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

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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

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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.

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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

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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”

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. 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

Issue No. 239 / July 15^th, 2021

Dear Professionals,   

We are glad to present to you the 239^th 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) HC: ‘Expansion’ different from ‘extension’; 2015 amendment to Sec. 36(1)(iii) prospective -  HC deletes the disallowance u/s 36(1)(iii) towards interest on borrowed capital for AYs 2013-14 & 2014-15; Holds “…word 'expansion' and 'extension' connote different meaning and legislature in its wisdom has used the terms differently under various provisions…therefore, the words cannot be used synonymously”; Assessee – Coffee Day Global filed its NIL return for AY 2013-14, wherein the AO disallowed a sum of Rs. 1.46 Cr. representing interest on borrowed capital on the grounds that it was utilized towards WIP, similar disallowance was made in AY 2014-2015; ITAT upheld the disallowance made by the AO on the grounds that in terms of proviso to section 36(1)(iii) the interest cost ought to have been capitalized; HC observes that prior to amendment of Section 36(1)(iii) in the year 2015, interest on borrowed capital utilized for the purpose of business or profession had to be allowed irrespective of the fact that it i...............Click here to read and download HC Judgment

2) ITAT: Service by affixture of notice devoid of witness, after office hours, invalid - ITAT quashes reassessment proceedings u/s 148 for AY 2008-09;Revenue completed assessment u/s 147 r.w.s 143(3) in respect of Assessee - private limited company making addition u/s 68, based on the information received from the Investigation wing stating that Assesseeobtained accommodation entries of Rs.30 lakhs on account of share capital; ITAT observes that the Assessee is correct in pleading that the notice u/s 148 was served through affixture without resorting to service by post etc, and as per Sec. 282 read with service rules from 9 to 17/20 of order ‘V’ under CPC, 1908, affixture made after working hours and without identification of place/witness makes the proceedings u/s 147/148 as void ab initio; Accepts Assessee’s submission that none of the Directors of the entity, to whom shares were allotted, were present and the AO never conducted any enquiry from the said party nor rejected evidences placed before him; Holds that the approval u/s 151 for issuance of notice u/s 148 was granted in a ................Click here to read and download ITAT Order

3) HC: Provision for bad, doubtful debts u/s 36(1)(viia) computable before adjusting b/f losses - HC upholds ITAT’s order and allows Assessee’s claim for deduction u/s 36(1)(viia), for AY 2011-12 & 2012-13, being 7.5% of total income towards provision made for rural advances before setting off of brought forwards losses; Revenue recomputed the total income restricting the deduction claimed under the said section to the provision made in the books of accounts after setting off the loss brought forward; ITAT also upheld Revenue’s treatment following Assessee’s own case for AY 2009-10 and 2010-11 and held that the deduction should be computed @ 7.5% of total income after setting off of brought forwards losses; Assessee submitted that the provision of Sec. 36(1)(viia) is a beneficent provision intended to promote rural banking and therefore should be allowed full play; HC peruses through the provisions along with the explanatory note dated 30.06.1982 and remarks “The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the .........Click here to read and download HC Judgment

4) HC:Deletes disallowance for not withholding tax on commission payment not taxable in India - HC upholds ITAT’s order in setting aside the disallowance made u/s 40(a)(i) on commission payments made to non-residents agents; Assessee paid commission to its Associated Enterprises which had rendered outside India in the form of placing orders with the manufacturers based outside India; Revenue disallowed the expenditure contending that Assessee had failed to deduct taxes on the amount of commission paid; HC accepts ITAT’s observation that the income of non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agent were rendered/utilized outside India and the commission was paid outside India; DistinguishesSC ruling in GVK Industries Ltd. from the present case as the consultancy herein is not at all utilized in India................Click here to read and download HC Judgment

5) ITAT: Holds unauthenticated information on foreign bank accounts from French authorities inadequate – ITAT rules Revenue was not justified in invoking Sec. 153A for AYs 2006-07 & 2007-08 and making additionsas unexplained investment, in the absence of any evidence; Revenue on the basis of information received under exchange of information mechanism, that the Assessee held account with HSBC having substantial credits which were not disclosed to the department made the additions; Assessee, however challenged the authenticity of information received in pen drive as the same was not received from the bank; ITAT observes that CIT(A) failed to address the argument of the assessee with regards to the information contained in pen drive, the source thereof and author thereof and its authenticity with any credible evidence or linkage with any of the document; ITAT holds “pen drive so received was just like an anonymous letter forwarded by French Competent Authority to the Indian Competent Authority”; ITAT deletes the addition made by the department on the grounds that CIT(A) has failed to appreciate that the origin of the source of information, stating merely because information is received under DTAC agreement does not make the information credible; Remarks that passing of the information from .................Click here to read and download ITAT Order

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“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112680+ 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. 238 / July 9^th, 2021

Dear Professionals,   

We are glad to present to you the 238^th 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) HC: Appeals with low tax-effect falling under exceptions to CBDT Circular, maintainable - HC upholds ITAT’s order dismissing the Miscellaneous Applications (MA) filed by the Assessee u/s 254(2) holding that the tax effect involved in all the said appeals did not exceed Rs. 50 lacs in view of the CBDT Circular dt. August 8, 2021; Pr. CIT-petitioner challenged ITAT’s order and contended that the ITAT had committed gross error by not entertaining the MAs in view of the subsequent CBDT Circular No. 23/2019 dt. September 06, 2019 as well as the Office Memorandum (OM) No. 279 dt. September 16, 2019 both being clarificatory in nature and thus, applicable retrospectively; Also, Pr. CIT highlighted that the Circular No. 23/2019 dt. September 06, 2019 provided the cases involving organized tax evasion scam through bogus long term capital gain/ short term capital loss on penny stocks were not made subject to the monetary limits prescribed for filing the appeals; HC analyses the provisions of Sec. 254(2) and the relevant Circulars and OM and observes that the said Circulars and OM were not in existence at the time of passing of the order by the ITAT, thus, states it to not be a mistake apparent from the record as contemplated u/s 254(2); Further, HC observes that notwithstanding anything contained in any Circular, appeals may be filed on merits as the exception to the said Circular, where the Board by way of special order may direct filing of appeals on merits in cases involving organized tax evasion activity, irrespective of the monetary limits fixed in earlier cases, further that there is nothing to suggest in the said Circular / OM that they shall have retrospective effect; Thus, HC holds that the ITAT is right in interpreting the Circular along with the OM where the tax effect may be low but the appeal could still be filed on merits.......................Click here to read and download HC Judgment

2) HC: Normal procedure of refund adjustment u/s 140A not applicable to KVS - HC allows Assessee’s petition directing Revenue to adjust the refund amount for the year 1996-97 to the tax arrears instead of penalty and accordingly re-determine the amount payable u/s 90(1) of the Finance (No.2) Act, 1998 (Act); Assessee-Company, engaged in export of tobacco, filed declaration under Karvivad Samadhan Scheme (KVS), 1998 to determine whether the tax refund be adjusted towards arrears of the tax and then interest and penalty or vice-versa; Also, the Assessee withdrew the pending litigation as required under the scheme so as to determine the tax amount at a flat rate; On failure of Revenue authorities to determine the amount within 60 days from the date of receipt of declaration, the Assessee filed a writ petition which was disposed of despatching the Certificate of Intimation and determining the tax payable amount after adjusting the refund amount towards penalty first; HC observes that the said action by the Revenue of adjusting the amount with the penalty and not with arrears of tax is legally impermissible; Holds “…any payment or part payment of taxes should first be adjusted towards tax and balance towards interest was correctly adopted while determined the tax payable under KVS scheme”; Refers to Karnataka HC ruling in Mangilal S. Jian where in it was observed “…normal procedure followed under Sec.140A of the Income Tax Act to apply the amount paid by the assessee first towards interest and the balance towards the tax payable is not applicable to the provisions of the Finance (No.2) Act, 1998 and the KVS scheme thereof.”; Thus, HC allows the writ and directs the Revenue to adjust tax refund against tax arrears instead of penalty and determine the amount payable under KVS............... Click here to read and download HC Judgment

3) HC: ‘Reasons to believe’ is prima facie material available with AO,  not legal evidence - HC dismisses the writ petition filed by the Assessee-petitioner against Revenue’s reassessment proceedings pertaining to transfer of a rural agricultural land for AY 2014-15, being sans substratum; Assessee had purchased a rural agricultural land which was sold during the AY and transferred 50% of the sale consideration to another person, recording the transaction in a registered agreement; Revenue, however treated the same to be urban agricultural land in its assessment order and contended that the Assessee herself has disclosed capital gains it her return of income on sale of land; HC denies Assessee’s observation that the reassessment proceedings in the present case are of a clear case of “change of opinion”; Refers to judicial precedents in case of Kelvinator India Ltd. and Tech. Spam India (P) Ltd. where it was held “…the phrase “reasons to believe” does not mean that the Assessing Officer should have ascertained the facts by legal evidence. All that is required is that the Assessing Officer should prima facie have some material on the basis of which there should be “reasons to believe” of certain income chargeable to tax escaping assessment”; HC observes that in the present case re-assessment proceeding has been initiated on the basis of material having direct bearing over the case of the Assessee which is based on the “reason to believe” recorded by the AO; Thus, HC finds that re-opening of the assessment proceeding was conducted on the basis of legally valid sanction accorded by the authority under provisions of Section 151, dismisses Writ of Assessee........... Click here to read and download HC Judgment

4) HC dismisses petition u/s 154 on Assessee’s failure to fulfil requirements of VsV Act - HC dismisses the petitions filed by the Assessee- A Japanese company, being devoid of merits; Assessee, engaged in execution of worldwide social-infrastructure projects and supervisory services in relation to erection, installation, etc, was asked by the Revenue for reconciliation of TDS amounts with that in Form 26AS; However, Revenue granted lesser credit of taxes and raised a demand; Assessee contended that the Revenue did not give the credit of the TDS in the relevant A.Ys 2015-16, 2016-17 and 2017-18, and wrongly withheld the said amount, thus leading to filing of rectification application u/s 154 which was rejected twice; Assessee then opted for DTVSV for AY 2016-17; HC observes that the Assessee failed to comply with Section 5(2) of the DTVSV Act wherein the applicant needs to pay the amount determined by the designated authority u/s 5(1) within 15 days of the date of receipt of the certificate; HC notes that Sec. 5(3) provides that every order passed u/s 5(1) determining the amount payable shall be conclusive and cannot be reopened in any other proceeding; Also the Assessee was required to withdraw the appeal pending before the CIT(A) on the issuance of certificate u/s 5(1) of the DTVSV Act, which again the Assessee failed to do so; Thus, HC opines that the Assessee having failed to comply with the mandatory requirements of the DTVSV Act, the present petitions cannot be entertained........ Click here to read and download HC Judgment

5) HC: Upholds reopening of assessment, finds Assessee under-assessed on income - HC dismisses WP filed by Assessee, upholds Revenue’s action to initiate reassessment proceedings u/s 147; Assessee-petitionerfiled 3 WP challenging the reassessment proceedings initiated by the Revenue with respect to claim of deduction u/s 80-IA; Assessee-company was engaged in provision of telecommunication services, and upon being granted the Licence by Dept. of Telecommunications, Government of India, started claiming deduction u/s 80IA from AY 2005-06; Return originally filed for the year was revised and Assessee claimed a deduction of Rs. 87.29 Cr. u/s 80IA, the assessment for AY 2006-07 was finalised with a refund of Rs. 1.41 Cr.; Revenue subsequently initiated reassessment proceedings, challenged by the Assessee through the writ petitions; Assessee contended that re-opening is based on change of opinion on the part of the Revenue, and is without jurisdiction since there are no new facts leading to issuance of impugned notice; Revenue contended that there being concrete material on record, it was a fit case for reassessment, and stated that Assessee has made an erroneous claim u/s 80-IA resulting in under assessment; HC notes that Revenue has addressed Assessee’s objections to re-opening adequately, stating their reasons to believe for the reassessment proceedings, the writs are liable to be dismissed; HC notes that section 147 covers under-assessment of income, notes that “High Court in a writ proceedings, cannot adjudicate all such disputed facts and circumstances raised between the parties. Disputed facts are to be adjudicated with reference to the documents, evidences and materials available on record and such an exercise is impermissible in a proceedings under Article 226 of the Constitution of India”; HC dismisses the writ petitions filed by the Assessee, states “the  petitioner is at liberty to defend the case by availing the opportunities to be provided by the respondents as contemplated under the provisions of the Income Tax Act”..............Click here to read and download HC Judgment

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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 112590+ 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