Issue No. 244 / August 25^th, 2021

Dear Professionals,   

We are glad to present to you the 244^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

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Key Takeaways from Handpicked Rulings

1) HC : Salary paid to pedagogues liable to TDS - Division Bench of HC dismisses batch of appeals seeking amnesty from paying tax on salaries; Upholds Single-Judge's order that the CBDT 1944 or 1977 Circular does not excludes income of pedagogues from charge of tax and is liable for TDS; Notes that Section 192 does not contemplate any exemption from the liability to deduct tax at source on the basis of the nature of calling, profession, or vocation of the person who receives the salary. If the income payable falls under the head 'Salaries', the statute attaches an obligation to the person paying the salary to deduct TDS. HC rejects Assessees’ submission that as per the canon law, once a perpetual vow of poverty is taken, the nun or priest, as the case may be, undergoes a civil death, and thereafter, they are not 'persons' under the Act and HC held that nuns and priests act like any other living human and the exigibility to tax is governed and controlled by the respective taxing statutes and not by the.............Click here to read and download HC Judgment copy

2) HC: Reassessments based on information from Investigation wing legally tenable - HC dismisses writ petition challenging the reopening proceedings u/s 148 for AY 2012-13 based on reasons to believe on the information received from the Investigation Wing; Assessee-Petitioner was served with a notice u/s 133(6) calling upon for certain information which he failed to respond to; Subsequently he was served a notice u/s 148 to file his return of income for the said AY, in response to which Assessee filed the return of income declaring income of Rs. 1.50 Cr; Revenue, on the basis of information received from DDIT (Investigation), Ahmedabad contended that Assessee was a beneficiary of accommodation entries received of Rs. 20 Lakhs, and an entity ‘Kamdhenu Marketing’ had provided bogus sales entries to the Assessee; Assessee submitted all material facts necessary for assessment were disclosed, and assessment was framed u/s 143(3); It was further submitted that assessment could not be reopened on basis of borrowed belief received from the investigating wing, without verifying the material; Revenue submitted that on account of Assessee’s failure to respond to notice u/s 133(6), notice u/s 148 was issued and assessment was to be re-opened on tangible and credible information from two investigation wings; HC observes in view of the jurisprudence that the expression ‘reasons to believe’ cannot be read to mean that AO should finally have ascertained the fact by legal evidence or conclusion, and the term ‘reason to believe’ would mean cause or justification...................Click here to read and download HC Judgment copy

3) HC: Assessee entitled to reapply on rejection under Industrial Park Scheme - HC dismisses writ against rejection of Assessee’s application under the ‘Industrial Park Scheme, 2002 made after expiry of the said scheme and opines that Assessee is entitled to submit an application under the second scheme notified subsequently; Assessee-Petitioner submitted its application under the said scheme dated Apr 01, 2002 on Dec 15, 2006 which was rejected by the impugned order stating that period mentioned in the scheme has expired and therefore, Assessee was required to submit a fresh application under the new scheme of the year 2008 and its application was rejected; Revenue submitted that since the period of operation of the scheme was upto Mar 31, 2006 Assessee’s application dated Dec 15, 2006 could not be entertained under the scheme; HC, on perusal of the scheme observes that in terms of applicability of the scheme it was clear that any undertaking which develops / develops and operates or maintains and operates an industrial park for the period from Apr’97 to Mar’06 was entitled to avail benefit under the Scheme; It further observes that in respect of the second scheme notified on Jan’08 the benefit was extended in respect of industrial parks commenced between Apr’06 upto Mar’09, and remarks cases where commercial parks commenced in the said period are to be considered under the second scheme; HC holds that in view of the fact that application itself was submitted beyond the period of applicability, it has to be necessarily considered...................Click here to read and download HC Judgment copy

4) HC: Directs Revenue to grant TDS credit for AY 2009-10 following coordinate bench’s ruling - HC directs Revenue to decide the rectification applications filed by Assessee-petitioner in accordance with law, within 12 weeks; Assessee-petitioner filed the writ seeking directions for allowing TDS credit on basis of TDS certificates issued, further for cancellation of consequential demand and penalty notices arising from order u/s 143(1)(a); Assessee, non-resident individuals derived income from house property and bank interest, filed their return of income claiming tax refund of Rs. 2.50 lacs each, which was not granted to them under assessment orders u/s 143(3); Subsequently Assessee filed a rectification us/s 154 stating details of TDS amounts which were not considered as prepaid taxes; It was further submitted that no order was passed u/s 154, and demand was raised without any action being taken on the letters filed by the Assessee; Revenue submitted it had no objection if the writs are disposed with a direction to AO to decide the rectification applications within a strict time frame and considering the...................Click here to read and download HC Judgment copy

5) HC: Approval granted by STPI as 100% EOU insufficient for claim of exemption u/s 10B - HC dismisses Assessee’s writ petition challenging CBDT instruction dated No.2/2009 dated Mar 9, 2009 r/w corrigendum to the instruction issued by the CBDT in the context of 100% EOUs under Software Technology Parks / Electronic Hardware Technology Parks scheme; Assessee company is a Government of India approved 100% EOU, which has been approved by Software Technology Parks of India (STPI) through powers delegated to it by Department of Electronics, Govt of India;Assessee’s case for AY 2006-07 was re-opened stating that it was not entitled to exemption u/s 10B as a 100% EOU since approval granted by Development Commissioners would be valid only if such approval was ratified by Board of Approval (BoA) under EOU scheme; Assessee submitted that a post approval ratification from the BoA was not mandated anywhere under the law in case of 100% EOU under the STP/EHTP scheme; Assessee further contended that approval granted in its favour is deemed to have been granted by the BoA for all purposes; Assessee challenged the validity of the impugned clarification issued stating the same to be violative of the Act; HC on perusal of the approval order issued in favour of Assessee observes that approval has been granted for setting up of 100% EOU under the EHTP scheme of the government and approved by STPI, and remarks that such approval cannot be validated for purpose of claiming exemption u/s 10B;...................Click here to read and download HC Judgment copy

6) HC: Reassessment notice u/s. 148 issued in the name of non-existent entity bad in law, incurable u/s. 292B - HC allows assessee’s writ, quashes notice u/s. 148 issued in the name of a  non-existent entity and the subsequent order rejecting objections raised by assessee; Notes that the reasons issued by the AO itself mentioned the very fact of merger of Neeraj Realtors (noticee) with Alok Knit Exports P Ltd.; Observes that “ the indisputable fact is respondent no.1 has invoked jurisdiction by issuing notice under Section 148 of the Act to an entity that had ceased to exist” , rejects Revenue’s stand that it was an error which could be corrected under Section 292B; Relies on SC decision in the case of Maruti Suzuki, factually, distinguishes SC ruling in Skylight Hospitality.............. Click here to read and download HC Judgment copy

7) HC: Sets aside Faceless Assessment order for violation of natural justice - HC sets aside faceless assessment orders and consequent orders for demand holding the same to be violative of principles of natural justice; Assessee submitted that mandatory valid SCN and draft assessment order was issued before drawing an adverse inference against it qua addition of short-term capital loss of Rs.8.70 Cr leading to a tax demand, thus preferred this writ challenging the same; Revenue submitted that Assessee’s writ was not maintainable considering recourse to alternate remedy available to Assessee; HC observes that the Faceless Assessment Scheme mandatorily provides for issuance of prior SCN and draft assessment order before issuing the final assessment order; HC holds that the Government is bound to follow the rules and standards they themselves had set on their pain of their action being invalidated; HC observes that in absence of SCN and draft assessment order resulted in violation of principles of natural justice, as well as the mandatory procedure under the ‘Faceless Assessment Scheme’; Further remarks that in case where there is violation of principles of natural justice, appeal is not an alternative effective remedy and a writ petition is maintainable; HC, accordingly sets aside the impugned Faceless Assessment order and consequential demand orders and remands matter back to the AO, with a direction to issue SCN and draft assessment order, and passed a reasoned order in accordance with law...................Click here to read and download HC Judgment copy

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Lot's more at Taxsutra Database 

Govt. notifies Taxation Laws (Amendment) Act, 2021

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About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113275+ 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;

· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

· Judicial “forward & backward reference”

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.

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Issue No. 243 / August 17th, 2021

Dear Professionals,   

We are glad to present to you the 243^rd edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

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Expert Column

The ‘The Taxation Laws (Amendment) Act, 2021’ was notified in Aug 13, 2021. It withdraws the retrospective amendments on taxability of indirect transfers. The bill is an outcome of India’s long-time tax disputes with UK firms Cairn Energy PLC and Vodafone Group. Indian economy is regarded as one with a huge potential on the global platform holding a promising future for any business enterprise and thus, India’s tax policy needs to be clear, unambiguous and consistent

CA Sachin Kumar B P (Chief Strategic Partner, Manohar Chowdhry & Associates), in this article, analyses the amendments and some of the potential issues required to be addressed. He states that the retrospective amendment was brought in to nullify the SC’s judgement and raise demand on Vodafone which met widespread disapproval from stakeholders,  and it was contended that such amendment was against the principle of tax certainty. He  states that India had initiated proceedings under the 2012 amendment in the case of 17 taxpayers including Cairn, New Singular Wireless, WNS Capital, Sanofi and SABMiller out of which lost to Cairn and Vodafone who took it to International Arbitration against the Indian Government.

Mr. Kumar elucidates on the implications of the amendment and highlights that though the amendment seeks to bury the past disputes, it is not futuristic. However, concludes by saying “…India withdraws the retrospective amendment. This is a welcome step from the Government. Retrospective amendment after the Hon’ble SC’s judgement in favour of Vodafone was unfair and did not augur well for India’s image in the international arena”

Click here to the article titled: “Indirect Transfers – Impact of withdrawal of the retrospective amendment"

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Key Takeaways from Handpicked Rulings

1) ITAT: Voluntary donation to Trade Federation not deductible expenditure, eligible u/s 80G - ITAT holds donation made to All India Gems & Jewellery Trade Federationnot a revenue expenditure, confirms CIT(A)’s order of treating it as donation eligible for deduction u/s 80G, Allows Assessee’s claim for repair & renovation expenses on leased premises as revenue expenditure; Assessee, engaged in manufacture and sale of gold, silver, platinum etc. availed membership of All India Gems Jewellery & Trade Federation, and paid Rs. 15.25 lacs to the federation as corpus donation; Assessee claimed the body was working for the interest of business Assessee was engaged in, and claimed the amount u/s 37(1) citing commercial expediency; Assessee further submitted that it had participated in a programme conducted by the federation and such payment of the such amount as donation was mandatory to participate therein; Revenue held that such donation was eligible for deduction u/s 80G and disallowed 50% of the claim which was confirmed by the CIT(A); On perusal of material on record, ITAT finds donation to be...............Click here to read and download ITAT Order

2) HC: Grants partial relief of interest u/s 234B to Trust - Madras HC allows writ petition, modifies the impugned order and grants partial waiver on interest u/s 234B; Assessee-Trust established in 1954 and claimed exemption from payment of tax; Post introduction of section 11(4) w.e.f AY 1984-85, Assessee was still under the bonafide belief that it was eligible to claim exemption from payment of income tax as 75% of surplus was deployed for educational purpose; The Division Bench of HC had allowed such exemption to the Assessee, against which Revenue filed an appeal before SC, and orders of the HC allowing exemption were reversed; Assessee claims that since the issue about claim of exemption was clarified by the SC in 2001; It remitted the amount of tax belatedly and approached the Revenue for grant of waiver of interest u/s 234B which was rejected; HC refers to...............Click here to read and download HC Judgment

3) ITAT: Exemption u/s 54F allowable on investment in spouse’s name, amount not invested in special account - Bangalore ITAT hold exemption u/s 54F cannot be denied in case where capital gain was not invested in CG account scheme within due date of filing return, and further where investment in new residential house is made in spouse’s name; Assessee was in receipt of certain immovable property as gift, which were sold during AY 2015-16 for Rs. 4.42 Cr, and invested Rs. 3.37 Cr upto October 31, 2017, and the balance was utilised in construction of residential property in spouse’s name on land owned by him; AO denied the exemption as amount of capital gain was not deposited in the CG account scheme within the due date of return, further on the grounds that investment was made in Assessee’s spouse’s name; On appeal CIT(A) confirmed AO’s action...............Click here to read and download ITAT Order

4) ITAT: Default TDS compliance prior to June1, 2015, late fee u/s 234E inapplicable - ITAT directs deletion of late fee u/s 234E for defaults in filing TDS statements being prior to June 01, 2015; Assessee-local body required to deduct and deposit TDS for Q1 of FY 2014-15 duly deducted and deposited the same, however filed the TDS statement for the first quarter on November 14, 2015; AO raised a demand for delay in furnishing the TDS statement; On appeal, CIT(A) confirmed the same; Assessee preferred an appeal with ITAT, but failed to appear despite issuance of notices, ITAT decides the matter basis available documents; ITAT observes Assessee challenged of the provisions u/s 200A empowering the AO to levy late fee u/s 234E , contending lack of machinery provisions, and finds the same tenable...............Click here to read and download ITAT Order

5) ITAT: No addition u/s 43CA, variation between stamp value, sale consideration less than 10% - Delhi ITAT holds addition made u/s 43CA not sustainable where difference between stamp duty value and actual sale consideration is less than 10% of the stamp duty value; Assessee-company entered into a collaboration agreement with another entity for construction of flats, under which Assessee was to get 35% of total revenue from sale of flats; During assessment proceedings, AO observed sale consideration in respect of a flat to be less than the stamp duty value, and accordingly made an addition to the extent of 35% of the difference between stamp duty valuation and sale consideration, which was confirmed by the CIT(A)...............Click here to read and download ITAT Order

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Lot's more at Taxsutra Database 

Govt. notifies Taxation Laws (Amendment) Act, 2021

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113160+ 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;

· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

· Judicial “forward & backward reference”

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 242 / August 9th, 2021

Dear Professionals,   

We are glad to present to you the 242^nd edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Expert Column

There has been a wave of changes brought in since the adaptation of information technology more and more in day-to-day activities, be it any kind of activity. Even the change is being adapted by the Income tax department not only by implementing electronic filing of return but also bringing technology in disposal of assessments, appeals, etc. It is very noteworthy that even the new income-tax forms notified by the Government have made it mandatory to file audit reports in the electronic mode at the time of filing tax returns.

CA Uttamchand P. Jain, throws light on the two additional Rules added by CBDT vide Notification No. 83/2021/F. No. 370142/30/2021-TPL namely “Rule 130 – Omission of certain rules and Forms and savings” and “Rule 131 – Electronic furnishing of Forms, Returns, Statements, Reports, Orders etc.”; Referring to Rule 131, the author states “It is a settled principle of law that the “Form” cannot go beyond the Rule under which it is notified and the Rule in turn cannot override the relevant Act.”. Gives an illustrative example of how we as taxpayers blindly follow the rule if e-filing when none of the forms prescribes so in particular. Highlights on the fact that there is no facility on the e-filing portal of revising any already uploaded form by adding an addendum or corrigendum to it, states “CDBT has taken a new path by inserting Rule 130 & Rule 131... novel way has been adopted for “Omission of certain rules and Forms and savings” which were hitherto was normally done under direct taxes at least by amending the respective Rule”

Click here to the article titled "Filing of Forms and Audit Reports – Are we on the way to path Correction!"

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Key Takeaways from Handpicked Rulings

1) HC: Upholds Assessee’s right to opt for revision over appeal, remits matter to AO for ascertainment of facts - HC sets aside the order of the revisional authority and remits the matter back to the AO to consider Assessee’s case in accordance with law; Assessee has challenged the legality and correctness of the single judge order in writ in the intra court appeal; In the impugned order, it was observed that Assessee has by-passed the remedy available u/s 246A and availed revisional remedy u/s 246; HC observes in the instant case, Assessee instead of preferring an appeal with the CIT(A), filed a revision petition u/s 264 before the revisional authority, being aggrieved by the AO’s order; HC remarks that Assessee was within its rights to opt for the revision instead of appeal and therefore all observations made by the single judge with regard to it are unsustainable; On perusal of merits involved in the case, HC observes that no application of mind is there as to whether the subject lands are capital assets or not, and unless the same is ascertained no demand under Chapter IV was tenable; HC remands the matter back to the AO to consider the case in the light of the observations made, in accordance with law; ............... Click here to read and download HC Judgment

2) ITAT: Directs Revenue to conduct detailed enquiry on allegation of transaction under Benami Law - ITAT in an appeal filed by the Assessee, remits matter back to the AO to conduct in depth inquiries; One Mr. Shulakhan Ram executed a document in favour of the Assessee-Individual with an intention to avoid long term capital gains tax of the property, and after the sale, entire consideration was transferred to Shulakhan Ram’s bank account except Rs.1 lac which was left to comply with the minimum balance requirement of HSBC Bank; ITAT observes that this was a case where innocent citizen was duped, and no appropriate enquiries were made by the AO / CIT(A) despite the facts being brought to their notice; ITAT remarks that the additions have been made in a cryptic and stereotypical manner, and thus, remands the matter back to the AO for necessary action under the Income tax law, as well as Benami property Act with directions to initiate proceedings u/s 148 or any other proceedings to ascertain the real nature of transactions, Further directs AO to decide the issue within a period of  6 months from receipt of this order.........................Click here to read and download ITAT Order

3) ITAT: Local authority not liable u/s 194LA for DRC issued on surrender of land – ITAT condones Assessee’s inordinate delay in filing appeal, and rules that provisions of section 194LA are not applicable to Assessee-Local Authority; Assessee was overseeing the development and provision of civic amenities, in consideration of acquisition of land for civic amenities and infrastructure, Assessee provided Development Rights Certificate (DRC); Revenue held Assessee was liable to deduct tax at source on the market value of DRC u/s 194LA, and since the same was not complied with, held Assessee as ‘assessee in default’ u/s 201(1); Assessee preferred an appeal before the CIT(A), filing of which was delayed by 598 days, physically and 1077 days for the online appeal; Assessee stated that delay in filing appeal was attributed to the officials of Assessee being busy with statutory duties relating to election, and that the delay was not wilful or malafide; CIT(A) refused to condone the delay and dismissed the appeal; ITAT observes that reasons adduced by the Assessee for..............Click here to read and download ITAT Order

4) HC: ‘Capitalisation’ not pre-condition for claiming deduction u/s 80-IA(4) - HC allows Assessee’s claim of deduction u/s 80-IA, and rules on the applicability of MAT provisions for AY 2005-06; Assessee -public limited company is wholly owned by Govt. of Karnataka and was engaged in activity of distribution of electricity; Assessee claimed deduction of Rs, 141 Cr u/s 80-IA(4), and filed nil return of income, whereas the book profits for the year under consideration were Rs.88.46 lacs; Assessee was assessed u/s 143(3) and claim for deduction u/s 80-IA(4) was disallowed, and tax liability was ascertained as per normal provisions; Revenue held that expenditure reflected as work in progress was not eligible for deduction unless.................. Click here to read and download HC Judgment

5) HC: Directs CBDT to condone delay in furnishing ITR attributable to CLB proceedings - HC upholds order passed by single judge in a writ filed by Assessee challenging CBDT’s rejection of application for refund where there was a delay in furnishing return of income; Assessee-company was undergoing proceedings before the CLB and on account of related delays, there was a delay in furnishing Assessee’s return of income; The Assessee applied for condonation of delay in filing return before the AO; Further since the claim of refund exceeded Rs. 50 lacs, it was required to make an application to CBDT for condonation of delay, which was rejected; Against such rejection Assessee preferred a writ petition,............. Click here to read and download HC Judgment

6) ITAT: Revision of reassessment order for overcoming limitation against revising original order, unsustainable - Mumbai ITAT holds that impugned order of the PCIT revising order u/s 143(3) r.w.s 147 is un-sustainable; Assessee’s case was re-opened u/s 147 for the reason that expenditure to the extent of Rs. 68.62 had escaped assessment, and during the course of reassessment proceedings, AO examine the issue of deduction u/s 80-IA, which was subsequently revised by PCIT’s order u/s 263; Assessee aggrieved by the revision preferred an appeal with ITAT; ITAT observes original assessment order contained an issue related to deduction u/s 80-IA, and any attempt by the assessing officer to deal with such issue in re-assessment proceedings would have amounted to review of the original assessment order, which is impermissible; ITAT further remarks that “the original assessment order could not be revised under section 263 of the Act due............ Click here to read and download ITAT Order

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Lot's more at Taxsutra Database 

Taxation Law Amendment Bill, 2021 being introduced in Lok Sabha

Access all “Taxsutra Database Newsletters”, in case you have missed any!

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 113060+ 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;

· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

· Judicial “forward & backward reference”

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 241 / August 3^rd, 2021

Dear Professionals,   

We are glad to present to you the 241^st edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated

***********************

Key Takeaways from Handpicked Rulings

1) HC: Upholds deduction u/s 80P(2) to co-operative society engaged in banking business with non-members, follows Mavilayi - Bombay HC allows deduction u/s 80P(2)(a)(i) to the Assessee-co-operative society registered under the Goa Cooperative Societies Act, 2001 for AY 2012-13; Revenue had contended that the Assessee is engaged in full-blown banking operations with non-members and thus, it has to be treated as a co-operative bank, rather than as a co-operative society making it ineligible u/s 80P(2)(a)(i) & (ii); Assessee submitted that the main object of the society is to accept the deposits and provide financial accommodation to their members and hence the core activity continues to be that of a cooperative credit society; CIT(A) and ITAT also held in favour of Revenue by virtue of section 80P(4); HC analyses the definition of a cooperative bank u/s  5(cci) and (ccv) of the Banking Regulation Act, 1949 and takes note of the point that the Assessee satisfies the condition of being a co-operative society except from the fact that it does accept deposits from non-members which is otherwise not allowable; However, HC also notes that the transactions with non-members are................. Click here to read and download HC judgment

2) HC: Distinguishes ‘Production’ with ‘Manufacture’, holds Production have wider connotation, allows deduction u/s 10B - Bombay HC upholds ITAT’s order treating blending of iron ore as ‘manufacturing’ as per SEZ Act, 2005 applying for exemption u/s 10B; Assessee Company mines and exports iron ore, besides dealing in shipping and shipbuilding, manufacturing and selling low-ash metallurgical coke, claimed deduction u/s 10B for its 100% export-oriented units at Amona, Chitradurga and Codli which is denied by the AO on the ground that there is no production or manufacturing in these units; AO stated its reason for denial that Amona and Chitradurga units that commenced production in 1985 and 1994,cannot be termed as new units merely by expanding with new plant or machinery in 2002-03 and 2005-06, respectively and the unit at Codli does not fulfill the conditions of manufacture or production as required under section 10B(b)................ Click here to read and download HC judgment

3) HC: Nature of income cannot be different for same transaction in two different taxpayers-  Bombay HC quashes ITAT’s order disallowing claim of capital gains on sale of plots of land by the Assessee and treating it as business income for AY 2010-11; Assessee, engaged in the business of cement and retail lime powder, claimed exemption u/s 54F on long term capital gains realized on sale of 4 plots of land which was purchased jointly with a co-owner and then subsequently converted into non agricultural land and then into various plots; Revenue contended that the activities of the Assessee had a character of an adventure in the nature of trade and thus, the intention behind sale of plots to different parties was to exploit the commercial potential of the land; HC observes that the Department had computed capital gains and granted section 50C benefit to the co-owner for the same transaction during its assessment while denying the same for the Assessee; Remarks that the said aspect needs to be considered while determining the nature of income in the hands of the Assessee for the subject AY;.............Click here to read and download HC judgment

4) ITAT: Fees paid to visiting doctors not liable to TDS u/s 192 in the absence of employer-employee relationship - ITAT upholds CIT(A)’s order in favour of Assessee-hospital allowing deduction of taxes u/s 194J and not u/s 192 in lieu of professional fees paid to visiting doctors for AY 2011-12; Assessee contended no existence of employer-employee relationship between the hospital and the visiting doctors as they were paid from the fees collected from the patients after retaining hospital’s share and were also not entitled to several benefits as were allowed to regular employees; Revenue on the other hand denied all of Assessee’s contentions and claimed, based on its survey findings u/s 133A, that services of the doctors were utilized only for the purpose of patients coming to the Assessee hospital and they were expected to work as per hospital’s rules and regulation and were barred from working in any other hospital or conduct private practice; ITAT takes note of Assessee’s submission showing monthly fees paid to visiting doctors that varied each month depending on the number of patients attended and also there was no specific timing and attendance record maintained by hospital with their respect;........................ Click here to read and download ITAT Order

5) ITAT: Quashes revisionary proceedings u/s 263, holds CSR expenses allowable deduction u/s 80G not falling under expressed restrictions - ITAT quashes revisionary proceedings initiated by Pr. CIT u/s 263 for AY 2016-17 for disallowing deduction claimed u/s 80G for CSR expenses; Assessee company, a mining service provider, claimed deduction on account of CSR expenses made to eligible/approved Charitable Trusts u/s 80G(5)(vi) which is mandatorily required as per section 135 of Companies Act; Pr. CIT contended that when there is an express prohibition u/s 37 by virtue of Explanation 2against allowing CSR expenditure, the A.O could not have given deduction u/s 80G; Further contended that the assessment order was passed without making any enquiries or verification, thus, attracting clause (a) of Explanation 2 to section 263(1); ITAT remarks that as per SC ruling in Malabar Industries Ltd “this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer…where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”..................... Click here to read and download ITAT Order

6) ITAT: Deduction u/s 80IB(10) cannot be denied on admitted ‘on-money’ in connection with ongoing residential project declared as income – ITAT rules in assessees' favour, holds that once it is agreed to be ‘on-money’ from the flats-bookings at the time of its inclusion in the total income, a fortiori, such an income, being from sale of flats albeit received as on-money, qualifies for the deduction u/s 80IB(10) on such amount; Explains that the doctrine of approbate and reprobate does not allow the IT authorities to blow hot and cold in the same breath, thereby accepting one consequence arising from the statement of the assessee while rejecting the other one; Holds that "When the assessee made a surrender with the clear backdrop of having received ‘on money’ and the Revenue accepted the same while including it in the total income, it cannot later on claim that no deduction u/s 80IB(10) can be granted on the same as the assessee failed to prove that the flat bookers gave such on-money."................ Click here to read and download ITAT Order

7) ITAT: Delay in claiming TDS credit not attributable to assessee; Quashes rectification u/s 154 refusing assessee’s interest claim u/s 244A for the period of delay – ITAT rules in favour of assessee, holds that “delay of TDS credit not attributable to Taxpayers as the department gives credit to the TDS only when reflected in 26AS”; Observes that the updation of Form 26AS is beyond the control of the Taxpayers, hence the delay in updation should not be attributed to the Taxpayers; Upholds CIT(A) order directing AO to allow interest u/s 244A as was allowed in the earlier 154 order for the full period from 01.04.2009 to 21.02.2013; Notes that the AO passed an rectification order and granted interest on self assessment tax however interest on the TDS credit was given from the date of claim of TDS as against the date of deduction of tax; The reason stated for this by the AO is that the assessee claimed credit of TDS in the return which was later revised; As the delay from 01.04.2009 to 21.02.2013 in claiming credit of additional amount of TDS is attributable to the assessee, hence AO granted interest u/s 244A on the additional amount of TDS from 21.02.2013 onwards only which was confirmed by CIT(A). ................ Click here to read and download ITAT Order

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About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112960+ 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;

· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

· Judicial “forward & backward reference”

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Copyright © TAXSUTRA. All Rights Reserved

Issue No. 240 / July 26^th, 2021

Dear Professionals,   

We are glad to present to you the 240^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

Status of Journals Updated:

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Expert Column

As the pandemic continuing to grip the countries across the globe, its effect can be across sectors, with countries bringing about necessary legislative amendments to provide relief to affected sectors and public at large. The CBDT vide its Press Release dated 25th June 2021 announced tax exemptions in respect of amounts received for COVID-19 treatment and ex gratia amounts received in case of death, from employers and well-wishers.

As we still await legislative amendments effecting these announcements, CA M.R. Ashwini and CA T. Usha Rani in their article acquaint readers with the existing provisions and their tax implications of various amounts received by employees and their nominees / beneficiaries from the employer. They also discuss procedural compliances in terms of existing provisions and are hopeful of further clarifications from the CBDT.

Click here to read the article “Tax Implications: Amounts received by legal heir on death of employees”

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To provide relief to taxpayers in view of the disruptions caused by the Covid-19 pandemic, the Government enacted “Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020” (TOLA). The TOLA seeks to enact legislative amendments in direct and indirect tax laws, which were introduced by the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 (Ordinance) as a part of Covid-19 related relief measures. 

CA Dindayal Dhandaria discusses the substituted provisions of Sec. 149 by Finance Act, 2021  which have reduced the time limit for re-opening of cases.The author shares his opinion as to whether by reducing the time limit for assessment or re-assessment or re-computation of income, the Department has either taken a bold step of confidence pursuant to its newly acquired technology or has granted an unintended benefit to the tax evaders. Elucidating on the new reassessment regime, the author illustrates how the amended structure of the provision is an unintended boon to certain taxpayers as there cannot be any assessment of income that would have escaped assessment after the expiry of three years. The author remarks this to be a bold step taken by the Department and states “If the Department is confident that, on the strength of its risk management strategy, technology, information-driven database, and inputs from CAG, it would capture all cases of escapement of income within a short period of 3 years from the end of the relevant assessment year, it would, undoubtedly, be a bold step”.

Click here to read the article “New Time Limits For Reassessment Of Income - A Bold Step Or An Unintended Boon?”

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Key Takeaways from Handpicked Rulings

1) HC: Commission to director forming part of salary not disallowable u/s 36(1)(ii) - HC holds that the commission paid to the Managing Director of the Assessee company by it is a part of salary on which taxes have been deducted, thus, disallowance u/s 36(1)(ii) is not attracted; Assessee company, engaged in the business of construction and sale of residential flats and also letting of property, paid an amount of Rs. 2.66 Cr. for AY 2010-11 as commission to its Chairman and Managing Director, holding 95% of the company’s shares and receiving fixed salary and other related benefits like other employees; Revenue treated the said payment to be disallowed u/s 36(1)(ii) which was dismissed by the CIT(A) and the ITAT; HC refers to coordinate bench ruling in Assessee's own case wherein it was held that “Managing Director…in terms of the Board resolution is entitled to receive commission for services rendered to the company. It is a term of employment on the basis of which he had rendered service…Commission was treated as a part and parcel of salary and TDS has been deducted…Payment of dividend is made in terms of the Companies Act, 1956…he has offered the entire commission for taxation and paid tax at the maximum marginal rate without claiming any deduction. Therefore, motive of tax avoidance is also absent.”; Thus, HC notes that the question of law in the instant case is similar to the case law referred to, hence, it decides the matter in favour of the Assessee..............Click here to read and download HC Judgment

2) ITAT: Upholds addition of cash deposit being commission for providing accommodation entries - ITAT dismisses Assessee’s appeals for AY 2003-04 & 2004-05, upholds Revenue’s orders for making addition u/s 68 on account of cash deposits into bank account received as commission on providing accommodation entries; Assessee, being part of a group (managed by Mr. Tarun Goyal) providing accommodation entries through its various entities, was issued notice u/s 153A determining commission income in respect of all the entries given outside the group @ 2.25% disregarding claim of Mr. Goel that commission income is to be taxed @ 0.25%; Subsequently, on direction received from the ITAT to look into unexplained credit entries by the Assessee and determine the rate of commission as per the procedure, AO passed the Assessment order determining the commission income @ 2%  instead; ITAT notes that the cash was received during the course of carrying on the business of accommodation entries; Observes that the Assessee failed to establish the source of deposit of cash into bank and prove the identity and creditworthiness of the alleged person from whom the cash is received and genuineness of the transaction.................Click here to read and download ITAT Order

3) HC: Deductor of tax responsible for its payment to Exchequer - HC directs Revenue to recover the balance tax which has escaped payment from the petitioner (landlord) for AY 2013-2014; The petitioner filed this petition against Revenue’s order to recover taxes on the rental income received; Claimed that when the tenant had withheld taxes from the amount paid to the petitioner but did not deposit the same with the Government, the petitioner cannot be saddled with the tax liability; HC observes that the tenants had failed to make payment of rent to the petitioner which led to adjustment of arrears with the interest free deposit; Takes note of the MoU as per which the tenant also did not remit the taxes on the payments made earlier to the petitioners; Clarifies the confusion with regard to the amount actually deducted and to be deducted and holds “If the second respondent had failed to remit the tax to the credit of the Income Tax Department, it is however open to the department to recover the same from the second respondent in the manner known to Law. Balance of tax if any, which has escaped payment alone can be recovered from the Petitioners, by issuing suitable notice under the provisions of the Income Tax Act…”......................Click here to read and download HC Judgment

4) HC: ITAT order invalid for non-granting opportunity under Rule 27 - HC holds order of ITAT invalid as passed without granting Assessee an opportunity of opposing the appeal by supporting the impugned order as per Rule 27 of the ITAT Rules,1963, thus,  restores the matter for fresh adjudication;Revenue had initially dismissed the appeal as withdrawn due to low tax effect which later on was restored on realising that the same falls under the exception clause 10(c) of the Circular dated 11/07/2018; Assessee contended that the Revenue passed the assessment order without allowing Assessee the right as per Rule 27 of the ITAT Rules as well did not accept the request for adjournment made before the ITAT; HC remarks “The contention that the appellant ought to have moved the Tribunal for restoration of the proceedings cannot be accepted for the reason that the Tribunal has decided the proceedings on merits and hence the appeal challenging its decision has been rightly filed”; Finds that the opportunity of hearing was lost in the entire process, thus, the proceedings are restored for fresh adjudication in accordance....................Click here to read and download HC Judgment

5) ITAT: Revisionary Order invalid where approval u/s 153D was not subjected to revision - ITAT quashes the revisionary order passed by PCIT u/s 263 for AY 2017-18; Holds “…PCIT has no power to revise the Order under section 263 of the I.T. Act, without revising the approval of the JCIT under section 153D”; Assessee, being a shareholder in M3M India Pvt. Ltd. (MIPL) entered into an agreement for an allotment of Villa located at M3M Golf Estate and accordingly invested Rs.110.18 Cr. by making several remittances to MIPL; On non-delivery of the said Villa under the Builder Buyer Agreement, the Assessee filed a complaint before the Sole Arbitrator and was awarded a compensation of Rs. Rs. 91.33 Cr. for the subject AY which was offered by the Assessee in her ROI as capital gains; Revenue framed assessment u/s 153B r.w.s 143(3) after getting the approval of JCIT u/s 153D, on coming across these facts during search operation on the Assessee, which was subsequently considered as erroneous and prejudicial to the interests of revenue by PCIT contendingthe transaction of investment to be ‘sham’ and held the compensation received to be revenue in nature; ITAT observes that the A.O before completion of assessment had discussed the matter with the JCIT several times and remarks that order u/s 143(3) r.w.s 153B cannot be revised without revising the approval of the JCIT; Notes that PCIT................ Click here to read and download ITAT Order

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Lot's more at Taxsutra Database 

Access all “Taxsutra Database Newsletters”, in case you have missed any! 

Access latest News....and more!

----------------------------------------------------------------------------------------------

About Taxsutra Database!

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112815+ 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;

· Effective search results supported by active filters around Court Level, Location, Case Numbers and Citation;

· Enhanced search feature, using the Unique Bulls Eye Application, by including "Exact words", "Any of these", "none of these" options.  

· Judicial “forward & backward reference”

The Taxsutra Database comes at a very special Annual Subscription price of 4200+ GST AND includes an annual license to the Taxsutra Library.

Click Here to Sign up, make payment and join the Taxsutra Family. 

Copyright © TAXSUTRA. All Rights Reserved