Issue No. 158/ Dec 17th, 2018
|
Key Takeaways from Handpicked rulings
1. [TS-9014-ITAT-2018(MUMBAI)-O] : Remuneration to Directors u/s. 40A(2) : Absent finding by AO to demonstrate that remuneration to directors is excessive and unreasonable having regard to the market rate or business needs or benefit derived by the assessee, disallowance u/s. 40A(2) is unsustainable - ITAT deletes disallowance u/s. 40A(2) on account of remuneration to directors for newspaper publisher, notes that over the years there is incremental increase in payment of remuneration to the directors and there is no quantum jump in the subject year; Explains that while invoking the provisions of sec. 40A(2)(a), the AO must bring material on record to demonstrate that the payment made by the assessee is excessive or unreasonable having regard to the market rate for the goods, services, facilities availed or the business needs of the assessee or commensurate with the benefit derived by the assessee which has not been done by the AO; Noting that the object behind introduction of sec 40A(2) is to prevent evasion of tax through shifting of profit by making payment to related parties, ITAT states that “Therefore, it is of paramount importance to examine whether the assessee has made payment for evading tax through shifting of profit”;
Click here to read the Ruling Copy
2. [TS-9018-ITAT-2018(JAIPUR)-O] : Penny Stock LTCG u/s. 10(48) : Absent evidence to show that assessee has paid over and above the purchase consideration or paid in cash, it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain - Jaipur ITAT allows assessee's appeals, sets aside CIT(A)'s order and directs the AO to not treat the LTCG as bogus and delete the consequential addition; Holds that when shares were allotted directly by the company to the assessee at par on face value then the same cannot be considered as a penny stock transactions; States that "...once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Shri Anil Agrawal recorded by the Investigation Wing"; Notes that the transaction is established from the evidence and record which cannot be manipulated as all the entries are part of the bank account and D-mat account which is also an independent material and evidence;
Click here to read the Ruling Copy
Editorial Note :
Mumbai ITAT in a similar case, facts and circumstances, following the above ruling allowed the LTCG exemption u/s. 10(38) in its ruling reported in [TS-9009-ITAT-2018(MUMBAI)-O],
Recently, Bangalore ITAT in its ruling reported in [TS-600-ITAT-2018(Bang)] has rejected assessee’s LTCG exemption claim citing dubious trading in ‘penny stocks’. Rejecting assessee’s stand that contract notes were placed on record and the payment were made through cheques identifying the company whose shares were transacted, ITAT observed that the financial worth of the company was very meager and which did not justify the manifold increase in the prices.
3. [TS-8948-ITAT-2018(DELHI)-O] : Principles of Mutuality/Benefit u/s. 11 : All ingredients of mutuality exists, interest income earned by assessee-society eligible for benefit under section 11 - ITAT rules in favour of assessee, holds that Interest income is nothing but income derived from property (i.e., maintenance fund from the members) held under the trust as stipulated in sec 11; Holds that “Once the assessee has been granted registration u/s 12A, then it is an incumbent upon the AO to mandatorily compute the income u/s 11 to 13. Such a benefit can only be denied if the conditions laid down u/s 11 to 13 are not fulfilled.”;
Click here to read the Ruling Copy
4. [TS-9104-ITAT-2018(BANGALORE)-O] : Manufacture vis-a-vis Additional Depreciation : Activity of Fractional distillation, using natural air to produce commercial gases is ‘manufacture’; Assessee eligible for additional depreciation u/s. 32(1)(ii) - ITAT dismisses Revenue’s appeal, allows additional claim of depreciation u/s. 32(1)(ii) to assessee on additions made to the plant and machinery during AY 2011-12; Notes that the gases produced by the assessee in the process of fractional distillation of air are having different chemical and physical properties and commercial values from the raw material and is in line with the intention of the legislature is to bring in new things, article or product by using the machines etc., and the said products, thing or article are having different commercial name and values;
Click here to read the Ruling Copy |
|
CBDT Updates:
1. CBDT- Clarifies scope of Departmental appeal on merits notwithstanding low tax effect - Clarification to Circular No. 3/2018
2. CBDT- Issues final notification u/s. 115JG relating conversion of foreign banks’ Indian branch into subsidiary - Notification No. 85/2018; Notification No. 86/2018
3. IT Dept. - Clarifies no Sec. 194A TDS on Senior citizens’ income not exceeding Rs. 50,000 - Notification No. 6/1/2018
4. MoF : Cabinet approves revised Model MoU between India and foreign Financial Intelligence Units (FIUs) for exchange of information
5. CBDT: Direct tax collection upto November, 2018 records increase of 15.7% compared to last year
Click here to read more latest news
|
Issue No. 157/ Dec 3rd, 2018
|
Key Takeaways from Handpicked rulings
1. [TS-7045-HC-2018(GUJARAT)-O] : ITAT’s jurisdiction for rectification: The jurisdiction to correct errors vested in the Tribunal is not akin to review powers - HC reverses Third Member ruling who upheld AM’s view that Revenue’s miscellaneous petition deserves to be allowed; Notes that Revenue sought rectification of the ITAT order (which had accepted assessee’s contention that the undisclosed income was agricultural income) on the ground that according to assessee, the undisclosed income belonged to his son and daughter-in-law; Holds that the Tribunal erred in recalling its order that was based on submissions made before it and upon consideration of materials and evidences on record; Noting Tribunal’s findings in its original order that no evidence was collected by the Revenue during the search or post search inquiry to hold that the additional income disclosed was not agriculture income, HC states that “Whatever be the correctness of these findings it cannot be stated that the Tribunal arrived at such findings without proper consideration of materials on record….The Tribunal could not have recalled the entire order under purported exercise of rectification powers.”
Click here to read the Ruling Copy
2. [TS-8935-ITAT-2018(DELHI)-O] : Taxability of transfer of software as royalty : Receipts from “Sale of Software” by Irish company not in nature of “Royalty” under Article 12 of India-Ireland DTAA - ITAT rules in favour of assessee, holds its income from sale of software not taxable in India; Notes that treaty provisions between India and Ireland unambiguously require that the use of copyright is to be taxed in the source country; Holds that assessee having transferred the copyrighted product and not the copyrights in the computer software programme, consideration received therefrom is not taxable in India in terms of the Treaty between India and Ireland; Relies on jurisdictional HC decisions in Ericsson A.B. and Infrasoft wherein it was held that software licensing income is not Royalty, not taxable in India; ;
Click here to read the Ruling Copy
3. [TS-8936-ITAT-2018(MUMBAI)-O] : Freebies to Doctors, MCI Guidelines : MCI guidelines prohibit doctors from accepting travel facilities for conferences where they are 'delegates' and not where they are ‘faculty doctors’ or ‘consultant doctors’; Expenses on sales staff, hiring materials and participation / sponsorship expenses on employees incurred for business purposes, not in violation of MCI Guidelines - ITAT allows amount spent by assessee (distributor of heart therapy products and related medical equipments) in connection with medical conference attendance of faculty and consultant doctors, finds that the expenditure is towards business exigencies that demand updating of knowledge of the doctors/surgeons to implant/use assessee's products;
Click here to read the Ruling Copy
4. [TS-8934-ITAT-2018(CHENNAI)-O]: Penalty for accepting & repaying loan/deposits in cash u/s. 271D & 271E : Absent explanation for receiving and paying out deposits in cash from shareholder-director in violation of provisions of Sec.269SS & 269T, penalty u/s.271D & 271E is confirmed - ITAT confirms penalty u/s. 271D & 271E, peruses the cash flow to note that sufficient funds were available with assessee to meet its requisite expenditure and hence, cash was not required to be taken; Holds that “ It is true that if the assessee really needs emergency funds for business exigencies, taking of cash can be considered as a reasonable cause but that has not been established here, clearly. In fact, the cash flow produced by the assessee clearly negates the claim of business exigencies raised by the assessee.”;
Click here to read the Ruling Copy
|
|
CBDT Updates:
1. Central Govt. appoints an Adjudicating Authority at New Delhi under the Prohibition of Benami Property Transactions Act, 1988 - Notification No. 79/2018
2. Central Govt. appoints an Adjudicating Authority at New Delhi under the Prohibition of Benami Property Transactions Act, 1988 - Notification No. 79/2018
3. Central Govt. establishes an Appellate Tribunal at New Delhi to hear appeals against the orders of the Adjudicating Authority under the Prohibition of Benami Property Transactions Act, 1988 - Notification No. 81/2018
4. CBDT issues final notification amending Rule 114 and forms for PAN application - Notification No. 82/2018
5. CBDT : India - China sign Protocol amending DTAA incorporating BEPS related changes
6. CBDT : Proposes draft rules & e-filing of forms for application for approval u/s 10(23C)/80G
Click here to read more latest news
|
Issue No. 155/ Oct 25th, 2018
|
Key Takeaways from Handpicked rulings 1. [TS-8475-ITAT-2018(KOLKATA)-O] : Time limits u/s. 54 for construction of residential house: The[1] one year prior window under sec. 54 is available even for construction of a residential house and not only for purchase - ITAT allows entire deduction claimed by the assessee u/s. 54, deletes the part disallowance sustained by the CIT(A) on the ground that the deduction cannot be allowed for amount spent on construction of residential house made before the date of transfer of original asset; Noting that the purpose of giving deduction u/s. 54 of the Act is to encourage the assessee to invest in residential property whether it is purchase or construction of residential house, holds that “...it does not stand to logic that an assessee who starts constructing a new residential house within one year before the sale of the old asset cannot get the benefit of deduction u/s. 54 of the Act however, an assessee who purchases a new residential property a year before sale of property is allowed deduction u/s. 54 of the Act is illogical.”; Click here to read the Ruling Copy 2. [TS-6928-HC-2018(JAMMU AND KASHMIR)-O] : Notice u/s. 143(2) when no return is filed: Notice u/s. 143(2) need not be issued if no return is furnished by the assessee u/s. 139 - HC allows Revenue's appeal for AY 2005-06, reverses ITAT order which held that notice u/s. 143(2) was required to be issued even in the case when no return is filed in response to notice u/s. 148; Notes that no return was filed in response to notice u/s. 148 and the return filed for AY 2005-06 was after the time limit prescribed u/s. 139(1) & 139(4) and hence have to be treated as non-est; Holds that “ Notice under Section 143(2) is required to be given only when return is furnished. Furnishing of the return is a sine qua non for issuance of notice under Section 143(2) of the Act. If no return is furnished by the assessee, there can be no reason for issuance of notice under Section 143(2) of the Act”; Click here to read the Ruling Copy 3. [TS-8455-ITAT-2018(MUMBAI)-O] : Deduction u/s. 54F on depreciable assets : Deeming fiction u/s. 50 treating capital gains on depreciable assets as short term capital gains, cannot be extended to Sec. 54F - ITAT allows assessee’s claim u/s. 54F on sale of a depreciable asset, holds that Sec.54F does not make any distinction between depreciable assets and non depreciable assets and capital gain arising from long term depreciable assets is long term capital gain for the purpose of claiming exemption u/s. 54F; Follows jurisdictional HC ruling in ACE Builders (P.) Ltd. [TS-38-HC-2005(Bombay)-O] wherein it was explained that the legal fiction created in Sec. 50 is to deem capital gain as short term capital gain and not to deem an asset as short term capital asset and therefore it cannot be said that Sec. 50 converts long term capital asset into short term capital asset; Click here to read the Ruling Copy Editorial Note :- Recently, ITAT Mumbai Bench in another case [TS-8457-ITAT-2018(Mumbai)-O] held that income earned by the assessee on sale of a depreciable property was to be treated as long-term capital gains entitling him to the benefit of deduction u/s 54F. 4. [TS-8481-ITAT-2018(DELHI)-O] : Penalty for belated E-TDS returns: Penalty for belated E-TDS returns filing u/s. 272A(2)(k) cannot be levied when delay is caused due to technical glitches caused by the software for filing of the returns - ITAT deletes penalty levied for belated filing of E-TDS returns for AY 2010-11, grants immunity u/s 273B noting technical difficulties faced in filing e-TDS returns; Notes that during financial year 2010-11, there was a switchover of filing of TDS return in paper forms to e-filing, by way of amendment in Rules which constituted hardships to assessees in filing the TDS returns and holds that “...due to software installed by revenue for e-filing of TDS returns, initial technological glitches has caused delay in filing of quarterly statements of TDS, for which no penalty can be levied on assessee.”; Click here to read the Ruling Copy 5. [TS-8474-ITAT-2018(BANGALORE)-O] : Allowability of interest for delayed remittance of TDS: Interest paid u/s. 201(1A) for delayed remittance of TDS in the nature of tax, cannot be allowed as a deduction - ITAT upholds disallowance of interest on delayed deposit of TDS u/s. 201(1A), notes that Madras HC in the case of Chennai Properties and Investment [TS-5404-HC-1998(Madras)-O] held that interest paid u/s. 201(1A) is also in the nature of tax and notwithstanding the fact that it is not the tax liability of the assessee, the same cannot be allowed as a deduction; Distinguishes assessee’s reliance on ITAT Kolkata bench decision in the case of Narayani Ispat Pvt Ltd [TS-7629-ITAT-2017(Kolkata)-O] wherein such interest on delayed remittance of TDS was held to be an allowable expenditure; Click here to read the Ruling Copy Editorial Note : SC in its decision reported in [TS-5004-SC-1997-O] held that interest on arrears of tax is compensatory in nature and not penal. |
|
CBDT Updates: 1. Central Govt. designates Sessions Courts as Special Courts for trial of offences punishable under the provisions of Prohibition of Benami Property Transactions Act, 1988 - Notification No. 67/2018 2. CBDT amends Form 36 (Form of appeal to the Appellate Tribunal) and Form 36A (Form of memorandum of cross-objections to the Appellate Tribunal) - Notification No. 73/2018 Click here to read more latest news |
Issue No. 154/ Oct 10th, 2018
|
Key Takeaways from Handpicked rulings
1. [TS-6890-HC-2018(BOMBAY)-O] : Proportionate addition of Deemed Dividend u/s. 2(22)(e) : Assessee being the only common shareholder in both the lending and the borrowing entities, the question of taxing proportionate deemed dividend assessee’s hands does not arise - HC upholds ITAT ruling that held deemed dividend taxable in hands of the assessee having substantial interest in both the lending and the borrowing entities; Further upholds ITAT’s rejection of assessee’s contention that proportionate addition of deemed dividend has to be made in the hands of the assessee taking into consideration the percentage of the shareholding in the borrowing company; Notes that ITAT held so particularly in the present case where assessee is the only common shareholder between the borrowing and lending entities; HC however hastens to add that different considerations may arise if there are two or more common shareholders among the lending and the borrowing companies;
Click here to read the Ruling Copy
2. [TS-8318-ITAT-2018(DELHI)-O] :Applicability of Sec. 50C on purchase transactions : Sec. 50C cannot be applied to tax shortfall of purchase price and stamp duty value as undisclosed investment - ITAT deletes addition u/s. 50C in hands of assessee-purchaser of property; Holds that section 50C applies to cases where a property has been sold and the legal fiction thereunder cannot be extended so as to take within its ambit the case of a purchaser where it is alleged that the purchaser had paid a price less than the stamp duty value and treat the shortfall as undisclosed investment u/s. 69; Notes that such a case can at best be taxed u/s. 56(2)(vii) which is however not applicable to assessee as it is a partnership firm;
Click here to read the Ruling Copy
3. [TS-8359-ITAT-2018(DELHI)-O] : TDS - Non-discrimination clause under DTAA : When a resident is not liable to deduct TDS while making a payment of certain nature to a resident, he is similarly not liable to deduct while making payment to a non-resident following the non-discrimination clause under the tax treaty - ITAT deletes disallowance u/s. 40(a)(i), applies non-discrimination clause under Article 26 of the India-USA DTAA and holds assessee not liable to deduct tax on purchase of bearings from a US based entity; Upholds CIT(A) order who followed several rulings including Special Bench decision in Rajeev Sureshbhai Gajwani [TS-86-ITAT-2011(Ahd)-O] and Herbalife International India [TS-5149-ITAT-2006(Delhi)-O] to conclude that the AO erred in applying Sec. 40(a)(i) to the assessee; ITAT also upholds CIT (A)’s observation that when the payee is not taxable in India, assessee is not liable to deduct tax u/s. 195 following SC decision in the case of GE India Technology [TS-201-SC-2010-O]
Click here to read the Ruling Copy
4. [TS-8378-ITAT-2018(MUMBAI)-O] : Sufficient Cause for levy of Penalty u/s. 271AAA : An advice by another CA at the time of appearing for subsequent year cannot constitute "sufficient cause" for condonation of delay for filing an appeal before the CIT(A) pursuant to a decision by assessee to not file an appeal against the order of the AO - ITAT condones the 2 days delay in filing an appeal before it, however, upholds CIT(A)’s dismissal of assessee’s appeal on the ground of a 285 days delay without a sufficient cause; Stresses on the onus on the assessee to explain the reasons for delay in filing the appeal with sufficient and reasonable cause; Notes CIT(A)’s reliance on SC decision in the case of Ajit Singh Thakur Singh vs. State of Gujarat wherein it was held that no event or circumstance arising after expiry of limitation can constitute a "sufficient cause";
Click here to read the Ruling Copy
5. [TS-6843-ITAT-2018(MUMBAI)-O] : Gift under a family arrangement vs. Transfer u/s. 2(47) : Gift of 50% share in a property to brother-in-law, as p
art of a family arrangement cannot be considered as transfer within the definition of section 2(47) - ITAT rules in favour of assessee, deletes additions made towards computation of long term capital gain for relinquishment of 50% share in property by way of gift; Notes that “Though she has received cash gift of Rs.68,50,000/- in pursuance of relinquishing her right in property, the said transaction is purely a family arrangement between the family members for better peace and harmony”; Holds thereby that the AO was incorrect in treating the said transactions within the meaning of transfer as defined under section 2(47)
Click here to read the Ruling Copy
|
|
CBDT Updates:
2. CBDT notifies that provisions of Sec. 112A(1)(iii)(a) shall not apply to equity shares acquired before 1st of October 2004 and equity shares not chargeable to STT - Notification No. 60/2018
3. CBDT notifies interest at 8% on deposits made under the Special Deposit Scheme for Non-Government Provident, Superannuation and Gratuity Funds, announced in the Ministry of Finance - Notification No. 5(1)-B(PD)/2018
4. CBDT extends tax audit due date pertaining to A.Y 2018-2019 from 15th October, 2018 to 31st October, 2018
Click here to read more latest news
|