Issue No. 237 / July 1^st, 2021

Dear Professionals, 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112490+ 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”  

We are glad to present to you the 237^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

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

Key Takeaways from Handpicked Rulings

1. HC: Sufficiency of “reasons to believe” u/s 147 is not for Court to judge, dismisses Assessee’s petition - HC dismisses Assessee’s appeal stating it to be devoid of merit,  holds AO had ‘reasons to believe’ for reopening assessment u/s 147;Assessee-petitioner, a private limited company, was issued notice u/s 148 related to AY 2012-13 in the year 2019; One of the creditors of the Assessee was subjected to survey by the Investigation Wing basis which Revenue claimed it had“reasons to believe” that income for the AY has escaped assessment; HC holds “The sufficiency of reasons for forming the belief is not for the Court to judge, but it is open to the assessee to establish that there, in fact, existed no belief or that the belief was not bona fide or that the belief was based on vague or irrelevant information”; HC states that since the ‘reason to believe’ in the instant case are the documents recovered during the course of survey action, therefore, there was tangible material available with the Revenue which had a prima facie link with the Assessee; Refers to SC ruling in M/s. Kelvinator of India Limited wherein it was held “…Assessing Officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is an escapement of income from assessment and that reasons must have a live link with the formation of the belief”; Also HC notes that the Assessee was the beneficiary of accommodation entries provided by the other assessee on whom survey action was conducted, thus rejects Assessee’s contention that there was non-application of mind by the Revenue, and dismisses the petition........... Click here to read and download HC Judgment

2. ITAT: Withdrawal of exemption u/s 10(23C)(vi) by Pr.CIT before CBDT Notification on Rule 2C, bad in law- ITAT sets aside Pr. CIT order holds that the show cause notice (SCN) itself suffered from inherent lack of jurisdiction as the CBDT’s notification 60/2019 was issued much later on Nov 5, 2019 which empowers Pr.CIT for revoking approval granted u/s 10(23C);Pr CIT had erred in law and on the facts not only in assuming jurisdiction u/s 10(23C)(vi) on Sep 16, 2019 but also he had wrongly withdrawn the assessee’s approval with effect from the date it had been granted the approval since the search was carried out almost a decade on Mar 23, 2018 whereas the approval was granted on Mar 27, 2008; The order withdrawing the approval was not sustainable for want of the Pr. CIT jurisdiction at the threshold itself which could not be made good in latter stages. Notes that the Pr CIT had withdrawn the assessee’s approval from the day from which was granted the very relief which was well beyond the period of the SCN itself, and that too, without even indicating how the assessee had violated the conditions of its approval granted earlier in all these intervening assessment years wherein it had also been assessed without any violation of the approval’s conditions; ITAT hold that Pr.CIT(Central) herein has erred in law and as on facts in withdrawing the assessee’s approval granted u/s 10(23C)(vi) of the Act; The assessee’s impugned approval is restored as a necessary corollary.........Click here to read and download ITAT order

3. ITAT upholds exemption u/s 56(2)(viib), finds Assessee deemed public company - ITAT upholds CIT(A)’s order deleting the addition made u/s 56(2)(viib),finds Assessee qualifies to be a company eligible for Sec. 56(2)(viib) exemption since it is covered under the clinching legislative expression “where a company, not being a company in which the public are substantially interested” as per section 2(18)(b)(B)(c) of the Act since the said other company was a listed one holding more than 50% of its stake in the relevant previous year”; Revenue contended that for AY 2014-15, CIT(A) has erred in concluding that assessee company is a deemed public limited company and hence provisions of Sec. 56(2)(viib) are not applicable without giving an opportunity to verify Assessee’s claim with regard to NCC Limited holding more than 40% shares of NCC Infrastructure Holding Limited; ITAT accepts CIT(A)’s view stating that the AO has carried the addition u/s 56(2) with the predetermined mindset to tax the realization over and above the value per share as worked out as per one of the methods prescribed under referred section; Refers to the provisions of Sec. 56(2)(viib) and remarks “The expression 'may' used in explanation to section 56(2)(viib) of the Act clearly indicates that income accrued under section 56(2)(viib] of the Act is not automatic”; Refers to Kolkata ITAT ruling in ASG Leather Pvt Ltd “wherein the court has laid down that the Assessing Officer should have given an opportunity to the assesse to exercise its options as per Explanation (a)(ii) to section 56(2)(viib)”.............. Click here to read and download ITAT order

4. HC: Allows Sec. 54F exemption in individual capacity, notes Assessee’s family never taxed as HUF - HC dismisses Sec. 263 notice under a writ petition filed by Assessee, allows exemption u/s 54F; Assessee-Individual inherited an agricultural land and a house form his parents shared among other siblings,orally recorded in a memorandum; On sale of the land, each person divided the share in the sale proceeds in a certain percentage as decided orally and claimed Sec. 54F exemption on the long-term capital gains, which treatment was accepted by Revenue; Pr. CIT issued notice u/s 263 on the grounds that there was no physical division of the property and therefore the exemption u/s 54F appeared to be contrary to Sec. 171; Thus contending that capital gains should have been assessed in the hands of the HUF and not under individual capacity; HC finds that the assessment order for AY 2008-09 for the petitioner’s other brother was never assessed in the status of HUF, thus, in his case as well Sec. 54F benefit is to be allowed; Further observes Sec. 171 which contains a deeming provision under which partition of the property of HUF is accepted only if there has been actual physical division of the property, in the absence of any such proof, the HUF shall be deemed to continue for the purpose of assessment of tax; However, it also mentions “A reading of sub- section 171 of the Income Tax Act, 1961 makes it very clear that it is applicable only where a Hindu family was already assessed as an Hindu Undivided Family (HUF).”; Holds that since the petitioner’s family was never assessed as HUF, allows the exemption in individual hands.............. Click here to read and download HC Judgment

5. HC restores the appeal dismissed on non-prosecution, directs ITAT to re-adjudicate on merits - HC restores appeal filed by Assessee-petitioner to ITAT for consideration on merits;Appeal filed by Assessee for AY 2009-10 was earlier disposed due to non-prosecution; Assessee-individual was engaged in transportation business, Revenue had made additions towards undisclosed transportation receipts and TDS towards excess of assets over liabilities, on appeal the additions were upheld by CIT(A) except additions towards undisclosed transportation; Assessee failed to appear on the day of hearing , and ITAT dismissed the appeal for want of prosecution; Assessee, without filing a restoration appeal, filed a writ petition with the HC and claimed “…even if the petitioner was not present before the Tribunal when the appeal was taken up for hearing, it could not have been dismissed for want of prosecution as Section 254 (1)…”;HC takes note of Article 265 of the Constitution that states “No assessing authority can refuse to assess the tax fairly and legally, merely because the taxpayer is not participating in the proceeding”;  HC refers to the SC ruling in S. Chenniappa Mudaliar wherein it was held that u/s 33(4) of the 1922 Act, “the Tribunal was bound to dispose of the appeal on merits, whether the Petitioner was present or not”; remarks that  “it follows from all this that the Appellate Tribunal is bound to give a proper decision on questions of fact as well as law which can only be done if the appeal is disposed of on the merits and not dismissed owing to the absence of the appellant”, referring to a catena of decisions; HC further takes note of Rule 24 of the Income Tax (Appellate Tribunal) Rules, 1963, observing that “the said Rule articulates that, where, on the day fixed for hearing or on any other date to which the hearing may be adjourned, the appellant does not appear in person or through an authorised representative when the appeal is called on for hearing, the Tribunal may dispose of the appeal on merits after hearing the respondent”, Thus, allows the writ petition and directs the ITAT to restore the appeal and decide the same on merits............. Click here to read and download HC Judgment

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1. Income Tax Act - 10th Edition 
2. Income Tax Rules - 10th Edition
3. Direct Taxes Ready Reckoner - 22nd Edition
4. Income Tax Mini Ready Reckoner - 24th Edition
5. Direct Taxes - Law & Practice -13th Edition
6. Taxation of Salaried Persons, Individuals & HUFs - 17th Edition
7. Taxation of Capital Gains -18th Edition
8. Guide To Tax Deduction At Source - 18th Edition
9. Concise Commentary on Income Tax (Expected to be released by end of July 2021)
10.Issues in Income tax (Expected to be released by August 2021)

You will immediately get access to a personally licensed e-copies of title no. 1 to title no. 8. E-copies of the rest of the 2 titles will be allocated to you as soon as those are released. 

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• Highlight sections of the Report, create notes and bookmarks, revisit their notes
• Seamlessly move from one section of the Report through another via a well-defined index of contents

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 236 / June 24^th, 2021

Dear Professionals, 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112390+ 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”

We are glad to present to you the 236^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

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

Key Takeaways from Handpicked Rulings

1) HC: Dismisses WP filed to institute disciplinary action against Income-tax officials; holds it as abuse of Court process - HC dismisses writ petition, directs petitioners to pay costs; Petitioners filed the writ to initiate action against Income-tax officials, including their prosecution in respect of certain real-estate transactions, also seek monitoring of investigation conducted under Benami Law and the PMLA Act, before filing the writ, petitioners had instituted a civil suit against the respondents on the same issue; Petitioners giving details of certain real estate transactions, allege that such transactions are prohibited benami transactions wherein the consideration as undervalued to avoid stamp duty, registration and transfer fee; HC remarks that “ This Court is not inclined to go into the several contentions advanced in the Writ Petition and conduct a parallel enquiry to that which would happen in the civil suit when it would go to trial”; Further opines that “aspersions cannot be cast on officers of Government Departments solely on the basis of suspicions and assumptions of the petitioners tarnishing their reputation”; states that “We are of the opinion that filing of this Writ Petition is an abuse of process of Court and this Court cannot allow itself to be used as a private investigator by the petitioners to prove their contentions in the civil suit or to coerce the respondents for a possible settlement under threat of a prosecution from respondents 1-5 under the various statutes referred to above.”; accordingly dismisses the writ...............Click here to read and download HC Judgment

2) HC: Dismisses WP, holds no valid ground raised by Assessee to stay demand - HC disposes of the writ petition filed for grant of stay of demand for AY 2014-15;  Assessee- company filed its return of income for AY 14-15 returning income of Rs. 1.76 lakhs which was processed u/s 143(1), Revenue issued notice u/s 148 assessing the income 30409 times higher resulting in an addition of Rs 575 crores making a high pitched assessment on the Assessee;Assessee made a request for staying the collection of tax, which was disposed of in a mechanical mannerby directing payment of 20% of outstanding balance demand in 10 equal instalments ignoring financial difficulty of the Assessee; HC observes that the petitioner’s business was hampered because of COVID-19 and as per CBDT instruction No.1914 which confers power on the authorities to grant stay of demand, requires the authority to consider three parameters namely “(i) existence of prima facie case, (ii) financial stringency, and (iii) balance of convenience” before giving any direction of stay; States that as per this CBDT instruction, authority can grant stay by directing payment of 20% of the demand or even less depending on case to case to protect the interest of Revenue; HC further observes that the Revenue considering Assessee’s hardship extended the time for payment of first instalment, but the Assessee still failed to comply with; HC remarks “…mere failure of the authorities to recover any amount cannot be considered as financial stringency of the petitioner”; Thus, HC having regard to the facts of the case concludes that no valid ground has been raised by the Assessee to interfere with Revenue's order; holds the writ to be devoid merits and dismisses it......................... Click here to read and download HC Judgment

3) HC: Dismisses WP; holds section 154 cannot be converted as an appeal for adjudication of disputable issues - HC dismisses WP filed by Assessee challenging notice u/s 154; Assessee, (Co-operative Bank) filed a writ petition, challenging notice u/s 154; Assessee chose not to appear in person, and file the writ petition, on the ground that his case is not covered within the scope of section 154, and Revenue has no jurisdiction to issue the notice, Assessee, however filed a reply in writing to this notice; Assessee contended that Revenue has considered all the aspects elaborately and passed order on merits, and the very initiation of proceedings for rectification of mistake is beyond scope; Assessee further stated that Revenue was trying to adjudicate a disputable point; The issue in case of Assessee was regards the allowability of deduction u/s 36(1)(vii) & 36(1)(via); Revenue contented that in case Assessee was of the opinion that there was no mistake apparent on record in terms of section 154, then it is a disputable issue which ought to be re-opened; HC remarks that Section 154 cannot be converted as an appeal for entertaining a ground for adjudication of merits or disputable issues; HC holds that “In the present writ petition, the respondent has established that they have not gone beyond the scope of Section 154 and they have taken steps to rectify the mistake apparent from record and the nature of mistake apparent from record is also furnished in the impugned notice issued under Section 154 of the Act. Thus the petitioner is at liberty to participate in the Section 154 proceedings and defend his case by availing opportunities provided by the Authorities”; dismisses the writ petition...................... Click here to read and download HC Judgment

4) HC: Condones delay, allows review petition for appeal, which was earlier not decided on merits - HC allows application seeking condonation of delay in filing the review petition and the review petition, directs Revenue to pay Rs. 5000/- to the Assessee to compensate for the inconvenience caused on account of delay in filing the review petition; Assessee objected to the condonation application on the grounds that the reasons accorded by the Revenue did not constitute ‘sufficient cause’ within the meaning of Sec. 5 of Limitation Act; HC observes that the appeal was withdrawn earlier on Revenue’s prayer that the tax effect might be less than Rs. 1 Cr. as per a policy decision take under Circular No. 17/2019 dated 08.08.2019, while granting liberty to the Revenue to file the application again if in case on scrutiny the tax effect is more than Rs. 1 Cr; HC remarks that although Revenue have been lethargic in filing the review petition along-with the application for condonation of delay, but the said appeal was not decided on merits earlier and was allowed to be withdrawn pursuant to the policy of the aforesaid Circular pursuant to which 100 cases were disposed of in a single day; Thus, HC views that it would be unjustified if the Revenue’s request for revival of the appeal is not allowed totally, directs the Revenue to compensate Assessee for inconvenience caused...................... Click here to read and download HC Judgment

5) HC: Allows Writ for illegal adjustment of refund; directs Revenue to pay interest - HC allows the writ petitions filed by the Assessee against adjustment of refund of AY 2019-20 with outstanding demands of AY 2017-18 and 2008-09, without a prior intimation u/s 245; Assessee had contended that there was illegal recovery of refunds arising for the said AY against the demands for AY 2017-18,since a stay already granted; HC refers to Delhi HC ruling in Maruthi Suzuki India Limited, wherein it was held “…once an absolute stay of recovery of demand of tax was granted to the assessee, it is improper and inappropriate for the Revenue to recover the money through adjustment of refunds.”; HC observes that the Revenue did not provide any explanation as to why the adjustment was made before the expiry of 30 days fixed under the second notice of intimation u/s 245, without averting to the objections filed by the Assessee; Accepts Assessee’s plea that issuance of notice u/s 245 is a necessary pre-requisite so as to enable the petitioner to file objections against orders of adjustment and the adjustment of refunds prior to issuance of such notice is patently illegal; Thus, directs Revenue to refund to the petitioner the amount with interest @ 15% per annum from the date on which it was determined till the date of payment.......................... Click here to read and download HC Judgment

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

Lot's more at Taxsutra Database 

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

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Ahuja-Gupta's 10 Superhit Direct-Tax Titles!!

Grab Tax Gurus Dr. Girish Ahuja and Dr. Ravi Gupta's bunch of 10 Superhit Direct-Tax e-books at just

Rs. 5,999!!! This pack includes following titles:

1. Income Tax Act - 10th Edition 
2. Income Tax Rules - 10th Edition
3. Direct Taxes Ready Reckoner - 22nd Edition
4. Income Tax Mini Ready Reckoner - 24th Edition
5. Direct Taxes - Law & Practice -13th Edition
6. Taxation of Salaried Persons, Individuals & HUFs - 17th Edition
7. Taxation of Capital Gains -18th Edition
8. Guide To Tax Deduction At Source - 18th Edition
9. Concise Commentary on Income Tax (Expected to be released by end of July 2021)
10.Issues in Income tax (Expected to be released by August 2021)

You will immediately get access to a personally licensed e-copies of title no. 1 to title no. 8. E-copies of the rest of the 2 titles will be allocated to you as soon as those are released. 

These are E-Book and will be made available to you on Taxsutra Reservoir under My Library

With a personally licensed Digital E book copy you can:

• Enjoy a great reading experience 24 X 7 on any device of your choice offering complete mobility
• Highlight sections of the Report, create notes and bookmarks, revisit their notes
• Seamlessly move from one section of the Report through another via a well-defined index of contents

Copyright © TAXSUTRA. All Rights Reserved

Issue No. 235 / June 16^th, 2021

Dear Professionals, 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112250+ 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”  

We are glad to present to you the 235^th edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

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

Expert Column 

Retirement planning ensures independence, and enables people to lead a life with an uncompromised standard of living after superannuation. India is yet to implement a robust social security system with retirement benefits, thus, the employees plan their retirement kitty during the tenure of employment. The major avenues for such planning are provident fund, gratuity and pension schemes. Such schemes provide considerable tax exemptions, and there have been instances wherein the top cadre employment is seen using them as an active tool for planning taxes. To dissuade these practices, the Union budget 2020 saw amendments to tax the employer's contributions towards such schemes and interest thereon in excess of specified thresholds.

Mr. Anurag Jain and Mr. Shubham Goel (Co-founders and Partners - ByTheBook Consulting LLP) discuss these amendments and the rules in the wake of practical challenges caused to employer and employee. They cover various aspects including double taxation of contribution in certain cases, ambiguity of the rules notified for interest computation and hint at possible difficulties in withholding taxes. The authors conclude with a suggestion “…it is imperative that the tax authorities bring clarifications on the working of formula under different practical scenarios/circumstances and also address the issue of potential double taxation of the same income.” 

Click here to read the Article titled, “Taxability of contribution towards retiral schemes – Challenges for companies”

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Key Takeaways from Handpicked Rulings

1) HC: Dismisses Assessee`s writ; issue of income escaping assessment requires determination by AO – HC dismisses writ, states that question of escapement of income from assessment is a matter of determination by the AO based on all relevant materials and explanations; declines to interfere on the challenge to assumption of jurisdiction; In connection with a search exercise conducted at third party’s premises, Revenue provisionally attached land and building, and despite objections, did not take any action to lift the attachment, in the interim the Assessee received notices u/s 153C for a period of seven years, in response to which Assessee re-submitted returns filed for the respective years as response; Assessee states that notices issued are without jurisdiction since there is no income escaping assessment; HC holds that this is not an issue which can be looked into by writ petition, requires determination of disputed facts....................... Click here to read and download HC Judgment copy

2) ITAT: Upholds revision u/s 263, on AO’s failure to make adequate enquiry resulting in undervalued stock – ITAT upholds PCIT’s revisionary order recomputing cost of valuation sans adequate enquiry by AO, rejects Assessee’s contention that AO adopted one view out of two possible views and since the Assessee was regularly and consistently following FIFO method, the AO could have accepted the same without any further examination and verification; Assessee company was engaged in trading of iron ores, original assessment was completed u/s 143(3) determining total income at Rs.2,13,61,760/-, thereafter Assessee received show cause notice as to why the assessment order should not be cancelled / modified u/s 263, PCIT made an addition on account of undervaluation of closing stock; ITAT clarifies AO was required to make adequate enquiry to cover all possibilities of leakage of revenue, notes that there was no whisper in the assessment order regarding the issue of under valuation; States that PCIT has not disturbed the method of valuation adopted by the assessee i.e. FIFO method, but recomputed the cost, to include a bill was not considered by the AO while passing the assessment order; ITAT upholds PCIT’s order holding the assessment as erroneous and prejudicial to the interest of the Revenue and directs the AO to modify the assessment order enhancing the addition............... Click here to read and download ITAT Order

3) ITAT: Confirms addition of depreciation on goodwill representing accounting entry – ITAT confirms addition of depreciation on goodwill and other intangibles of Rs.44 Cr. arising from excess consideration paid by the Assessee in acquisition of running business for Rs.1240 Cr. whereby goodwill was recorded at Rs.792 Cr. ; ITAT is of the view that in absence of transfer and valuation of the asset, there cannot be any claim of ownership or claim of depreciation and allowing depreciation on fictional goodwill would tantamount to making profit/loss out of oneself; ITAT takes note of the valuation reports as per which the goodwill amount was only a balancing entry which in its opinion did not reflect the outcome of any due diligence procedures; Holds, "The balancing entry treated as goodwill as per accounting standards is fictional in nature in the present case and does not represent any real intangible and the accounting procedure in double entry accounting system cannot override the provisions of Income Tax Act.".............. Click here to read and download ITAT Order

4) HC: “May” as used in u/s 144B(7) does not absolve Revenue, obligated to consider request for personal hearing – HC holds that usage of 'may' u/s 144B(7) cannot absolve Revenue from obligation to consider 'personal hearing' request, sets aside faceless assessment order for denovo adjudication; Petitioner submitted that although personal hearings were sought for after issuance of show cause notice-cum-draft assessment orders at two occasions, Revenue chose not to accord the same; Referring to the Faceless Scheme contained in Sec 144B, HC remarks that "if one were to look at the relevant provisions, ...., then, one would get a sense as to why the legislature has provided a personal hearing in the matter:"; Rules that "...the usage of the word ‘may’, to our minds, cannot absolve the revenue from the obligation cast upon it, to consider the request made for grant of personal hearing. Besides this, under sub-clause (h) of Section 144B(7)(xii) read with Section 144B(7)(viii), revenue has been given the power to frame standards, procedures and processes for approving the request made for according personal hearing to an assessee who makes a request qua the same."; Upon Revenue’s counsel informing the Court that no such guidelines / standards have been framed, HC states that "given the aforesaid facts and circumstances, it was incumbent upon the Revenue to accord a personal hearing to the petitioner"..............Click here to read and download HC Judgment copy

5) HC: Upholds 14A disallowance even when no exempt income earned- HC: Upholds disallowance u/s 14A even if assessee did not earned exempt income in assessment year, quashes ITAT’s order, follows the Supreme Court as well as CBDT Circular No.5/2014 dated 11.02.2014 which clearly provides that disallowance u/s 14A of the Act read with Rule 8D has to be made even when the tax paid for a particular year is not earned in exempt income; Assessee is investment company with main object of making investments, during the year substantial investments were made using borrowed money, accordingly the interest expenditure was disallowed, on appeal to ITAT, it allowed the appeal.........Click here to read and download HC Judgment copy

6) HC: Revised submission of Form 10 at any time before the completion of assessment is valid compliance of law - HC dismisses Revenue’s appeal, allows assessee-trust’s accumulation of surplus amount to the extent of addition made by revising the Form 10 during the course of assessment proceedings............Click here to read and download HC judgment copy

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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!

Issue No. 232 / May 25th, 2021

Dear Professionals, 

“Taxsutra Database”, a true Income-tax research tool, is an archive of over 112020+ 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”  

We are glad to present to you the 232^nd edition of ‘Taxsutra Database Bulletin’, where we keep you updated with current trends in the tax arena!

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

Expert Column 

There has been a lot of fuss about the tax abuse done by giant tech corporations that have been drawing the attention of the Government as well as the public. Financial crisis of 2008 led to a lot of attention on such tax affairs leading to retaliation by OECD in the form of its BEPS Projects. India has been at the forefront in introducing the action plans of the BEPS in its tax laws by introducing Equalization Levy to tax the Digital economy.

In this regard, Mr. Arpith Jain (Lead, India and APAC Corporate Tax at Finastra) discusses the interplay of Equalization levy (EL) and the treaty provisions. Observing that the EL has been specifically kept out of the Income tax provisions, the author ponders over the question as to whether the EL can be kept outside of the income tax treaties as well. The author makes a comparative analysis of OECD model treaties and Indian treaties, discusses Article 2 and 24 of the tax treaties, elucidates on whether EL can be treated as covered tax under Article 2.Comparingthe EL provisions with Income tax, the author states “the only de-link between EL and income tax is the PE. Income tax needs PE to tax an income and EL does the exact opposite i.e. taxes where PE is absent.” The author also analyses if the EL is discriminatory in terms of Article 24. Further, the author states that introduction of Article 12B (similar to the EL) in the UN model and its commentary suggest that the treaties currently do not tax these specified services in absence of PE and hence the necessity of the new article has arisen. While signing off, the author remarks “We already have a wider definition of business connection, with introduction to Dependent Agent PE, and Significant Economic Presence in the income tax Act. We also have the Equalisation Levy, it seems like Indian administration is not leaving no stone unturned in the attempt to tax the Digital Business.”

Click here to read the Article titled “Equalization Levy and Treaties”

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Key Takeaways from Handpicked Rulings

1) ITAT: Urban Development Authorities' income earned while discharging statutory function eligible for exemption u/s 11 - ITAT grants exemption u/s 11 despite earning income exceeding limit prescribed u/s 2(15), holds it to be Assessee’s statutory obligation under Uttar Pradesh Urban Planning & Development Act, 1973 (UP Act) ; Assessee, a body corporate under the UP Act, registered u/s 12A and enjoyed exemption u/s 11 and was assessed as AOP/BOI under the head PGBP as its receipts exceeded the limit prescribed u/s 2(15) and were classified as activity in the nature of trade and commerce; ITAT observes that assessee received income of Rs. 9.98 Cr. on sale of plot which was found objectionable by Revenue, notes that objects of an urban development authority are to promote and secure development area according to plan ................Click here to read and download ITAT order

2) HC dismisses assessee’s writ, upholds CIT order cancelling assessee-trust’s registration u/s 12A/12AA, holds that amendment in Sec. 12AA(3) by Finance Act, 2010 is only clarificatory in nature and the insertion of clause (3) would not affect the pre-existing power of the CIT for cancellation of registration; Assessee-trust, registered u/s 12A since the year 1984, assailed the CIT order passed in 2008 cancelling the registration on the ground that that the amendment in Sec. 12AA(3), granting power to cancel the registration of a trust/institution,is applicable prospectively from June 1,2010, i.e. from AY 2011-12 and subsequent years, which was also clarified by CBDT Circular No.1/2011 dated April 6, 2011; HC, after analysing the provisions of Sec. 12A and Sec. 12AA, remarks “even prior to the Finance Act, 2010, the Principal Commissioner or Commissioner is............Click here to read and download HC Order

3) HC dismisses assessee’s writ petition challenging reassessment proceedings u/s 147 initiated on non-existing entity for AY 2005-06; Assessee contented that the company was merged with effect from April 01, 2009 whereas the impugned order was issued on July 17, 2012 anddespite communicating the Revenue about the change in address of the entity, notice was served on non-existing entity; HC observes that the changed address as communicated to the department of both the entities are one and same; Takes note of Sec. 170(1) pointed out by the Revenue and remarks “When Section 170(ii) contemplates that the successor Company is liable and responsible, mere service of notice............... Click here to read and download HC Order

4) Assessment order u/s.158BC r.w.s 143(3) r.w.s 254 barred by limitation as per provisions of section 153(2A), liable to be quashed - ITAT quashes tax assessment order u/s. 158BC r.w.s 143(3) r.w.s 254 determining undisclosed income of about rs. 57 crores against TTV Dhinakaran, notes that the HC dismissed assessees` plea and directed AO to complete the assessment proceedings without any further lapse of time; Notes that the said order was received in the Office of PCIT on 13.02.2019, the AO has sixty days clear time to pass order giving effect order and if such 60 days is considered for limitation period, then the AO ought to have passed assessment order on 14.04.2019; ITAT holds that the assessment order passed u/s. 158BC r.w.s 143(3) / 254 dated 31.12.2019 is barred by limitation and liable to be quashed............... Click here to read and ITAT Order

5) HC upholds transfer order passed u/s 127 by Revenue to centralise the case of the assessee-firm from ADIT (Investigation) Gandhidham to DCIT Rajkot; Pursuant to survey action conducted on the assessee, Revenue issued show cause notice to assessee-firm to centralize thecase of the assessee along with the other cases with the “DCIT, Central Circle – 2, Rajkot” with a view to facilitate effective investigation and coordinated action and subsequently passed order u/s 127 transferring assessee’s case; Relies on co-ordinate bench ruling in Shree Ram Vessel Scrap P. Ltd. wherein it was held that for effective and coordinative investigation, if otherwise established on the record, the same can be agood ground for transfer of a case; Also refers to Bombay HC ruling in Aamby Valley Ltd., where it was held that “if the transferorder does indicate some valid reasons to justify the transfer and suchreasons are neither perverse or arbitrary or mala fide this Court would.............. Click here to read and download HC Order

6) HC upholds reassessment proceedings initiated in case of assessee for AY 2011-12, rejects assessee’s change of opinion plea; Revenue initiated reassessment proceedings when the issues in the original assessment were already disposed of by the ITAT; Assessee contended that reopening of a concluded assessment was mere change in opinion and thus was liable to be set aside; Observes that the issue involved in original assessment and the reason for reopening the assessment was different, opines that Revenue “in clear terms,formed an opinion that the issue involved during the original assessmentwas dis-allowance of slump sale and the reasons for reopening of assessment under Section 147 of the Act, was to reassess the income of Rs.82,49,045/-, which has escaped assessment being entirely different.”; Remarks that when factually Revenue formed an opinion by assigning reasons that the issue involved ......................Click here to read and download HC Order

7) HC dismisses Revenue appeal, deletes the disallowance made u/s 14A made in case of assessee-company (Real estate developer); For AY 2009-10, Revenue made disallowance of Rs. 4.95 Cr u/s  14A r.w.Rule 8D(2)(ii) by computing 0.5% of average investments in respect of exempt dividend income earned by the assessee; Observes that capital and reserves of the company are far in excess of the investment made, opines that the presumption can be drawn that such investments have been made from capital and reserves and non-interest bearing funds and not out of borrowed funds to warrant any disallowance while computing the income; Opines that there is no positive material to show that assessee had incurred such expenditure to earn exempt income as envisaged under Rule 8D(1)...........Click here to read and download HC Order

8) HC stays demand of 669cr from faceless assessment made without hearing the Assessee - HC stays the operation of faceless assessment order passed and as well as the penalty proceedings initiated u/s 274 read with 270A of the Act. HC considers assessee's submission that in reply of show cause notice w.r.t. draft assessment the submissions were filed and a hearing was requested. However, without considering his request for hearing, notice of demand for Rs.669.31 crores and penalty proceedings have been initiated......................Click here to read and download HC Order

9) HC stays demand of 374 cr from faceless assessment made without hearing the Assessee - HC stays the operation of faceless assessment order passed and as well as the show cause notice (SCN) for penalty u/s 274 r.w.s 270A and 271AAC. HC considers assessee's submission that in reply of SCN w.r.t. draft assessment order dt. 15th April 2021 the submissions were filed and a hearing was requested. However, without considering his request for hearing, assessment order on 21st April, 2021 raising a demand of Rs. 374,02,52,160/-  has been passed and the penalty proceedings have been initiated.................Click here to read and download HC Order

10) HC issues notice, stays operation of impugned assessment order for AY 2018-19 - HC issues notice, stays operation of impugned assessment order for AY 2018-19; Considers assessee’s submission that no show-cause notice has been served upon it before making the addition u/s. 69; Also considers the submission that while an addition of Rs. 90,00,000 has been made u/s. 69, tax at the rate of 60% has been levied in terms of Section 115BBE, as a result of which the tax demand raised has scaled up to Rs. 92,14,550/-, an amount, which is more than the addition made by the AO......................Click here to read and download HC order

11) HC: Issues notice, grants stay on writ against assessment order passed in breach of its own timeline - HC issues notice to Revenue upon writ petition filed by assessee-company assailing assessment order passed in breach of its own timeline. Observes that a show cause notice was issued to the assessee on April 18, 2021 and seeking explanation from the assessee by 23:59 hours on April 22 and AO passed an assessment order u/s 143(3) r.w.s 144B of the IT Act, 1961 for the concerning AY 2018-2019 on April 22 at 14:11 hours. HC notes that prima facie, it appears that there has been a breach of principles of natural justice, grants stay on impugned order as well as the notice of demand issued u/s 156 and the notice initiating penalty proceedings u/s 270A of the Act.................. Click here to read and download HC order

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