to the contrary would
go against the basic purpose for which the appellate powers are given to the Tribunal
under section 254 which is to determine the correct tax liability of the assessee.
A harmonious reading of section 254(1) and Rules 11 and 29 of the Income-tax
(Appellate Tribunal) Rules, 1963, coupled with the basic purpose underlying the
appellate powers of the Tribunal leaves no manner of doubt that the Tribunal while
exercising its appellate jurisdiction would have the discretion to allow new grounds
to be raised before it or additional questions of law arising out of the record before
it. What cannot be done is examination of new sources of income for which separate
remedies are provided to the Revenue under the Act. (AY. 2007-08)
VMT Spinning Co. Ltd. v. CIT (2016) 389 ITR 326 / 74 taxmann.com 33 (P&H)(HC)
744
S. 254(1) Appellate Tribunal
S. 254(1) : Appellate Tribunal – Discretionary power to consider issue raised for first 2214
time before it – Tribunal need not remand the matter to Assessing Officer.
Dismissing the appeal of assessee the Court held that the assessee did not raise the
claim with respect to the interest and salary paid to the partners either before the
Assessing Officer or before the Commissioner (Appeals). The claim was raised only
when the matter was argued. This claim could not have been considered by the Tribunal
in the absence of supporting documents, including the partnership deed. The fact
that issues relating to sale of branded items and bulk sales were remanded for fresh
adjudication to the Assessing Officer would not mean that the Tribunal should have
remitted this claim of the assessee also to the Assessing Officer. Thus the Tribunal had
not committed any illegality. (AY. 2007-08, 2008-09)
Classy The Antique Defend Furniture v. Dy. CIT (2016) 387 ITR 212 / 242 Taxman 469
(Ker.)(HC)
S. 254(1) : Appellate Tribunal – Additional evidence – Deduction at source – Refusal of 2215
Tribunal to admit additional evidence was held to be not justified – Assessing Officer
directed to examine relevant challan and determine amount of deduction at source.
[S. 40(a)(ia), 192, ITATR. 1963, R. 29]
Allowing the appeal the Court held that it was a fit case for the Appellate Tribunal
to have exercised its powers under Rule 29 of the Appellate Tribunal Rules, 1963
requiring the production of the challan evidencing the payment of the tax deducted at
source in the Government treasury and to have directed the authorities to examine the
genuineness of the challan. The order of the Appellate Tribunal refusing to allow the
assessee to adduce additional evidence was to be quashed and the Assessing Officer
was to examine the challan and accordingly determine the amount of deduction for tax
payable. (AY. 2010-11)
Haryana State Road and Bridges Development Corporation Ltd. v. CIT (2016) 388 ITR
253/ 243 Taxman 187 (P&H)(HC)
S. 254(1) : Appellate Tribunal – Best judgment assessment – Concurrent finding of 2216
authorities not based upon evidence – Order of Appellate Tribunal perverse – Order
was set aside to. [S. 144]
Allowing the appeal of assessee the Court held that although there had been a
concurrent finding by the authorities, the finding was not based upon any evidence
and was without taking into account relevant materials. It was not necessary for the
Assessing Officer to produce materials to show the basis on which he had estimated,
but he must be rational and reasonable while assessing the assessee to the best of his
judgment and there was an element of guess-work in a best judgment assessment.
Making a best judgment assessment could not be a ground for fixing any unjustifiable
sum of income or profit without reference to it in the preceding assessment years. In
the immediately preceding assessment year the assessee's final net profit rate after
deduction of partners' salaries, interest and depreciation had come to 4.46 per cent.
when the assessment was made under section 143(3) of the Income-tax Act, 1961 which
rate was definitely a relevant material and should have been taken into consideration
by the Assessing Officer and the appellate authorities while considering the rate of
745
Appellate Tribunal S. 254(1)
10 per cent introduced by the Assessing Officer. The Appellate Tribunal had given a
complete go-by to its several decisions fixing the final net profit rate of 6 per cent in the
case of other similarly situated assessees who were also in civil contract works of the
Government and no reasonable man could have estimated the net profit at more than
8 per cent. In the case of the assessee, even after the deduction on account of partners'
salaries, interest and depreciation, it still had led to a net profit rate of approximately
7.9 per cent which was much above the net profit rate as it had been found after regular
assessment was made of the same assessee. The said rate was also not in accordance
with the other decision of the Appellate Tribunal in the case of similarly situated
contractor. The order of the Appellate Tribunal was perverse. Matter remanded. (AY.
2004-05)
Prasad Construction and Co. v. CIT (2016) 388 ITR 579 / (2017) 152 DTR 72 (Patna)(HC)
2217 S. 254(1) : Appellate Tribunal – Reassessment – Order being perverse the order of
Tribunal was set aside. [S. 147, 148]
Allowing the appeal of revenue, the Court held that Tribunal, which was the final
fact finding authority, failed to properly analyse the evidence on record and without
appropriate reasons confirmed the order of the Commissioner (Appeals) with regard
to the deletion of additions made by the Assessing Officer. That in the order of the
Commissioner (Appeals), the statements of the persons who were said to have loaned
money to the assessee through its finance division were not analysed properly or
considered the way they deserved to be. The holding of the Commissioner (Appeals)
that the transactions had "more or less been unequivocally confirmed" was not only
self-contradictory, but also against the record. The order of the Appellate Tribunal
did not clarify the matter either and no discussion was found therein with regard to
the statements of the alleged creditors of the assessee-firm. Reliance was placed on
the statement of one S, a partner of the assessee-firm without comparing it with the
statements of the alleged creditors. The Appellate Tribunal failed to find out about
the finality of the proceedings before the civil court and confirmed the order of the
Commissioner (Appeals). The order of the Appellate Tribunal was perverse. Matter
remanded. (AY. 2003-04)
CIT v. Ajay Electronic (2016) 388 ITR 272 (P&H)(HC)
2218 S. 254(1) : Appellate Tribunal – Duty to pass reasoned order – Failure to pass reasoned
order – Matter remanded.
Allowing the appeal of revenue, the Court held that the Supreme Court in Kranti
Associates P. Ltd. v. Masood Ahmed Khan (2010) 9 SCC 496 statutorily requires recording
of reasons and requirement of passing a reasoned order by an authority whether
administrative, quasi-judicial or judicial. The Income-tax Appellate Tribunal being the
final fact finding authority should pass a well reasoned order after examining the entire
evidence on record. Held, that a perusal of the order passed by the Tribunal showed
that findings had not been recorded after giving detailed reasons and considering the
overall material and evidence an record. The order of the Tribunal was to be set aside.
Matter remanded to Tribunal. (AY. 2007-08)
CIT v. Banarsi Sweets P. Ltd. (2016) 387 ITR 172 (P&H)(HC)
746
S. 254(1) Appellate Tribunal
S. 254(1) : Appellate Tribunal – Tribunal has the power to consider issue not raised 2219
before Commissioner (Appeals) but raised before it first time.
Dismissing the appeal of revenue the Court held that the powers of the Tribunal
are wide enough to consider a point which may not have been urged before the
Commissioner (Appeals) as long as the question requires to be examined in the interest
of justice. Held accordingly, that the Tribunal had not exceeded its jurisdiction in
examining the question whether the Assessing Officer was justified in extending the
time for the auditor nominated under section 142(2C) of the Income-tax Act, 1961, to
submit the audit report.
PCIT v. Nilkanth Concast P. Ltd. (2016) 387 ITR 568 / 241 Taxman 194 (Delhi)(HC)
Editorial : Order in Nilkanth Concast P. Ltd. v. Deputy CIT (2016) 48 ITR (Trib.) 264
(Delhi) is affirmed. SLP is granted to the revenue , PCIT v.Nilkanth Concast ( P) Ltd v.
Ltd ( 2017) 246 Taxman 371 ( SC)
S. 254(1) : Appellate Tribunal – Tribunal passing two conflicting orders for same year 2220
on different dates – Circumstances in which such orders came to be passed unclear –
Matter remanded to Tribunal to be decided afresh. [S. 11, 12, 12A]
The Appellate Tribunal allowed the appeal of the Revenue on January 23, 2014 holding the
activities of the trust were not charitable and upheld the assessment order. Another order
came to be passed by the Tribunal on October 9, 2012 in the assessee's favour for the same
year. On appeals both by the Department and the assessee: Held, that it was not clear how
the second order was passed without recalling the earlier order. At first the matter was
decided in favour of the assessee and later the converse view was taken. The matter was to
be remanded to the Tribunal to decide afresh after hearing both the parties. (AY. 2006-07)
Gurudaspur Improvement Trust v. CIT (2016) 387 ITR 741 (P&H)(HC)
S. 254(1) : Appellate Tribunal – Additional ground – Second round of appeal – No 2221
estoppel against the law – Pure question of law can be raised in second round of
appeal. [S. 158BC]
Question of law raised in HC was by revenue was the admissibility of additional
ground raised by assessee before Tribunal in second round of appeal challenging the
very jurisdiction of AO to make block assessment u/s. 158BC was rightly entertained by
Tribunal. The Hon’ble Court dismissed the appeal and held that there were no estoppels
against law. Fact that assessee took part in the first round of litigation without raising
said ground cannot stop the assessee from raising the pure question of law in the second
round of appeal. Further the order of Tribunal allowing additional ground was never
challenged by the Revenue.
CIT v. Jolly Fantasy World Ltd. (2015) 373 ITR 530 / 231 Taxman 668 / (2016) 139 DTR
163 (Guj.)(HC)
Editorial : SLP was dismissed (2016) 73 taxmann.com 159 / 242 Taxman 113 (SC)
S. 254(1) : Appellate Tribunal – Business expenditure – Tribunal holding liability not 2222
accrued in year in question deciding on basis of order for preceding year was held to
be not proper – Matter remanded. [S. 37(1), 145]
Allowing the appeal of revenue the Court held that if there was a difference in the
clauses of the agreements for the two years and the dispute between the seller and the
747
Appellate Tribunal S. 254(1)
assessee which had not existed during the earlier AY, the Tribunal had not considered
the different fact-situation in the AY 1986-87 from that existing in 1985-86. The matter
was restored to the Tribunal for final disposal in the context of the fact situation as
existing for the AY in question. The order of the Tribunal was quashed and set-aside.
Matter remanded. (AY. 1986-87)
CIT v. Monika India (No.2) (2016) 386 ITR 617 / 286 CTR 435 / 135 DTR 290 (Bom.)(HC)
2223 S. 254(1) : Appellate Tribunal – Powers – Delay of 997 days in filing application could
not be condoned. [S. 11, 12A]
The assessee had filed an application u/s. 12A of the Act for registration of trust which
was rejected by the Commissioner of Income-tax. Against the said order, the assessee
filed an appeal before the Tribunal belated by 997 days. The Tribunal did not condone
the delay and rejected the appeal. Dismissing the appeal Court held that the assessee
could not provide the details of counsel who advised them that registration u/s. 12A is
not a condition precedent for seeking relief u/s. 11. In absence of the same, delay of 997
days in the filing of appeal could not condoned.
Spporthi Sadan Convent v. CIT (2016) 239 Taxman 68 (Karn.)(HC)
2224 S. 254(1) : Appellate Tribunal – Duty – Deduction at source – Conflicting opinions
expressed by Tribunal in same judgment – Non application of mind – Matter remanded
for rehearing. [S. 40(a)(ia), 194C]
Allowing the appeal of revenue the Court held that the tribunal had expressed
conflicting opinions in the same judgment and that the deletion of addition of a sum of
more than ` 3 crores was made in a slipshod manner by the Tribunal without applying
its mind. Matter remanded. (AY. 2006-07)
CIT v. Vikas Coal Co. (2016) 385 ITR 536 (Cal) (HC)
2225 S. 254(1) : Appellate Tribunal – Precedent – Tribunal in refusing to follow judgment of
the co-ordinate Bench in the assessee’s own case (holding that transfer fees and TDR
premium received by a co-operative society is not taxable on principles of mutuality)
without giving reasons is not justified and is breach of principles of judicial discipline
– Order of Tribunal was set aside. [S. 4]
Allowing the appeal of assessee the Court held that Tribunal in refusing to follow
judgement of the co-ordinate bench in the assessee’s own case (holding that transfer
fees and TDR premium received by a co-operative society is not taxable on principles of
mutuality) without giving reasons is not justified and is breach of principles of judicial
discipline. Order of Tribunal was set aside. (AY. 1996-97, 2000-01, 2001-02, 2002-03,
2006-07, 2007-08)
Hatkesh Co-op. Housing Society Ltd. v. ACIT (2016) 234 Taxman 213 (Bom.)(HC)
Editorial : Order of Tribunal in Hatkesh Co-op Housing Society Ltd. v. ACIT (2013) 27 ITR
494 (Mum.)(Trib.) is set aside.
748
S. 254(1) Appellate Tribunal
S. 254(1) : Appellate Tribunal – Duti – Condonation of delay of 843 days – An appeal 2226
was wrongly filed before the AO and not CIT(A) as an unintentional on part lapse of
the assessee. The AO ought to have returned the appeal to enable the assessee to take
corrective steps. The likelihood of error is inherent in human nature. The power of
condonation is in view of human fallibility and must be exercised in cases of bona
fide lapses – Awarded cost of ` 10000, to the assessee.
Assessing Officer passed the order on 31-12-2007, the appeal was filed before the
Assessing Officer instead of CIT(A) on 8th February 2008 (within the period of
limitation). After realizing the mistake correct appeal was filed along with condonation
of delay on 12th May 2011. CIT(A) by his order dated 4th August, 2011 rejected the
application for condonation of delay and dismissed the appeal. In appeal Tribunal also
affirmed the order of CIT(A). On further appeal to High Court allowing the appeal the
Court held that it is very clear that the appellant as well as the department bona fide
proceeded on the basis that its appeal before the CIT(A) is pending. The lapse on the
part of the assessee was unintentional. Further, the analogy made in the impugned
order with nature is inappropriate. Human interaction is influenced by human nature.
Inherent in human nature is the likelihood of error. Therefore, the adage “to err is
human”. Thus, the power to condone delay while applying the law of limitation. This
power of condonation is only in view of human fallibility. The laws of nature are not
subject to human error, thus beyond human correction. In fact, the Apex Court in State
of Madhya Pradesh v. Pradip Kumar (2000) 7 SCC 372 has observed to the effect that
although the law assists the vigilant, an unintentional lapse on the part of the litigant
would not normally close the doors of adjudication so as to be permanently closed,
as it is human to err. In this case, we have found that it is an unintentional lapse on
the part of the appellant. We are, therefore, of the view that the impugned order is not
sustainable and the question as framed is answered in favour of the appellant assessee.
Court also directed the assessee for payment of costs of ` 10,000/- by a pay order drawn
in the name of “The Principal Commissioner of Income Tax-15, Mumbai” within a
period of four weeks from today. (ITA No. 192 of 2014, dt. 19.07.2016) (AY. 2005-06)
Prashnath Project Ltd. v. DCIT (Bom.)(HC); www.itatonline.org
S. 254(1) : Appellate Tribunal – Duty – Cross – Objection – Tribunal is duty bound to 2227
consider submissions in regard to cross-objection. [S. 153A, R. 27]
The Commissioner (Appeals) deleted the addition. In the Department's appeal before the
Tribunal, the assessee filed a cross-objection contending that no material was found in
support of addition. The Tribunal refused to entertain the cross-objection application
under Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, stating that the
contention had not been taken in the first instance before the Commissioner (Appeals).
On appeal:
Held, that the Tribunal was duty bound to consider the assessee's contention, rather
than brushing aside the cross-objections. The order of the Tribunal to the extent that it
denied the right of the assessee to urge cross-objections was to be set aside. The right
of the parties to urge contentions in support of their submissions on the merits was to
be reserved. (AY. 2000-01)
Brijwasi Impex P. Ltd. v. CIT (2016) 384 ITR 320 (Delhi)(HC)
749
Appellate Tribunal S. 254(1)
2228 S. 254(1) : Appellate Tribunal – Duty – Assessment of third person – Failure by
Appellate Tribunal to record finding regarding satisfaction and consider whether
satisfaction note was antedated – Matter remanded. [S. 158BC, 158BD]
Allowing the appeal of the revenue the Court held that the Appellate Tribunal being the
final fact finding authority had not recorded any finding with regard to the recording
of the satisfaction note dated May 31, 2005. Further nothing was observed whether the
satisfaction note, if any, produced by the Department was ante-dated or not. Under such
circumstances, the matter was to be remanded to the Appellate Tribunal to examine the
matter afresh and record a reason based finding. (BP. 1-4-1997 to 8-5-2003)
CIT v. Anupam Nagalia (2016) 384 ITR 442 (P&H)(HC)
2229 S. 254(1) : Appellate Tribunal – New ground – Issue purely one of law – Tribunal can
permit issue to be raised for first time before it. [S. 143(2), 147, 148, 292BB]
Where no evidence or disputed facts are sought to be brought on record, and the issue
being purely one of law, the Appellate Tribunal can permit the assessee to raise such a
point before it. (AY. 2005-06 to 2008-09)
PCIT v. Silver Line (2016) 383 ITR 455 / 283 CTR 148 / 65 taxmann.com 137 / 129 DTR
191 (Delhi)(HC)
2230 S. 254(1) : Appellate Tribunal – Duty – Pass a reasoned order in view of binding
precedent of Apex Court in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan [2010]
9 SCC 496 – Order of Tribunal was set aside.
Court held that, the Supreme Court in Kranti Associates Pvt. Ltd. v. Masood Ahmed Khan
(2010) 9 SCC 496 has dealt with the requirement of passing a reasoned order by an
authority whether administrative, quasi-judicial or judicial.
The source of credit entries in the bank account was not explained by the assessee and
no enquiry whatsoever was made by the Assessing Officer to find out the genuineness of
the deposits. The Commissioner held the assessment proceedings to be prejudicial and
erroneous to the interests of the Revenue and cancelled them directing the Assessing
Officer to complete the assessment de novo after affording fresh opportunity to the
assessee. The Tribunal set aside the order of the Commissioner. On appeal to the High
Court. Held, that the Tribunal being the final fact finding authority was required to deal
with all aspects of the factual matrix and then record its conclusions based thereon. It
had failed to do so. Hence its order was not valid. Matter remanded to the Tribunal to
pass a reasoned order. (AY. 2007-08)
CIT v. Indra Sen Aggarwal (2016) 383 ITR 592 / 138 DTR 76 (P&H)(HC)
2231 S. 254(1) : Appellate Tribunal – Duty – Business expenditure – Non-consideration of
material placed on record would itself lead to perversity in findings of facts arrived
by Tribunal which would call for interference of the High Court. [S. 37(1), 260A]
The assessee paid commission (a) to taxi drivers, travel agents etc. to procure more
business for Assessee and (b) to its staff for sale of tickets. The AO disallowed the
said commission. The CIT(A) examined material and other evidence on record and
allowed deduction to the extent amounts were verified and disallowed deduction for
amounts which could not be verified. On department’s appeal the Tribunal reversed
750
S. 254(1) Appellate Tribunal
findings of the CIT(A) without considering the details filed before the lower authorities.
On assessee’s appeal the High Court held that the CIT(A) whilst coming to the
conclusion that the assessee was entitled for deduction in respect of commission paid
to taxi drivers, travel agents etc., had minutely scrutinized the material on record, but,
however, on perusal of the impugned order, it appeared that the Tribunal had not at
all scrutinized the material whilst reversing the findings of the Commissioner. In fact,
there were no reasons recorded in the impugned order of the Tribunal to hold that the
findings of the CIT(A) cannot be sustained. Non-consideration of such material would
itself lead to perversity in the findings of fact, arrived at by the Tribunal which would
call for interference of Court in the present appeal. As far as claim of the Assessee
towards deduction on account of commission paid to the staff was concerned, the
Tribunal can re-examine the matter on its own merits in the light of the judgment of
the Supreme Court in the case of Shahzada Nand & Sons v. CIT (AIR 1977 SC 1182)
wherein Supreme Court accepted that there can be cases where commission could be
paid also to the staff for carrying out extra services. Accordingly, matter was restored to
Tribunal to adjudicate the issue as per directions. (AY. 2009-10)
Emerald Cruises v. ITAT (2016) 238 Taxman 143 (Bom.)(HC)
S. 254(1) : Appellate Tribunal – Power – It is the inherent power of the Tribunal to 2232
consolidate the appeals if the issues are similar and the reasons for consolidating the
same is to be recorded in writing.
The High Court has held that it is the inherent power of the Tribunal to consolidate the
appeals if the issues involved in the appeal are similar and identical to avoid conflicting
directions and orders and the same have to be recorded in writing. If they involve
common questions, common arguments, they can be conveniently disposed of by a
common order. However, it was held that there was no justification for consolidating
matters and by keeping the earlier case pending till further appeals accumulated for
subsequent years raising the same issues and questions. In that event, it would be
wiser to decide the earliest case and if the same applies on facts and there is nothing
different or distinguishing factor brought on record in successive assessment years, then
the earlier decision can be applied and followed. (AY. 2001-02)
DIT v. Societe Generale (2016) 237 Taxman 182 (Bom.)(HC)
S. 254(1) : Appellate Tribunal – Power – Remand was not a power to be exercised in 2233
a routine manner and should be used sparingly as an exception only when the facts
warranted such course of action.
Allowing the appeal of the assessee the Court held that the jurisdiction of the Tribunal
being that of the last fact finding authority, it was empowered to examine the documents
placed by the assessee in support of its claim. It was a settled law that remand was
not a power to be exercised in a routine manner and should be used sparingly as an
exception only when the facts warranted such course of action. When the materials
were available on record, the Tribunal ought to have arrived at a conclusion rather than
further remanding the matter to the Assessing Officer that too, after giving a positive
finding that the methodology adopted by the assessee was on a scientific and reasonable
basis. No proper reasoning was given by the Tribunal for exercising the power of
751
Appellate Tribunal S. 254(1)
remand. The directions issued by the High Court while remanding the matter to the
Tribunal were not considered by the Tribunal in the true spirit. It was the obligation
cast on the Tribunal to examine the case of the assessee in the light of the judgment
of the Supreme Court and to come to a decision. But, remanding the matter to the
Assessing Officer was in disregard of the judgment of the court. The Tribunal was to
consider the case of the assessee in the light of the directions issued by the court and
applying the principles of law laid down by the Supreme Court, which stated that the
provision for warranty could be made permissible if the requirements were fulfilled.
Matter remanded. (AY. 2002-03, 2003-04)
Dell International Services India P. Ltd. v. ACIT (2016) 382 ITR 37 (Karn.)(HC)
2234 S. 254(1) : Appellate Tribunal – Duties – No jurisdiction to make addition which
Assessing Officer or Commissioner (Appeals) did not make and on which no appeal
or cross objection filed by Department.
Held, allowing the appeal, that it was not open to the Tribunal to confirm the addition
because no such addition was made. When the Department had not filed cross
objections against the order of the Commissioner (Appeals) in respect of the impugned
sum, there was no basis for the Tribunal to confirm the addition. The addition made
by the Tribunal for the first time was in excess of its jurisdiction. [BP. 1-4-1998 to
21-04-1998)
Sheo Kumar Mishra v. Dy. CIT (2016) 382 ITR 424 / 134 DTR 376 / 287 CTR 75 (Cal.)(HC)
2235 S. 254(1) : Appellate Tribunal – Duties – Adjournment – Failure by ITAT to grant an
adjournment requested due to bereavement results in breach of principles of natural
justice – Matter was set aside.
In the peculiar facts and circumstances of the case and in the interest of justice, the
learned Tribunal could have given an opportunity of hearing to the appellant for the
subsequent date. Having failed to grant a short adjournment has resulted in passing
the impugned order in breach of the principle of natural justice which calls for the
interference of this Court. The substantial question of law is answered accordingly.
Zuari Global Ltd. v. Pr. CIT (2016) 383 ITR 171 (Bom.)(HC)
2236 S. 254(1) : Appellate Tribunal – Precedent – Non-consideration by the ITAT of a
judgement of the Co-ordinate Bench makes the order a non-speaking one and breaches
the principles of natural justice – Order of Tribunal was set aside. [S. 14A, R.8D]
Allowing the appeal, the Court held that in fact the impugned order of the Tribunal
in paragraph 6 thereof does record the appellant’s reliance upon the decision of the
Court of its coordinate Bench in J.K. Investors (Bombay) Ltd v. Assistant Commissioner of
Income Tax (ITA No. 7858/MUM/2011) decided on 13th March, 2013. However, thereafter
the impugned order does not deal with the appellant’s reliance upon the decision of the
Tribunal in J. K. Investors (supra) while dismissing the appellant-assessee’s appeal before
it. In fact the impugned order of the Tribunal ought to have dealt with its decision in
J. K. Investors (supra) and considered its applicability to the present facts. In view of
the fact that the impugned order of the Tribunal does not deal with its decision in J.
K. Investors (supra) relied upon by the appellant assessee in support of its submission
as recorded in the impugned order itself makes the impugned order a non-speaking
752
S. 254(1) Appellate Tribunal
order and, therefore, in breach of principles of natural justice. The substantial question
of law is answered in the affirmative i.e., in favour of the appellant and against the
revenue. However, the issue of applicability of Rule 8D of the Rules or otherwise has
yet to be determined by the Tribunal. In these circumstances, we set aside the impugned
order dated 10th July, 2013 passed by the Tribunal and restore the entire appeal to the
Tribunal for fresh disposal in accordance with law. All contentions of both sides left
open. (ITA No. 2342 of 2013, dt. 08.03.2016)
DSP Investment Pvt. Ltd. v. ACIT (Bom.)(HC); www.itatonline.org
S. 254(1) : Appellate Tribunal – Precedent – Binding nature – Jurisdictional High Court 2237
– Law declared by the decision of the High Court will be binding upon all authorities
and Tribunals functioning with in State – Duty of Tribunal to follow decision of
jurisdictional High Court and Co. – Ordinate Tribunal – Writ is maintainable. [S. 14A,
Constitution of India, Art. 226]
Law declared by the decisions of the High Court will be binding upon all authorities
and Tribunals functioning within State; when an appeal is not entertained then the
order of the Tribunal holds the filed and the Co-ordinate Benches of Tribunal are
obliged to follow the same. Duty of Tribunal to follow decision of jurisdictional High
Court and Co-ordinate Tribunal. Not following the judgment of Jurisdictional High Court,
the Writ is maintainable and the Court would quash such an order. (AY. 2008-09)
HDFC Bank Ltd. v. DCIT (2016) 383 ITR 529 / 132 DTR 89 / 284 CTR 414 (Bom.)(HC)
S. 254(1) : Appellate Tribunal – Power – The power under Rule 12 of ITAT Rules is to 2238
either reject a memorandum of appeal or return it for correction, if the memorandum
of appeal is not in the prescribed form. It is only after the memorandum of appeal is
put in the prescribed form that it has to be represented for acceptance under Rule 7.
[S. 260A, R. 7, 12]
Against the order of the Commissioner (Appeals), the revenue filed an appeal before
the Tribunal in the prescribed form. The Tribunal by order dated 6-11-2007 dismissed
the appeal on the ground that the revenue had not obtained approval of the Committee
on Disputes (COD) to prosecute a dispute with the assessee, a public sector company,
which was required in view of the decision of the Supreme Court in the case of ONGC
v. CCE (2004) 6 SCC 437. Thereafter on 17-2-2011, the Supreme Court in the case
of Electronics Corpn. of India Ltd. v. Union of India (2011) 332 ITR 58 held that the
approval of COD was no longer required to prosecute a dispute amongst the departments
of the Government and Public Sector undertakings inter se. Consequent to the above, in
the year 2012 the revenue filed a miscellaneous application before the Tribunal for recall
of the order dated 6-11-2007. The Tribunal by order dated 8-2-2013 dismissed the above
application as being beyond the period of limitation provided in section 254(2). Before
the High Court, the Revenue contended that there was no occasion to apply section
254(2) to its application for recall of the order dated 6-11-2007. It was further argued
that order dated 6-11-2007 was not an order passed under section 254(1) but an order
under rule 12 of the Income-tax (Appellate Tribunal) Rules, 1963, and accordingly, no
period of limitation applied.
The High Court held that rule 12 could not have any application, as the sine qua non
for its application was that the memorandum of appeal was not in the prescribed form.
753
Appellate Tribunal S. 254(1)
Admittedly, in instant case, the memorandum of appeal was in the prescribed form. The
appeal filed by the revenue itself was listed for hearing on 6-11-2007 before a Division
Bench of the Tribunal leading to an order under section 254(1). This order was an
appealable order under section 260A.
The High Court further observed that whenever a memorandum of appeal is rejected
under Rule 12, then it has to be represented under Rule 7. In the instant case, no
memorandum of appeal has been represented by the revenue under Rule 7. This also
is indicative of the fact that the order dated 6-11-2007 of the Tribunal has not been
exercised under Rule 12 but under section 254(1). Moreover the period from the date
of rejection of the memorandum of appeal till the date of representation after amending
the memorandum of appeal would not be excluded while computing the period of
limitation as provided under the Act for the purposes of filing an appeal before the
Tribunal. (AY. 2000-01)
CIT v. Air India Ltd. (2016) 383 ITR 284 / 237 Taxman 639 / 131 DTR 81 / 289 CTR 287
(Bom.)(HC)
2239 S. 254(1) : Appellate Tribunal – Additional evidence – CIT(A) ought to have given
opportunity to Assessing Officer before admitting additional evidence. [S. 144, 250,
R. 46A(3)]
A best judgment assessment was passed under section 144 of the Act by Assessing
Officer, disallowing deductions under section 10A of the Act. On appeal, CIT(A) set
aside the assessment order after considering the documents furnished and the evidence
placed on record by the assessee. Aggrieved the Revenue appealed against the CIT(A)
order before the Tribunal.
Tribunal dismissed the revenue’s appeal and held that there is no requirement in law
that the CIT(A) should invariably consult or confront the Assessing Officer every time
additional evidence is obtained by CIT(A) on its own motion. Also in cases wherein the
additional evidence is in nature of clinching evidence, leaving no further room for any
doubt or controversy, in such case no useful purpose would be served in performing
the ritual or forwarding the evidence to the assessing officer and in obtaining his report.
Revenue preferred appeal before the High Court against the impugned order. High Court
noted that the Tribunal had failed to note that Rule 46A(3) requires the assessing officer
to be given an opportunity to examine the documents produced by the assessee for the
first time before the CIT(A). This mandate of Rule 46A(3) could not have been dispensed
with, as it is a statutorily prescribed rule of natural justice. High Court held that Rule
46A(3), cannot be whittled down or brushed aside as performing a ritual. While sub
rule (4) confers power on the first appellate authority to cause production of documents,
justice and fair play would require the Assessing Officer to be given the opportunity to
examine such documents and put forth his objections. Accordingly, the High Court held
that the document which the assessee intends to place before the appellate authority,
cannot be entertained by CIT(A) except on fulfilment of the following conditions:-
(1) recording reasons in writing for receiving such evidence; and (2) giving the assessing
authority an opportunity to examine the documents.
As a result High Court set aside the CIT(A) order and directed to pass a fresh order after
giving the Assessing Officer opportunity of being heard. (AY. 2010-11)
CIT v. NE Technologies India (P) Ltd. (2016) 237 Taxman 151 (AP)(HC)
754
S. 254(1) Appellate Tribunal
S. 254(1) : Appellate Tribunal – Duties – Right of Respondent in an appeal before 2240
Tribunal – The respondent cannot assail the finding of the CIT(A) without filing an
appeal – Rule 27 would not permit the respondent to expand the scope of an appeal
and argue on issues which are not subject matter of appeal. [S. 68, 153A, R. 27]
Pursuant to a search and seizure action, the AO invoked the provisions of S. 153A of
the Act and completed the assessment by bringing to tax share application money as
unexplained u/s. 68 of the Act.
The CIT(A) held that addition u/s. 68 was beyond the scope of S. 153A, however, upheld
the addition on merits. The Tribunal though allowed the revenue to assail the finding of
the CIT(A) on scope of Sec. 153A, reversed the assessment order.
Against the order of the Tribunal, the Revenue preferred an appeal before the HC wherein
it was held that the issue whether the additions made by the AO were outside the scope
of s. 153A, had been decided by the CIT(A) in favour of assessee, against which no appeal
was preferred by the Revenue before the Tribunal and thus, had attained the finality. In
absence of any appeal, the Tribunal could not have disturbed the said findings. Further,
the Revenue cannot take recourse to Rule 27 of the ITAT (Rules), 1963 as it would not
extend to permitting the respondent to expand the scope of an appeal and assail the
decision on issues, which are not subject matter of the appeal.(AY. 2008-09)
CIT v. Divine Infracon (P) Ltd. (2016) 131 DTR 395 (Delhi)(HC)
S. 254 (1) : Appellate Tribunal – Powers – Tribunal does not have inherent power to 2241
dismiss an appeal in default on account of absence of appellant on date of hearing.
[R. 24]
The ITAT does not have inherent power to dismiss an appeal in default on account of
absence of appellant on date of hearing. (AY. 2004-05)
Partha Mitra v. ITO (2016) 161 ITD 25/ (2017) 183 TTJ 330 / 145 DTR 99 (TM)(Kol.)(Trib.)
S. 254(1) : Appellate Tribunal – Stay of demand to be granted if the assessed income 2242
is 10 times that of the returned income.
The assessee had applied for stay of demand before the ITAT. The ITAT held that since
the assessed income was 10 times that of the returned income, the demand was high
pitched and liable to be stayed in view of CBDT Instruction No. 96 dated 21-0-1969.
(AY. 2011-12)
Dimension Data Asia Pacific Pte. Ltd. v. DCIT (2016) 52 ITR 155 / (2017) 183 TTJ 673
(Mum.)(Trib.)
S. 254(1) : Appellate Tribunal – Stay – Collection and recovery – Assessee deemed in 2243
default – Adjustments were made contrary to the decision of the Co-ordinate benches
of the Tribunal, stay on recovery of outstanding demand was to be granted. [S. 2(14)),
92B, 92C, 220]
Tribunal held that where TPO made addition to assessee's ALP in respect of rendering
IT enabled services to its AEs, in view of fact that TPO had included/excluded certain
concerns in final set of comparables which were contrary to ratio of certain decisions
of Co-ordinate Benches of Tribunal, stay on recovery of outstanding demand was to be
granted. (AY. 2011-12)
Vodafone India Services (P.) Ltd. v. DCIT (2016) 158 ITD 264 (Mum.)(Trib.)
755
Appellate Tribunal S. 254(1)
2244 S. 254(1) : Appellate Tribunal – Additional grounds – Transfer pricing – Arm's length
price – Assessee can raise additional ground to seek exclusion of a comparable
included in assessee's own TP study when he had not raised such ground before any
of lower authorities. [S. 92C]
Assessee can raise additional ground to seek exclusion of a comparable which was
included in assessee's own TP study even though he had not raised such ground before
any of lower authorities. (AY. 2007-08)
Novell Software Development (India) (P.) Ltd. v. Dy. CIT (2016) 158 ITD 237 / 178 TTJ
629 (Bang.)(Trib.)
2245 S. 254(1) : Appellate Tribunal – Precedent – Co-ordinate benches cannot disregard the
view of another Co-ordinate Bench.
The Tribunal held that it is well settled in law that Co-ordinate Benches cannot
disregard the view of another Co-ordinate Bench, it is however equally true that it is
vital to the administration of justice that those exercising judicial power must have
the necessary freedom to doubt the correctness of an earlier decision if and when
subsequent proceedings bring to light that is perceived by them as an erroneous decision
in the earlier case. (AY. 2009-10)
Dy. CIT v. Kalpataru Power Transmission Ltd. (2016) 177 TTJ 394 / 133 DTR 113 / (2017)
162 ITD 18 (Ahd.)(Trib.)
2246 S. 254(1) : Appellate Tribunal – Corrigendum – Additional evidence – Tribunal cannot
consider new material or information which comes to the possession of the AO after
passing the assessment order – The appellate procedure is designed to adjudicate
matters that were originally framed in the assessment order and new material cannot
be considered.
It is an admitted fact that the statement taken from Shri Jagdish Prasad Purohit was not
considered by the AO. Under the scheme of the Act, the order passed by the assessing
officer is being contested by the assessee before Ld. CIT(A) and thereafter, by both the
parties before the Tribunal, if they feel aggrieved by the order passed by Ld CIT(A).
After passing the assessment order, the assessing officer becomes functus officio and
hence, if any material or information comes to the knowledge of the AO subsequently,
then the assessing officer is required to follow the course of action provided under
the Act and the Income-tax Act does not provide for modification of the order that
has already been passed. The appellate procedure has been designed to adjudicate the
matters that were originally framed in the assessment order. Hence, in our considered
view, it may not be correct an altogether new material at this stage. Further, the Ld.
AR has submitted that Shri Jagdish Prasad Purohit has not implicated the assessee
in the statement and he has retracted from the statement by filing an affidavit. He
has also furnished a copy of retraction statement. These limited facts show that the
statement given by Shri Jagdish Prasad Purohit and its reliability are debatable. Since the
additional evidence sought to be relied upon by the revenue is a debatable one; since
the same was not considered or relied upon by the AO and since alternative course of
action is available to the revenue under the Act to deal with the same, in our view, it
should not be admitted at this stage. Accordingly we are of the view that the grounds
756
S. 254(1) Appellate Tribunal
urged by placing reliance on the same are also liable to be dismissed. Accordingly we
decline to admit the additional evidence filed by the revenue and the revised grounds
urged by the revenue in connection there with are also dismissed. (ITA No. 2034/
mum/2014, dt. 09.05.2016) (AY. 2009-10)
H. K. Pujara Builders v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 254(1) : Appellate Tribunal – Duties – A liberal view must be taken in matters 2247
of condonation of delay. A delay of 2,191 days caused by an employee leaving the
services of the assessee and not handing over papers to the assessee deserves to be
condoned.
There was a delay of 2,191 days in filing the instant appeal. In the affidavit, the assessee
stated that the employee concerned, who was handling with the taxation matter left the
assessee company and due to inadvertent mistake, the papers and documents, related to
the appeal remained to be handed over, which caused the delay.
Held, if a litigant satisfies the Courts that there was sufficient reason for availing the
remedy after the expiry of limitation, delay could be condoned. In every case of delay,
there can be some lapses on the part of the litigant concern. That alone is not enough
to turn down the plea and to shut the doors against him, unless and until, it makes
a mala-fide or a dilatory statutory, the court must show utmost consideration to such
litigant. In matters concerning the filing of appeals, in exercise of the statutory right, a
refusal to condone the delay can result in a meritorious matter being thrown out at the
threshold, which may lead to miscarriage of justice. Since the employee who was earlier
handling the tax matters of the assessee company, while leaving the job of the assessee
company, did not handover the relevant papers either to the assessee or to the next
person, a fact which caused the delay, the delay was liable to be condoned by taking a
lenient view. (ITA No. 3786/Mum/2012, dt. 18.03.20165) (AY. 2002-03)
Lahoti Overseas Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org
S. 254(1) : Appellate Tribunal – Duties – Delay of 1,737 days was condoned. [S. 2248
10(10C)]
Tribunal has condoned the delay of 1737 days on the ground that delay was due
to callousness and lack of commitment of his authorised representatives and health
problems of assessee, keeping in view fact that assessee would be otherwise entitled
to benefit of deduction under section 10(10C) as per CBDT Instruction and keeping
in mind circumstances in which appeal of assessee was filed belatedly, delay in filing
appeal was to be condoned. (AY. 2004-05)
Anupam Biswas v. ITO (2016) 157 ITD 445 (SMC) (Kol.)(Trib.)
S. 254(1) : Appellate Tribunal – Duties – Delay of 2,192 days – Reason of waiting for 2249
decision of regular appeal cannot be a sufficient reason to condone the delay. [S.
12AA]
Dismissing the appeal the Tribunal held that the explanation of the assessee that the delay
of filing of appeal of 2192 days was on the plea of waiting for decision of regular appeals
for other assessment years would not amount to a sufficient cause for condonation of
delay in filing appeal against said rejection order. (AY. 2009-10 to 2011-12)
Baddi Barotiwala Nalagarh Development Authority v. CIT (2016) 157 ITD 571(Chd.)(Trib.)
757
Appellate Tribunal S. 254(1)
2250 S. 254(1) : Appellate Tribunal – Additional grounds – Facts necessary to apply filter
sought to be relied upon in the additional ground are already available on record
– Assessee can claim the said filter for necessary adjudication – Additional Ground
admissible. [S. 92C]
On admissibility of additional ground, question as to whether the aforesaid two
companies are comparable or not with the assessee as per FAR analysis has to be
decided on the basis of data which is available in public domain. Therefore, facts
necessary to apply the filter sought to be relied in the additional grounds are already
available on record. Therefore, there can be no valid objection to deciding the question
of applying the aforesaid filter, if otherwise it is found to be a valid filter. Decision
of Quark Systems clearly supports the plea of assessee. Question as to whether the
turnover filter was a filter applied in determining ALP in software development services
is a matter of judicial decision. Thereby, ground of appeal deserves to be admitted for
adjudication. (AY. 2006-07)
FCG Software Services (India) (P) Ltd v. ITO (2016) 176 TTJ 145 / 66 taxmann.com 296
(Bang.)(Trib.)
2251 S. 254(1) : Appellate Tribunal – Duties – Right of Respondent – Revenue has no right
to appeal against view taken by AO/TPO himself. [R. 27]
Though revenue has right to file cross objections against the adverse order of the
CIT(A) but it has no right to file appeal against the view taken by the AO/TPO himself
which was not disturbed in the first appeal. When TPO himself considered ASE Ltd. as
comparable, there could be no reason for revenue to be aggrieved against its inclusion;
and department could take recourse to other legal remedies, if any, available as per law
insofar as its grievance against decision of Assessing Officer/TPO was concerned. (AY.
2007-08)
ACIT v. Tech Books Electronics P. Ltd (2016) 176 TTJ 20 / 65 taxmann.com 241 (Delhi)
(Trib.)
2252 S. 254(1) : Appellate Tribunal – Additional evidence – Ledger account is not an
additional evidence. [R. 29]
The assessee submitted copy of ledger account during the hearing of the appeal before
the CIT(A). Since copy of the ledger account of the assessee was placed before the
authorities during the first appellate proceedings and assessment proceedings, it could
not be treated as additional evidence. Therefore, there was no requirement of invoking
provisions of Rule 29 of the 1963 Rules for admission and consideration of additional
evidence. (AY. 2009-10)
Vipin Malik v. ACIT (2016) 45 ITR 589 (Delhi)(Trib.)
2253 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Order becoming erroneous due to subsequent amendment of law with retrospective
effect by words "marketing of agricultural produce grown by its members" – Order can
be rectified. [S. 80P(2)(a)(iii)]
Once an amendment of law is made and it is applicable with retrospective effect, it is
deemed to be in existence from the date when it is made applicable and if an order is
758
S. 254(2) Appellate Tribunal
passed contrary to the amended law, there is a mistake of law in the order and such a
mistake must be rectified.
Parliament by the Income-tax (Second Amendment) Act, 1998, which came into force on
January 8, 1999, amended the provisions of section 80P(2)(a)(iii) with retrospective effect
from April 1, 1968. The amendment introduced the words "the marketing of agricultural
produce grown by its members or" with retrospective effect, i.e., April 1, 1968. The
Supreme Court in National Agricultural Co-operative Marketing Federation of India Ltd.
v. Union of India (2003) 260 ITR 548 (SC) upheld the retrospective amendment.
The assessee, a co-operative society, had been making purchase of food grains from its
member societies as an agent of the Government and selling it to the Food Corporation
of India. The income arising therefrom was exempt from tax under section 80P(2)(a)(iii)
as held by the Court in the assessee's own case in CIT v. Haryana State Co-operative
Supply and Marketing Federation Ltd. (1990) 182 ITR 53 (P&H). For the assessment years
1990-91, 1992-93, 1993-94 and 1995-96, the Tribunal rectified its orders and withdrew
the exemption. On appeals to the High Court: Held, dismissing the appeals, that the
order of rectification was valid. (AY. 1990-1991 to 1995-96)
Haryana State Co-op. Supply and Marketing Federation Ltd. v. CIT (2016) 389 ITR 266
(P&H)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – 2254
Mistake apparent on face of record, can be mistake on part of litigant or his advisors.
[S. 115WC, 154]
Held, that section 254(2) did not provide that it had to be a mistake solely on the part
of the Appellate Tribunal to recall an order and that the statutory power could also be
exercised in the case of mistake apparent on the part of the litigant or his advisors.
Neither the Appellate Tribunal nor the assessee was aware of the judgment of the
jurisdictional High Court. Therefore, the prayer for leave to withdraw the appeal and
the order allowing the prayer were both based on a mistake. The order was to be set
aside. The Appellate Tribunal was directed to hear the matter on its merits. Mahamaya
Banerjee [1989] AIR 1989 Cal. 106 relied on.
Binaguri Tea Company P. Ltd. v. Dy. CIT (2016) 389 ITR 648 / 75 taxmann.com 106 /
(2017) 147 DTR 364 (Cal.)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – A 2255
Writ Petition filed little after four months of receipt of impugned order suffers from
“delay”. If the Writ Petition does not explain the reasons for the “delay”, it is liable
to be dismissed – Affidavit if desired should be filed before the Tribunal and not first
time before the High Court. [Constitution of India, Art. 226]
Dismissing the petition against the order passed by the Tribunal u/s. 254(2), the Court
held that (i) We find that the impugned order of the Tribunal was passed on 4th
December, 2015, received by the petitioner on 28th December, 2015. This petition has
been filed on 29th April, 2016. The petition states that according to the petitioner, there
is no delay in filing the petition. However, this Court is of the view that there is a delay
and delay may be condoned. However, no reasons with particulars are specified in the
petition. In view of the fact that the petition itself does not explain the reason for the
759
Appellate Tribunal S. 254(2)
delay, the petition is liable to be dismissed. Court also observed that the affidavit if
desired should be filed before the Tribunal and not first time before the High Court.
(AY. 2006-07)
Shirpur Gold Refiner Ltd. v. ITAT (2017) 291 CTR 112 / 144 DTR 108 (Bom.)(HC)
2256 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – In
an order passed in a Miscellaneous Application, the Tribunal cannot deal with the
merits of the issue. The Tribunal must recall the original appellate order and refix the
matter for hearing and pass an order u/s. 254(1) of the Act. [S. 254(1)]
This Court in its order dated 31st July, 2007 has while setting aside the order dated
7th March, 2007 of the Tribunal dismissing the petitioner’s Miscellaneous Application
had held that there was an error apparent from the record in the order dated 9th May,
2006. The direction of the Court in its order dated 31st July, 2007 to the Tribunal to
dispose off the Miscellaneous Application on merits as there is an error apparent on
record in the order dated 9th May, 2006. This disposing of Miscellaneous Application
could only be after recalling the conclusion in its order dated 9th May, 2006 allowing
the Revenue’s appeal and hearing the petitioner on the issue of penalty being imposable
even in the absence of a demand notice being served upon the assessee. This was for
the reason that its conclusion was reached without having considered the petitioner’s
contention that no penalty can be imposed in the absence of receipt of a demand
notice by the petitioner. However, the Tribunal in the impugned order has dealt with
the issue of imposition of penalty being imposed under Section 221 of the Act even
without service of demand notice under Section 156 of the Act upon an assessee. This
the Tribunal could have only done while passing an order in appeal. The consequent
order which would have been passed in appeal would enable the parties to challenge
the same before this Court in an appeal under Section 260A of the Act. The procedure
adopted by the Revenue in this case has deprived the right of statutory appeal to
the petitioner. No appeal is entertained by this Court from an order dismissing the
Miscellaneous Application for rectification under Section 254(2) of the Act [Chem Amit
v. ACIT (2005) 272 ITR 397 (Bom.)(HC)]. Thus in the process of atoning for a mistake,
one should take utmost care to ensure no further prejudice is caused. The rejection
on merits of the contentions of the parties by the Tribunal on a substantial question
of law is subject to the statutory right of appeal under Section 260A of the Act. This
right cannot be bypassed by dealing with the merits in a Miscellaneous Application for
rectification. (AY. 2001-02)
Safari Mercantile Private Limited v. ITAT (2016) 386 ITR 4 / 287 CTR 593 / 73 taxmann.
com 287/ 139 DTR 89 (Bom.)(HC)
2257 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Review or recall of order is not permitted.
Question of law in HC was whether review or recall of the order in the order of
Tribunal was maintainable as Rectification Application u/s. 254(2) was rejected by the
Tribunal. The Hon’ble HC dismissed appeal of the assessee and held that Tribunal in its
order impugned has taken into consideration the arguments raised by the counsel for
the assessee and arrived at a finding that in the earlier order passed by it which was
on merits, the claim about S. 142(2A), was specifically dealt by it. Once the Tribunal
760
S. 254(2) Appellate Tribunal
in its earlier order has decided claim on merits, may be whatever conclusion has been
drawn, the Tribunal rightly came to the conclusion that no mistake crept in its earlier
order. Assessee by way of moving application u/s. 254(2), in fact, tried to review the
order which was correctly been rejected and question of review did not arise. (AY. 1988-
89 to 1997-98)
Bhagwan Singh Palaria v. CIT (2016) 134 DTR 67 (Raj.)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record 2258
– Inordinate delay in filing application – Rejection of application was held to be
justified. [S. 253]
Dismissing the appeal of revenue, the Court held that there was inordinate delay in
filing application for restoration of appeal hence rejection of application was held to be
justified. (AY. 2001-02)
CIT v. State Bank of Hyderabad (2016) 382 ITR 499 (T&AP)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – 2259
Rule of consistency – Interest income whether business income or income from other
sources – Matter remanded.
Assessee treating interest as business income. Assessing Officer and appellate authorities
treating it as income from other sources. Tribunal can examine whether order sought
to be rectified has apparent error of law not limited to mistakes of fact apparent on
face of record. Tribunal dismissing rectification application filed by assessee. Tribunal
to examine issue in light of stand of Department in earlier and later AYs. Rule of
consistency is to be followed. Matter remanded. (AY. 2006-07)
Promain Ltd. v. CIT (2016) 382 ITR 25 (Delhi)(HC)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record 2260
– Power of rectification – Finding on merits cannot be challenged in the guise of
rectification. [S. 119(2)(b), 237]
The Assessing Officer held that the assessee is not eligible for refund claimed in
the return of income as the return was filed belatedly and the assessee was asked
to approach the CBDT by filing an application under section 119(2)(b) of the Act, if
required. Aggrieved by the intimation, the assessee filed an appeal before the CIT(A),
who dismissed the appeal holding that the intimation by the Assessing Officer is not an
order under section 237 of the Act. Aggrieved, the assessee filed an appeal before the
Tribunal, wherein it was held that the communication of the Assessing Officer rejecting
the refund amounted to an order passed under section 237 of the Act. Aggrieved, the
revenue filed a miscellaneous application before the ITAT seeking to rectify the order
which was dismissed on the ground that the ITAT cannot reverse its order in the garb
of rectification. On appeal by the Revenue, the High Court dismissed the appeal holding
that as the order of the Tribunal cannot be a subject matter of rectification when it held
on merits that the communication amounted to an order under section 237 of the Act
and the Revenue had a remedy of filing an appeal before the High Court against the
same.
CIT v. Sri. Ponkumar Magnesite Mines Lorry Transport Operator Periyagollapatti (2016)
236 Taxman 410 (Mad.)(HC)
761
Appellate Tribunal S. 254(2)
2261 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Mercantile system of accounting – Income yet to accrue – Interest brought to tax and
levy upheld by Tribunal – Assessee's application pointing out error – Based on facts
Tribunal subsequently passing rectified order – Within jurisdiction of Tribunal.
Dismissing the appeal of revenue, the Court held that the Tribunal was not shown to
have been unjustified in rectifying its mistake and deleting the addition. The Tribunal
had not exceeded its jurisdiction under section 254(2) in passing the modified order.
(AY. 2002-03)
CIT v. West Bengal Infrastructure Development Finance Corporation Ltd. (2016) 385 ITR
672 (Cal.)(HC)
2262 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Additional income declared during survey – Bogus commission expenditure was held
to be not allowable – Rectification application was held to be not maintainable. [S.
37(1), 133A]
Dismissing the rectification application of the assessee, the Tribunal held that bogus
commission expenditure was claimed to set off the additional income which was
declared in the course of survey hence, rectification application was held to be not
maintainable. (AY. 2008-09)
H. Gouthamchand Jain v. ITO (2016) 159 ITD 526 (Chennai)(Trib.)
2263 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Miscellaneous application was filed after seven years of impugned order was held to
be not maintainable as the Tribunal has no power to condone the delay as the petition
was not filed with in four years. [S. 254(1)]
Tribunal dismissed appeal for want of prosecution. Assessees filed M.As after seven
years of impugned order. According to them, dismissal of appeal for want of prosecution
could not be considered an order under section 254(1) and, therefore, time-limit
prescribed u/s. 254(2) did not apply. Tribunal held that dismissal of appeal for want
of prosecution, though according to assessees was illegal or contrary to law, was
nevertheless an order passed u/s. 254(1) in which event remedy available to assessees
was to file a petition before Tribunal to recall order within a period of 4 years. Beyond
such period Tribunal had no power to condone delay and, therefore, miscellaneous
application were not maintainable.
Paresh Dhanji Chedda v. Dy. CIT (2016) 160 ITD 656 / (2017) 184 TTJ 132 / 149 DTR
124 (Hyd.)(Trib.)
2264 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Application to reagitate an issue which has already been decided by the Tribunal was
held to be not maintainable.
Assessee filed a rectification application contending that while passing its order,
Tribunal did not consider its plea that it had transferred land under joint development
agreement to a builder and, thus, said land could not be included in its taxable wealth.
Tribunal held that; it had recorded a clear finding in its order that title of land had not
been passed on to developer, and, thus, assessee-company continued to be owner of
land and was liable to pay wealth-tax. The assessee had filed rectification application to
762
S. 254(2) Appellate Tribunal
re-agitate an issue which had already been decided by Tribunal. Therefore, rectification
Application was to be rejected. Tribunal also observed that conduct of the petitioner
in an uncertain terms as it resulted in colossal waste of valuable time of this Tribunal.
(AY. 2004-05 to 2007-08)
Triad Resorts & Hotels (P.) Ltd. v. WTO (2016) 160 ITD 668 (Bang.)(Trib.)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – 2265
Income from house property – Income from sub-lease of property, neither main object
nor business activity was to take on lease and sub-let properties, rightly taxed as
income from house property, Rectification Application was dismissed. [S. 22, 28(i)]
Tribunal has held that the income from sub-lease of property was assessable as income
from house property. The assessee has filed Rectification Application on the basis of
Chennai Properties & Investments Ltd v. CIT (2015) 373 ITR 673 (SC). Dismissing the
rectification the Tribunal held that in this case neither object nor main business activity
of assessee was to take on lease and sub-let properties. Since order of the Supreme
Court was distinguishable on facts, same could not be applied. Income from sub-lease
of property is to be assessed as income from house property. (AY. 2003-04 to 2008-09)
Prolific Consultancy Services (P.) Ltd. v. ITO (2016) 161 ITD 296 / (2017) 183 TTJ 801 /
151 DTR 107 (Mum.)(Trib.)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – 2266
Non-consideration of the verdict of the Tribunal constitutes a mistake apparent from
the record. [S. 9(1)(iv), 195(2)]
Allowing the petition the Court held that non-consideration of the verdict of the
Tribunal in Solid Works Corporation (51 SOT 34) and misreading of the Delhi High
Court's verdict in Ericsson AB constitutes a mistake apparent from the record u/s. 254(2)
and the orders have to be recalled. (dt. of order 18.11.2016.) (117 group matters)
Reliance Communication Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 (Mum.)(Trib.)
Reliance BPO Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 (Mum.)(Trib.)
Reliance Telecom Ltd. v. DDIT (2017) 149 DTR 17 / 183 TTJ 388 (Mum.)(Trib.)
S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record – 2267
Subsequent decision of High Court reversing the view of the ITAT constitute mistake
apparent from record. [S. 14A]
The Rectification Application was filed on the basis of Delhi High Court decision in CIT
v. Holcim India (P) Ltd. (2014) 90 CCH 0081 (Delhi)(HC) wherein the Court held that
provisions of section 14A cannot be invoked when no exempt income was earned by
assessee during the relevant financial period. Allowing the petition the Tribunal held
that non consideration of proposition of law laid down by the High Court is a mistake
apparent from record. Tribunal followed the ratio in ACIT v. Saurashtra Kutcch Stock
Exchange Ltd. (2003) 262 ITR 146 (Guj.)(HC). (MA. No. 269/Del/2014 /ITA No. 4395/
Del/2013, dt. 19.02.2016) (AY. 2008-09)
Green Meadows Pvt. Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org
763
Appellate Tribunal S. 254(2)
2268 S. 254(2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Keyman insurance policy – Tribunal decided on the basis of IRDA circulars – Mistake
apparent on record. [S. 10(10D)].
Assessee took Keyman Insurance Policies on life of its employee and claimed deduction
in respect of premium. Tribunal decided the issue on the basis of IRDA circulars
which has no role to play in deciding whether premium on insurance policies paid are
covered by scope of 'keyman insurance policy' under section 10(10D). On Rectification
Application by assessee, allowing the petition the Tribunal held that the order of
the Tribunal sufferred from mistake apparent from record particularly when specific
submissions of assessee were not adjudicated. Matter remanded. (AY. 2006-07)
F.C. Sondhi & Co. (India) (P.) Ltd. v. Dy. CIT (2016) 156 ITD 103 / 178 TTJ 237 / 134 DTR
186 (Asr.)(Trib)
2269 S. 254(2A) : Appellate Tribunal – Stay – Tribunal has power to grant stay for a period
exceeding three hundred and sixty five days.
Dismissing the appeal of revenue, the Court held that where the delay in disposing
of the appeal is not attributable to the assessee, the Tribunal has the power to grant
extension of stay beyond 365 days in deserving cases. (AY. 2009-10)
PCIT v. Carrier Air Conditioning and Refrigeration Ltd. (2016) 387 ITR 441 (P&H)(HC)
2270 S. 254(2A) : Appellate Tribunal – Stay – Tribunal was justified in extending further
stay on tax demand
Where appeal is not disposed of within statutorily prescribed period of 365 days from
date of grant of initial stay and such delay is not attributable to assessee, Tribunal was
justified in extending further stay on tax demand. (AY. 2007-08, 2008-09, 2010-11)
ITO v. Anil Girishbhai Darji (2016) 239 Taxman 146 (Guj.)(HC)
2271 S. 254(2A) : Appellate Tribunal – Stay – Tribunal has power to grant stay beyond 365
days. [S. 254(1)]
Dismissing the writ petition of revenue the Court held that as the Third Proviso which
restricts the power of the ITAT to grant stay beyond 365 days “even if the delay in
disposing of the appeal is not attributable to the assessee” has been struck down in
Pepsi Foods Pvt. Ltd. v. ACIT (2015) 376 ITR 87 (Del.) as being arbitrary, unreasonable
and discriminatory, the law laid down in Narang Overseas (P) Ltd. v. ITAT (2007) 295
ITR 22 (Bom.) & CIT v. Ronuk Industries Ltd. (2011) 333 ITR 99 (Bom.) that the ITAT
has power to grant stay beyond 365 days has to be followed. (AY. 2009-10 to 2012-13)
CIT v. Tata Teleservices (Maharashtra) Ltd. (2016) 133 DTR 119 / 286 CTR 336 (Bom.)(HC)
2272 S. 254(2A) : Appellate Tribunal – Stay – The Tribunal has power to extend stay beyond
period of 365 days provided delay in disposal of appeal is not attributable to assessee.
[S. 254(1)]
The Tribunal has power to extend stay beyond period of 365 days provided delay in
disposal of appeal is not attributable to assessee. (AY. 2008-09)
L.G. Electronics India (P.) Ltd. v. ACIT (2016) 179 TTJ 705 / 64 taxmann.com 111 / 138
DTR 194 (Delhi)(Trib.)
764
S. 256 Reference
S. 254(2A) : Appellate Tribunal – Stay – Delay in disposing of appeal is not 2273
attributable to assessee, Tribunal has power to grant extension of stay of recovery of
outstanding demand beyond 365 days in deserving cases. [S. 220]
Delay in disposing of appeal is not attributable to assessee, Tribunal has power to grant
extension of stay of recovery of outstanding demand beyond 365 days in deserving
cases. (AY. 2007-08)
SAP Labs India (P.) Ltd. v. ACIT (2016) 157 ITD 705 / 179 TTJ 515 (Bang.)(Trib.)
S. 255. Procedure of Appellate Tribunal.
S. 255 : Appellate Tribunal – Procedure – Functions – Representation by Commissioner 2274
(DR) and Senior (DR) – Penalty – Concealment – As per CBDT Instruction No. 9/2013
dated 22.07.2013, appeals against imposition of penalty or levy of interest in which
the aggregate of penalty imposed or interest levied by the AO is more than ` 3 crore
in the cities of Mumbai and Delhi are to be argued by the CIT(DR) and matters other
than this are to be argued by the Senior DR.
As per CBDT Instruction No. 9/2013 dated 22.07.2013, appeals against imposition of
penalty or levy of interest in which the aggregate of penalty imposed or interest levied
by the AO is more than ` 3 crore in the cities of Mumbai and Delhi are to be argued
by the CIT(DR) and matters other than this are to be argued by the Senior DR (ITA No.
7034 TO 7038/Del/2014, dt. 21.06.2016) (AY. 2006-07)
M. G. Contractors Pvt. Ltd. v. DCIT (Delhi)(Trib.); www.itatonline.org
S. 255 : Appellate Tribunal – Special Bench – Matter before a Division Bench of 2275
Tribunal for giving effect to majority opinion of Accountant Member and Third
Member and assessee raised objections urging to adjourn matter or refer matter to
President for Constitution of a Special Bench, objections were liable to be rejected and
majority view deserved to be confirmed. [S. 271(1)(c)]
CIT(A) deleted penalty imposed upon assessee under section 271(1)(c). Third Member
of Tribunal concurring with view taken by Accountant Member opined that CIT(A)
was not justified in deleting penalty. When Competent Authority placed matter before
a Division Bench for giving effect to majority opinion, assessee raised objections urging
to adjourn matter or refer matter to President for Constitution of a Special Bench.
Earlier a Division Bench of Tribunal in case of Jupiter Corporation Services Ltd. v. Dy.
CIT (2015) 62 taxmann.com 58 (Ahd.) on similar issue in favour of revenue. In view
of above decision, objections raised by assessee were liable to be rejected and majority
view deserved to be confirmed. (AY. 1995-96 to 1997-98)
ACIT v. Megh Malhar Finstock (P.) Ltd (2016) 157 ITD 593 (Ahd.)(Trib.)
S. 256. Statement of case to the High Court.
S. 256 : Reference – High Court – Reference jurisdiction High Court should not act 2276
as an appellate Court to review such findings of fact arrived at by the Tribunal by a
process of reappreciation and reappraisal of the evidence on record.
The Court held that it is well settled that issues of fact determined by the Tribunal are
final and the High Court in exercise of its reference jurisdiction should not act as an
765
Reference S. 256
appellate Court to review such findings of fact arrived at by the Tribunal by a process
of reappreciation and reappraisal of the evidence on record. On merit dismissed the
appeal of assessee. (AY. 1984-85)
Ganapathy & Co. v. CIT (2016) 381 ITR 363 / 237 Taxman 587 / 283 CTR 121 / 130 DTR
233 (SC)
2277 S. 256 : Reference – High Court – Monetary limits prescribed for litigation by revenue
– Effect of CBDT Instruction No. 5 of 2014 – Instruction applicable to pending
references – Reference returned unanswered.
Where a reference under section 256(1) of the was filed in which tax effect was less
than ` 4 lakhs. Held, that Instruction No. 5 of 2014 issued by the Central Board of
Direct Taxes was applicable to the reference, even if it was pending. The tax effect
involved was less than the monetary limit prescribed by the instruction. There was
nothing to indicate that the issue raised in this particular reference would fall within the
exclusion clause in the instruction or that the issue had a cascading effect. Therefore,
the reference was to be returned unanswered. (AY. 1988-89)
CIT v. Computer Point (I) Ltd. (2016) 381 ITR 441 (Bom.)(HC)
2278 S. 256 : Reference – High Court – Failure to serve reference as provided by Rule 658
of the Bombay High Court Rules upon the Respondent means that the applicant is not
interested in pursuing the reference and the same has to be returned unanswered.
Dismissing the Reference of the assessee the Court held that this Reference under
Section 256(1) of the Income-tax Act, 1961 by the Income Tax Appellate Tribunal
(Tribunal) seeks our opinion on two substantial questions of law as framed by it.
However, Mr. Rattesar, the learned counsel appearing for the applicant assessee very
fairly states that he is not in a possession of evidence to show that the Reference has
been served upon the Revenue. This Reference is of the year 2000. In terms of Rule 658
of the Bombay High Court (Original Side) Rules, the party at whose instance a Reference
has been made to this Court is required to take all such steps as are necessary to have
a notice issued and served upon the opposite party within two months from the receipt
of notice of the Reference from the High Court.
In view of the fact that the applicant assessee has no evidence of having served the
Reference upon the Respondent Revenue, we are not inclined to examine the questions
of law as raised for our opinion at the instance of the applicant assessee. Mr. Ravi
Rattesar states that he has now served the Respondent Revenue and would request
that the Reference be taken up for disposal. This Reference pertains to the year 2000
relating to A.Y. 1985-86. This non-compliance with the requirement of service for over
sixteen years is itself an indication of the applicant not being serious about pursuing
this Reference. Thus we decline to extend time. In the above view, the Reference is
returned unanswered. However, it is made clear that the question raised hereinabove
are left open for consideration in an appropriate case, if not already decided. (ITA No.
11 of 2000, dt. 19.08.2016) (AY. 1988-89)
Naath industries Pvt. Ltd. v. CIT (Bom.)(HC); www.itatonline.org
766
S. 260A Appeal
S. 260A. Appeal to High Court.
S. 260A : Appeal – High Court – Substantial question of law – Duty of High Court to 2279
frame – Decision of appeal without doing so – Order set aside and matter remanded
for consideration afresh
Where the appeal under section 260A of the Income-tax Act, 1961 had been decided by
the High Court without framing any substantial question of law : Held, that the High
Court ought to have framed the substantial questions of law arising in the appeal before
answering them. The High Court having not done that, the order passed by it was liable
to be set aside and the matter remanded to the High Court for consideration de novo
after formulating the substantial questions of law arising, if any.
Jai Hind Cycle Company Ltd. v. CIT (2016) 388 ITR 482 / 243 Taxman 354 / 144 DTR
321 / (2017) 291 CTR 239 (SC)
Editorial: Decision of the Telangana and Andhra Pradesh High Court in CIT v. Jaihind
Cycle Co. [2014] 367 ITR 421 (T&AP) is set aside.
S. 260A : Appeal – High Court – Review – Appeal of department was dismissal on 2280
ground tax effect below limit set by Board – Affidavit of Department showing tax
effect above limit – Request to High Court to consider review petition and if necessary
appeal on merits [S.268]
Allowing the petition the Court held that where the High Court disposed of the
Department's appeal without entering into the merits on the ground that the tax demand
which formed the subject matter of the appeal was less than ` 2 lakhs and dismissed
the review petition filed by the Department as not maintainable against an order passed
under the provisions of section 260A of the Income-tax Act, 1961, on appeal to the
Supreme Court :
The Department having filed an affidavit explaining how the notional tax effect was
far beyond the amount of ` 2 lakhs, and the court having taken a view that a review
would be available of orders passed under section 260A of the Act, the court, without
expressing any opinion on the merits of the matter, allowed the appeals, set aside both
the orders passed by the High Court and requested the High Court to decide the review
petition and thereafter the appeal itself, if so required, on the merits.
CIT v. Automobile Corporation of Goa Ltd. (2016) 387 ITR 140 / 242 taxman 101 / 290
CTR 485 / 144 DTR 166 (SC)
Editorial : Decisions of the Panaji Bench of the Bombay High Court set aside. (ITA No. 7
of 2004 dt 25-8-2010, Review Petition No. 26 of 2010 dt. 28-3-2012)
S. 260A : Appeal – High Court – Substantial question of law – Evasion of tax – Sale of 2281
flats below market rate – High Court ought to have framed question whether assessee
had recourse to colourable device to evade tax [S. 4, 28(iv), 69B]
Where the High Court held that the Tribunal was justified in holding, based on the
documents produced including the balance-sheet and the fact that the two entities to
which flats were sold by the assessee had made payment in advance but the assessee
had not explained the reason for selecting one for a deal at lower rate, that both sales
were not genuine and that there had been an attempt to suppress the real income on
767
Appeal S. 260A
which the tax had to be computed, and that therefore, no substantial question of law
arose, on appeal to the Supreme Court :
Held, the High Court should have framed the substantial question of law pertaining to
the issue whether the assessee had recourse to any kind of colourable device to evade
the tax. (AY. 2005-06)
Diamond Investment and Properties v. ITO (2016) 389 ITR 289 (2017) 292 CTR 252 / 147
DTR 59 / 247 Taxman 225 (SC)
Editorial: Decision of the Bombay High Court in Diamond Investment and Properties v.
ITO (2017) 247 Taxman 250 (Bom.)(HC) was directed to frame the question of law.
2282 S. 260A : Appeal – High Court – Deduction at source – Contractor – Opportunity of
being heard – Assessee not heard by High Court – Review petition dismissed by High
Court – Appeal – Supreme Court – Orders set aside and matter remanded for decision
afresh [S. 194C]
Held, allowing the appeal, that it was a fact that the assessee was not heard when the
judgment was delivered. Even the review petition filed by the assessee was also rejected.
In the circumstances, the judgment was to be set aside and the matters remitted to the
High Court for hearing afresh. (AY. 1997-98)
Novo Nordisk Pharma India Ltd. v. CIT (2016) 389 ITR 134 / 144 DTR 369 / (2017) 244
Taxman 53 / 291 CTR 21 (SC)
Editorial: CIT v. Novo Nordisk Pharma India Ltd. (2012) 341 ITR 451 (Karn.)(HC) is set
aside.
2283 S. 260A : Appeal – High Court – Power to recall order – Order passed on appeal was
not ex parte – Recall of the order was set aside [Code of Civil Procedure Code, 1908,
O.XLI.R. 21]
Allowing the appeal of revenue, against the order of the High Court recalling its order
dated August 27, 2013 (CIT v. Subrata Roy (2016) 385 ITR 547 (All.)(HC)) passed on
appeals under section 260A(7) of the Act read with rule 21 of Order XLI of the Code
of Civil Procedure, 1908; held that a perusal of the order of the Court dated August
27, 2013 on the appeals would go to show that it was not an ex prate order. The
participation of the assessee in the hearing of the appeals was also evident from various
other parts of the order. Not only was the order not an ex parte order as contemplated
by r. 21 of Order XLI, the order passed by the High Court clearly contained findings to
the contrary. In these circumstances the High Court did not have the jurisdiction under
r. 21 of order XLI of the Code to recall the final order dated August 27, 2013 passed
in the income tax Appeals. The power available under r. 21 of order XLI is hedged by
certain pre-conditions and unless the pre-conditions are satisfied the power thereunder
cannot be exercised. The order of the High Court recalling its order was liable to be
set aside leaving the assessee at liberty to challenge the order dated August 27, 2013
in accordance with law, if so advised. Decision of Allahabad High Court was set aside.
CIT v. Subrata Roy (2016) 385 ITR 570 / 287 CTR 129 (SC)
768
S. 260A Appeal
S. 260A : Appeal – High Court – Kerala Court fee – 1% of assessed income – Maximum 2284
of ` 10,000/ – State Government was to make amendment, matter was stayed till
information about steps taken by State Government was provided [Kerala Court Fee
Act, 1959, S. 52, 52A]
Sections 52 and 52A of the Kerala Court Fee and Suits Valuation Act, 1959 specified
that court fee for filing appeal against order of Tribunal would be where such income
exceed ` 2 lakh, 1 per cent of assessed income subject to maximum of ` 10,000. High
Court noted that in many cases total income assessed by the Assessing Officer may not
survive at all and thus, matter required. However even after 11 years, it was not known
whether an action was taken on recommendation of High Court. Whether, even though
instant appeal was heard on merit, matter was to be stayed till relevant information was
provided by the State Government.
K. Raveendranathan Nair v. CIT (2016) 236 Taxman 6 (SC)
S. 260A : Appeal – High Court – Question of law – Before the High Court, Department 2285
raised question of law only in respect of merits, however, no specific question in
respect of the jurisdictional issue; Court issued directions to the Commissioner to
examine the issue and take considered view [S. 69C, 153C]
The ITAT in its order allowed the appeal of the assessee on two grounds viz. on the
jurisdictional issue that the AO did not have any jurisdiction to pass an order u/s.
153C as well as on the merits that cash payments cannot be added u/s 69C. While
challenging the said order before the High Court, the Department only raised question of
law in respect of the merits of the addition without challenging the finding of the ITAT
in respect of the jurisdictional issue. High Court held that, in absence of any specific
grievance with regard to the finding of the Tribunal on applicability of S.153C of the
Act, the other questions raised and urged becomes academic. It also directed the CIT
to examine the issue and to take corrective measures to ensure that a considered view
is taken in respect of the orders of the Tribunal which are being challenged before the
Court. Matter was adjourned.
CIT v. Ambit Realty (P) Ltd. (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
CIT v. Arpit Land (P) Ltd. (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
CIT v. Ganarya Land (P) Ltd. (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
CIT v. Lavanya Land (P) Ltd. (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
CIT v. Krutika Land (P) Ltd. (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
CIT v. Samson Perinechery (2016) 139 DTR 43 / 288 CTR 50 (Bom.)(HC)
S. 260A : Appeal – High Court – Delay of 1,494, Further it re-filed appeal with a delay 2286
of 1,021 days – Reason for delay in re-filing appeal was change of Standing Counsel
– High Court was right when it dismissed the petition on the ground of delay as there
was no justifiable reason for the delay
Revenue filed appeal before High Court with a delay of 1,494 days. Further it re-filed
appeal with a delay of 1021 days. It filed applications seeking condonation of delay.
It stated that initially appeal was filed in Gujarat High Court and disposed of by an
order with liberty to file a fresh appeal before Bombay High Court and in meantime
case of assessee got transferred to New Delhi and thereafter revenue sought opinion
769
Appeal S. 260A
of Standing Counsel and filed appeal before Delhi High Court. It further pointed out
that reason for delay in re-filing appeal was change of Standing Counsel. High Court
dismissed applications for condonation of delay on plea that there was no justifiable
reason for delay in filing appeal and in re-filing appeal and accordingly, dismissed
appeal of revenue.
PCIT v. Bhaskar Power Projects (P.) Ltd. (2016) 73 taxmann.com 382 (Delhi)(HC)
Editorial : The Supreme Court dismissed the SLP of the Department; PCIT v. Bhaskar
Power Projects (P.) Ltd. (2016) 242 Taxman 367 (SC)
2287 S. 260A : Appeal – High Court – Question of law – Finding of fact which is perverse
gives rise to question of law – Finding based on evidence binding on High Court
A question of fact becomes a question of law, if the finding is either without any
evidence or material or, if the finding is contrary to the evidence, or is perverse or there
is no direct nexus between the conclusion of fact and the primary fact upon which that
conclusion is based. In the exercise of powers under section 260A, findings of fact of
the Tribunal cannot be disturbed.
CIT v. Sangu Chakra Hotels P. Ltd. (2016) 389 ITR 117 / 74 taxmann.com 76 / (2017) 150
DTR 259 (Mad.)(HC)
2288 S. 260A : Appeal – High Court – Rule of consistency – Order of Tribunal following
earlier decision of Tribunal against which no appeal filed by Department – Appeal
therefrom not maintainable [S. 2(14), 45, 50C]
Where the Department had accepted the decision of the court or the Appellate Tribunal
on an issue and had not appealed against it, then a subsequent decision following the
earlier decision could not be challenged. That the Department had not shown that there
were any distinguishing features either in facts or in law in the present appeal from that
which arose in the earlier decision of the Appellate Tribunal which was not appealed
against. No question of law arose. (AY. 2007-08)
CIT v. Greenfield Hotels and Estates P. Ltd. (2016) 389 ITR 68 / (2017) 77 taxmann.com
308 (Bom.)(HC)
2289 S. 260A : Appeal – High Court – Questions which was not raised during assessment or
appellate proceedings, cannot be raised first time before High Court [S. 2(IA)]
Court held that, where revenue had not raised issue of expenditure on income from
flowers and petals of nursery during assessment proceedings and even during appeal, it
could not be introduced for first time in appeal under section 260A.
CIT v. K. N. Pannirselvam (2016) 243 Taxman 219 (Mad.)(HC)
2290 S. 260A : Appeal – High Court – Cross-objection – Appeal not registered on file of
court – Cross – objection is not maintainable [Code of Civil Procedure, 1908, O. 41,
r. 22(4)
The Department filed an appeal against the decision of the Tribunal. The assessee filed
a cross-objection against it. The appeal was rejected for non-removal of office objection:
Dismissing the cross-objection, that the appeal was never registered on the file of the
court. Under Code of Civil Procedure, 1908, O. 41, r. 22(4), the original appeal was
required to be "withdrawn" or dismissed "for default" in order to enable the respondent
770
S. 260A Appeal
to maintain its memorandum of cross-objection. The appeal was not dismissed "for
default" or "withdrawn" but came to be rejected, not on the merits, but for failure to
remove office objections. Compliance with office objections was a necessary process
and part of the justice administration system and reflected on the party's conduct of the
case. Non-removal of objections despite repeated adjournments within the time specified
signified inability or a conscious decision on the part of a litigant to not pursue the
case. It was not open to the cross objector to insist, as of right, that the cross-objection
must be heard notwithstanding rejection of the appeal. Therefore, since the appeal was
not registered in the file of the court, the cross-objection was not maintainable. Once a
case is rejected for non-compliance with objections and more particularly after time is
extended by the court to remove the objections within the time specified, the appellant
loses his remedy of appeal. (AY. 2000-01)
Cipla Ltd v. ACIT (2016) 387 ITR 52 / 290 CTR 387 / 141 DTR 73 / 73 taxmann.com 22
(Bom.)(HC)
S. 260A : Appeal – High Court – Territorial jurisdiction of court – High Court 2291
exercising territorial jurisdiction over situs of Assessing Officer has jurisdiction to
hear the appeal
The assessee's registered office was at Dharamshala in Himachal Pradesh. For the
assessment year 2008-09, notices under sections 142(1) and 143(2) of the Income-tax
Act, 1961 were issued to the assessee and the assessment order was passed by the
Assessing Officer at Dharamshala. The appeal against the order was filed by the assessee
before the Commissioner (Appeals) at Shimla and was allowed. Both the assessee as
well as the Department filed cross appeals before the Tribunal at Chandigarh which
dismissed the appeal of the Department. On appeal to the Punjab and Haryana High
Court: Held, that the Punjab and Haryana High Court had no territorial jurisdiction
to adjudicate upon the dispute over an order passed by the Assessing Officer at
Dharamshala, Himachal Pradesh. Since the initial process of assessment was started
at Dharamshala and the final assessment was made by the Assessing Officer at
Dharamshala, Himachal Pradesh, the Punjab and Haryana High Court lacked jurisdiction
to adjudicate the matter. (AY. 2008-09)
CIT v. Tibetan Children's Village. (2016) 388 ITR 126 (P&H)(HC)
S.260A : Appeal – High Court – Monetary limits – Circular has retrospective effect 2292
[S. 80-IB]
Circular No. 21 of 2015, dated December 10, 2015 provides that appeals shall not be
filed before the High Court where the tax effect does not exceed ` 20 lakhs. The circular
applies retrospectively even to the pending appeals.
CIT v. Micro Instruments Company. (2016) 388 ITR 46 / 289 CTR 152 / 75 taxmann.com
304 (P&H)(HC)
S. 260A : Appeal – High Court – Power to review – On facts petition was dismissed 2293
Court held that the High Court has power to correct apparent errors in its order hence
review application - is maintainable, however on facts there was no error apparent on
record to justify review accordingly review petition was dismissed.
CIT v. Sherwood Diocesan College Society (2016) 388 ITR 634 (Uttarakhand)(HC)
771
Appeal S. 260A
2294 S. 260A : Appeal – High Court – Contention that assessees were established for private
religious purposes raised for first time before High Court which cannot be considered
[S. 11, 12, 12A]
Court held that the contentions which was not raised before the Tribunal cannot be
raised first time before the High Court.
CIT v. Sherwood Diocesan College Society. (2016) 388 ITR 639 (Uttarakhand)(HC)
2295 S. 260A : Appeal – High Court – High Court has power to correct apparent errors in
its order – Review application – Maintainable – No error apparent on record to justify
review – To be dismissed [S. 260A(7)]
The High Court has not only the power, but a duty to correct any apparent error in
respect of any order passed by it. This is the plenary power of the High Court. The High
Court enjoys the power of review not only as a constitutional court, but as specifically
vested by virtue of sub-section (7) of section 260A of the Income-tax Act, 1961. Held,
that the review applications were maintainable. However there was no error apparent
on the record to justify review. The review applications were to be dismissed.
CIT v. All Saints College Society. (2016) 388 ITR 634 (Uttarakhand)(HC)
Editorial : CIT v. All Saints College Society (2016) 388 ITR 639 (Uttarakhand)(HC) is
affirmed.
2296 S. 260A : Appeal – High Court – Finding of fact based on evidence – No substantial
question of law arises – Appeal is not maintainable [S. 69B, 145]
Dismissing the appeal of revenue, the Court held that if a finding of fact is not
challenged as being perverse, the High Court is bound to accept such finding. Court
held, no substantial question of law had been framed and the questions pertained to
findings of fact, which could not be said to be perverse as it was evident that the books
of account of the assessee had been rejected by the assessing authority, in which case
the same books of account could not be relied upon to make an addition on account of
trade creditors and also for arriving at the closing stock. The Tribunal was justified in
deleting the additions to the income. (AY. 2007-08)
CIT v. Bahubali Neminath Muttin (2016) 388 ITR 608 / 242 Taxman 279 / 140 DTR 57
(2017) 291 CTR 214 (Karn.)(HC)
2297 S. 260A : Appeal – High Court – Income not returned because assessee believed it
was not assessable – Tribunal finding that belief was genuine – High Court cannot
interfere with finding
Dismissing the appeal of revenue, the Court held that appreciation of evidence was
a question of fact and not a question of law. It was not a matter where the Tribunal
had not considered the entire facts and circumstances of the case under which the
income was offered by the assessee as the income from house property by submission
of revised returns and payment of tax even before the proceedings were initiated by the
Department after survey. Apart from the above, the additional aspect was that the view
of the Tribunal on acquiring property under barter system could not be totally ruled
out. No substantial question of law arose from the order of the Tribunal. (AY. 2007-08)
PCIT v. Minitechs Aerotools P. Ltd. (2016) 387 ITR 166 (Karn.)(HC)
772
S. 260A Appeal
S. 260A : Appeal – High Court – Territorial jurisdiction of High Court – Initial process 2298
of assessment and final assessment framed by AO outside territorial jurisdiction of
High Court – High Court lacks territorial jurisdiction to adjudicate matter
Dismissing the appeal of revenue, the Court held that Since the initial process of
assessment was started at Hyderabad and the final assessment was framed by the AO
at Hyderabad, the Punjab and Haryana High Court lacked territorial jurisdiction to
adjudicate the matter. (AY. 2004-05)
PCIT v. ITW India Ltd. (2016) 386 ITR 290 (P&H)(HC)
S. 260A : Appeal – High Court – Income-tax – General principles – Rule of consistency 2299
– Special Bench of Tribunal for some years holding interest on deposits not chargeable
to tax – Department bound to follow judgment of Special Bench [Interest Tax Act,
1974, S. 2(7)]
It was not possible to accept the contention of the Department that the expression
"interest on loan and advances" occurring in section 2(7) of the Act should include
"interest on deposits" as well notwithstanding that there was no reference to such
interest in the definition itself.
The Special Bench of the Appellate Tribunal in Housing & Urban Development
Corporation Ltd v. JCIT dt 25-11-2005 (SB)(Trib.) and had answered the question in favour
of the assessee for the AYs 1992-93, 1993-94 and 1996-97. The present appeals pertained
to the AYs 1994-95 and 1995-96. Therefore, by applying the rule of consistency the
Department was directed to follow the judgment which had attained finality as the view
expressed had been accepted by the Department. (AY 1994-95, 1995-96)
Housing and Urban Development Corpn Ltd v. Dy. CIT (2016) 386 ITR 212 / 140 DTR
108 (Delhi)(HC)
S. 260A : Appeal – High Court – Natural justice – Business loss – Tribunal holding 2300
reliance upon statements of persons not produced for cross examination breach of
natural justice – Upholding disallowance of loss as not genuine relying on surrounding
circumstances and other evidence – Proper [S. 28(i), 254(1)]
On appeal : Held, dismissing the appeal, that the finding of fact recorded by the
Tribunal was not shown to be perverse or arbitrary. It was a possible view in the context
of facts that arose for consideration. No question of law arose. (AY. 1996-97)
Monika India v. ITO (2016) 386 ITR 639 (Bom.)(HC)
Editorial: SLP filed by the assessee was dismissed Monika India v. ITO (2016) 383 ITR 6
(St.)
S. 260A : Appeal – High Court – Generation of power – Wind mills – Losses incurred 2301
in the eligible unit were adjusted against profits of ineligible unit – Appeal not
projecting grievance that decision of Special Bench of Tribunal misapplied or not
applied – Tribunal's conclusion not made subject matter of challenge – Appeal not
maintainable [S. 80IA]
The assessee was engaged in the business of manufacture of material handling
equipment and generation of power. It had installed windmills and that was a unit
eligible for deduction under section 80-IA. The other unit of the assessee was not
773
Appeal S. 260A
entitled to deduction. The assessee claimed loss on account of the eligible unit for
AYs, viz. 2005-06 to 2008-09. These losses incurred in the eligible unit were adjusted
against profits of ineligible unit, i.e. the manufacturing unit in the respective years.
After adjusting these losses, positive income was determined and tax was paid. For these
years in which the eligible unit incurred losses, there was no claim for deduction under
section 80-IA by the assessee. The AO disallowed this claim of set off of loss of eligible
units against the income of ineligible units in the same year. The losses were, therefore,
added in the income of the assessee. The Commissioner (Appeals) granted partial relief.
The Tribunal held that loss incurred in business of power generation which was entitled
to deduction under section 80IA could be set off against business income from the
manufacturing unit. On appeal projecting the applicability of section 80-IA(5) of the Act.
Held, that this was not an appeal projecting a grievance that the Special Bench decision
in CIT v. Goldmine Shares and Finance Pvt. Ltd. (2008) 302 ITR 208 (AT)(SB) (Ahd.)
(Trib.) was misapplied or not applied or incorrectly applied. Once the statement of facts
about which there was no dispute showed that there was no deduction claimed under
section 80-IA for the AYs in question, there was no occasion for the Tribunal to have
gone into these questions. Merely because the Tribunal had gone into and considered
them, the court was not obliged to go into them given the admitted factual background.
The Department's question projected the applicability of section 80IA(5) of the Act. The
Tribunal`s conclusion was thus not made subject matter of challenge in this appeal by
the Department. (AY. 2005-06 to 2008-09)
CIT v. Hercules Hoists Ltd. (2016) 386 ITR 698 (Bom.)(HC)
Editorial : Order in Hercules Hoists Ltd. v. Asst. CIT [2013] 22 ITR (Trib.) 527 (Mumbai)
affirmed. SLP is granted the Department, CIT v. Hercules Hoists Ltd. [2016] 380 ITR 7 (St.)
2302 S. 260A : Appeal – High Court – Direction by High Court to Tribunal to answer
questions of law – Tribunal not correct in closing matter on technicalities – Matter
remanded again
The High Court had observed that the direction of the Board was that "henceforth"
appeals shall not be filed in cases where the tax effect did not exceed the monetary
limits prescribed in the Instruction. Therefore, the operation of the Instruction was
only prospective. This position was made further clear observing that clause 11 of the
Instruction clarified that the Instruction would apply to appeals filed on or after July,
10, 2014 only. Matter remanded. (AY. 1979-80)
CIT v. Khairunnisa Ebrahim (Late) (Smt.) (2016) 386 ITR 430 (Ker.)(HC)
2303 S. 260A : Appeal – High Court – Gratuity provision – Question of fact which was not
raised before the Tribunal cannot be raised for the first time before the High Court
[S. 40A(7)]
HC dismissed the plea raised by the assessee first time before the HC which was not raised
in any of the lower authorities. HC dismissed the plea as the question of fact which was
not raised by it before any of the lower authorities. Therefore provision for the purpose of
payment to an approved Gratuity Fund i.e. the LIC Group Gratuity Scheme raised for the
first time before the HC cannot be permitted to be raised in HC. (AY. 2003-04)
Bihar State Warehousing Corporation v. CIT (2016) 386 ITR 410 / 242 Taxman 142 / 287
CTR 556 / 139 DTR 16 (Patna)(HC)
774
S. 260A Appeal
S. 260A : Appeal – High Court – Rule of consistency – Capital or revenue receipt – 2304
Mesne profits – Special Bench of Tribunal holding mesne profits capital receipt and
department not diligent in prsecuting appeal therefrom – Appeal from order following
Special Bench not entertained [S. 4, 115JB]
Dismissing the appeal of revenue, the Court held that we find that the issue before
the Special Bench of the Tribunal in Narang Overseas Pvt. Ltd. was to determine the
character of mesne profits being either capital or revenue in nature. The Special Bench
of the Tribunal in Narang Overseas Pvt. Ltd. held that the same is capital in nature.
There is no doubt that the issue arising herein is also with regard to the character of
mesne profits received by the assessee. In this case also, the amounts are received
by the assessee from a person in wrongful possession of its property i.e. after the
relationship of landlord and tenant has come to an end. Once the Special Bench order
of the Tribunal in Narang Overseas Pvt. Ltd. has taken a view on the character of
mesne profits, then unless the Revenue challenges the order of the Special Bench of
the Tribunal it would be unfair of the Revenue to pick and choose assessees where it
would follow the decision of the Special Bench of the Tribunal in Narang Overseas Pvt.
Ltd. The least that is expected of the State which prides itself on Rule of Law is that it
would equally apply the law to all assessees.
(iii) We make it clear that we have not examined the merits of the question raised for
our consideration. We are not entertaining the present appeal on the limited ground
that the Revenue must adopt a uniform stand in respect of all assessees. This is more
so as the issue of law is settled by the decision of the Special Bench of the Tribunal in
Narang Overseas Pvt. Ltd., (supra). The fact that even after the dismissal of its Appeal
(L) No.1791 of 2008 for non-removal of office objections on 25th June, 2009, no steps
have been taken by the Revenue to have the appeal restored, is evidence enough of the
Revenue having accepted the decision of the Special Bench of the Tribunal in Narang
Overseas Pvt. Ltd. Thus, the question as framed in the present facts does not give rise
to any substantial question of law. (AY. 2008-09)
CIT v. Goodwill Theatres Pvt. Ltd. (2016) 386 ITR 294 / 241 Taxman 352 / 144 DTR 221
(Bom.)(HC)
S. 260A : Appeal – High Court – Low tax effect – As per the CBDT’s low tax effect 2305
circular, the tax effect has to be seen each year irrespective of the fact that a common
issue arises over several years [S. 80IA]
Circular No.21/2015 dated 10.12.2015 applies retrospectively even to the pending
appeals. Although the disputed issues arise in more than one assessment year, in
view of Paragraph 5 of the circular, the appeals could be filed only in respect of such
assessment years in which the tax effect in respect of the disputed issue exceeds
` 20 lakhs. As per paragraph 10 pending appeals below the specified tax limit are to
be withdrawn. Further, separate orders for each assessment year have been passed in
the present case. Each assessment year is a separate year and the entitlement to the
deduction would depend upon the facts and circumstances obtaining in a given year.
(ITA No.958 of 2008, dt. 02.09.2016)(AY. 2003-04)
CIT v. Mirco Instruments Company (P&H)(HC); www.itatonline.org
775
Appeal S. 260A
2306 S. 260A : Appeal – High Court – Delay of 344 days – Extraordinary delay not
satisfactorily explained – Casualness of counsel in attending to defects pointed out by
Registry – Delay was not condoned
The Department's appeal to the court was returned by the Registry raising certain
objections. There was a delay of 344 days in removing the objections and re-filing
the appeal by the Department of which the Department sought condonation. Held,
dismissing the appeal, (i) that apart from saying that the appeals had been filed in the
discharge of official duties and that some delay had taken place since the concerned
officer had to perform other functions as Assessing Officer, there was no satisfactory
explanation for the extraordinary delay. There was some casualness on the part of
counsel for the Department in attending to the defects pointed out by the Registry.
Consequently, the court would not condone the delay in re-filing the appeal.
CIT v. Ashian Needles P. Ltd. (2016) 384 ITR 144 (Delhi)(HC)
2307 S. 260A : Appeal – High Court – Rule of consistency – Tribunal passing order following
its own earlier order on grounds of facts being identical – No reasons in memorandum
of appeal or affidavit by Department for filing appeal where earlier order of Tribunal
not challenged – Inference is that earlier order of Tribunal accepted by Department –
Appeal is not entertained [S. 254(1)]
Where the Tribunal has taken a view on a legal issue and the Department has in turn
either accepted it or challenged it in a higher forum, and a subsequent order of the
Tribunal follows the earlier order of the Tribunal, the assessee must be treated in the
same manner in which the assessee in the earlier case has been treated. However, there
could be valid reasons for the Department to take a different view other than that taken
in an earlier similar case. Where the order being challenged before the court has merely
followed its earlier order and the Department has accepted it and not filed an appeal
against it, the officer concerned must justify the filing of the appeal in this case setting
out the reasons therefor in the memorandum of appeal or at least before the hearing in
an affidavit filed by the Department before the court. The State cannot act arbitrarily to
pick and choose orders from which appeals would be made.
Where the earlier order of the Tribunal in another matter was merely followed by
it stating that the facts were identical, and an appeal is filed from the subsequent
order, the memorandum of appeal ought to mention whether any appeal was preferred
from the earlier order. If not and if it was accepted by the Department, the reason for
pursuing appeal from the subsequent order ought to be indicated in the memorandum
of appeal or in an affidavit. The necessary information with regard to appeal being filed
or not from the earlier order has to be within the knowledge of the Department.
Where the Tribunal had passed orders in favour of the assessee following its own order
in a matter on identical facts but no information was forthcoming whether any appeal
was filed against the earlier order that was followed by the Tribunal nor had the officer
filed any affidavit pointing out the reasons why the order was being challenged where
no appeal was filed in the earlier case. Held, dismissing the appeal, that an inference
was drawn that the earlier order which was followed by the Tribunal had been accepted
by the Department. However, the Department was at liberty to apply to have the appeal
776
S. 260A Appeal
recalled in case any appeal had been filed by it against the earlier order that was
followed by the Tribunal.(AY. 2004-05)
CIT v. Synchem Chemicals (I) Ltd. (2016) 384 ITR 498 (Bom.)(HC)
Editorial: The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. Synchem Chemicals (I) Ltd. [2016] 384 ITR 122 (St.)
S. 260A : Appeal – High Court – Plea urged for first time in appeal before High Court 2308
– Not permissible [S. 10(3), 45 56]
That the Assessing Officer was in error in proceeding on the basis that a sum of ` 10
lakhs received by each of the assessees was in the nature of a casual and non-recurring
receipt which could be brought to tax under section 10(3) of the Act. The Assessing
Officer having held that it could not be in the nature of capital gains it was not open to
the Department to seek to bring it to tax under the heading revenue receipt. What was
in the nature of a capital receipt could not be sought to be brought to tax resorting to
section 10(3) read with section 56 of the Act. (AY. 1993-94, 1994-95)
Gynendra Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
S. 260A : Appeal – High Court – Only on substantial question of law – Tribunal 2309
upholding assessment of sums as income of assessee from undisclosed sources –
Findings based on facts – Appeals not maintainable [S. 153A]
Tribunal upholding assessment of sums as income of assessee from undisclosed sources.
Held, dismissing the appeals, that the appeals were not maintainable as they did not
give rise to any questions of law to be considered by the court under section 260A. The
findings in the Tribunal's order were entirely factual. The assessees did not have a case
that any of their contentions were not considered by the Tribunal or that the findings
of fact arrived at by the Tribunal were perverse. (AY. 2002-03 to 2008-09)
O.G. Sunil v. Dy. CIT (2016) 383 ITR 617 (Ker.)(HC)
S. 260A : Appeal – High Court – Review petition – Held to be not maintainable 2310
[S. 80IB(10)]
The assessee has filed Review Petition in SC challenging the provisions of the Municipal
Corporation Act which was overlooked though specifically pointed out during the final
hearing of the main appeal. Dismissing the Petition, Hon’ble SC held that neither the
provisions of S.300 of the Municipal Corporation Act which have been relied upon by
the Review Petition in the present Petitions nor the decision of the SC in Sundaram
Pillai V. V. R. Pattabiraman AIR 1985 SC 582 will be of any avail. Therefore no case of
review was made out. (AY. 2008-09)
Global Realty & Ors. v. CIT (2016) 134 DTR 334 / 286 CTR 216 (MP)(HC)
S. 260A : Appeal – High Court – Additional question of law which is not raised either 2311
by AO or before the Tribunal and even not mentioned in the appeal memo [S. 4,
S. 260A]
Dismissing the appeal of revenue the Court held that the additional question of law
raised by the revenue’s counsel that the assessee has adopted colourable device to evade
tax was never raised by the AO or before the Tribunal. In fact, the AO had confirmed
777
Appeal S. 260A
the demand only on ground that though issue is decided by High Court, it is still
pending in the Apex Court on a question of law and not pending on issue of fact viz.
adoption of colourable device. The High Court dismissing the revenue’s appeal held that
the revenue must understand that Tribunal being the final fact finding authority, there
was no reason to interfere with the order of the Tribunal and revisit the documents or
issues not part of record before them or even remotely referred to in the appeal memo.
(AY. 2008-09)
CIT v. Kanga & Co. (2016) 133 DTR 257 (Bom.)(HC)
2312 S. 260A : Appeal – High Court – Commission – Findings of fact – Court will not
disturb [S. 37(1)]
Whether entire commission taxable in assessee's hands and in which year is findings
recorded by Tribunal is findings of fact. Court will not disturb. (AY. 1991-92)
Ranjeet Singh v. CIT (2016) 382 ITR 409 / 238 Taxman 552 (P&H)(HC)
2313 S. 260A : Appeal – High Court – Binding nature – Reluctance of AOs to comply with
binding Court judgments leads to negative reactions amongst business entities doing
business in India and hurts National pride and image. Hereafter non-compliance with
orders would visit officials with individual penalties, including forfeiture of salaries.
A copy of order be sent to the Secretary in the Ministry of Finance, Government of
India and the Chairman, Central Board of Excise and Customs
We are mindful of the fact that the judgment and order of this Court was delivered
much after the impugned order. The impugned order is dated 29th January, 2016,
whereas the Division Bench in the petitioner’s case is dated 22nd February, 2016. But,
we expected the officers to save precious time of this Court in not requiring it to pass
a detailed order and judgment by withdrawing the impugned condition/clause. That
is not forthcoming as we find that officers after officers are reluctant to take decisions
for the consequences might be drastic for them. No officer is acting independently and
following judgments of this Court, but waiting for the superiors to give them a nod.
Even the superiors are reluctant given the status of the assessee and the quantum of
the demand or the refund claim. We are sure that some day we would be required to
step in and order action against such officers who refuse to comply with the Court
judgments and which are binding on them as they fear drastic consequences or unless
their superiors have given them the green signal. If there is such reluctance, then,
we do not find any enthusiasm much less encouragement for business entities to do
business in India or with Indian business entitles. Such negative reactions / responses
hurt eventually the National pride and image. It is time that the officers inculcate in
them a habit of following and implementing judicial orders which bind them and
unmindful of the response of their superiors. That would generate the right support
from all, including those who come forward to pay taxes and sometimes voluntarily.
Hereafter if such orders are not withdrawn despite binding Division Bench judgments of
this Court that would visit the officials with individual penalties, including forfeiture of
their salaries until they take a corrective action. If any approval or nod is required from
superiors that should also be granted expeditiously and while obeying the court orders,
the officers can always reserve the Revenue’s rights to challenge them in appropriate
778
S. 260A Appeal
legal proceedings. A copy of order be sent to the Secretary in the Ministry of Finance,
Government of India and the Chairman, Central Board of Excise and Customs. We are
constrained to observe as above simply because repeated suggestions to Mr. Jetley so as
to persuade the officers to withdraw the orders impugned in the petition of their own
did not meet any favourable response. (WP No. 2855 of 2016, dt. 28.03.2016)
Larsen & Tourbo Limited v. UOI (Bom.)(HC), www.itatonline.org
S. 260A : Appeal – High Court – Transfer Pricing – High Court irked at fact that 2314
Dept. is unaware of which of its matters are admitted/dismissed. Chief CIT directed
to streamline the procedure for filing appeal before the High Court – Pr. Chief
Commissioner has assured that in the website of department a separate section
called legal cell will be included and all information regarding appeals admitted and
dismissed will be made available to the assesses [S. 92C]
When the matter came up for hearing the Hon’ble Court observed that in few of the
matters the appeal of the revenue on the above issue were dismissed after considering
the detailed arguments of the assessee and the revenue. The said orders of the Bombay
High Court were also accepted by the revenue. The Hon’ble court also observed that
similar matter was decided in favour of the assessee by the Delhi High Court. However,
in one of the matter the issue was admitted by the Bombay High Court by an ex parte
order which was not brought to the notice of the Hon’ble High Court. To avoid such
an inconsistent stand of the revenue, the Hon’ble Court directed the Principal Chief
Commissioner to stream line the procedure to be followed for filing an appeal to the
High Court and to bring transparency. In pursuance to the said direction of the Hon’ble
High Court, Principal Chief Commissioner of Income Tax filed an affidavit before the
Court on 5/5/2016, wherein he has informed that he has constituted the committee of
Chief Commissioners on 3/5/2016 (Refer copy enclosed). Principal Chief Commissioner
in his affidavit stated that website www.incometaxgovin it has been decided to add
a legal corner on the website where all questions of law admitted, dismissed by the
Hon’ble Bombay High Court will be hosted. The access to the website will be provided
to all concerned for easy reference where the questions of law would be bunched
section wise. Expert Committee will meet every week and decision pronounced by
the Bombay High Court will be discussed and appropriate action will be taken (Refer
Affidavit). Hon’ble High Court also agreed with the suggestion of Dr. K. Shivaram,
Sr. Advocate that the legal corner on the website should also indicate whether the
question of law formulated by the Revenue was rejected and the same has been accepted
by the Income Tax Dept. The counsel for the revenue stated that on instruction from
the Principal Chief Commissioner the website will be functional by 15/6/2016. (ITA No.
2287 of 2013, dt. 06.05.2016)
CIT v. TCL India Holding Pvt. Ltd. (Bom.)(HC); www.itatonline.org
779
Appeal S. 260A
2315 S. 260A : Appeal – High Court – Strictures passed against department for casual
and careless representation despite huge revenue implications. Dept directed to
take remedial measures such as updating the website, appointment of meritorious
advocates, proper evaluation of work done by the advocates, ensuring even
distribution of work amongst advocates etc. Prevailing practice of evaluating
competence of advocates on basis of "cases won or lost" deplored – The Registry is
directed to send a copy of this order on the Chairman, Central Board of Direct Taxes
(CBDT) and the Principal Commissioner of Income Tax [S. 92C]
Strictures passed against department for casual and careless representation despite huge
revenue implications. Dept. directed to take remedial measures such as updating the
website, appointment of meritorious advocates, proper evaluation of work done by the
advocates, ensuring even distribution of work amongst advocates etc. Prevailing practice of
evaluating competence of advocates on basis of "cases won or lost" deplored. The Registry is
directed to send a copy of this order on the Chairman, Central Board of Direct Taxes (CBDT)
and the Principal Commissioner of Income Tax. (ITA No. 2287 of 2013, dt. 12.07.2016)
CIT v. TCL India Holding Pvt. Ltd. (2016) / 241 Taxman 138 / 138 DTR 319 / 288 CTR
34 (Bom.)(HC)
2316 S. 260A : Appeal – High Court – Revenue should be deprecated for filing frivolous
appeal. When a question of law is already covered by earlier orders of the Court, the
Court may constrained to impose cost on AO & CIT
The Revenue had raised various questions of law which were either covered by earlier
orders of Tribunal in assessee’s own case and are accepted by Revenue by not filing an
appeal to HC; or which already been concluded by Supreme Court against the Revenue.
In such a scenario, the HC held that a question of law which is already settled and
accepted by Revenue in earlier years in assessee’s own case, cannot be again challenged
before the Court. However, the Revenue can challenge the ground on a different valid
point provided the same is mentioned in the memo of appeal or is filed before the
hearing by way of an affidavit. Otherwise, the Court may be constrained to impose costs
on the AO concerned and CIT heading the Commissionerate. (AY. 2003-04)
CIT v. Goodlas Nerolac Paints Ltd. (2016) 386 ITR 108 / 131 DTR 57 / 284 CTR 266
(Bom.)(HC)
2317 S. 260A : Appeal – High Court – Question not raised before Tribunal cannot be raised
before Court
Question not raised before Tribunal cannot be raised before Court. (AY. 2000-01)
CIT v. Air India Ltd. (2016) 383 ITR 284 / 237 Taxman 639 / 131 DTR 81 / 289 CTR 287
(Bom.)(HC)
2318 S. 260A : Appeal – High Court – Plea urged for first time in appeal before High Court
is not permissible [S. 10(3), 45, 56]
The Court held that the Department could not be permitted to shift its stand from one
forum to another. Under these circumstances, the court was not prepared to permit the
Department to urge a new plea for the first time in the High Court. (AY. 1993-94, 1994-95)
Girish Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
Gynendra Bansal v. UOI (2016) 384 ITR 161 (Delhi)(HC)
780
S. 260A Appeal
S. 260A : Appeal – High Court – Substantial question of law raised for the first time 2319
which is based on records and does not require any investigation of any facts can be
admitted in appeal before the High Court [S. 143(2), 292BB]
The issue before the HC was that whether the AO was justified passing an assessment
order without serving a notice u/s. 143(2) within the stipulated period as prescribed
under the Act. The HC held that the jurisdiction of AO starts only if the notice
u/s. 143(2) is issued within the prescribed time. It has nothing to do with service of
the notice which is contemplated u/s. 292BB. Therefore, the order of the Tribunal, First
appellate authority and the assessment order cannot be sustained and are to be quashed.
Further, the assessee had raised the aforesaid question for the first time before the HC
to which the Revenue raised objection for admission. The HC held that a substantial
question of law which is based on records and does not require any investigation of any
facts can be entertained in appeal before the HC even if the same is not taken before
the lower authorities. (AY. 1997-98)
U P Hotels Ltd. v. CIT (2016) 131 DTR 99 / 283 CTR 417 (All.)(HC)
S. 260A : Appeal – High Court – Delay of 1,271 days – No reasonable explanation for 2320
delay – Delay could not be condoned
Held, dismissing the appeals, that the court was not satisfied with the reasons offered
for the extraordinary delay of 1,271 days and the delay of 1,876 days in filing the
appeals. The delay could not be condoned.
CIT v. Arvinder Singh (2016) 380 ITR 179 (Delhi)(HC)
CIT v. Elegant Travels P. Ltd. (2016) 380 ITR 179 (Delhi)(HC)
S. 260A : Appeal – High Court – Substantial questions of law – No finding whether 2321
during AY whether there was separate inter college – Substantial questions of law
arose [S. 2(7), 2(24), 2(31), 10(23C)(vi)]
The Tribunal and the Commissioner (Appeals) had not examined whether during the
AYs, there was any separate inter college inasmuch as it was for the first time that
approval was granted to run an inter college on July 14, 2012. While reversing the order
of the Assessing Officer, this factual aspect was not dealt with. All the issues had to be
looked into along with the definition of the word "assessee" u/s. 2(7), the definition of
the word "person" u/s. 2(31), the definition of the word "income" u/s. 10 as contained
in section 2(24). It was in this background that the claim of exemption as sought
u/s. 10(23C)(iiiad) would also have to be seen. Therefore, substantial questions of law
arose for consideration on the facts and legal issues. (AY. 2010-11, 2011-12)
CIT(E) v. Chironji Lal Virendra Pal Saraswati Shaiksha parishad (2016) 380 ITR 265 (All.)
(HC)
781
Commissioner S. 263
S. 263. Revision of orders prejudicial to revenue
2322 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Even if AO applies
mind and decides not to assess expenditure as unexplained u/s. 69C because the
assessee withdrew the claim for deduction, the CIT is entitled to revise the assessment
on the ground that the matter needed further investigation – Revision on issue not
mentioned in the notice is permissible, however he must be heard at each stage –
Order is not erroneous merely because another view is possible [S. 69C]
Court held that there can be no doubt that so long as the view taken by the Assessing
Officer is a possible view the same ought not to be interfered with by the Commissioner
under Section 263 of the Act merely on the ground that there is another possible view
of the matter. Permitting exercise of revisional power in a situation where two views
are possible would really amount to conferring some kind of an appellate power in the
revisional authority. This is a course of action that must be desisted from. However,
the above is not the situation in the present case in view of the reasons stated by the
learned Commissioner of Income Tax on the basis of which the said authority felt that
the matter needed further investigation, a view with which we wholly agree. Making a
claim which would prima facie disclose that the expenses in respect of which deduction
has been claimed has been incurred and thereafter abandoning/withdrawing the same
gives rise to the necessity of further enquiry in the interest of the Revenue. The notice
issued under Section 69C of the Act could not have been simply dropped on the ground
that the claim has been withdrawn. We, therefore, are of the opinion that the learned
Commissioner of Income Tax was perfectly justified in coming to his conclusions insofar
as the issue No. (iii) is concerned and in passing the impugned order on that basis. The
learned Tribunal as well as the High Court, therefore, ought not to have interfered with
the said conclusion. Court also held that so long as the view taken by the Assessing
Officer is possible view it ought not to be interfered with by the Commissioner under
section 263 of the Act, merely on the ground that there is another view of the matter.
Permitting exercise of revisional power in a situation where two views are possible
would really amount to conferring some kind of an appellate power in the revisionary
authority. This is a course of action that must be desisted from. (AY. 2001-02)
CIT v. Amitabh Bachchan (2016) 384 ITR 200 / 135 DTR 73 / 286 CTR 113 / 240 Taxman
221 (SC)
2323 S. 263 : Commissioner – Revision of orders prejudicial to revenue – AO taking one
of two possible views – Order is not erroneous even if there was loss to revenue
[S. 80HHC, 80-IB]
The AO after considering the matter in detail had passed an assessment order by
applying his mind. There was a divergence of views taken by different High Courts.
Hence, the Tribunal was justified in setting aside the order of the Commissioner passed
under section 263. (AY. 2001-02)
CIT v. Rashid Exports Industries (2016) 389 ITR 293 / 66 Taxmann.Com 38 (All.)(HC)
782
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Co-operative 2324
society – Bank interest – Surplus funds with bank not being attributable to business
carried on by society, cannot be deducted under section 80P(2)(a)(i) – Revision was
held to be justified [S. 80P(2)(a)(i)]
The assessee had claimed deduction under section 80P and not specifically under
section 80P(2)(a)(i). The assessee had also not shown any bifurcation of the income
derived from providing credit facilities to its members and the interest earned by
depositing surplus funds with the bank. In response to the notice under section 263,
the assessee had contended that the reason for treating the interest income received
from deposits as business income was that the funds of the business were kept in
interest earning account with facility to withdraw the fund as and when necessary
to earn interest for and on behalf of its members and that it was one of its activities
as provided in section 80P(2)(a) and that the gains of business attributable to such
activity were exempted from taxable income. The contention of the assessee that the
Commissioner had not held that the interest derived from the deposits in the bank was
income from other sources did not merit consideration for the reason that it was for the
AO, pursuant to the order under section 263 to examine the nature of the income and
tax it accordingly. Having regard to the stand adopted by the assessee in response to
the notice under section 263, it could not be said that the Commissioner had travelled
beyond the scope of the notice under section 263, inasmuch as, he had only dealt with
the contention raised by the assessee. The Appellate Tribunal was justified in upholding
the invocation of powers under section 263 by the Commissioner and that the order did
not suffer from any legal infirmity. (AY. 2009-10, 2010-11)
State Bank of India v. CIT (2016) 389 ITR 578 / 241 Taxman 163 / 290 CTR 129 (Guj.)
(HC)
Editorial : The Supreme Court has granted special leave to the assessee to appeal against
this judgment: State Bank of India v. CIT (2016) 389 ITR (2016) 389 ITR 3 (St.)]
S. 263: Commissioner – Revision of orders prejudicial to revenue – Court denied to 2325
hear the issue of revisional power of CIT as it was not going to affect tax liability of
assessee [S. 146(3)]
Delhi High Court following the order in CIT v. Asha Primlani (Smt.) ITA No. 532 of 1996
dt 6-9-2007 has held that by virtue of amendment in section 263 by Taxation Laws
(Amendment) Act, 1984, Commissioner could exercise powers under section 263 in
respect of an order passed by inspecting Assistant Commissioner only with effect from
1-10-1994. Accordingly the question was answered in favour of assessee. On appeal
by revenue the assessee argued that question had become academic as tax liability of
assessee had been decided in favour of assessee in earlier and subsequent assessment
years, hence, even if question would be decided in favour of revenue, it would have nil
effective relief. Revenue argued that question might be decided inasmuch as it might
still be a live issue in other cases. Court held that the revenue had to satisfy Court that
said question was a live issue in other adjudications after which cases would be decided
on merits (AY. 1978-79, 1979-80)
CIT v. Mitsui & Co. Ltd. (2016) 238 Taxman 575 (SC)
Editorial : Order in Mitsui & Co. Ltd. v. CIT (2008) 167 Taxman 179 (Delhi)(HC)
783
Commissioner S. 263
2326 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Loss not proved by
assessee by adducing evidence – Setting aside of order by Appellate Tribunal without
considering relevant material facts was held to be perverse
Allowing the appeal of the assessee the Court held that the Appellate Tribunal had
not applied its mind and had not considered all the relevant materials and that its
conclusion in setting aside the order of the Commissioner was perverse. The Appellate
Tribunal had evidently failed to make a distinction between an inference and a
presumption. Even in the case of a trial when the question arose as to whether or not a
fact had been proved, the question had to be answered on the basis as to whether the
evidence adduced probabilised the claim or contention of the plaintiff or the defendant,
as the case might be. The Tribunal had failed to notice the facts which were not in
dispute and that the inference drawn by the Commissioner was not based either on
presumptions or surmises or suspicions. It was reasonable to infer that an attempt might
have been made to reduce the income by showing fictitious loss. (AY. 2007-08)
PCIT v. Indian Finance Ltd. (2016) 389 ITR 242 (Cal.)(HC)
2327 S. 263 : Commissioner – Revision of orders prejudicial to revenue – AO taking one of
two possible views – Conflict of view in High Courts – Order of AO not erroneous –
Revision of order was held to be not valid [S. 80HHC, 80-IB, 80-IA(9)]
Dismissing the appeal of the revenue, the Court held that; the AO after considering the
matter in detail had passed an assessment order by applying his mind. The AO had
allowed the deduction under sections 80HHC and 80-IB to the extent of the amount of
profits and gains as contemplated under section 80-IA(9). The question as to whether
the deduction under section 80HHC was to be computed after reducing the deduction
under section 80-IB from the profits and gains was a legal consideration. The AO
granted deduction under sections 80HHC and 80-IB taking the same figure of profits.
On the other hand, the Department’s case was that the deduction under section 80HHC
was required to be computed after reducing the amount of deduction under section
80-IB from profits and gains. On this score, there was a divergence of views taken by
different High Courts. Hence, the Tribunal was justified in setting aside the order of the
Commissioner passed under section 263. (AY. 2001-02)
CIT v. Asian Handicrafts (2016) 389 ITR 293 / 66 taxmann.com 38 (All.)(HC)
2328 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Deduction was
allowed without enquiry – Revision was held to be justified – Order served a few days
after limitation, order is not barred by limitation [S. 80-IB]
Dismissing the appeal of assessee the Court held that Assessing Officer granting special
deduction without enquiry. Order erroneous and prejudicial to Revenue hence revision
order was held to be justified. Court also held that it had been categorically recorded
by the Tribunal that the order under section 263 in the case of the assessee was passed
on March 20, 2013 which was required to be passed up to March 31, 2013. Thus, the
order was within the period of limitation. The order was dispatched on April 4, 2013
and received by the assessee on April 6, 2013. The order was not barred by limitation.
(AY. 2009-10)
A.S. Precision Machines P. Ltd. v. CIT (2016) 388 ITR 440 / (2017) 146 DTR 161 / 293
CTR 340 (P&H)(HC)
784
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Limitation – 2329
Reassessment in respect of items other than item sought to be revised by Commissioner
– Period of limitation begins from original assessment – Not from date of reassessment
in which item was not dealt with [S. 143(3), 147, 148]
Allowing the petition the Court held that; the reassessment order was not for review
or reassessment of the entire case but only in respect of a particular item. In all
other respects, the original assessment order was maintained, and addition made by
reassessment order dated March 26, 2015 was added in income assessed in the original
assessment order. Though the notice under section 263(1) of the Act referred to the
reassessment order, in fact it referred to a discrepancy in the regular assessment order
dated October 31, 2011, wherein the incentive of value added tax from Maharashtra
Government received by the assessee was allowed to be deducted. This incentive had
no concern with the reassessment proceedings in the order dated March 3, 2015. Since
the notice issued by the Principal Commissioner was in reference to a discrepancy in
the original assessment order dated October 31, 2011 and not the reassessment order
dated March 26, 2015, the limitation would run from the date of the regular order of
assessment and therefore, the notice was barred by limitation prescribed under section
263(2) of Act, 1961. (AY. 2007-08)
L G Electronics India P. Ltd. v. P CIT (2016) 388 ITR 135 / 290 CTR 283 / 143 DTR 105/
(2017) 79 taxmann.com 418 (All.)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Capital gains – 2330
Stock-in-trade converted in to investment – Indexation – Revision was held to be valid
[S. 2(42A), 45]
Dismissing the appeal the Court held that the assessee-company was engaged in the
business of trading in cement, paper, AC sheets, pipes, etc. Till March 31, 1993 certain
shares were held as stock-in-trade and were converted into investment by a resolution
dated March 31, 1993. In the previous year relevant to the assessment year 1994-95,
the assessee sold these shares and claimed that the shares were investment during the
assessment year 1994-95 and the profits arising from the sale were capital gains, on
which indexing benefit was allowable. The Assessing Officer allowed the indexation
benefit not from the date of conversion but from the date of purchase, which resulted in
long-term capital loss. The Commissioner set aside the order acting under section 263,
which was confirmed by the Tribunal was held to be valid. (AY 1994-95)
Cambay Investment Corporation Ltd. v. DCIT (2016) 388 ITR 366 / 242 Taxman 13 (Guj.)
(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Expenditure out 2331
of undisclosed business receipts is allowable – Revision was held to be not justified
[S. 69C]
Dismissing the appeal the Court held that the Tribunal had not erred in its view
particularly considering the fact that the Commissioner had limited powers of revision
under section 263 of the Income-tax Act, 1961. Even in a case of unaccounted receipts
of a businessman, it was only the profit element embedded in the business which could
be taxed and not the entire amount. If the assessee could have pointed out that even
785
Commissioner S. 263
on unaccounted receipts, expenditure had been incurred for the purpose of business, it
would have been only the reasonable profit on such receipts which should have been
taxed. (AY. 2006-07)
CIT v. Babulal K. Daga (2016) 387 ITR 114 (Guj.)(HC)
2332 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Export Oriented
Undertaking – Assessing Officer adopting one of two plausible views – Revision was
held to be not proper [S. 10B]
Dismissing the appeal of the revenue, the Court held that the Commissioner could not
have assumed jurisdiction under section 263 of the Income-tax Act, 1961. The view
taken by the Assessing Officer allowing the set off was one of the possible views and
in such a case, the Commissioner could not have assumed jurisdiction under section
263 of the Act. The order of the Tribunal was proper. (AY. 2003-04)
CIT v. D.C. Mills P. Ltd. (2016) 387 ITR 64 (Ker.)(HC)
2333 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Assessment order
was passed after enquiry hence the order was not prejudicial to Revenue therefore
revision was not valid
Dismissing the appeal of revenue, the Court held that the twin tests required to be
satisfied for exercising the power under section 263 of the Act are: (a) the order to
be revised (assessment order) is erroneous, (b) it is prejudicial to the interests of the
Revenue. Held, that the Commissioner had proceeded to initiate proceedings under
section 263 of the Act only on the ground that the Assessing Officer had not assigned
any reasons for accepting the valuation of the work-in-progress declared by the assessee.
In accordance with the materials placed before the Tribunal in the records pertaining to
the assessment year in question, a detailed examination was made by the Tribunal and
the Tribunal was of the view that the Assessing Officer had applied his mind before
accepting the figure declared by the assessee in the work-in-progress report. Such an
order could not be held to be erroneous and prejudicial to the interests of the Revenue.
It was not a case of "lack of inquiry". Further inquiry ordered by the Commissioner
would amount to a fishing inquiry in the matter already concluded. The profit declared
by the assessee worked out to more than 8 per cent that was normally adopted and
accepted by the Department. However, in the computation of work-in-progress made by
the Appellate Commissioner, the profit margin worked out to more than 31.8 per cent
which was practicably not acceptable. Accordingly, on this count also, the order passed
by the Commissioner was untenable. The Tribunal was right in setting aside the order
of revision. (AY. 2006-07)
CIT v. Saravana Developers (2016) 387 ITR 239 / 289 CTR 550 / 68 taxmann.com 148
(Karn.)(HC)
2334 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Survey –
Assessment order after considering material on record and documentary evidence
obtained by Additional Director of Income Tax (Inv.) – Order of revision was held to
be not valid
Dismissing the appeal of revenue, the Court held that at no point of time was it made
clear to the assessee as to the points that he had to meet. Thus it could not be said
786
S. 263 Commissioner
that a reasonable opportunity was granted to the assessee by the Commissioner during
the course of proceedings under section 263. Even on the merits the Assessing Officer
before passing his order had taken into account two vital documents, namely, the survey
report and valuer's report, and after discussing the two documents he had passed the
order which showed the application of mind by him. The Tribunal also noted that when
the documentary evidence under reference had been obtained by no less an authority
than the Additional Director (Inv.) and when such a report had been passed on to the
Assessing Officer he was bound to adopt it and such action of the Assessing Officer
could not be said to be erroneous even if the order may be prejudicial to the interests of
the Revenue. The Tribunal was justified in cancelling the order of revision. (AY 2002-03)
CIT v. Satish Kumar Keshri (2016) 387 ITR 447 (Patna)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Administrative 2335
expenses – Revision was held to be not valid [S. 80-IB]
Tribunal held that, the deduction was allowed in the earlier year and the Commissioner
has not stated any reason for denying the deduction hence the order of revision was
quashed. Dismissing the appeal of Revenue the Court held that the Department was
unable to show any error in the findings recorded by the Tribunal. (AY. 2004-05)
CIT v. Superman Knitters (P) Ltd. (2016) 387 ITR 494 / 69 taxmann.com 181 (P&H)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Wrong allowance 2336
– Failure by Assessing Officer to include sum assessed in original assessment, revision
was held to be proper
Dismissing the appeal the Court held that the Appellate Tribunal had legally and
validly affirmed the revision order of the Commissioner. No error or perversity was
demonstrated in the order of the Commissioner and the Appellate Tribunal. The
Assessing Officer had gone beyond the remand order passed by the Appellate Tribunal.
(AY. 2004-05)
B. K. Jain v. CIT (2016) 387 ITR 605 (P&H)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Held, mere fact 2337
that the AO did not make any reference to the issues in the assessment order cannot
make the order erroneous when the issues were indeed looked into – Held, AO made
enquiries and was satisfied with the replies of the assessee, order of revision was held
to be invalid [S. 68]
ITAT held that the AO made enquiries about the issues involved and which have been
noted by the CIT. The assessee made submissions by placing all relevant documents
before the AO. It further held that the mere fact that the AO did not make any reference
to the impugned issues in the assessment order cannot make the order erroneous when
the issues were indeed looked into. On the above findings, the High Court held that the
findings were rendered on facts and which cannot be held to be perverse. (AY. 2007-08)
CIT v. Reliance Communication Ltd. (2016) 240 Taxman 655 (Bom.)(HC)
Editorial : SLP of revenue was dismissed, CIT v. Reliance Communication Ltd. (2017) 244
Taxman 55 (SC).
787
Commissioner S. 263
2338 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Entire amount
received on transfer of development rights cannot be taxed as the same is subject to
performance of certain obligation to environment clearance – Warranty expenses –
Allowed after raising query – Allowed after application of mind – Revision was held
to be not justified [S. 37(1)]
Dismissing the appeal of the revenue, the Court held that AO held that the entire
amount received on transfer of development rights cannot be taxed as the same is
subject to performance of certain obligation relating to environment clearance. AO held
that only part amount taxable and balance treated as deposit. AO also allowed warranty
expenses after calling for relevant details. CIT set aside the assessment u/s. 263. Tribunal
allowed the appeal of assessee on appeal the Court held that on the first issue, AO has
taken a view which is not based on incorrect assumption of facts or law. On second
issue, AO had raised a query and after considering the material allowed the deduction.
Assessing Officer has applied his mind on both the issues revision was held to be not
justified. (AY. 2007-08)
CIT v. Gera Developments (P.) Ltd. (2016) 387 ITR 691 / 240 Taxman 467 (Bom.)(HC)
2339 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Assessing Officer
has already made addition concerning the same expenditure – Revision to make
addition on better premises or on different application of legal principle was held to
be not justified [S. 145]
On appeal by the assessee the Court held that whereas against addition proposed by
Commissioner in notice issued under section 263 Assessing Officer had already made
much greater addition concerning same expenditure, Commissioner could not exercise
power under section 263 to make addition on better premises with better reasoning or
on different application of legal principles. (AY. 2008-09 to 2012-13)
JMC Projects (India) Ltd. v. PCIT (2015) 67 taxmann.com 258 / 136 DTR 279 (Guj.)(HC)
2340 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Action initiated
by the commissioner is not sustainable in a case where the AO had made specific
enquiries by raising queries and had thereafter accepted the stand of the assessee
[S. 68]
During the concerned years, the assessee had received certain gifts. In the course of
assessment proceedings, the AO verified the identity, genuineness and creditworthiness
of the donors. On verification, the AO accepted the gifts received by the assessee.
Thereafter, CIT initiated proceedings under section 263 and set aside the orders of
the AO and further directed that in case the gifts were not found to be genuine, then
the Assessing Officer was at liberty to invoke Section 68. High Court held that it was
settled that if during the assessment proceedings, queries were raised and the assessee
responded to the same, then even if an Assessment order does not mention the same, it
does not mean that the Assessing Officer has not applied his mind to the issues. High
Court held that in the present case, assessee had given evidence of the communications
received from the donors of the gifts along with the statement of their Bank accounts
and that the AO was satisfied about the identities of the donors, the source from where
these funds had come and also the creditworthiness/capacity of the donor. Therefore,
once the AO was satisfied with regard to the same, there was no further requirement
788
S. 263 Commissioner
on the part of the AO to disclose his satisfaction in the Assessment Order. High Court
also rejected the argument that the donor had not been examined by the AO. High Court
observed that it was not necessary in every case that all the evidence produced had to
be tested by cross examination of the person giving the evidence. It is only in cases
where the evidence produced gives rise to suspicion that further scrutiny is called for. If
there is nothing on record to indicate that the evidence produced is not reliable and the
AO was satisfied with the same, then it is not open to the CIT to exercise his powers
of revision without the CIT recording how and why the order is erroneous due to not
examining the donors. HC further held that it was not necessary that the AO should
have verified the source of the source and even otherwise this would be a case of an
inadequate enquiry and not a ‘no enquiry’. HC held that the proceeding initiated by the
CIT under section 263 was not sustainable. (AY. 2007-08, 2008-09)
CIT v. Nirav Modi (2016) 138 DTR 81 / 241 Taxman 255 / (2017) 390 ITR 292 / 291 CTR
245 (Bom.)(HC)
Editorial : SLP of the revenue was dismissed; CIT v. Nirav Modi (2016) 389 ITR 42 /
(2017) 244 Taxman 194 (SC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Export Oriented 2341
undertakings – Where Development Commissioner granted approval as a 100% Export
Oriented Undertaking which was ratified by the Board, assessee entitled to claim
exemption [S. 10B]
The assessee earned revenue from developing software for foreign clients. In the return
of income, the assessee claimed deduction u/s. 10B of the Act which was accepted by
the Assessing Officer in the scrutiny assessment u/s. 143(3) of the Act. The CIT invoked
section 263 of the Act and held that the approval granted to assessee was as an “Export
Oriented Unit” and not as an “Undertaking” as envisaged u/s. 10B of the Act. Thus,
deduction u/s. 10B of the Act allowed by the AO is erroneous as well as prejudicial to
the interest of the revenue. On appeal, the Tribunal reversed the findings of the CIT and
restored the benefit u/s. 10B of the Act to the assessee. On appeal, the High Court held
that the assessee’s unit was granted approval as a 100% EOU by a letter of permission
which was ratified in second meeting of the Board for Approval. Thus, the assessee
was entitled for deduction u/s. 10B of the Act. The findings of the Commissioner are
erroneous in holding that the assessee is a “Unit” under SEZ and not an “Undertaking”
for claiming deduction u/s. 10B of the Act. (AY. 2010-11)
PCIT v. Zealous Web Technologies (2016) 239 Taxman 224 (Guj.)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Method of 2342
accounting – Solicitor following cash system of accounting – Advance deposits
received from clients – Treated as liability in accounts and adjusted towards fees and
expenditure incurred on behalf of client in subsequent years – No loss of revenue –
Revision to bring deposits shown in balance – Sheet to tax was held to be not proper
Dismissing the appeal of revenue the Court held that the deposits were treated by the
assessee as a capital receipt and the deposits were adjusted in the subsequent years
against the expenditure incurred for or on behalf of the client from whom the deposit
was received. Such expenditure also included the fees of the assessee himself. It was at
789
Commissioner S. 263
that stage that the money was earned by him. Before that, he was holding the money
as an agent or as a fiduciary of his client. The Appellate Tribunal was right in taking
the view that it did. (AY. 2005-06)
CIT v. Bijoy Kumar Jain (2016) 385 ITR 339 / 240 Taxman 438 / 139 DTR 283 (Cal.)(HC)
2343 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Assessing Officer
treating income from sale of carbon credits as capital receipt – Order not erroneous
– Commissioner could not set aside order [S. 4, 28(i)]
The requirement for exercise of power under section 263 is that the order passed by
the lower authority should not only be erroneous, but should also be prejudicial to the
interests of the Revenue.
Held, that earning of carbon credit was not the business of the assessee nor was it
generated as a by-product on account of business activity of power generation, but it
was earned on account of concern for environment. Carbon credit was generated on
account of employment of good and viable practices by the assessee. The Tribunal had
rightly held that it was a capital receipt. The Tribunal was justified in setting aside the
order of the revision. (AY. 2009-10)
CIT v. Subhash Kabini Power Corporation Ltd. (2016) 385 ITR 592 / 240 Taxman 514/
287 CTR 147 (Karn.)(HC)
Editorial: Order in Subhash Kabini Power Corporation Ltd. v. CIT (2015) 37 ITR 106 (Trib.)
(Bang.) is affirmed.
2344 S. 263 : Commissioner – Revision of orders prejudicial to revenue – An Assessment
order which has been revised under section 264 cannot again be considered for
revision under section 263 of the Act
The assessee applied for registration under section 12A of the Act on 27.03.2006 which
was rejected by CIT. The Tribunal allowed the appeal of the assessee and directed the
CIT to grant the registration under section 12A w.e.f. 1st April, 2003. The order of the
Tribunal was given effect to by passing an order dated 27th July, 2009. However, the
assessment order on 27th December, 2009 passed under section for A.Y. 2007-08 was
passed without granting the benefit of section 11. Assessee filed the application against
assessment order under section 264 which was allowed by the CIT directing the AO to
recompute the income. The AO passed an order giving effect to CIT’s order recomputing
the income of the assessee vide order dated 27th May, 2011. On 22nd March, 2012, the
CIT passed an order under section 263 revising the assessment order passed on 27th
December, 2009. On appeal by the assessee, the Tribunal reversed the order of CIT. On
appeal to the High Court it was held that the assessment order passed on 27th July,
2009 has merged with the order of CIT passed under section 264 which was also given
effect to vide order dated 27th May, 2011. Therefore, the original assessment did not
even exist in the eyes of law. Hence, the CIT did not have the jurisdiction to revise the
order under section 263 of the Act. (AY. 2007-08)
CIT v. New Mangalore Port Trust (2016) 382 ITR 434 / 238 Taxman 397 / 283 CTR 342
(Karn.)(HC)
790
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Transfer of case 2345
– Once order of transfer duly published and communicated Commissioner becomes
functus officio – Issuance of notice thereafter by Commissioner without jurisdiction
[S. 124, 127]
Held, (i) that the actual transfer of files may have taken place on July 29, 2013 but a
notice under section 143(2) by the Assessing Officer of the circle to which jurisdiction
was transferred was issued on March 18, 2013. The jurisdiction in this case had
been transferred by the order dated September 3, 2012 by the Commissioner himself.
Once that was done he lost seisin over the matter. The Commissioner became functus
officio prior to March 18, 2013 because the Assessing Officer had assumed jurisdiction
without which the notice dated March 18, 2013 under section 143(2) could not have
been issued. The order of transfer was duly published and thereafter acted upon by the
Assessing Officer to whose circle jurisdiction had been transferred. The issuance of the
notice dated March 18, 2013 under section 263 and the consequent order dated March
26, 2013 passed under section 263 were without jurisdiction and a nullity. (AY. 2008-09)
Ramshila Enterprises P. Ltd. v. PCIT (2016) 383 ITR 546 / 239 Taxman 17 (Cal.)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Held, AO 2346
disallowed interest expenditure in accordance with Rule 8D hence view adopted by
AO a plausible view – Order not erroneous [S. 14A, 35D]
The assessee company had incurred expense on Initial Public Offer and claimed
deduction u/s. 35D, which was allowed by the AO during the assessment proceedings.
AO disallowed certain interest expenditure under rule 8D(2)(ii). CIT invoked section
263 on two grounds viz. deduction of expense on Initial Public Offer should not be
allowed on ground that the assessee was not an industrial undertaking and secondly
entire interest expenditure incurred by assessee was attributable to earning of exempt
income and should be disallowed u/s. 14A. High Court relying upon the case of
Dy. CIT v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2013) 356 ITR 460 / 215 Taxman
72 / 33 taxmann.com 117 (Guj.) held that when a claim u/s. 35D has been granted by
the AO in respect of previous years, such claim cannot be disallowed subsequently
without disturbing the decision in the initial year. In respect of 14A disallowance, High
Court held that AO himself computed disallowance of interest expenditure u/s. 14A read
with rule 8D. In both the issues, the view adopted by the AO was a plausible view and
therefore, it cannot be said that the assessment order was erroneous so as to warrant
exercise of powers u/s. 263. (AY. 2009-10)
PCIT v. Deep Industries Ltd. (2016) 238 Taxman 198 (Guj.)(HC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – CIT directed AO 2347
to redo capital gain computation on the market value on surrender of tenancy rights
by assessee – Order of Commissioner was held to be not justified where the Assessing
Officer has adopted one of the possible views [S. 45, 48]
Assessee declared capital gains at ` 1,76,88,000 plus 20 lakhs on surrender of tenancy
rights by adopting full value of consideration. The AO computed capital gains at
` 2,30,14,568 plus 20 lakhs. Assessee filed an appeal against the assessment order which
was allowed by the CIT(A), Tribunal dismissed the Revenue’s appeal and Revenue’s
791
Commissioner S. 263
appeal in High Court is pending disposal. Meanwhile, the CIT invoked powers under
section 263 and directed the AO to recompute capital gain by adopting the market value
of tenancy rights. However, the Tribunal held that no provision under the Act permits
to adopt market value as full value of consideration when Assessee has received built
up area in exchange of tenancy rights. It further held that if AO adopted one of the
two possible views and FVOC is the cost incurred by the developer, then CIT would
not be justified in invoking powers under section 263. High Court affirmed the order of
Tribunal and dismissed the Revenues appeal. (AY. 2005-06)
CIT v. Khivraj Motors (2016) 133 DTR 142 (Karn.)(HC)
2348 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Cash credits
– Share capital – Even if the AO has conducted an inquiry into the taxability of
share capital receipts CIT is entitled to revise if the AO has not applied his mind to
important aspects [S. 68]
In Subhlakshmi Vanijya Pvt. Ltd. v. CIT (2015) 155 ITD 171 (Kol.)(Trib.) Vaibhavlaxmi
Financial Advisory Pvt. Ltd. v. CIT and Rajmandir Estates Pvt. Ltd. vs. CIT the Tribunal
upheld the exercise of revisionary powers u/s. 263 by the CIT on the ground that though
the AO had conducted necessary enquiries, he had not applied his mind properly to
the evidence on record. The assessee filed an appeal in the High Court, dismissing
the appeal the Court held that we have indicated above the pieces of evidence which
go to show that the Commissioner had reasons to entertain the belief that this was or
could be a case of money laundering which went unnoticed because the Assessing
Officer did not hold requisite investigation except for calling for the records. The
evidence which we have tabulated above and the prima facie inference drawn by us
is deducible from the documents also submitted before the Assessing Officer. The fact
that the Assessing Officer did not apply his mind to those pieces of evidence would
be evident from the assessment order itself. The persons behind the assessee company
and the persons behind the subscribing companies were not interrogated which was
essential to unearth the truth. The question for consideration is whether in the presence
of materials discussed above the Commissioner was justified in treating the assessment
order erroneous and prejudicial to the interest of the revenue. That question in the
facts and circumstances has to be answered in the affirmative. Whether receipt of share
capital was a taxable event prior to 1st April, 2013 before introduction of Clause (VII-b)
to the sub-section 2 of Section 56 of the Income-tax Act; whether the concept of arm’s
length pricing in a domestic transaction before introduction of Sections 92A and 92BA
of the Income-tax Act was there at the relevant point of time are not questions which
arise for determination in this case. (AY. 2009-10)
Rajmandir Estates (P) Ltd. v. PCIT (2016) 386 ITR 162 / 240 Taxman 306 / 287 CTR 512
/ 136 DTR 345 (Cal.)(HC)
Editorial : SLP of assessee is dismissed, Rajmandir Estates (P) Ltd. v. PCIT (2017) 242
Taxman 127 (SC)
792
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Book profit – As 2349
the loss suffered on transfer of business was rightly debited to the P&L A/c as per
AS 13, it cannot be added back to the Book Profits – Revision order was held to be
bad in law [S. 115JB]
The assessee debited an amount of ` 919.52 lakhs to the Profit and Loss account in
accordance with a scheme of arrangement for the transfer of its investment division
to Daisy Commercials Pvt. Ltd. (hereinafter referred to as ‘DCPL’). According to the
sanctioned scheme, the assessee transferred its investment division worth ` 23.16 crores
to DCPL. The shareholders of the assessee company were issued shares of the value
of ` 13.96 crores in DCPL. The assessee reduced its share capital by ` 13.96 crores.
The difference between the investment value of ` 23.16 crores and the share capital
reduction of ` 13.96 cores, that is, ` 9.20 crores was debited to the Profit & Loss account
for the year ended March 31, 2006. This was allowed by the AO in computing the book
profits. The CIT revised the assessment u/s. 263 and held that not adding back the
aforesaid amount of ` 919.52 lakhs in computing the book profit u/s. 115JB of the Act
made the assessment order erroneous and prejudicial to the interests of the revenue.
The Tribunal accepted the claim of the assessee. On appeal by the department to the
High Court HELD dismissing the appeal:
(i) What is required of us is to examine the legality of exercise of power under Section
263 of the Act by the CIT. It is a fact that the assessee incurred loss of a sum of
` 9.20 crores by resorting to transfer of its investment division to Daisy
Commercials Private Ltd. The loss was debited to the profit and loss account.
The assessment was under Section 115JB of the Act. The Assessing Officer did
not question the act of debiting loss arising out of the transfer to the P/L account.
The CIT was of the opinion that the loss could not have been debited to the P/L
account and the amount was required to be added back for computation of book
profit under Section 115JB.
(ii) The Accounting Standards laid down by the Institute however provide for
recognition of the profit or loss arising out of investment in the profit and loss
account. Reference in this regard may be made to Clauses 21 and 25 of Accounting
Standard 13. The disclosure made in the financial statements is in pursuance of
the requirement of Clause 25 quoted above and is also in pursuance of Clause 2(b)
of Part II of Schedule VI to the Companies Act, 1956 which is not to be construed
as any qualification indicating any inaccuracy in the accounts. There was, thus
no mistake on the part of the assessee in debiting the loss to the profit and loss
account. Once it is realised that the assessee had correctly debited the profit and
loss account for the loss arising out of the transfer of investment division, there
remains no difficulty in realising that the CIT proceeded on a wrong premise
which was responsible for exercise of jurisdiction under Section 263 which he
would not have done if he had realised the correct position. (AY. 2006-07)
CIT v. Binani Cement Ltd. (2016) 384 ITR 457 / 136 DTR 177 / 239 Taxman 29 / 289 CTR
181 (Cal.)(HC)
793
Commissioner S. 263
2350 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Amounts not
deductible – Disallowance for short-deduction TDS default (i.e. deduction u/s. 194H
instead of u/s. 194H) [S. 40(a)(ia), 194C, 194H]
The CIT passed an order u/s. 263 on the ground that the Assessing Officer has not
disallowed the expenditure under Section 40a(ia) of the Act as per the audit report
submitted by the statutory auditors in Form 3CD wherein it was specifically made clear
that the assessee has not considered CBDT Circular No. 715 in respect of Section 194C
of the Act pertaining to deduction of TDS on advertisement contract with M/s TLG India
Pvt. Ltd. After hearing the parties, the Commissioner set aside the assessment order
holding that the provisions of Section 40a(ia) of the Act is applicable. Being aggrieved
by the said order, the assessee preferred appeal before the Tribunal. The Tribunal having
considered the explanation furnished by the assessee before the Assessing Officer which
forms part of the assessment records, has come to a conclusion that the assessee has
deducted TDS under Section 194H of the Act and the provisions of Section 194C of
the Act are not applicable to the present case. On law, it followed the Judgment of the
Calcutta High Court reported in S. K. Tekriwal (2014) 361 ITR 432 (Cal). As regards the
binding nature of the CBDT Circular, the Tribunal has followed the Judgment of the
Apex Court in Hindustan Aeronautics Limited reported in 243 ITR 808. The Tribunal
has also followed a co-ordinate Bench decision of this Court in Dhaanya Seeds Private
Limited reported in ITA No. 1523/Bang/2012 dated 27.09.2013. Thus, Tribunal having
considered the case on facts and law, has come to a conclusion that the Commissioner
had no jurisdiction to invoke the provisions of Section 263 of the Act as the twin
conditions which are mandatorily required to be satisfied for invoking the provisions
of Section 263 of the Act i.e., (i) order to be revised is erroneous and (ii) prejudicial to
the interest of the revenue are not satisfied. On appeal by the department to the High
Court HELD dismissing the appeal:
We have carefully considered the arguments addressed by both the parties and perused
the material on record in the light of the Judgments referred to by the Tribunal in
arriving at the conclusion. An identical question regarding Section 40(a)(ia) of the Act
was considered by the Calcutta High Court in S. K. Tekriwal (2014) 361 ITR 432 (Cal)
and the findings given by the Calcutta High Court has been followed by the Tribunal.
Similarly, as regards the binding nature of the CBDT, the Tribunal has followed the
Judgment of the Apex Court in HAL (supra). In view of both the decisions cited supra,
no substantial questions of law arises for our determination in this appeal. (ITA No. 342
of 2015, dt. 16.02.2016) (AY. 2007-08)
CIT v. Hewlett-Packard India Sales Pvt. Ltd. (2016) 382 ITR 496 (Karn.)(HC)
2351 S. 263 : Commissioner – Revision of orders prejudicial to Revenue – Lease rental –
Capital or revenue – Revision was is not justified as the Commissioner failed to record
as to how and in what manner order was erroneous and prejudicial to revenue
The Assessee Company had claimed a deduction on account of lease rental paid for
motor car taken on finance lease and the same was allowed in the assessment. The
Commissioner being of the view that the lease rentals were required to be treated as
capital expenditure, thus directed the Assessing Officer to examine the same.
Tribunal was of the view that the Assessing Officer (while passing the order under
section 143(3) of the Act) had requisite details and evidences and on being satisfied
794
S. 263 Commissioner
of such details and evidences, he had allowed the claim to the assessee. Therefore the
assessment order passed by the Assessing Officer was not erroneous and prejudicial to
the revenue. Aggrieved by the order, the revenue preferred an appeal before the High
Court.
The High Court followed the earlier year orders, wherein DRP had ruled in the favour of
the assessee and had allowed deductions on account of lease rental payment. High Court
also noted that the Commissioner had simply directed the Assessing Officer to examine
the matter without recording as to why the order passed by the Assessing Officer was
prejudicial to the interest of the revenue and erroneous.
High Court held that the Assessing Officer had adopted one of the courses permissible
by law and the factors relevant for exercise of power under section 263 were absent and
the order passed does not record how and in what manner the assessment order passed
by the Assessing Officer was erroneous and prejudicial to the interest of the Revenue.
Accordingly High Court dismissed the revenue’s appeal. (AY. 2007-08)
CIT v. Philips India Ltd. (2016) 237 Taxman 538 (Cal.)(HC)
Editorial: SLP is granted to the revenue, CIT v. Philips India Ltd. (2017) 245 Taxman 44
(SC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Order passed 2352
without complying with the direction of Tribunal would erroneous and prejudicial to
interests of Revenue. Therefore, CIT has power to exercise revisional powers to set
aside the assessment [S. 254(1)]
The Tribunal had remanded matter to the AO after issuing certain directions. However,
the AO passed the order without complying with the directions of the Tribunal.
Thereafter, the CIT exercised revisional powers u/s. 263 in setting aside the assessment
order and remanded it to AO.
Appeal was filed before the High Court challenging the jurisdiction of CIT u/s. 263. The
High Court held that assessment order passed without complying with the directions of
the Tribunal (remand order) is erroneous and prejudicial to the interest of Revenue and
thus CIT has power to revise the assessment order u/s. 263. (AY. 1990-91 to 1994-95)
U.P. Forest Corporation v. CIT (2015) 235 Taxman 270 / (2016) 131 DTR 274 / 284 CTR
311 (All.)(HC)
Editorial: SLP of assessee was admitted, U.P. Forest Corporation v. CIT (2016) 240 Taxman
3 (SC)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Transfer – Mere 2353
agreement for transfer of shares does not cause effective transfer of shares unless it
is accompanied with delivery of share certificate and duly signed and stamped share
transfer form. An agreement to transfer share merely gives an enforceable right to the
parties [S. 2(47), 54EC, 54F, Companies Act, 1956, S. 108]
Allowing the appeal of the assessee the Tribunal held that a mere agreement for transfer
of shares does not cause effective transfer of shares unless it is accompanied with delivery
of share certificate and duly signed and stamped share transfer form. An agreement to
transfer share merely gives an enforceable right to the parties, considering the CBDT
Circular No. 704 dated 28.04.1995, order of Commissioner was set aside. (AY. 2010-11)
Y. V. Ramana v. CIT (2016) 183 TTJ 337 / (2017) 145 DTR 202 (Vizag.)(Trib.)
795
Commissioner S. 263
2354 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Revision –
Revision is held to be valid on the basis of proposal by the Assessing Officer if other
conditions are satisfied
Tribunal held that Revision is held to be valid on the basis of proposal by the Assessing
Officer if other conditions are satisfied. (AY. 2004-05)
Stewarts & Lloyds of India Ltd. v. CIT (2016) 158 ITD 456 / 178 TTJ 188 (Kol.)(Trib.)
2355 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Order passed by
Assessing Officer accepting sale consideration declared by assessee resulted in escapement
of capital gains tax and, thus, impugned revisional order was to be upheld [S. 45, 48]
Tribunal held that on facts, the assessment order passed by Assessing Officer accepting
sale consideration declared by assessee resulted in escapement of capital gains tax and,
thus, impugned revisional order was to be upheld. (AY. 2012-13)
Kumar Rajaram v. ITO (2016) 157 ITD 772 / 178 TTJ 168 (Chennai)(Trib.)
2356 S. 263 : Commissioner – Revision of orders prejudicial to revenue – No query with
regard to application of Section 50C of Act was ever raised by AO in any manner –
Revision was held to be justified [S. 50C]
No query with regard to application of Section 50C of Act was ever raised by AO in any
manner. No inquiry was made by CIT(A) with respect to application or examination of
provisions of Section 50C of Act. Commissioner had requisite powers and jurisdiction
to examine application of Section 50C of Act which were omitted to be applied by the
AO. (AY. 2004-05)
Vithal Nagar Co-operative Housing Society Ltd. and Ors. v. CIT (2016) 52 ITR 21 / (2017)
185 TTJ 780 (Mum.)(Trib.)
2357 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Commissioner
could not cause roving inquiry into assessment and re-examine the statement of affairs
which were not seized material [S. 153A]
Allowing the appeal of the assessee the Tribunal held that Commissioner could not
cause roving inquiry into assessment and re-examine the statement of affairs which were
not seized material. (AY. 2012-13)
V. R. Venkatachalam v. ACIT (2016) 48 ITR 13 (Chennai)(Trib.)
2358 S. 263 : Commissioner – Revision of orders prejudicial to revenue – AO found no
violation of S. 40A(3) on three occasions, revision on the basis of audit objection is
impermissible [S. 40A(3)]
Allowing the appeal of the assessee, the Tribunal held that the issue of violation of the
provisions of section 40A(3) was examined three times that is (i) during the assessment
proceedings, (ii) after assessment proceedings, and (iii) during initiation of reassessment
proceedings and he had not found any violation of such provisions. Such decision of
the AO cannot be held as erroneous and prejudicial to the Revenue merely because that
no elaborate finding has been recorded in the order of the AO in this regard. Therefore,
order u/s. 263 was set aside. (AY. 2010-11)
Sartaj Singh v. PCIT (2016) 48 ITR 604 (Amritsar)(Trib.)
796
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Deduction at 2359
source – Interest other than interest on securities – Reimbursement of commission to
holding company – Reimbursement would not come under purview of interest so as
to make assessee liable to deduct tax at source u/s. 194A, revision was held to be bad
on law [S. 2(28A), 194A]
Allowing the appeal of the assessee, the Tribunal held that since there was no money
borrowed or debt incurred, therefore provisions of sections 2(28A) and 194A do not
apply. Payment made to NCL is not “income by way of interest”. The impugned receipt
would be in the nature of reimbursement of expenses incurred by it. Therefore the order
passed by the Assessing Officer is one of the possible views. Even on merit one cannot
find that bank guarantee commission does not come under the purview of interest so
as to make liable to deduction of tax at source u/s. 194A. Accordingly the order of
Commissioner was set aside. (AY. 2010-11, 2011-12)
Neo Sports Broadcast (P.) Ltd. v. CIT (2016) 159 ITD 136 / 181 TTJ 417 (Mum.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Deduction 2360
at source – Commission on sale of lottery tickets – There was no principal-agent
relationship between parties, payment in question could not be regarded as
'commission' requiring deduction of tax at source [S. 40(a)(ia), 194G, 194H]
During year, assessee made payments to various stockists by way of prize winning
money attributable to unsold lottery tickets. Commissioner held that the assessee
was liable to deduct tax at source u/s. 194G while making aforesaid payments since
there was failure on the part of the assessee, to do so, the payments were liable to be
disallowed u/s. 40(a)(ia). On appeal allowing the appeal the Tribunal held that there
was no principal-agent relationship between parties, payment in question could not be
regarded as 'commission' requiring deduction of tax at source. Therefore, impugned order
passed by authorities below was set aside. (AY. 2010-11)
Future Distributors v. PCIT (2016) 160 ITD 574 / 181 TTJ 1 / 50 ITR 515 (Kol.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Proposal by AO 2361
and lack of proper enquiry – Revision was held to be not valid
The Tribunal held that since the proposal came from the AO and the CIT initiated
revision proceedings merely on the basis of such proposal, the revision is not valid.
The Tribunal further held that it may be a case of inadequate enquiry but not a case of
no enquiry and therefore CIT was not justified in invoking his revisionary jurisdiction
under section 263. (AY. 2010-11)
Shantai Exim Ltd. v. CIT (2016) 178 TTJ 451 / 136 DTR 313 (Ahd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Lack of proper 2362
enquiry – Revision was held to be not valid
The Tribunal held that the AO has completed the assessment after accepting the
submissions of assessee that bank deposits reflected turnover from retail business. It is
clear from the aforesaid fact that the AO passed orders after due application of mind.
Therefore, action under section 263 was not warranted. (AY. 2007-08, 2008-09)
Vikrant Mehra v. ITO (2016) 178 TTJ 53 (UO) / 48 ITR 382 (Asr.)(Trib.)
797
Commissioner S. 263
2363 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Order was passed
on the basis of audit objection – Revision proceedings was held to be bad in law
[S. 40A(3)]
Order passed by AO was not erroneous and was not prejudicial to interest of Revenue.
Proceedings u/s. 263 were initiated on basis of audit objections as was noted by CIT(A)
in his order. Punjab & Haryana High Court in case of CIT v. Sohana Woollen Mills had
held that mere audit objections, and merely because different view could be taken were
not enough to hold that order of AO was erroneous or prejudicial to interest of Revenue.
Order passed by CIT was set aside. Assessee’s Appeal allowed. (AY. 2010-11)
Sartaj Singh v. PCIT (2016) 48 ITR 604 / 179 TTJ 17 (UO)(Asr.)(Trib.)
2364 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Explanation 2
declaratory in nature – Lack of enquiry by the AO – Revision valid
The Commissioner noticed from the assessment records that the assessee claimed
deduction for expenditure in respect of provision on account of warranty, sales tax,
excise and liquidated damages. He took the view that no expenditure in the nature
of contingent expenditure or provision for expenditure can be allowed under section
28 or section 37 unless the assessee followed the mercantile system of accounting
and the liability claimed on accrual basis had crystallised during the previous year,
that the expenditure claimed was nothing but provision for expenditure and that the
Assessing Officer had failed to make relevant and meaningful enquiry into whether the
liability relating to warranty, sales tax, excise and liquidated damages had crystallised
to the extent deduction had been claimed in the return. The Commissioner set aside
the assessment on the ground that the Assessing Officer had acted in a routine and
perfunctory manner and failed to carry out the relevant and necessary inquiries and
examination as warranted by the facts of the case and made an assessment order which
was erroneous and prejudicial to the interests of the Revenue. The Tribunal held that
the amendment to section 263 by the Finance Act, 2015, by insertion of Explanation 2
to section 263 of the Income Tax Act, 1961, is declaratory and clarificatory in nature.
It, inter alia, provides that if the Assessing Officer passes an order without making
inquiries or verifications which he should have made or the order is passed allowing
any relief without inquiring into the claim, the order shall be deemed to be erroneous
and prejudicial to the interests of the Revenue. (AY. 2007-08)
Crompton Greaves Ltd. v. CIT (2016) 46 ITR 465 / 140 DTR 153 / 177 TTJ 1 (Mum.)(Trib.)
Editorial: Miscellaneous Application is filed, which is pending for hearing
2365 S. 263 : Commissioner – Revision of orders prejudicial to revenue – AO made detailed
enquiry at assessment stage for cash deposit by R against property – CIT found enquiry
inadequate and issued notice after audit objection was raised – Revision not permissible
The AO called for an explanation of the assessee with regard to cash deposited in
his bank account. During the assessment proceedings, the assessee furnished copies
of bank account, cash book, Statement of R from whom advance had been received
against property which even contained explanation about source of income of R to
advance cash to assessee and agreement copy. The Commissioner issued notice under
Section 263 and noted that the agreement was not registered and further statement of R
798
S. 263 Commissioner
was not subjected to cross examination and thereafter took the view that there was lack
of application of mind by AO and for want of proper enquiry directed him to make fresh
assessment. On appeal to Tribunal, it was held that AO had examined the issue in detail
and proper enquiries were made. If there was inadequate enquiry, that would not by
itself give occasion to Commissioner to pass order under Section 263. The Commissioner
issued notice after the audit objection was raised and was not taken further action
against the assessee. Such a course was not sustainable in law. (AY. 2009-10)
Vikram Kaswan v. CIT (2016) 47 ITR 322 (Chd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Amalgamation 2366
of companies – No provision for communication of factum of amalgamation to
Commissioner – Initiation of revision proceedings against amalgamating company after
date of amalgamation – Not valid
The High Court approved the merger of HEPL with the assessee with effect from April 1,
2011. The Commissioner issued notice under Section 263 on December 24, 2014 in the
name of HEPL and passed an order in the same name. The assessee contended that the
order was passed in the name of non-existing company and fact of amalgamation was
brought to the notice of AO by letter dated July 23, 2013. On appeal to Tribunal, it was
held that there was no provision in the Act to communicate the factum of amalgamation
to the Commissioner. The assessee had already informed the AO. Before taking up any
action under Section 263, the Commissioner had to pursue records and the records
would include the communication made by the assessee to the AO intimating about the
fact of amalgamation. Hence, initiation of proceedings under Section 263 against HEPL
after its amalgamation with the assessee was void ab-initio. (AY. 2006-07)
Milestone Tradelinks P. Ltd. v. ITO (2016) 47 ITR 606 (Ahd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – If the assessee had 2367
filed all the requisite details with the AO at the time of assessment, then revision by
CIT is not possible due to mere change of opinion
The AO allowed exemption u/s. 10(23C) to the assessee, a charitable society, and treated
it to be registered u/s. 12AA and the receipts were considered to be below ` 1 crore.
The CIT initiated proceedings u/s. 263 on the basis that the assessee was not registered
u/s. 12AA before the completion of assessment and the consolidated receipts of the
trust were more than ` 1 crore since it had not included scholarship receipts to its total
receipts. Further, the CIT observed that depreciation was claimed on capital expenditure
which was allowed in the year of purchase of assets as application. The ITAT quashed
the revision of order by CIT since the assessee had filed all the requisite details with the
AO, at the time of assessment, who had allowed the claim of the assessee. The revision
by the CIT was merely due to a change of opinion which was not allowable. Various
courts have held in favour of the assessee with respect to the claim of depreciation on
capital expenditure and the AO had specifically looked into the aggregate receipts of
the Assessee. (AY. 2010-11)
Baberwad Shiksha Samiti v. CIT (E) (2016) 47 ITR 218 / 134 DTR 65 / 177 T TJ 380
(Jaipur)(Trib.)
799
Commissioner S. 263
2368 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Additional ground
– Addition not challenged in original assessment cannot be challenged in appeal
against order pursuant to revision order u/s. 263
The assessee claimed deduction of ` 9,65,903 towards prior period expenses for the
assessment year 2006-07. Since the expenses did not relate to the assessment year
2006-07, the claim was disallowed by the Assessing Officer while passing the original
assessment order under section 143(3) of the Income-tax Act, 1961. This assessment
year was a subject matter of revision under section 263 and the Assessing Officer was
directed to consider the allowability of depreciation on the improvement made towards
leasehold properties. Consequent to the revision order passed under section 263, the
Assessing Officer completed the assessment under section 143(3) read with section
263. On appeal challenging the disallowance of prior period expenses, the Tribunal
held that the addition did not emanate from the order passed under section 143(3) read
with section 263. Since the assessee failed to challenge the addition in the original
assessment, it could not challenge the addition in appeal against the order of revision,
as this was not the subject matter of the order passed under section 263. (AY. 2006-07)
Accel Frontline Ltd. v. DCIT (2016) 46 ITR 138 (Chennai)(Trib.)
2369 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Amalgamation
of companies – As the amalgamation company ceases to exist, revision order on the
amalgamating company is bad in law
The fact of merger of Bond Co. Ltd. with the assessee with effect from April 1, 2013,
was duly informed to the Assessing Officer by letter dated November 24, 2014. However,
the Commissioner under section 263 of the Income-tax Act, 1961, passed a revisional
order in the name of Bond Co. Ltd. on March 10, 2015. The Tribunal held that Bond
Co. Ltd. had amalgamated with the assessee by order of the Calcutta High Court on May
16, 2014, and pursuant to the amalgamation, Bond Co. Ltd., had lost its identity and
existence. The reply letter dated January 27, 2015, before the Commissioner in response
to showcause notice showed that the assessee had specifically brought to the notice of
the Commissioner that Bond Co. Ltd. had amalgamated with the assessee. Hence, the
assessee had duly discharged its onus of intimating the Department about the fact of
merger of Bond Co. Ltd. In these circumstances, the Commissioner ought to have taken
cognizance of the fact and should have issued a fresh showcause notice in the name of
the assessee and proceeded to pass the fresh order in the name of the assessee. Pursuant
to the amalgamation, the amalgamating company lost its existence. Section 292BB could
not be applied in the facts because it could be made applicable only to assessment or
reassessment proceedings and not to revision proceedings as contemplated under section
263. Moreover, the provisions of section 292BB would not come to the rescue of the
Revenue when there was a basic fault in the assumption of jurisdiction itself by the
Commissioner issuing the show cause notice and passing the order on the nonexistent
entity. When there is a jurisdictional defect, it does not become curable. (AY. 2010-11)
Emerald Co. Ltd. v. ITO (2016) 46 ITR 619 / 176 TTJ 276 / 133 DTR 177 (Kol.)(Trib.)
800
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Capital gains – 2370
Income from house property – Receipt of one time premium on allotment of tenancy
rights perpetually to tenants is chargeable to tax as capital gains and not as income
from house property – Revision of order was held to be not justified [S. 22, 45, 54EC]
Assessee received one time premium for grant of tenancy rights in a property. Tenancy
was perpetual and assessee did not have power to evict tenant till rents were paid.
Assessee invested said amount in Rural Electrification Corporation Bond and claimed
exemption u/s. 54EC which was allowed by AO. The Commissioner, u/s. 263, held that
said amount was chargeable as income from house property and, therefore, exemption
u/s. 54EC was not admissible. The Honourable ITAT observed that property constitute’s
a bundle of rights and transfer by way of allotment of perpetual tenancy with right of
occupancy and enjoyment of property perpetually in favour of tenant is also transfer
of one of the right out of bundle of rights which property carries with it and shall
be chargeable to tax u/s. 55(2)(a), read with section 45 as income from capital gains.
Therefore view of A.O. was correct which was duly supported by provisions of Act,
therefore, order passed by Commissioner u/s. 263 was unsustainable in law. (AY. 2009-10)
Sujaysingh P. Bobade (HUF) v. ITO (2016) 158 ITD 125 / 140 DTR 132 / 180 TTJ 631
(Mum.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Notice issued by 2371
CIT on the ground that sufficient enquiry has not been made – Unjustified
The assessee firm engaged in the business of developing and constructing housing
projects and sale of plots. During the course of assessment proceedings, the assessee
produced its books of account, bank account, sale bills, purchase bills and vouchers
of expenses etc. which were test checked. The assessee has also filed details of capital
introduced by the partners and other details called for which have been verified and
placed on record. During the year the assessee has claimed deduction under Section
80IB(10) of the Act and details of the same have been filed. Since the assessee has
fulfilled all the conditions laid down under Section 80IB(10) of the Act, the deduction
under Section 80IB(10) is allowed. In this regard the assessee has filed separate
trading account of sale of plots and bungalow at Butibori, Sale of shop at Besa and
sale of bungalows at Besa covered under Section 80IB(10) of the Act. However, CIT
issued notice under Section 263 of the Act on the ground that the AO has allowed
the deduction under Section 80IB(10) without proper verification and without making
necessary enquiries. The assessee being aggrieved filed an appeal before the Hon'ble
Appellate Tribunal. The Appellate Tribunal was pleased to quash the notice issued
under Section 263 of the Act by observing that the AO has made the necessary
enquiry by issuing questionnaire to the assessee and obtaining the details as he desired
necessary. Now the learned CIT was of the opinion that the details obtained by the
assessee were not sufficient. In our considered opinion this approach of the learned
CIT in invoking the jurisdiction under Section 263 of the I.T. Act is not sustainable.
(AY. 2006-07)
Harihar Housing Agency v. CIT (2016) 177 TTJ 242 / 134 DTR 107 (Nag.)(Trib.)
801
Commissioner S. 263
2372 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Order of AO brief
and cryptic – Brief order could not be said to be erroneous and prejudicial to interest
of Revenue
AO required the assessee to submit certain record regarding the purchaser/seller alongwith
complete postal address and was satisfied with the record produced before him and
explanation given to him. ITAT held that the CIT had wrongly presumed that the
Assessing officer had not properly examined the issue. The order of the Assessing officer
may be brief and cryptic but that by itself is not sufficient reason to brand the assessment
order as erroneous and prejudicial to the interest of Revenue. It is well settled law that
writing an order in details may be a legal requirement but the order not fulfilling this
requirements cannot be said to be erroneous and prejudicial to the interest of revenue.
The AO had made proper and desired enquires before passing the order. (AY. 2010-11)
Ved Prakash Contractors v. CIT (2016) 175 TTJ 19 (UO) (Chd.)(Trib.)
2373 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Deduction of tax
at source – Commission or brokerage etc. [S. 194H]
Where Assessing Officer while completing assessment did not make any enquiry relating
to non-deduction of tax at source in respect of discount/commission paid to vendors
against pre-paid recharge vouchers, Commissioner was justified in setting aside said
assessment in exercise of his revisional power. (AY. 2006-07 to 2010-11)
Vodafone South Ltd. v. CIT (TDS) (2015) 155 ITD 109 / 174 TTJ 246 / (2016) 131 DTR 92
(Chd.)(Trib.)
2374 S. 263 : Commissioner – Revision of orders prejudicial to revenue – In challenging the
validity of a section 263 revision order, the validity of the underlying section 143(3)
assessment order which is sought to be revised can be examined even if the said
assessment order has not been challenged and has become final. If the assessment
order is passed on a non-existent entity, the revision order is void [S. 292B]
Allowing the appeal of assessee the Tribunal held that if the impugned assessment order
passed u/s. 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a
valid jurisdiction to pass the impugned order u/s. 263 to revise the non est assessment
order. The original assessment order passed u/s. 143(3) dt. 24-10-2013 was null & void
in the eyes of law as the same was passed upon a non-existing entity and, therefore,
the CIT could not have assumed jurisdiction under the law to make revision of a non
est order and, therefore, the impugned order passed u/s. 263 by the CIT is also nullity
in the eyes of law and therefore the same is hereby quashed. (ITA No. 688/Mum/2016,
dt. 10.06.2016) (AY. 2011-12)
Westlife Development Ltd. v. Pr. CIT (Mum.)(Trib.); www.itatonline.org
2375 S. 263 : Commissioner – Revision of orders prejudicial to revenue – There is doubt
whether Explanation 2(a) to Section 263, inserted by FA 2015 w.e.f. 01.04.2015 has
retrospective effect. The said Explanation does not override the law that the CIT
cannot fault an assessment order without conducting his own inquiry or verification
to establish that the assessment order is not sustainable in law
Allowing the appeal the Tribunal held that there is doubt whether Explanation 2(a) to
Section 263, inserted by FA 2015 w.e.f. 01.04.2015 has retrospective effect. The said
802
S. 263 Commissioner
Explanation does not override the law that the CIT cannot fault an assessment order
without conducting his own inquiry or verification to establish that the assessment order
is not sustainable in law.( ITA No. 2690, 2691/Mum/2016, dt. 06.05.2016) (AY. 2008-09)
Narayan Tatu Rane v. ITO (Mum.)(Trib.), www.itatonline.org
S. 263 : Commissioner – Revision of orders prejudicial to revenue – As issue of 2376
whether TDS should be u/s. 194C or 194H is subject to two views, revision is not
possible [S. 194C, 194H]
Allowing the appeal of assessee the Tribunal held that in the original assessment
proceedings, the AO had analysed the payment in detail and then concluded that the
provisions of section 194C are applicable. Also, not two but three views were possible
viz. (i) TDS u/s. 194H which was discussed by the AO in original order; (ii) TDS u/s.
194C which was upheld by AO; and (iii) section 194A now sought to be taken by CIT.
Since three views were possible, revision was not permissible. Furthermore, even on
merits, it was held that view of the CIT was not correct because there was no money
borrowed or debt incurred, and hence, payment made to NCL was not “income by way
of interest”. (AY. 2010-11, 2011-12)
Neo Sports Broadcast Pvt.Ltd. v. CIT (2016) 142 DTR 329 (Mum.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Share application 2377
– Revision cannot be initiated to conduct roving inquiries whether share application
money share premium constitute undisclosed income
Allowing the appeal, the Tribunal held that in the present case although the AO has
mentioned regarding the submissions of documents and discussion carried out but still
the CIT has mentioned while passing the order u/s. 263 of the Act that the order of
AO is erroneous and prejudicial to the interest of revenue. In this respect we would
further like to mention that the order of AO in the present case may be brief but that
by itself is not a sufficient reason to held the order of assessment as erroneous and
prejudicial to the interest of the revenue. The scope of interference u/s. 263 is not
to set aside merely unfavaourable orders and bring to tax some more money to the
treasury nor is the section meant to get at sheer escapement of revenue which is taken
care of by other provisions in the Act. Power under section 263 cannot be exercised
for starting fishing and roving enquiries. In the garb of exercising power under Section
263, the Commissioner cannot initiate proceedings with a view to starting fishing and
roving enquires in matters or orders which are already concluded. (ITA No. 2794&2795/
Mum/2014 dt. 23.03.2016) (AY. 2004-05)
Rachana Finance & Investments Pvt. Ltd. v. CIT (Mum.)(Trib.); www.itatonline.org
S. 263 : Commissioner – Revision of order prejudicial to revenue – An order of 2378
revision which does not show independent application of mind by the CIT is against
the spirit of the Act and liable to be set aside [S. 143(3)]
Allowing the appeal of assessee the Tribunal held that; (i) As per the provisions of
section 263 it is the Commissioner of Income Tax who has to examine the records and
thereafter form an independent opinion that the order passed by the Assessing Officer
is erroneous in so far as it prejudicial to the interest of revenue. In the present case we
803
Commissioner S. 263
find that the Commissioner of Income Tax has not exercised his independent judgment
for invoking revisional powers. The Commissioner of Income Tax has to pass a speaking
order highlighting deficiencies in the assessment order with reasons.
(ii) A perusal of the impugned order shows, that the Commissioner of Income Tax
in the instant case has merely reproduced the deficiencies pointed out by the Dy.
Commissioner of Income Tax in the assessment order. The Commissioner of Income Tax
has not given the reasons as to how the findings of the Assessing Officer are erroneous
in so far as prejudicial to the interest of revenue. The contention of the assessee is that
all the relevant documents were placed on record by the assessee during the course of
assessment proceedings. The Assessing Officer has passed the order after considering
the same. The duty of the assessee is bring all the relevant documents before the
Assessing Officer. The manner in which the order is to be passed is the prerogative of
the Assessing Officer.
(iii) The order of the Assessing Officer may be brief and cryptic but that by itself is
not sufficient reason to hold that the assessment order is erroneous and prejudicial to
the interest of revenue. It is for the Commissioner to point out as to what error was
committed by the Assessing Officer in taking a particular view. In the case in hand,
the Commissioner of Income Tax has failed to point out error in the assessment order.
For invoking revisionary powers the Commissioner of Income Tax has to exercise his
own discretion and judgment. Here the Commissioner of Income Tax has invoked
the provisions of section 263 at the mere suggestion of the Dy. Commissioner of
Income Tax, without exercising his own discretion and judgment. In view of the
fact that the Commissioner of Income Tax has invoked the provisions of section 263
without applying his own independent judgment and merely at the behest of proposal
forwarded by the Dy. Commissioner of Income Tax is against the spirit of Act. Thus,
the impugned order is liable to be set aside.(ITA No. 1223/PN/2013, dt. 21.12.2015)
(AY. 2008-09)
Span Overseas Ltd. v. CIT (Mum.)(Trib.); www.itatonline.org
2379 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Order passed on
a non-existing entity – Consent of assessee will not give jurisdiction to Commissioner
to revises the order – Order was held to be bad in law
Allowing the appeal of assessee the Tribunal held that Order passed on a non-existing
entity – Consent of assessee will not give jurisdiction to Commissioner to revise the
order – Order was held to be bad in law. (ITA No. 1578/Ahd/2015, dt. 04.03.2016) (AY.
2006-07)
Milestone Tradelinks P. Ltd. v. ITO (Ahad.)(Trib.); www.itatonline.org
2380 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Solicitor received
money from his client to meet out expenses incurred on behalf of client, solicitor
remained liable to account by this money to his client, and, hence, it did not become
income of assessee – Revision order was held to be not valid [S. 5, 145]
Where assessee-solicitor received money from his client to meet out expenses incurred
on behalf of client, solicitor remained liable to account by this money to his client, and,
804
S. 263 Commissioner
hence, it did not become income of assessee. Revision proceedings was held to be not
valid. (AY. 2005-06, 2007-08)
ACIT v. Pawan Kumar Jhunjhunwala (2016) 157 ITD 667 (Kol.)(Trib.)
S. 263: Commissioner – Revision of orders prejudicial to revenue –Investment from 2381
borrowed money – Revision was held to be not valid [S. 54F]
Allowing the appeal of the assessee the Tribunal held that where assessee had fulfilled
all conditions of investment of equivalent amount of capital gain in purchase of
residential house qualifying for relief under section 54F, she would be entitled to
exemption under section 54F for total investment irrespective of fact that part of such
investment came from borrowed money. (AY. 2009-10)
Sumathi Gedupudi (Smt.) v. Add. CIT (2016) 156 ITD 419 / 177 TTJ 660 / 133 DTR 188
(Hyd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – VDIS certificate 2382
– Even inadequate, that would not, by itself, give occasion to Commissioner to pass
revision order merely because he has a different opinion in matter [S. 69A]
Tribunal held that where the assessee had filed VDIS certificate to show that jewellery
found during search had been declared under VDIS and Assessing Officer accepted such
certificate, there was no error in order of Assessing Officer so as to invoke revisional
jurisdiction. If there was an enquiry, even inadequate, that would not, by itself, give
occasion to Commissioner to pass order under section 263, merely because he has a
different opinion in matter (AY. 2011-12)
Narain Singla v. Pc.CIT (2016) 156 ITD 275 (Chd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Detailed enquiry 2383
made during assessment proceedings and AO came to conclusion that no TDS is liable
to be deducted – Merely, AO did mention about these investigations does not make
order illegal – CIT cannot impose his view and hold order is erroneous [S. 40(a)ia),
271C]
Held that CIT can assume jurisdiction u/s. 263 if CIT finds AO’s order to be erroneous
and prejudicial to interest of revenue simultaneously. If AO has taken one of the
possible views then CIT cannot impose his view. But if AO makes enquires but fails
to apply law properly then the order can be said to erroneous. Also, CIT has to show
that the case is prejudicial to revenue. AO has raised the issue of non-deduction of
TDS which were duly replied by assessee. Further, AO has conducted independent
enquires from the suppliers of the material also. Hence, it is not a case of no enquiry.
Also, it cannot be a case of inadequate enquiry as query raised by AO has been properly
addressed and AO has also preferred to issue notices to concerned parties which were
duly replied to AO. On this basis, no disallowance was made. Judging this case on the
scale of no enquiry or inadequate enquiry would not serve any purpose. Fact that AO
did not mention these investigations made by him in assessment order does not make
his action illegal. Further, once provisions of sec. 40(a)(ia) are not applicable on facts,
whatever was going through in the mind of AO at that time, it is a fact that he has
reached to a correct conclusion. Thereby, order of AO cannot be erroneous. Initiating
805
Commissioner S. 263
Section 271C penalty proceedings cannot be a relevant factor to decide whether
disallowance u/s. 40(a)(ia) was applicable or not. Thereby, order u/s. 263 cannot be
erroneous and jurisdiction assumed by CIT is bad in law. (AY 2005-06)
Krypton Datamatics Ltd. v. DCIT (2016) 176 TTJ 11(UO) (Chd.)(Trib.)
2384 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Revision not possible
if the AO had taken a view after due consideration of assessee’s submissions [S. 143(3)]
After the completion of assessment u/s 143(3), the CIT invoked the powers u/s. 263 and
alleged that the AO did not complete the assessment in a proper manner. The ITAT
held that the assessee had filed detailed submissions before the AO on all the issues
mentioned by the CIT based on which the AO had taken a view. This view, though
different from that of the CIT, cannot be taken as prejudicial to the revenue, especially
when the view of the AO had been supported by the judgment of the Hon'ble Supreme
Court. (AY. 2008-09, 2009-10)
Damsak Projects P. Ltd. v. DCIT (2016) 45 ITR 278 (Mum.)(Trib.)
2385 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Deemed Dividend
– No incriminating materials found during search – No addition was made in
assessment – Revision on premise of deemed dividend was held to be not justified
[S. 2(22)(e)]
Deemed dividend could be assessed only in the hands of shareholder and only when
the loan is advanced by a company to such shareholder. The monies received by the
assessee from the lending company constituted an intercorporate deposit and not a loan
and hence the provisions of section 2(22)(e) are not applicable. Intercorporate deposits
and loans are totally distinct and separate. The assessee was not a shareholder of GGPL
in any of the AY for which the proceedings u/s. 263 had been initiated. Thus, the
AO had rightly not made any additions towards deemed dividend in the proceedings
completed u/s. 153C. (AY. 2007-08 to 2010-11)
Tanuj Holdings Pvt. Ltd. v. Dy. CIT (2016) 46 ITR 420 (Kol.)(Trib.)
2386 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Inadequate or lack
of enquiry – Revision was held to be not justified [S. 54F]
Where Assessing Officer examined an issue, Commissioner could not assume jurisdiction
on same issue by stating that Assessing Officer had conducted inadequate enquiry or
there was a lack of enquiry. (AY. 2009-10)
Vegesina Kamala v. ITO (2016) 157 ITD 457 (Visakha)(Trib.)
2387 S. 263 : Commissioner – Revision of orders prejudicial to revenue – Assessment order
passed in pursuance of time barred notice is not amenable to revision [S. 143(2)]
Held that the notice u/s. 143(2) of the Act, was issued beyond time. The assessment
order passed pursuant to the notice which was beyond time was not justified and all
proceedings subsequent to the notice were of no consequence. Hence, the revision order
passed u/s. 263 was to be quashed. (AY. 2007-08)
Krishan Kumar Saraf v. CIT (2016) 46 ITR 387 (Delhi)(Trib.)
806
S. 263 Commissioner
S. 263 : Commissioner – Revision of orders prejudicial to revenue – No power to 2388
decide issue adjudicated by appellate authorities – Original seized document relating
to agreement for purchase of land already considered by appellate authorities against
department – Copy of the same document not admissible in evidence in subsequent
revision proceedings
If a matter in issue has been considered in appeal and decided by the appellate
authorities, the same issue could not be a subject matter of revision u/s. 263 of the
Income-tax Act, 1961. The AO observed that according to the document seized during
the search, the agreement was for the purchase of land by the assessee at the rate of
` 1,25,000/- per bigha whereas the rate of land under the agreement was ` 6,50,000
per bigha. The AO concluded that the assessee paid an amount of ` 23,62,500 for the
purchase of the land leading to an addition u/s. 69B.
On appeal, the Tribunal held that the AO had examined the seized document at
the assessment stage and his order has been set aside by the appellate authorities.
Therefore, there was no question of considering his order to be erroneous in so far as
prejudicial to the interests of the revenue. When the seized document itself was not
relied upon by the appellate authorities, the copy of the same agreement as was received
through independent sources would not make any difference in favour of the revenue.
Therefore, the proceedings u/s. 263 were clearly beyond the competence of the principal
commissioner and the whole proceedings were unjustified and unreasonable and liable
to be set aside. (AY. 2007-08)
R. P. Import and Export Pvt. Ltd. v. CIT (2016) 46 ITR 97 (Chd.)(Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – Failing to record 2389
reasons in assessment order for conclusion reached by AO on issues arising for
consideration – Revision directing for fresh assessment was proper
The assessee claimed depreciation on goodwill and operational expenses. The Principal
Commissioner invoked the provisions of section 263 of the Act on the ground that the
AO had not discussed and verified the claim of the assessee. On appeal, the assessee
contended that the AO had raised specific enquiries during the course of assessment
proceedings and accepted its claim and it was not necessary to discuss about the
enquiries made by the AO in the assessment order.
Held that the AO had not discussed the issues that arose for consideration in the
assessment order. The proceedings before the AO being judicial proceedings, he was
expected to record his own reasons for the conclusion reached. Whether it was an
administrative order or judicial order, the reasons for the conclusion or decision taken
had to be recorded in the order itself. There was no infirmity in the order of the
Principal Commissioner. The AO was directed to conduct an independent enquiry and
pass a speaking order recording his own reasons without being influenced by any of the
observations made by the Principal Commissioner. (AY. 2010-11)
Medall Health Care P. Ltd. v. CIT (2016) 46 ITR 36 (Chennai)(Trib.)
807
Commissioner S. 263
2390 S. 263 : Commissioner – Revision of orders prejudicial to revenue Amortization of
preliminary expenses – Allowability of claim attaining finality in assessment’s own
case for same AY by Tribunal – Question not open to further adjudication in revision
proceedings [S. 35D]
The assessee claimed deduction u/s. 35D of the Act, in respect of amortisation of
expenditure incurred on the initial public offer of Equity shares. The claim of the
assessee was allowed by the AO but the Commissioner u/s. 263 of the Act cancelled
the assessment order on the ground that the assessee was not an industrial undertaking
entitled to deduction u/s. 35D. The Tribunal confirmed the order of the Commissioner
passed u/s. 263. The CIT(A) confirmed the order of AO on the ground that since the
Tribunal had held that the assessee was not an industrial undertaking, the assessee was
not entitled to deduction u/s. 35D of the Act.
On appeal held that after the order of the Tribunal in the assessee’s own case, the issue
of allowability of claim u/s. 35D was no more open for consideration. Hence, the High
court would be the right forum to hear the legal grievances against the order passed
u/s. 263. (AY. 2006-07)
Yes Bank Ltd v. ACIT (2016) 46 ITR 88 (Mum.)(Trib.)
2391 S. 263 : Commissioner – Revision of order prejudicial to the revenue – Principle of
Mutuality – Beneficiaries of assessee trust general public – Principle of mutuality not
applicable – Revision was held to be justified [S. 12AA]
The assessee trust was not registered u/s.12AA of the Act, but was established by three
individuals and was administered by three trustees. The object of the assessee was
to perform pooj as for the benefit of the mankind. For the relevant previous year, the
assessee claimed exemption on the principle of mutuality. The AO allowed the claim
of the assessee under the concept of mutuality. The Commissioner (Exemptions) in
exercise of powers u/s. 263 of the Act found that the beneficiaries of the assessee were
the general public without restriction of case, religion and colour and therefore, the
income could not be exempted under the concept of mutuality.
On appeal, the Tribunal held that beneficiaries of the assessee were the entire mankind
and individual beneficiaries could not be identified. Since the beneficiaries could not
be identified and the assessee was administered only by three trustees, the contributors
might not have any role in the administration. Therefore, there was no question of
applying the concept of mutuality and the Commissioner (E) was justified in denying
the exemption. (AY. 2010-11)
Sri Sai Padhuga Trust v. ITO(E) (2016) 45 ITR 633 (Chennai)(Trib.)
S. 264. Revision of other orders
2392 S. 264 : Commissioner – Revision of other orders – Mistake in tax assessment, even if
due to assessee's mistake, could be corrected in exercise of Commissioner's revisional
powers [S. 17(2), 115WA, 143(3)]
The assessee was employed as a General Manager by ONGC, India. ONGC reimbursed
conveyance maintenance and repair expenditure (CMRE) and uniform allowance
expenditure to the assessee. The Assessing Officer added on 20 per cent of CMRE and
808
S. 264 Commissioner
100 per cent on the uniform reimbursement expenses in the income of the assessee.
On revision petition before the Commissioner, the assessee argued that the employer
ONGC had treated the benefit as fringe benefit under section 115WA and had paid
tax accordingly, which was accepted by the Assessing Officer. Thus, the assessee
could not be asked to pay tax again because it would amount to double taxation. The
Commissioner rejected the revision petition on the ground that the Commissioner in
similar cases had confirmed similar disallowance. On petition before the High Court;
allowing the petition the Court held that mistake in tax assessment, even if due to
assessee's mistake, could be corrected in exercise of Commissioner's revisional powers.
Thus, in the result, impugned order dated 22-9-2011 passed by the Commissioner is set
aside. The disallowance of 20 per cent of the CMRE benefit and 100 per cent of the
uniform allowance made in case of the petitioner by the Assessing Officer is reversed.
(AY. 2007-08)
Kamlesh K. Singhal General Manager (MM) v. CIT (2016) 389 ITR 247 / 243 Taxman 250
(Guj.)(HC)
S. 264 : Commissioner – Revision of other orders – Assessment – Order of 2393
Commissioner dismissing the revision petition was held to be valid [Art. 226]
Dismissing the writ petition, the Court held that the assessee had failed to produce
sufficient material either before the Assessing Officer or the Commissioner in the
revision proceedings on the basis whereof a finding of fact could have been returned in
favour of the assessee. The factual matrix was required to be established by producing
material evidence in that regard before the assessing authority or the revisional
authority. The assessee was unable to give any one good or sufficient reason which
prevented him to produce material evidence in support of his version either before the
Assessing Officer or the Commissioner. The assessee could not be allowed de novo trial
under the garb of this submission. In such a situation, in the absence of any material
on record which could substantiate the claim of the assessee, the petition under article
226 could not be entertained. Moreover, it was evident that disputed questions of fact
were involved. It would, thus, not be appropriate in writ jurisdiction to adjudicate them.
The writ petition was not maintainable.
Charanjit Singh v. CBDT (2016) 388 ITR 469 (P&H)(HC)
S. 264 : Commissioner – Revision of other orders – Charge of income-tax – AOP – 2394
Principle of res judicata would not apply to income tax matters. However, where there
is no change in the factual position or the law, the views expressed in one year are
binding for the subsequent years – On facts the order of Commissioner rejecting the
revision application was set aside [S. 4, 67A, 86, 143(1), 167B]
Allowing the petition against the order under section 264 dismissing revision application
filed in respect of an intimation u/s. 143(1) of the Act. Remanding the matter back to
the AO, Hon’ble Judge held that Revision against intimation u/s. 143(1) assessing the
AOP u/s. 167B was wrongly rejected by CIT in view of the fact that right from AY. 2005-
06, shares of members of the AOP were accepted to be definite and each member was
assessed on his share of income and there was no change of facts. Since the Revenue
tried to justify impugned order on the basis of the Section 67A & 86 which were not
809
Commissioner S. 264
discussed in the impugned order, matter was remanded to CIT for consideration afresh.
The question before the HC was whether an income can be taxed in the hands of AOP
as against the past practice of the Revenue in taxing the same in the hands of members
of such AOP. The HC, referring to the decision of Apex Court in the case of Radhasoami
Satsang v. CIT [193 ITR 321 (SC) and Bharat Sanchar Nigam Ltd. v. UOI [(2006) 282
ITR 273 (SC)] held that though the principle of res judicata is not applicable to tax
matters as cause of action for each assessment year is different/distinct, however, in a
case where there is no change in the factual position or the law, the view expressed in
one year is binding for the subsequent years based on the principle of consistency. The
HC further held that in the present case, the revenue has to prove that the facts of this
year are different from earlier years to tax the income in the hands of AOP. Accordingly,
the matter was set-aside to the files of Commissioner to examine afresh. (AY. 2011-12)
Madhukar C. Ashar v. UOI (2016) 239 Taxman 367 / 139 DTR 268 (Bom.)(HC)
2395 S. 264 : Commissioner – Revision of other orders – Rectification of mistake – Capital
gains – Intimation u/s. 143(1) is an order for the purposes of section 264 – Non-
payment of prescribed fee prior to institution of the revision proceedings, which was
paid during the pendency of the proceedings, cannot be a ground for rejection of the
application u/s. 264 [S. 143(1), 154]
Assessee in his return of income, offered to tax gains arising from sale of shares as
short term capital gain. Subsequently, the assessee filed an application u/s. 154 before
the AO contending that the capital gains on transfer of shares were actually long term
capital gains exempt from tax u/s. 10(38). AO rejected the application. Assessee filed
an application to the CIT u/s. 264, which was rejected by him on the ground that the
assessee had not paid prescribed fee along with application u/s. 264 and secondly, the
intimation u/s. 143(1) could not be regarded as an order for purpose of section 264.
High Court held that, from reading of the provisions of section 264, it cannot be said
that the non-payment of the prescribed fee prior to the institution of the application for
revision would be fatal. Since, the assessee had paid the fees during the pendency of
the proceedings, therefore, the illegality was held to be cured. High Court also held that
section 264 uses the expression 'any order', which would imply that the section does
not limit the power to correct errors committed by the subordinate authorities but could
even be exercised where errors are committed by assessees. Further, it was also held
that intimation u/s. 143(1) can be regarded as an order for the purpose of section 264.
It was also held that CIT failed to appreciate that the assessee was not only impugning
the intimation u/s. 143(1) but also the rejection of the application u/s. 154. Accordingly,
the order of CIT was set aside and the matter was remanded back to him. (AY. 2008-09)
Vijay Gupta v. CIT (2016) 386 ITR 643 / 238 Taxman 505 / 137 DTR 401 (2017) 291 CTR
517 (Delhi)(HC)
810
S. 264 Commissioner
S. 268A. Filing of appeal or application for reference by income-tax authority
S. 268A : Appeal – Application – Reference – New monetary threshold limit is also 2396
applicable to pending cases
The High Court held that the Circular No. 21/2015, dated 10-12-2015 and instruction no
5 /2014 dated 10-07 2014 would apply retrospectively to all pending appeals.
CIT v. Manbhar Devi Meena (Smt.) (2016) 240 Taxman 235 (Raj.)(HC)
S. 268A : Appeal – High Court – Tax effect – Tax effect has to be determined on basis 2397
of aggregate tax effect in appeal and not only on basis of value of tax effect of question
on which appeal is admitted [S. 260A]
Court held that filing of appeal or reference by income-tax authority (Circular No.
21/2015 dated 10-02-2015 (2015) 379 ITR 107 (St.) has to be determined on basis of
aggregate tax effect in appeal and not only on basis of value of tax effect of question on
which appeal is admitted. (AY. 1998-99)
CIT v. Nahar Export Ltd. (2016) 389 ITR 33 / 76 taxmann.com 146 (P&H)(HC)
S. 268A : Appeal – Instructions – No appeals were to be filed to Supreme Court where 2398
tax effect was less than ` 10 lakhs
As per Instruction No. 2/2005 dated 24.10.2005 of the CBDT, no appeals were to be
filed where the tax effect was less than ` 10 lakhs. Further, as the Department had not
filed appeal even before High Court in a similar case, the matter was dismissed with
the question of law left open. (AY. 1991-92)
CIT v. Hemraj Mahabir Prasad Ltd. (2016) 382 ITR 170 / 237 taxman 379 / 286 CTR 112
/ 134 DTR 192 (SC)
S. 268A : Appeal – High Court – Monetary limit for filing appeal and reference – 2399
Though the low tax effect circular No. 21/2015 dated 10.12.2015 does not refer to
references filed u/s. 256(1), it has to be held to apply to references as well in view of
the objective of the CBDT to focus only on large tax effect matters [S. 256(1), 260A]
Dismissing the reference of revenue as unanswered, the Court held that the need for
the CBDT to issue the 15th December 2015 circular and to clarify that it would apply
retrospectively to govern even pending appeals arose on account of the enormous
increase in the number of appeals being filed by the revenue over the years. To give
figures of this Court in the year 1995, the total number of references filed in this Court
were in the aggregate 504 i.e., both at the instance of the revenue and the assessee. In
2001, the total number of appeals filed under section 260A of the Act in this Court in
the aggregate were 648 and 546 of these were filed by the revenue. In 2009, the total
number of appeals filed under section 260A of the Act in the aggregate was 4,266, out
of which, that filed by the revenue were 3,790. However, it may be pointed out that in
2015, the total number of appeals filed under section 260A of the Act in the aggregate
was 2,384, out of which, that filed by the revenue were 1,834. Thus, the revenue has
now become circumspect in filing appeals as they seem to filter orders of the Tribunal
which requires challenge. However, many of the indiscriminate appeals filed by the
revenue, are awaiting disposal. It thus appears that appeals are being filed by the
811
Reference S. 268A
revenue from almost every order of the Tribunal adverse to it, without taking into
account the tax effect involved with the fear that in other cases where tax effect is more,
the non-filing of an appeal may be used against the department as having accepted the
position in law. It is in that view that the circular of 2015 clarifies that non filing of
appeal in view of low tax effect will not be used against the revenue in other appeals.
Therefore the CBDT to ensure that there is uniformity in respect of filing of appeals has
fixed threshold limits which would do away with the discretion of the officer to file
and pursue the appeal remedy where the tax effect is less than the minimum amounts
specified. It is noteworthy that the circular specifically provides that where the tax
effect is higher than that specified in the circular then the filing of appeal in such cases
is to be decided on the merits of the case. Therefore, to enable the revenue to focus
on matters where the tax implication is above ` 20 lakhs only such matters should be
agitated in appeal before the High Court according to the circular. This policy of non
filing and of not pressing and/or withdrawing admitted appeals having tax effect of less
than ` 20 lakhs has been specifically declared to be retrospective by the circular dated
10th December, 2015. There is no reason why the circular should not apply to pending
References where the tax effect is less than ` 20 lakhs as the objective of the circular
would stand fulfilled on its application even to pending references more particularly
bearing in mind that there are 1,149 number of references still awaiting disposal by
this Court and a large number of them would have tax effect of less than ` 20 lakhs.
In the above view, we hold that as admittedly, the tax effect is less than ` 20 lakhs in
the present Reference Application at the instance of the revenue, the same is being
returned unanswered. However, we make it clear that the question of law as raised for
our opinion is left open be considered in an appropriate case.
CIT v. Sunny Sounds P. Ltd. (2016) 381 ITR 443 / 237 Taxman 295 / 283 CTR 158 / 130
DTR 265 (Bom.)(HC)
2400 S. 268A : Reference – Filing of appeal or application for reference by income
tax authority – Determination of monetary limit, instructions were operative
retrospectively to pending appeals
Dismissing the appeals of the revenue, the Tribunal held that monetary limit,
instructions were operative retrospectively to pending appeals. (AY. 2002-03)
ACIT v. Pragati Vanijya Ltd. (2016) 48 ITR 77 (Delhi)(Trib.)
2401 S. 268A : Appeal – Tax effect is less than ` 4 lakhs appeal of revenue was not
maintainable
Where tax effect in appeal filed by revenue was less than ` 4 lakhs, in view of
provisions of section 268A inserted by Finance Act, 2008, read with Instruction No.
5/14, dated 10-7-2014, appeal so filed was not maintainable. (AY. 2008-09)
Dy. CIT v. Amit Paccraft (2015) 68 SOT 213 (URO) (Delhi)(Trib.)
812
S. 269SS Acceptance of loans and deposits
CHAPTER XX-B
REQUIREMENT AS TO MODE OF ACCEPTANCE, PAYMENT OR
REPAYMENT IN CERTAIN CASES TO COUNTERACT EVASION OF TAX
S. 269SS. Mode of taking or accepting certain loans, deposits and specified sum
S. 269SS : Acceptance of loans and deposits – Share application money – Bona fide 2402
belief – Deletion of penalty was held to be justified [S. 271D]
During year, assessee-company had accepted share application money in cash from
various persons. Assessing Officer was of view that money received was of nature of
deposit in hands of assessee and hence it had violated provisions of section 269SS. He,
therefore, levied penalty under section 271D. Both Commissioner (Appeals) and Tribunal
deleted penalty holding that assessee had a bona fide belief that share application
money was neither loans or deposits. High Court held that assessee was under bona fide
impression that money received was only towards allotment of shares and it was not a
loan or deposit; therefore, in view of decision of Madras High Court in case of CIT v.
Rugmini Ram Raghav Spinners (P.) Ltd. (2008) 304 ITR 417, no substantial question of
law arose for consideration. (AY. 2002-03 to 2004-05)
CIT v. Object Frontier Software (P.) Ltd. (2016) 75 taxmann.com 169 (Mad.)(HC)
Editorial : SLP is granted to the revenue, CIT v. Object Frontier Software (P.) Ltd. (2016)
243 Taxman 239 (SC)
S. 269SS : Acceptance of loans and deposits – Otherwise than by account payee 2403
cheque or account payee bank draft – Mere fact that said amount was utilised directly
towards payment of construction activities would not alter character of deposit,
penalty was held leviable [S. 271D]
Allowing the appeal of the revenue, the Court held that there was a direct nexus of the
money having flown from 'R' in the books of account of the assessee, may be towards
payment of constructional activities of the assessee but it did not alter the character of
deposit. Accordingly, it held that the payment was definitely in the nature of loan or
deposit. The argument as to ignorance of law was rejected on the ground that company
was assisted by Chartered Accountant and Company Secretary from the beginning. The
argument of the assessee that the amount in any case had to be paid to petty labourers
and contractors in a remote place where the company has been established was rejected
being beyond the purview of the question being raised by the revenue. It was held that
the same mode could have been adopted by the assessee by taking the amount from 'R'
by account payee cheques and withdrawing the same after having received from 'R' by
cheques. Accordingly, the Court reversed the order of the ITAT and upheld the penalty.
(AY. 1992-93, 1993-94)
CIT v. Chandra Cement Ltd. (2016) 143 DTR 41 / (2017) 291 CTR 581 / (2017) 393 ITR
324 (Raj.)(HC)
813
Acceptance of loans and deposits S. 269SS
2404 S. 269SS : Acceptance of loans and deposits – Otherwise than by account payee
cheque or account payee bank draft – Received cash for more than ` 20,000 for
investment on behalf of his agriculturalist friend and source of money was explained,
penalty was not leviable [S. 68, 271D, 273B]
Allowing the appeal of the assessee the Tribunal held that the amount in question had
not been treated as cash credits u/s. 68. The assessee explained that said amount was
received from his friend for making investments on his behalf. Transaction in question
was genuine and bona fide and, therefore, penalty was not liable. (AY. 2008-09)
Mohanjeet Singh v. JCIT (2016) 159 ITD 582 (Chd.)(Trib.)
2405 S. 269SS : Acceptance of loans and deposits – Otherwise than by account payee
cheque or account payee bank draft – Share application money to meet urgent and
immediate requirement of business, hence levy of penalty was held to be not justified
[S. 271D, 273B]
Allowing the appeal of assessee the Tribunal held that the assessee had sufficiently
proved that share application money was taken in cash from a director to meet urgent
and immediate requirement of business and there was a reasonable cause to take 'loan'
or deposit otherwise than by account payee cheque or account payee bank draft, penalty
could not have been levied. (AY. 2006-07)
Valley Extraction (P.) Ltd. v. Jt. CIT (2016) 158 ITD 976 (Chd.)(Trib.)
2406 S. 269SS : Acceptance of loans and deposits – Otherwise than by account payee
cheque or account payee bank draft – Audit report highlighting violations – Imposition
of penalty justified [S. 271D]
The assessee was in the business of dealing in shares and securities and also
receiving loans and advancing loans. It received cash loans of ` 73.8 lakhs from L
in contravention of the provisions of section 269SS of the Act. The AO held that the
assessee in accepting the cash loans from L to the tune of ` 48.6 lakhs exceeding
` 20,000 had violated the provisions of section 269SS and, hence, penalty u/s. 271D
was leviable, and levied penalty of ` 48.6 lakhs u/s. 271D. This was confirmed by the
CIT (A).
Held that the cash loans were utilised mainly by the assessee for advancing money to
sister concerns for which no reasonable cause was shown. The sister concern of the
assessee could have itself borrowed loan from L directly instead of routing the money
through the assessee. The assessee had taken the plea that these loans were genuine.
The provisions of section 269SS are strict provisions making the taxpayer liable for
penalty for taking loan or deposit of ` 20,000 or more in cash. Thus, it was not only
loan transaction which should be genuine but the taxpayer should come forward with
reasonable cause as provided u/s. 273B to get out of clutches of section 269SS r.w.s.
271D. Thus, both the conditions are to be cumulatively satisfied by the taxpayer. (AY.
2005-06)
Pankaj Investments v. ACIT (2016) 46 ITR 345 (Mum.)(Trib.)
814
S. 269UC Purchase by Central Government of immovable properties
CHAPTER XX-C
PURCHASE BY CENTRAL GOVERNMENT OF IMMOVABLE
PROPERTIES IN CERTAIN CASES OF TRANSFER
S. 269UA. Definitions
S. 269UA : Purchase of immovable property by Central Government – Understatement 2407
of consideration – Land held under lease from Municipality – Comparable instance of
sale taken of property in adjustment and commercial property – Order for pre-emptive
purchase was vitiated [S. 269UD]
Allowing the appeal the Court held that the Authority had wrongly compared the
commercial premises which shows notice was visited by gross violation of mind.
Authority also erred in holding that V had transferred property to the extent of 78 per
cent to U and the consideration for was ` 1,00,40,000 was not in respect of built up area
but on the other hand clearly stated to be for transfer of subject land. Thus the order
of Appropriate Authority thus suffered from gross perversity. The Court also held that
the High Court had failed to render a finding on the relevance of the comparable sale
instances, particularly, why a sale instance in an adjusting locality had been considered
valid instead of sale instance in the same locality. Accordingly the order of High Court
was reversed.
Unitech Ltd. and Another v. UOI (2016) 381 ITR 456 / 133 DTR 2 / 237 Taxman 361 /
285 CTR 162 (SC)
Editorial : Decision in Vidarbha Engineering Industries v. UOI (2004) 271 ITR 229 (Bom.)
(HC) is reversed.
S. 269UC. Restrictions on transfer of immoveable property
S. 269UC : Purchase by Central Government of immovable properties – Restrictions 2408
on transfer – Declaration filed under Kar Vivad Samadhan Scheme during pendency
of appeal from block assessment – Certificate issued in terms of Scheme in favour of
vendor granting immunity from prosecution – No legal obligation on part of vendor
and purchasers to file Form 37-I – Prosecution for failure to file Form 37-I in respect
of sale under section 269UC is not maintainable [S. 276AB, R. 48L, Form No. 37I]
The first respondent, the owner of certain property, sold it in six portions to the other
respondents under six separate sale deeds executed in during March, 1995, transferring
to each a one-sixth undivided share in the property for a sale price of ` 9 lakhs each,
the total sale consideration being ` 54 lakhs. Thereafter, a search was conducted under
section 132 of the in the residence of the vendor and based on documents seized,
the Department took the view that the sale value of the property sold by the vendor
was nearly ` 130 lakhs and had been grossly undervalued at ` 54 lakhs to evade
payment of tax. The AO made a block assessment for the period 1987-88 to 1996-97
of the total undisclosed income at ` 96,38,355 and arrived at the tax due at 60% The
vendor appealed against the assessment. During the pendency of the appeal before the
Appellate Tribunal, she filed a declaration under the Kar Vivad Samadhan Scheme,
1998 and the designated authority under the Scheme issued a certificate determining
the amount payable by her towards full and final settlement of the tax arrears for the
815
Purchase by Central Government of immovable properties S. 269UD
block period April 1, 1986 to October 3, 1996 quantifying the arrears as ` 47,83,018
and the vendor also paid the tax due at ` 31,88,675. On receipt of such payment, the
designated authority under the scheme issued an immunity certificate in favour of the
vendor. Eight months later, the Department initiated prosecution against the vendor
and the purchasers for the offence punishable under sections 269UC and 276AB, on
the ground that they failed to file the statement in form 37-I in respect of the sale
transaction effected between them and thereby they had contravened the provisions of
section 269UC, which was an offence punishable under section 276AB. The vendor filed
a writ petition upon which the court directed the trial court to permit the vendor to file
an application to drop the proceedings initiated against her on the ground that she had
been granted immunity by the Department under the scheme. Before the Trial Court, the
purchasers filed separate petitions. The Trial Court discharged the vendor as well as the
purchasers from the purview of prosecution. On a revision petition by the Department:
Held, dismissing the petitions, (i) that from the certificate issued under the Scheme, it
was clear that the vendor paid the tax for the block period April 1, 1986 to October 3,
1996. The declaration made by the vendor under section 89 of the Finance (No. 2) Act,
1998, included the sale of the property in favour of the purchasers and covered the
value of the property assessed by the Department. Only after analysing the declaration
made by the vendor, was the dispute settled. When the vendor made such declaration
and paid the tax arrears, the prosecution launched against her and the purchasers was
unnecessary.
(ii) That the obligation on the part of the vendor and purchasers to file form 37-I would
arise only when the consideration for the transfer was above ` 10 lakhs as contemplated
under section 269UC. Since each of the sale deeds was executed for a value of
` 9 lakhs, there was no legal obligation on the part of the vendor and purchasers to
file form 37-I. Further, the declaration made by the vendor granted immunity from
prosecution, which included immunity from proceedings under section 269UC of the
Act for failure to file Form 37-I. (BP. 1987-88 to 1996-97)
Rajagopal (R.) Member-I, Appropriate Authority v. N. Sasikala (Smt.) (2015) 64 taxmann.
com 254 / (2016) 381 ITR 79 / 139 DTR 70 (Mad.)(HC)
Rajagopal (R.) Member-I, Appropriate Authority v. S. Ramayama (Smt.) (2015) 64
taxmann.com 254 (2016) 381 ITR 79 (Mad.)(HC)
Rajagopal (R.) Member-I, Appropriate Authority v. V. N. Sudhagaran and Another. (2015)
64 taxmann.com 254 / (2016) 381 ITR 79 (Mad.)(HC)
S. 269UD. Order by appropriate authority for purchase by Central Governrment of
immoveable property
2409 S. 269UD : Purchase by Central Government of immovable properties – Order – Plot
held on lease – Development agreement entered into with assessee in respect of said
plot – Form 37-I submitted u/s. 269UC – Consideration declared in the form was
` 100.40 lakh – Appropriated authority of the view that consideration understated
by 15% based on sale instance in an adjoining locality – Assessee pointed out sale
instance in the same locality – Appropriate Authority rejected the sale instance –
Order passed u/s. 269UD for compulsory pre-emptive purchase – Held, transfer of
816
S. 269UD Purchase by Central Government of immoveable properties
development right of the land by lessee did not amount to sale under Chapter XXC
– Further, held order preferring sale instance in adjoining locality over that in same
locality invalid [S. 269UA, 269UC]
One ‘V’ Engineers held 3 plots of land on lease. It entered into a development agreement
with the assessee in respect of the said land. The assessee submitted a statement in
Form 37-I u/s. 269UC wherein the consideration for the transfer was declared at ` 100.40
lakh towards the cost of construction of the share of ‘V’ Engineers. The Appropriate
Authority, relying on the sale instance in the adjoining locality stated that the sale
consideration was understated by more than 15%. The assessee, in rebuttal, gave a sale
instance in the same locality. However, the Appropriate Authority, rejected the latter sale
instance and passed an order u/s. 269UD for compulsory pre-emptive purchase of the
land. Supreme Court held that, since ‘V’ Engineers were not the owners of the land and
were mere lessee, therefore there could not have been any valid exchange or transfer of
the land. Further, it was held that the transaction was not in the nature of sale, lease or
a license. Further, held that acceptance of sale instance in adjoining locality over that
in the same locality was not proper.
Unitech Ltd. v. UOI (2016) 381 ITR 456 / 237 Taxman 361 / 285 CTR 162 / 133 DTR 2
(SC)
S. 269UD : Purchase by Central Government of immoveable properties – Bidder cannot 2410
insist on confirmation of sale in his favour – Terms and conditions of auction giving
right to Commissioner to reject bid and refund earnest money deposited – Direction
to return earnest money with interest
Held, that the reasons given by the Department for rejecting the petitioner's bid were
(a) that the sale was never confirmed on account of the interim order by the Court,
(b) the bidders requested for refund of the earnest money with interest at 12% by
their letter dated October 11, 2004, (c) the Court did not confirm the sale although the
Department had asked it to confirm the sale but enquired whether the Department was
agreeable to re-auction the property, (d) re-auction was required to discover the current
market price and (e) under the terms and conditions of auction sale, the earnest money
ought to be refunded to the bidders. The reasons were valid. There was no confirmation
of sale in favour of the petitioners and the petitioners could not insist on confirmation
of the sale in their favour having participated in the auction despite being aware of the
interim order. Considering the location of the property, it was only through a re-auction
that the correct current market price could be determined. It would not be justified to
deprive the Department of realising the best possible price for the property. The only
relief that could be granted to the petitioners was to direct the Department to return
the earnest money to the petitioners forthwith. [The Department was directed to refund
the earnest money deposited by the petitioners with interest at 12% per annum from
February 15, 1995 till the date of refund.]
Anand Mehta v. UOI (2016) 385 ITR 379 (Delhi)(HC)
817
Penalty S. 271(1)(c)
CHAPTER XX1
PENALTIES IMPOSABLE
S. 271. Failure to furnish returns, comply with notices, concealment of income, etc.
2411 S. 271(1)(c) : Penalty – Concealment – SLP admitted against the decision of the Madras
High Court wherein it was held that the levy of penalty was justified as the assessee
had made excess claim of depreciation on machinery [S. 271(1)(c), 32]
The Honourable Apex Court admitted the Special Leave Petition filed against the
decision of the Honourable Madras High Court in the case of CIT v. Sundaram Finance
Ltd. (2013) 353 ITR 375 / 216 Taxman 60 (Mag.)(Mad.), wherein it was held that the
penalty is leviable in respect of the excess of depreciation on machinery made by the
assessee and the same was accepted by the assessee only after it was discovered by the
Department. (AY. 1999-00)
Sundaram Finance Ltd. v. CIT (2016) 240 Taxman 297 (SC)
2412 S. 271(1)(c) : Penalty – Concealment – Disallowance of deductions – Penalty cannot
be imposed
The assessee had claimed certain deductions which were disallowed and addition had
been made to its income. On the basis of this penalty proceedings under section 271(1)
(c) were initiated for the assessment years 1993-94, 1994-95 and 1995-96. Penalty was
imposed but it was cancelled by the Tribunal. On appeal: Held, dismissing the appeal,
that there was no finding that there were any concealment of any particulars of income
or that the assessee had furnished inaccurate particulars of income to attract section
271(1)(c). Secondly the AO had levied penalty ignoring the explanation submitted by
the assessee. The cancellation of penalty was therefore justified. (AY. 1993-94, 1994-95,
1995-96)
CIT v. Samurai Techno Trading P. Ltd. (2016) 389 ITR 357 (Ker.)(HC)
2413 S. 271(1)(c) : Penalty – Concealment – Search and seizure – Voluntary disclosure
and surrender of income by assesse – Assessee's statement in course of search,
specification of manner in which income derived, payment of tax with interest, if any,
on undisclosed income – Facts involved requiring adjudication in light of Supreme
Court ruling – Tribunal was directed to decide the matter afresh [S. 132(4)]
Held, that a perusal of the order showed that the order passed by the Tribunal required
the facts to be re-adjudicated by the Tribunal in the light of the interpretation given
by the Supreme Court in Asst. CIT v. Gebilal Kanhaialal, HUF. As the final fact finding
authority, it was required to deal with all aspects of the facts and law before recording
its conclusions based therein. The Tribunal had only recorded that the income declared
by the assessee would not provide immunity to him from imposition of penalty under
section 271(1)(c) unless the conditions mentioned in the statement under section 132(4)
and the conditions laid down in clause (2) of Explanation 5 to section 271 were fulfilled
and that the authorities were fully justified that the assessee was not entitled to the
immunity and imposing penalty. Therefore, the Tribunal was directed to decide the
matter afresh setting aside the orders passed. (AY. 1994-95)
Surender Paul v. CIT (2016) 389 ITR 58 (P&H)(HC)
818
S. 271(1)(c) Penalty
S. 271(1)(c) : Penalty – Concealment – Notice did not specify under which limb of 2414
section 271(1)(c) penalty proceedings had been initiated, i.e., whether for concealment
of particulars of income or furnishing of inaccurate particulars of income hence levy
of penalty was held to be bad in law [S. 274]
Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in
case of CIT v. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karn.)(HC)
allowed appeal of assessee holding that notice issued by Assessing Officer under section
274 read with section 271(1)(c) was bad in law, as it did not specify under which limb
of section 271(1)(c) penalty proceedings had been initiated, i.e., whether for concealment
of particulars of income or furnishing of inaccurate particulars of income. High Court
dismissed the appeal of the revenue on the ground that there was no substantial
question of law arising for determination. (AY. 2009-10)
CIT v. SSA'S Emerald Meadows. (2016) 73 taxmann.com 241 (Karn.)(HC)
Editorial : SLP of revenue was dismissed. CIT v. SSA'S Emerald Meadows (2016) 242
Taxman 180 (SC)
S. 271(1)(c) : Penalty – Concealment – Disallowance of expenses – No concealment of 2415
income,penalty cannot be levied [S. 40(a)(ia)]
Held, that an addition to income was made on account of disallowance of expenditure
under section 40(a)(ia). The assessee had made a claim to deduction in the return of
income. No finding had been recorded by the authorities below that the claim made
by the assessee was mala fide. It had been categorically recorded by the Tribunal after
examining the entire material on record that the Commissioner (Appeals) had rightly
cancelled the penalty against the assessee. It was further recorded that the assessee
made a bona fide claim to deduction of the expenditure and even though it was not
acceptable to the Department it would not lead to the conclusion that the assessee
had concealed the particulars of income or filed inaccurate particulars of income. The
Tribunal was justified in cancelling the penalty under section 271(1)(c). CIT v. Zoom
Communication P. Ltd. (2010) 327 ITR 510 (Delhi) distinguished. (AY. 2006-07)
PCIT v. Torque Pharmaceuticals P. Ltd. (2016) 389 ITR 46 (P&H)(HC)
S. 271(1)(c) : Penalty – Concealment – Penalty cannot be levied in a case where the 2416
assessee has relied on legal opinion of a professional and there is no tax impact i.e.
the loss disallowed in year one is allowed set-off in a later year
Dismissing the appeal of revenue, the Court held that the decision of the Tribunal that
the respondent ought not to be made liable for penalty cannot be said to be perverse or
absurd. The Tribunal noted that the respondent had claimed the set off of its business
income of ` 1.85 crores against the brought forward business losses of the earlier years
on the basis of a legal opinion received from a leading firm of Chartered Accountants.
The Tribunal found nothing clandestine in the manner in which the opinion was sought.
In any event, even our attention was not invited to anything which suggests any mala
fides either in the obtaining of the opinion or otherwise. Further, the loss was allowed
to be carried forward in the assessment year, namely, assessment year 2002-03. Inter
alia, in these circumstances, the Tribunal found as a matter of fact that the letter dated
13.12.2006 was voluntary and not merely because a notice had been issued under
section 143(2) of the Act. This is a perception on the basis of the facts of the case
819
Penalty S. 271(1)(c)
and warrants no interference. In these circumstances including in view of the fact that
there is no financial implication on account of the change in the basis of the claim, no
substantial question of law arises in this case. (ITA No. 347-2015, dt. 30.11.2016) (AY.
2004-05)
PCIT v. Atotech India Ltd. (P & H)(HC); www.itatonline.org
2417 S. 271(1)(c) : Penalty – Concealment – Business connection – Bona fide claim that
refund of taxes was held to be not taxable – Levy of penalty was held to be not
justified [S. 9(1)(i)]
On revenue's appeal to the High Court the Court held that the two authorities have
concurrently came to a finding of fact that the conduct of the respondent assessee was
bona fide and its claim that amount received from its affiliated companies on account
of C-ICT and Corporate Services is not taxable was based on an interpretation of DTAA.
It is a settled position of law that where the issue is debatable then mere making of
a claim on the basis of a particular interpretation would not lead to an imposition of
penalty. Bearing in mind that for the earlier assessment years the respondent assessee
claimed and had been granted refund of taxes deducted at source by the affiliated
companies in respect of the payment received by it for Corporate Services and C-ICT
Services would also establish that the claim made by the respondent assessee that the
income received is not chargeable to tax was a bona fide claim. On facts there is a
concurrent finding of there being no concealment of income or furnishing an inaccurate
claim of income. In view of the above concurrent finding of fact by the Commissioner
(Appeals) and the Tribunal, the proposed question does not give rise to any substantial
question of law and, accordingly, appeal was dismissed. (AY. 2006-07)
DIT v. Koninklijke-DSM-NV (2016) 243 Taxman 115 (Bom.)(HC)
2418 S. 271(1)(c) : Penalty – Concealment – Deletion of penalty on ground of deletion of
addition by Tribunal – Additions restored by court – Commissioner (Appeals) to decide
on issue of penalty – Matter remanded
Allowing the appeal Court held that since the Commissioner (Appeals) set aside the
penalties imposed by the Assessing Officer only on the ground that the Tribunal had
deleted the addition, the issue of penalty was to be remanded to the Commissioner
(Appeals) for decision afresh. Matter remanded. (AY. 2006-07)
CIT v. Aman Khera (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann.com 185 (Delhi)(HC)
CIT v. Jyoti Khera (2016) 387 ITR 33 / 288 CTR 381 / 76 taxmann.com 185 (Delhi)(HC)
CIT v. Raman Khera (2016) 387 ITR 33/ 288 CTR 381 / 76 taxmann.com 185 (Delhi)(HC)
2419 S. 271(1)(c) : Penalty – Concealment – Survey – Disclosure of income – Revised return
– Levy of penalty was held to be justified [S. 133A]
Dismissing the appeal of the assesse the Court held that taking into consideration the
material on record and voluminous documents found during the course of survey, the
statements and offering of income during the course of survey, could not be said to be
voluntary as it was a clear cut admission. It was only when faced with the statements
as also the unrecorded/recorded documents found at the business premises that the
assessee came forward with a surrender. In the penalty proceedings the assessee had
not even attempted to establish its bona fides nor submitted any explanation worth
820
S. 271(1)(c) Penalty
considering. This was a proved case of concealment of income and penalty was rightly
imposed by the Assessing Officer and had rightly been upheld by both the appellate
authorities. MAK Data P. Ltd. v. CIT (2013) 358 ITR 593 (SC) applied. (AY. 2006-07)
Grass Field Farms and Resorts P. Ltd. v. DCIT (2016) 388 ITR 395 / 141 DTR 205 / 289
CTR 312 / (2017) 79 taxmann.com 426 (Raj.)(HC)
Editorial : Grass Field Farms & Resorts (P) Ltd v. Dy. CIT (2016) 159 ITD 31 (TM)(Jaipur)
(Trib.) is affirmed.
S. 271(1)(c) : Penalty – Concealment – Survey – Surrender of income – Only part of 2420
undisclosed income had been surrendered – Levy of penalty was held to be justified
[S. 133A, 139]
Dismissing the appeal of assesse the Court held that the Tribunal held that the surrender
was not made voluntarily and the documents were found in this assessment year, still
the assessee had not bothered to file any return, that even for assessment years 2004-05
and 2005-06, only part of the income was declared and that therefore the assessee had
clearly concealed the particulars of his income which would attract penal consequences.
Court held that the finding of the Tribunal had not been shown to be illegal or perverse.
The imposition of penalty was valid. (AY. 2002-03)
B.K. Jain v. CIT (2016) 388 ITR 300 (P & H)(HC)
S. 271(1)(c) : Penalty – Concealment – Difference between income returned and income 2421
assessed – Penalty was quashed [S. 264]
The revision application filed by the assessee under section 264 of the Act against the
penalty was rejected. On a writ petition:
Held, allowing the petition, that penalty under section 271(1)(c) could not be imposed
when there was no concealment of income or furnishing of inaccurate particulars of
income. Merely because there was a difference between the income returned and the
income assessed as a result of disallowance made by the Assessing Officer, it could
not be said that the assessee had furnished inaccurate particulars of income. The
outstanding expenses were not believed by the Assessing Officer but the outstanding
debt was believed. The authority ought to have either believed both or disbelieved both
outstanding expenses and outstanding debt. There was no finding to the effect that the
details furnished by the assessee were incorrect or false. Therefore, the penalty imposed
under section 271(1)(c) of the Act was to be quashed. (AY. 1996-97)
Jayeshbhai J. Shah v. CIT (2016) 388 ITR 293 (Guj.)(HC)
S. 271(1)(c) : Penalty – Concealment – Search prior to 1-6-2007 – Money, bullion, 2422
jewellery or other valuables not found during search – Addition on basis of materials
collected during search – Addition can be made only to disclosed income – Penalty
cannot be levied [S. 132, 153A, 271(1)(c), Expln. 5]
Dismissing the appeal of revenue the Court held that there was no error in the order
of the Tribunal deleting the penalty. The entire amount of ` 2.06 crores pertained to
on-money receipts by the assessee. There was no money, bullion, jewellery or other
valuable article or thing of such value found during the search and the additional
income was based on materials collected during the search. Prior to June 1, 2007,
applying Explanation 5 to section 271(1)(c) of the Income-tax Act, 1961, penalty could
821
Penalty S. 271(1)(c)
not have been levied. Explanation 5 to section 271(1)(c) of the Income-tax Act, 1961,
applies to a search carried out before June 1, 2007. In such a case, if the assessee is
found to be the owner of any money, bullion, jewellery or other valuable article or thing
and the assessee claims that such assets have been acquired by utilising his income for
the previous year that ended before the date of the search but the return of income has
not been filed before the said date or, if filed, such income has not been disclosed, then,
notwithstanding that such income is declared by him in the return of income furnished
after the date of the search, the assessee would be liable to levy of penalty, unless upon
fulfilment of conditions contained in clauses (1) and (2) of the Explanation, the assessee
can claim immunity. This Explanation 5 nowhere refers to any income based on any
entry in any books of account or other documents or transactions. The Legislature for
the period post June 1, 2007 has enacted Explanation 5A. In terms of Explanation 5A
even in a case where during the search, the assessee is found to be the owner of any
income based on any entry in the books of account or other documents or transactions,
the penalty would attach, provided other requirements are fulfilled. (AY. 2005-06)
PCIT v. Jigesh Venilal Koralwala (2016) 387 ITR 177 / (2017) 147 DTR 172 / 294 CTR
124 (Guj.)(HC)
2423 S. 271(1)(c) : Penalty – Concealment – Cessation of trading liability – Quantum
addition was confirmed by Supreme Court – Creditors have denied that any amount
was due to the assesse. On facts levy of penalty was held to be justified [S. 41(1)]
Dismissing the appeal of the assesse, the Court held that in quantum proceedings
which were taken up to the Supreme Court was dismissed. Court also observed that the
Tribunal in quantum proceedings had recorded a fact that a creditor had denied that
any amount was due to the assessee and one of them was also not found at the address
given. On facts the Court held that not offering to tax the ceased liabilities would it self
amount to furnishing inaccurate particulars of income leading to escapement of income
from tax. Accordingly Tribunal was justified in sustaining penalty. (AY. 2005-06)
Palki Investment & Trading Co. (P) Ltd. v. ITO (2016) 139 DTR 57 / 288 CTR 473 / 71
taxmann.com 322 (Bom.)(HC)
2424 S. 271(1)(c) : Penalty – Concealment – Survey – Levy of penalty was upheld rejecting
assessee’s contention that the income was not disclosed as the books of account were
impounded and the correct income figure could not be determined [S. 133A]
In the course of the quantum proceedings, additions were sustained on two counts –
unaccounted collection receipts from the hospital and denial of claim of deduction of
certain expenditure. Penalty proceedings were initiated thereafter. HC upheld the levy of
penalty. HC rejected the assessee’s explanation that its books of account for the relevant
year were impounded by the revenue and therefore, the correct figures of income could
not be furnished as per its return of income and further that the accounts could not
be audited because of impounding of books. HC held that this explanation was rightly
rejected by the AO as it was the assessee's duty to get its accounts audited and the time
for audit had expired long before the survey. Further, the assessee could have applied
for copies of extracts of the records impounded which was not done by the assessee.
(AY. 2004-05)
Manural Huda Trust v. CIT (2016) 138 DTR 28 (Ker.)(HC)
822
S. 271(1)(c) Penalty
S. 271(1)(c) : Penalty – Concealment – Cessation of trading liability – Quantum 2425
addition was confirmed by Supreme Court – On facts levy of penalty was held to be
justified [S. 41(1)]
Dismissing the appeal the Court held that in quantum proceedings which were taken
upto the SC, the Tribunal had recorded a fact that a creditor had denied that any
amount was due to the assessee and one of them was also not found at the address
given, further, an attempt was made to escape offering of ceased liability as income
obliged to do u/s. 41(1), Tribunal was justified in sustaining penalty. (AY. 2005-06)
Palki Investment & Trading Co. (P) Ltd. v. ITO (2016) 139 DTR 57 / 288 CTR 473 / 71
taxmann.com 322 (Bom.)(HC)
S. 271(1)(c) : Penalty – Concealment – Business expenditure – Assessee accepting order 2426
and revising subsequent returns – Not a case of concealment of income or furnishing
inaccurate particulars thereof – Levy of penalty not warranted
The assessee had paid a sum on account of compensation for mining ores for a period
of five years which it claimed as revenue expenditure in one year. The AO was of the
view that the expenditure was allowable over a period of five years which was the
period during which the mining was to be conducted. The assessee accepted that order
and accordingly revised the subsequent returns. Held it was not possible to hold that
the assessee furnished inadequate particulars or concealed its income and penalty could
not be levied. (AY. 2005-06)
CIT v. Thakur Prasad Sao and Sons (P) Ltd. (2016) 386 ITR 448 (Cal.)(HC)
S. 271(1)(c) : Penalty – Concealment – Merely submitting an incorrect claim in law 2427
for expenditure would not amount to furnishing inaccurate particulars of income so
as to attract penalty [S. 40(a)(ia)]
The assessee was engaged in the business of construction. During assessment
proceedings, the AO noticed that in some cases, the tax deducted at source (‘TDS’)
from certain parties to whom labour payments were made, were not deposited into
Government account as per the provisions of section 200(1) of the Act. The AO
disallowed such payments under section 40(a)(ia) of the Act and also levied penalty
under section 271(1)(c) of the Act for furnishing inaccurate particulars of income. In
appeal CIT(A) deleted the penalty. On appeal by revenue the Tribunal held that the
assessee had suppressed the actual particulars of income by not making disallowance
under section 40(a)(ia) of the Act and restored the penalty order passed by the AO.
Aggrieved, assessee filed an appeal before the High Court. Allowing the appeal of
assesse the Court held that words 'inaccurate particulars' in section 271(1)(c) must mean
details supplied in return – which are not accurate, not exact or correct or not according
to truth or erroneous – merely submitting an incorrect claim in law for expenditure
would not amount to furnishing inaccurate particulars of income so as to attract penalty
under section 271(1)(c). (AY. 2006-07)
Nayan C. Shah v. ITO (2016) 386 ITR 304 / 240 Taxman 115 (Guj.)(HC)
823
Penalty S. 271(1)(c)
2428 S. 271(1)(c) : Penalty – Concealment – Claim of assessee not found to be mala fide –
No error in cancelling penalty imposed
Dismissing the appeal of the revenue, the Court held that there should be concealment
of income of the assessee or the assessee must have furnished inaccurate particulars of
his income. The claim made by the assessee had not been shown to suffer from these
conditions. In the absence of any finding recorded by the Commissioner (Appeals) or
the Tribunal with regard to the claim of the assessee that it was mala fide, there was
no error in cancelling the penalty imposed by the AO. (AY. 2007-08)
CIT v. Rana Sugar Ltd. (2016) 386 ITR 316 (P&H)(HC)
2429 S. 271(1)(c) : Penalty – Concealment – Received interest with refund amount – Did not
include in profit and loss account but disclosed same in notes to accounts – Could not
be said that Assessee had furnished inaccurate particulars [S. 4]
The assessee received interest with the amount of income tax refund arising from
orders passed by the CIT(A) for the assessment years 1993-94 to 1996-97. The revenue
appealed against the order of the CIT(A) before the Tribunal. Since the matter was
subjudice, the assessee did not include the income arising out of the aforesaid amount
of interest in his profit and loss account but disclosed the same in the notes to the
accounts. The AO rejected the assessee’s action and subsequently initiated penalty
proceedings both for the concealment of income as well as furnishing of inaccurate
particulars of income.
The High Court held that the AO himself admitted that the assessee had disclosed the
said interest income. Disclosure and concealment cannot co-exist. When a finding is
recorded that disclosure was indeed made then the conclusion as regards concealment
is bad. Furthermore it cannot also be said that the assessee had furnished inaccurate
particulars of income. This is so because there was no material on record to indicate
that the particulars furnished by the assessee were factually incorrect. Hence it was
held that penalty under section 271(1)(c) cannot be levied on the assesee. The revenue’s
appeal was dismissed. (AY. 2004-05)
CIT v. Pilani Investments & Industries Corporation Limited (2016) 383 ITR 635 / 238
Taxman 384 / 284 CTR 272 / 131 DTR 321 (Cal.)(HC)
2430 S. 271(1)(c) : Penalty – Concealment – Unexplained expenditure – Payment of
commission – Held, assessee failed to establish the genuineness of payments – Adverse
inference against the assessee for failing to cross-examine would equally apply to the
penalty proceedings – Penalty sustained [S. 69C]
Assessee claimed deduction of payment of certain commission to three companies
which was accepted in the original assessment. Thereafter, a search was conducted on
the entities to whom commission was paid by the assessee and during the search, 'M',
managing director of the said three payee companies admitted in a statement that the
transactions with the assessee were hawala entries. In another statement 'M' stated that
he was contacted by one 'J' being the agent between them and the assessee. Statement
of 'M' was confirmed by 'J'. Thereafter the assessment of the assessee was reopened.
During the reassessment proceedings, assessee was offered an opportunity to cross-
examine 'M' but assessee expressed its inability to cross-examine 'M' at a short notice
824
S. 271(1)(c) Penalty
of two working days and assessment was finalised. Tribunal restored the matter back to
the AO for cross-examination of ‘M’ and ‘J’. On the day fixed for cross-examination 'J'
was present in the office of the AO but despite efforts made by the AO, 'M' could not
be traced and produced for cross-examination. Assessee was asked to cross-examine 'J'
but refused to cross-examine him on the ground of his being stranger to the transaction.
According to the assessee, without first cross-examining 'M', no useful purpose would
be served in cross-examining 'J'. AO finalised the assessment after making the addition
and also levied penalty u/s. 271(1)(c). Tribunal upheld the quantum addition but deleted
the penalty on the ground that since the High Court has admitted the question of law,
therefore penalty could not be levied. In quantum appeal, High Court held that, de
hors the evidence of 'M', the evidence of 'J' was, by itself, sufficient to draw an adverse
inference against the assessee that the payments of the commission were fictitious and
accordingly High Court upheld the addition. In so far as penalty was concerned High
Court held that mere pendency of the quantum appeal could not have led the Tribunal
to conclude that the issue was debatable. It was further held that assessee failed to
discharge onus of proving the genuineness of the payments. High Court also held
that the adverse inference against the assessee for failing to cross-examine 'J' would
equally apply to the penalty proceedings and there was no necessity to again offer the
assessee a further opportunity of cross-examining 'M' and 'J' in the penalty proceedings.
Accordingly, the levy of penalty was upheld. (AY. 1981-82, 1983-84)
Roger Enterprises (P.) Ltd. v. CIT (2016) 382 ITR 639 / 238 Taxman 434 (Delhi)(HC)
S. 271(1)(c) : Penalty – Concealment – Validity of order – Order passed under section 2431
271(1)(c) is invalid when the show-cause notice was issued for levy of penalty under
section 271(1)(b) – Merely stating that penalty proceedings have been initiated would
not satisfy the requirement of law [S. 271(1B)]
The Assessing Officer levied penalty under section 271(1)(c) after issuing show-cause
notice under section 271(1)(b) of the Act. The penalty was levied as a consequence of
the disallowance of certain finance expenses claimed as revenue expenditure which was
held to be capital in nature. It is held by the High Court that the levy of penalty under
section 271(1)(c) is not valid for the reason that the show-cause notice was not issued
for levy of penalty under section 271(1)(c) and that in the facts and circumstances of the
case, a penalty under section 271(1)(c) is untenable as the disallowance was made based
on the return of income filed by the assessee. It is also held that no proper satisfaction
as mandated under section 271(1B) of the Act was not recorded by the Assessing Officer
and therefore, levy of penalty is unjustified. (AY. 2001-02)
Safina Hotels Pvt. Ltd. v. CIT (2016) 237 Taxman 702 / 137 DTR 89 (Karn.)(HC)
S. 271(1)(c) : Penalty – Concealment – Bogus Liability – On confrontation of facts – 2432
Assessee Surrendered the liability subject to non-initiation of penalty – AO could not
have given such assurance – Levy of penalty is held to be justified [S. 41(1), 260A]
CIT(A) and Tribunal confirmed the addition. On appeal before High Court it was held
that no substantial question of law arose since on inability to provide confirmations,
surrender by mentioning to avoid further litigation and to have mental peace does not
make out that the assessee had offered the same amount subject to non-initiation of
825
Penalty S. 271(1)(c)
penalty. Further held that the AO could not have assured the assessee of non-initiation
of penalty proceedings as both are independent proceedings. Also held that no perversity
is seen as it was finding of fact that liability was bogus as on enquiry AO noticed that
liability squared up through self-bearer cheques and in cash. Levy of penalty was held
to be justified. (AY. 2007-08)
Girraj Mehta v. CIT (2016) 382 ITR 385 / 133 DTR 182 / 285 CTR 205 (Raj.)(HC)
2433 S. 271(1)(c) : Penalty – Concealment – Quantum appeal is admitted by High Court on
substantial question of law hence addition itself becomes debatable, hence the levy of
penalty was held to be not justified [S. 54, 54F, 260A]
The assessee claimed deduction under section 54 against sale of commercial building
which was denied by AO not being residential house. Alternate claim of 54F was also
denied as at the time of inspection the residential house acquired was also demolished
and site was used for construction of hospital. The disallowance was upheld upto
Tribunal and quantum appeal was admitted by High Court on substantial question of
law. The AO levied penalty under section 271(1)(c) for concealment which was upheld
by CIT(A). On further appeal Tribunal reversed the orders and cancelled the penalty.
On revenue appeal, the High Court upheld the decision of Tribunal holding that where
penalty is imposed in respect of an addition where High Court has admitted appeal as
substantial question of law, then sustainability of the addition itself becomes debatable
and therefore penalty cannot be imposed. (AY. 2008-09)
CIT v. Harsha N. Biliangady (Dr.) (2015) 379 ITR 529 / (2016) 133 DTR 223 (Karn.)(HC)
2434 S. 271(1)(c) : Penalty – Concealment – Disclosing all particulars of income and
claiming deduction based on certificate issued by chartered accountant – Deletion of
penalty was held to be justified [S. 80IC]
The assessee-firm engaged in the business of manufacturing of biscuits, cookies and
other bakery products filed a nil return for the AY 2009-10 on September 30, 2009,
claiming deduction under section 80-IC of the Act. The Assessing Officer disallowed
the deduction amount. Penalty proceedings under section 271(1)(c) were also initiated
for filing inaccurate particulars of income and an order imposing penalty was passed.
The Commissioner (Appeals) upheld the order imposing penalty. The Appellate Tribunal
deleted the penalty. On appeal : Held, dismissing the appeal, that the judgment of the
Supreme Court in the case of Liberty India v. CIT (2009) 317 ITR 218 (SC) (which held
against the assessee) was rendered on August 31, 2009 but was published for the first
time only on September 17, 2009. It had been categorically recorded by the Tribunal
that there was very little gap between the publication of the decision of the Supreme
Court in Liberty India's case and the filing of the return by the assessee. At the time
of filing the return the issue was debatable and penalty could not have been levied.
Further the Tribunal had found that the assessee had disclosed all the particulars of the
income and had not concealed anything. Once proper disclosure was made penalty was
not attracted. The return was filed on the basis of the certificate issued by the chartered
accountant though under mistake, and the assessee could take the benefit on the basis
of bona fide belief. The view adopted by the Appellate Tribunal was a plausible view
based on appreciation of material on record and, therefore the order did not warrant
any interference by the Court. The Department was unable to show any perversity or
826
S. 271(1)(c) Penalty
illegality in the order. No substantial question of law arose for consideration. (AY. 2009-
10)
PCIT v. S.S. Food Industries (2016) 382 ITR 388 (P &H)(HC)
Editorial : S. S. Foods Industries v. ACIT (2015) 38 ITR 90 (Chd.)(Trib.) is affirmed.
S. 271(1)(c) : Penalty – Concealment – Bogus Purchases – If the assessment order in 2435
the quantum proceedings is altered by an appellate authority in a significant way, the
very basis of initiation of the penalty proceedings is rendered non-existent and the AO
cannot continue the penalty proceedings on the basis of the same notice
Relying on the decision of the Calcutta High Court in CIT v. Ananda Bazar Patrika
Pvt. Ltd. (1979) 116 ITR 416 (Cal.), the ITAT held that “once the basis for initiation
of penalty proceedings was altered or modified by the first appellate authority, the
Assessing Officer has no jurisdiction thereafter to proceed on the basis of the findings
of the first appellate authority”. On further appeal by the department HELD by the High
Court dismissing the appeal:
Once the assessment order of the AO in the quantum proceedings was altered by the
CIT(A) in a significant way, the very basis of initiation of the penalty proceedings
was rendered non-existent. The AO could not have thereafter continued the penalty
proceedings on the basis of the same notice. Also, the Court concurs with the CIT(A)
and the ITAT that once the finding of the AO on bogus purchases was set aside,
it could not be said that there was any concealment of facts or furnishing of inaccurate
particulars by the assessee that warranted the imposition of penalty under section
271(1)(c) of the Act. (ITA No. 313/2016, dt. 13.05.2016) (AY. 2007-08)
Pr. CIT v. Fortune Technocomps (P) Ltd. (Delhi)(HC); www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Disallowance of claim, effect of – Business loss 2436
was shown in e-return, software automatically reflected loss returned as carry forward
loss – The assessee had in subsequent assessment year had not claimed carry forward
loss was evidence of fact that there was no intent to furnish inaccurate particulars
of income
The assessee filed its return of income claiming deduction of certain expenditure which
resulted in business loss. The Assessing Officer disallowed the expenditure as the
business had not commenced and added the same to the income of the assessee. The
AO disallowed the carry forward loss as claimed in the return of income as it was filed
beyond the due date. The AO also passed a penalty order under section 271(1)(c) on
ground that assessee had deliberately furnished inaccurate particulars of income relating
to carry forward loss.
The CIT(A) as well as the Tribunal set aside the penalty order holding that even when
assessee declared net loss in its e-return, it was automatically reflected as carry forward
loss. It was also found that return of income filed for the subsequent assessment year
prior to the order of the subject assessment year also indicated that the assessee had not
claimed any set off or loss carried forward from the earlier assessment years.
The High Court dismissed the Revenue’s appeal holding that, the CIT(A) and the
Tribunal have concurrently reached a finding of fact that the assessee had not claimed
any carry forward loss either in the return which it has filed for the subject assessment
827
Penalty S. 271(1)(c)
year or in the subsequent assessment years. In the subject assessment year, once a
loss was shown in the e-return, the software suo motu reflected the loss returned as
carry forward loss. The assessee has not fed in the entry of carried forward loss while
filing its return of income in the e-return. The fact that assessee had in the subsequent
assessment year not claimed carry forward loss was evidence of the fact that there was
no intent to furnish inaccurate particulars of income or conceal income. In any case,
both the Commissioner (Appeals) as well as the Tribunal had concurrently reached a
finding of fact that there was no intent on the part of the assessee to evade tax. This
finding is not shown to be arbitrary. Therefore, the Tribunal was justified in setting
aside impugned penalty order. (AY. 2008-09)
CIT v. First Data (India) (P.) Ltd. (2016) 384 ITR 260 / 237 Taxman 543 (Bom.)(HC)
2437 S. 271(1)(c) : Penalty – Concealment – Foreign gifts – Factum of gifts mentioned in note
in return – When explanation called for further particulars not furnished on account
of sour relationship – Tribunal cancelling penalty
Held, the concealment, as such, in the facts and circumstances, was missing, as
admittedly, it was not that the amount was detected subsequently but the factum of
the gifts from the brother and sister had been mentioned in the note in the return.
The explanation was later on called for and further particulars could not be furnished
on account of sour relationship and the fact that the assessee was not in touch with
her brother who had allegedly shifted from Canada, thereafter. In such circumstances,
the discretion which had been exercised by the Tribunal, in setting aside the penalty,
could not be said to be perverse or suffering from such illegality as would warrant
interference. (AY. 2009-10)
CIT v. Sunila Sharma (2016) 380 ITR 462 (P&H)(HC)
2438 S. 271(1)(c) : Penalty – Concealment – Survey – Capital gains on sale of shares –
Penalty is not leviable on income declared during survey and offered in return – A
mere change of head of income from capital gains to business income does not attract
penalty. [S. 10 (38)]
Dismissing the appeal of revenue the Court held that we finding that the Commissioner
of Income Tax(A) during the penalty proceedings had again examined the issue whether
the claim of capital gain made in the regular return of income to the extent of ` 1.62
crores with the particulars in support of the same. On examination, the CIT(A) reaches
a prima facie conclusion that the income could be regarded as long term capital gain.
Once the aforesaid conclusion has been reached coupled with two further facts viz.
the authorities have rendered a finding of fact that the respondent-assessee had not
concealed its income nor filed inaccurate particulars attributable to capital gains in its
regular return of income, the view taken to delete the penalty is a possible view. In the
present fact, the view taken by the CIT(A) as well as the Tribunal is a reasonable and
possible view. Nothing has been shown to us to hold that the findings of the CIT(A)
and Tribunal was perverse and/or arbitrary warranting any interference by this Court.
It may be pointed out that even in the Memo of Appeal, it is not urged by the Revenue
that the finding of the CIT (A) and Tribunal are in any manner perverse. The reliance
by the revenue upon the decision of the Apex Court in Mak Data P. Ltd v. CIT (2013)
828
S. 271(1)(c) Penalty
358 ITR 593 (SC) to contend that the justification of having deleted and accepted the
amount of ` 1.62 crores as business income, to buy peace is not available. (AY. 2006-07)
CIT v. Hiralal Doshi (2016) 383 ITR 19 (Bom.)(HC)
S. 271(1)(c) : Penalty – Concealment – The non-specification in the notice as to 2439
whether penalty is proposed for concealment or for furnishing of inaccurate
particulars reflects non-application of mind and renders it void. The fact that the
assessee participated in the penalty proceedings does not render the penalty as valid
[S. 274, 292B, 292BB]
Allowing the appeal the Tribunal held that non-specification in the notice as to whether
penalty is proposed for concealment or for furnishing of inaccurate particulars reflects
non-application of mind and renders it void. The fact that the assessee participated in
the penalty proceedings does not render the penalty as valid. (ITA No. 2187 & 1789/
Mum/2014, dt. 21.12.2016) (AY. 2009-10)
Dr. Sarita Milind Davare v. ACIT (2017) 184 TTJ 184 TTJ 9 (UO)(Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Addition made by changing assessment year 2440
would not result either in concealment of particulars of income or furnishing of
inaccurate particulars of income
The addition made by changing the assessment year will not result either in
concealment of particulars of income or furnishing of inaccurate particulars of income.
Addition made by the Assessing Officer on estimated basis would not give rise to
penalty u/s. 271(1)(c) of the Act. (AY. 1999-2000, 2003-04, 2004-05)
Hindustan Organic Chemical Ltd. v. ACIT (2016) 48 ITR 646 646 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Quantum addition was deleted – Penalty would 2441
not survive
The Appellate Tribunal held that the disallowances made by AO. were deleted by the
Appellate Tribunal. Hence, there was no basis to continue with the penalty proceedings.
ACIT v. Tata Industries Ltd. (2016) 51 ITR 101 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Satisfaction – The exercise of power to 2442
record satisfaction that the person has concealed its income or furnished inaccurate
particulars of income has to be exercised in assessment proceedings itself, CIT(A)
in appellate proceedings has no jurisdiction to record satisfaction and levy penalty
[S. 133A, 251]
Assessee’s assessment having been completed by the AO, who had not recorded any
satisfaction for initiating penalty under section 271(1)(c) with regard to the additional
income offered by the assessee pursuant to the survey action under section 133A, CIT(A)
had no jurisdiction to initiate the penalty proceedings and thereafter also complete the
same in respect of the said additional income while disposing of the appeal against levy
of penalty under section 271(1)(c) in respect of other additions. (AY. 2003-04).
Ajit Ramchandra Jadhav v. ACIT (2016) 178 TTJ 204 / 135 DTR 1 (Pune)(Trib.)
829
Penalty S. 271(1)(c)
2443 S. 271(1)(c) : Penalty – Concealment – Capital gains – Confirmation in quantum
proceedings – Levy of penalty was held to be not justified
Dismissing the appeal of the revenue the Tribunal held that element of guesswork could
not be ruled out and quantum of income determined was certainly not beyond shadow
of doubts. Finally, the tribunal concluded stating that as conclusion in respect of any
concealment of income or furnishing of inaccurate particulars of income on part of
Assessee was uncertain, penalty could not be levied. (AY. 2004-05, 2005-06)
ACIT v. G. M. Finance & Trading Co., (2016) 135 DTR 57 / 176 TTJ 638 (Mum.)(Trib.)
2444 S. 271(1)(c) : Penalty – Concealment – Search and seizure – Initiation proceedings was
held to be bad in law, penalty if any leviable it may be section 271AAA(1) [S. 132,
271AAA(1)]
Allowing the appeal of the assessee, the Tribunal held that; the assessee during search
and seizure proceedings admitted that undisclosed income had been accrued to him
along with his three brothers in their individual capacity by way of trading in various
commodities and real estates and all such facts got duly corroborated from seized
material. Penalty if at all leviable, it should be levied under section 271AAA(1) and
not under section 271(1)(c) as had categorically been provided in section 271AAA(3).
Intention of legislative in incorporating provisions contained under section 271AA was
to provide general amnesty in search and seizure cases. Case of Assessee undisputedly
falls under section 271AAA and could not be dealt with u/s. 271(1)(c) by any stretch
of imagination even. Very initiation of penalty proceedings against Assessee under
section 271(1)(c) were vitiated in view of amended provisions of law as additional
income was disclosed by Assessee on basis of search operation conducted. So initiation
of penalty proceedings as well as penalty orders and impugned order passed by CIT(A)
were not sustainable in eyes of law, penalty imposed was deleted. (AY. 2008-09)
Ashwani Kumar Arora v. ACIT (2016) 50 ITR 37 (Delhi)(Trib.)
2445 S. 271(1)(c) : Penalty – Concealment – Legal representatives – Liability to pay “any
sum” that deceased would be liable to pay – “any sum” does not include penalty
levied on deceased assessee [S. 159]
The assessee expired in 2010, in the period between completion of assessment in 2008
and passing of penalty order in 2011. The Tribunal held that “any sum” referred in
section 159(1) does not include penalty proceedings on the legal representatives
u/s. 159(2). Penalty proceedings are different and distinct in nature than tax, as the
former are levied for contumacious conduct of the wrong-doer. Penalty imposed on legal
heir not justified. (AY. 2006-07)
Srikrishan Agarwal v. Dy. CIT (2016) 48 ITR 548 (Jaipur)(Trib.)
2446 S. 271(1)(c) : Penalty – Concealment – Share application money claimed as bad debt
– Levy of penalty was deleted [S. 36(1)(iii), 37(1)]
Allowing the appeal the Tribunal held that; The genuineness of payment of share
application money had not been disputed at any stage, thus, the automatic levy of
penalty cannot be sustained only due to disallowance of expenditure in corresponding
assessment proceedings. The determination of tax liability and levy of penalty are two
different events under the Act and the AO is duty bound under it to make out a case
830
S. 271(1)(c) Penalty
for levy of penalty independent of assessment proceedings. Making an incorrect claim
in law cannot tantamount to furnishing inaccurate particulars. (AY. 2008-09)
Qpro Infotech Ltd. v. DCIT (2016) 49 ITR 41 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Making an incorrect claim in law cannot 2447
tantamount to furnishing inaccurate particulars, no penalty can be imposed
[S. 80-IB(10)]
Dismissing the appeal of the revenue, the Tribunal held that there was no denial of the
fact that the project was completed on the basis of plans approved by the competent
authority. So far as the issue of area exceeding 1,000 square feet was concerned, the
assessee explained that the flats were bought independent of each other and at the later
stage the buyers or occupants got them combined. While adjudicating the quantum
addition the explanation of the assessee was accepted by the Commissioner (Appeals).
Making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars.
In order to attract the penalty provision under section 271(1)(c) either there should be
concealment of income or furnishing of inaccurate particulars. (AY. 2016-17)
ITO v. Kapil Ashok Bajaj (2016) 49 ITR 44 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Omission to add back provision of bad debts 2448
and loss on account of sale of fixed assets in income return, levy of penalty was held
to be not justified
Allowing the appeal of the assessee the Tribunal held that omission to add back
provision of bad debts and loss on account of sale of fixed assets in income return, levy
of penalty was held to be not justified. (AY. 2003-04)
Hewitt Associates (India) P. Ltd. v. Dy. CIT (2016) 49 ITR 53 (Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – capital or revenue – Payment to tenants – Levy 2449
of penalty was held to be justified [S. 37(1)]
The assessee company had paid sum of money to the tenants to vacate occupied
premises of hotel building. The assessee claimed deduction as revenue expenditure. AO
disallowed the said expenditure as capital in nature, which was confirmed by Tribunal.
The AO imposed penalty for claiming the same as business expenditure. CIT(A) and
ITAT confirmed the penalty. (AY. 2003-04)
Hotel Steelwell (P.) Ltd. v. DCIT (2016) 161 ITD 767 (Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Search and seizure – On facts penalty was held 2450
to be justified [S. 153A]
The assessee at the time of filing of return of income in terms of section 153A of the
Act, admitted some unexplained receipts for the assessment years. The AO levied
penalty which was up held by the CIT(A).
On appeal it was held that merely because the assessees have not challenged the
additions does not mean that it is a benevolent act of buying peace. The facts clearly
spell out that the assessees were left with no alternative but to accept the undisclosed
transactions and income. In these peculiar facts, the levy of penalty was held to be
justified. (AY. 2007-08, 2009-10)
Chandubhai Ambalal Prajapati v. ACIT (2016) 50 ITR 74 (Ahd.)(Trib.)
831
Penalty S. 271(1)(c)
2451 S. 271(1)(c) : Penalty – Concealment – Penalty cannot be imposed if the AO does
not specify whether the penalty is for "concealment of income" or for "furnishing
inaccurate particulars”
Allowing the appeal of assessee the Tribunal held that penalty cannot be imposed if
the AO does not specify whether the penalty is for "concealment of income" or for
"furnishing inaccurate particulars". Penalty cannot be imposed in respect of income
surrendered by the assessee if the AO does not link the income to incriminating
documents. (ITA No. 7034 to 7038/Del/2014, dt. 19.09.2016) (AY. 2006-07 to 2010-11)
M. G. Contractors Pvt. Ltd. v. DCIT (Delhi)(Trib); www.itatonline.org
2452 S. 271(1)(c) : Penalty – Concealment – Mere omission to compute capital gains – Levy
of penalty was held to be not justified [S. 45]
Dismissing the appeal of the revenue the Tribunal held that mere omission to compute
capital gains. Levy of penalty was held to be not justified. (AY. 2008-09)
ITO v. Market committee Sirsa (2016) 179 TTJ 29 (UO)(Chd.)(Trib.)
2453 S. 271(1)(c) : Penalty – Concealment – Difference in pricing methodology adopted by
assessee and AO, levy of penalty was held to be not justified
Allowing the appeal the Tribunal held that addition having been made due to difference
in the pricing methodology adopted by AO for determining the expected profits from
international transaction and not on account of inaccuracy, discrepancy or concealment
found in information furnished by the assessee for determining ALP of the international
transaction, it cannot be held that the computation of the price charged in the
international transaction made as per section 92C lacked in good faith or due diligence
and, therefore, assessee is not liable for penalty under section 271(1)(c) r/w Expl. 7
thereto. The Tribunal noted that it is not open to for the AO to hold assessee guilty
under section 271(1)(c) in one year and not in preceding two years under identical
circumstances. (AY. 2008-09)
Cherokee India (P) Ltd. v. Dy. CIT (2016) 179 TTJ 9 2/ 136 DTR 353 (Mum.)(Trib.)
2454 S. 271(1)(c) : Penalty – Concealment – Additional income declared in statement not
disclosed in return – Levy of penalty was held to be not justified
The Tribunal held that no money, bullion jewelery or any other valuable article
was found during the course of search. Therefore, Expl. to section 271(1)(c) cannot
be involved in this case. Merely because addition has been sustained in quantum
proceedings, the same cannot be a ground for levy of penalty under section 271(1)(c).
This is not a fit case for levy of penalty under section 271(1)(c). (AY. 1990-91)
ITO v. Talwalkar Bhalerao & Mate (2016) 178 TTJ 1 (UO)(Pune)(Trib.)
2455 S. 271(1)(c) : Penalty – Concealment – Addition as deemed dividend – Levy of penalty
was held to be not justified
The Tribunal held that the assessee at the time of quantum addition as well as the time
of penalty proceedings has reiterated that the advances are in the course of regular
business. It is a running account, said advances later on repaid. This issue is debatable
as various courts have held that business transaction is not covered under section
2(22)(e) of the Act. The transactions were made for the purpose of business and
832
S. 271(1)(c) Penalty
commercial expediency is bona fide. Penalty imposed by AO & confirmed by CIT(A) are
not justified, accordingly penalty is deleted in all the cases.
Trimurty Buildcon (P) Ltd. v. Dy. CIT (2016) 178 TTJ 373 / 135 DTR 161 / 47 DTR 50
(Jaipur.)(Trib.)
Trimurty Famrs & Retreats v. Dy. CIT (2016) 178 TTJ 373 / 135 DTR 161 (Jaipur)(Trib.)
Geeta Mishra (Smt.) v. Dy. CIT (2016) 178 TTJ 373 / 135 DTR 161 (Jaipur)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Computation of ALP – Levy of penalty was held 2456
to be not justified [S. 92C]
The Tribunal held that the assessee has satisfied all the requisite conditions as stipulated
in the exception crafted in Expln. 7. Therefore, mere fact that the TPO has determined
nil ALP of the international transactions cannot be a reason to impose penalty under
section 271(1)(c). (AY. 2010-11)
Mitsui Prime Advanced Composites India (P) Ltd. v. Dy. CIT (2016) 178 TTJ 490 / 136
DTR 282 (Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Pre-amended Explanation 5A to Section 271(1)(c) 2457
applies to non-filer assessees where a ROI is not filed before search and undisclosed
income is not offered in the ROI. The amended provision of Explanation 5A, which
is applicable to both filers and non-filers of returns, does not apply to searches
conducted pre 13.08.2009. Penalty levied u/s. 271(1)(c) to cases which are covered by
section 271AAA is void [S. 132(4), 153A, 271AAA]
Allowing the appeal of the assessee the Tribunal held that pre-amended Explanation
5A to section 271(1)(c) applies to non-filer assessees where a ROI is not filed before
search and undisclosed income is not offered in the ROI. The amended provision of
Explanation 5A, which is applicable to both filers and non-filers of returns, does not
apply to searches conducted pre 13.08.2009. Penalty levied u/s. 271(1)(c) to cases which
are covered by s. 271AAA is void. (ITA Nos. 189 to 192/Vizag/2014, dt. 16.09.2016)(AY.
2005-06 to 2008-09)
Nukala Ramakrishna Eluru v. DCIT (Vizag)(Trib.); www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Income-tax provisions are highly complicated 2458
– Difficult for a layman to understand the same – Even seasoned tax professionals
have difficulty in comprehending these provisions – Making a claim for deduction
u/s. 80-IA which had numerous conditions is a complicated affair – Cannot attract
penalty [S. 80-IA]
The assessee had made a claim u/s. 80-IA of the Act. Along with the return of income
the assessee had filed report from a Chartered Accountant in Form No. 10CCB as
required u/s. 80-IA(7) of the Act. The claim was made on the advice of the auditors.
A perusal of the audit report demonstrates that the auditors of the assessee also
believed that the assessee was eligible for deduction u/s. 80-IA of the Act. It was a
conscious claim made by the assessee supported by an audit report. The assessee had
also made an application to STPI for setting up the infrastructure facilities under the
STPI Scheme. The AO disallowed the claim u/s. 80-IA for various reasons such as
assessee was not engaged in the business of developing, operating and maintaining the
infrastructure facilities as specified in Section 80-IA as it was merely providing certain
833
Penalty S. 271(1)(c)
interiors, furniture, fixtures and generator back-up power services etc. for BPO/software
companies. Further it held that the guarantee card issued to the assessee company for
approval of 100% software export unit status had no connection with claim of deduction
u/s. 80-IA and accordingly levied penalty u/s. 271(1)(c). On appeal to Tribunal, it held
that the assessee acted under the guidance and advice of a chartered accountant. It
was under a bona fide belief that it is entitled to the claim for deduction under the
provisions of Section 80-IA of the Act. It further held that provisions of Act were
highly complicated and difficult for layman to understand the same. Even seasoned tax
professionals have difficulty in comprehending these provisions. Further making a clam
for deduction under the provision of section 80-IA which had numerous conditions
attached was a complicated affair. It could not be said that it was a case of furnishing
of inaccurate particulars of income. (AY. 2004-05)
Oxford Softech P Ltd v. ITO (2016) 47 ITR 794 (Delhi)(Trib.)
2459 S. 271(1)(c) : Penalty – Concealment – Department appeal – Tax effect less that limits
prescribed
All the appeals filed by the Department against deletion of penalty and pending before
Tribunal, where the tax effect involved was not more than ` 10,00,000/- and hence not
maintainable in view of Circular No.21 of 2015 dt. 10-12-2015. (AY. 1994-95)
DCIT v. Soma Textiles and Industries Ltd. (2016) 45 ITR 147 / 175 TTJ 1 / 129 DTR 12
(Ahd.)(Trib.)
2460 S. 271(1)(c) : Penalty – Concealment – Unexplained investments – Failure by assessee
to explain source of investment – Penalty justified
The assessee failed to explain the source of investments for ` 200 crores in spite of
several opportunities were provided during assessment and penalty proceedings. The
AO added the said amount as unexplained investments under section 69 of the Act
and initiated penalty proceedings. On appeal to Tribunal, it was held that there was
no material to explain the source of investments of the assessee and therefore the
authorities were justified in making addition and levying penalty. (AY 2005-06)
Sai Televisions Limited v. ITO (2016) 47 ITR 651 (Chennai)(Trib.)
2461 S. 271(1)(c) : Penalty – Concealment – No penalty in case of debatable issue
The AO made addition on account of excess claim of depreciation under technical
upgradation fund scheme and disallowed capital subsidy. Penalty proceedings was
initiated on the same. The ITAT deleted the penalty since the issue was debatable and
all details were submitted by the assessee and there was neither any concealment nor
was there any filing of inaccurate particulars of income. (AY. 2006-07)
ACIT v. SPL Industries Ltd. (2016) 47 ITR 204 (Delhi)(Trib.)
2462 S. 271(1)(c) : Penalty – Concealment – Advances taken from sister – Concerns in
course of regular business – Not deemed dividend – Penalty could not be imposed on
debatable issue [S. 2(22)(e)]
The assessee received loans from its sister concern. The assessee stated that the
advances were taken in course of regular business. The AO added the amount as
834
S. 271(1)(c) Penalty
deemed dividend under section 2(22)(e) of the Income tax Act, 1961 and initiated
penalty proceedings under section 271(1)(c) for the assessee’s failure to disclose income
in its return. On appeal to Tribunal, it was held that the assessee had filed its return for
all the years and disclosed the particulars of the shareholding pattern, advances taken
and given by it in the return. The accumulated profit also had been disclosed. Further it
observed that the assessee had filed its return under section 153A wherein also all the
detailed facts and figures were disclosed. The business transactions was not covered by
section 2(22)(e) and since the issue was debatable, penalty could not be imposed. (AY.
2002-03 to 2004-05, 2006-07 to 2008-09)
Trimurty Buildcon P. Ltd. v. DCIT (2016) 47 ITR 50 / 135 DTR 161 / 178 TTJ 373 (Jaipur)
(Trib.)
Geeta Mishra (Smt.) v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.)
Abhishek Estate P. Ltd. v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.)
Trimurty Farms and Retreats v. DCIT (2016) 47 ITR 50 (Jaipur)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Mistake of online portal – Bona fide mistake – 2463
Levy of penalty was not justified
Assessee offered a bona fide explanation stating that her salary was understated in her
return due to mistake of online tax return filing portal and there was no deliberate
attempt on part of assessee to conceal income, concealment penalty was not justified.
(AY. 2011-12)
Richa Dubey (Mrs.) v. ITO (2016) 158 ITD 541 / 48 ITR 195 / 179 TTJ 78 / 137 DTR 65
(Mum)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Income deemed to accrue or arise in India – 2464
Salaries – Salary earned in USA exempted from tax as employee was held as resident
of USA under tie-breaker Rule of DTAA – DTAA-India-USA [S. 9(1)(ii), Art. 4(2), 16(1)]
Assessee an individual derived income from salary and other sources. Assessee
was working in USA during period from 1-4-2010 to 1-7-2010 and assessee claimed
exemption as per Article 16(1) of DTAA based on split residency position. Assessing
Officer observed that since period of assessee's stay in India was more than 183 days,
assessee being resident of India, his entire global income was to be subjected to tax in
India and as such, assessee's claim for exemption under Article 16(1) was disallowed
and added back to total income of Assesse. Consequently, penalty u/s. 271(1)(c) was
levied. Based on determination of residential status as per tie-breaker analysis contained
in Article 4(2), assessee was tie-breaking to USA from 1-4-2010 to 30-6-2010 and, thus,
would be considered as resident of USA for said period. Since assessee had exercised
his employment in USA during above period, he was entitled to claim exemption
of salary in India as per Article 16(1). Assessee's conduct could not be said to be
contumacious so as to warrant levy of concealment penalty. (AY. 2011-12)
Raman Chopra. v. Dy. CIT (2016) 158 ITD 904 / 48 ITR 164 (Delhi)(Trib.)
835
Penalty S. 271(1)(c)
2465 S. 271(1)(c) : Penalty – Concealment – Accrual of (Banks/NBFC, in case of) – Assessee
– NBFC provided security in form of cash collateral for loans purchased by purchaser
– Bank but did not book said amount as its income, levy of concealment penalty was
justified [S. 5]
Assessee, a Non-Banking Financial Company, was engaged in business of providing
loans. It sold a portion of loans to purchaser-bank on Bilateral Buy Out Basis. As per
agreement, assessee provided cash collateral for 2 per cent of loans by way of fixed
deposits of which lien was made in favour of purchaser-bank. Such cash collateral had
to be utilized by purchaser-bank to cover any shortfall in repayment of loans. Assessee
did not treat such cash collateral as its income on ground that its case fell in capacity
of contractor and money was retained for a certain period which should not be taxable
until retention period was over. The AO. levied penalty for furnishing inaccurate
particulars. Treatment given by assessee was incorrect and had no sanction of law and
also not supported by any accounting standard and therefore claim of assessee was false
and was of furnishing inaccurate particulars of income; therefore levy of penalty was
justified. (AY. 2007-08)
Dy. CIT v. Madura Micro Finance Ltd. (2016) 157 ITD 918 (Chennai)(Trib.)
2466 S. 271(1)(c) : Penalty – Concealment – Set-off of business loss – Change of share
holdings- Levy of penalty was not justified [S. 79]
Allowing the appeal of the assessee the Tribunal held that the provisions of section 79
are complex and highly technical. Though technically speaking there was violation of
section 79 but it is not a case of concealment of income or filing inaccurate particulars
on the part of assessee. The benefit of set off of losses was claimed by the assessee in
the return as per the understanding of section 79. The appellate authorities upheld the
stand of the AO. But that itself would not attract levy of penalty. The Tribunal also
held that making disallowance and levy of penalty are two different events under the
Income-tax law, and happening of an event does not automatically lead to another. (AY.
2008-09) (ITA No. 3871/Mum/2014 dt. 16-03-2016)
Just Lifestyle P. Ltd-. v. DCIT (Chamber’s Journal 2016-April – P. 86 (Mum.)(Trib.)
2467 S. 271(1)(c) : Penalty – Concealment – Set-off of speculation loss against salary income
– Bona fide mistake – Levy of penalty was not justified
Allowing the appeal of assessee the Tribunal held that the assessee had disclosed entire
income from salary, income from other sources and income from business. However the
AO has treated the share business as speculation loss on the basis of material furnished
by the assessee himself. The AO has not gathered any material from outside sources.
Hence the assessee cannot be held to have concealed particulars of income or furnished
inaccurate particulars. (AY. 2004-05) (ITA No. 8814/Mum/2011 dt. 4-03-2016)
Ravi M. Arabatti v. ITO (2016) Chamber’s Journal-April, P. 87
2468 S. 271(1)(c) : Penalty – Concealment – Computation of ALP in good faith and with due
diligence – Levy of penalty was held to be not justified
The Tribunal held that the only conclusion that could be drawn in the peculiar facts
and circumstances of the case is that the use of multiple year data was done with due
836
S. 271(1)(c) Penalty
diligence and in good faith as till 2007. The issue was debatable and wherever there
is debate on the issue and two views are possible the bona fide of an explanation in
having followed one of the views cannot be a ground for penalty. Thus penalty cannot
be imposed. (AY. 2006-07, 2007-08)
ACIT v. Boston Scientific India P. Ltd. (2016) 177 TTJ 729 / 137 DTR 153 / 49 ITR 435
(Delhi)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Surrender of income without any incriminating 2469
materials no penalty can be levied [S. 132(4), 153A]
It is undisputed fact that during the course of search, no incriminating documents
were found and seized. The assessee surrendered the additional income under section
132(4) at ` 15 lakhs and requested not to impose penalty u/s. 271(1)(c) of the IT Act.
The AO imposed the penalty by invoking the Explanation 5A to section 271(1)(c) of the
Act, which has been confirmed by ld. CIT (A) by considering the judgment of Hon’ble
Supreme Court in the case of MAK Data Pvt. Ltd. v. CIT (2013) 358 ITR 593 (SC). But for
imposing the penalty under Explanation 5A on the basis of statement recorded during
the course of search, it is necessary to be found incriminating documents and is to be
considered at the time of assessment framed under section 153A of the Act. The issue
has been considered by various High Courts as well as by ITAT as relied upon by the
assessee, which are squarely applicable to the case of the assessee. As no incriminating
documents were found during the course of search, therefore, Explanation 5A to section
271(1)(c) is not applicable. Accordingly, we delete the penalty confirmed by ld. CIT(A).
(ITA No. 296/JP/2014, dt. 06.05.2016) (AY. 2007-08)
Ajay trader v. DCIT (Jaipur)(Trib.); www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Levy of penalty u/s. 271(1)(c) on income 2470
disclosed in a search instead of u/s. 271AAA is not sustainable [S. 153A, 271AAA]
(i) It is not in dispute that the assessee during the search and seizure proceedings
categorically admitted that the undisclosed income of ` 36,02,828/- has been
accrued to him along with his three brothers in their individual capacity by way
of trading in various commodities and real estates and all these facts got duly
corroborated from the seized material.
(ii) When aforesaid undisputed facts are examined in the light of the amended
provisions contained under sub-section (2) and (3) of section 271AAA, the
penalty in this case, if at all leviable, it should have been levied under section
271AAA(1) and not u/s. 271(1)(c) as has categorically been provided in sub-section
(3) of section 271AAA. Intention of the legislative in incorporating the provisions
contained u/s. 271AA Affective during the period 1st June, 2007 to 1st July, 2012
is to provide general amnesty in search and seizure cases, and the case of the
assessee undisputedly falls u/s. 271AAA and cannot be dealt with u/s. 271(1)(c) by
any stretch of imagination even.
(iii) So, we are of the considered view that the very initiation of the penalty
proceedings against the assessee u/s. 271(1)(c) are vitiated in view of the amended
provisions of law applicable effective from 1.6.2007 till 1.7.2012, as the additional
income to the tune of ` 36,80,520/- was disclosed by the assessee on the basis of
837
Penalty S. 271(1)(c)
search operation conducted on 10.02.2009. So, without going into the merits of the
case, we are of the considered view that initiation of penalty proceedings as well
as penalty orders and impugned order passed by the ld. CIT(A) are not sustainable
in the eyes of law. (ITA No. 844/Del/2014, dt. 19.05.2016) (AY. 2008-09)
Ashwani Kumar Arora v. ACIT (Delhi)(Trib.); www.itatonline.org
2471 S. 271(1)(c) : Penalty – Concealment – Rejection of books of account and estimate of
income – Levy of penalty was held to be not justified [S. 144]
Allowing the appeal of assessee Tribunal held that; where Assessing Officer framed
assessment of assessee under section 144 and after rejecting account books adopted net
profit rate of 8 per cent, which was reduced by Tribunal to 7 per cent, and in mean
time Assessing Officer also levied penalty under section 271(1)(c), since assessee was
an existing assessee and it did not file return for above assessment year and Assessing
Officer and Tribunal adopted different estimates, no penalty under section 271(1)(c) was
leviable upon assessee. (AY. 2007-08)
California Design & Construction INC India, Chandigarh v. ITO (2016) 156 ITD 919 (Chd.)
(Trib.)
2472 S. 271(1)(c) : Penalty – Concealment – Disallowance of claim of loss from share
transaction – Levy of penalty was held to be not valid as despite the request broker
was not summoned [S. 131]
Authorities below having failed to consider the explanation and evidence adduced by
the assessee in support of his claim of loss from share transactions and not summoned
the broker by serving summons under section 131 despite such request by the assessee,
penalty under section 271(1)(c) imposed by the AO simply by relying on the findings in
the assessment order and the contents of the letter of the stock exchange intimating that
the said broker was not registered without verifying the same is untenable. (AY. 2005-06)
Gordhan Das Gilara v. ACIT (2016) 130 DTR 67 / 175 TTJ 627 (Jaipur)(Trib.)
2473 S. 271(1)(c) : Penalty – Concealment – Non-disclosure of receipts from sale of paintings
by professional painter on bona fide belief – Levy of penalty was held to be not
justified
AO having not disputed the position that the paintings sold by the assessee a
professional painter, were personal effects of the assessee and consequently the income
from the sale of paintings were capital receipts not chargeable to tax, the plea of the
assessee that the receipts from the sale of paintings were not offered to tax on the basis
of bona fide belief is acceptable. Further, satisfaction for initiation of penalty proceedings
is not discernible from the order of assessment penalty u/s. 271(1)(c) was not therefore
sustainable. (AY. 2006-07)
Suvaprasanna Bhatacharya v. ACIT (2016) 130 DTR 49 / 175 TTJ 238 (Kol.)(Trib.)
2474 S. 271(1)(c) : Penalty – Concealment – If show cause notice does not specify the
concealment particulars – Levy of penalty was held to be bad in law
Allowing the appeal of assesse the Tribunal held that for valid initiation of penalty
proceedings it is essential that prima facie, the case may deserve the imposition of
penalty should be discernible from the order passed and notice must specify as to
838
S. 271(1)(c) Penalty
whether the assessee was quality of having ‘furnished in accurate particulars of income’
or having ‘concealed particulars of such income. (AY. 2006-07)
Suvaprasanna Bhatacharya v. ACIT (2016) 130 DTR 49 / 175 TTJ 238 (Kol.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Quantum appeal admitted – Capital gains 2475
on sale of land based on registered valuer’s report – Subsequently modified in
reassessment proceedings by AO and then by CIT(A) – There could be no concealment
of income or furnishing of inaccurate particulars on part of assessee – No penalty
when quantum appeal is admitted by High Court
The assessee declared capital gain on sale of land in its return of income. The capital
gain to the tune of ` 46,48,295 was determined based on registered valuer’s report. The
said return of income was accepted under section 143(3) of the Act. The assessment
was subsequently reopened under section 148 and capital gain was recomputed to
` 3,36,63,125. The CIT(A) reduced the capital gains determined by AO to ` 2,23,95,570
which was confirmed by Tribunal. Penalty proceedings were initiated against the
assessee. On appeal to Tribunal, it was held that there were 3 different opinions with
respect to rates of land i.e., one adopted by AO in original assessment, two as formed
by the AO in reassessment proceedings and three as adopted by CIT(A). The Tribunal
approved the view of CIT(A) which was again subject to review before the High Court.
Therefore it could not be said with certainty that there was concealment of income
or furnishing of inaccurate particulars of income on the part of the assessee. Further
the quantum appeal being admitted by High Court, it was apparent that the issue was
debatable. Penalty under section 271(1)(c) could not be sustained. (AY. 2004-05, 2005-06)
ACIT v. G. M. Finance & Trading Co. (2016) 176 TTJ 638 / 135 DTR 57 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – No penalty in case addition does not have any 2476
effect of taxes to be paid and tax continues to be paid as per section 115JB [S. 94 (7),
115JB]
The assessee had failed to give effect to section 94(7) and penalty was levied by the AO
for filing inaccurate particulars of income. However, since the Assessee was paying tax
as per the provisions of section 115JB, this did not have any effect on the tax liability
as per normal provisions of the Act. The ITAT held that since the addition did not have
any bearing on the tax to be paid, no penalty should be levied. (AY. 2005-06)
Compucom Software Ltd. v. DCIT (2016) 45 ITR 619 (Jaipur)(Trib.)
S. 271(1)(c) : Penalty – Concealment – Furnishing of inaccurate particulars – Claim 2477
made by assessee held to be not sustainable in law – Penalty cannot be levied
AO levied penalty on 5 additions namely 1) claim of depreciation under the block
‘Buildings’ 2) Loss on sale of current assets 3) Claim of bad debts 4) Investments written
off and 5) Irrecoverable project expenses written off on the ground that assessee has
furnished inaccurate particulars of income. The CIT(A) deleted the penalty. On appeal to
Tribunal, it held that other than the claim made by the assessee with regard to 5 items, no
fault has been found by the AO in the particulars of income submitted by the assessee in
its return. Merely because the claim of the assessee was not sustainable in law, assessee
cannot be construed to have furnished inaccurate particulars of income. (AY. 2007-08)
ACIT v. Best & Crompton Engg. Ltd. (2015) 43 ITR 600 / (2016) 176 TTJ 224 (Chennai)
(Trib.)
839
Penalty S. 271(1)(c)
2478 S. 271(1)(c) : Penalty – Concealment – Surrender of income – Loss shown in return
was assessed as Nil income – AO accepted the surrender without raising any objection
– Reason given by assessee for making the surrender appears to be reasonable – Not
case of revenue that assessee has not actually incurred loss – Levy of penalty was
held to be not justified
Held that AO has recorded that during assessment assessee was under the burden of
heavy debt and was not involved in any business activities. Such finding of a fact
was based on report of the inspector deputed to make enquires regarding the assessee.
Due to difficult circumstances, assessee has expressed its inability to furnish details
or information and as a consequence surrendered the loss. Assessee surrendered his
loses to buy peace in view of the impossibility faced by him in furnishing adequate
details to substantiate claim of loss. Reason given by assessee for making the alleged
surrender appears to be plausible and reasonable from a common man’s point of view.
AO accepted the surrender without any objection or reservation and no infirmity has
been pointed out by AO or CIT(A) in the explanation given by assessee for making the
alleged surrender of losses. AO has not alleged that assessee has actually not earned
the loses and by claiming the same has furnished inaccurate particulars of income.
Surrender of income is without relying on any adverse material. No adverse material
available on record, observations of AO and CIT(A) about concealment of income or
furnishing of inaccurate particulars of income are not borne out from record and hence
liable to be deleted. (AY. 2007-08)
Narindera Industries v. ACIT (2016) 176 TTJ 35 (UO)(Chd.)(Trib.)
2479 S. 271(1)(c) : Penalty – Concealment – Penalty to be levied in case the explanation of
the assessee is false and not bona fide though the quantum appeal is admitted before
High Court [S. 80HHC]
The deduction u/s. 80HHC claimed by the Assessee was not allowed by the AO on the
ground that the export proceeds were not repatriated within 6 months from end of the
year. The assessee alleged that it received post-facto approval from RBI. Against the
adverse decision of the ITAT, the assessee’s appeal was admitted by the High Court.
Subsequently, penalty was levied by the AO. The levy of penalty was upheld by the
ITAT on the ground that the approval from the RBI was an after-thought and was not
applied for during the impugned year, hence the explanation of the assessee was false
and was not bona fide. (AY 2003-04)
Emblem Fashion Wear Exports P. Ltd. v. ITO (2016) 45 ITR 358 (Mum.)(Trib.)
2480 S. 271(1)(c) : Penalty – Concealment – Additional income was disclosed in the return-
Levy of penalty was held to be not justified [S. 153A]
Tribunal held that levy of penalty in respect of amount disclosed in the return of
income was held to be not justified. (AY. 2003-04 to 2006-07)
Radhey Shyam Mittal v. Dy. CIT (2016) 175 TTJ 70 (UO)(SMC)(Jaipur)(Trib.)
840
S. 271(1)(c) Penalty
S. 271(1)(c) : Penalty – Concealment – Claim of assessee supported by Accounting 2481
Standard-7 – Not a case of concealment of particulars because information given by
assessee in its return was found to be correct – Levy of penalty was held to be not
justified
Assessee claimed expenses on account of provision made for contract some of which
were complete and others incomplete. The AO disallowed the provision since it was in
the nature of unascertained liability and also imposed penalty u/s. 271(1)(c) of the Act.
The CIT(A) confirmed this.
On appeal by the assessee, Tribunal held that the assessee claimed losses with regard
to the incomplete work which was not allowed by the AO and the losses were added
to the income of the assessee. It was not a case of furnishing inaccurate particulars
of income. Making an incorrect claim in the return of income would not amount to
concealment of particulars. The AO was not justified in levying penalty since the claim
of assessee was supported by Accounting Standard-7 issued by ICAI. The penalty was
to be deleted. (AY. 2003-04)
Uhde India P. Ltd. v. ACIT (2016) 45 ITR 177 (Mum.)(Trib.)
S. 271(1)(c) : Penalty – Concealment – If show-cause notice does not delete 2482
inappropriate words whereby it was not clear as to whether the default is concealing
particulars of income or for furnishing inaccurate particulars of income, the levy of
penalty is invalid
The Tribunal quashed penalty proceedings initiated u/s. 271(1)(c) for AY 2007-08 as
penalty show cause notice failed to specify default committed by assessee i.e., the AO
did not delete inappropriate words/parts whereby it was not clear as to the default
committed by assessee was for concealing particulars of income or for furnishing
inaccurate particulars of income. (ITA No. 1746/Mum/2011, dt. 22.12.2015) (AY. 2007-08)
Sanghavi Savla Commodity Brokers Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Disallowance of expenses and deductions – 2483
Penalty cannot be levied on all issues in a "wholesale" manner. The AO has to give
findings for each issue separately [S. 80IB, 80HHC]
Allowing the appeal of assessee the Tribunal held that Penalty cannot be levied on all
issues in a "wholesale" manner. The AO has to give findings for each issue separately.
He has to apply mind meticulously and carefully for each issue separately and establish
precisely whether there was concealment of income or furnishing of inaccurate
particulars of income. The assessee cannot be fastened with the liability of penalty
without there being a clear or specific charge. Fixing a charge in a vague and casual
manner is not permitted under the law. Fixing twin charges is also not permitted under
the law. (AY. 2004-05)
Mangalam Drugs & Organics Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org
S. 271(1)(c) : Penalty – Concealment – Depreciation – House property – No penalty 2484
leviable on bona fide human error committed while filing return of income
When the assessee was confronted with the depreciation being claimed on the property,
the income from which had been returned under the head income from house property,
841
Penalty S. 271AA
it immediately realised its mistake of computation of total income and agreed for the
addition to its total income. The mistake was inadvertent, is evident from the fact that
assessee had furnished return of income of ` 3,27,79,273/- and, therefore, there was no
reason to make a false claim of a petty sum of ` 7,87,734/-. The property was appearing
in the fixed assets schedule along with other properties, therefore, for all practical
purposes, it was treated as a business asset and the depreciation was, accordingly,
claimed in the books of account. This aspect is not disputed. It was only at the time of
computation of income that the assessee should have made the addition to the profits as
per P&L A/c because the income from this property was returned under the head income
from house property. Under such circumstances it cannot be disputed that human error
could have crept into while making the computation. Thus, it is evident that assessee
did not misrepresent the facts at any stage of proceeding. (ITA No. 1590/Del/2014.
dt. 03.03.2016) (AY. 2009-10)
B. L. International v. ACIT (Delhi)(Trib.); www.itatonline.org
S. 271AA: Penalty for failure to keep and maintain information and documents in
respect of certain transactions .
2485 S. 271AA : Penalty – Failure to keep and maintain books of account – Documents –
International transaction – Transfer pricing – Delay was due to auditor was busy in
marriage of his son, levy of penalty was held to be not justified
Allowing the appeal of the assessee, the Tribunal held that the considering technicalities
of Transfer Pricing as auditor has to explain and clarify on international transaction to
Assessing Officer and in view of fact that there was no modification in ALP adopted
by assessee in TP proceedings, reasons advanced by assessee looked genuine and, thus,
there was no need to impose penalty under section 271AA as the delay was due to
auditor was busy in marriage of his son, levy of penalty was held to be not justified.
(AY. 2011-12)
Augustan Knitwear (P.) Ltd. v. ACIT (2016) 157 ITD 741 / 180 TTJ 134 (Chennai)(Trib.)
S. 271AAA. Penalty where search has been initiated
2486 S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Discloser of
additional income and immunity from penalty [S. 132(4), 153A]
The Tribunal held that the assessee having made disclosure of additional income in the
statement under section 132(4) substantiating the reasons therefore, we offered the said
income in the return filed under section 153A, the disclosure was made voluntarily by
the assesse and, therefore it is entitled to immunity from levy of penalty under section
271AAA(2). Tribunal followed the decision of Supreme Court in the case of Sudarshan
Silk & Sarees v. CIT (2008) 300 ITR 205 (SC). (AY. 2009-10)
Dy. CIT v. Salasar Stock Broking Ltd. (2016) 181 TTJ 526 (Kol.)(Trib.)
842
S. 271B Penalty
S. 271AAA : Penalty – Search and seizure – Admitted undisclosed income and during 2487
search stated that income derived from business of financing and brokerage – Levy of
penalty was held to be not justified [S. 132(4)]
Search and seizure carried out at premises of assessee group in which incriminating
evidence was gathered. Assessee admitted undisclosed income and during search also
stated that income derived from business of financing and brokerage. Penalty was levied.
CIT(A) deleted the penalty. Dismissing the appeal of the revenue the Tribunal held that
deletion of penalty by CIT(A) was held to be justified. (AY. 2010-11)
DCIT v. Nirmal Kumar Agarwal (2016) 161 ITD 749 (Jaipur)(Trib.)
S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 – Additional Income 2488
voluntarily offered to tax in the return consequent to a search and as per disclosure
petition, entitles immunity from penalty u/s. 271AAA
The assessee filed its return of income on September 25, 2009, declaring a total loss
of ` 6,71,01,221. Pursuant to the search, notice under section 153A of the Act was
served upon the assessee. The assessee filed the return of income in response to the
notice issued under section 153A of the Act on May 31, 2010, declaring a total loss
of ` 4,71,01,221 wherein the assessee included the disclosure made during the course
of search operations of ` 2,00,00,000. Pursuant to the search, the assessee filed a
disclosure petition before the ADIT (Investigation), disclosing the additional income
of ` 2,00,00,000 for this year as the assessee may not be able to instantly produce all
the relevant documentation required by the Department with regard to monies received
from various parties including advances, margin money and deposits. The assessee
explained that it was carrying on the activity of sale and purchase of shares for its
own and also carried on the same on behalf of the clients to earn brokerage. The AO
levied penalty u/s. 271AAA. On appeal, the ITAT deleted the penalty and held that
penalty u/s. 271AAA cannot be levied just because the income not offered to tax in the
original return filed u/s. 139(1). The ITAT relied on the disclosure petition u/s. 132(4)
filed by the assessee along with reasons for offering the additional income and proper
documentation, filed to the satisfaction of the AO. The ITAT held that the Assessee was
entitled to immunity from penalty u/s. 271AAA. (AY. 2009-10)
DCIT v. Salasar Stock broking Ltd. (2016) 47 ITR 616 (Kol.)(Trib.)
S. 271B. Failure to get accounts audited
S. 271B : Penalty – Failure to get accounts audited – Bona fide belief – Penalty cannot 2489
be levied [S. 44AB]
Allowing the appeal the Court held that it is clear from section 273B of the Income-tax
Act, 1961, that no penalty shall be leviable to a person or on assessee for any failure
referred to under the provision of section 271B of the Act, if, it is proved that there was
reasonable cause for such failure. Held, that it was clear that the assessee was under the
bona fide belief that the provisions of section 44AB were not applicable to a club, while
supplying beverages, liquor, etc., to its members as it was not engaged in any business.
Penalty could not be imposed under section 271B.
Koramangala Club v. ITO (2016) 387 ITR 630 (Karn.)(HC)
843
Penalty S. 271B
2490 S. 271B : Penalty – Failure to get accounts audited – Belief that a mutual association
like a club is not liable for tax audit is a bona fide one and constitutes reasonable
cause u/s. 273B [S. 44AB, 273B]
Allowing the appeal of assesssee the Court held that without entering into the issue of
applicability of section 44AB of the Act, the assessee had the bona fide belief which
constituted reasonable cause to absolve him from the levy of penalty. Section 273(B) of
the Act makes it clear that that no penalty shall be leviable to a person or on assessee
for any failure referred to under the provision of Section 271B of the Act, if, it is proved
that there was reasonable cause for such failure. (ITA No. 279 & 280 of 2010, C/W ITA
No. 173/2009, dt. 26.02.2016)
Koramangala Club v. ITO (Kar.)(HC); www.itatonline.org
2491 S. 271B : Penalty – Failure to get accounts audited – Dispute with auditor is a
reasonable cause – Levy of penalty was not justified [S. 273B]
Allowing the appeal of the assessee the Tribunal held that penalty for delay in
furnishing tax audit report should not be imposed if there is no mala fide reason for the
delay. Dispute with auditor is a reasonable cause u/s. 273B for the delay in furnishing
the tax audit report. (ITA No. 514/JP/2014, dt. 14.09.2016) (AY. 2008-09)
Gemorium v. ITO (Trib.)(Jaipur); www.itatonline.org
S. 271C. Penalty for failure to deduct tax at source
2492 S. 271C : Penalty – Failure to deduct at source – Tax and interest was paid – Penalty
cannot be levied if Department is unable to show contumacious conduct on the part
of the assessee [S. 201(1), 201(IA)]
The Tribunal deleted the levy of penalty u/s. 271-C for failure to deduct tax at source
on the basis that the department has to show that there was “contumacious conduct
on the part of the assessee, which was affirmed by the High Court. On appeal to the
Supreme Court, HELD dismissing the appeal: “On facts, we are convinced that there is
no substantial question of law, the facts and law having properly and correctly been
assessed and approached by the Commissioner of Income Tax (Appeals) as well as by
the Income Tax Appellate Tribunal. Thus, we see no merits in the appeal and it is
accordingly dismissed. No costs”.
CIT v. Bank of Nova Scotia (2016) 380 ITR 550 / 237 Taxman 594 / 283 CTR 128 / 130
DTR 240 (SC)
2493 S. 271C : Penalty – Failure to deduct at source – Reasonable cause – Debatable – Rent –
Contract – Levy of penalty was held to be not justified [S. 194C, 194-I, 271(1)(c), 273B]
On appeal Court held that the assessee failed to deduct a substantial portion of the
tax that ought to have been deducted under section 194-I of the Act. Therefore,
section 271C stood straightaway attracted. However at the stage when the tax had to
be deducted at source the question whether tax had to be deducted at source under
section 194C or under section 194-I of the Act was not a settled one. The Central Board
of Direct Taxes itself had to issue circulars clarifying the position. Since the issue that
whether the tax was to be deducted at source from warehouse charges under section
844
S. 271C Penalty
194C or under section 194-I of the Act was a debatable one, there was a reasonable
cause for the failure of the assessee to deduct tax at source under section 194-I of the
Act at the time such deduction had to be made. Penalty could not be levied under
section 271C of the Act.
Hindustan Coca Cola Beverages P. Ltd. v. JCIT (2016) 387 ITR 471 / 73 taxmann.com 71
/ 140 DTR 73 (Delhi)(HC)
Editorial : Order of the Appellate Tribunal in Hindustan Coca-Cola Beverages P. Ltd. v.
Joint CIT (2004) 270 ITR (AT) 114 (Delhi) set aside
S. 271C : Penalty – Failure to deduct at source – Assessee under bona fide belief that 2494
tax not deductible at source – Issue involved nascent – Levy of penalty was quashed
[S. 264]
For the assessment year 1999-2000, the AO levied penalty under section 271C on the
ground that there was no reasonable cause shown by the assessee for non-deduction of
tax at source. The Commissioner affirmed this in revision under section 264. On writ
petitions:
Held, allowing the petitions, that the order of the Commissioner and the penalty
imposed by the AO under section 271C were to be quashed on the ground that assessee
under bona fide belief that tax not deductible at source. (AY. 1999-2000)
Woodward Governor (India) Ltd. v. CIT (2016) 389 ITR 65 (Delhi)(HC)
S. 271C : Penalty – Failure to deduct at source – CIT (A) nowhere mentioned reason on 2495
basis of which he had concluded that penalty was to be deleted, matter was remanded
back [S. 194J]
Allowing the appeal of the revenue, the Tribunal held that CIT(A) deleted penalty
imposed by AO stating that there were favourable decision available to assessee.
However, he had nowhere mentioned to assessee during relevant time according to
which assessee was not liable to deduct tax on payments made by assessee third party
administrator (TPA) to hospitals. Matter was remanded back. (AY. 2007-08, 2008-09)
ACIT v. United Healthcare India (P.) Ltd. (2016) 160 ITD 631 (Mum.)(Trib.)
S. 271C : Penalty – Failure to deduct at source – No penalty in case tax was not 2496
deducted based on certificate of CA and the taxability of the payment for services
was contentious
The assessee had made certain payments to non-residents for engineering and drafting
services and purchase of shrink-wrapped software. The AO disallowed the same on the
basis that no tax was deducted while making the payments. No appeal was filed by
the assessee against the disallowance. Penalty was levied by the AO. The ITAT deleted
the levy of penalty on the basis that there was reasonable cause for not deducting tax
u/s. 273B. The taxability of technical services and purchase of software was contentious
and the assessee in bona fide belief relied on the certificate of the CA for non-deduction
of tax. (AY. 2009-10)
Addl. DIT v. Leighton Welspun Contractors P. Ltd. (2016) 156 ITD 515 / 47 ITR 97 (Mum.)
(Trib.)
845
Penalty S. 271C
2497 S. 271C : Penalty – Failure to deduct at source – Payee had paid taxes on its income
and hence assessee cannot be treated as assessee in default
The assessee, a State Electricity Board, was engaged in generation, transmission and
distribution of power. The power was transmitted through the transmission network
of the Power Grid Corporation and the assessee made payment on account of wheeling
charges and transmission charges. Further as per the agreement entered into with
PGCIL, the tariff was to be decided by the Central Electricity Regulatory Commission
(CERC), and as per clause 7 of the regulation of the CERC, tax on incomes of generating
companies or transmission licences was to be computed as an expense and recovered
from beneficiary. In view of the same PGCIL had collected all due taxes from the
assessee in the various bills raised on it for the relevant assessment years. The assessee
was under the bona fide belief that since it has already paid taxes to PGCIL any further
tax deduction at source would only amount to double taxation, and, therefore, did not
deduct tax at source. The Assessing Officer imposed penalty under section 271C of
the Income tax Act, 1961, on the ground that the assessee had failed to deduct tax at
source on the payments of transmission charges to the Power Grid Corporation. The
Commissioner (Appeals) confirmed the order of the Assessing Officer. The Tribunal
held that the assessee was liable to deduct tax at source but had failed to do so on
payments made to the Power Grid Corporation. Admittedly, the Power Grid Corporation
had paid taxes on its income received from the assessee and, hence, the assessee was
not to be treated as an assessee in default under section 201 of the Act. Since there
was a reasonable cause for not deducting the tax at source on the payment, the penalty
levied under section 271C was to be deleted. (AY. 2007-08)
Himachal Pradesh State Electricity Board v. Addl. CIT (TDS) (2016) 46 ITR 113 / 177 TTJ
18 (UO)(Chd.)(Trib.)
2498 S. 271C : Penalty – Failure to deduct at source – Confirmation of demand raised u/s.
201, cannot be sole criteria for imposing penalty as proceedings are two separate and
independent proceedings – No mala fide intention could be imputed to assessee for
failure to deduct tax and, accordingly, penalty imposed was deleted [S. 195, 201, 273B]
Imposition of penalty u/s. 271C is neither automatic nor mandatory; authority concerned
is empowered u/s. 273B not to impose penalty in a deserving case if he is satisfied that
there was reasonable cause for failure to comply with statutory requirement. Where
confirmation of demand raised u/s. 201, cannot be sole criteria for imposing penalty u/s.
271C as proceedings u/s. 271C and 201 are two independent and separate proceedings.
Assessee paid a certain sum in foreign currency to a non-resident for development of
website and other allied works. Assessee submitted that payment was made without
deduction of TDS under section 195 on basis of advice of her CA that tax was not
required to be deducted at source on said remittances because payment was made to
a non-resident having no PE in India and that too, for services rendered outside India.
AO treated assessee as an assessee-in-default u/s. 201(1), though the assessee challenged
said order, but she accepted her liability on the basis of same AO. initiated penalty
proceedings u/s. 271C. No mala fide intention could be imputed to assessee for failure
to deduct tax and, accordingly, penalty imposed u/s. 271C was deleted. (AY. 2007-08)
Aishwarya Rai Bachchan (Smt.) v. Addl. CIT (2016) 158 ITD 987 / 140 DTR 297 / 180
TTJ 643 (Mum.)(Trib.)
846
S. 271D Penalty
S. 271C : Penalty – Failure to deduct at source – Failure to remit to revenue tax 2499
deducted at source – Penalty is held to be leviable [S. 273B]
Where tax was deducted at source and was remitted belatedly, though with interest the
provisions of section 271C of the Income-tax Act, 1961, are fully applicable. Penalty has
to be imposed. Section 273B providing for waiver or reduction of penalty is not attracted
in a case where tax was deducted and not remitted to the Revenue.
Classic Concepts Home India P. Ltd. v. CIT (2016) 383 ITR 626 (Ker.)(HC)
S. 271C : Penalty – Failure to deduct at source – Based on the certificate of chartered 2500
accountant certificate – Levy of penalty was held to be not justified – DTAA-India-UK
[S. 201, 201(IA), 273B, Art. 13]
Dismissing the appeal of revenue the Tribunal held that; where view adopted by
assessee based upon certificate of CA that engineering services availed by it were not
technical services, was one of possible views, there was reasonable cause as envisaged
under section 273B for not deducting tax at source by assessee and, thus, penalty under
section 271C was not to be imposed. (AY. 2009-10)
ADIT v. Leighton Welspun Contractors (P.) Ltd. (2016) 156 ITD 515 / 47 ITR 97 (Mum.)
(Trib.)
S. 271D. Penalty for failure to comply with the provisions of section 269SS
S. 271D : Penalty – Takes or accepts any loan or deposit – Limitation – AO has the 2501
power to initiate penalty proceedings under section 271D of the Act and upon referral
to the Additional Commissioner, the penalty order would by barred by limitation as
the date of issue of notice would be the date when the AO issued notice [S. 269SS,
274]
Dismissing the appeal of the revenue, the Court held that section 271D(2) of the Act
provides that the jurisdiction of imposing penalty is vested in the Joint Commissioner.
The High Court held that though section 271D of the Act vests the jurisdiction of
imposing penalty solely in the Joint Commissioner, it is silent as regards to who could
initiate the proceedings. Relying on the ruling of the Supreme Court in the case of
D. M. Manasvi v. CIT (1972) 86 ITR 557, the High Court held that in a case falling
under section 271D the AO is not precluded from initiating the proceedings by issuing
a notice. The High Court had distinguished the ruling of the Kerala High Court in the
case of Grihalakshmi Vision (2015) (379 ITR 100) wherein it was held that if the AO
has come across a case of violation of law attracting penal provisions and has thereafter
a notice, it would tantamount to be an act without jurisdiction. Thus, the High Court
held that the order is hit by limitation as the proceedings were initiated on 26-12-2006
when the notice was issued by the AO and hence the period of limitation expired on
30-6-2007, whereas the order imposing penalty was passed on 21-9-2007. Thus, the
appeal was dismissed. (AY. 2004-05)
CIT v. Narayani & Sons (P) Ltd. (2016) 141 DTR 315 / 289 CTR 301 / 73 taxmann.com
21 (Cal.)(HC)
847
Penalty S. 271D
2502 S. 271D : Penalty – Takes or accepts any loan or deposit – Loan was taken to meet
sudden business exigency – Levy of penalty was held to be not justified [S. 269SS,
273B]
Allowing the appeal of the assesse, the Tribunal held that since cash transactions were
due to business exigency warranting immediate discharge of certain liability, these
transactions would be genuine and there was reasonable cause as envisaged in under
section 273B, therefore, no penalty could be imposed. (AY. 2008-09)
Chawla Chemtech (P.) Ltd. v. JCIT (2016) 158 ITD 48 (Chd)(Trib.)
S. 271E. Penalty for failure to comply with the provisos of section 269T
2503 S. 271E : Penalty – Repayment of loan or deposit – Fresh assessment order was
concerned that there was no satisfaction recorded regarding penalty proceedings
u/s. 271E of the Act, though in the order the AO wanted penalty proceedings to be
initiated u/s. 271(1)(c) of the Act. Penalty u/s. 271E was without any satisfaction and
no such penalty could be levied [S. 269SS, 271(1)(c)]
Assessment Order was passed on the basis of CIB information informing the Department
that the assessee was engaged in large scale purchase and sale of wheat, but it is not
filing IT Return. Ex-parte order was passed at certain income. AO observed that the
assessee had contravened the provisions of section 269SS of the Act and because of
this, AO initiated penalty proceedings u/s. 271E of the IT Act. CIT(A) allowed the appeal
and set aside the order with direction of de novo after affording adequate opportunity to
the assessee. After remand, the AO passed fresh Assessment Order. In this Assessment
Order, the AO did not recorded satisfaction regarding initiation of penalty proceedings
u/s. 271E. On the basis of original Assessment order, show cause notice was given to the
assessee and it resulted in passing the penalty order. Tribunal and High Court allowed
the appeal of assessee and deleted penalty. On appeal in SC, Hon’ble SC held that
fresh assessment order was concerned that there was no satisfaction recorded regarding
penalty proceedings u/s. 271E of the Act, though in the order the AO wanted penalty
proceedings to be initiated u/s. 271(1)(c) of the Act. Penalty u/s. 271E was without any
satisfaction and no such penalty could be levied. (AY. 1991-92, 1992-93)
CIT v. Jai Laxmi Rice Mills (2015) 379 ITR 521 / (2016) 134 DTR 223 / 286 CTR 159 /
237 Taxman 375 (SC)
2504 S. 271E : Penalty – Repayment of loan or deposit – Repayment by cash would not
attract penalty if as on the date of repayment, there was no unsecured loan
The assessee took cash loans from a party during the year, on which penalty u/s. 271D
was levied. Subsequently, during the same year, the credit balance of the party changed
to a debit balance and came within the category of loans and advances. The Assessee
repaid the loan, which was taken earlier, in cash. The AO levied penalty on the cash
repayment of loans. The ITAT held that as on the date of cash repayments, the ledger of
the party was not an unsecured loan and hence, no penalty u/s. 271E could be levied.
(AY. 2008-09)
Hemant Rajnikant Shroff v. Addl. CIT (2016) 47 ITR 388 / 179 TTJ 365 (Ahd.)(Trib.)
848
S. 272A Penalty
S.271G. Penalty for failure to furnish information or document under section 92D
S. 271G : Penalty – International transactions – Failure to furnish information 2505
required to be maintained – Penalty proceedings – Not to be stayed – But order to
be implemented only after decision on whether there was international transaction
[S. 92D, 92E]
On writ the Court held that penalty proceedings under section 271G had been initiated
on the basis that the provisions of Chapter X and in particular sections 92D and 92E
had not been complied with by the assessee, which invited penal consequences. As the
assessee did not have an opportunity to represent its case, while the penalty proceedings
might be continued the order imposing penalty, if any, was not to be implemented till
the decision of the Dispute Resolution Panel or the Commissioner (Appeals) as the
case may be on the preliminary issue as to whether the transactions were international
transactions or not. (AY. 2011-12, 2012-13, 2013-14, 2014-15)
Shri Vishnu Eatables (India) Ltd. v. Dy. CIT (2016) 389 ITR 385 / 243 Taxman 446 / 289
CTR 337 (P&H)(HC)
S. 272A. Penalty for failue to answer questions, sign statements, furnish information,
returns or statements, allow inspections etc.
S. 272A : Penalty – Failure to answer questions – Sign statements – 2506
Furnish information – Levy of penalty for non-filing of e-TDS statements is upheld
[S. 272A(2)(k)]
The assessee deducted tax at source in respect of certain payments made and after
having deposited to the credit of the Central Government, failed to furnish the
statements from AY 2008-09 to AY 2012-13. The Assessing Officer levied penalty under
section 272A(2)(k) as the assessee did not provide any sufficient or reasonable cause for
not filing the statements within the time limit prescribed. CIT(A) partially reduced the
penalty i.e., penalty was levied for default from 1/4/2010 as the new Principal had joined
in January 2010 and that the earlier standby Principal did not have any administrative
experience. The same was upheld by the Tribunal. On appeal, it was held that the levy
of penalty was justified even though there is no loss of revenue to the Government for
non-filing of the statements as it leads to hassles with respect to processing of returns
of assessees and therefore, stringent action is to be taken for non-compliance. (AY. 2009-
10 to 2012-13)
Raja Harpal Singh Inter College v. PCIT (2016) 386 ITR 327 / 240 Taxman 123 / 288 CTR
435 / 138 DTR 289 (All.)(HC)
S. 272A : Penalty – Furnish information – Deduction at source – No plausible 2507
explanation given by assessee – Concurrent finding that there was no justifiable reason
or cause for delay – Levy of penalty was held to be justified [S. 200, 273B]
Held, dismissing the appeal, that on a perusal of Form 26Q for the financial year 2008-
09 relating to the Assessment Year 2009-10 there was a delay of nearly five years in
filing the statements of tax deducted at source. No plausible explanation had been
tendered by the assessee for filing the returns regarding tax deducted at source belatedly
849
Penalty S. 272A
and therefore the benefit under section 273B of the Act could not be given. Since the
assessee had failed to mandatorily file the return pertaining to tax deducted at source
within the prescribed time, it had rightly been treated to be in default for delayed filing
of such return. The assessee failed to explain that there was any reasonable cause or
failure to comply with the provisions of law and the authorities below had concurrently
concluded that there was delay in filing the return without any justifiable reason or
cause. The penalty was rightly imposed on the assessee in all the three financial years.
There was no error or perversity in the approach of the authorities below or in the
findings recorded by them warranting interference. (AY. 2009-10)
Central Scientific Instruments Organisation v. CIT (TDS) (2016) 385 ITR 617 / 143 DTR
234 (P&H)(HC)
2508 S. 272A : Penalty – Delay in filing e-TDS return – Reasonable cause – Levy of penalty
was held to be not justified [S. 272(2)(k), 273B]
Allowing the appeal of the assesse, the Tribunal held that delay in filing quarterly
return was due to non-availabliity of expert staff, who were aware of intricacies of filing
e-returns. Tribunal also held that provisions of section 273B cover default committed
under section 272A(2)(k). (AY. 2011-12)
Nav Maharashtra Vidyalaya. v. (2016) 161 ITD 732 / 182 TTJ 729 (Pune)(Trib.)
2509 S. 272A : Penalty – Delay in filing TDS return – Different stand before AO and CIT(A)
– No reasonable cause – Levy of penalty was held to be justified [S. 272A(2)(k)]
Before AO, assessee submitted its Explanation by stating that deductee was director of
company to whom rent/professional fee was paid and salary was paid to family members
of company, hence, there was no wilful intention to delay or deprive any deductee
of TDS credit. However, assessee had taken completely different stand in Appeal
proceedings by stating that due to oversight of staff, TDS statement could not be filed. It
was held that no specific reasonable cause having been shown by assessee for admitted
delay in filing TDS returns and assessee taking different stands before AO and appellate
authority, penalty under s. 272A(2)(k) was sustainable. (AY. 2010-11).
Weatherguard Aircon (P) Ltd. v. Addl.CIT (2016) 130 DTR 133 / 176 TTJ 141 (Mum.)(Trib.)
2510 S. 272A : Penalty – Non-filing of TDS returns – Penalty technical in nature as TDS
deposited within due date as the delay in filing is revenue neutral, levy of penalty
was not justified [S. 200(3), 272A(2)(k)]
Penalty levied u/s. 272A(2)(k) by AO as assessee bank did not file the quarterly return
of tax deducted at source (TDS) in Form 26Q as required under section 200 (3) within
the stipulated time. Assessee submitted that as bank located in semi-rural area and
most clients being agriculturists and small businessmen or from unorganised sector
could not submit their PAN numbers on time. As per rule declared by the Department
vide press release that e-return without PAN numbers would not be accepted unless
85%-90% of the permanent account number of deductees have been filed. CIT(A)
upheld order of AO. The ITAT held that assessee had duly complied with the statutory
requirement of deducting and depositing the tax due on or before the due date but was
prevented by sufficient cause in not filing the return of TDS within the time specified
850
S. 275 Penalty
u/s. 200(3). Penalty is merely technical in nature and no loss was caused to the Revenue
Department. It noted that levy of penalty is not mandatory in each and every case and
depends upon facts of the case. Considering explanation of the assessee, the ITAT held
that there was reasonable cause in favour of assessee for non-filing of TDS return.
Hence, the penalty order was set aside. (AY. 2008-09)
Punjab National Bank v. JCIT (TDS) (2016) 48 ITR 8 (Chd.)(Trib.)
S. 273B. Penalty not to be imposed in certain cases
S. 273B : Penalty – Not to be imposed – Deduction at source – Absence of reasonable 2511
cause, levy of penalty was held to be justified [S. 194A, 271C]
Allowing the appeal of revenue, the Court held that when there was a failure on the
part of the assessee to deduct tax at source in violation of section 194A of the Act, the
penal provisions of section 271C of the Act were attracted. In such a case, the only way
out for the assessee was to take the benefit of section 273B of the Act by establishing
that there was reasonable cause justifying its failure to comply with section 194A of
the Act. The assessee failed to establish reasonable cause, as contemplated in section
273B of the Act to resist an order of penalty under section 271C of the Act. The
Commissioner (Appeals) and the Tribunal acted illegally in cancelling the penalty levied
on the assessee. (AY. 1998-99)
CIT v. Muthoot Bankers (Aryasala) (2016) 385 ITR 51 / 71 taxmann.com 110 / 141 DTR
198/289 CTR 309 (Ker.)(HC)
S. 275. Bar of limitation for imposing penalties
S. 275 : Penalty – Bar of limitation – Penalty proceedings for contravention of Sections 2512
269SS & 269T are not related to the assessment proceeding but are independent of
it. Therefore, the completion of appellate proceedings arising out of the assessment
proceedings has no relevance. Consequently, the limitation prescribed by S. 275(1)(a)
does not apply [S. 269SS, 269T, 271D, 271E]
On appeal by the department to the Supreme Court HELD dismissing the appeal: On
perusing the judgment of the High Court, it is found that penalty imposed on the
respondent herein was also set aside on the ground that the provisions of sections
271D and 271E of the Income-tax Act were invoked after six months of limitation
and, therefore, such penalty could not have been imposed. Since the outcome of
the judgment of the High Court can be sustained on this aspect alone, it is not even
necessary to go into other aspects. Leaving the other questions of law open, the appeal
is dismissed. (AY. 1993-94 to 1995-96)
CIT v. Hissaria Brothers (2016) 386 ITR 719 / 243 Taxman 174 / 140 DTR 18 / 288 CTR
244 (SC)
Editorial : Decision in CIT v. Hissaria Brothers (2007) 291 ITR 244 (Raj.)(HC)
851
Penalty S. 275
2513 S. 275 : Penalty – Bar of limitation – During the pendency of appeal before ITAT,
penalty u/s. 271(1)(c) cannot be levied on the assessee [S. 147, 148, 271(1)(c)]
Certain addition was made to assessee's income in reassessment proceedings. First
Appellate Authority had disposed off the appeal and further appeal of assessee before
the Tribunal was pending. In the meantime, the AO levied penalty on the assessee u/s.
271(1)(c). Held, order imposing penalty cannot be passed if the appeal against basic
order of assessment is pending before the competent superior authority. Held, notices
initiating penalty, could not have been issued before the order of the ITAT. (AY. 1959-60)
R. B. Shreeram Durgaprasad v. CIT (2016) 237 Taxman 189 / 137 DTR 332 / 287 CTR
228 (Bom.)(HC)
2514 S. 275 : Penalty – Bar of limitation – Penalty u/s. 271D – Accepts any loan or deposit
– Penalty valid if levied within the expiry of financial year in which proceedings u/s.
271D has been initiated, or the end of one year from the end the financial year in
which order of CIT(A) initiating penalty was received [S. 271D]
The assessee made cash deposits on various dates but was unable to explain the source
of the cash deposited. Addition u/s. 68 was made by the AO. The addition was deleted
by the CIT(A) since it was explained by the assessee that it had taken cash loan from
the assessee’s brother to pay the EMIs on loans from various banks. On direction of the
CIT(A) vide his order dated 1-03-2013, penalty u/s. 271D was initiated by the AO vide
notice dated 19-08-2013 and levied vide order dated 28-03-2014. The ITAT held that
there was no delay in levy of penalty u/s. 271D since the time limit for levy of penalty
expires on 31-03-2014, being expiry of financial year in which proceedings u/s. 271D
have been initiated as well as the end of one year from the end the financial year in
which order of CIT(A) was received. Further, the ITAT also upheld the levy of penalty
since neither parties were agriculturalists and had bank accounts in Surat and were
regularly filing return of income. (AY. 2008-09)
Hemant Rajnikant Shroff v. Addl. CIT (2016) 47 ITR 388 / 179 TTJ 365 (Ahd.)(Trib.)
852
S. 276D Offences and prosecutions
CHAPTER XII
OFFENCES AND PROSECUTIONS
S. 276C. Wilful attempt to evade tax, etc.
S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Notice under 2515
section 156 for recovering the tax need not be issued before launching prosecution.
Existence of other modes of recovery cannot act as a bar to the initiation of
prosecution proceedings [S. 156, 221(1)]
Assessee filed the return of income declaring the total income of ` 2.10 crore on which
tax and interest of ` 68.28 lakh became payable. However, out of the above tax payable,
the assessee did not pay a sum of ` 58.15 lakh. Notice under section 221(1) was issued
to him by the DCIT to produce the details of tax paid. Assessee filed a letter stating that
he had done contracts for the State Government on which tax was payable. However,
self-assessment tax was not paid as he did not receive the amounts due from the State
Government and that he was willing to pay the tax once these amounts were received
from the Government. Prosecution proceedings were launched against the assessee. High
Court rejected the assessee’s plea that prosecution should be quashed as notice under
section 156 was not served on the assessee. High Court held that such notice is not
required to be issued for prosecution. High Court further held that existence of other
modes of recovery cannot act as a bar to the initiation of prosecution proceedings. (AY.
2012-13)
Kalluri Krishan Pushkar v. Dy. CIT (2016) 236 Taxman 27 / 135 DTR 351 (AP &T)(HC)
S. 276D. Failure to produce accounts and documents
S. 276D : Offences and prosecutions – Failure to produce books of account – 2516
Documents – Pendency of appeal has no bearing on the initiation of the prosecution
under the Act – At the time of commission of alleged offence the petitioner has not
reached the age of 70 years, hence circular was held to be not applicable
Assessee filed return of income declaring total income of ` 75,31,769. Subsequently,
when the Income-tax department received information regarding existence of a foreign
bank account, the assessee offered to pay the tax on the amount lying in his foreign
bank account. Later on, assessee filed appeal against the assessment order and penalty
order passed by the Assessing Officer. The assessee also filed a stay application,
before Additional Chief Metropolitan Magistrate, against launch of prosecution on the
ground that the appeal before the appellate authority is pending. The Additional Chief
Metropolitan Magistrate dismissed the stay application filed by the assesse. On writ
petition, High Court held that pendency of appeal before the authority has no bearing on
the prosecution. The Court also held that at the time of commission of alleged offence
offence the petitioner has not reached the age of 70 years hence the instruction No. 5051
dated 07-02-2011 which stated that no prosecution can be initiated against a person who
is above the age of 70 years was held to be not applicable. (AY. 2007-08)
Pradip Burman v. ITO (2016) 382 ITR 418/ 236 Taxman 606 / 129 DTR 404 (Delhi)(HC)
853
Offences and prosecutions S. 277
S. 277. False statement in verification, etc.
2517 S. 277 : Offences and prosecutions – False statement – Verification – Search and
seizure – Statement that assessees did not have any bank locker found to be untrue –
Complaint filed by Deputy Director (Investigation) incompetent [S. 116, 132, Code of
Criminal Procedure, 1973, S. 195]
The assessees had residences at Bhopal and Aurangabad and filed their returns of
income at Bhopal. Search operations under section 132 of the Act were simultaneously
conducted at both places on the strength of the warrant of authorisation under section
132 of the Act, issued, signed and sealed by the Director of Income-tax (Investigation),
Bhopal. In the course of the interrogation of the assessees on whether they or any of
them either individually or jointly did hold any locker, their answer was in the negative.
Their statements were recorded by the Income-tax Officers. Further investigation
revealed that they did hold a locker in a bank at Aurangabad. The office of the Deputy
Director of Income-tax (Investigation), Bhopal issued a show-cause notice to the
assessees under section 277 of the Act alleging that they had made false statement under
section 132(4) thereof, and seeking a reply why prosecution should not follow by virtue
thereof. Pursuant to this, a complaint was filed by the Deputy Director of Income-tax
(Investigation), Bhopal, in the Court of the Chief Judicial Magistrate, Bhopal, asserting
that by making such false statement in the course of search operations which were
judicial proceedings in terms of section 136 of the Act, the assessees had committed
offence under sections 109, 191, 193, 196, 200, 420, 120B and 34 of the Indian Penal
Code, 1860. The Chief Judicial Magistrate issued process and on petitions before the
High Court by the assessees seeking quashing of the proceedings on the ground that
the search operations having been undertaken by the Income-tax Officers, the complaint
could not have been lodged by the Deputy Director of Income-tax (Investigation) who
was not the appellate authority in terms of section 195(4) of the 1973 Code and further
no part of the alleged offence having been committed within the territorial limits of the
court of the Chief Judicial Magistrate, Bhopal, the latter had no jurisdiction to either
entertain the complaint or take cognizance of the accusations. The High Court upheld
the jurisdiction of the Chief Judicial Magistrate and the competence of the Deputy
Director (Investigation) to lodge the complaint. On further appeal:
Held accordingly, that the Deputy Director of Income-tax (Investigation), Bhopal, was
not an authority to whom appeal would ordinarily lie from the decisions/orders of
Income-tax Officers involved in search proceedings so as to empower him to lodge
the complaint in view of the restrictive preconditions imposed by section 195 of the
1973 Code. The complaint filed by the Deputy Director of Income-tax, (Investigation),
Bhopal thus on an overall analysis of the facts of the case and the law involved was
incompetent. The complaint was unsustainable in law having been filed by an authority,
incompetent in terms of section 195 of the 1973 Code.
Court also held that it could not be said that in the singular facts and circumstances,
no part of the offence alleged had been committed within the jurisdictional limits of
the Chief Judicial Magistrate, Bhopal. On a cumulative reading of sections 177, 178 and
179 of the 1973 Code in particular and the in-built flexibility discernible in the latter
two provisions, in the attendant facts and circumstances of the case where a single and
854
S. 279 Offences and prosecutions
combined search operation had been undertaken simultaneously both at Bhopal and
Aurangabad for the same purpose, the alleged offence could be tried by courts otherwise
competent at both these places. To confine the jurisdiction within the territorial limits
to the court at Aurangabad would amount to impermissible and illogical truncation of
the ambit of sections 178 and 179 of the 1973 Code.
From the decision of the Madhya Pradesh High Court.
Babita Lila v. UOI (2016) 387 ITR 305 / 288 CTR 489 / 243 Taxman 258 (SC)
S. 279. Prosecution to be at instance of Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner
S. 279 : Offences and prosecutions – Compounding of offences – Application for 2518
compounding cannot be rejected merely because, conviction of assessee in criminal
court [S. 276B, 278B]
Chief Commissioner of Income tax TDS has rejected the petitioner’s application for
compounding the offence committed by the petitioner under section 276B read with
section 278B of the Income-tax Act, on the ground that the assessee has been convicted
by the Criminal Court. Allowing the petition the Court held that the assessee has
been convicted of an offense does not mean that the application for compounding of
the offence is not maintainable. Under the guidelines, the competent authority has to
examine the merits of the case and decide whether there is a case for compounding.
There are no fetters on the powers of the competent authority under the guidelines.
Thus, this Court is of the view that the respondent can examine the matter afresh
without being, in any manner, influenced merely because of the conviction passed
against the petitioner by the Criminal Court. (AY. 1981-82, 1983-84, 1984-85)
V. A. Haseeb and Co. (Firm) v. CCIT (2017) 152 DTR 306 (Mad.)(HC)
855
Certain transfers to be void S. 281
CHAPTER XXIII
MISCELLANEOUS
S. 281. Certain transfers to be void
2519 S. 281 : Certain transfers to be void – Notice issued under section 13(2) of SARFAESI
Act by financial institution tantamount to an attachment and where such notice
was issue prior to attachment order passed by TRO, it would get precedence over
attachment of property by TRO [SARFAESI Act, 2002, S. 13(2) 19, 35]
Assessee filed WP in HC challenging the order attaching the property and also prayer
for a direction to the sub-registrar to register the sale deed executed by the IDBI Bank in
favour of the Petitioner transferring title of the ground floor of the property in question.
Also assessee prayed for direction to IDBI to refund the entire amount paid by the
Petitioner as consideration for the ground floor of the property in question. Allowing
the WP, HC held that notice issued by IDBI u/s. 13(2) of SARFAESI Act was prior to
the impugned order dated 25/11/2013, passed to the impugned order dated 25/11/2013,
passed by the IT department attaching the property in question and therefore it had the
right to proceed e-auction the property in question on 25/2/2015 notwithstanding that
the IT Department had passed the impugned attachment order dated 25/11/2013. The
petition was allowed,
Suresh Kumar Goyal v. CIT (2016) 139 DTR 362 / 73 taxmann.com 10 (Delhi)(HC)
S. 282. Service of notice generally
2520 S. 282 : Service of notice – Shifting of address from time-to-time and simultaneous
operation of business from different places – Affixture of notice at last known address
proper
Held that considering that the assessee admittedly received the notice dated April 12,
2010 under section 148 at a place other than the address where the assessee admittedly
was carrying on business and considering that the assessee had simultaneously been
operating from four different places, the view taken by the Tribunal that the assessee
had been shifting its address from time-to-time and when such frequent change in the
address the service at the last known address by affixture was proper was a plausible
view and did not admit of any challenge on the ground of perversity. (AY. 2008-09)
Ramshila Enterprises P. Ltd. v. PCIT (2016) 383 ITR 546 / 239 Taxman 17 (Cal.)(HC)
2521 S. 282 : Service of notice – On facts as there was no valid service of notice assessment
was quashed [S. 143(2), 292BB]
Allowing the appeal of assessee the Tribunal held that if there is no valid service of
the notice the assessment is bad in law. (ITA No. 669/Del/2012, dt. 27.05.2016) (A.Y.
2006-07)
Micro Spacematrix Solution P. Ltd. v. ITO (Delhi)(Trib.); www.itatonline.org
856
S. 293 Bar of suits in civil courts
S. 292BB. Notice deemed to be valid in certain circumstances
S. 292BB : Notice of demand to be valid in certain circumstances – Failure of 2522
AO to issue notice u/s. 143(2) prior to finalising reassessment order could not be
condoned by referring to Section 292BB and is fatal to the order of reassessment –
Reassessment was not sustainable in law [S. 147, 148]
The assessee was issued notice u/s. 148 for reopening of a concluded assessment.
However, the assessee was not issued a notice u/s. 143(2) till the date the assessee
informed AO that the return filed originally should be treated as the return filed
pursuant to notice u/s. 148 of the Act.
On appeal before the CIT(A), the assessee raised an issue that in absence of a notice
u/s. 143(2), the reassessment order was invalid. However, CIT(A) negatived the
contention of the assessee that no specific notice was required to be issued u/s. 143(2).
Assessee’s further appeal was allowed by the Tribunal.
On revenue’s appeal, the HC held that if the AO found that there were problems with
the return which required explanation by the assessee then AO ought to have followed
up with a notice u/s. 143(2). Department cannot take reliance of section 292BB to
condone such procedural lapses as provisions of section 292BB applies for failure
of “service” of notice and not with regard to failure to “issue” of notice. Thus, the
reassessment order was not held to be sustainable in law. (AY. 2008-09)
CIT v. Jai Shiv Shankar Traders Pvt. Ltd. (2016) 383 ITR 448 / 129 DTR 63 / 282 CTR
435 (Delhi)(HC)
S. 293. Bar of suits in civil courts
S. 293 : Bar of suits in civil courts – Payment made in installments in accordance with 2523
the order of the Court for release of assets seized – Three pay orders deposited with
the department not encashed – Principal amount remaining dormant without interest
accruing thereon – Dispute settled by the Settlement commission – Demand finalised
by the AO – Interest on amount of the pay order demanded by the assessee – Civil
suit filed – Held, dues of the assessee stood determined by the order of Settlement
commission – Held, assessee has no right to claim interest on the bank drafts pending
encashment at this stage – Held, right way was to file appeal against the AO order –
Held, no jurisdiction with the High Court to entertain civil suit [S. 245D]
In a search operation, certain silver bars of the assessee were seized. On filing a writ
petition, the Court directed the assessee to make payment in installments of the market
value of the seized assets and get the assets released. The assessee, inter-alia, gave three
pay orders which were not encashed by the Department and therefore, the principal
amount was lying dormant with the bank without interest accruing thereon. In so far
as the assessments were concerned, the assessee went to the Settlement Commission,
who had passed the order. Pursuant to such order, the AO computed the income and
determined the amount payable by the assessee. Assessee was aggrieved by the fact that
no interest was paid to him on the amount of pay orders which was not encashed by
the Department. In the civil suit filed by the assessee, the Court held that, assessee was
well aware about the said pay orders but he did not raise the issue before the Settlement
857
Bar of suits in civil courts S. 293
Commission or the AO. Thus, the Court held that either the issue was not raised or if
it was raised, the AO had denied the interest to the assessee. Accordingly, it was held
that the right remedy was to file an appeal against the said order of the AO and in view
of section 293, no civil suit can be entertained by the Court.
Vishwanath Khanna v. CCIT (2016) 237 Taxman 502 (Delhi)(HC)
2524 S. 293 : Bar of suits in civil courts – Income-tax Act is a complete Code and no
separate suit is maintainable for claim of damages when the assessee had exhausted
all the remedies under the Income-tax Act and further where the assessee had failed
to prove that search carried out was illegal and that damages were actually suffered
Search was conducted at the premises of the assessee, a registered partnership firm and
assessee’s stock of perishable items were seized. It was alleged by the assessee that the
search was illegal and that search warrants were obtained with an ulterior motive by the
tax officer from the higher authorities by misleading the facts. The assessee filed a suit
for recovery of damages caused by the act of revenue authorities. Trial Court and the
First Appellate Court dismissed the suit of the assessee. High Court noted that the Lower
Courts had given a categorical finding that the assessee had exhausted all the remedies
under the Income-tax Act, 1961 which could not be interfered with. High Court held
that Income-tax Act is a complete Code and no separate suit is maintainable. High Court
further noted that the assessee had failed to prove that any illegal raid was conducted
by the Income Tax Authorities and had also failed to prove the damages suffered by it.
(BP. 1986-87 to 1996-97)
Paras Rice Mills v. UOI (2016) 236 Taxman 21 (P&H)(HC)
858
S. 6 Valuation of shares
Gift tax Act, 1958
S. 6. Value of gifts, how determined
S. 6 : Valuation of shares – Promoter's quota and were prevented from being traded in 2525
stock exchange during lock-in-period – SLP is granted [S. 4(1)(a)]
The High Court after noticing the lock-in period held that the CIT(A)’s finding were
correct and upheld its order and dismissed the order passed by the Tribunal. Against
High Court's ruling that where shares transferred, which were subject matter of gift tax
proceedings belongs to promoter's quota and were prevented from being traded in stock
exchange during lock-in-period, same could not be subject-matter of quotation in stock
exchange and as a class these could not fall within definition of quoted shares. The
leave is granted by the Supreme Court. (AY. 1993-94)
DCIT v. BPL Ltd. (2016) 240 Taxman 301 (SC)
Editorial : Refer BPL Ltd. (2007) 293 ITR 21 (Karn.)(HC)
859
Interest S. 2(7)
Interest-tax Act, 1974
S. 2. Definitions
2526 S. 2(7) : Interest – Interest on debentures and upfront fees and interest on monies lent
to other corporations – Levy is not attracted
Dismissing the appeal of revenue the Court held that Interest on debentures and upfront
fees and interest on monies lent to other corporations would not attract the provisions
of the Interest-tax Act, 1974.
CIT v. Gujarat Industrial Investment Corporation (2016) 388 ITR 484 / 243 Taxman 56 /
144 DTR 337 / (2017) 291 CTR 17 (SC)(HC)
2527 S. 2(7) : Interest – Interest on inter-corporate deposits is not chargeable to tax [S. 5]
Dismissing the appeal of revenue the Court held that the expression "advance" occurring
in section 2(7) of the Interest-tax Act, 1974, along with the expression "loan" should take
its colour from "loan" and cannot be given wider interpretation to include deposit as
well. Hence, inter-corporate deposit is not in the nature of loan or advance within the
meaning of section 2(7) and therefore, interest thereon is not chargeable to the interest-
tax under section 5.
CIT v. Gujarat Industrial Investment Corporation Ltd. (2016) 387 ITR 573 (Guj.)(HC)
2528 S. 2(7) : Interest – Inter-corporate deposits – Not included
Allowing the appeal the Court held that it was not possible to accept the contention
of the Department that the expression "interest on loan and advances" occurring in
section 2(7) of the Act should include "interest on deposits" as well notwithstanding
that there was no reference to such interest in the definition itself. The Special Bench
of the Appellate Tribunal in Housing & Urban Development Corporation Ltd v. JCIT
dt. 25-11-2005 (SB)(Trib.), had answered the question in favour of the assessee for the
AYs. 1992-93, 1993-94 and 1996-97. The present appeals pertained to the AYs. 1994-
95 and 1995-96. Therefore, by applying the rule of consistency the Department was
directed to follow the judgment which had attained finality as the view expressed had
been accepted by the Department. (AY. 1994-95, 1995-96)
Housing and Urban Development Corpn. Ltd. v. Dy. CIT (2016) 386 ITR 212 / 140 DTR
108 (Delhi)(HC)
S. 10. Interest escaping assessment
2529 S. 10 : Reopening of assessment – If no assessment order is passed, there cannot be
a notice for reassessment inasmuch as the question of reassessment arises only when
there is an assessment in the first instance
On the return filed by the assessee for the assessment year 1997-98 under the
Interest-tax Act, 1974 no assessment order was passed. Much after the last date of the
assessment year, the Assessing Officer sought to reopen the assessment by notice under
section 10 of the Act and thereafter proceeded to reassess the interest chargeable under
860
S. 10 Reopening of assessment
the Act. The Commissioner (Appeals) set aside the reassessment order and this was
upheld by the Appellate Tribunal. On further appeal by the Revenue, the High Court
reversed the Tribunal holding that even if there was no original assessment order passed
under section 10, there could be reassessment. On further appeal:
Held, allowing the appeal, that where there was no assessment order passed, there
could not be a notice for reassessment inasmuch as the question of reassessment would
arise only when there was an assessment in the first instance. Trustees of H. E. H. the
Nizam's Supplemental Family Trust v. CIT (2000) 242 ITR 381 (SC) followed. (AY. 1997-
98)
Standard Chartered Finance Ltd. v. CIT (2016) 381 ITR 453 / 238 Taxman 87 / 284 CTR
210 /132 DTR 87 (SC)
861
Instructions issued by Ministry of Finance cannot modify Scheme. . . S. 88
Kar Vivad Samadhan Scheme, 1988
S. 88. Settlement of tax payable
2530 S. 88 : Instructions issued by Ministry of Finance cannot modify Scheme having
statutory character – Instructions regarding applicability of marginal rate to unpaid
tax for determining disputed income – Not applicable to taxable income arising from
capital gains for which uniform rate applies – Assessing Officer to determine disputed
income in relation to unpaid tax by applying rate of 33.6% and to calculate tax at
35% of disputed income [S. 89]
The instructions issued by the Ministry of Finance cannot modify a scheme which is
statutory in character. The instructions of the Ministry of Finance regarding applicability
of a marginal rate to the unpaid tax for determining the disputed income cannot apply
where the taxable income arises only from capital gains and to which a uniform rate
of 33.6% applies.
Held, that the instructions issued were not consistent with the provisions of the
Finance (No. 2) Act, 1998, which did not deal with the marginal rate, particularly
when computing the disputed income arising out of the capital gains. The Act would
stipulate the rate of tax where the tax was in arrears. For the assessee, the rate was 35%
of the disputed income. Therefore, the first step was to determine the unpaid tax which
undisputedly was ` 81,58,392. The next step was to determine the disputed income in
relation to the unpaid tax applying the rate of 33.6% Thirdly, the tax payable would be
calculated at 35% of the disputed income so computed. The Department was directed to
re-compute the disputed income and thereafter calculate the tax payable by the assessee
in terms of the Scheme. (AY. 1994-95)
B.P. Jain and Associates v. CIT (2016) 381 ITR 423 / 67 taxmann.com 332 / 137 DTR 288
/ 287 CTR 334 (Delhi)(HC)
S. 95. Scheme not to apply in certain cases
2531 S. 95 : Penalty – Concealment – Criminal proceedings – As per Circular where assessee
had been discharged before filing of declaration, then, he was entitled to avail of
Samadhan Scheme [S. 96, 271(1)(c)]
Metropolitan Magistrate passed order discharging assessee and its partners from
prosecution and penalty imposed u/s. 271(1)(c) was reduced. Assessee filed declaration
under Samadhan Scheme, seeking to settle outstanding penalty and interest.
Designated Authority rejected assessee’s declaration, this on ground that prosecution
for concealment of income had already been instituted before date of filing of
declaration, therefore, benefit of the Samadhan Scheme could not be extended in view
of clear mandate of Section 95(i)(a) of the Finance No. 2 Act, 1988. On writ allowing
the petition the Court held that as clarified by Circular issued under Section 96 of
Samadhan Scheme, mere initiation of criminal proceedings would by itself not be bar,
if assessee concerned had been discharged. Only exclusion was of pending proceedings
for conviction or conviction prior to filing of declaration. Circular clarified that where
862
S. 95 Penalty
assessee had been discharged before filing of declaration, then, he was entitled to
avail of Samadhan Scheme. Asssessee was discharged before it filed its application
of settlement, thus, Designated Authority was bound to accept application made for
settlement under Samadhan Scheme. Criminal Revision Petition filed by Income Tax
Department was rejected for non-removal of office objection and Revenue had taken no
steps till date to have matter restored – It appeared that Revenue itself was not serious
about prosecuting Criminal Revision Petition filed by it to High Court. Accordingly Court
set aside order passed by designated Authority under Samadhan Scheme and restore
issue for fresh consideration, to include satisfaction of all other requirements.
Tigrania Steel Corporation v. CIT (2016) 143 DTR 310 / (2017) 496 (Bom.)(HC)
863
Collection and recovery of security transaction tax S. 100
Securities Transaction Act
– Finance Act, 2004
S. 100. Collection and recovery of security transaction tax
2532 S. 100 : Collection and recovery of security transaction tax – Short deduction – SEBI
issued circular to NSE for using two client codes on certain transaction of Foreign
Institutional Investors and NSE intimated brokers/members to take separate codes,
and brokers/members did not take separate client code, NSE could not be held liable
for alleged short-deduction of Securities Transaction Tax as NSE was not authorised
to collect tax beyond client codes [S. 98, 99]
All Securities Transaction Tax (STT) collected through a Member could be made under
a particular client code only which was provided by members/brokers and not by NSE.
Where SEBI issued circular to assessee NSE for using two client codes, one for sale and
second for purchase in case of Foreign Institutional Investors (FIIs), if brokers/members
did not take any separate client code, then assessee could not be held responsible,
because assessee had already intimated/circulated that each and every broker/member
should in such cases take two client codes. Assessee was only required to see that
transactions of purchase and sale had undertaken through particular client codes or not
and there was no mechanism provided under Act or rules that NSE should mandatorily
collect STT beyond client codes. Thus, NSE could not be held liable for any alleged
short-deduction of STT. (AY. 2005-06 to 2009-10)
National Stock Exchange v. Addl. CIT (2016) 158 ITD 850 / 178 TTJ 409 / 136 DTR 49
(Mum.)(Trib.)
864
S. 2(ea) Assets
Wealth-tax Act, 1957
S. 2. Definitions
S. 2(e) : Assets – Net wealth – Where the possession and control of the property 2533
vests with the assessee to the exclusion of everyone else and it is the assessee who is
exploiting the property for its own purposes, it is not open to the assessee to contend
that the property in question does not belong to it [S. 4]
Allowing the appeal of revenue the Court held that where control and possession of
land and building leased out by development authority DDA vested with assessee to
exclusion of everyone else and it was also exploiting property for its own purpose,
value of said property would be included in net wealth of assessee even though lease
deed of property had not been executed yet by DDA in assessee's favour. (AY. 1989-90
to 1991-92)
CWT v. Mohan Exports India P. Ltd. (2016) 387 ITR 252 / 70 taxmann.com 220 (Delhi)
(HC)
S. 2(ea) : Assets – Urban land-Exclusions – Land occupied by any building "which has 2534
been constructed" with approval of appropriate authority – Means building whose
construction is complete – Not building which is being constructed – The land on
which a building is under construction is liable to wealth tax
The assessee HUF was the owner of land. He entered into various development
agreements for construction of residential flats. The assessee contended that he
continued to be the owner of land till the sale of flats. The WTO held that the land
in question was urban land hence liable to tax under wealth tax Act. Tribunal held
that the land owned by the assessee was exempt from Wealth-tax Act in terms of
clause (ii) of Explanation 1(b) to section 2(ea)(v). High Court reversed the order of
Tribunal on the ground that as the building had not been constructed and was still
under construction during the assessment year in question. On appeal the Supreme
Court also held that Land occupied by any building "which has been constructed" with
approval of appropriate authority, means building whose construction is complete and
not building which is being constructed. (AY. 2000-01)
Giridhar G. Yadalam v. CWT (2016) 384 ITR 52 / 237 Taxman 392 / 284 CTR 433 / 132
DTR 289 (SC)
Editorial : Arising out of order in CWT v. Giridhar G. Yadalam (2007) 163 Taxman 372 /
(2010) 325 ITR 233 (Ker.)(HC)
S. 2(ea) : Assets – Ownership of asset disputed – Right to income in dispute – Asset 2535
not includible in net wealth of assessee
Dismissing the appeal of revenue the Court held that the Tribunal was justified in
holding that the provision of Wealth-tax Act did not stand attracted yet. That too would
have to await the final decision in the appellate proceedings emanating from the order
of the Additional District Judge in the proceedings under section 31(2) of the Land
Acquisition Act. (AY 1985-86 to 1992-93)
CWT v. Suman Dhamija (2016) 382 ITR 343 (Delhi)(HC)
865
Assets S. 2(ea)
2536 S. 2(ea) : Assets – Urban land – Structure standing over the land during relevant
period being a half/semi-finished one could not come within the exclusionary clause
so as to take it out from ambit of urban land
Assessee company initially engaged in business of manufacturing soft drinks. Later on,
it was sold. However, land along with business premises remained under ownership and
possession of assessee. Assessee entered into an agreement with developer, according
to which, old building was to be demolished by assessee and new commercial complex
was to be developed by developer. Assessing Officer treated property in question as
'Urban Land' under section 2(ea)(v). Commissioner (Appeals) upheld order of Assessing
Officer. Tribunal held that structure standing over the land during relevant period being
a half/semi-finished one could not come within the exclusionary clause so as to take it
out from ambit of urban land under section 2(ea). (AY. 2003-04 and 2004-05)
Hyderabad Bottling Co. Ltd. v. ACIT (2015) 154 ITD 470 / 174 TTJ 898 / 130 DTR 10
(Mum.)(Trib.)
S. 5. Exemption in respect of certain assets
2537 S. 5(1)(i) : Exemption – Refund of wealth tax paid – On the date of belated filing of
the WT Return, the assessee was fully aware that it did not comply with the essential
conditions for claiming exemption. Therefore they were not entitled for refund wealth
-tax voluntarily [S. 10(2)(b), 14(1)]
Petitioner was a charitable Trust registered u/s. 12A(a) of the IT Act, 1961. The Petitioner
Trust was holding shares of Bajaj Auto Ltd. as on 31/3/1991. In terms of s. 11(5) of IT
Act r.w.s. 13(1)(d) of the IT Act, the shares held by charitable trust were required to be
invested in conformity or modes that had been specified in S. 11(5) of IT Act, failing
the exemption provided to the charitable trusts from payment of income tax would
be forfeited. In view of amendment in s. 13(1)(d) of IT Act, it filed a revised return
of Income on 18/6/1992 claiming exemption u/s. 11 of IT Act. Further Petitioner filed
belated wealth Tax Returns for AY. 1991-92 under protest on 26/11/1993 disclosing
certain amount of wealth. Petitioner paid self assessment tax, including interest for
late filing of return, the Petitioner claimed that it was entitled to exemption u/s. 5(1)
(i) of WT Act. On appeal in HC, Hon’ble HC dismissed assessee’s appeal and held that
conduct of assesee in filing the WT return belatedly and much after date by which it
was required to disinvest the shares held in the prohibited modes and the fact that it
did not do so, should disentitle it to any of the reliefs prayed for. On the date of belated
filing of the WT Return, the assessee was fully aware that it did not comply with the
essential conditions for claiming exemption. Therefore they were not entitled for refund
wealth-tax voluntarily. (AY. 1991-92)
Wular Trust v. ADIT (WT(E) (2016) 134 DTR 359 (Delhi)(HC)
S. 17. Wealth escaping assessment
2538 S. 17 : Reassessment – Reassessment only for examining correctness of claim was held
to be not proper [S. 2(ea)]
Allowing the appeal the Court held that; in the absence of any specific meaning ascribed
to the expression "industrial purposes" by the Act, it would be safe to treat the banking
866
S. 40 Net wealth
activity carried on by the assessee as an industrial enterprise and, the usage of any
vacant land held by it as falling within the expression "industrial purposes" and, hence,
for a period of two years from the date of acquisition of such vacant urban land, it was
liable to be kept outside the purview of the expression "asset" described under section
2(ea) of the Act. No attention had been paid by any of the three authorities, who dealt
with the case of the assessee, in this regard. That the proviso to rule 14 would be
applicable where it is not possible to calculate the amount of debt that is utilised for
purposes of acquiring each of the assets and the formula contained therein brought out
the theory of proportionate liability and the principle that would become applicable.
Since more than fifteen years had elapsed, the court found that no useful purpose would
be served in remanding the matter and restored the original order of the Assessing
Officer. (AY. 1999-2000, 2000-01, 2001-02)
Karur Vysya Bank Ltd. v. CIT (2016) 388 ITR 37 / 74 taxmann.com 69 / (2017) 150 DTR
375 (Mad.)(HC)
Finance Act, 1983 (1983) 142 ITR 41 (St.)
S. 40. Revival of levy of wealth tax in the case of closely held companies
S. 40 : Net wealth – Leasehold interest in the land is to be considered while computing 2539
the net wealth of the assessee (S. 40 Finance Act, 1983)
Assessee had taken a land, situated at Pimpri, on lease from MIDC. Out of the total
land admeasuring 9,605 sq.m., part of the land admeasuring 2,175 sq.m. was vacant.
Assessee did not include the land in the net wealth computed for the purpose of wealth
tax on the ground that definition of asset u/s. 40 of Finance Act, 1983 did not include
any interest held in the land and secondly, the land did not “belong” to the assessee.
Assessing Officer assessed the leasehold interest in the land to wealth tax and completed
the assessment. The CIT(A) and Tribunal confirmed the order of the AO. On appeal,
the High Court held that the definition includes land other than agriculture land and
the proviso to section 40(3)(v) uses the word “held” and not “owned” by the assessee.
Therefore, leasehold interest is assessable to wealth tax. The High Court also held that
the words “belonging to” have been used to include assests in possession without full
ownership but having domain over it to exercise powers which would otherwise vest in
the owner. Therefore, leasehold land held by the assessee belongs to the assessee and
is exigible to wealth tax. (AY. 1988-89)
Jai Hind Sciaky Ltd. v. Dy. CIT (2016) 383 ITR 25 / 130 DTR 177 / 286 CTR 76 (Bom.)(HC)
867
Interpretation of taxing statutes
Interpretation of taxing statutes
2540 Beneficial provisions
Beneficial provisions of the law must be construed liberally. While interpreting a
beneficial legislation, the rule of liberal construction should be preferred over the rule
of strict interpretation, and, therefore, an effort must be made to see how the benefit
can be provided to the person claiming it sincerely and genuinely. An interpretation
that achieves the object of the legislation should be preferred over the one that tends
to frustrate it, and the one which takes in a direction to find out how the benefit can
be denied. Thus, for appreciating the true meaning of the terms used in the section,
an expression of wider amplitude may be preferred in comparison to a narrower one
while defining the scope and boundaries of the benefits intended to be provided by the
Legislature. A narrow minded approach or myopic view while examining the eligibility
of deduction may cause undue hardship to eligible persons and may frustrate the object
of legislation. Purposive construction is a well accepted rule of interpretation which
says that the courts must look upon the object which the statute seeks to achieve,
especially while interpreting any beneficial legislation. If there is an ambiguity, a
purposive approach for interpreting the Act is necessary. If two views are possible, one
that effectuates the purpose or intendment of the provision and the other that frustrates
it, the former must be preferred. Every effort should be made to make a purposive
construction with a view to effectuate the purpose and object of the statutory provision.
(AY. 2001-02, 2002-03)
Sunil Gavaskar v. ITO (IT) (2016) 47 ITR 243 / 177 TTJ 500 / 134 DTR 113 (Mum.)(Trib.)
2541 Casus omissus
There is no presumption that a casus omissus exists and a court should avoid creating a
casus omissus where there is none. It is a fundamental rule of interpretation that courts
would not fill the gaps in a statute, their functions being to declare or decide the law.
Babita Lila v. UOI (2016) 387 ITR 305 / 288 CTR 489 / 243 Taxman 258 (SC)
2542 Conflict between welfare legislation and tax legislation – Welfare legislation will
prevail
If there is a conflict between a social welfare legislation and a taxation legislation, then,
the social welfare legislation should prevail since it sub-serves larger public interest.
The Motor Vehicles Act, 1988 is one such legislation which has been passed with a
benevolent intention for compensating the accident victims who have suffered bodily
disablement or loss of life and the Income-tax Act which is primarily intended for tax
collection by the State cannot put spokes in the effective and efficacious enforcement
of the Motor Vehicles Act.
Managing Director, Tamil Nadu State Transport Corpn (Salem) Ltd. v. Chinnadurai (2016)
385 ITR 656 / 240 Taxman 162 / 142 DTR 65 / 290 CTR 297 (Mad.)(HC)
868
Interpretation of taxing statutes
Finance Ministers announcement in parliament – The fact that the Finance Minister 2543
announced a concession in Parliament does not entitle the assessee to relief if the same
is not set out in the Finance Act [Constitution of India, Art. 14]
(i) The whole thrust of the appellant is that the proposals of the Finance Minister
were duly approved by the Parliament. No doubt, the appellant has placed before
this Court the proposals of the Finance Minister which discloses the intention of
the Government but there is no material placed before us to demonstrate that the
budget proposals are duly accepted by the Parliament. It is an admitted fact that
pursuant to the proposals, the Finance Act was passed by the Parliament wherein
for the goods specified under Tariff Sub-Heading 2208.10, particular tariff was
specified. We are unable to agree with the argument advanced by the appellant
for the reason that he is unable to make note of the difference between a proposal
moved before the Parliament and a statutory provision enacted by the Parliament,
because the process of Taxation involves various considerations and criteria.
(ii) Every legislation is done with the object of public good as said by Jeremy Bentham.
Taxation is an unilateral decision of the Parliament and it is the exercise of
the sovereign power. The financial proposals put forth by the Finance Minister
reflects the Governmental view for raising revenue to meet the expenditure for
the financial year and it is the financial policy of the Central Government. The
Finance Minister’s speech only highlights the more important proposals of the
budget. Those are not the enactments by the Parliament. The law as enacted is
what is contained in the Finance Act. After it is legislated upon by the Parliament
and a rate of duty that is prescribed in relation to a particular Tariff Head that
constitutes the authoritative expression of the legislative will of Parliament. Now
in the present facts of the case, as per the Finance Bill, the legislative will of the
Parliament is that for the commodities falling under Tariff Head 2208.10, the tariff
is ` 300/- per litre or 400% whichever is higher. Even assuming that the amount of
tax is excessive, in the matters of taxation laws, the Court permits greater latitude
to the discretion of the legislature and it is not amenable to judicial review. In
view of the foregoing discussion, we are unable to concur with the submission
of the appellant that the budget proposals are duly passed and approved by the
Parliament and moreover, if the appellant is aggrieved by the particular tariff
prescribed under the Finance Act and the same is contrary to the approved budget
proposals, he ought to have questioned the same if permissible. (Civil Appeal Nos.
4676-4677 of 2013, dt 22.07.2016)
Amin Merchant v. Chairman CBEC (SC); www.itatonline.org
Finance Ministers speech – Aids to construction – Budget speech of Finance Minister 2544
The speech of a Minister is relevant in so far it gives the background for the
introduction of a particular provision. It is not determinative of the construction of
the provision, but gives the render an idea as to what was in Minister’s mind when he
sought to introduce it.
CIT v. Meghalaya Steel Ltd. (2016) 383 ITR 217 / 132 DTR 273 / 284 CTR 321 / 238
Taxman 559 (SC)
869
Interpretation of taxing statutes
2545 Heading of section
Section 153A of the Income-tax Act, 1961, bears the heading "Assessment in case of
search or requisition". It is well settled that the heading of the section can be regarded
as a key to the interpretation of the operative portion of the section and if there is
no ambiguity in the language or if it is plain and clear, then the heading used in the
section strengthens that meaning.
PCIT v. Saumya Construction P. Ltd. (2016) 387 ITR 529 (Guj.)(HC)
2546 Limitation – Practical and rational construction – Limitation [S. 158BE]
Court held that a provision relating to limitation must be strictly construed. As a general
rule, therefore, when there is no stay of the assessment proceedings passed by the Court,
Explanation 1 to section 158BE of the Act may not be attracted. However, this general
statement of legal principle has to be read subject to an exception in order to interpret
it rationally and practically.
VLS Finance Ltd. v. CIT (2016) 384 ITR 1 / 286 CTR 146 / 134 DTR 305 / 239 Taxman
404 (SC)
Editorial : Decision in VLS Finance Ltd. v. CIT (2007) 289 ITR 286 (Delhi)(HC) is affirmed.
Review petition was dismissed VLS Finance Ltd. v. CIT (2016) 386 ITR 407 (SC)
2547 Obiter dicta – Rule of consistency – Court stated that the how revenue casually takes
up the important matter – Copy of order was sent to Chairman CBDT, Principal Chief
Commissioner [S. 145, 260A]
Court has made observation that though 95% additions were deleted by the Tribunal,
the Revenue has neither filed an appeal nor cross objection when the question of law
was admitted by High Court. Court also observed that “we need not comment anything
further except to bring to the knowledge of the higher officials of Revenue as to how
casually important matters like this are taken care of and seriousness which should
be attached to such matters is taken lightly. While appeals which have hardly any
important are being filed as a matter of routine.”
Obiter dicta : It is the prerogative of the Revenue to challenge or not to challenge the
orders of the Commissioner (Appeals)/Income Tax Appellate Tribunal to a higher forum
but there should be proper justification and reasoning when a decision is taken not to
challenge the deletion of heavy additions made by the Assessing Officer. Copy of order
was sent to Chairman CBDT, Principal Chief Commissioner (AY. 2000-01, 2001-02)
Chaturbhuj Manoj Kumar v. CIT (2016) 388 ITR 194 (Raj.)(HC)
Rajaram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC)
Hazariram and Ors v. CIT (2016) 388 ITR 194 (Raj.)(HC)
2548 Precedent – Decision of one High Court not binding on another
The decision of one High Court is not a binding precedent upon another High Court
and at best can only have persuasive value.
Humayun Suleman Merchant v. CCIT (2016) 387 ITR 421 / 242 Taxman 189 / 140 DTR
209 (Bom.)(HC)
870
Interpretation of taxing statutes
Precedent – Supreme Court – Decision of Supreme Court on particular set of facts – 2549
No change in facts or law in subsequent year – Appellate Tribunal cannot disregard
decision and arrive at contrary conclusion
On the same transactions and same set of facts reaching a different conclusion than
that reached by the Supreme Court was not possible and was impermissible. The
Tribunal's order was vitiated by serious errors of law apparent on the face of the record.
It was also perverse for it ignored vital materials which had been noted extensively
in the judgment of the Supreme Court. None of the amendments post the Supreme
Court judgment would enable the Department to urge that the position as noted in
the Supreme Court judgment no longer subsisted. There were no capital gains. Since
there was no income the provisions of section 92B read with section 92F(v) were not
applicable. (AY. 2008-09)
Vodafone India Services P. Ltd. v. CIT (2016) 385 ITR 169 / 284 CTR 441 / 69 taxmann.
com 283 (Bom.)(HC)
Editorial : The Supreme Court has granted special leave to the Department to appeal
against this judgment CIT v. Vodafone India Services P. Ltd. (2016) 384 ITR 182 (St.)
Precedent – Binding precedent – Decision of High Court binding on income-tax 2550
authorities and appellate authorities within its jurisdiction. [Contempt of Courts Act,
1971 [S. 2(b)]
The law laid down by the High Court must be followed by all authorities and
subordinate Tribunals and they cannot ignore it either in initiating proceedings or
deciding the rights involved in such a proceeding. If in spite of the earlier exposition
of law by the High Court having been pointed out and attention being pointedly drawn
to that legal position, proceedings are initiated, it must be held to be a wilful disregard
of the law laid down by the High Court and would amount to civil contempt as defined
in section 2(b) of the Contempt of Courts Act, 1971.
Kaira District Co-op. Milk Producers Union Ltd v. Dy. CIT (2016) 386 ITR 633 (Guj.)(HC)
Precedent – High Court – Decision of High Court on question binding on co-ordinate 2551
Bench – That decision did not involve large tax effect and therefore not taken on
appeal – Not a ground not to not follow it
Held, dismissing the appeal, that if the Tribunal had followed the decision of the
court, no substantial question of law would arise for consideration in the appeal. The
Department's contention that since the tax amount was less in the earlier case and the
matter had been not carried before the Supreme Court, the efficacy of the decision of
the court would be lost was not tenable. When on the same issue a co-ordinate Bench
of the court had already taken a view, departure therefrom was not permissible unless
there were strong and valid reasons or the Supreme Court had taken a different view.
When the issue was covered by the decision of the court, no substantial question of law
would arise for consideration. (AY. 2008-09)
PCIT v. C. Gopalaswamy (2016) 384 ITR 307 (Karn.)(HC)
871
Interpretation of taxing statutes
2552 Precedent – High Court – Effect to be given not to be deferred till decision of Supreme
Court
When an issue is covered by the decision of the court, effect to be given to it cannot
be deferred until such time as the Supreme Court ultimately decides the matter. (AY.
2006-07 to 2008-09)
CIT v. Tata Elxi Ltd. (2016) 382 ITR 654 (Karn.)(HC)
2553 Reasonable interpretation
If a strictly literal interpretation of the statute leads to a manifestly unreasonable and
absurd consequence, the literal interpretation would have to make way for a reasonable
interpretation which avoids such absurdity and mischief and makes the provision
rational and sensible, and in accordance with the object and purpose of the statute, even
if such interpretation results into doing of "some violence" to the language used by the
Legislature. (AY. 1980-81)
Somaiya Organo Chemicals Ltd v. CIT (2016) 388 ITR 423 / 290 CTR 30 / 142 DTR 361
(Bom.)(HC)
2554 Strict construction – Casus omissus
The principles of law have been settled that the fiscal statute should be construed
strictly as applicable only to taxing provisions such as surcharge provisions or a
provision imposing penalty. Any liberal construction of the statute cannot be permissible
under law.
It is well settled that in the matter of interpretation of taxing statutes, courts would not
be justified in interpreting some other expressions, which the legislation thought to omit.
Casus omissus cannot be supplied by the court except in the case of clear necessity and
when reason for it is found in the four corners of the statute itself and for that purpose
all the parts of a statute or section must be construed together and every clause of a
section should be construed with reference to the context and other clauses thereof so
that the construction to be put on a particular provision makes a consistent enactment
of the whole statute. This would be more so if a literal construction of a particular
clause leads to manifestly absurd or anomalous results which could not have been
intended by the Legislature.
Ashok Kumar Sethi v. Dy. CIT (2016) 387 ITR 375 / 244 Taxman 174 (Mad.)(HC)
2555 Strict interpretation
In interpreting a fiscal statute one must have regard to the strict letter of law and intent
can never override the plain and unambiguous letter of the law.
Humayun Suleman Merchant v. CCIT (2016) 387 ITR 421 / 242 Taxman 189 / 140 DTR
209 (Bom.)(HC)
2556 Strict construction
In a taxing Act, one has to look merely at what is clearly said. There is no room for
intendment. There is no equity about a tax. There is no presumption as to tax. Nothing
is to be implied. One can only look fairly at the language used.
CIT v. Yokogawa India Limited (2017) 391 ITR 274 / 145 DTR 1 / 291 CTR 1 / 244 Taxman
273 (SC)
872
Art. 226 Writ
The Constitution of India
Art. 226. Power of High Courts to issue certain writs
Art. 226 : Writ – Existence of alternative remedy – Writ will not ordinarily issue – 2557
Appeal filed against assessment order – No allegation of infringement of fundamental
rights or lack of jurisdiction – Writ petition not maintainable
When an alternative and equally efficacious remedy is open to a litigant, he should
be required to pursue that remedy and not invoke the special jurisdiction of the High
Court to issue a prerogative writ. It is true that the existence of another remedy does
not affect the jurisdiction of the court to issue a writ; but the existence of an adequate
legal remedy is a thing to be taken into consideration in the matter of granting writs.
Union of India v. T. R. Varma (1958) SCR 499 relied on.
Considering the fact that the assessee had already availed of the remedy of appeal before
the Commissioner (Appeals) against the order in relation to several points, including
the point involved in the present case, the court would not exercise its extraordinary
jurisdiction, inasmuch as, interference by the court would result in examination of the
same order, may be, on different points by the Commissioner (Appeals) as well as this
court, leading to an anomalous situation. [The Commissioner (Appeals) was directed to
hear and decide the appeal as expeditiously as possible, and considering that in earlier
years the issue had been decided in favour of the assessee, there shall be no coercive
recovery pursuant to the demand notice to the extent of demand pertaining to the
addition in question.] (AY. 2012-13)
Kaira District Co-op. Milk Producers Union Ltd v. Dy. CIT (2016) 386 ITR 633 (Guj.)(HC)
Art. 226 : Writ – Assessee, a non-resident shown as beneficiary in Swiss bank account 2558
– Reassessment proceedings based on information received by Central Board of Direct
Taxes from French Government – Non-co-operation by assessee in obtaining necessary
documents from foreign bank – Court will not interfere under writ jurisdiction
[S. 147, 148]
Held, that in the normal course, if the assessee had nothing to hide and serious
allegations or questions were being raised by the Department about the funds in
Swiss bank account, the assessee would have co-operated in obtaining the necessary
documents from the bank which would have revealed or given clues as to the source of
the monies in the bank. The conduct on the part of the assessee and her uncle in not
being forthcoming, led to the conclusion that it was not a fit case to interfere with the
orders of the statutory authorities in exercise of writ jurisdiction. (AY. 2006-07)
Soignee R. Kothari v. Dy. CIT (2016) 386 ITR 466 / 285 CTR 230 / 134 DTR 193 (Bom.)
(HC)
873
Standards of professional conduct and Etiquette S. 28(2)
Allied laws
Advocate Act, 1961
S. 28. Power to make rules
2559 S. 28(2) : Standards of professional conduct and Etiquette – A Public Interest Litigation
(PIL) filed by a lawyer to gain popularity and publicity and attract more clients
amounts to an unethical practice of soliciting work and is in violation of the Code of
Conduct. The media should not publish the names of the advocates who appeared in
any case as it is an indirect method of soliciting work or indulging in advertisement of
the professional abilities or skills of the advocates. The media should also not publish
the names of the Judges unless it is so essentially required
A Public Interest Litigation (PIL) filed by a lawyer to gain popularity and publicity
and attract more clients amounts to an unethical practice of soliciting work and is
in violation of the Code of Conduct. The media should not publish the names of the
advocates who appeared in any case as it is an indirect method of soliciting work
or indulging in advertisement of the professional abilities or skills of the advocates.
The media should also not publish the names of the Judges unless it is so essentially
required (WP No. 15480 of 2016, dt. 22.08.2016)
S. Baskar Mathuram v. the State of Tamilnadu (Mad.)(HC), www.itatonline.org
Chartered Accountants Act, 1949
2560 S. 21 : Professional or other misconduct – Carrying on business of company directly
and obtaining the loan from the bank was held to be professional misconduct and his
name was to be removed from membership register of Council for a period of three
years [S. 22]
A complaint had been lodged by bank that respondent, Chartered Accountant had
obtained a term loan from the bank. Report of Disciplinary Committee stated that as a
Chartered Accountant respondent was carrying on business directly and his claim that
he was merely a director in his professional capacity was incorrect. On reference the
Court held that since the findings with reasons given by the Council have not been
controverted, in that, the respondent has chosen not to contest the instant proceedings,
the findings of the Council are not reopened which are detailed and would rest of
crystallizing the same as above. Indeed, professional misconduct under clauses 5, 6, 7
and 8 of Part I of the 2nd Schedule is made out and it is concurred, and thus penalty
of removing respondent's name from the membership register of the Council for a period
of three years is inflicted upon.
Council of Institute of Chartered Accountants of India v. B. K. Dhingra (2016) 243 Taxman
90 (Delhi)(HC)
874
S. 22 Professional misconduct
S. 22 : Professional misconduct – Disclosure of confidential/privilege information by an 2561
auditor which was gathered in course of audit of a company would be a professional
misconduct which is liable to penalty [S. 21]
Chartered Accountant had shared information gathered as an auditor of company with
third party, it would be a professional misconduct. Since company had tried to defame
respondent Chartered Accountant first and he had retaliated, he was to be reprimanded.
Held that he was liable to penalty.
Council of the Institute of Chartered Accountants of India v. Devinder kumar Jain (2016)
242 Taxman 41 (Delhi)(HC)
S. 22 : Professional misconduct – Not detecting of fraudulent transactions in bank was 2562
held to be professional misconduct and liable to penalty [S. 21]
Taking into account said fact and that we are deciding the reference in the year 2016
we are of the opinion that accepting the decision of the Council at its meetings held
on January 16 and 17, 2011 in so far it concludes the respondent guilty of misconduct
contemplated by clause (7) of Part I of Second Schedule read with sections 21 and 22 of
the Chartered Accountants Act, 1949, ends of justice would suffice if penalty of severe
reprimand contemplated by section 21(6)(c) of the Chartered Accountants Act, 1949 is
inflicted upon the respondent. Not detecting of fraudulent transactions in bank was held
to be professional misconduct.
Council of the Institute of Chartered Accountants of India v. Uma Shanakar Jha (2016)
242 Taxman 49 (Delhi)(HC)
S. 22 : Professional misconduct – Chartered Accountant as a liquidator – Levy of 2563
penalty was held to be not justified as he was not acting as chartered Accountant
[S. 21]
As the assessee was acting as individual in his dealings with complainant which were
purely commercial, hence while selling shares held by him, assessee was not acting as
Chartered Accountant, and thus impugned conduct would not be a misconduct for the
purposes of the Act and penalty would not be imposable.
Council of the Institute of Chartered Accountants of India v. Gurvinder Singh (2016) 242
Taxman 36 (Delhi)(HC)
S. 22 : Professional misconduct – Professional who threatened client would certainly 2564
committed misconduct because act was of kind which was not expected by members
of civil society to be committed by professional – Liable to penalty [S. 21]
A professional who threatens a client would certainly commit a misconduct because the
act is of a kind which is not expected by members of a civil society to be committed
by a professional and penalty envisaged thereby would be justified. Liable to penalty.
Council of the Institute of Chartered Accountants of India v. Mahesh Kumar Gupta (2016)
242 Taxman 44 (Delhi)(HC)
S. 22 : Professional misconduct – Held guilty of professional misconduct as he did not 2565
provide services after receiving advance fee [S. 21]
The conduct of the respondent justifies the proposed penalty.
875
Professional misconduct S. 22
We answer the reference in the affirmative holding that the respondent is guilty of
misconduct and we impose the penalty of suspension of the name of the respondent
No. 1 Rakesh Verma from the Register of Members for a period of one year. Held guilty
of professional misconduct as the CA did not provide services after receiving advance
fee of ` 2.50 lakhs.
Council of the Institute of Chartered Accountants of India v. Rakesh Verma (2016) 242
Taxman 55 (Delhi)(HC)
876
S. 195 Prosecution
The Code of Criminal Procedure, 1973
S. 177. Ordinary place of inquiry and trial
S. 177 : Offences and prosecution – Court – Territorial jurisdiction – False statement 2566
during search – Single and combined search operation undertaken simultaneously at
Bhopal and Aurangabad – Offence could be tried by Courts at both places [S. 132,
277, CRPC, S. 178, 179]
Dismissing the petition the Court held that Single and combined search operation
undertaken simultaneously at Bhopal and Aurangabad. Offence could be tried by courts
at both places
Babita Lila v. UOI (2016) 387 ITR 305 / 288 CTR 489 / 73 taxmann.com 32 (SC)
S. 195. Prosecution for contempt of law full authority of public servants, for offences
against public justice and for offences relating to documents given in evidence
S. 195 : Prosecution – Territorial jurisdiction and competence of the Deputy Director 2567
of Income-tax to lodge a complaint for evasion of tax – Allowing the petition the Court
held that the complaint is unsustainable in law having been filed by an authority,
incompetent in terms of section 195 of the Code [Income-tax Act 1961, S. 131, 132,
136. Constitution of India, Art 136, Indian Penal code, S. 109, 191]
The essence of the discord is the competence of the Deputy Director, Income Tax
(Investigation)-I, Bhopal (M.P.) to lodge the complaint. Whereas, according to the
appellants, he is not the authority or the forum before which appeals would ordinarily
lie from the actions/decisions of the I.T.Os who had recorded their statements, as
mandated by section 194 (4) of the Code, it is urged on behalf of the respondent that
having regard to the overall scheme of the Act, he indeed was possessed of the appellate
jurisdiction to maintain the complaint. As nothing much turns on the ingredients of the
offences under sections 193, 196, 200 IPC qua the issue to be addressed, after detailed
discussion analysing various provisions the Court held that though the concept of “cause
of action“ identifiable with a civil action is not routinely relevant for the determination
of territoriality of criminal courts as had been ruled by this Court in Dashrath Rupsingh
Rathod vs. State of Maharashtra and Another, (2014) 9 SCC 129, their Lordships however
were cognizant of the word “ordinarily” used in section 177 of the Code to acknowledge
the exceptions contained in section 178 thereof. Section 179 also did not elude notice.
Be that as it may, on a cumulative reading of sections 177, 178 and 179 of the Code
in particular and the inbuilt flexibility discernible in the latter two provisions, we are
of the comprehension that in the attendant facts and circumstances of the case where
to repeat, a single and combine search operation had been undertaken simultaneously
both at Bhopal and Aurangabad for the same purpose, the alleged offence can be tried
by courts otherwise competent at both the aforementioned places. To confine the
jurisdiction within the territorial limits to the court at Aurangabad would amount, in our
view, to impermissible and illogical truncation of the ambit of sections 178 and 179 of
the Code. The objection with regard to the competence of the Court of the Chief Judicial
877
Professional misconduct S. 22
Magistrate, Bhopal is hereby rejected. The inevitable consequence of the determination
in its entirety however is that the complaint is unsustainable in law having been filed
by an authority, incompetent in terms of section 195 of the Code.
Babita Lila v. UOI (2016) 387 ITR 305 / 243 Taxman 258 / 140 DTR 241 / 288 CTR 489
(SC)
878
S. 110 Accountability
Customs Act, 1962
S. 110 : Accountability – Strictures – Customs officials directed to pay costs of ` 14 2568
lakh + interest @ 9% p.a. from personal account and to face disciplinary action for
“high-handedness”, arbitrariness” and seeking to “hoodwink” Court
Honourable Court explained the accountability of the public officers by referring various
Judgments of Apex Court and held that when this Court has found that the petitioners
have been put to a loss of at least ` 14,69,650/- on account of complete deterioration
of quality of split betel nuts solely on account of deliberate laches on the part of the
officials of the Custom Department it would direct respondent No. 2 to pay a sum of
` 14,69,650/- along with interest at the rate of 9% per annum for the period 28.3.2013,
the date on which the order of provisional release of the seized article was passed
by the competent authority to the order directing release of the seized articles dated
9.8.2014 within a period of three months from to AY. The Court also observed that; It is,
however, made clear that such amount, which has to be paid by way of compensation
for the loss caused to the petitioners on account of delay of nearly 1½ years in release
of the seized articles, shall be recovered from the erring officials and for the purposes
of fixing individual responsibility on such erring officials this Court would direct the
Chairman of Central Board of Excise and Customs Department of Revenue, New Delhi
to get an enquiry conducted by an Officer not below in the rank of Chief Commissioner
of Customs who must not be posted and/or associated in any manner with Patna Zone
of the Custom Department. Upon completion of such enquiry and upon submission
of enquiry report appropriate action under the orders of Chairman Central Board of
Excise and Customs, New Delhi be taken against erring officials not only for recovery
of the amount directed to be paid under this judgment to the petitioners but also for
initiating and concluding disciplinary proceedings by the competent authority against
the erring officials of Customs Department of Patna zone who are found to have caused
delay in release of the seized articles of the petitioners in any part of period in between
28.3.2013 to 9.8.2014. This whole exercise must be completed within a period of six
months from the date of receipt of this judgment by the Chairman of the Central Board
of Excise and Customs, New Delhi, who having taken his action as directed above shall
also submit his action taken report to the registry of this Court on or before 30th of
June, 2016. With the aforementioned observations and directions, this writ application
is allowed with a cost of ` 25,000/- quantified by this Court for coercing and compelling
the petitioners to file this writ petition for release of their seized betel nuts to be paid
by the Respondents to the petitioners within a period of three months from today. It
is, however, made clear that irrespective of initiation and conclusion of the aforesaid
proceedings against the erring officials of Customs department of Patna zone by the
Chairman of Central Board of Excise and Customs, the payment of the amount of
` 14,69,650/- along with interest at the rate of 9% per annum from 28.3.2013 to 9.8.2014
must be made to the petitioners within a period of three months from today, failing
which the amount of interest on the amount of ` 14,69,650/- shall stand enhanced from
9% per annum to 18% per annum from 28.3.2013 till the date of its actual payment. Let
a copy of this judgment be sent immediately to not only the Chairman of Central Board
of Excise and Customs Department of Revenue, Ministry of Finance, New Delhi, but also
879
Accountability S. 110
to the Commissioner of Customs (Preventive), respondent No. 2, for its compliance in
letter and spirit. (Civil WP. No. 13382 of 2014, dt. 30.11.2015)
Overseas Enterprises v. UOI (Patna)(HC); www.itatonline.org
880
S. 6 Ancestral property
Hindu Succession Act, 1956
S. 6. Devolution of interest in coparcenary property
S. 6 : Ancestral property – Formation of a HUF by the surviving members of the 2569
deceased [Amendment of 2005]
(a) The law, therefore, insofar as it applies to joint family property governed by
the Mitakshara School, prior to the amendment of 2005, could therefore be
summarized as follows:—
(i) When a male Hindu dies after the commencement of the Hindu Succession
Act, 1956, having at the time of his death an interest in Mitakshara
coparcenary property, his interest in the property will devolve by
survivorship upon the surviving members of the coparcenary (vide Section 6).
(ii) To proposition (i), an exception is contained in Section 30
Explanation of the Act, making it clear that notwithstanding anything
contained in the Act, the interest of a male Hindu in Mitakshara coparcenary
property is property that can be disposed of by him by will or other
testamentary disposition.
(iii) A second exception engrafted on proposition (i) is contained in the proviso
to section 6, which states that if such a male Hindu had died leaving behind
a female relative specified in Class I of the Schedule or a male relative
specified in that Class who claims through such female relative surviving
him, then the interest of the deceased in the coparcenary property would
devolve by testamentary or intestate succession, and not by survivorship.
(iv) In order to determine the share of the Hindu male coparcener who is
governed by section 6 proviso, a partition is effected by operation of law
immediately before his death. In this partition, all the coparceners and the
male Hindu’s widow get a share in the joint family property.
(v) On the application of Section 8 of the Act, either by reason of the death of a
male Hindu leaving self-acquired property or by the application of section 6
proviso, such property would devolve only by intestacy and not survivorship.
(vi) On a conjoint reading of sections 4, 8 and 19 of the Act, after joint family
property has been distributed in accordance with section 8 on principles
of intestacy, the joint family property ceases to be joint family property in
the hands of the various persons who have succeeded to it as they hold the
property as tenants in common and not as joint tenants.
(b) Applying the law to the facts of this case, it is clear that on the death of Jagannath
Singh in 1973, the joint family property which was ancestral property in the
hands of Jagannath Singh and the other coparceners, devolved by succession
under Section 8 of the Act. This being the case, the ancestral property ceased to
be joint family property on the date of death of Jagannath Singh, and the other
coparceners and his widow held the property as tenants in common and not as
joint tenants. This being the case, on the date of the birth of the appellant in 1977
the said ancestral property, not being joint family property, the suit for partition
881
The Hindu Succession (Amendment Act), 2005 S. 6
of such property would not be maintainable. (Civil Appeal No. 2360 of 2016,
dt. 02.03.2016)
Uttam v. Saubhag Singh, AIR 2016 SC 1169, 2016 (3) Bom CR 83 / (2016) 286 CTR 15
/ 134 DTR 145 (SC)
2570 S. 6 : The Hindu Succession (Amendment Act), 2005 which came into effect on
09.09.2015 and by which daughters in a joint Hindu family, governed by Mitakshara
law, were granted statutory right in the coparcenary property (being property not
partitioned or alienated) of their fathers applies only if both the father and the
daughter are alive on the date of commencement of the Amendment Act
(i) An amendment of a substantive provision is always prospective unless either
expressly or by necessary intendment it is retrospective. In the present case, there
is neither any express provision for giving retrospective effect to the amended
provision nor necessary intendment to that effect. Requirement of partition being
registered can have no application to statutory notional partition on opening of
succession as per unamended provision, having regard to nature of such partition
which is by operation of law. The intent and effect of the Amendment will be
considered a little later. On this finding, the view of the High Court cannot be
sustained.
(ii) Contention of the respondents that the Amendment should be read as retrospective
being a piece of social legislation cannot be accepted. Even a social legislation
cannot be given retrospective effect unless so provided for or so intended by the
legislature. In the present case, the legislature has expressly made the Amendment
applicable on and from its commencement and only if death of the coparcener in
question is after the Amendment. Thus, no other interpretation is possible in view
of express language of the statute. The proviso keeping dispositions or alienations
or partitions prior to 20th December, 2004 unaffected can also not lead to the
inference that the daughter could be a coparcener prior to the commencement of
the Act. The proviso only means that the transactions not covered thereby will
not affect the extent of coparcenary property which may be available when the
main provision is applicable. Similarly, Explanation has to be read harmoniously
with the substantive provision of Section 6 (5) by being limited to a transaction of
partition effected after 20th December,2004. Notional partition, by its very nature,
is not covered either under proviso or under sub-section 5 or under the
Explanation.
(iii) Interpretation of a provision depends on the text and the context (RBI v. Peerless
(1987) 1 SCC 424, para 33). Normal rule is to read the words of a statute in
ordinary sense. In case of ambiguity, rational meaning has to be given (Kehar Singh
v. State (1988) 3 SCC 609). In case of apparent conflict, harmonious meaning to
advance the object and intention of legislature has to be given (District Mining
Officer v. Tata Iron and Steel Co. (2001) 7 SCC 358).
(iv) There have been number of occasions when a proviso or an explanation came up
for interpretation. Depending on the text, context and the purpose, different rules
of interpretation have been applied (S. Sundaram Pillai v. R. Pattabiraman (1985)
1 SCC 591).
882
S. 6 Co-parcener
(v) Normal rule is that a proviso excepts something out of the enactment which
would otherwise be within the purview of the enactment but if the text, context
or purpose so require a different rule may apply. Similarly, an explanation is to
explain the meaning of words of the section but if the language or purpose so
require, the explanation can be so interpreted. Rules of interpretation of statutes
are useful servants but difficult masters (Keshavji Ravji & Co. v. CIT (1990) 2 SCC
231). Object of interpretation is to discover the intention of legislature.
(vi) In this background, we find that the proviso to section 6(1) and sub-section (5)
of Section 6 clearly intend to exclude the transactions referred to therein which
may have taken place prior to 20th December, 2004 on which date the Bill was
introduced. Explanation cannot permit reopening of partitions which were valid
when effected. Object of giving finality to transactions prior to 20th December,
2004 is not to make the main provision retrospective in any manner. The object
is that by fake transactions available property at the introduction of the Bill is
not taken away and remains available as and when right conferred by the statute
becomes available and is to be enforced. Main provision of the Amendment in
section 6(1) and (3) is not in any manner intended to be affected but strengthened
in this wAY. Settled principles governing such transactions relied upon by
the appellants are not intended to be done away with for period prior to 20th
December, 2004. In no case statutory notional partition even after 20th December,
2004 could be covered by the Explanation or the proviso in question.
(vii) Accordingly, we hold that the rights under the amendment are applicable to
living daughters of living coparceners as on 9th September, 2005 irrespective
of when such daughters are born. Disposition or alienation including partitions
which may have taken place before 20th December, 2004 as per law applicable
prior to the said date will remain unaffected. Any transaction of partition effected
thereafter will be governed by the Explanation. (Civil Appeal No. 7217 of 2013,
dt. 24.11.2015)
Prakash v. Phulvati (SC); www.itatonline.org
S. 6 : Co-parcener – Eldest daughter is entitled to be Karta of the HUF – Pursuant 2571
to the amendment to the Hindu Succession Act, 1956 by the Hindu Succession
(Amendment) Act, 2005 all rights which were available to a Hindu male are now also
available to a Hindu female. A daughter is now recognised as a co-parcener by birth
in her own right and has the same rights in the co-parcenary property that are given
to a son. Consequently, the eldest daughter is entitled to be the Karta of the HUF.
The High Court had to consider whether the plaintiff, being the first born amongst the
co-parceners of the HUF property, would by virtue of her birth, be entitled to be its
Karta. HELD by the High Court upholding the claim:
(i) It is rather an odd proposition that while females would have equal rights of
inheritance in an HUF property, this right could nonetheless be curtailed when
it comes to the management of the same. The clear language of Section 6 of the
Hindu Succession Act does not stipulate any such restriction. Therefore, the
submissions on behalf of defendant Nos. 1 to 4 which are to the contrary are
untenable.
883
The Hindu Succession (Amendment Act), 2005 S. 6
(ii) The impediment which prevented a female member of a HUF from becoming its
Karta was that she did not possess the necessary qualification of co-parcenership.
Section 6 of the Hindu Succession Act is a socially beneficial legislation; it gives
equal rights of inheritance to Hindu males and females. Its objective is to recognise
the rights of female Hindus as co-parceners and to enhance their right to equality
apropos succession. Therefore, Courts would be extremely vigilant apropos any
endeavour to curtail or fetter the statutory guarantee of enhancement of their
rights. Now that this disqualification has been removed by the 2005 Amendment,
there is no reason why Hindu women should be denied the position of a Karta.
If a male member of an HUF, by virtue of his being the first born eldest, can
be a Karta, so can a female member. The Court finds no restriction in the law
preventing the eldest female co-parcener of an HUF, from being its Karta. The
plaintiff’s father’s right in the HUF did not dissipate but was inherited by her. Nor
did her marriage alter the right to inherit the co-parcenary to which she succeeded
after her fathers demise in terms of Section 6. The said provision only emphasises
the statutory rights of females. Accordingly, issues 5, 6 and 8 too are found in
favour of the plaintiff. In these circumstances, the suit is decreed in favour of the
plaintiff in terms of the prayer clause, and she is declared the Karta of “D.R. Gupta
& Sons (HUF)”. (CS (OS) 2011/2006, dt. 22.12.2015)
Sujata Sharma v. Manu Gupta (2016) IIAD (Delhi) 312 / 226 (2016) DLT 647 (Delhi)(HC);
www.itatonline.org
884
S. 408 Corruption
Indian Penal Code, 1860
S. 408. Criminal breach of trust by clerk or servant
S. 408 : Corruption – Strictures – High Court Shocked at Loot of Taxpayers Funds 2572
by Corrupt Babus – Calls For Non-Cooperation Movement by Taxpayers to Eradicate
"Hydra Headed Monster" of corruption – If corruption continues taxpayers may
resort to refuse to pay taxes by ‘non-cooperation movement’ [S. 4, Code of Criminal
Procedure, 1973]
Hon’ble Justice A. B. Chaudhari of the Nagpur Bench of the Bombay High Court has
passed severe strictures against the Government for turning a blind eye to the rampant
corruption in the country. The learned Judge lamented that “It shocks one and all as
to the manner in which the taxpayers’ money is being swindled, misappropriated and
robbed by such unscrupulous holders of posts”.
He also pointed that corruption has become the order of the day over the past few
decades and that taxpayers are helpless victims of the sordid state of affairs.
“Does the taxpayers pay the money to the Government for such kind of acrobatics being
played” Justice Chaudhari asked in a rhetorical manner.
He also lamented that ethics and morals have taken a back seat in modern India’s
scheme of things. He opined that to eradicate the “hydra headed monster” of corruption,
citizens have to come together to tell their Governments that they have had enough. He
also recommended that taxpayers’ may have to resort to refuse to pay taxes by a “non-
cooperation movement“.
The learned Judge also found fault with the attitude of the employees’ unions who are
otherwise very vigilant about their rights. He expressed surprise that the Unions do not
“condemn, outcast or demonstrate against their counterpart bureaucracy indulging in
corruption” and on the contrary support their misdeeds.
“The reply filed on behalf of the State shows misappropriation and embezzlement of
amount to the tune of approximately ` 385 crores, which is stymieing. It shocks one and
all as to the manner in which the taxpayers’ money is being swindled, misappropriated
and robbed by such unscrupulous holders of posts. The money was meant for
upliftment of the ‘Matang’ community and instead of that, the political appointee, the
Chairman Ramesh Kadam, in league with the Managing Director and the Bank Officers
of the Bank of Maharashtra, looted the taxpayers’ money. How this huge amount of
` 385 crores will come back is a ‘million dollar question’.
For the last over two decades, this has become the order of the day and sordid state of
affairs; whereas the taxpayers’ are merely looking at this grim situation.
Does the taxpayers pay the money to the Government for such kind of acrobatics being
played.
Ethics and morals have taken a back seat in modern India’s scheme of things. In my
considered opinion, corruption can be beaten if all work together.
To eradicate the cancer of corruption the “hydra headed monster”, it is now a high
time for the citizens to come together to tell their Governments that they have had
enough. That is this miasma of corruption. If the same continues, taxpayers’ may resort
to refuse to pay taxes by ‘non-cooperation movement’. It is surprising that the Unions
885
Corruption S. 408
of Central or State Government employees, whether politically affiliated or otherwise,
make demonstrations for demanding the application of VII Pay Commission, but they do
not condemn, outcast or demonstrate against their counterpart bureaucracy indulging in
corruption. On the contrary, they provide support.
There has been a report in the recent point of time that there are some more
Corporations of the State of Maharashtra who have indulged into huge misappropriation
of the taxpayers’ money in the alike fashion.
Therefore, this Court expects the Director General of Police, MS, Mumbai and rather
requests him to take up such cases and find out the veracity of such a claim made in
newspapers, and if there is substance, to immediately proceed to take action in all such
cases as the taxpayers are in deep anguish. Let the Government as well as mandarins in
the corridors of power understand the excruciating pain and anguish of the tax payers,
who have been suffering for over two decades in the State of Maharashtra. There is a
onerous responsibility on those who govern to prove to the taxpayers that eradication
of corruption would not prove for them a “forlorn hope”.
Pralhad @Pratap S/o. Tanbaji Pawar v. State of Maharashtra (2016) 238 Taxman 83
(Bom.)(HC)
886
Sales tax Tribunal
Sales Tax Tribunal
Sales tax Tribunal – Residential accommodation to members of the Sales tax Tribunal 2573
– Severe strictures passed at the attitude of the Government in creating “hurdles and
obstacles in the smooth working and functioning of all the tribunals and courts – Copy
of this order be forwarded to the Chief Secretary of the State
Severe strictures passed at the attitude of the Government in creating “hurdles and
obstacles in the smooth working and functioning of all the Tribunals and Courts”
and the fact that the “State has yet to adopt a culture of respect and regard for the
judiciary”. Directions given that issue of allotment of residential quarters to Tribunal
Members should not be kept a “closely guarded secret” but made public. We are not
making these observations by restricting the case only to the Sales Tax Tribunal. We
would expect these directions and observations to hold good equally for other Courts
and Tribunals functional in the State. Let therefore a copy of this order be forwarded to
the Chief Secretary of the State. He should invite the attention of all concerned to the
above observations. (WP No. 2069 of 2015, dt. 28.06.2016)
Sale Tax Tribunal Bar Association v. The State of Maharashtra (Bom.)(HC); www.itatonline.
org
887
Notice issued to wife of convict on basis of income-tax returns S. 2
Smugglers and Foreign Exchange
Manipulators (Forfeiture of Property)
Act, 1976
2574 S. 2 : Notice issued to wife of convict on basis of income-tax returns – Purchase of
properties from agricultural income and foreign remittances made through proper
banking channels – No nexus shown between properties and convict or income
from illegal activity – Individual properties of relative cannot be forfeited [S. 7(1),
Constitution of India, Art. 226]
Dismissing the writ petition of the Competent Authority against the order of Tribunal
which set aside the order, the Court held that it was only when the link or the nexus
of the properties with the convict or detenu or to the income from such illegal activity
was established, the properties standing in the name of a relative could be forfeited.
The Department had accepted the agricultural income and the foreign remittances had
been made through proper banking channel. The properties had been purchased from
agricultural income and remittances. Upon a perusal of the statement of reasons with
the notice it was evident that the entire proceedings had been initiated on the basis of
income-tax returns. Indisputably the properties were individual properties without any
nexus to the convict and therefore could not be forfeited.
Competent Authority (SAFEM (FOP) and NDPS Act v. M. Khader Moideen (2016) 387 ITR
390 (Mad.)(HC)
888
Constitutional validity
Service tax – Finance Act, 1994
Constitutional validity – Parliament was competent to bring within the service tax net 2575
the activity of job work involved in the manufacture of alcoholic liquor for human
consumption
Petitioner has challenged the levy of service tax on manufacture of alcoholic liquor for
human consumption on job basis. HC dismissed the WP and held that challenge to
the validity of section 113A(1) of Finance Act, 2009 being which section 65(19) of the
Finance Act, 1994 stood amended as also challenge to the validity of section 60B of
the Finance Act, 1994 r/w 65B(40) & section 66D of the Finance Act, 1994 as amended
by clause (f) of section 107 & cl (2) of section 109 of Finance Act, 2015 was negative.
Parliament was competent to bring within the service tax net the activity of job work
involved in the manufacture of alcoholic liquor for human consumption.
Carlsberg India (P) Ltd. v. UOI (2016) 139 DTR 289 / 288 CTR 128 (Delhi)(HC)
889
Taxable Service S. 65B
Service tax
2576 Constitutional Validity – Service component of composite contract of supply of food
and drinks by an air conditioned restaurant within the service tax net, food and
drinks by an air conditioned restaurant within the service tax net was constitutionally
valid. [Service tax (determination of value) Rules, 2006, r. 2c
The question of law in WP in HC was whereby the provision of any person by a restaurant
by having the facility of air conditioning in any part of its establishment beverages to service
tax. Also challenged was the constitutional validity for the declaration that section 66E(i)
of Finance Act, 1994 to the extent it seeks to constitute a service portion in any activity
of supply of food or other articles as ‘declared service’ to be bad in law. The Petitioners
sought a declaration that r. 2c of service tax (Determination of value Rules, 2006 as invalid.
Hon’ble HC dismissed the WP and held that it was not possible to accept the contention
of the assessee that parliament lacks legislative competence to enact section 65(105)(zzzzv)
with view to bring the service component of composite contract of supply of food and
drinks by an air conditioned restaurant within the service tax net, food and drinks by an
air conditioned restaurant within the service tax net, provisions of section 65B(105)(zzzzv)
r.w.s 66E (i), section 65B(zz) & section 65B(44) as well as r. 2C of Service Tax (determination
of value) Rules, 2006 was constitutionally valid. Further section 65(105)(zzzzw) pertaining
to levy of service tax on the provision of short term accommodation and the corresponding
seeking to operationalise the levy was unconstitutional and invalid.
Federation of Hotels & Restaurants Association of India v. UOI (2016) 139 DTR 321 / 288
CTR 245 (Delhi)(HC)
2577 S. 65B : Taxable Service – Nature of services – Buying and selling of lottery tickets
did not fall within meaning of ‘service’ u/s. 65B – In absence of privity of contract
between petitioner and sellers and buyers, levy of reverse service tax is unsustainable
and liable to be struck down – Sub-rule (7C) of Rule 6 of Service Tax Rules, 1994 did
not create charge of service tax and was subordinate piece of legislation [S. 66D, 67]
Petitioner Companies are engaged in the business of sale of paper and online lottery tickets
organized by the Government of Sikkim. Petitioner procures the lottery tickets in bulk from
the Government and resells the same to the public at large through various agents, stockists,
resellers etc. Post amendments in various clauses u/ss. 65B, 66D and 67 of the Finance Act,
1994 by Finance Act, 2015, Petitioner were sought to be covered under the net of service tax.
On a writ petition, the HC held that activities carried on by the Petitioners in relation to
promotion of marketing, organizing, selling of lottery of facilitating in organizing lottery of
any kind in any other manner, would not fall within the meaning of ‘service’ under Clause
(44) of section 65B. Further, in absence of privity of contract between Petitioner and the
sellers and buyers down the line after the second tier, levy of reverse service tax is clearly
unsustainable and liable to struck down. Further, by insertion of Explanation to Section 66D
the main provision, is sought to be expanded, is being ultra vires the Finance Act, 1994 and
is accordingly struck down. The Sub-Rule (7C) of Rule 6 of the Service Tax Rules, 1994 only
provides an optional composite scheme for payment of tax and therefore, does not create
a charge of service tax and is a subordinate piece of legislation, hereby stands quashed.
Future Gaming & Hotel Services (P) Ltd. v. UOI (2016) 282 CTR 225 / 129 DTR 275
(Sikkim)(HC)
890
Circulars/Instructions/Guidelines – Referencer
Circulars/Instructions/
Guidelines – Referencer
Circulars/Instructions/Orders/Press Notes/Releases/Articles/Opinions.
Circular No. 23 of 2015 dt. 28-12-2015 – TDS under section 194A, of the Act on interest
on fixed deposit made on direction of courts – Reg. (2016) 380 ITR 16 (St.)
Circular No. 24 of 2015 dt. 31-12-2015 – Recording of satisfaction note under section
158BD/153C of the Act – Reg. (2015) 380 ITR 32 (St.)
Circular No. 25 of 2015 dt. 31-12-2015 – Penalty under section 271(1)(c) wherein
additions/disallowances made under normal provisions of the Income-tax Act, 1961
but tax levied under MAT provisions under section 115JB/115JC, for cases prior to
assessment year 2016-17 – Reg. (2016) 380 ITR 34 (St.)
Circular No. 1 of 2016 dt. 15th February, 2016 – Clarification of term “initial assessment
year” in section 80IB(5) of the Income-tax Act, 1961 (2016) 381 ITR 1 (St.)
Circular No. 2 of 2016 dt. 25th February, 2016 – Benefits of the India-United Kingdom
(UK) Double Taxation Avoidance Agreement to UK partnership firms (2016) 382 ITR 8
(St.)
Circular No. 3 of 2016 dt. 26th February, 2016 – Clarification regarding nature of share
buy-back transactions under Income-tax Act, 1961 – Regd. (2016) 382 ITR 9 (St).
Circular No. 4 of 2016 dt. 29th February, 2016 – Tax deduction at source (TDS) on
payments by broadcasters or television channels to production houses for production
of content or programme for telecasting (2016) 382 ITR 12 (St)
Circular No. 5 of 2016 dt. 29th February, 2016 – Tax deduction at source (TDS) on
payments by television channels and publishing houses to advertisement companies for
procuring or canvassing for advertisements (2016) 382 ITR 13 (St)
Circular No. 6 of 2016 dt. 29th February, 2016 – Issue of taxability of surplus on sale
of shares and securities – Capital gains or business income – Instructions in order to
reduce litigation – Reg. (2016) 382 ITR 14 (St)
Circular No. 7 of 2016 dt. 7th March, 2016 – Clarification regarding taxability of
consortium members – Ref. (2016) 382 ITR 27 (St.)
Circular No. 8 of 2016 dated 17th March 2016, – Sub-Modification of
891
Circulars/Instructions/Guidelines – Referencer
Circular dated 8th March, 2016 – Clarification on applicability of Circular No. 21 of
2015 (2015) 379 ITR 107 (St.) – Regarding – Reference – Cross-objection. (Monetary
limits for filing appeals before Tribunal and High Courts)(2016) 382 ITR 43 (St.)
Circular dated 18th April, 2016 – Draft rules for granting relief or deduction of income-
tax under section 90/90A/91 of the Income-tax Act – Reg. (F. No. 142/24/2015-TPL) (2016)
383 ITR 19 (St.)
Circular No. 9/DV of 2016, dated 26th April, 2016 – Commencement of limitation for
penalty proceedings under section 271D and 271E of the Income-tax Act, 1961 – Reg.
(2016) 383 ITR 21 (St.)
Circular No. 10 of 2016, dated, 26th April, 2016 – Limitation for penalty proceedings
under section 271D and 271E of the Income-tax Act, 1961 – Reg. (2016) 383 ITR 22 (St.)
Circular No 11 of 2016 dated 26th April, 2016 – Payment of interest on refund under
section 244A of excess TDS deposited under section 195 of the Income-tax Act, 1961.
– Reg. (2016) 383 ITR 23 (St.)
Circular No. 12 of 2016, dated 30th May, 2016 – Admissibility of claim of deduction of
bad debt under section 36(1)(vii) read with section 36(2) of the Income-tax Act, 1961 –
Regd. (2016) 384 ITR 178 (St.)
Circular No. 13 of 2016, dated 9th May, 2016 – Sub: Verification of tax-returns for
assessment years 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 and 2014-15 through
EVC which are pending due to non filing of ITR-V form and processing of such returns
(2016) 384 ITR 140 (St.)
Circular No 14 of 2016, dated 18th May, 2016 – Sub-Digital reporting of Form No. 60 –
Reg. (2016) 384 ITR 142 (St.)
Circular No. 15 of 2016, dated 19th May, 2016 – Sub-Additional depreciation under
section 32(1)(iia), of the Income-tax Act, 1961 – Reg. (Printing and publishing amounts
manufacture) (2016) 384 ITR 143 (St.).
Circular No. 16 of 2016, dated 20th May, 2016 – Subject: Explanatory notes on
provisions of the Income Declaration Scheme, 2016 as provided in Chapter IX of the
Finance Act, 2016 (2016) (2016) 384 ITR 144 (St.)
Circular No. 17 of 2016, dated 20th May, 2016 – Subject: Clarification on the Income
Declaration Scheme, 2016 (2016) 384 ITR 148 (St.)
Circular No 18 of 2016, dated 23rd May, 2016, Subject: Relaxation for furnishing of
UID in case of Form 15G/15H for certain quarter – Regarding (2016) 384 ITR 152 (St).
892
Circulars/Instructions/Guidelines – Referencer
Circular No. 19 of 2016, dated 25th May, 2016 – Income declaration Scheme – Principal
Commissioner to whom declaration to be made (2016) 384 ITR 153 (St.)
Circular No. 20 of 2016, dated 26th May, 2016 – Sub – e-Filing of appeals: Extension of
time limit – Regd. (2016) 384 ITR 179 (St.)
Circular No. 21 of 2016, dated 27th May, 2016 – Sub-Clarification regarding cancellation
of registration under section 12AA of the Income-tax Act, 1961 in certain circumstances
– Regd (2016) 384 ITR 180 (St.)
Circular No. 22 of 2016, dated 8th June, 2016 – Amendment in section 206C vide
Finance Act, 2016 – Clarifications – Reg. (2016) 384 ITR 185 (St.)
Circular No. 23 of 2016, dated 24th June, 2016 – Amendment in section 206C of the
Income-tax Act, vide Finance Act, 2016 – Clarification – Regd. (2016) 385 ITR 18 (St.)
Circular No. 24 of 2016, dated 27th June, 2016 – Clarifications on the Income
declaration Scheme, 2016 (2016) 385 ITR 19 (St.)
Circular No. 25 of 2016, dated 30th June, 206 – Clarifications on the Income Declaration
Scheme, 2016 (2016) 385 ITR 22 (St.)
Circular No. 26 of 2016 dated 4th July, 2016 – Applicability of section 197A(ID) and
section 10 (15) (viii) of the Income-tax Act, 1961 to interest paid by IFSC banking units
(IBUs) – Clarification, Regd. (2016) 385 ITR 49 (St.)
Circular No. 27 of 2016, dated 14th July, 2016 – Clarification on the income Declaration
Scheme, 2016 (2016) 385 ITR 50 (St.)
Circular No. 28 of 2016 dated 27th July, 2016 – Clarification regarding attaining
prescribed age of 60 years/80 years on 31st March itself, in case of senior/very senior
citizens whose date of birth falls on 1st April, for purposes of Income-tax Act, 1961 –
Regd (2016) 386 ITR 4 (St.)
Circular No. 29 of 2016, dated 18th August, 2016 – Clarifications on the Income
Declaration Scheme, 2016 (2016) 386 ITR 21 (St.)
Circular No. 30 of 2016, dated 26th August, 2016 – Streamlining the process of no
objection certificate (NOC), port clearance certificate (PCC), voyage return and voyage
assessment in the case of foreign shipping companies (FSCs) (2016) 386 ITR 29 (St.)
Circular No. 32 of 2016, dated 1st September, 2016 – Enquiry or investigation in respect
of document/evidence relating to the Income Declaration Scheme (IDS), 2016 found
during the course search under section 132 or survey action under section 133A of the
income-tax Act, 1961 – Reg. (2016) 386 ITR 34 (St.)
893
Circulars/Instructions/Guidelines – Referencer
Circular No. 33 of 2016, dated 12th September, 2016 – Clarification on the Direct Tax
Dispute Resolution Scheme, 2016 (2016) 387 ITR 9 (St.)
Circular No. 34 of 2016, dated 21st September, 2016 – Sub: order under section 119
of the Income-tax Act, 1961 (IDS) (F. No. 282/227/2016-IT (Inv).V.) 26/2016 (2016) 387
ITR 21 (St.)
Circular No. 35 of 2016, dated 13th October, 2016 – Applicability of TDS provisions of
section 194-I of Income-tax Act, 1961 on lump sum lease premium paid for acquisition
of long term lease – Reg. (2016) 388 ITR 38 (St)
Circular No. 36 of 2016, dated 25th October, 2016 – Taxability of the compensation
received by the land owners for the land acquired under the Right to Fair Compensation
and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013
(RFCTLARRA Act) – Reg (2016) 388 ITR 48 (St).
Circular No. 37 of 2016, dated 2nd November, 2016 – Chapter VI-A deduction on
enhanced profits – Reg. (2016) 388 ITR 62 (St)
Circular No. 38 of 2016, dated 22nd November, 2016 – Admissibility of expenditure
incurred by affirm on Keyman Insurance Policy in the case of a partner – Reg. (2016)
389 ITR 12 (St.)
Circular No. 39 of 2016 dated 29th November, 2016 – Transport, power and interest
subsidies received by an industrial undertaking – Eligibility for deduction under section
80IB, 80IC, etc. – Reg. (2016) 389 ITR 28 (St)
Circular No. 40 of 2016, dated 9th December, 2016 – Directions under section 119 of
the Income-tax Act, 1961 – Reg. (2016) 389 ITR 42 (St.)
Circular, dated, 14th September, 2016 – Sub-Clarification, reg. under section 119 of the
Income-tax Act, 1961, dated 9th September, 2016 (F. No. 225/195/2016-ITA II) (2016)
387 ITR 14 (st)
Circular, dated 14th September, 2016 – Clarification reg. under section 119 of the
Income-tax Act, 1961 dated 9th September, 2016 (F. No. 225/195/2016-ITA II) (2016)
387 ITR 14 (St)
Circular, dated 15th September, 2016 – Office Memorandum (IDS) (F.NO 225/233/2016
–ITA II (2016) 387 ITR 15 (St.)
Circular dated 26th September, 2016 – Implementation of the Direct Tax Dispute
Resolution Scheme, 2016 – Reg. (2016) 387 ITR 34 (St.)
894
Circulars/Instructions/Guidelines – Referencer
Circular dated 30th September, 2016 – Uploading of Form-I filed under the Income
Declaration Scheme, 2016 – Reg. (2016) 387 ITR 35 (St.)
Circular dated 26th October, 2016 – Withholding of tax on “other sum chargeable” in
the case of non-residents – Disallowance under section 40(a)(i) of the Income-tax Act,
1961 – Reg. (2016) 388 ITR 52 (St.)
1
Notifications
Amendment of Rules regarding quotation of PAN for specified transactions – Reg. – (Rule
114B dt. 17-12-2015) (2016) 380 ITR 11 (St.)
Order dt. 17-12-2015 – Income-tax Act, 1961: Order under section 119
Declaration of Undisclosed Income: Designated Income-tax Authority (2015) 380 ITR
15 (St.)
Instruction No. 18 of 2015 dt. 23-12-2015 – Applicability of Minimum Alternative Tax
(MAT) on foreign companies for the period prior to 1-4-2015 – Reg. (2015) 380 ITR 10
(St.)
Instruction No. 20 of 2015, dt. 29-12-2015 – Scrutiny assessments some important issues
and scope of scrutiny in case selected through computer scrutiny selection (“CASS”) reg.
(2016) 380 ITR 36 (St.)
Notification No. 1 of 2016, dated 19th January, 2016 – Electronic Verification Code (EVC)
for electronically filed income-tax Return – Additional modes (2016) 380 ITR 1 (St.)
Notification No. 2 of 2016 dated 3rd February, 2016 – Procedure and Standards for
ensuring secured transmission of electronic communication – Reg. (2016) 380 ITR 5 (St.)
Instruction No. 1 of 2016, dated 15th February, 2016 – Following the prescribed time
limit in passing order under sub-section (8) of section 154 of the income-tax Act, 1961
– Reg. (2016) 382 ITR 16 (St.)
Instruction No. 2 of 2016, dated 15th February, 2016 – Passing rectification order under
section 154 of the Income tax Act, 1961 – Reg. (2016) 392 ITR 17 (St).
Instruction No. 3 of 2016, dated 10th March, 2016 – Sub-Guidelines for implementation
of Transfer Pricing Provisions – Replacement of Instruction No. 15 of 2015 – Reg (2015)
378 ITR 27 (St.) (2016) 382 ITR 36 (St.)
4 of 2016 dt. 6th April 2016. Sub-Procedure for registration and submission of statement
as per clause (k) of sub-section (1) of section 285BA of the Income-tax Act, 1961 read
with sub-rule (7) of Rule 114G of the Income-tax Rules, 1962 (2016) 393 ITR 7 (St.)
895
Circulars/Instructions/Guidelines – Referencer
Office memorandum dated, 29th January, 2016 – Issue of refunds – procedure to be
followed in other cases where notice under section 245 has been issued for ITRs
processed in financial year 2015-16 – Reg. (F. No. 312/109/2015-ot) (2016) 382 ITR 17
(St.)
Instruction No. 9 of 2016 – Reg. (Audit objection)(2016) 382 ITR 44 (St.)
Order dated 6th May, 2016. Committee notified. (S. 9A, Rule 10 VVA) (2016) 384 ITR
154 (St.)
Notification under section 48, Explanation, clause (v): Cost of Index for 2016-17
specified for purpose of computation of capital gains. (Notification No. S.O. 1948 (E),
dated 2nd June, 2016 (2016) 384 ITR 185 (St.)
Notification No. S.O. 2143(E), dated 17th June, 2016 – S.197A – No deduction of tax on
certain payments (2016) 385 ITR 17 (St.)
Order dated, 6th May, 2016. Committee notified. – Rule 10VA, read with 9A (F. No.
173/237/ 2016 –ITA-I) (2016) 384 ITR 154 (St.)
Instruction No. 4 of 2016, dated 14th July, 2016 – Compulsory manual selection of cases
for scrutiny during the financial year 2016-17, Reg. (2016) 385 ITR 53 (St.)
Instruction No. 5 of 2016, dated 14th July, 2016 – Direction regarding scope of enquiry
in case under “limited Scrutiny” selected through CASS and 2016 – Reg. (2016) 385
ITR 56 (St.)
Order dated 29th July, 2016 – Income-tax Act, 1961: Order under section 119 : Extension
of due date for filing returns from 31-7-2016 to 5-8-2016 (2016) 386 ITR 8 (St.)
Order dated 29th July, 2016 – Income-tax Act, 1961: Order under section 119: Extension
of due date for filing returns from 31-7-2016 to 31-8-2016 (2016) 386 ITR 8 (St.)
Order dated 29th July, 2016 – Income-tax Act, 1961: Order under section 119: Extension
of due date for filing returns from 31-7-2016 to 31-8-2016 in the State of Jammu and
Kashmir (2016) 386 ITR 8 (St.)
Order dated 29th July, 2016 – Income-tax Act, 1961: Order under section 119: Further
extension of due date for filing returns from 31-8-2016 to 30-9-2016 in the State of
Jammu and Kashmir (2016) 386 ITR 35 (St.)
Instruction No. 8 of 2016, dated 15th September, 2016 – The Income Declaration
Scheme, 2016 – Reg. (F. No. 142/8/ 2016-TPL)(2016) 388 ITR 51 (St).
896
Circulars/Instructions/Guidelines – Referencer
Instruction No. 9 of 2016, dated 27th September, 2016 – The Income Declaration
Scheme 2016 – Reg. (F. No. 142/8/2016–TPL) (2016) 387 ITR 32 (St.)
Instruction No. 10 of 2016, dated 28th September, 2016 – The Income Declaration
Scheme, 2016 – Reg. (F. No. 142/8/2016–TPL) (2016) 387 ITR 33 (St.)
Instruction No. 11 of 2016, dated 13th October, 2016 – The Income Declaration Scheme,
2016 – Reg. (2016) 388 ITR 40 (St.)
Order dated 9th September, 2016 – Order under section 119 : Extension of due date for
filing returns by tax payers whose accounts are audited from 30-09-2016 to 17-10-2016
(F. No. 225/195/2016/ITA. II (2016) 387 ITR 4 (St.)
Circular dated 30 the September, 2016 – Order under section 119 of the Income tax Act,
1961, dated 9th September, 2016 (F. No. 225/195/2016 /ITA–II)-(Extension of due date to
all assesses). (2016) 387 ITR 36 (St.)
Circular dated 27th September, 2016 – Sub-Extended office hours on 30th September,
2016 for the IDS – 2016 (2016) 387 ITR 28 (St).
Notification under section 90: Agreement between the Government of the Republic of
India and the Government of Republic of Maldives for avoidance of double taxation of
income derived from international air transport (No. S.O. 2853 (E), dated 2nd September,
2016) (2016) 387 ITR 16 (St).
Order dated 15th October, 2016 – Order under section 119 of the Income-tax Act, 1961:
Extension of due date for filing returns and reports of audit pertaining to assessment
year 2016-17 for all categories of assesses in the State of Jammu and Kashmir to
December, 2016 (2016) 388 ITR 49 (St.)
Order dated 25th October 2016 – Order under section 119 of the Income-tax Act, 1961
– Issue of intimation under section 143(1) of the Income-tax Act, 1961 beyond the
prescribed time in non-scrutiny cases – Reg. (F. No. 225/220/2016–ITA.11) (2016) 388
ITR 50 (St.)
Notification No. 11 of 2016, dated 2nd December, 2016 – Procedure for the purpose of
furnishing and verification of Form 26A for removing of default of short deduction and/
or non-dedcution of tax at source – Reg. (2016) 389 ITR 42 (St.)
Press Notes
Sub: Threshold limit of tax audit under section 44AB and section 44AD – Clarification
regarding (2016) 385 ITR 15 (St.)
Rules
Income Declaration Scheme Rules, 2016 (2016) 384 ITR 165 (St.)
897
Circulars/Instructions/Guidelines – Referencer
Income Declaration Scheme Rules, 2016: Corrigendum (2016) 384 ITR 188 (St.)
Income Declaration Scheme (Amendment) Rules, 2016 (2016) 386 ITR 3 (St)
Direct Tax Dispute Resolution Scheme Rules, 2016 (2016) 384 ITR 183 (St.)
Finance Bill, 2016
Budget speech of Minister of Finance for 2016-17:
Part A (2016) 381 ITR 9 (St.)
Part B (2016) 381 ITR 29 (St.)
Annexures (2016) 381 ITR 40(St.)
Finance Bill, 2016 (2016) 381 ITR 51 (St.)
Notes on clauses (2016) 381 ITR 169 (St.)
Memorandum explaining the provisions in the Finance Bill, 2016 (2016) 381 ITR 241
(St).
Finance Bill, 2016: Notice of amendments (2016) 383 ITR 10 (St.)
Finance Act, 2016 (Assent of the President) on 14th May, 2016 (2016) 384 ITR 1(St.)
Repealing and amending Act, 2016 (Act No. 23 of 2016) (Assent of president on 6th
May, 2016) (2016) 385 ITR 9 (St.)
Taxation laws (Amendment) Bill, 2016 (As introduced in Lok Sabha on 8th August,
2016) (2016) 386 ITR 25 (St.)
Finance Act, 2016 : Notification under section 187: Commencement of section 187:
Amendment – (2016) 386 ITR 5 (St.)
Taxation Laws (Amendment) Act, 2016 (No. 47 of 2016) (Assent of the President on 8th
September, 2016) (2016) 387 ITR 5 (St.)
The Taxation Laws (Second Amendment)Bill, 2016 (2016) 389 ITR 14 (St.)
Taxation Laws (Second Amendment) Act, 2016 (Act No 48 of 2016) (Assent of the
President on 15 – December, 2016) (2016) 389 ITR 48 (St.)
Circular No. 3 of 2017, dated 26th January, 2017 – Explanatory notes to the provisions
of the Finance Act, 2016 (2017) 391 ITR 253 (St.)
Finance Act, 2016: Notification No. S.O. 4058 (E), dated 16-12-2016 – Notification under
sections, 199A(1) and 199C (1)
Schemes
Gold Monetisation Scheme, 2015 (2016) 382 ITR 18 (St.)
Gold Monetisation (Amendment) Scheme, 206 (2016) 386 ITR 11 (St.)
Pradhan mantra Garib Kalyan Deposit Scheme, 2016 (2016) 389 ITR 56 (St.)
Commencement of Pradhan Mantri Garib Kalyan Yojana, 2016 (2016) 399 ITR 68 (St.)
Indian Trusts (Amendment) Bill, 2016 (2016) 386 ITR 10 (St.)
898
Circulars/Instructions/Guidelines – Referencer
Articles – Section wise
S.2(15) : A charitable and/or religious trust is entitled to carry forward and adjust the
excess expenditure in earlier years against the income of subsequent years by S. K. Tyagi
(2016) 389 ITR 1 (Journal)
S.10(10D) : Taxability of returns from foreign Insurance Companies by Dr. Neha Pathakji
(2016) 243 Taxman 1 (Mag.)
S.10(5) : Meaning of term “leave” under section 10(5) of the Income-tax Act, 1961,
relating to LTA/LTC by S. K. Tyagi (2016) 386 ITR 1 (Journal)
S.10(23C) : Condonation of delay in filing application – Delays in filing applications
under section 10(23C) of the Income-tax Act,1961 for exemption cannot be condoned
by Revenue authorities by T. N. Pandey (2016) 388 ITR 45 (Articles)
S.12A : Charitable trust – Income-tax department’s view that Spiritual and Religious
activities cannot be entwined for determining taxability of anonymous donation is
reversed by the Tribunal by T. N. Pandey (2016) 236 Taxman 1 (Magazine)
S.12A : Charitable Trusts – Exemption and deduction under section 12A and 80G of the
Income-tax Act, 1961 by Bhagirath Patel (2016) 290 CTR 2 (Articles)
S. 13A : Tax exemption of income of political parties – Delhi High Court Decisions by
T. N. Pandey (2016) 385 ITR 26 (Journal)
S.14A : No disallowance under section 14A, where the assessee has got no income from
a composite and indivisible business, by S. K. Tyagi (2016) 384 ITR 1(Journal)
S.14A : Expenditure under Section 14A not disallowed if no exempt income received
during the year by Vineet Sawheny (2016) n 237 Taxman 1 (Mag.)(Articles)
S.15 : ‘Salary’ – A word assigned different meanings under the I.T. Act, 1961 by T. N.
Pandey (2016) 240 Taxman 1 (Mag.)
S.17(2) : Conveyance allowance or transport allowance? Minimisation of tax incidence,
by payment of conveyance allowance, as also transport allowance, to an employee by
S. K. Tyagi (2016) 384 ITR 41 (Journal)
S.24 : Controversies – Interest paid on borrowings for purchase of house – Section 24
& S. 48 by Pradip Kapasi (2016) BCAJ – July – P. 63
Controversies – Taxability of foreign salary credited to NRE Bank account by Pradip
Kapasi (2016) BCAJ–August – P. 61
899
Circulars/Instructions/Guidelines – Referencer
S.32 : Depreciation on aired radio programmes: Aired radio programme cannot be a
thing entitled for additional depreciation under section 32(1)(iia) of the Act. by T. N.
Pandey (2016) 383 ITR 1 (Journal)
S.32 : Interpretation of word “Acquired“ for additional depreciation – An analysis by
Sanjay Bansal (2016) 241 Taxman 1 (Mag.)
S.37(1) : Business expenditure – Disallowance of business expenditure for non-deduction
of tax source by Dr. Govindrajan (2016) 388 ITR 1 (Article) (Journal)
S.37(1) : Business expenditure – Payment of compensation for encroachment cannot be
deducted under section 37(1) by T. N. Pandey (2016) 287 CTR 36 (Articles)
S.40(a)(ia) : Tax deduction at source – Tax deduction under a wrong section cannot
avoid applicability of S.40(a)(ia) – By T. N. Pandey (2016) 282 CTR 20 (Articles)
S.40A(2)(b) : Transactions with related parties. – Section 40A(2)(b) of the Income-tax
Act, 1961 by Manoj Mehta (2016) 240 Taxman 31 (Mag.)
S.41(1) : A provision to ensure equity and fair play by T. N. Pandey (2016) 381 ITR 9
(Journal)
S.41(1) : Controversies – Write – Back of loans – Section 41(1) & 28(iv) by Pradip Kapasi
(2016) BCAJ – June – P. 79
S.44AD: Relief or Pain by Deepak Kalani (2016) 237 Taxman 23 (Mag.) (Articles)
S.45 : Capital gains – Taxation issues in case of ‘Transfer” of property under
development agreement (2016) 239 Taxman 49 (Mag.)
S.45 : Capital gains – loans and advances are capital assets generating capital gains or
losses on transfer by T. N. Pandey (2016) 287 CTR 6 (Articles)
S.45 : Controversies – Rate of tax applicable to capital gains on loss exemption by a
charitable or religious Trust by Pradip Kapashi (2016) BCAJ – December – P. 47
S.45 : Controversies – Rate of taxation and deemed short term capital gains by Pradip
Kapashi (2016) BCAJ – November P. 51
S.45 : Controversies – Need for deposits under capital gains account scheme by Pradip
Kapasi (2016) BCAJ – July – P. 63
S.45 : Controversies – Need for deposits under capital gains accounts Scheme, by Pradip
Kapasi (2016) BCAJ – October P. 49
900
Circulars/Instructions/Guidelines – Referencer
S.50 : Decision of Bombay High Court on applicability of deemed provisions of section
50 of the Act, by S. Krishnan (2016) 238 Taxman 1 (Mag.) (Articles)
S.50 : Controversies – Depreciable asset forming part of block of assets is sold and new
depreciable asset is acquired at the fag end of the financial year whether includable
in the block of assets for the purpose of section 50 by Kaushik D. Shah (2016) ACAJ,
October, P. 453
S.54F : Capital gains – Exemption on liquidation of a company – A case study on
exemption of capital gain under section 54F available to a share holder on liquidation
of a company By Jignesh R. Shah (2016) 389 ITR 13 (Journal)
S.54F : Capital gains – For exemption u/s. 54F of the Income-tax Act, 1961, acquisition
of a residential house is necessary – Not its use as such by T. N. Pandey (2016) 241
Taxman 15 (Mag).
S.54F : Capital gains – Exemption under S.54F for cost on additions and improvements
in the house by T. N. Pandey (2016) 284 CTR 7 (Articles)
S.68 : Cash credits – Credits in bank accounts cannot be taxed as income by invoking
S.68 by T. N. Pandey (2016) 290 CTR 1 (Articles)
S.73 : Controversies – Business of derivatives trading and Explanation to S. 73 by Pradip
Kapasi (2016) BCAJ – September P. 49
S.79 : Controversies – Carry forward of loss and section 79 by Pradip Kapasi (2016)
BCAJ – February – P. 50.
S.80E : Interest on loan taken for higher education abroad is also deductible by T. N.
Pandey (2016) 283 CTR 1 (Articles)
S.80IA : Controversies – For the purpose of claiming deduction u/s. 80IA of the Act, is
it mandatory to maintain separate books of account? By Kaushik D. Shah (2016) ACAJ
– February – P. 684
S.80IA : Controversies – Whether compensation for loss of energy generation received
entitled for deduction u/s. 80IA of the Act, by Kaushik D. Shah (2016) ACAJ – March
– P. 748
S.80IB(10) : Controversies – Deduction u/s 80 IB(10) – Delay in receipt of completion
Certificate by Pradeep Kapasi (2016) BCAJ – January – P. 35
S.92 : Transfer Pricing – Computation having regard to or in conformity with arm’s
length price is not income chargeable to tax – R. P. Garg and Beenu Yadav (2016) 386
ITR 14 (Journal)
901
Circulars/Instructions/Guidelines – Referencer
S.115BBC : Income tax department’s view that spiritual and religious activities cannot be
entwined for determining taxability of anonymous donations is reversed by the Tribunal
by T. N. Pandey (2016) 236 Taxman 1 (Mag.) (Articles)
S.115JB : MAT impact on special reserve created by NBFCs by S. K. Gandhi (2012) 242
Taxman 73 (Mag.)
S.119 : Misuse of S. 119 by the Board – Glaring instance by Minu Agarwal (2016) 289
CTR 17 (Articles)
S.139 : Controversies – Obligation of foreign company to file return of income where
income exempt under DTAA by Pradip Kapasi (2016) March – BCAJ – P. 45
S.143(2) : limited scrutiny – Limited to what extent? by Deepak Goel (2016) 241 Taxman
19 (Mag.)
S.143(3) : Assessment – Assessment must stand to reason by T. N. Pandey (2016) 45
ITR 7 (Journal) (Trib.).
S.147 : A critical analysis of amendments to section 147 and 149 by the Finance Act,
2012 by H. Padamchand Khincha (2016) 243 Taxman 3 (Mag.)
S.147 : Assessment of income accruing retrospectively: Assessments cannot be reopened
for earlier years when income accrues retrospectively from a later date – by T. N. Pandey
(2016) 386 ITR 25 (Journal)
S.151 : Reading down the Rule of Audi Alteram Partem in section 151 of the Income-
tax Act, 1961 – A mandatory safeguard, by Sanjay Bansal (2016) 240 Taxman 7 (Mag).
S.147 : A Comprehensive Guide to The law of Reopening of Assessments Under Sections
147 to 153 of The Income-tax Act, 1961 – Shri Ajay Singh, Advocate www.itatonline.org
S.192 : Tax-Treatment and TDS in respect of remuneration payable to an employee of an
Indian company, located abroad by S. K. Tyagi (2016) 385 ITR 1 (Journal)
S.194A : A note on New India Assurance Company Ltd. v. Sudesh Chawala (2016) 380
ITR 467 (P& H)(HC) by Pasupathi (2016) 382 ITR 9 (Journal)
S.194J : Closements – Whether payment of transaction charges to stock exchange
amounts to FTS – S. 194J – Part – 11, by Kishor Karia (2016) BCAJ – July – 59
S.194J : Closements – Whether payment of transaction charges to stock exchange
amounts to FTS – S. 194J – Part 1 by Kishor Karia (2016) BCAJ – June – 73
902
Circulars/Instructions/Guidelines – Referencer
S.194J : Closements – Whether payment of transaction charges to stock exchange
amounts to FTS –S. 194J –Part 1 by Kishor Karia (2016) BCAJ – July – 59
S.199 : Deduction at source – Controversies – When there is mismatch between income
as per 26AS statement and income as per books of account whether addition can be
made as undisclosed income.? By Kaushik D. Shah (2016) ACAJ – May – 90.
S.206AA : Relaxation to non-Residents from higher withholding tax rate in absence of
PAN – Much needed relief by Ankur Kansal and Jasmeet Kohli (2016) 240 Taxman 37
(Mag.)
S.206AA : Impact of section 206AA on the rates of TDS, particularly in respect of
payments to non-residents by S.K. Tyagi (2016) 388 ITR 57 (Articles)
S.254(1) : Appellate Tribunal – Whether Tribunal can put informal questions during
hearing of an Appeal ? by Gopal Nathani (2016) 242 Taxman 7 (Mag.)
S.255(3) : Constitution of the Special Bench of ITAT – High Court view the Constitution
of Special Bench of the ITAT through private meeting as being opposed to the Rule of
law, fairness and transparency by T. N. Pandy (2015) 380 ITR 14 (Journal).
S.263 : Revision: Show cause notice for initiating proceedings under section 263:
The Supreme Court has reiterated that formal show cause notice is not necessary for
initiating proceedings under section 263 of the Income-tax Act in Amitabh Bachchan’s
case by T. N. Pandey (2016) 386 ITR 47 (Journal).
S.263 : Revision: An analysis by Deepa Khare (2016) BCAJ – January – P.11.
S.263 : Revision: Power of Revisionary Authority to direct for Penalty – Baffling legal
position by Minu Agarwal (2016) 283 CTR 4 (Articles)
S.263 : AO’s order, subject to revision u/s 264 of the I.T. Act, 1961, cannot once again
be revised u/263 & No cross objection can be filed by the revenue before the Tribunal in
assessee’s appeal against order u/s 263 by T. N. Pandey (2016) 239 Taxman 33 (Mag.) .
S.264 : Revision petition u/s. 264 of the Income-tax Act, 1961, can be filed against
intimation u/s. 143(1) of the Act and Assessing Officer should not take advantage of the
assessee’s ignorance, by T. N. Pandey (2016) 241 Taxman 7 (Mag.)
S.270A : Levy of Penalty on Deposit of Unaccounted Cash u/s. 270A of The Income-Tax
Act: Opinions of Two Eminent Experts – Jaiprakash Bairagra, CA www.itatonline.org.
S.270A : The Entire Law on Penalty for Under – Reporting and Misreporting of Income
Explained – Shri Rahul Hakani, Advocate www.itatonline.org
903
Circulars/Instructions/Guidelines – Referencer
S.270AA : Immunity from imposition of penalty etc. Whether inherently vague and
anomalous by Minu Agarwal (2016) 286 CTR 1(Articles)
S.270AA : New penal provisions under section 270A, r/w S. 270AA of the IT Act, 1961
by Mr. N. M Ranka (2016) 287 CTR 27 (Articles)
S.271(1)(c) : Penalty – Concealment – Tax delinquency : What is more serious – Under
reporting of income or its misrepresentation by T. N. Pandey (2016) 239 Taxman 1
(Magzine)
S.271(1)(c) : Penalty – Concealment – The satisfaction note in penalty proceedings by
T.C.A. Ramanujam (2016) 287 CTR 33 (Articles)
S.288 : Cracking the conundrum : Appearance clause under taxation statutes by Ajay
Jain (2016) 239 Taxman 37 (Mag.)
Articles – Subject wise
A.
Assessment – Notice to a deceased – Whether nullity or irregularity by Minu Agarwal
(2016) 288 CTR 1 (Articles)
Accounting – Accounting of cash discounts by S. Ramachandran (2016) 288 CTR 4
(Articles)
Accounts – Recent amendments to Accounting Standards (2016) 285 CTR 17 (Articles)
Accounts – Inadequate clarifications on Indian Accounting Standards (2016) 287 CTR
9 (Articles)
Assessment–E. Governance of income-tax – New controversies in the making – by Minu
Agarwal (2016) 282 CTR 1 (Articles)
The Seeds of Litigation Plant – “Assessment Proceedings” – Shri Prarthana Jalan,
CAwww.itatonline .org
Appeal – Revenue’s filing of frivolous appeals is viewed with displeasure by the ITAT
By T. N. Pandey (2016) 45 ITR 1 (Journal)(Trib.)
Appeal – Complete Guide to Filing Appeals Before CIT(A) and Drafting Applications For
Stay of Demand – Shri. Rahul R. Sarda, Advocate www.itatonline.org
Account – Deferred tax accounting for depreciation and other asset related items by S.
Ramachandra (2016) 283 CTR 33 (Articles)
Accounts – Draft revised Schedule III of the Companies Act, 2013 – Some comments by
S. Ramachandran (2016) 284 CTR 1 (Articles)
904
Circulars/Instructions/Guidelines – Referencer
Accounts – Recent amendments to Accounting Standards by S. Ramachandran (2016)
285 CTR 28 (Articles)
Assessment – Effective steps needed for apathetic and indifferent handling of income-
tax assessments by income tax authorities by T. N. Pandey (2016) 284 CTR 48 (Articles)
Assessment – Casual treatment of obvious tax avoidance – Casually passing of
assessment order by Assessing Officer practice of results in High Court’s confirmation
of an apparent tax avoidance by T. N. Pandey (2016) 384 ITR 24 (Journal)
Accounts – Defects in Indian Accounting Standards by S. Ramachandran (2016) 286
CTR 12 (Articles)
B.
A brief introduction to the Benami Property (Prohibition) Amendment Act, 2016 by
Aditya Ajgaonkar (2016) AIFTPJ – August – P. 19 www.itatonline.org
Buy back of shares – Financial Restructuring through buy-back of Shares by Dr. Jagdish
Joshipura (2016) ACAJ – May. P. 74
Buy-back of shares by private and public unlisted companies under the Companies Act,
2013 by Ashok Dhere (2016) BCAJ – January – P.83
Bogus purchases – By C. R. Sharedalal (2016) ACAJ – March – P. 734
Black Money law – Combat against undisclosed Foreign Income and assets by P.V.S.S.
Prasad (2016) AIFTP Journal – January – P. 29
Budget 2016: An uncalled for penalty – Rewriting the law relating to penalty for
concealment or furnishing inaccurate particulars of income seems uncalled for ! by T.N.
Pandey (2016) 382 ITR 13 (Articles) (Journal)
Budget 2016: Tax reforms on course by T.C.A. Ramannujam (2016) 382 ITR 27 (Articles)
(Journal)
Buy-back of shares – Tax incidence (2016) 288 CTR 9 (Opinion)
C.
Constitution of India – Art. 141 – Constitution ensures finality of supreme Court’s
decisions – Not their Infallibilty by T. N. Pandey (2016) 387 ITR 10 (Journal)
The Rule of consistency by T.C.A Ramanujam (2016) 387 ITR 1 (Journal)
Chamber’s Journal – Important Supreme Court Decisions, (2016) January – P. 13-83
Chamber’s Journal – Base Erosion & Profit Shifting (BEPS)(2016) February – P. 11 to 246
905
Circulars/Instructions/Guidelines – Referencer
Chamber’s Journal – Finance Bill, 2016 (2016) March – P. 13 to 116
Chamber’s Journal – Charitable Trusts and Association – Law and procedure – (2016)
April – P.11 to 76
Chambers’s Journal – Provisions Applicable to IT Returns for AY.2016–17 (2016) May -
P. P. 11 to 62
Chambers’ Journal – Charitable Trusts and Association – Taxation and FCRA (2016)
June – P. 11 TO 101
Chamber’s Journal – Income disclosure scheme, dispute Resolution Scheme – 2016 and
equalisation levy (2016) – July – P. 11 to 79
Chamber’s Journal – Auditor ‘s reporting responsibilities under the Companies Act, 2013
– (2016) – August – P. 11 to 67
Chamber’s Journal – Foreign direct investment in India – (2016) September – P. 11 to 94
Chamber’s Journal – Development in transfer pricing law (2016) October – 11 – 126
Chamber’s Journal – Taxation of royalty and FTS (2016) November – 11 – 81
Chamber’s Journal – Demonetisation – Legal & Tax implications – (2016) – December –
P. 11 to 46.
Controversies – Date & cost of acquisition of capital asset converted from stock-in-trade
by Pradip Kapasi (2016) BCAJ –March – P. 55
Controversies – Major controversies under the Income-tax Act by V. P. Gupta (2016)
AIFTP Journal – January –P. 11
Charitable Trusts – Analyzing relationship between charity and business in IT Act. By
Tilak Chandana (2016) 283 CTR 22 (Articles)
Compliance Window –VDS-2016 – Why invite another embarrassment when past
schemes have not been a success? By T. N. Pandey (2016) 238 Taxman 5 (Mag.)
Charitable Trust – Levy of tax if charitable institution ceases to exist or covert in to
non-charitable By Narayan Jain (2016) AIFTP – Journal – April P. 14
Conventions – Conventions for the noble profession of law by N. M. Ranka (2016) AIFTP
– Journal – June – P. 10
906
Circulars/Instructions/Guidelines – Referencer
Charitable institutions: Excess expenditure adjustment – In the case of charitable
institutions adjusting excess expenditure of one year against income of another year is
application of income under section 11 of the Income-tax Act, by T. N. Pandey (2016)
384 ITR 21 (Journal)
Charitable institutions – Tax implications – When bodies such as Charitable institutions
cease to be charitable, close down or merge with others etc., what are the tax
implications? By T. N. Pandey (2016) 384 ITR 34 (Journal)
Consortium for EPC and Turnkey contracts – Much awaited guidance an AOP position
by Rakesh B. Jain, Anuj Singhal and Yogesh Indap (2016) 239 Taxman 8 (Mag.)
Co-operative Society – Taxability of Interest earned from bank by any type of Co-
Operative Society/Club/ Mutual Association by R. B. Popat (2016) 240 Taxman 20 (Mag.)
Charitable Trust – Double deductions for same outgoing – Whether justifiable by Minu
Agarwal (2016) 286 CTR 9 (Articles)
Charitable Trust and Association – Taxation and FCRA (2016) Chamber’s journal – June,
2016 11-101
Charitable Trusts – A Charitable and /or Religious Trust is entitled to carry forward and
adjust the excess expenditure in earlier years the income of subsequent years by S.K
Tyagi (2016) 389 ITR 1 (Article) Journal)
Conventions for the noble Profession of law by N. M. Ranka (2016) AIFTP J – June, 10
Charitable Trusts – Supreme Court Judgment in Visvesvaraya Technological University
case by V. N. Murlidhran (2016) 287 CTR 14 (Articles)
D.
Demonetization – Did demonetization meet its objective? By T. N. Pandey (2016) 389
ITR 25 (Article) (Journal)
Demonetisation – Taxation of High Value Currency notes demonetised by P. N. Shah
(2016) AIFTP – December – P. 11
Demonetisation vis-a-vis Relevant Provisions of Income-tax Act, 1961 and implications
of the taxation law (Second Amendment) Bill, 2016 by I.P. Bansal (2016) AIFTP –
December – P. 17
Demonetisation – Announcement of Demonetisation of Rs. 500 and Rs 1000 Bank Notes
by V. R. Ghelani (2016) AIFTP – December – P. 27
Demonetisation : What does it imply with respect to income tax and Benami
Transactions ? by M. M. Bhasin (2016) AIFTP – December–P. 31
907
Circulars/Instructions/Guidelines – Referencer
Demonetisation – Tax and legal issues by V. Sridhran, Dr. K. Shivaram, Pradip Kapashi
and Dr. Dilip Sheth (2016) AIFTP – December – P. 35
Denomination – Did denomination meet its objective ? – The move to demonetise high
–value currency notes was a well-conceived measure for eradication (stocked) black
money but it lost its sheen because of the failure to visualise the resultant problems and
consequent unpreparedness to meet these –By T.N. Pandey (2016) 389 ITR 25 (Journal)
Daughter as Karta of the HUF –By T.C.A. Ramanujam (2016) 388 ITR 49 (Articles)
Demonetisation: Tax And Legal Issues – The Chamber of Tax Consultants
Taxation of High Value Currency Notes Demonetized by Shri P. N. Shah, CA www.
itatonline.org
Daughter’s right in coparcenary – IV by M. L. Bhakta (2016) BCAJ – February – P. 12
DTAA – The Mauritian DTAA – A big victory for a fair tax system in India by T.C.A.
Ramnujam and T.C.A. Sangeetha (2016) 384 ITR 16 (Journal)
Disallowance of business expenditure for non-deduction of tax at source by Dr. M.
Govindarajan (2016) 388 ITR 1 (Article)
Direct Taxes Dispute Resolution Scheme – Whether futile by Minu Agrawal (2016) 287
CTR 25 (Articles)
Double Tax Avoidance – Protocol for amendment of India Mauritius tax Treaty by Nisha
Malpani (2016) 289 CTR 20 (Articles)
E.
Draft guidelines on POEM under Indian tax law : not so much of a poetry for corporates
by Jiger Saiya (2016) 237 Taxman 7 (Mag.) (Articles)
Equalisation levy – Analysis of “Equalisation levy “ and some issues by Rajiv G. Shah
(2016) BCAJ – December – P. 19
E-Commerce in International taxation – Issues and challenges by Chetan Ladha (2016)
243 Taxman 33 (Mag.)
Easwar Committee – Feedback on Justice R. V. Easwar Committee by S. Rajaratnam
(2016) 381 ITR 18 (Journal)
Easwar Committee – Income-tax simplification committee’s First report (Draft) Report:
A critical appraisal by T. N. Pandey, (2016) 381 ITR 33 (Journal)
908
Circulars/Instructions/Guidelines – Referencer
Equalisation levy: A tax variant for augmenting revenue by T. N. Pandey (2016) 383 ITR
25 (Journal)
Editorial – Tribute to Hon’ble Mr. S. H. Kapadia former Chief Justice of India (2016)
AIFTP – January – P.5 & 58
Editorial – Expectation from the tax Bar – Reform and stable tax regime – Structural
changes for better administration of tax laws by Dr. K. Shivaram (2016) AIFTP Journal
– February – P. 5
Editorial – Finance Bill, 2016 – Amnesty scheme to tax defaulters – A premium for
dishonesty – Honest tax payers pay tax every year whereas dishonest taxpayers pay tax
once in five years by Dr. K. Shivaram (2016) AIFTP Journal – March 2016 P. 5
Editorial – Strictures against tax administration – Case laws – By Dr. K. Shivaram
(2016) AIFTP Journal – April – 5
Editorial – Elevation & Appointment of Hon’ble Judges, By N. M. Ranka (2016) AIFTP-
Journal – May- P. 5
Editorial – Goods and Services Tax by P. C. Joshi (2016) AIFTP – Journal – June – P 5
Editorial – Income Declaration Scheme, 2016 and Direct Tax Dispute Resolution Scheme,
2016 by Dr. K. Shivaram (2016) AIFTPJ – July. 5
Editorial – Training programme “ UDBHAV” for the judicial and accountant members of
the Income Tax Appellate Tribunal, will help the institution render better administration
of justice by Dr . K. Shivaram (2016) AIFTPJ – August P. 5
Editorial – Why is the Government not appointing the Vice-Presidents of the ITAT ?
Whether the move of the Government to merge the ITAT with other Tribunals is justified
? by Dr . K. Shivaram (2016) AIFTPJ – October P. 5
Editorial – Demonetisation – A great move and bold step to reduce the black money
circulation in our country – War against corruption and black money – Move of the
Government deserves to be appreciated and encouraged by Dr. K. Shivaram (2016)
AIFTPJ – November P. 5
Editorial – Demonetisation – by Dr . K. Shivaram (2016) AIFTPJ – December P. 5
F.
Finance Act, 2016 by P. N. Shah (2016) BACAJ – June – P. 10
Finance Bill, 2016 – Expectations on the Union Budget 2016: May the force be with you
by T.C.A. Ramanujam and T.C.A Sangeetha (2016) 381 ITR 1 (Journal)
909
Circulars/Instructions/Guidelines – Referencer
Finance Bill, 2016 – An uncalled penalty – Rewriting the law relating to penalty for
concealment or furnishing inaccurate particulars of income seems uncalled for ! by
T. N. Pandey (2016) 382 ITR 13 (Journal)
Finance Bill, 2016 – Some budgetary declarations – Whether sustainable by Minu
Agarwal (2016) 284 CTR 37 (Articles)
Finance Bill, 2016 – Salient features of the Finance Bill, 2016 : Relating to direct taxes
(2016) 382 ITR 37 (Articles) (Journal)
Finance Bill, 2016 – Personal taxation by T.C.A. Ramanujam (2016) 284 CTR 14
(Articles)
Finance Bill, 2016 – Proposals concerning personal taxation by T. N. Pandey (2016) 284
CTR 22 (Articles)
Finance Bill, 2016 – Union Budget, 2016 – First impression by T.C.A Sangheetha (2016)
284 CTR 17 (Articles)
Finance Bill, 2016_ Union Budget – Hidden realities of balanced budget by Minu
Agarwal (2016) 284 CTR 21 (Articles)
Finance Bill, 2016 – Capital gains – Finance Bill, 2026 and Section 50C by R.
Raghunathan (2016) 284 CTR 9 (Articles)
Finance Bill, 2016 – Assessment – Proposed amendments in S. 143(1) – Whether
sustainable by Minu Agarwal (2016) 284 CTR 29 (Articles)
Finance Bill, 2016 – Phasing out tax incentives – By T.C.A. Ramanujam (2016) 285 CTR
6 (Articles)
Finance Bill, 2016 – Proposed amendments relatable to charitable institutions by
N.M.Ranka (2016) 285 CTR 1 (Articles)
Finance Bill, 2016 – Tax law and litigation by T.C.A. Sangeetha (2016) 285 CTR 14
(Articles)
Finance Bill, 2016 – Royalty on patents under the Finance Bill, 2016 by Gayatri
Sridharan (2016) 384 ITR 29 (Journal)
Finance Bill, 2016 – Income Declaration Scheme, 2016 – Constitutional issues by S. R.
Wadhwa (2016) AIFTP J March –P. 21
Finance Bill, 2016 – Rationalisation of penalty provisions under the Income tax Act,
1961 as per the Finance Bill, 2106 – by K.C. Singal (2016) AIFTP J March – P. 25
910
Circulars/Instructions/Guidelines – Referencer
Finance Bill, 2016 – Analysis of some of the provisions in Finance Bill, 2016 impacting
International tax by H. Padamchand Khincha (2016) AIFTP J March – P. 33
Finance Bill, 2016 – Salient Features of the Direct Tax Dispute Resolution Scheme, 2016
and analysis thereof by V. P. Gupta (2016) AIFTP J March – P. 48
Finance Bill, 2016 – Equalisation levy and TDS by Rahul Sarda (2016) AIFTP J March
– P. 54
Finance Bill, 2016 – Presumptive taxation by H. N. Motiwalla (2016) AIFTP J March
– P. 61
Finance Bill, 2016 – Important Amendments made by Finance Bill, 2016 – Relating to
Service tax by Ashok Chandak & Shailendra Jain (2016) AIFTP J March – P. 64
Union Budget – Amendments in customs legislation by Jayesh M. Gogri (2016) AIFTP
J March – P. 71
Union Budget – Amendment to Central Excise Legislation by Payal (Prerana) Shah 2016)
AIFTP J March – P. 75
Finance Bill, 2016 – Impact of Proposed Amendment In Section 10(12) by Finance
Bill, 2016 on Taxability of Receipt of Accumulated Balance of Recognized Employee
Provident Fund (REPF) – Shri Gautam Baid, CA www.itatonline.org
The Law on Presumptive Taxation on Professionals as Proposed by Finance Bill 2016 –
Shri. H. N. Motiwalla www.itatonline.org
Impact of The Taxation Laws (Second Amendment) Bill, 2016 – Dr. Raj K. Agarwal &
Dr. Rakesh Gupta www.itatonline.org
Fundamental Duties of Citizens by Hon’ble Mr. Justice R. K. Agarwal (2016) AIFTPJ –
December – P 9
Analysis of The Taxation Laws (Second Amendment) Bill, 2016 – Gautam Baid, CA
www.itatonline.org
Impact Of The Taxation Laws (Second Amendment) Bill, 2016 – Dr. Raj K. Agarwal &
Dr. Rakesh Gupta www.itatonline.org
Fiends with tax benefits : EU spoils the party by Hardeep Singh Chawla (2016) 243
Taxman 47 (Mag)
Fortunate happenstances for the assessee by Gopal Nathni (2016) 46 ITR 23 (Journal)
(Trib.)
911
Circulars/Instructions/Guidelines – Referencer
Firm – Reconstitution of firm – Tax implications where it is inferred to be non-genuine
(2016) 288 CTR 6 (Opinion)
G.
GAR – General Anti – Avoidance Rule by P. N. Shah (2016) BCAJ – August – P. 12
General – A note on New India Assurance Company Ltd. v. Sudesh Chawla (2016) 380
ITR 467 (P& H) by Pasupathi (2016) 382 ITR 9 (Articles) (Journal)
The farcical implementation of Shome recommendation – In the garb of implementation
of Shome panel’s recommendations, an entirely new agenda for direct and indirect taxes
cannot be introduced by T.N.Pandey (2016) 382 ITR 1 (Articles) (Journal)
H.
HUF – The daughter as Karta of the HUF – by T.C.A. Ramanujam (2016) 388 ITR 49 (St)
HUF – The male monopoly of Kartas of HUF is over a Female can became Karta of HUF
– An analysis by T. V. Ganeshan (2016) 239 Taxman 19 (Magzine)
HUF – A son born of lawful marriage of a Hindu with a Christian mother would be a
member of father’s HUF by T. N. Pandey (2016) 240 Taxman 15 (Mag.)
Understanding The Concept of Hindu Undivided Family – Shri Abhishek Jain, CA www.
itatonline.org
I.
Income Tax Appellate Tribunal, Platinum Jubilee Celebration
The Income Tax Appellate Tribunal, 1941 to 2016 by Justice S. Ranganathan (2016)
AIFTPJ March 2016 P. 9
ITAT – Random Thoughts by Sohrab E. Dastur (2016) AIFTPJ March 2016 P. 10
Income tax Appellate Tribunal, As I see it since, 1954 by N. M. Ranka (2016) AIFTPJ
March 2016 P. 11
75 years of ITAT – A Historic Milestone – My Reminiscences by Dr. K. Shivaram (2016)
AIFTPJ March 2016 P. 11.
Income Tax Appellate Tribunal’s 75 years of excellence (2016) AIFTPJ March 2016 P. 17
Sample Analysis showing the result of the review of the orders of the Tribunal by the
High Court’s during the last 75 years (2016) AIFTPJ March 2016 P. 20
912
Circulars/Instructions/Guidelines – Referencer
ITAT – In and about ITAT–20 things I learnt in twenty years – By Justice T.N.C.
Rangarajan (Retd.) (2016) AIFTP –Journal – April – P. 7
ITAT–Special Bench – Constitution of the Special Bench of ITAT: High Court view the
constitution of the Special Bench of the ITAT through private meetings as being opposed
to the rule of law, fairness and transparency by T.N. Pandey (2016) 390 ITR 1 (Articles)
(Journal)
ITAT – My tryst with the Tribunal by S. Rajaratnam (2016) 382 ITR 70 (Article) (Journal)
ITAT – Pending appeals before ITAT as on 1-8-2016 (2016) AIFTPJ – August – P. 58
ITAT – Pendency before ITAT as on 1-12-2015 (2016) AIFTP Journal – Dec. P. 48
ITAT – “Relive Your School Life” – Shri Prarthana Jalan, CA www.itatonline.org
Income Declaration Scheme, 2016 – Circulars, Comparison of VDIS 1997, Kar Vivad
Scheme, Various Disclosure Schemes (2017) AIFTPJ – July – P. 7 – 81
Income Declaration Scheme, 2016 – Salient features by Dindayal Dhandaria (2016) 237
Taxman 29 (Mag) (Articles)
Income Disclosure Scheme, dispute resolution Scheme – 2016 and equalisation levy
(2016) Chamber’s Journal – July – P. 11 – 79
Income Declaration Scheme 2016 – Constitutional Issues by S. R. Wadhwa, Advocate
www.itatonline.org
Income Declaration Scheme, 2016 – Whether Supersedes Law of Limitation Applicable
To Reopening of Cases by Dr. Raj K. Agarwal & Dr. Rakesh Gupta www.itatonline.org
ICDS – New beginning of accounting standard under Income-tax by Jitendra Jain (2016)
242 Taxman 13 (Mag.)
ICDS – Revised income computation and disclosure Standards – Critical analysis by S.
Ramachandran (2016) 289 CTR 1 (Articles)
IDS – Income Disclosure Scheme, 2016 – A black law to tackle black money ! by
Dindayal Dhandaria (2016) 386 ITR 65 (Journal)
Income – Taxing amount which neither accrued nor received as income by T. N. Pandey
(2016) 286 CTR 6 (Articles)
Top Brass of The Income Tax Department Explain Important Aspects of The Income
Declaration Scheme 2016 www.itatonline.org
913
Circulars/Instructions/Guidelines – Referencer
Income-tax Act, 1961 – Amending the Income–tax Act – The new initiative to amend
Income-tax Act, 1961, needs substantial tuning up to be a meaningful exercise by T.N.
Pandy (2015) 380 ITR 1 (Journal)
Income – Tax free interest on deposit of a public subscription money – T.C.A. Sangeetha
(2016) 282 CTR 17 (Articles)
Income characterisation on sales tax-free bonds by H. Padamchand Khincha (2016)
BCAJ –February – P. 17
International Taxation – Payments to non-residents law and procedure (Withholding tax
provisions under section 195 of the Act by Mayur B. Nayak (2016) BCAJ – Nov – P. 55
International Taxation – Growing significance of prevention of Money Laundering Act,
2002 by Mayur B. Nayak (2016) BCAJ – September – P. 53
International Taxation – Permanent establishment and the “power of deposition” test
– Deciphering the contours of the “Power of deposition” test governing permanent
establishments by Ananya Kapoor (2016) 389 ITR 19 (Articles) (Journal)
International Taxation – Frame work of sources of exchange of information in tax matters
– An over view by Mayur Nayak (2016) BCAJ – January – P.44
International Taxation – Home Office as PE by Bhaumik Goda (2017) BCAJ – December
– P. 10
International Taxation – Transfer pricing documentation – Country by country reporting
by Mayur B Nayak (2017) BCAJ –October – P. 55
International Taxation – Foreign tax credit Rules – An analysis by Maur B. Nayak (2016)
BCAJ – August – P. 69
International Taxation – Equailization levy – A step into unchartered territory by Mayur
Nayak (2017) BCAJ – July – P.67
International Taxation – Decoding residence Rule through not so rhyming poem – How
melodious is the Indian Poem – Analysis by Mayur Nayak (2016) BCAJ – February – P. 55
International taxation – Taxation of artists and sportsmen by Mayur Nayak (2016) March
– BCAJ – P. 51
International Taxation – Revised procedure for making remittances to non-residents –
New rules 37BB u/s. 195(6) of the Income-tax Act, 1961 by Mayur Nayak (2016) BCAJ
– March – P. 61
914
Circulars/Instructions/Guidelines – Referencer
Guide to Rules Issued by the CBDT For Grant of Foreign Tax Credit – Shri Paras Dawar,
CA www.itatonline.org
Analysis of Draft Rules issued by CBDT For Grant of Foreign Tax Credit – Shri Paras
Dawar. CA www.itatonline.org
An Expert Analysis of International Tax Provisions In Finance Bill 2016 Relating to
Equalisation Levy, BEPS and POEM – Shri Padamchand Khincha, CA. Shri P Shivanand
Nayak, CA. Shri Prem Raj Rathod CA and Shri Mohit A Parmar, CA www.itatonline.org
Whether A Liability Exists For Filing Return of Income in Case of A Foreign Company
Earning Non-Taxable Income? – Shri Chirag Wadhwa www.itatonline.org
Permanent Establishment: The Continuing Conundrum – Shri Ashish Karundia, CA
www.itatonline.org
Interpretation – Rules for interpretation of tax laws – Part – 1 By N. M. Ranka (2016)
BCAJ- April – P. 19
Interpretation – Rules for interpretation of tax laws – Part – II By N. M. Ranka (2016)
BCAJ – May – P. 17
Interpretation – Rules of Interpretation of tax statutes – Part 111 By N. M. Ranka (2016)
BCAJ – June P. 43
Interpretation – Rules of Interpretation of tax statutes –Part 1V By N. M. Ranka (2016)
BCAJ – July. P. 19
Interest – Receipt of interest and full value of consideration by Pradip Kapashi (2016)
BCAJ – April – P. 48
J.
Jointly and severally liable by M. K. Krishnan (2016) VST 29 (Journal)
L.
Loan is a capital asset – An analysis of the decision of Mumbai ITAT by Vinay V.
Kawadia (2016) 239 Taxman 29 (Magzine)
LTC – LTC exemption cannot be vailed of for places outside India by T. N. Pandey
(2016) 240 Taxman 27 (Mag.)
Legal practice – Practical aspects of legal practice (for young lawyers) by Hon’ble Justice
R. Banumathi (2015) 8 SCC 28
Art of Legal Writing: Impact and Analysis – Shri Dr. Arpit Haldia, CA www.itatonline.org
915
Circulars/Instructions/Guidelines – Referencer
M.
Moot Courts are an integral part of law Students learning process by P. C. Joshi (2016)
AIFTPJ –August – P. 18
Merger – Stamp duty – 2 States : The story of mergers and stamp duty by Anup P. Shah
(2016) BCAJ –June – P. 121
Merger – Stamp duty – Set–off of stamp duty payable is not permissible in case of
Inter-State amalgamation of companies (Chief Controlling Revenue Authority v. Reliance
Industries Ltd (68 taxmann.com 140 (Bom)(HC), By Ankit Talsania (2016) ACAJ –May
– P. 113
Manufacture – The connotations of the term “manufacture” – Courts have given various
shades to the meaning of “manufacture” under taxation laws – By T. N. Pandey (2015)
380 ITR 35 (Journal)
Measures to prevent base erosion and profit shifting (BEPS) by T.C.A. Ramanujam (2016)
380 ITR 29 (Journal)
Mauritius Treaty amendment – Reading the fine print by Krishna Malhotra, Mahima
Gautam (2016) 239 Taxman 25 (Magzine)
Mauritius tax Treaty – Knowledge sharing alert – International tax – Recent amendment
to India – Mauritius tax Treaty (2016) 239 Taxman 43 (Mag.)
N.
Namaskaar – Learing to be happy by Pradeep Shah (2016) BCAJ – Jan – P. 5
Namsakaar – Duty by K.C. Narang (2016) BCAJ – March – P. 5
Namaskaar – The Three Gates of Hell by Pradeep Shah (2016) BCAJ – April – P.5
Namaskaar – Attitude by K.C. Narang (2016) BCAJ – May – P.5
Equation of success by Ashok Kataria (2016) ACAJ – February – P. 667
Natural Justice in Taxation by Dr. Ashok Saraf (2016) AIFTP – Journal – April – P. 11
O.
Opinions
S.2(15 : Collections of a charity towards corpus fund (2016) 284 CTR 1 (Opinion)
S.2(15) : Chartable Trust – Filing of audit report (2016) 289 CTR 10 (Opinion)
916
Circulars/Instructions/Guidelines – Referencer
S.2(15) : Charitable Trust – Propagation of religious education (2016) 286 CTR 19
(Opinion)
S.2(47) : Transfer – Capital gains – Time of transfer of a development agreement by S.
Rajratnam (2016) 290 CTR 9 (opinions)
S.9(1)(i) : Income deemed to accrue or arise in India – Certification fees received from
abroad (2016) 284 CTR 6 (Options)
S.10A and 10B : Exemption under sections 10A and 10B –IT enabled services by S.
Rajartnam (2016) 290 CTR 9 (opinions)
S.11 : Exemption – Need for proper return (2016) 2016) 286 CTR 6 (Opinion)
S.15 : Salary – Perquisite – Treatment of salary in advance (2016) 286 CTR 27 (Opinion)
S.22 : Investment in property to earn rental income (2016) 294 CTR 3 (Opinion)
S.28(1) : Income – Liability of a politician to tax on his income from political
preoccupation by S. Rajratnam (2016) 290 CTR 30 (opinions)
S.28(1) : Business income or capital gains – Sale of land (2016) 289 CTR 9 (Opinion)
S. 35(2AB): Expenditure on scientific research under S. 35(2AB) (2016) 289 CTR 17
(Opinion)
S.37(1) : Business expenditure – Benefits to children of employees – Whether admissible
deduction (2016) 288 CTR 1 (Opinion)
S.37(1) : Treatment of corporate social responsibility (2016) 286 CTR 1 (Opinion)
S.40A(2) : Disallowances (2016) 286 CTR 17 (Opinion)
S.40A (2) : Donation to a related Trust – Applicability of S. 40(A)(2). (2016) 287 CTR
3 (Opinion)
S.40(A)(3): Payment on behalf of another (2016) 287 CTR 1 (Opinions)
S.45 : Capital gains – Sale of disputed property by S. Rajratnam (2016) 290 CTR 25
(opinions)
S.45(4) : Firm – Retirement of a partner from LLP – Incidence of tax by by S. Rajratnam
(2016) 290 CTR 13 (opinions)
S.56 : Income from other sources: Gifts between family members (2016) 289 CTR 11
(Opinion)
917
Circulars/Instructions/Guidelines – Referencer
S.56(2)(vii) : Income-Tax implications – Creation of Trust and gift of property by S.
Rajartnam (2016) 290 CTR 17 (opinions)
S.56(2)(viib) : Issue of shares by a private company – Tax implications under S. 56(2)
(viib) (2016) 287 CTR 6 (Opinion)
S.80IA : Irregularities in coal mining lease – Fallout of Supreme Court Judgment (2016)
288 CTR 17 (Opinion)
S.90 : Double taxation relief – Agreement between India and USA – Fees for technical
services vis-a-vis payment to non-profit organisation as service fee in connection with
hospital (2016) 289 CTR 1 (Opinion)
S.115O : Dividend distribution tax – Effect of amendment to S. 115O by the Finance
Act, 2014 (2016) 286 CTR 25 (Opinion)
S.115JB : Treatment of amount drawn from securities premium account. (2016) 289 CTR
2 (Opinion)
S.139 : Omission to file return – Options to assessee (2016) 288 CTR 12 (Opinion)
S.153A: Search and seizure – Computation of undisclosed income (2016) 286 CTR 7
(Opinion)
S.195: TDS – Payment of retainer for sales agent abroad (2016) 286 CTR 12 (Opinion)
S.199: Credit for TDS under S. 199 (2016) 286 CTR 11 (Opinion)
Subsidies – Capital subsidies and accounting by S.N. Inamdar (2016) BCAJ – November
– P. 12
Settlement Commission – Income tax Settlement Commission by Chetan A. Karia (2016)
AIFTPJ – June – P. 14
P.
Penalty for under reporting and misreporting of income – S. 270A –New penalty
provisions introduced by Finance Act, 2016 by Rahul Hakani (2016) AIFTPJ – October
–P. 32
Permanent establishment – Permanent establishment and the “Power of disposition
“Test –Deciphering the contours of the “Power of disposition” Test governing permanent
establishments – Ananya Kapoor (2016) 389 ITR 19 (Journal)
Panama Papers: Well worked strategy, not hurried reactions, can play bring results by T.
N. Pandey (2016) 383 ITR 1(Journal)
918
Circulars/Instructions/Guidelines – Referencer
Pradhan Mantri Garib Kalyan Yojana – FAQ – (2016) 243 Taxman 13 (Mag.)
Pradhan Mantri Garib Kalyan Yojana v. Voluntary Disclosure under section 115BBE
(2016) 243 Taxman 18 (Mag.)
Pradhan Mantri Garib Kalyan Yojana: Last Call To Tax Evaders To Come Clean – Rahul
Sarda, Advocate www.itatonline.org
14 things you need to know for declaring unaccounted income under PMGKY (2016)
243 Taxman 57 (Mag.)
Check list for filing declaration of unaccounted cash or deposits (2016) 243 Taxman 20
(Mag.)
Precedents – Boon or bane ? by Honourable Justice Mr. R. V. Raveendran (2015) 8 SCC
J1
Precedents – How to comprehend precedents by Mr. Mohan Pararasran (2016) 2 SCC
28 (Journal)
Penalty For Cash Deposit In Banks Declaring As Unaccounted Income? – Dr. Raj K.
Agarwal & Dr. Rakesh Gupta www.itatonline.org
Guide To The Law On Levy Of Penalty On Additions Made In Search & Seizure
Proceedings – Shri Vinay Kawdia, CA www.itatonline.org
Rationalisation Of Penalty Provisions Under The Income-tax Act 1961 As Per The
Finance Bill, 2016 – Shri K. C. Singhal, former Vice President www.itatonline.org
The Role Of Professionals In Tax Reforms: Justice Mr. R. K. Agrawal – Justice Mr. R. K.
Agrawal www.itatonline.org
R.
Reassessment – An Overview – S. 147-153 by Ajay R. Singh (2016) AIFTPJ – P. 9
Reassessment – Is there a limitation for ’’Reassessment” when the return is processed
u/s. 143(1)? By V. Subramani (2017) BCAJ – September – P.10
Right to Information Act – Ten years of Right to Information Act, by Dr. Mahesh Thakar
Advocate (2016) AIR 105 – May – Journal.
Right to Information by Narayan Varma (2016) AIFTP Journal – January – P.9
919
Circulars/Instructions/Guidelines – Referencer
Right to Information – Details of income tax returns cannot be requisitioned under
RTI Act, except for larger public interest by T. N. Pandey (2016) 237 Taxman 15 (Mag.)
(Articles)
Reserve Bank : Is the Reserve Bank of India liable to dividend distribution tax on
dividend payment to Government ? By T.N. Pandy (2016) 383 ITR 20 (Journal)
Real Estate – Overview of the Real Estate (Regulation & Development) Act, 2016 by Kirit
J Hakani (2016) AIFTP – June P. 39
Return – Revision – The Curious case of Amitabh Bachchan by T.C.A Sangeetha (2016)
287 CTR 1 (Articles)
S.
Settlement Commission – Income tax – Settlement commission by Chetan A. Karia
(2016) AIFTP Journal – June – P. 14
Settlement Commission has no power to order special Audit in cases for Settlement
before it by T. N. Pandey (2016) 238 Taxman 13 (Mag.) (Articles)
Savings – Tax savings by the end of the financial year by T.C.A Sangeetha (2016) 283
CTR 19 (Articles)
Salary – Damages for failure to employ not profits in lieu of salary – Whether
sustainable by Minu Agarwal (2016) 283 CTR 17 (Articles)
Settlement Commission – Settlement Commission has no power to order special audit
in cases for settlement before it by T. N. Pandey (2016) 238 Taxman 13 (Mag.)
Service tax
Service tax on Club or Association including Co-operative Housing Societies By
Rajkamal Shah (2016) AIFTPJ – August – P. 23
A new dose of service tax by designating as Swatchh Bharat cess by – T.N. Pandy
(2016) 282 CTR 4 (Articles)
Service tax – Service tax liability on sale of space for advertisement in magazines,
journals and newsletters by Tilak Chandana (2016) 284 CTR 39 (Articles)
Service tax – Subjecting film acting to service tax and exempting artists is not
discriminatory by T.N. Pandey (2016) 284 CTR 32 (Articles)
Service tax – An Overview of Finance Act, 1994, relating to Service tax – Post Negative
Regime By B. Srinivas & S.S. Satyanaryana (2016) AIFTP Jaournal – January – P. 42
920
Circulars/Instructions/Guidelines – Referencer
Service tax – Service tax on business auxiliary Services – Pre and post 1st July, 2012
scenario by T.N. Pandey (2016) 286 CTR 18 (Articles)
SLP, dismissed – 1st April – 30th November, 2015 by Samir Dalal The Chamber’s Journal
(2016) January P. 73 – 83
State Budget – (2016) AIFTP – Journal – April –P 18 to 39
Stay: Stay in high pitched assessment – Unsatisfactory legal position by Minu Agarwal
(2016) 289 CTR 25 (Articles)
T.
Tax Revolution and Economic Revolution by Honourable Justice Mr. V. Gopala Gowda
(2016) AIFTPJ – August – P. 10
Tax Reform – Role of Professional by Hon’ble Justice Mr. R.K. Agarwal (2016) AIFTPJ
– August – P. 15
Tax Reform – Random reflections – By S. Rajrathnam (2016) 390 ITR 49 (Article)
(Journal)
Tax reforms – Growing inequality and taxation of super rich by T.C.A. Ramanujam
(2016) 286 CTR 4 (Articles)
Trust – Can a Trust be a Beneficiary in another Trust ? by M. L. Bhakta (2017) BCAJ –
October – P.19
Transfer Pricing – Applicability of Transfer Pricing on marketing Intangibles –Part 1 by
Dhinal A. Shah (2016) ACAJ October – P. 460
Transfer Pricing – Concept of Fraud and its relevance to Transfer Pricing by Sivam
Subramanian (2016) 243 Taxman 21 (Mag)
Transfer Pricing: Interest – Free Loan to a subsidiary by Gopal Nathani (2016) 387 ITR
6 (Journal)
“To Tax and to please” – Ashok Kumbhat Memorial Endowment Lecture by Honourable
Justice Easwar Judge Delhi High Court (2016) 386 ITR 11 (Journal)
Trust – Can a Trust be a beneficiary in another Trust by M. L. Bhakta (2016) BCAJ –Oct
– P. 19
Tax reform – Growing inequality and taxation of super rich by T.C.A Ramanujam (2016)
286 CTR 4 (Articles)
Tax reform – Random reflections by S. Rajratnam (2016) 380 ITR 49 (Journal)
921
Circulars/Instructions/Guidelines – Referencer
Treaty – Loss of revenue on account of a punctuation – Whether it is fair to allow slip of
royalty tax for mere existence of a “ comma” punctuation following the word “ process’
in Articles 12(3), /12(4) by Gopal Nathani (2016) 46 ITR 45 (Journal)(Trib.)
Transfer pricing – AMP: A controversy far from over, by Jigner Saiya (2016) March –
BCAJ – P. 10
Tax Administration Reform Commission – The Farcical implementation of Shome
recommendation by T.N. Pandey (2016) 382 ITR 1 (Journal)
Tax Articles for your Reference by Kishor Vanjara (2016) Chamber’s Journal – March –
P. 206
Tax Articles for your Reference by Kishor Vanjara (2016) Chamber’s Journal – April – P.
136
Tax administration – Responsibilities and duties of Departmental Offices – Ten Action
points for the year, 2016–17 by S.R. Wadhwa (2016) AIFTP Journal – January – P. 21
Tribunal – Whether Tribunal can decide cross objection even when it declares the
appeal as non-maintainable by T.N. Pnadey (2016) 239 Taxman 13 (Magzine)
Tax deduction at source – No TDS on general provisions for expenses, made on
estimate basis, at the end of the financial year by S. K. Tyagi (2016) 386 ITR 8 (Journal)
TDS and TCS: While expanding the coverage of TDS and TCS collections, the Income-
tax department needs to address the taxpayers’ problems concerning compliance by T.N.
Pandey (2016) 388 ITR 68 (Articles)
Tax Revolution And Economic Revolution By Justice Mr. V. Gopala Gowda – Hon’ble
Justice Mr. V. Gopala Gowda www.itatonline.org
Tribute – Chief Justice Sarosh Homi Kapadia – A tribute by Sohrab Dastur (2016) The
Chamber’s Journal – January – P. 10
Tribute – A Tribute to Hon’ble Mr. Justice S.H. Kapadia former Chief Justice of India,
(2016) AIFTPJ – January P. ?
Tribute – Respectful homage to late Shri Narayan Varma by Dr. K. shivaram (2016) The
Chamber’s Journal – January– P. 11
Tax Articles for your Reference by Kishor D. Vanjara (2016) The Chamber’s Journal –
March – P. 206
Tax Articles for your Reference by Kishor D. Vanjara (2016) The Chamber’s Journal –
April – P. 136
922
Circulars/Instructions/Guidelines – Referencer
Tax Articles for your Reference by Kishor D. Vanjara (2016) The Chamber’s Journal –
June – P. 172
Tax Articles for your Reference by Kishor D. Vanjara (2016) The Chamber’s Journal –
August – P. 127
Tax Articles for your Reference by Kishor D. Vanjara (2016) The Chamber’s Journal –
October – P. 186
V
VDIS – Recourse to the VDI Scheme: The Government is sparing no efforts to enthuse
tax – Evaders to make the VDIS a success ! T.N. Pandey (2016) 386 ITR 57 (Journal)
Voluntary Disclosure Scheme under section 118BBE – 20 things to know (2016) 243
Taxman 16 (Mag.)
W.
Writ – Judicial orders of Civil Courts and amenability to writ jurisdiction (Under Article
32) : A study by Prof. (Dr.) Mukund Sarada (2016) AIR 103 – May – Journal.
923
Notes
924
You might also like
- Course Plan - SLL5721 Principles of Taxation LawsNo ratings yetCourse Plan - SLL5721 Principles of Taxation Laws7 pages
- Case Laws in Favour of Department Second Edition PDFNo ratings yetCase Laws in Favour of Department Second Edition PDF986 pages
- Law of Taxation - Income Tax by Adv. Ajinkya ReddyNo ratings yetLaw of Taxation - Income Tax by Adv. Ajinkya Reddy9 pages
- Tamil Nadu National Law University: Course Syllabus Law of Indirect Taxation Course ObjectivesNo ratings yetTamil Nadu National Law University: Course Syllabus Law of Indirect Taxation Course Objectives5 pages
- Course Outline For Direct Taxation 2022-2No ratings yetCourse Outline For Direct Taxation 2022-27 pages
- (SpringerBriefs in Law) Nigam Nuggehalli - International Taxation - The Indian Perspective-Springer India (2020)No ratings yet(SpringerBriefs in Law) Nigam Nuggehalli - International Taxation - The Indian Perspective-Springer India (2020)117 pages
- INCOME TAX - Write - Ups - ConsolidatedNo ratings yetINCOME TAX - Write - Ups - Consolidated313 pages
- Domestic Tax Digest July 2015 Dec 2018No ratings yetDomestic Tax Digest July 2015 Dec 20181,110 pages
- CA Final DT Case Law Book by CA Saket Ghiria100% (1)CA Final DT Case Law Book by CA Saket Ghiria78 pages
- Indirect Tax Final Project - Utkarsh & SudiptNo ratings yetIndirect Tax Final Project - Utkarsh & Sudipt18 pages
- In The Hon'ble High Court of JudicatureNo ratings yetIn The Hon'ble High Court of Judicature37 pages
- Singhal Tax Book - Compressed - RotatedNo ratings yetSinghal Tax Book - Compressed - Rotated192 pages
- 1-Law Cover Print - Combine634642971062050292 PDF100% (1)1-Law Cover Print - Combine634642971062050292 PDF274 pages
- SalesCommon IncomeTax-PublicatoinAugust2021No ratings yetSalesCommon IncomeTax-PublicatoinAugust20218 pages
- Commissioner of Income-tax-LTU vs. Shell India Markets (P.) Ltd.No ratings yetCommissioner of Income-tax-LTU vs. Shell India Markets (P.) Ltd.4 pages
- PreSpot30 Important Keywords Regarding Budgeting, Fiscal PolicyNo ratings yetPreSpot30 Important Keywords Regarding Budgeting, Fiscal Policy6 pages
- Isbn Product Author Price INR Edition Binding in StockNo ratings yetIsbn Product Author Price INR Edition Binding in Stock12 pages
- Appeal Under Section 260A: Tax Case 2018No ratings yetAppeal Under Section 260A: Tax Case 201826 pages
- Introduction To Political Science First Lecture Bba100% (1)Introduction To Political Science First Lecture Bba13 pages
- NTPC Limited: (A Government of India Enterprise)No ratings yetNTPC Limited: (A Government of India Enterprise)10 pages
- The Myth of International Order: Why Weak States Persist and Alternatives To The State Fade Away Arjun Chowdhury100% (3)The Myth of International Order: Why Weak States Persist and Alternatives To The State Fade Away Arjun Chowdhury47 pages
- @airbus: Component Maintenance Manual With Illustrated Part ListNo ratings yet@airbus: Component Maintenance Manual With Illustrated Part List13 pages
- Guidelines for Engaging Retired NVS StaffNo ratings yetGuidelines for Engaging Retired NVS Staff2 pages
- Radixx Malware Attack: By: Muhammad FarazNo ratings yetRadixx Malware Attack: By: Muhammad Faraz11 pages
- AmE vs BrE: Impact on Language TeachingNo ratings yetAmE vs BrE: Impact on Language Teaching16 pages
- Eclipse Second Dawn For The Galaxy Rulebook ENNo ratings yetEclipse Second Dawn For The Galaxy Rulebook EN32 pages
- daily-Lesson-Plan-week-1-for - ORGANIZATION & MANAGEMENTNo ratings yetdaily-Lesson-Plan-week-1-for - ORGANIZATION & MANAGEMENT4 pages
- RSK200052 Bass 2018 G1 DIGITAL 16mar2023No ratings yetRSK200052 Bass 2018 G1 DIGITAL 16mar202365 pages
- Polypropylene (Asia-Pacific) 31 Jan 2020No ratings yetPolypropylene (Asia-Pacific) 31 Jan 20207 pages
