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THE CHAMBER OF TAX CONSULTANTS

3, Rewa Chambers, Ground Floor, 31, New Marine Lines, Mumbai - 400 020 Tel.: 2200 1787 / 2209 0423 Fax: 2200 2455 E-mail: office@ctconline.org

Visit us at: Website: http://www.ctconline.org

Study Group Meeting held on – 6th December, 2013

- CA Dinesh R. Shah

06/12/2013

The Recent Direct Taxes Judgements.

CHARITABLE TRUST.

(1) 2(15). Charitable purpose- Intention to make profit – Denial of exemption

was held to be not justified. (Se. 11,12A)

Profit earned by sale of milk fodder and other item by gaushala established

by Mahatma Gandhi to breed and keep caws, to improve quality of cows

and oxen to produce and sell cow’s milk and its various preparations was

entitled to exemption Held intention to make profit was essential to attract

disqualification and that some profit incidentally earned is not sufficient

(A.Y. 2009-10)

Sabarmati Ashram Gaushalla Trust V/s. Addln. DIT (Exemption)

(2013) 25 ITR 701 Ahd. Tribunal.

(2013) 144 ITD 280 (4)

(2) Se.12A. Registration – Amendment in object clause- amended clause to be

considered matter remanded

Since the denial of registration was based on the pre-amended clause the

registration application was to be considered in light of the amended

clause. Matter remanded.

Vyapari Vyavasayi Ekapuna Samithi Welfare Society V/s. CIT (2013) 24 ITR

528 (Cochin Tribunal)

(3) Kodava Samaj V/s. Director of I,.T Exemption ITAT Bangalore C. Bench.

(2013) 93 DTR Bangalore (Tribunal) 2909 (issue No 190)

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Charitable trust: Registration under Se.12A cancellation under Se.12AA(3).

From the fact that income of the society comprised of receipts from the

activity of letting out a Kalyana Mantapa owned by it on rent and fees

received from the members on sale of liquor in the bar run by the assessee

it does not follow that the activities of the assessee is not genuine e or that

the activities are not being carried out in accordance with the objects of

the assessee- As per second proviso to Se. 2 (15), even if there are receipts

from commercial activities if below Rs.25 lkhs will still be considered as

“Charitable purpose” when registration was granted to the assessee under

section 12AA(1) it is not open to the Director of IT (Exemption) to re-

examine the objects of the trust in proceedings under Se. 12AA(3).

(4) ADIT V/s. Shri Vile Parle Kelwani Mdal. ITAST Mumbai E’Bench’.

ITA No. 7106/Mum/2011. A.Y. 2008-09. Date of order 5-10-20-12.

(Reported in No. 2012 BCAJ Journal)

Se.11. Income from Management development program earned by Education

Institute. Considered as eligible for exemption (ii_ Income from hiring premises

and advertisement rights since applied for Educational activities eligible for

exemptions.

CIT V/s. Andhra Chamber of Commerce. (1965) 55 ITR 722 (SC).

Where in it has been held that the rental Income from letting out of property can

not be held to be Income from Business and Income will be exempt as Income

from property held for charitable purpose.

(5) Dy Director of IT V/s GK R Charities. ITA No 8210/ Mum/2010. 10-8-2012.

Claim for depreciation on Fixed Asset is treated as application of Income.

(2) receipt of loan in Violation of Bombay Public Trust Act does not invite denial

of exemption u/s 11. (3) Repayment of Loan originally taken for objects of the

trust will amount to an application of Income.

(December 2012 BCAJ Journal) (6) Charitable trust Certificate u/s 80G (5)

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Amendment by Finance Act (No2) of 2009 and Circular No.5 and 7 of 2010

issued by C.B.D.T Certificate once granted operates in perpetuity withdrawal, if

any should be as per the procedure.

CIT V/s. Bhola Bhandari ‘Charitable Trust. 259 CITR 279 (P & H)

(July 2013 Bombay C.A Journal) (7) Educational Activity (Explained)

Charitable Trust

Ahmedabad Management Association V/s. Jt. D. of IT (Exemption) (2013) 93

DTR. Tribunal 161 (187) Activities of the assessee . Which include continuing

education of diploma Certificate programme. Management development

Programme Public Falk and Seminars and worksho0p and conferences are in

the field of Education as they satisfy the test of systematic Instruction and training

and therefore, it is eligible for exemption under Se.11. consequently addition

made by the A.O in respect of corpus donation cannot be sustained.

(8) Tamil Nadu Industrial Guidance and Expect Promotion Bureau V/s. Asst,. CIT.

exemption. (2013) 91 DTR (Chennai) (Tribunal) 267 (issue No.156)

Where assessee facilitates in providing licence, approval and permission from

various Government t Agencies for setting up of Industries in the State for which

it is charging fees having lost its Character of Charitable organization after

Isertition of proviso to (Se.2 (15) is not eligible for exemption under Se.11.

(9) Charitable Trust; Registration under Se.12A. Cancellation under Se. 12AA

(3)

Madras Motor Sports Club V/s. Director of I.T (Exemption 5) Chennai B.

(2013) 90 DTR (Tribunal) Chennai Bench. 197 (issue No 143)

Director of IT (Exemptions) having accepted that the objects of the assessee-

society use in the nature of advancement of general public utility falling within

the ambit of Se.2(15) the same did not become non- charitable merely because

its aggregate receipts of the nature mentioned in the first proviso to section 2(15)

exceeds Rs.10 lakhs and therefore registration granted to the assessee under

Se.12A (a) can not be cancelled only on that ground.

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10 Exemption under Se. 10 (23c) (iv) Charitable purpose. Applicability of proviso to Se.2 (15) vis-a vis coaching classes and charging of fees:- The ICAI & others V/s. Director general of IT (Exemptions) and ors.

(2014) 90 DTR (Delhi H.C) Page 161 (141) 2013 358 ITR 91 Delhi H.C.

Activities of importing education and practical training to the students pursuing

the chartered Accountancy Course fall within the definition of ‘Charitable

Purpose’ in Se. 2 (15) Activities of the assessee- Institute in conducting coaching

classes and campus interviews of the assessee for a fees being integral and

ancillary to the education programme. Conducted by it and not fuelled by profit

motive, it can not be said that the assessee is carrying on the business trade or

commerce falling within the scope of first proviso to Se.2 (15) and therefore, it is

institution established for Charitable purpose eligible for exemption under Se. 10

(23C) (iv)

11. Asst. CIT V/s. Industrial Extension Bureau

(2013) 59 SOT 189 (3)

A.Y. 2009-10. Whether if a return is filed within time specified in Section 139 (4)

and option contemplated by Explanation to Se.11(1) is exercised in writing along

with such return requirement of said explanation would stand satisfied. Held

YES. .

12. Charitable Purpose.

(2013) 26 ITR Tribunal 376 (Agra)

Dy. CIT V/s. Nehru Prassatika Asptal Samiti .

Exemption- Hospital- Assessee Earning Interest from Fixed Deposits. Directly

incidental to main activities of trust- Exemption allowable.

13. Christian Medical College V/s. CIT

(2013) 27 ITR Tribunal Chandigrah (308)

Denial of renewal of Exemption on ground that object religious in nature:- finding

that training, medical care and concession provided to all persons irrespective of

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their case, creed or religion. Assessee entitled to registration IT Act 1981. Se

12AA.

14. Joint CIT V/s. Sewa Education Trust.

(2013) 27 ITR Tribunal (Agra) 292.

Accumulation of Income. Delay in filing in form 10, fund to be accumulated

deposited with nationalized bank for the construction of School building-

Resolution for such accumulation passed during the year. Delay in filing form 10

to be condoned. Exemption to be allowed Joint CIT V/s. Sewa Education Trust..

15. Association of Corporation and Apex Societies of Handloom V/s. Asst.CIT 30

Taxmann.com 22 (Delhi)

Se.11: A.Y. 1998-99 to 2000-01 Exemption of Income from property held under

trust Accumulation of Income for purposes of Se.11 (1) Form No.10. Could be

furnished during reassessment proceeding.

16(a). Bureau of Indian Standards V/s. Director General of IT (Exemption) (2013) 358

ITR 78 (Delhi)

Charitable Institution notified by Central Govt. meaning of Charitable Institution

Statutory Authority set up as Regulatory Body- Charitable Institution Fees

charges by such Authority Entitled to exemption Se. 2 (15) & 10 (23c) (iv)

Indian Nutritional Medical Association V/s. CIT.

16(b) (2013) 27 ITR (Tribunal) 322. Cochin.

Charitable purpose Registration of trusts object of Society to provide services to

medical professionals and to promote sale of nutritional medicines. Not

charitable activities. Assessee not entitled to registration Se.12AA.

17(a) 12A: Registration: Trust. Significant or material change in object clause of MOA

by voluntary act of the assessee- Change to be vetted by revenue authorities

before granting the benefit under Se.11 and 13 of the Act,. Board of Control of

Cricket in India V/s. ITO (2012) 136 ITD 301 / 19 ITR 91 (Mumbai)

17(b) Charitable Trust.

CIT V/s. State Urban Development Agency. (Suda) (2013) 218 Taxman 146.

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Non- maintenance of accounts by a trust cannot be cause for denial of its

registration.

CAPITAL GAINS.

18. Exemption CIT V/s. Jagtar Singh. Chawla.

(2013) 358 ITR P & H High Court) 411.

Transfer of Capital Asset and Investment proceeds in residential property-

Investment within extended period of limitation for filing return.

Assessee entitled to exemption u/s 54F.

Ref. ITR online volume 1 Reported in 358 ITR Volume I.

Other cases CIT V.s Rajeshkumar Jalan 286 ITR 276 (Ghauti)

(II) CIT V/s. Jagriti Aggarwal 339 ITO 610 (P & H)

19. Capital Gains: Tenancy Right.

Meher R. Surti V/s. ITO

(2014) 27 ITR (Tribunal) 340 Mumbai (3)

Capital Gains Long Term Capital Gains- Exemption surrender of tenancy rights-

Deemed ownership cannot be considered for exemption- Assessee not entitled to

exemption for transfer of residential house under Se.54 I.T Act 1961 Se. 54 &

54F.

Capital Gains: Cost of acquisition Tenancy rights inherited by assessee. Cost of

acquisition is cost to previous owner, not nil- option for assessee to adopt fair

market value of tenancy right as on April 1, 1981 I.T Act 1961. SS 48, 49 (i) (ii)

(a), 55 (2) (i) (a) (b). .

20. Transfer:

Smt. Sowear Janaki V/s. Income tax Officer.

(2015) 271 ITR (Tribunal) 226 Chennai (2)

Agreement between assessee and builders for agreement of sale and Joint

Development of land Agreement requiring transfer of possession within previous

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year- No evidence to suggest possession given at later point of Time. Transfer

within meaning of Section 2 (47) Income tax Act 1961 S.2 (47).

21. Capital Gains: Exemption- Sale of residential Property and Investment of gain in

purchase of residential property to be constructed Se.54.

Sri Prasad Nimmagadda V/s. Dy. CIT.

(2016) 27 ITR Tribunal. Page 63 Hyderabad.

Scope of Section 54. Amount of Capital Gain not utilized in construction of

residential house within three years from date of three years expires exemption

can not be denied under Se.54 I.T act 1961 Se. 54.

22. Capital Gains- Computation:- Applicability of S.(12a) proviso to non-resident-

Cairn UK. Holdings Ltd. V/s. Director of I.T.

(2013) 94 DTR. (Delhi H.C) Page No.1 (issue No.196)

A non resident assessee is entitled to benefit of proviso to S.112 (1) on Sale of

equity shares said benefit cannot be denied because the second proviso to

Se.48 is not applicable.

23. Capital Gains:- Long Term or Short term . of Suresh Rao V/s. ITO

(2017) 94 DTR Banglore B. Tribunal Page No.1. (issue No. 196)

Property allotted to assessee in lieu.

24. Delivery based transactions in shares.

Honey Consultancy Services (P) Ltd. V/s. Dy. CIT 9 (2)

(2018) 144 ITD 541. (8) Mumbai Tribunal.

Profit arising from delivery based transaction of shares would be taxable as

capital gain.

25. Suresh Rao V/s. ITO 2 (1) Manglore.

(2019) 144 ITD 677 (9)

Where allotter failed to deliver property originall7y allotted and subsequently

registered alternate property in lieu of original property allottee’s right to property

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became vested from date of original allotment and capital gain on transfer of

property would be ascertained accordingly.

26. CIT I V/s. Yatish Trading Co (P) Ltd.

(2013) Taxman 316 (4) Se. 28 (1) & Se.45.

Capital Gains. Chargeable as (Business Profits V/s. Capital Gains)

A.Y. 2006-07. whether fact that an assessee is trading in shares and securities

would not estop it from dealing in shares as Investment and offer gain for tax

under head “Capital Gains” Held ‘YES’ whether it is open to trader to hold hares

as stock-in-trade as well as Investment and once shares sold are held as

Investment gains arising out of such sale of Investment are to be assessed under

head ”Capital gains” an d not under head Business Profits” Held ‘YES’.

27. CIT V/s. Bankim Jayantilal Shah.

(2020) 218 Taxman 310 (4) Gujarat High Court.

Profit from Intermittent dealing in shares is taxable as capital gains and not as

business Income..

28. CIT V/s. Manish Nathalal Lavti

(2021) 218 Taxman 308 (4) Gujarat High Court.

A.Y. 2006-07. Assessee, a salaried class person, earned profit amounting to

Rs.68 lakhs on sale of shares and claimed same as long term capital gain- A.O

held that assessee was trading in shares and accordingly treated profit in

question as business Income. Tribunal held that assessee was an Inverter and

accordingly treated gain in question as long tyerm Capital gain. Whether

Tribunal was justified in its view Held ‘YES’.

29. S. Muthuraja V/s. CIT.

(2022) 218 Taxman 73 (Madras H.C) (3)

Se. 50C of I.T Act 1961. Capital gains special provisions for full value of

consideration in certain cases (Reference to valuation officer) As A.Y. 2009-10

whether where specific objection was made by assessee to the A.O adopting

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market value of property under Se. 50C (2). A.O ought to have referred valuation

of Capital asset to valuation officer. Held ‘YES’.

30. Capital Gains:-

CIT V/s. J. Mahalingam (2013) 218 Taxman 157 (1)

Possession of land, along with power to sell given to an advocate to discharge

agreed services, deemed as transfer .

31. When transfer complete Agreement V/s. Possession(?)

Bhatia Nagar Premises Cooperative Society Ltd. V/s. ITO

24 (3) (1) (2013) 59 SOT 134 (Mumbai) (3)

Se. 2 (47) of I.T Act 1961 read with Section 53A of Transfer of Property Act

1882. Capital gains Transfer Development Rights Agreement) A.Y. 2009-10.

Whether where assessee- housing society entered into Development Rights

Agreement (DRA) with Developer transfer of property could be said to have

taken place only when possession was handed over to developer, and not on

date of agreement, when only a small partition of consideration had been

received Held ‘YES’.

32 S.2(47): Transfer- Capital gains- Firm- Reduction of share of partners-

Reconstitution of firm cannot be considered as transfer.[Ss.45(3), 45(4)]

It cannot be said that the land owned by a firm was transferred when firm was

reconstituted and new partners were admitted and there was reduction in the

shares of erstwhile partners. Capital gains did not arise on reduction of share of

partners.(A.Y. 1996-97)

CIT V/s. P.N. Panjawani (2013) 356 ITR 676 (Karn) (HC)

CIT V/s. Usha K. Panjkanai (2013) 356 ITR 676 (Karn) (HC)

33. S.2 (47) : Transfer- Date of transfer – Transfer of handing over possession

of property is – and not on date of sale agreement. [Ss.45, 54EC, Transfer

of Property Act, S.53A]

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Azad Zabarchand Bhandari V/s ACIT (2013) 58 SOT 347 (Mum.) (Trib.)

34 S.2(47): Transfer – Year of Transfer – Capital gains- Development

Agreement- Joint venture – No transfer as commencement of construction

activity was not started. [S.2(47) (v), 45, Transfer of Property, Act, 1882,

S.53A)

Tribunal held that during the previous year only an agreement to develop the

property was entered in to, whereby assigned his landed property in favour of

joint venture between him and developer, without commencement of construction

activity. Tribunal held that there is no transfer, as there is no extinguishment of

rights or receipt of consideration, it could not be said that developer had

performed its obligations as envisaged in section 53A of Transfer of Property Act,

and therefore there was no transfer as per section 2(47) so as to attract capital

gain tax (ITA No.290) 292 & 336/ Hyd /Bench dt.7-06-2013 (A.Y. 2006 – 07).

S. Ranjit Reddy V/s. Dy.CIT (Hud) (Trib.) (Unreported)

35. S.2(47) : Transfer – Year of Transfer – Development Agreement – Possession.

[Ss.2(47) (V), 45]

“Possession” as contemplated in Section 2(47) (V) need not necessarily be sole

and exclusive possession, so long as the transferee is enabled to exercise

general control over the property and to make use of it for the intended purpose.

In the case of an agreement for development of property, the mere fact that the

Assessee, as owner, has also the right to enter the property to oversee the

development work or to ensure performance of the terms of the agreement, does

not restrict the rights of the developer or introduce any incompatibility. {A.Y.

2005-06)

Durdana Khatoon (Mrs) V/s.ACIT (2013) 24 ITR 55 (Hyd.) (Trib.)

36. S.50C: Capital gains- Full value of consideration- Stamp valuation- lease

hold rights – MIDC Land.

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It is settled position that the provisions of section 50C do not apply to lease hold

rights. However whether or not an assessee has mere lease hold rights or has

rights superior to lease rights would depend upon correct interpretation of the

deeds. Merely because the nomenclature given to the deed is of ‘Lease’, it does

not follow that the assessee has only lease rights. Matter remanded.

Shava Norgren (P) Ltd. V/s. Dy. CIY (2013) 81 DTR 434 (Mum.) (Trib.)

37. S.54 : Capital gains- Year of taxability – Development agreement. [S.54F]

The assessee owned a piece of land and house on it and entered into an

agreement to develop the property. According to the agreement between the

parties, the assessee was entitled to get 42.5% of built-up area. Held, the

income arising from sale of land to the extent of 57.5% share arose to the

assessee in the financial year in which the agreement was executed. (A.Y. 2007-

08).

ACIT V/s. V. Ram Mohan (2013) 24 ITR 50 (Chennai) (Trib).

38 S.54F: Capital gains – Investment made before sale of existing residential

property is not entitled to exemption.

Investment in construction of new residential property made by assessee is not

entitled to deduction under section 54F to the extent the same is made before the

sale of existing residential property.*(A.Y. 2008-09)

Nimmagadda Sridevi (Smt) V/s. DCIT (2013) 58 SOT 54 (Hyd.) (Trib.)

BUSINESS INCOME

39. S.37 (1) : Business expenditure- Pooja expenses is allowable.

Pooja expenses were allowable as revenue expenditure. (A.Y. 2004-05)

Karur Vysya Bank Ltd. V/s. ACIT (2013) 25 ITR 731 (Chennai) (Trib.)

40 S.37(1) : Business expenditure- Professional fee – Merely because there is

no formal agreement express cannot be disallowed.

KEC International Ltd. V/s DCIT (2013) 58 SOT 18 (URO) (Mum) (Trib.)

BUSINESS INCOME & DEDUCTIONS.

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41. Deduction only on actual payment

Euro Pratik Ispat (P) Ltd. V/s. Asst.CIT.

(2013) 27 ITR Tribunal (432) Mumbai.

Provident fund contribution made after due date for filing return. Allowable in the

year of payment Se. 36 (i) (va) 43B.

42. Depreciation: Rate of Depreciation:-

Rayban Sun Optics India Ltd V/s. Dy. CIT.

(2013)27 ITR (Tribunal 440 Delhi. (Section 32)

Uninterrupted Power Supply System (UPS) and printer. Higher depreciation at

Sixty percent allowable.

43. Deduction only on actual payment.

(2013) 358 ITR 43 ( P & H High Court) (1)

Business Expenditure deduction only on actual payment contributions of

employee’s State Insurance and Provident fund deposited prior to filing return u/s.

139 (1). Allowable Se. 2 (24) (x) 36 (i) (va) 43B, 139 (1).

44. Jewellery Business: Wastage Loss:-

Dy CIT V/s. Sanghi Jewellers (P) Ltd.

(2014) 27 ITR (Tribunal) 317 Hyderabad.

Business Loss:- Jewellery Business. Wastage Loss of Gold and Silver. Wastage

of 5 percent within permissible limit Addition to be deleted.

45. Abbas Wuzir (P)Ltd V/s. (2004) 265 ITR 77 (All).

ITO has to be that he has to look at the matter from the view point of a prudent

businessman, and not from his own view point.

46. Commission paid to the Partners Son Se. 40 A (2)

S.M. HAQ V/s,. CIT (2013) 358 ITR 246 (All)

Business Expenditure: Firm- Commission Disallowance of part of Commission-

Commission paid to Son of Partner claim that young man of twenty one had

expertise in mixing tobacco,. No evidence to support claim- Agreement for

payment of commission stating that it was for looking after labour, production and

dispatch Disallowance of part of commission- Justified.

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47. CIT V/s. Excel Industries Ltd. (SC)

a. 358 ITR 295 (S.C) (2)

(I) Res. Judicata:- Consistent view taken in favour of assessee on questions-

Court will not take different view without vary convincing reasons.

(II) Income tax Department Not to indulge in fruitless litigation where no loss of

revenue involved.

(III) Assessing Officer:- duly to take pragmatic view rather than pedantic

approach.

48. Fines:

Usha Mircro Process Controls Ltd. V/s. CIT.

(2013) 218 Taxman 68. (3) (Delhi H.C)

Se.37 (1) of I.T Act 1961. Business Expenditure- allowability of ‘Penalties’ A.Y.

1985-86. whether, where assessee- importer paid redemption fine in lieu of

confiscation of re-exported goods, it was compensatory in nature and not penal,

and was therefore, an allowable deduction u/s 37 (1).

49. Business Income:-

CIT V/s. Velankani Information System (P) ltd.

(2013) 218 Taxman 88 (2) Karnataka)

Rental Income from specialized buildings with comprehensive facilities are

inseperable and assessable as business Income.

50. Bad Debts.

CIT II V/s Gujarat Narmada Valley Fertilizers Co. Ltd. (2013) 218 Taxman.122

(1)

Sum lent by employer to motivate its employees is a business decision, allowable

as bad debts if irrecoverable.

51. Business Income or Income from other Sources (?)

Interest.

Oasis Securities Ltd V/s. Dy. CIT

(2013) 59 sot 302 (4)

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Where assessee engaged in business of stock broking earned bank interest on

account of 50 percent of margin money given in form of fixed deposit to obtain

bank guarantee in favour of National Stock Exchange (NSE). So that assessee

could have trading limits in cash market segments of NSE. Such Interest was

taxable as business Income.

52. Section 14A disallowance.

Oasis Securities Ltd. V/s. Dy. CIT (2013) 59 SOT 302 (4)

A.Y. 2007- 08. Assessee had borrowed money which was utilized in purchase of

shares held both as Investment as well as stock-in-trade. Whether since shares

in which borrowed money was invested were trading shares disallowance of

interest under Section 14A could not be made in relation to stock-inp trade. Held

‘YES’.

Whether , however in respect of Investment in shares, Since some administrative

expenses had been incurred by the assessee, disallowance under Section 14A

had to be made Held ‘YES’.

53. Interest payment whether covered under Se.36 (i) (iii) or ASe.37 (i) Explanation(?)

Asst. CIT V/s. Arun Thomas (2013) 94 DTR Cochi (Tribunal) 116 (199)

Where the assessee had borrowed funds outside the books of account in his

Individual capacity for the purpose of money lending business, same is allowable

as deduction under the provisions of Se.36 (i) (iii) and provisions of Se.37 (i) read

with explanation thereof are not applicable.

ASSESSMENT – REASSESSMENT.

54. Rectification of mistakes:-

CIT V/s. Nathpa Jhakri Joint Venture.

(2013) 358 ITR 233 (Bombay H.C) (2)

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Mistake must be apparent from record- dispute regarding period for which

interest on refund was payable- part of Interest cannot be withdrawn in

rectification proceedings. Se.154.

(The Supreme Court in T.S. Balaram V/s. ITO V/s. Volkart Bros. (1971) 82 ITR

50 (SC) held that the mistake apparent on the record must be an obvious and

patent mistake and not something which can be established by a long drawn

process of reasoning on points on which there could be two possible opinions:-

55. Refund:- Advance tax.

(2013) 358 ITR 291 (SC)

CIT V/s. Gujarat Fluoro Chemicals (Supreme Court) (2)

Refund Advance tax- deduction of tax at source- Aggregate of Instalments of

advance tax or deduction of at source exceeding assessed tax Interest on refund

only as provided for in statute. Sandik Asia’s case explained. Se. 214 &244A.

56. Re.opening of case.

ITO V/s. on Exim (P) Ltd.

(2013) 94 DTR (Delhi Tribunal) 140 (200)

A.O having re.opened the assessment on the basis that the assessee had

received accommodation entries from the company ASB Ltd. Pursuant to the

information received from the Investigationwing without indicating the nature of

transasctions made by the assessee, much less anything to establish that the

said transactions are in the nature of accommodation entries, the reasons

forming thebasis of re.opening of assessment do not satisfy the requirement of

Se.147.

57. E- Return.

Gemini Communication Ltd. V/s. Asst. CIT Chennai.

(2013) 144 ITD 634 (8)

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Filling of return electronically is a directory provision and if return is filed

manually on or before due date, such return can not be ignored for purpose of

allowing assessee’s claim for deduction.

58. Service of notice:-

Shahbad Co.operative Sugur Mills Ltd. V/s. Dy. CIT.

(2013) 218 Taxman 352 (5( (Punjab and Har. H.C)

Presumption as to valid Service of notive hold good if same is not returned back

to department.

59. Re-assessment. Change of opinion, Assessment made u/s 143 (1)

Asst. CIT V/s. Kapil Dev.

(2013) 94 DTR (Delhi Tribunal) Page No. 35 (197)

Re-assessment change of opinion: Assessment under Se. 143 (1) once there

was no original assessment u/s 143 (3) no opinion was expressed by the A.O .

Therefore, it can not be said that the reopening of assessment w3as based on

change of opinion by the A.O. Further, Since the original assessments were not

completed under Se.143 (3) PROVISO TO s.147 was not applicable. Therefore

CIT (A) was not justified in quashing the reopening of assessments on the basis

that assessee had disclosed all the material facts necessary for assessment.

T.D. S & INTERNATIONAL TAXATION.

60. Commission Payment to non-resident (Se.195)

9(1) (VII), 40 (a) (ia) 195.

CIT V/s. . Model Exims (2013) 358 ITR 72 (All ) (1)

Business Expenditure – Disallowance Payments to non-resident- failure to

deduct tax at source. Circulars in force during relevant year not obliging

assessee tio deduct tax at source- Circular withdrawing earlier circulars operative

only from date of issue and not applicable from earlier years- Circulars binding

upon Department- No obligation to deduct tax at source on commission paid to

non-

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resident who was not liable to pay tax in India- Expenditure allowable.

61. T.D.S Payment received under holiday Home Scheme.

CIT V/s. Oil and natural Gas Corpt. (India) Ltd.

(2013) 358 ITR 131 Gujarat H,.C (1)

Payment received under holiday home Scheme. Exempt in employee’s hands

only if, in fact, used towards hotel, boarding and lodging facilities for holidays

amounts not spent towards holiday home scheme would constitute employee’s

taxable Income.

62. Business Expenditure:-

Vipin P. Mehta V/s. ITO. (2013) (ITR Tribunal OL)

(27 ITR Part I)

Disallow- Payments liable to deduction of tax at source- Assessee at time of

payment holding declarations in form 15H or form 15G,. Furnished by payees-

Assessee not liable to deduct tax. Delay by assessee in filing of declaration form

with Department. Section 40 (a) (ia) not attracted. Disallowance not proper. I.T

Act. SS.40 (a) (ia) 194A.

63 Disallowance under Se.40 (a) (i) Payment of Commission to foreign Agent:-

Reliance International V/s. ITO (2013) 94 DTR Luknow Tribunal Bench Page 14.

[issue No.196] A.Y. 2008-09.

Assessee having made payment of commission to foreign agent outside India for

the services rendered outside India, it can not be held that the agent received

payment in India merely because it is recorded in the books of accounts

maintained in India, and, therefore, assessee was not required to deduct tax at

source from the payment of commission to the agent and consequently it could

not be disallowed under Se. 40 (a) (i).

64. CIT V/s. Career Laucher India Ltd (Delhi H.C)

(2014) 358 ITR 179 (Delhi HC) (2)

18

T.D.S contract Assessee running Coaching Classes for competitive exams .

Agreement with franchises not a work contract. Tax not deductible at source on

payment to franchisees.

65. CIT V/s. Mother Dairy India Ltd.

(2013) 358 ITR 218 (Delhi HC) (2)

TDS Commission- Assessee undertaking procumbent and marketing of milk and

milk products through concession- concessionaries concessionaries agent

making purchases of milk- outright- Not a case of agency that concessionaires

operated out of booths or with equipment provided by assessee or that assessee

had right to inspection not material, Difference between maximum retail price

fixed by assessee and price concessionaire paid to assessee not commission.

Assessee not bound to deduct tax at source there from IT act 19612. Se. 194H.

(Note. Property is goods were transported).

66. TDS under Section 194C

Asst.CIT (TDS) V/s. Delhi Public School.

(2013) 144 ITD 670 (9) (Delhi Tribunal)

School to apply section 194C on a transport contract, if transporter incurs running

cost and keeps possession on vehicles.

67. TDS Under Section 194 I

ITO V/s. Indian News Papers Society.

(2013) 144 ITD 668. (9) Delhi Tribunal.

Payment of one time lease premium to acquire a leasehold land is not subject to

tax deduction u/s 194I.

68. ITO (TDS( V/s. Navi Mumbai Sez (P) Ltd.

(2013) 38 Taxmann.com 218 Mumbai Tribunal.

Lease premium paid to acquire a leasehold land for 60 years isn’t a rent, no

TDS under Se.194I.

69. Disallowance under 40 (a) (ia)

CIT V/s. Vector Shipping Services (P) Ltd.

19

(2013) 218 Taxman 93 (Allahbad) High Court.

(2013) 94 DTR (All) 101

Paid V/s. Payable Clash Allahbad High Court affirms view taken by special

Bench in Merilyn Shipping case.

70. TDS Under Section 194J

CIT V/s. (TDS) V/s. Rajsthan Urban Infrastructure.

(2013) 218 Taxman. 10 Rajsthan.

Service tax charged on Professional receipts but remitted separately would not

be subject to section 194J TPS

71. CIT V/s. Crescent Export Syndicate.

(2013)94 DTR (Calcutta HC) Page No 81 (198)

Expenses sought to be disallowed under Se. 40 (a) (ia) are those Expenses” on

which tax D deductible at source under Chapter XVII-B and nothing turns on the

basis of the fact that the legislature used the word “Payable and not” paid or

Credited”.

72. Business Expenditure. Disallowance under Se. 40 (a) (ia)

CIT V/s. Naresh Kumar (2013) 94 DTR (Delhi H.C) Page No. 48 (issue No

197)

Applicability of amendment of Se.40 (a) (ia) by the Finance Act 2010. [In a case

where the tax was deductible and was so deducted during the last month of

previous year on or before the due date specified in subsection (1) of Se.139.

On which tax is deductible at source under Chapter XVIIB and such tax has not

been deducted or after deduction has not been paid on or before the due date

specified in sub-section (1) of Se.139].

Tribunal was justified in holding that the amendment made to Se. 40 (a) (ia) by

the Finance Act 2010 should be given retrospective effect and applicable to A.Y.

2008-09 in question.

PENALTY. Penalty Under Se.271 (1) (c )

20

73. Silver Land Developers (P) Ltd V/s. ITO ITA No 8444 / Mum/ 2010. A.Y. 2005-06. Date of Order 8/3/2013. Se.271 (1) ( c) Penalty cannot be levied when the dispute is not about the genuiness of the expenditure or the bonafides of the claim but only about the year of its allowability.

(2013) TIOL-265-ITAT Mum. (May2013)- BCAJ.

74. Enhancement of Income on estimation basis:- (149 issue) CIT V/s. P. Rojes (2013) 90 DTR (Madras H.C) 399 Penalty under Se.271 (1) (c ) can not be imposed on the basis of Estimation of Income more so, when thee is no specific findings as to whether it is a case of suppression of turnover or of estimation of Income at a lower rate, and the assessee had filed revised P & L A/c showing enhanced net profit before the completion of assessment.

75. Penalty u/s 271 (1) ( c) concealment. N. Ranjit V/s CIT (2013) 91 DTR (Madras H.C) 17 Revised return showing capital gains- Facts clearly point out to the contumacious conduct of the assessee that but for the Investigation and the Enquiry made by the Revenue the revised returns would not have come as regards the Income relating to the Capital gains arising on the sales of shares and therefore, penalty under Se. 271 (1) ( c) was sustainable.

76. Disallowance of claim for deduction:- CIT V/s. DCM Ltd. (2013) 93 DTR (Del. .H.C) 406 Disallowance of claim for deduction- Law does not bar or prohibit an assessee from making a claim. Which he believes may be accepted or is plausible when such a claim is made during the course of regular or scrutiny assessment, liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law.

77. Mrs. Maninder Sidhu V/s. ACIT. (2011) 132 ITD 296 (Del.) A.Y. 2004-05. Set off Long Term Capital Loss against Short term Capital Gain wrongly claimed by assessee. Withdrew the claim during the course of assessment- Revenue did not prove or show falsity of facts- as disclosed by assessee in computation of Income- In fact revenue accepted computation of Capital loss and gain. Assessee under bonafide belief that set off is allowed in the absence of any proof of falsity of facts in computation of Income as submitted by the assessee. Penalty not to be levied wrong claim is to be distinguished from false claim.

78. CIT V/s. Bennett Coleman & Co. Ltd. 259 CTR. 383 (Bom) Penalty- Concealment under Se.271 (1) ( c) A.Y. 1999-2000. Inadvertent mistake in claiming exemption. Not justified.

79. (2011) 132 ITD 34 (Allahbad) Asst. CIT V/s. A.H. Wheelers & Co. (P) Ltd. A.Y. 2004-05. Section 271 (1) ( c) Penalty can not be levied in respect of wrong figures claimed by the assessee by mistake.

80. Penalty: CIT V/s. Amit Jain 351 ITR 74 (Delhi H.C) Short term Capital gains assessed as business Income. Penalty u/s. 271 (1)( c) not justified.

81. Se.50C & 271 (1) (c ) (20130TIOL-39- ITAT MADF C. Basker V/s. ACIT A.Y. 2007-08 dated (12.10.2012) The mere fact that the A.O had invoked Se.50C (2) and adopted guideline value for computing Capital Gains- ignoring what was disclosed by the assessee. IPSO facts can not be the sole basis for imposing penalty.

82. (2012) 150 TTJ 159 (Mumbai)

BSEL Infrastructure Realty Ltd V/s. Asst. CIT.

21

ITA No 6559/M-2011. (13-4-2012)Penalty can not be levied when additions were made while computing the total Income under normal provisions of the I.T Act but finally the assessee’s Income was determined on the basis of book Profit u/s 115JB.

83. (2013) IIOL- 764 ITAT Indore. ` B.C.A.J – October 2013.

Section 40 (a) (ia) 271 (1) ( c) Disallowance under Sec. 40 (a) (ia) does not attract penalty under section 271 (1) ( c) . making an incorrect claim in law does not tantamount to furnishing of inaccurate particulars of Income. Levy of penalty is not justified merely because the assessee has claimed certain expenditure that expenditure is not eligible in view of the provisions of Se. 40(a) (ia) of the Act and for that reason, Expenditure is disallowed.

84. Transfer Pricing- Penalty under

Se. 271 (1) ( c ) Michael Aram Exports (P) Ltd. V/s. Income tax Officer.

(2013)27 ITR Tribunal 528 Delhi (4) Concealment of Income. Adjustment applying transfer pricing provisions – not concealment of Income. Cancellation of penalty justified.

85. Dispute as to year of taxability of Income. Dy.CIT V/s. Otuis Elevator Co. (I) Ltd. (2013) 27 ITR (Tribunal) 303 (Mumbai) (3) Penalty furnishing inaccurate particulars of Income. Dispute as to year of taxability of Income. Penalty can not be levied. Se.271 (1) ( c).

86. Kalyan Sarkar V/s. Dy.CIT (2013) 27 ITR (Tribunal) 360 Cuttack.(3) Concealment- Mutual Fund Investment Information from assessee’s portfolio Manager that Capital Investment of assessee was worth mere. Not a case of concealment of Income – decisions favourable to assessee should be accepted. Levy of penalty not justified. I.T Act 1961 271 (1) ( c).

87. Advatia Estate Development (P) Ltd. V/s. ITO (2013) 27 ITR (Tribunal) 112 Mumbai (1) Penalty- Concealment of Income. Admission of substantial question of law by High Court with respect to additions on basis of which penalty levied penalty to be deleted. Income tax Act 1961 Se. 271 (1) ( c)

88. CIT V/s. Smt. Neela Datta. (2013)357 ITR 525 (Delhi ) H.C) (4) Penalty concealment of Income. Furnishing in accurate. Particulars- Employee’s Stock option Scheme. Revenue treating gains not as long term Capital Gains but us short term Capital gains:- Assessee surrendering right to contest issue on condition no penalty would be imposed. Whether gains long term or short term, a contentious issue at material time not a case of furnishing in accurate particulars or concealment of Income No penalty legible.

89. CIT V/s. Rajiv Bhatara. (2013) 94 DTR (P&H High Court) 137 (200) Penalty under Se. 271 (1) (c ) could not be levied merely because assessee’s claim of land being situated beyond 8 Kms of municipal limit was rejected and profit assessed as capital gains.

90. IL & FS Maritime Infrastructure Co. Ltd. (2013) 144 ITD 559 (8) <u,bai Tribunal.

22

Delay in furnishing TP Report condoned as assessee had belief that transaction was not covered under T.P.

91. Penalty – PAN CIT V/s. Gail (India) Ltd. (2013) 218 TYaxman 415 (5) Se. 139A read with Section 272B of I.T Act 1961. PAN- Quoting in TDS Certificates Penalty for failure to comply with provisions of Section 139A. A.Y. 2003-04. Whether, where assessee deductor did not mention PAN of deductees on TDS Certificates issued by iot as same was not provided by deductees within as same was not provided by deductees within time prescribed there was reasonable cause for non-compliance of Section 139A (5A) and therefore, penalty under Section 272B could not be imposed. Held ‘YES’.

92. Penalty under Se. 271 (1) ( c) Concealment. Mahaveer Jain V/s. Dty. CIT (2013) 94 DTR Jodhpur Tribunal Page 25 (197) Assessee having surrendered unexplained credits involving small amounts in the return filed under Se.153C in order to avoid litigation and disclosed capital gain which was earlier shown in the return of the subsequent year by mistake and also another capital gain which was wrongly shown on business Income in the original return it can not be said that the assessee had concealed his Income or furnished in accurate particulars of Income in respect of the aforesaid disclosure/ addition and therefore levy of penalty under Se. 271 (1) ( c) was not justified.

93. Disallowance of claim for Loss. CIT V/s. DCM Ltd. (Delhi H.C) 406 (192) Disallowance for deduction. Law does not bar or prohibit an assessee for making a claim, which he believes may be accepted or is plausible- when such a claim is made during the course of regular or scrutiny assessment- liberal view is required to be taken as necessarily the claim is bound to be carefully scrutinized both on facts and in law.

94. S.271B : Penalty – Failure to get accounts audited – Civil contractor is not liable to penalty as theCBDT has not prescribed the books of account, [S.44AA, 44AB, 261A, Rule 6F]

K.V. Ramachandran V/s Dy. CIT (2013) 58 SOT 264 (Cochin) (Trib.)

Others.

95. Deemed Dividend Se.2 (22) (e )

Asst. CIT V/s. Source Hub India (P) Ltd.

(2013) 27 ITR (Tribunal) 470 Bangalore (4)

Company- Dividend – Deemed dividend. Loan to assessee Company by another

Company- common Shareholders. Scope of Section 2 (22) ( c) Provision does

not contemplate piercing corporate Viel. Test of holding substantial Interest by

common shareholders does not satisfied- Assessee not shareholder of company

which provided Loan- Section 2 (22) ( c) not attracted.

96. Principle of Mutuality.

23

Hatkesh Co.op. H.S. Ltd. V/s. Asst. CIT.

(2013) 27 ITR (Tribunal) 494 (4)

Essential condition for application of principle.

Mutual arrangement must not lead to scope for generation of Income in hands of

Individual member.

97. Re-assessment Limitation.

Se.80HH. 147 149 (i) (a)

Dy. CIT V./s Simplex Concrete Piles (India) Ltd.

(2013) 358 ITR 129 (SC)

Notice after four years: Special deduction. Industrial undertaking- Assessment

completed on Basis of decision of High Court allowing deduction for Civil

construction can not be reopened after four years solely on basis of subsequent

reversal of high court by Supreme Court.

98 Agilsys. It Services India (P) Ltd. V/s. Income tax.

(2013) 27 ITR (Tribunal) 244 Mumbai (2)

Reassessment- Notice after four years- conditions precedent- No averment in

notice or in reasons and truly material facts. Notice invalid.

99. Section 56. Marriage gift of daughter received by the father whether exempt (?)

Rajinder Mohan Lal V/s. Dy. CIT

(2013) 218 Taxman 213 (3)

A.Y. 2007-08. Whether word Individual appearing in clause (b) of proviso to

section 56 (2) (vi) relates to marriage of Individual concerned i.e. assessee, and

not to marriage of any other person related to him in whatsoever degree- Held

YES, Assessee received gifts from relatives and friends on occasion of his

daughter’s marriage. He did not admit any tax liability on amount of gifts-

Whether in view of aforesaid position of law amount of gifts was not exempted

from tax and was rightly added to Income of assessee Held ‘YES’.

100. Speculative Transactions:-

24

CIT V/s DLF Commercial Developers Ltd.

a. 218 taxman 45 (2)

Se. 43 (5) read with Section 73, of I.T Act 1961 Speculative transactions

(Derivatives) whether definition of speculative transaction” as indicated in

Se.43(5) is restricted in its application to working out mandate of sections 28 to

41only Held ‘YES’.

Whether in terms of Explanation to Se.73 in case of certain types or class of

companies, business of purchase and sale of shares is deemed to be speculation

business- Held ‘YES’.

Whether where by all accounts derivatives were based on stocks and

shares which full squarely within explanation to section 73 loss from sale,

purchase of such derivative would be speculative loss which could not be

permitted to be carried forward. Held ‘YES’.

101. Settlement Commission:-

CIT V/s. Income tax Settlement Commission.

(2013) 218 Taxman 49 (Gujarat H.C)

Application for Settlement was not maintainable if assessment became time

barred.

102. Tax Practitioner:-

Samagra Vikas Mahila Samiti V/s. CIT Gwalior.

(2013) 59 SOT 243 (4) Agra Tribunal.

Where retired Additional CIT claimed that without any certificate of registration

us ITP he could practice before Income tax Authorities, mere possession of

Educational qualification without under going department examination conducted

by Board itself was not sufficient to have any right to practice as ITP.

103 Gifts/ Award received by an amateur Sportsman. Whether taxable (?)

Abhinav Bindra V/s. Dy. CIT

(2013) 94 DTR (Delhi Tribunal) 45 (issue No. 197)

25

Gifts, awards received by the assessee, an amateur Sportsman (Shooter) from

various governments. Local authorities trusts and institutions besides some

corporates and Individuals for winning a gold medal in the Olympic Games are

covered by Circular No 447 dt. 22nd Jan. 1980 and therefore the same cannot be

treated as Income in his hands. (Note. Circular No.447 is not withdrawn, despite

the amendment in S.10 (17A) and Insertion of Se. 56 (2) (v) has also no been

controverted by the Revenue.