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2021-09-22
Issue No. 247 / September 22nd, 2021
Dear Professionals,
We are glad to present to you the 247th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!
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Status of Journals Updated
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ITR Vol 436 PART 4
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Dated: 30th Aug 2021
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ITR Trib 90 Issue 4
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Dated: 6th Sep 2021
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CTR Vol. 321 Issue 30
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Dated: 13th Aug 2021
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DTR Vol 204 Issue 160
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Dated: 1st Sep 2021
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TAXMAN Vol. 281 Part 5
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Dated: 11th Sep 2021
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ITD VOL.190 Issue 2
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Dated: 1st Sep 2021
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TTJ VOL. 212 Issue 31
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Dated: 17th Aug 2021
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Key Takeaways from Handpicked Rulings
1) HC: Co-op society offering credit facilities to members, not co-op banks, eligible for deduction u/s 80P - Assessees-Deendayal Nagar Sahakari Pathsaunstha Maryadit and The Shiroda Urban Cooperative Credit Society Ltd. are registered Co-operative Societies, governed by the Goa Co-operative Societies, formed with the object of accepting deposits and provide credit facilities; In the course of assessment proceedings Revenue held the Assessees would be co-operative banks within the meaning of Part V of the Banking Regulation Act and disallowed the deduction u/s 80P(2); Revenue further held the activity of the society to be akin to banking and their members were from public and transactions took place post membership, and that there was no express prohibition on induction of a co-operative society as a member; HC observes that Assessees have their paid up share capital and reserves in excess of Rs. 1 lakh, and thus satisfied one of the conditions under Part V of the Banking Regulation Act; Further remarks that Revenue was at loss to show as to how there is prohibition to induct a cooperative society; With regards to business of accepting deposits and lending money, HC remarked that no specific material was placed on record showing that Assessees were offering credit facilities to non-members ……………..Click here to read and download HC judgment
2) HC: Rental income from leasing plant & machinery deductible u/s 80HHC - Assessee-Company, engaged in manufacture and sale-export of Calcined Petroleum Coke (CPC), was disallowed deduction u/s 80HHC by the Revenue pursuant to the directions issued by the CIT u/s 263 holding that product exported by Assessee was mineral oil; AO in giving effect to the aforesaid order, partially allowed Assessee’s claim for deduction u/s 80HHC which was challenged before the CIT(A) who remanded the matter for re-computation of deduction u/s 80HHC; Assessee preferred an appeal before the ITAT which dismissed the appeals against which order Assessee preferred before the HC;Observes that Assessee engaged in manufacture of CPC purchased plant and machinery which was given on lease and Assessee derived rental income……………..Click here to read and download HC judgment
3) HC: Interest on interest-free loan not taxable, when advanced to subsidiary for commercial expediency - Bombay HC dismisses Revenue’s appeal, rules against taxability of interest income for interest-free loans advanced to subsidiary entities;Assessee-Company was a holding company with deep interest in its subsidiary, advanced interest-free loans of Rs. 132.31 Cr. to the subsidiary entity and was called upon to explain why such interest income should not be taxed in its hands; Revenue made an addition of Rs. 15.37 Cr, disregarding the explanation provided by the Assessee, which was deleted by the CIT(A) and ITAT on appeal; HC observes both the CIT(A) and ITAT have recorded findings of fact that loans advanced to subsidiaries were not sham transactions and were advanced for reasons of commercial expediency; HC finds from the material on record that the company has reserves of over Rs.1000 Cr. and even the subsidiaries did not derive any interest income from the interest free advances received from the Assessee……………..Click here to read and download HC judgment
4) ITAT: Quashes revision; Assessment based on adequate enquiries, original documents - ITAT allows Assessee’s appeal, holds proceedings u/s 263 to be not erroneous where the AO passed the order pursuant to sufficient enquires; A search operation was conducted at the premises of one M/s Godwin Group, during the course of which, certain documents related to Assessee-Individual were found; Based on the information and after recording the satisfaction note, Assessee’s case was subjected to assessment u/s 153C; The evidence obtained pertained to an agreement to sell a particular property for a consideration of Rs.11.25 Cr.; Assessee submitted that the agreement was executed by a Amarjit Randhwa acting for himself and a co-owner, and that the Assessee had not appointed this person as a GPA, and accordingly the agreement to sell cannot be used against Assessee; Revenue after making adequate enquiry accepted Assessee’s submission and held that entire amount was liable to be assessed in the case of Amarjit Randhwa in his individual capacity; Subsequently Pr.CIT initiated proceedings u/s 263 holding the assessment as erroneous and made without adequate enquiry; ITAT finds that “once the order passed by the CIT Appeal in the hands of the ……………..Click here to read and download ITAT Order
5) HC: Seizure of jewellery held as stock-in-trade, illegal; Awards Rs.1 Lac as interest - HC allows assessee-jeweller’s writ petition, directs Revenue to “forthwith return to the Petitioner, the jewellery seized” and directs revenue to pay interest of a sum of Rs.1 lakh as a gross amount towards retention of assessee's is stock-in-trade; Declares all the actions taken pursuant to search, as illegal and contrary to the provision of Section 132(1)(iii); Holds that ..”the seizure has to be conducted after due care and caution”; The the Investigation Wing was in possession of credible information that Petitioner was in possession of jewellery which represents his undisclosed income or property; Further notes that before seizure is conducted explanation ought to be taken from the concerned firms and if they are able to produce the related books of account and necessary proof of articles which may include sale details, purchase details, stock register, audit reports, income tax returns etc., the Income Tax Authorities ought to take a decision at this stage and ought not to be allowed to seize the goods for years together to await for the assessment order to be passed in relation to concerned employee; The claim of the goods in terms of Section 132(1)(iii) was made by the assessee as the jewellery seized was stock-in-trade and required material was already placed before the Income Tax Authorities; Thus, holds the seizure to be unjustified and illegal……………..Click here to read and download HC judgment
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Expert Column
The recent ruling by the Mumbai bench of ITAT in case of Pramod Lele , held that the expression ‘Management consultancy’ could not be brought within the ambit of ‘Technical consultancy’ and it is still a debatable issue whether it constitutes a business receipt or a professional receipt. The bench ruled out that classifying the management consultancy receipt as business or profession, constitutes a ‘reasonable cause’ u/s 273B and thus, penalty levied u/s 271B for not getting the accounts audited as required u/s 44AB, is deleted.
Author, CA A. Sekar, analyses the judgment and elucidates the observations made by the ITAT in this article. Distinguishes between the terms ‘business’ as per Sec. 2(13) and ‘profession’ as per Sec. 2(36) and remarks “All professions are businesses, but not all businesses are not professions”. He agrees with ITAT on the fundamental feature that to constitute a profession, some advanced skills are needed to be acquired by advanced education and special training. However, points out that no attention was drawn to Explanation (2) u/s 9(vii) according to which the definition found in bilateral treaties, the fees for ‘technical services’ includes consideration received for rendering any managerial, technical or consultancy services, thus, the author raises a question that whether inclusion of the term consultancy under one umbrella of Sec. 9(vii) is sufficient to conclude that the word ‘technical consultancy’ used in Sec. 44AA would also cover all the stated services.Click here to read an article titled, “Business vs Profession receipts - Is it debatable?”
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