Twin claim u/s 80HHC/80-IA; Receipt of bonus-shares u/s 56(2); Revisionary powers of CIT u/s. 263; Loss of Shareholding - Whether Capital Loss?... and lots more!
“Taxsutra Database”, a true Income-tax research tool, is an archive of over 111160+ Income Tax Rulings reported across ITR, CTR, Taxman, DTR, ITD, TTJ, and ITR (Trib) and also includes recent ‘unreported handpicked rulings of SC, HC & ITAT’. It is a completely integrated service with the following features:
· Comprehensive coverage of all latest cases powered by an advanced search engine to provide a seamless user experience;
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· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.
· Judicial “forward & backward reference”
We are glad to present to you the 227th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Key Takeaways from Handpicked Rulings
1) ITAT allows Revenue appeals in Co-operative Bank case, upholds Pr. CIT's Sec. 263 order - ITAT upholds CIT's revision u/s 263 of AO's assessment order in respect of loss on account of One time Settlement (OTS) in case of assessee, a co-operative bank; Pr CIT noticed that AO completed the assessment by allowing deduction u/s 36(1)(vii) without referring to its first proviso and applying the provisions of section 36(1)(via) r.w.s 36(2); Accordingly, the PCIT issued show cause notice to the assessee by issuing notice u/s. 263(1) calling upon to explain as to why the assessment order be not cancelled / modified; Assessee submitted that “loss on OTS” is nothing but the claim of deduction of bad debt ..... Click here to read and download ITAT Order
2) ITAT: Upholds revision u/s. 263 for AO’s non-observance of impact of observations of special auditor in earlier years - ITAT upholds Pr CIT’s invocation of revisionary jurisdiction u/s. 263 for 2014-15, in absence of inquiry by AO on the differences in the values adopted in the balance sheet for the present year considering changes made by the special auditor appointed u/s. 142(2A) for the previous year i.e., AY 2013-14; Observes that during the assessment, if the AO has considered the details and formed an opinion, which is one of the possible views in law, then that view deserves not to be replaced by the higher authority i.e. Commissioner while exercising the powers u/s 263 of the Act; However, states that “A moot question before us is, whether the AO has taken one of the views possible in law?”; Noting that the AO issued notice only on 20.12.2017, and he has passed the assessment order on 30.12.2017, ITAT opines that even if one assumes that AO had taken cognizance of the details, and was duly aware about the........Click here to read and download ITAT Order
3) ITAT: Mere mentioning the wrong section is not fatal to the addition, substance prevails over form – ITAT rejects assessee's contention that the unexplained deposit into bank account cannot be considered as income u/s 68 and it should be u/s. 69 / 69A of the Act; Notes that assessee made huge cash deposits in his bank account ......Click here to read and download ITAT Order
Note: Bangalore ITAT in [TS-7605-ITAT-2017(BANGALORE)-O] held that mere mention of section 153C in the assessment order will not render the assessment invalid or void ab-initio.
4) ITAT allows twin claims of Section 80HHC and Section 80-IA - ITAT, in the second round of proceedings, rules in favour of the assessee, follows SC decision in [TS-5090-SC-2015-O]; Assessee filed an appeal claiming that CIT(A) erred in upholding the decision of the AO of restricting the deductions under Chapter VI-A despite the fact that the aggregate of deductions under section 80IA and under section 80HHC was less than 100% of the profits of the business of the assessee; ITAT notes that Revenue's SLP in [TS-5090-SC-2015-O], stands dismissed on 17-09-2018, meaning thereby that the corresponding HC’s order deciding the issue in assessee's favour and against the department has attained finality that the twin claims of Section 80HHC and Section 80-IA raised at the former's behest qua profits of the eligible business undertaking do not amount to double deduction.......Click here to read and download ITAT Order
Note: ITAT in the aforesaid order notes that SC in [TS-5090-SC-2015-O] has dismissed Revenue’s appeal against HC order allowing twin claim of deductions u/s. 80HHC and 80-IA. "On the contrary, the division bench comprising Justice Anil R. Dave and Justice Deepak Misra referred the question of twin deduction u/s 80HHC and 80IA to a larger bench due to difference of opinion expressed in the Order dt. 10.12.2015
5) HC: Receipt of bonus-shares, though without consideration, not taxable u/s 56(2) – HC dismisses Revenue’s appeal, upholds ITAT order deleting addition made u/s 56(2)(vii)(c), holds that bonus shares received by assessee during AY 2012-13 does not result in ‘receipt of property without consideration’ as envisaged u/s 56(2)(vii)(c); Notes that 56(2)(vii) of the Act contemplates two contingencies firstly, where the property is received without consideration and secondly, where it is received for consideration less than the fair market value; Explains that “The issue of bonus shares by capitalization of reserves ......Click here to read and download HC Judgment copy
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Expert Column
Pursuant to announcement of merger of LVB with DBS India, many investors have been raising queries regarding the claim of loss on shareholding in LVB shares and whether under the tax laws, assessees are entitled to claim the loss in the current financial year and set it off against any capital gain on the sale of other assets. With the stock market booming, investors made huge gains by way of capital gains and if not attentive, they may end up paying tax (including advance tax) without setting off the eligible losses which they are otherwise entitled to.
Against this backdrop, CA S. Ramanujam analyses the LVB-DBS amalgamation scheme while scrutinizing as to when the loss actually crystallises so as to enable the assessee to claim it as a deduction. The author highlights steps taken by the Govt. and RBI to protect the investors’ / depositors’ interests to rescue companies/financial institutions that went into financial crisis. Talking specifically about the LVB crisis, the author inter alia points out an interesting clause under the amalgamation scheme notified by the Finance Ministry, which specifies that all the share capital and reserves & surplus of LVB are written off as on November 27, 2020 and all the value of shares became nil.
Analyzing the relevant provisions of the Income Tax Act and case laws explaining the applicability of ‘extinguishment’, the author observes that an extinguishment has occurred in LVB’s shares. The author opines that the ultimate outcome in this case even when, in the most unlikely scenario, a compensation is ordered by Courts to all shareholders may not affect the present claim, based on the RBI notifications, one can claim the loss which can be carried forward if there are no matching capital gains to set off. In conclusion, the author remarks that “One can end up by saying—the law needs to gallop too, along with the new solutions offered to tackle bigger scams; both should move hand in hand!”
Click here to read this incisive article titled “Loss of Shareholding in Lakshmi Vilas Bank - Whether Capital Loss?”
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Against this backdrop, CA S. Ramanujam analyses the LVB-DBS amalgamation scheme while scrutinizing as to when the loss actually crystallises so as to enable the assessee to claim it as a deduction. The author highlights steps taken by the Govt. and RBI to protect the investors’ / depositors’ interests to rescue companies/financial institutions that went into financial crisis. Talking specifically about the LVB crisis, the author inter alia points out an interesting clause under the amalgamation scheme notified by the Finance Ministry, which specifies that all the share capital and reserves & surplus of LVB are written off as on November 27, 2020 and all the value of shares became nil. 
