CONSOLIDATED DIGEST OF CASE LAWS (JANUARY...

Consolidated Digest of Case Laws (January 2017 to May 2017) http://www.itatonline.org

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CONSOLIDATED DIGEST OF CASE LAWS (JANUARY 2017 TO MAY 2017) (Journals Referred: ACAJ /AIR/AIFTPJ/ BCAJ / BLR / IT Review//Comp Cas/CTR / CCH/DTR /E.L.T./GSTR/ ITD / ITR / ITR (Trib) /JT/ SOT /SCC / TTJ /Tax LR /Taxman / Tax World/ VST/ www.itatonline.org) Compiled by Research team of KSA LEGAL CHAMBERS and AIFTP Journal committee S. 2(12A) : Books of accounts - Entries in loose papers/ sheets are irrelevant and inadmissible as evidence- Offences and prosecution- Settlement commission. [S. 132, 143(3), 245D, Evidence Act, S.34] Entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. Finding of Settlement Commission disregarding such evidence as in admissible and unreliable . The materials in question were not good enough to constitute offences to direct the registration of a first information report and investigation therein. (C.B.I. v. V.C. Shukla (1998)3 SCC 410 (SC) followed) Common Cause (A Registered Society) v. UOI ( 2017) 394 ITR 220 (SC) S.2(14)(iii): Capital asset-Agricultural land-Sale of agricultural land to non –agriculturist cannot be the ground to deny the exemption- Capital gains cannot be chargeable to tax.[S. 45, Goa, Daman and Diu Land Revenue Code, 1968 , S. 2(1), 105] Allowing the appeal of the assessee, the Tribunal held that, there is no bar under Goa, Daman and Diu Land Revenue Code, 1968 that an agriculturist and / or one who possesses agricultural land cannot transfer such land to any party who is not agriculturist . On facts there is sufficient support that that land was used as agricultural land and the assesse was using the produce for personal purposes . An entry in the record of rights and certified entry in the register of mutation shall be presumed to be true until the contrary is proved or new entry is lawfully substituted therefore. Accordingly property in question cannot be treated as capital asset as contemplated under section 2(14) (iii) and capital gains are not chargeable to tax. (AY.2007 -08) Shankar Dalal & Ors v. CIT ( 2017) 294 CTR 107 / 150 DTR 197 (Bom.) (HC) S. 2(14)(iii) : Capital asset-Agricultural land-Land situate at specified distance from municipal limits-Report of Inspector of Survey and Land Records more reliable than that of Income-tax Department Valuer-Gains on sale of land not assessable as capital gains- No substantial question of law.[S. 45, 260A]. Dismissing the appeal of the revenue the Court held that ; the Revenue Department and survey authorities were competent to measure the land and issue appropriate certificates, and these could not be ignored by the Assessing Officer, by relying on the report of the investigation wing. In such matters, it would be appropriate, to take the assistance of the survey authorities to arrive at the conclusion. On the facts and circumstances of the case, in the matter giving weightage to the evidence adduced in this regard, report of the Departmental Inspector vis-a-vis certificates of the


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Revenue authorities, produced before the Assessing Officer, the latter ought to be given weightage and accepted, unless the contrary was proved. The Tribunal was justified in holding that the land was agricultural. No substantial question of law arose from the order of the Tribunal. (AY.2008-2009) CIT v. K.R.N Prabhakaran (HUF)( 2016) 73 taxmann.com 305/ (2017) 393 ITR 175 (Mad) (HC) S. 2(22)(e) : Deemed dividend-The HUF is the beneficial shareholder. Even if it is assumed that the Karta is the registered shareholder and not the HUF, as per Explanation 3 to S. 2(22), any payment to a concern (i.e. the HUF) in which the shareholder (i.e. the Karta) has a substantial interest is also covered. The Supreme Court had to consider the following question of law: “Whether in view of the settled principle that HUF cannot be a registered shareholder in a company and hence could not have been both registered and beneficial shareholder, loan/advances received by HUF could be deemed as dividend within the meaning of Section 2(22)(e) of the Income Tax Act, 1961 especially in view of the term “concern” as defined in the Section itself?” HELD by the Supreme Court dismissing the appeal; the Court held that; even if we presume that it is not a registered shareholder in lending company loan received by HUF is liable to be taxable as deemed dividend if karta shareholder has substantial interest in HUF.(AY. 2006-07) Gopal and Sons (HUF) v. CIT(2017) 391 ITR 1 /145 DTR 289 / 245 Taxman 48/ 291 CTR 321 (SC) Editorial: Decision of Calcutta High Court in Gopal and sons (HUF) v. CIT (2017) 391 ITR 1 in affirmed. S.2(22)(e):Deemed dividend – Assessee was not a shareholder in lender company, loan taken by any partner cannot be taxed as deemed dividend. Dismissing the appeal of the revenue, the Tribunal held that; since assessee was not shareholder in lender company loan cannot be taxed in hands of assessee as deemed dividend.(AY. 2009-10) DCIT v. Siroya Developers (2017) 162 ITD 718 (Mum.)(Trib.) S. 4: Charge of income–tax -Capital or revenue- Subvention received by assessee from parent company at time when assessee making losses, payment to protect capital investment was held to be not revenue receipt. [S.2(24), 28(i)] On the question whether the subvention received by the assessee-company from its parent company in Germany in a situation where the assessee-company was making losses had to be treated as a capital or revenue receipt: Held, that the voluntary payments made by the parent company to its loss making Indian company could be understood to be payments made in order to protect the capital investment of the assessee-company. The payments made to the assessee-company by the parent company for the assessment years in question could not be held to be revenue receipts. (AY. 1999-2000, 2000-2001, 2001-2002) Siemens Pub. Communication Network Ltd v. CIT (2017) 390 ITR 1 / 291 CTR 22/ 244 Taxman 188 (SC) S. 4: Charge of income-tax–Capital or revenue-Non-compete fees-Receipt of non-compete fees is capital receipt and not assessable as capital gains.[S. 28(iv), 45, 55(2)] Dismissing the appeals of the revenue the Court held that ;the amount received as non-compete fees by the assessee could only be treated as capital receipt and was not liable to tax. The Appellate Tribunal was right in holding that, (a) the provisions of section 28(iv) of the Income-tax Act, 1961 were not applicable in the case of the assessee, and (b) the amount of non-compete


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fees received by the assessee was not taxable as capital gains under section 45 read with section 55(2). CIT v. Anjum G. Balakhia (2017) 393 ITR 320 (Guj)( HC) Editorial: SLP of revenue was dismissed, CIT v. Anjum G. Balakhia (2017) 391 ITR 345 (St.) S.4: Charge of income-tax–Capital or revenue-Profits from sale of carbon credits capital in nature. Dismissing the appeal of the revenue , the Court held that , profits from sale of "carbon credits" are capital in nature and would not form part of chargeable income under the Income-tax Act. PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR 568 (All.)(HC) Editorial: SLP is granted to the revenue, PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR 43 (St.)Ed.] S. 4: Charge of income-tax –capital or revenue Transport subsidy to stimulate industrial activity in backward region was held to be capital receipt. [S.2(24)] Held the transport subsidy received by the assessee was intended to stimulate industrial activity in the backward region, to generate employment opportunities and bring about developments in the North Eastern States and it was not meant to provide higher profit for the entrepreneur. It was intended to encourage investment in difficult and far flung States and the sum received as subsidy could not be treated as a revenue receipt. (AY. 2001-2002) Shiv Shakti Flour Mills P. Ltd. v. CIT (2017) 390 ITR 346 / 291 CTR 221/ 77 taxmann.com 115 / 145 DTR 18 (Gauhati)(HC) S. 4 : Charge of income-tax -Land purchased for company by its director-Sale of land cannot be assessed in the hands of director. Dismissing the appeal of the revenue, the Court held that; the assessee being a director executed title deeds for and on behalf of the company and the beneficial owner for all practical purposes was the limited company which had even paid due taxes later on at the time when the property was sold. The amount was not assessable in the hands of the assesse. (AY. 2009-2010) CIT v. Atma Ram Gupta (Individual) (2017) 392 ITR 12 (Raj)(HC) S.4: Charge of income-tax – Capital or revenue- Refundable security deposit received by club cannot be assessed as revenue receipt . Dismissing the appeals of the revenue the Court held that; merely because the security deposit was not kept apart or subsequently the amount of security deposit was utilised by the club for other purposes such as construction and providing other amenities at the club, it would not lose the character of "deposit". The amount was not assessable as a revenue receipt. (AY. 2008-2009 to 2012-2013 ) PCIT v.Gulmohar Green Golf and Country Club Ltd. (2017) 392 ITR 60168 / 292 CTR 206/ 77 taxmann.com (Guj)(HC) S.4:Charge of income-tax–Co-operative society- Amounts transferred to Distribution Pool Fund Account not assessable in hands of co-operative society.[S.2(24), 2(31), 80P] The Government of India appointed a Salt Expert Committee to study salt manufacturing activity in different parts of the country. The society was formed to save individual salt manufacturers from extinction in terms of the advice tendered by the Salt Expert Committee. The very fact that the bye-laws permitted the society to recover the "manufacturing expenses" and "other dues" from its members was sufficient indication that the ownership of the salt to the extent of the respective share of each individual member continued to remain with the respective member himself. This inference was fortified by clause 80 of the bye-laws, which permits the members to raise loans on the "security" of their proportional interest in the "agar" and "salt produced". AO


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brought to tax the amounts transferred to distribution pool fund account. The addition was deleted in appeal . On appeal by the revenue , dismissing the appeal the Court held that ; logically the amount transferred to the "Distribution Pool Fund Account" could not be brought within the umbrella of Chapter XVI. Hence, it was not taxable in the hands of the society. (AY. 2006-2007) CIT v. Nagarbail Salt-Owners Co-op. Society Ltd. (2017) 390 ITR 415/291 CTR 287 / 145 DTR 166 (Karn.)( HC) S.4: Charge of income tax-Capital or revenue-Statutory authority-Funds received from State Government for infrastructure development in State-Interest thereon capital receipt - Incentive subsidy for distribution of subsidies to industrialists was not chargeable to tax. [S. 2(24),5] Dismissing the appeal of the revenue , the Court held that ,funds received from State Government for infrastructure development in State-Interest thereon capital receipt. Incentive subsidy for distribution of subsidies to industrialists was not chargeable to tax.(AY. 2005-2006 ) ACIT v. Bihar Industrial Area Development Authority (2017) 390 ITR 475 (Patna) (HC) S. 4 : Charge of income-tax–Capital or revenue–Club-Security deposit as entrance fee ,which were refundable after 25 years is capital receipt.[S.28(i)] Dismissing the appeal of the revenue , the Court held that ; where the assessee club enrolled members on payment of security deposit as entrance fees which were refundable after 25 years & such receipt is utilized for purpose of club’s construction & other amenities – Such deposit is to be considered as ‘Capital receipt’. Relied on Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT [2004] 270 ITR 1 (SC). (AY.2008-09, 2011-12, 2012-13) PCIT v. Gulmohar Green Golf & Country Club Ltd. (2017) 146 DTR 217 (Guj HC) S. 4: Charge of income-tax-Method of accounting- stock in trade - Development of property-Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching principle -Accounting Standard-9. [S. 2(47), 5, 145] The assessee was engaged in the business of development of property. The Assessing Officer held that the revenue should be recognised at every stage of receipt of sale consideration which was up held by the CIT(A).On appeal allowing the appeal the Tribunal held that ; provision relating to deemed transfer as in case of capital assets not applicable to transactions of stock-in-trade. Income in respect of transfer of immovable property recognised only when risks, rewards and ownership of property transferred to buyer. Matching required to be done on accrual basis in respect of income offered to tax. Matter remanded. (AY. 2007-2008) S. K. Properties v. ITO (2017) 53 ITR 607 (Bang.) (Trib.) S. 4: Charge of income-tax – Accrual - Mercantile system of accounting— Retention money not to be taken into account in computing profits. [S. 5, 145] Certain percentage of contract price retained by customers to be paid on satisfactory performance of contract. Assessee had no right to claim any part of retention money till verification of satisfactory execution of contract therefore retention money not to be taken into account in computing profits. (AY.2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.) (Trib.) S. 4 : Charge of income-tax-Capital or revenue-Share warrants-Receipt of advance amount was forfeited on account of non-payment was a capital receipt. Advance received against Share warrants were forfeited on account of non-payment was a capital receipt. (AY.. 2003-2004 to 2011-2012)


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Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib) S. 4: Charge of income-tax - Capital or revenue-Receipts from sale of carbon credits is capital receipt. Receipts from sale of carbon credits are capital receipt.(AY.2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 ( Kol) (Trib.) S. 4 : Charge of income-tax -Capital or revenue-Sales tax remission scheme is capital receipt- Subsidy cannot be reduced from actual cost for the purpose of depreciation [S. 32]. Subsidy received as per sales tax remission scheme is capital receipt. The amount is receivable only after commencement of production would not alter character of subsidy. The referable to cost of fixed assets cannot be the ground from reducing subsidy from actual cost for purposes of depreciation. (AY.. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib) S.4: Charge of income-tax-Accrual-Banking company- Interest on non-performing assets cannot be assessed on accrual basis. [S.5, 145] Dismissing the appeal of the assesse, the Tribunal held that; Interest on non-performing assets cannot be assessed on accrual basis. (AY.2009-2010, 2010-2011) ACIT v. Tambaram Co-op. Urban Bank Ltd. (2017) 53 ITR 1 (Chennai)(Trib.) S.4: Charge of income-tax –Amount not be taxed in hands of assessee merely because offered to tax [S.119, Constitution of India, Art. 265] Amount not be taxed in hands of assessee merely because offered to tax . Office memorandum to Ministry of Civil Aviation is no authority in law which cannot be basis to hold an amount taxable. (AY.2008-09) Add.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 / 148 DTR 201 (Mum.) (Trib.) S.4: Income chargeable to tax-Diversion of income by overriding title- Passenger service fee-security component-- Surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity which is not taxable. [S.2(24), 5] Passenger service fee and security component, surplus to be mandatorily transferred to account of Airports Authority of India. Amount held in fiduciary capacity therefore not taxable. (AY.2008-09) Addl CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.)(Trib.) S. 5: Scope of total income–Sub-contract- Amount received for work shared proportionate to work was shown separately, hence Amount received by other person cannot be added to his income- Income cannot be assessed as joint venture. [S.4] Dismissing the appeal of the revenue , the Court held that; there was enough material to show that the amount received from the contract was directly shared by the assessee and “B”. When after receipt of the contract amount, the shares were identified and taken by both the parties of the joint venture, it could not be treated as a sub-contract. There was no material brought by the Revenue to show that there was any contract entered into by the assessee to assign the work to “B” as sub-contractor. Further, when the respective share was received by the assessee, it had been shown as the income by the assessee in the return of income. When the assessee had not claimed any amount towards expenditure pertaining to the contract amount which had been received by the assessee, there would not be any scope for disallowing any amount towards expenditure. ( AY.2005-2006, 2006-2007, 2007-2008 ) CIT v. G. Balraj. (2017) 390 ITR 50 (Karn)(HC)


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S. 5 : Scope of total income – Salary received by a non-resident for services rendered abroad for a period of 286 days, accrues outside India and hence, was not chargeable to tax in India. [S. 6,9,264] A Writ Petition was filed before the HC challenging the order passed u/s. 264 and 143(1), contending that salary received was not taxable in India as the services were rendered outside India and CIT ought to have completed the assessment rather than remanding the assessment to AO. Allowing the Writ, the HC observed that income would not be taxed in India solely on the basis that such income was received or deemed to be received in India but also, on whether the income was accrued in India or outside India. The place of accrual of the income, i.e, the place where the services have been rendered, becomes material in determining whether the income was accrued in India or outside India. In present case, undisputedly, the petitioner had received income/salary for rendition of services outside India for a period of 286 days, and therefore has to be treated as accrued outside India and not chargeable to tax in India. (AY. 2011-12) Utanka Roy v. DIT(IT) (2017) 390 ITR 109 /291 CTR 501 /146 DTR 27 (Cal.)(HC) S. 5: Scope of total income-Non-resident-Permanent establishment-Assessee deciding venue and participating teams bound to it to compete in racing in terms agreed with assessee-Proof of assessee carrying on business in India for duration of race within meaning of expression under article 5(1) of DTAA – DTAA- India-United Kingdom.[Art. 5(1), 13 195] The assessee was a United Kingdom tax resident company. Consequent to agreements entered into between the FIA (an international motor sports events regulating association), FOAM (the asset management company, and the assessee, FOAM licensed all commercial rights in the FIA formula one world championship to the assessee for a 100 year term. Court held that; the entire event, i.e., the FIA championship in the circuit was organised and controlled by the assessee. The assessee’s participation and the undertakings given to it by each of these actors, who were responsible for the event as a whole, brought out its central and dominant role. The conceptualisation of the event and the right to include it in any particular circuit was that of the assessee; it decided the venue and the participating teams were bound to it to compete in the race in the terms agreed with the assessee. All these, unequivocally, showed that the assessee carried on business in India for the duration of the race (and for two weeks before the race and a week thereafter). Every right which it possessed was monetised; the US$40 million which was paid was only a part of that commercial exploitation by the assessee. Thus the assessee carried on business in India within the meaning of the expression under article 5(1) of the Double Taxation Avoidance Agreement between India and the United Kingdom (DTAA). The assesse was held to be liable to deduct tax at source. CIT v. Formula One World Championship Ltd. (2017) 390 ITR 199 /291 CTR 24/ 145 DTR 33 (Delhi)(HC) Jaiprakash Associated Ltd v. CIT (2017) 390 ITR 199 / 291 CTR 24/ 145 DTR 33 (Delhi)(HC) S. 5 : Scope of total income-Accrual–Developer-Income could be recognized only in year in which conveyance deed was registered. [S.2(47), 4, 145, AS, 9] Assessee recognized revenue only in the year in which registration of conveyance deed of plots sold took place however , the AO estimated income under mercantile system of deriving income on yearly basis. On appeal CIT( A) confirmed he addition . Tribunal held that ; As per the accounting standard 9 the recognition of income also lays down that the income in respect of transfer of immovable property can be recognized only when the risks, rewards and ownership of the property is transferred to the buyer. On these observations the ITAT had remanded back to the AO with a direction that the income in respect of sale of plots can be recognized only in the year


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in which conveyance deed executed is registered in favour of the buyers and to allow the development expenditure incurred as expenditure.( AY. 2007 -08) S.K. Properties v. ITO (2017) 162 ITD 419 / 53 ITR 607 (Bang.) (Trib.) S.9(1)(i):Income deemed to accrue or arise in India- Royalty— Payment for software not royalty hence not taxable in India as royalty, but business income, DTAA- India – China [S.9(1)(vi), Art. 12, Copyright Act, 1957, S. 14.] Dismissing theof the revenue the Court held that; the software supplied was not independent, but necessary for the hardware supplied by it, under the contract. The assessee also provided upgrades for the software. The supplies made (of the software) enabled the use of the hardware sold. It was not disputed that without the software, use of the hardware was not possible. The mere fact that separate invoicing was done for purchase and other transactions did not imply that it was royalty payment. In such cases, the nomenclature (of licence or some other fee) was indeterminate of the true nature. Nor was the circumstance that updates of the software were routinely given to the assessee's customers. These facts did not detract from the nature of the transaction, which was supply of software, in the nature of articles or goods. The payments for software did not constitute royalty. CIT (IT) v. ZTE Corporation (2017) 392 ITR 80 / 245 Taxman 252/ 293 CTR 94 / 147 DTR 121 (Delhi)(HC) S.9(1)(i):Income deemed to accrue or arise in India- International; Airlines Technical Pool (IATP)-Reciprocity in service rendered and received from pool members-Amount received from pool not taxable in India. DTAA India–Germany- Netherland. [Art. 8] Dismissing the appeal of the revenue, the Court held that ; the assessees participated in the International Airlines Technical Pool and earned certain revenues from such activities and also incurred expenditure. There was clear reciprocity as to the extension of services ; membership was premised upon each participating member being able to provide facilities for which it was formed. As there was reciprocity in the rendering and availing of services, there was clearly participation in the Pool; in terms of the two Double Taxation Avoidance Agreements (between India and Germany and between India and the Netherlands) the profits from such participation were not taxable in India. DIT v. KLM Royal Dutch Airlines (2017) 392 ITR 218/ 245 Taxman 341/ 292 CTR 121 / 147 DTR 1 (Delhi)(HC) DIT v. Lufthansa German Airlines (2017) 392 ITR 218/ 245 Taxman 341/ 292 CTR 121 / 147 DTR1 (Delhi)(HC) S. 9(1)(i):Income deemed to accrue or arise in India- Business connection–Formula One Grand Prix of India' event constitute business income , liable to deduct tax at source- DTAA- India –UK. [S. 195, Art., 5, 13] Formula One World Championship Limited (‘FOWC’) and Jaypee Sports International Limited (‘Jaypee’) filed applications before the Authority for Advance Ruling (AAR). FOWC had entered into a ‘Race Promotion Contract’ (RPC) dated September 13, 2011 with Jaypee, granting Jaypee the right to host, stage and promote the Formula One Grand Prix of India event for a consideration of US$ 40 million. Some other agreements were also entered into between FOWC and Jaypee as well as group companies of FOWC and Jaypee. In the applications filed by FOWC and Jaypee before the AAR, advance ruling of AAR was solicited on two main questions/queries: (i) whether the payment of consideration receivable by FOWC in terms of the said RPC from Jaypee was or was not royalty as defined in Article 13 of the ‘Double Taxation Avoidance Agreement’ (DTAA) entered into between the Government of United Kingdom and the Republic of India?; and


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(ii) whether FOWC was having any ‘Permanent Establishment’ (PE) in India in terms of Article 5 of DTAA? (iii) whether any part of the consideration received or receivable by FOWC from Jaypee outside India was subject to tax at source under Section 195 of the Indian Income Tax Act, 1961 (hereinafter after referred to as the ‘Act’). The AAR answered the first question holding that the consideration paid or payable by Jaypee to FOWC amounted to ‘Royalty’ under the DTAA. Second question was answered in favour of FOWC holding that it did not have any PE in India. As far as the question of subjecting the payments to tax at source under Section 195 of the Act is concerned, AAR ruled that since the amount received/receivable by FOWC was income in the nature of Royalty and it was liable to pay tax there on to the Income Tax Department in India, it was incumbent upon Jaypee to deduct the tax at source on the payments made to FOWC. FOWC and Jaypee challenged the ruling on the first issue by filing writ petitions in the High Court contending that the payment would not constitute Royalty under Article 13 of the DTAA. Revenue also filed the writ petition challenging the answer of the AAR on the second issue by taking the stand that FOWC had PE in India in terms of Article 5 of the DTAA and, therefore, tax was payable accordingly. The High Court reversed the findings of the AAR on both the issues. Whereas it has held that the amount paid/payable under RPC by Jaypee to FOWC would not be treated as Royalty, as per the High Court FOWC had the PE in India and, therefore, taxable in India. While deciding this question, the High Court has not accepted the plea of the Revenue that it was not a dependent PE. The High Court has also held, as the sequitur, that Jaypee is bound to make appropriate deductions from the amount payable to FOWC under Section 195 of the Act. All three parties filed appeals before the Supreme Court. As per FOWC and Jaypee, no tax is payable in India on the consideration paid under RPC as it is neither Royalty nor FOWC has any PE in India. It is pertinent to mention that the Revenue has not challenged the findings of the High Court that the amount paid under RPC does not constitute royalty. Therefore, that aspect of the matter has attained finality. The main question in the appeals therefore pertained to PE. After analysing various case laws on the subjects , the court held that ; We are of the opinion that the test laid down by the Andhra Pradesh High Court in Visakhapatnam Port Trust case fully stands satisfied. Not only the Buddh International Circuit is a fixed place where the commercial/economic activity of conducting F-1 Championship was carried out, one could clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e. FOWC) on the soil of this country. It is already noted above that as per Philip Baker27, a PE must have three characteristics: stability, productivity and dependence. All characteristics are present in this case. Fixed place of business in the form of physical location, i.e. Buddh International Circuit, was at the disposal of FOWC through which it conducted business. Aesthetics of law and taxation jurisprudence leave no doubt in our mind that taxable event has taken place in India and non-resident FOWC is liable to pay tax in India on the income it has earned on this soil. As regards deduction of tax at source , the Court observed that; Jaypee was bound to make appropriate deductions from the amounts paid under Section 195 of the Act. In view of the foregoing, the appeals preferred by the FOWC and Jaypee are dismissed, subject to observations as made above. Formula One World Championship Limited v. CIT( 2017) 394 ITR 80 / 150 DTR 305/ 247 Taxman 153 (SC) Jaiprakash Associates Ltd v CIT ( 2017) 394 ITR 80/ 150 DTR 305 (SC) S. 9(1)(i): Income deemed to accrue or arise in India –Business income-Consideration received for licensing of software programmes on the facts of the case cannot be assessed as "royalty" it is to be assessed as business income -DTAA- India –Netherland [S. 9(1)(vi), 90(2), Art. 7, 12 ] On appeal by the assessee to the Tribunal HELD allowing the appeal:


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(i) A parallel to practical, every-day examples would be useful. Take, for instance, the example of when one buys a book from Amazon for their Kindle device. In this case, Amazon can transfer the intellectual property of the book to multiple other users simultaneously, but each single transaction would still be a sale. This would also be true of the example of a music CD. The CD is the ‘medium’ by which the intellectual property, viz. the songs, passes to the buyer. The manufacturer can sell it to an end-user or to an intermediate retailer. The same song can be put on countless CDs. This too is a sale. When one buys a car, one buys the technology that is contained in the body of the car; the body is just the medium. On ITunes, when one buys a song, the song is transferred into a format which is accessible to the buyer, a proprietory format that needs a special device or software. Yet it is a sale. Limitless ITunes users can buy the song simultaneously. This is a sale to each of them. In the case of CD containing software, say for example Microsoft Word, the medium would again be the CD holding the intellectual property, which would be the software technology. This would also be a sale, despite the fact that this same software technology could be put on unlimited number of CDs and sold to multiple users simultaneously. Effective control of that particular software on that one CD is passed to the buyer. The buyer could use it, alienate it, destroy it, and do anything at all that he likes with it. If he made illicit copies of it, this would constitute infringement; and that in itself would not make the transfer of the software on a CD a service. Even if the buyer transferred this nontransferable software, it would amount to a breach of contract provided in the CD package, just as it would under Monsanto India’s sub-licensing agreement. However, this does not do anything to disqualify the transaction itself from being a sale. These are all sales. (ii) A perusal of the provisions of the Copyright Act reveals that the computer software is included in the definition of literary work and is covered under the purview and scope of copyright. The exclusive rights to do or authorize the doing of certain acts as mentioned in clause (a) and clause (b) of section 14 vests in the owner of the work such as to reproduce the work, to issue copies, to make translation or adaptation, to sell or give on commercial rental in respect of a work. The internal use of the work for the purpose it has been purchased does not constitute right to use the copy right in work. Our above also finds support from certain other provisions of the Copyright Act. (iii) In absence of transfer of rights to authorise doing of certain acts as mentioned in sections 2, 13 & 14 of the Copyright Act it cannot be said that there was transfer of copyright. Therefore, in view of these judgments payment on sale of software shall not fall within the definition of ‘Royalty’, as per DTAA. (iv) If we analyse and compare various provisions of the Copyright Act with the relevant clauses of the master agreement, it is noted that the said agreement does not permit HLL to carry out any alteration or conversion of any nature, so as to fall within the definition of ‘adaptation’ as defined in Copyright Act, 1957. The right given to the customer for reproduction was only for the limited purpose so as to make it usable for all the offices of HLL in India and no right was given to HLL for commercial exploitation of the same. It is also noted that the terms of the agreement do not allow or authorise HLL to do any of the acts covered by the definition of ‘copyright’. Under these circumstances, the payment made by HLL cannot be construed as payment made towards ‘use’ of copyright particularly when the provisions of Indian Income-tax Act and DTAA are read together with the provisions of the Copyright Act, 1957. (iv) It was also argued by the Revenue that provisions of section 9(1)(vi) should be applied, and if these are so applied, then the sale of software shall be covered under Explanation 4 to section 9(1)(vi), and, therefore, the same should be brought to tax as such. In this regard also, it is noticed by us that no corresponding amendment has been made in the provisions of the DTAA. Under these circumstances, the assessee would be entitled to the provisions, which are more beneficial to the assessee out of the provisions of Indian Income-tax Act and DTAA between India and the Netherlands, in view of provisions contained in section 90(2) of the Act. We have already held that as per the provisions of India Netherlands DTAA, the amount received by the assessee on


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account of sale of software would not fall within the definition of ‘Royalty’ as provided in Article 12(4) of the DTAA. Under these circumstances, it will not be legally permissible for us to refer to the provisions of the Act to decide the taxability of this amount in the hands of the assessee in India. Thus, in our considered view, based upon the facts and circumstances of the case and legal position as discussed above, the impugned amount received by the assessee is in the nature of business profits assessable under Article 7 of India Netherlands DTAA and would not be taxable as ‘Royalty’ under Article 12 of the DTAA.( I.T.A. Nos.83 & 84/Mum/2007, dt. 21.12.2016)( AY. 1998-99, 1999-2000) Qad Europe B. V. DDIT (Mum.)(Trib.); www.itatonline.org S.9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment- There is no agency PE hence no income could be said to be attributable to assessee, a foreign income, in India from its Indian subsidiary also when TPO had accepted that transaction between them was at ALP-DTAA-India Mauritius. [Art. 5 , 7] Assessee-company was engaged in business of broadcasting of sports channel, namely, 'Ten Sports' all across globe including India. Its subsidiary (Taj India) was also appointed as exclusive distributor of TV Channel 'Ten Sports' to cable operators and other permitted systems on 'principal to principal basis'. Taj India entered into sub-distribution agreement independently with other parties in India under which it shared distribution revenue with such sub-distributors. Assessee filed its return of income declaring 'Nil' income on ground that advertisement and distribution revenue earned by it was not taxable in India . Assessing Officer held that assessee had income chargeable to tax in India as Taj India was its agency PE. Tribunal in assessee's case in earlier year held that Taj India did not constitute 'agency PE' in terms of India-Mauritius DTAA . Tribunal also held that, when it was found that Taj India was being remunerated at arm's length, on facts, no further income/profit could be said to be attributable to assessee in India from its subsidiary. ( AY.2006-07 to 2008-09 Taj TV Ltd. v. DIT (2017) 162 ITD 674 (Mum.)(Trib.) S. 9(1)(i) : Income deemed to accrue or arise in India – Service agreement -Once DTAA does not recognize any income as FTS or royalty, then classification of said income has to be as per other provisions of DTAA and assessable as business income- DTAA-India –UAE [ S.9(1)(vi), 9(1)(vii), Art. 5, 7, 12 ] Assessee a non-resident company incorporated in UAE entered into service agreement with its Indian counterpart ABB India for rendering certain services on which it did not pay any taxes in India on ground that provisions of DTAA which did not have a clause on Fees for Technical Services (FTS) were more beneficial than corresponding provisions of Income-tax Act. Allowing the appeal of assesse , the , Tribunal held that once DTAA does not recognize any income as FTS or royalty, then classification of said income has to be as per other provisions of DTAA. In absence of provision in DTAA to tax FTS, same would be taxed as per article 7 of DTAA applicable for business profit and in absence of PE in India, said income would not be chargeable to tax in India. (AY. 2012-2013) ABB FZ-LLC v. ITO (International Transactions) (2017) 162 ITD 89 / 184 TTJ 351 / 148 DTR 97 (Bang)(Trib.) S. 9(1)(i):Income deemed to accrue or arise in India - Business connection -No operations of the business of commission agent is carried on in India- Not liable to deduct tax at source. [ S.5(2), 9(1)(vii), 195, 201(1), 201(IA)] Dismissing the appeal of revenue the Tribunal held that ; no operations of the business of commission agent is carried on in India, the Explanation 1 to Section 9(1)(i) takes the entire commission income from outside the ambit of deeming fiction under section 9(1)(i), and, in


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effect, outside the ambit of income ‘deemed to accrue or arise in India’ for the purpose of Section 5(2)(b), the assesse is not liable to deduct tax at source .(AY. 2010-11) DCIT v. Welspun Corporation Limited ( 2017) 147 DTR 113 (Ahd.)(Trib.) S.9(1)(i):Income deemed to accrue or arise in India-Undersea cable for providing dedicated bandwidth to assessee - Installation beyond territory of India and no operations carried out in India--Income did not accrue or arise in India- DTAA-India –USA. [Art. 12] Non-resident parties in the case of the assessee did not have any business connection in India. The undersea cable for providing dedicated bandwidth to the assessee was installed beyond the territory of India and no operations were carried out by the non-resident party. It was responsible for restoring connectivity and managing faults in connectivity etc. in respect of data transmitted through undersea cable only. Similarly, the operations carried out by another company were also in the U. S. A. and not in India. Since the operations by both the non-resident parties were carried out beyond the territory of India, section 9(1)(i) was not attracted in the case of the two non-resident parties. (AY. 2002-2003, 2003-2004) CIT v. Geo Connect Ltd. (2017) 54 ITR 481 (Delhi)(Trib.) S.9(1)(i): Income deemed to accrue or arise in India -Sale of software products to end-users in India-Matter was set aside[ Art 5, 12]. Assessing Officer to take into account facts and circumstances and to determine whether permanent establishment existed and also whether income taxable as royalty to depend on his determination. (.AY.2006-2007, 2008-2009) Interwoven Inc. v. DDIT (2017) 54 ITR 320 (Mum.)(Trib.) S. 9(1)(i):Income deemed to accrue or arise in India - Business connection – Tribunal held that 2.6% of the total sales for working out the profits attributable to the PE in India as against 3.5% which was applied by the Assessing Officer- Reassessment was up held – Interest u/s 234B was deleted-DTAA-India –USA. [Art. 5, 7]. Deciding the Group matters of the assessee, the Tribunal dismissed the grounds of the assessee on reassessment, and held that that 2.6% of the total sales for working out the profits attributable to the PE in India as against 3.5% which was applied by the Assessing Officer. Entire law explained on whether the deputation of personnel by a foreign company to assist the Indian subsidiaries in negotiations, marketing etc leads to a “fixed place PE” or a “Dependent Agent PE” under Article 5 of the DTAA and if so, the manner in which the profits of the foreign company are attributable to operations in India . Interest levied u/s 234B was directed to be deleted. (ITA No. 671/del/2011, dt. 27.01.2017)(AY. 2001-02) GE Energy Parts Inc v. ADIT(2017) 56 ITR 51 /184 TTJ 570 (Delhi)(Trib.)www.itatonline.org S.9(1)(i):Income deemed to accrue or arise in India-Non-resident-Undersea cable for providing dedicated bandwidth to assessee-Installation beyond territory of India and no operations carried out in India, income did not accrue or arise in India. Dismissing the appeal of the revenue , the Tribunal held that ; Undersea cable for providing dedicated bandwidth to assessee--Installation beyond territory of India and no operations carried out in India, income did not accrue or arise in India. (AY. 2002-2003, 2003-2004 ) CIT v.GEO Connect Ltd ( 2017) 54 ITR 481 (Delhi)(Trib.) S.9(1)(i):Income deemed to accrue or arise in India-Non-resident-Royalty—Transmission of call data and its effective management, Consideration paid to non-resident parties is not royalty.


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Dismissing the appeal of the revenue , the Tribunal held that ; Non-resident rendering services of transmission of call data and its effective management. No agreement for use or right to use any industrial, commercial or scientific equipment between non-resident and assessee, consideration paid to non-resident parties is not royalty. (AY. 2002-2003, 2003-2004 ) CIT v.GEO Connect Ltd. (2017) 54 ITR 481 ( Delhi)(Trib.) S. 9(1)(i) :Income deemed to accrue or arise in India- Permanent establishment - Special skill and knowledge of managing director , constituted dependent agent PE in India hence not entitle the benefit of DTAA- DTAA-India -Switzerland [S.90 Art.5] The Tribunal held that the assessee was relying on the special skills and knowledge of S who was also the Managing Director of Indian entity, which was carrying on similar functions. S was acting exclusively and almost exclusively for and on behalf of the assessee during the currency of contracts in question. Therefore, S constituted a dependent agent PE of the assessee in India. Assessee is not entitled to benefit of Article 5 of DTAA. Order of Assessing Officer was up held . (AY. 2008-09) Carpi Tech SA v. ADIT (2017) 183 TTJ 264 (Chennai)(Trib.) S. 9(1)(v) : Income deemed to accrue or arise in India– Interest-Bank incorporated in Mauritius- It was not requirement of treaty that assessee must be doing banking activities in India as well to avail exemption in respect of interest income on securities as provided in article 11(3)(c) of India-Mauritius DTAA DTAA- India- Mauritius-Beneficial ownership- matter remanded to the file of the AO. [S.115AD, Art.11] The assessee was a Foreign Company (NR) registered as a 'Bank' in Mauritius. The assessee earned certain amount as 'interest income' on securities. The assessee claimed the same as exempt income under Article 11(3) of the Indo-Mauritius DTAA.AO disallowed the exemption and taxed the same as per the provisions of section 115AD of the Act. Allowing the appeal of the assessee the Tribunal held that; assessee, a bank, incorporated in Mauritius, was qualified to perform FII activities in India approved by SEBI and, it was not requirement of treaty that assessee must be doing banking activities in India as well to avail exemption in respect of interest income on securities as provided in article 11(3)(c) of India. AO should understand the expression ”Beneficial ownership” relates to the international fiscal concept and it should be given such a meaning respecting the secrecy clause of the assessee , if any. For the limited purpose, this issue was remanded to the file of the AO.(AY.2011-12 ) HSBC Bank (Mauritius) Ltd. v.DCIT (2017) 163 ITD 310 (Mum.) (Trib.) S. 9(1)(vi) : Income deemed to accrue or arise in India– Royalty- Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services–Functional Permanent Establishment-Installation PE in India-Cannot be taxesd as business income-DTAA-India-Netherlands. [S.9(1)(i), 9(1)(vii), Art. 5(3), 12(2)] Allowing the appeal of the assessee the Tribunal held that ;under section 4 of the Act, the charge to tax is on the total income of every person. Section 5 of the Act explains the scope of total income of every person. Section 5(2) lays down the scope of total income of every person who is a non-resident. Any income received or deemed to be received in India and any income which accrues or arises in India or is deemed to have, accrued and arisen in India shall be included in his total income. Section 9 of the Act lays down as to when income shall be deemed to have accrued or arisen in India. Section 90 of the Act provides that Central Government may enter into an agreement with the Government of any country outside India for avoidance of Double Taxation of income under the Act and under the corresponding law in force in that country. Section 90(2) provides that where such agreement exists with any country outside India, then in relation to an assessee to whom such agreement applies, the provisions of the Act, shall apply only to the extent they are more beneficial to that assessee. India and Netherlands have entered into an Agreement


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for Avoidance of Double Taxation (DTAA) with effect from 21-1-1989 and therefore the taxability of any income that accrues or arises in India to the assessee who is non-resident in India and a tax resident of Netherlands will have to be determined in accordance with the said DTAA. As to when a non-resident would be considered as having a PE in the other country is generally decided on the basis of the facts in each case, the criteria being the extent to which the Non-Resident has set a firm foot in the soil of the other country. If a non-resident is considered as having a Permanent Establishment (PE) in the other country then income attributable to the PE will be taxed in the other country. As to whether the income attributable to the PE alone has to be taxed in the other country or any other income which accrues to the Non-Resident in the other country having no connection with the PE, can also be brought to tax in the other country, is also laid down in the various clauses of the DTAA between countries. Available Model Conventions differ in this regard. Some provide for taxing profits/income only to the extent that they are attributable to the PE, which is referred to as “No force of Attraction” principle. Some provide for taxing income/profits from direct transactions effected by the non-resident, provided the transactions are of the same or similar kind as that effected through the PE, which is referred to as “Limited Force of Attraction” principle. Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle. Accordingly the Tribunal held that the sale of equipment and its accessories with software imbedded in the equipment cannot be taxed in the hands of the assessee as business income as the assessee does not have a PE in India to which the profits can be said to be attributable .In the circumstances , the revenue cannot bifurcate the consideration towards software and licence embedded in the equipment from the combined sale value of the equipment and accessories and seek to bring to tax the amount bifurcated for software as in the nature of “ Royalty” as envisaged under section 9(1)(vi) of the Act . ( ITA No. 574/Kol/2014, dt. 08.02.2017)(AY. 2010-11) HITT Holland Instituted of Traffic Technology B.V. v. DDIT (Kol.)(Trib.); www.itatonline.org S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – On line publications- Data base -Payment for use of copyrighted material rather than for use of copyright is not be treated as royalty and not liable to deduct tax at source – DTAA-India –USA. [S.195, Art.12] Dismissing the appeal of the revenue, the Tribunal held that; the article 12(3) of Indo US tax treaty unambiguously requires that use of copyright that taxability can be triggered in the source country. When assessee made payment to a US based entity for access to its online publication/database. It was noted that payment in question was not use of copyright but a copyrighted material. Thus payment could not be treated as royalty liable to withholding tax. (AY. 2009-10, 2010 – 2011) ITO (IT) v. Cadila Healthcare Ltd. (2017) 162 ITD 575 / 184 TTJ 178/ 151 DTR 267 (Ahd.)(Trib.) S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Sale of software products to end-users in India—Matter was set aside. [Art. 5, 12] Tribunal held that the Assessing Officer shall first decide the issue of permanent establishment which had a bearing on the ground raised by the Department in its appeal and then decide the issues under appeal. The Assessing Officer shall also take into consideration various judgments as may be relied upon by the assessee .(AY.2006-2007, 2008-2009)


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DIT (IT) v. Interwoven Inc. (2017) 54 ITR 320 (Mum.)(Trib.) S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty Sale of software-Maintenance service charges- Amount received by assessee not "use" of copyright-Not royalty and not taxable in India- DTAA-India –Netherland. [S. 9(1)(i),147, 148, Art.12(4),Copyright Act, 1957, S. 2(a)] The claim of the assessee was that the income was not liable to be taxed as royalty but was in the nature of business income and the income was not taxable in the absence of permanent establishment of the assessee in India. AO has held that the said receipt was taxable as royalty which was up held by the CIT( A). On appeal allowing the appeal he Tribunal held that ; agreement was not permitting Indian subsidiary to carry out any alteration or conversion of any nature. Right given to customer for reproduction only for limited purpose therefore amount received by assessee not "use" of copyright- and not royalty and not taxable in India.(AY.1998-1999, 1999-2000) Qad Europe B.V. v. DIT (2017) 53 ITR 259 (Mum.)(Trib.) S.9(1)(vii): Income deemed to accrue or arise from India- Automated software-based communication system set up and maintained by assessee for use of its agents enabling them to access customer and documentation information—Payment received for providing said facility was held to be not taxable as fees for technical services- DTAA- India –Denmark. [Art. 13, 19] Dismissing the appeal of the revenue, the Court held that; Automated software-based communication system set up and maintained by assessee for use of its agents enabling them to access customer and documentation information. Payment received for providing said facility was held to be not taxable as fees for technical services. (AY. 2001-2002 ) DIT(IT) v. A.P. Moller Maersk A/S (2017) 392 ITR 186/ 246 Taxman 309/ 293CTR 1 / 147 DTR 395 (SC) Editorial: Decision in DIT(IT) v. A.P. Moller Maersk A/S ( 2015) 374 ITR 497 (Bom) (HC) is affirmed S. 9(1)(vii): Income deemed to accrue or arise in India-Fees for technical services–Common facilities is not technical services-Reimbursement of a common technical computer facility is not “fees for technical services”. Amount received by way of reimbursement of expenses does not have the character of income DTAA-India- Denmark. [Art. 12] Dismissing the appeal of the revenue the Court held that ; In order to constitute “technical services”, services catering to the special needs of the person using them must be rendered. The provision of a common facility is not “technical services”. Amount paid towards reimbursement of a common technical computer facility is not “fees for technical services”. Amount received by way of reimbursement of expenses does not have the character of income.( CA.No. 8040 of 2015, dt. 17.02.2017) DIT v. A.P. Moller Maersk AS (SC); www.itatonline.org S.9(1)(vi):Income deemed to accrue or arise in India– Royalty –Payment made for use of software could not be considered as royalty hence not liable to deduct tax at source– DTAA –India–USA [S. 195, Art. 12 (4)] Payment made to US company for use of software owned by US company, for use software only for internal business operations and would not sub-license or modify same, could not be considered as royalty within meaning of article 12(4) of DTAA and hence not liable to deduct tax at source. (AY. 2008-09, 2009-10) ADIT v. First Advantage (P.) Ltd. (2017) 163 ITD 165 (Mum) (Trib.)


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S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Payment to various non-resident companies for software support licence packages was not royalty- DTAA-India-UK. [S.195, Art. 12, 13 ] Allowing the appeal of the assesse, the Tribunal held that;Payment to various non-resident companies for software support licence packages was not royalty and liable to deduct tax at source. (AY 2006-07 to 2009-10) Quaolcomm India (P.) Ltd. v ADIT(2017) 162 ITD 493 (Hyd.) (Trib.) S. 9(1)(vii):Income deemed to accrue or arise in India - Fees for technical services - Dismantling of paper mill machinery was 'contract of work' and not a 'contract of service' payment made under said contract could not be regarded as fee for technical services and not liable to deduct tax at source- DTAA –India –Poland. [S. 195, Art. 13] Dismissing the appeal of the revenue, the Tribunal held that ; contract entered into by assessee-company with a foreign company for dismantling of paper mill machinery was 'contract of work' and not a 'contract of service', payment made under said contract could not be regarded as fee for technical services hence not liable to deduct tax at source . ( AY. 2012-13 ) ITO v. Emami Paper Mills Ltd. (2017) 163 ITD 212 (Kol.) (Trib.) S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical services–Management support and other services –Merely because provision for services may require technical input by providing services , it cannot be said that technical knowledge , skill etc .are made available to person purchasing service -DTAA –India – Finland. [Art. 13] Assessee a foreign company, earned revenue from management support and other services provided to its AE in India. The AO held that these services constituted technical service. On appeal allowing the appeal of the assessee, the Tribunal held that; no technology or technical knowhow, skills etc. were made available by assessee in order to enable Indian company to function on its own without dependence of assesse. Tribunal also held that to cover the provisions of article 13(4) of DTAA, not only services should be of technical nature but such services should result in making technology available to person receiving technical services. Merely because provision of service may require technical input by person providing service, cannot be said that technical knowledge, skills, etc. are available. (AY. 2010-11, 2011-12) Outotec Oyj v. DIT (2017) 162 ITD 541 / 183 TTJ 289 (Kol.)(Trib.) S. 9(1)(vii):Income deemed to accrue or arise in India-Fees for technical services-Bio analytical services provided does not involve any transfer of technology hence the payment is not a Fees for Technical Services – Not liable to deduct tax at source- DTAA- India –UK- Canada –USA. [S.195, Art. 12, 13] Assessee has made payments for services rendered by non-residents based in USA , Canada and UK for services in nature of bio analysis .AO held that the payments made was highly technical in nature and liable to deduct tax at source . On appeal CIT(A) decided the issue in favour of the assessee.Dismissing the appeal of the revenue , the Tribunal held that ; services provided by non-residents did not involve any transfer of technology and recipient of services was enabled to use these services in future without recourse to service providers. Therefore, payment to the non-resident would not be treated as fees technical/included Services. (AY. 2009-10, 2010-2011) ITO( IT) v. Cadila Healthcare Ltd. (2017) 162 ITD 575 / 184 TTJ 178 / 151 DTR 267 (Ahd.)(Trib.) S.9(1)(vii): Income deemed to accrue or arise in India-Fees for technical services-Transmission of call data from end of Indian territory to person outside India is not fees for technical services hence not taxable in India.


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Transmission of call data from end of Indian territory to person outside India is not fees for technical services hence not taxable in India. (AY. 2002-2003, 2003-2004) CIT v.GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.) S. 9(1)(vii): Income deemed to accrue or arise in India –Payment made towards various IT support services received from the holding Company and associated enterprises of the group concerns are not in the nature of Fees for Technical Services , hence not liable to deduct tax at source–DTAA-India-Canada DTAA. [S.9(1)(vi), 195, Art. 12] Dismissing the appeal of revenue ; the Tribunal held that ; As we have noted earlier, it is not even the case of the Assessing Officer that the assessee, i.e. recipient of services, was enabled to use these services in future without recourse to BT Canada. The tests laid down by Hon’ble Court were clearly not satisfied. There mere fact that there were certain technical inputs or that the assessee immensely benefited from these services, even resulting in value addition to the employees of the assessee, is wholly irrelevant. The expression ‘make available’ has a specific meaning in the context of the tax treaties and there is, thus, no need to adopt the day to day meaning of this expression, as has been done by the Assessing Officer. Accordingly; payment made towards various IT support services received from the holding Company and associated enterprises of the group concerns are not in the nature of Fees for Technical Services , hence not liable to deduct tax at source.(AY. 2013-14) DCIT v. Bombardier Transportation India Pvt. Ltd. (2017) 146 DTR 45 (Ahd.)(Trib.) S. 9(1)(vii):Income deemed to accrue or arise in India - Fees for technical services - opinions or services could be used by assessee for its business purposes in succeeding years without any aid and assistance of consultant, payment made for said services amounted to fee for technical services-OECD Model Convention.[Art. 12] Assessee company was engaged in business of dairy products, It entered into agreement with MJR, Singapore for purpose of providing advice to assessee on various matters of strategic and operational importance. The AO held that consultancy charges paid by assessee to foreign company amounted to fee for technical services. On appeal dismissing the appeal the Tribunal held that ; since consultancy services were rendered by foreign company, it was made available to assessee for its enduring benefit and those consultancy advisories, opinions or services could be used by assessee for its business purposes in succeeding years without any aid and assistance of consultant, said services were rightly regarded as technical services. (AY.2007-08 to 2009-10) Nilgiri Dairy Farm (P.) Ltd. v. ITO (2017) 162 ITD 109 (Bang.)(Trib.) S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Fees paid with respect to a ‘contract of work’ does not constitute "fees for technical services" and consequently the assessee is not liable to deduct TDS.[S. 195, 201] Dismissing the appeal of revenue, the Tribunal held that;There is a difference between a 'contract of work' and a ‘contract of service’. In a 'contract of work', the activity is predominantly physical while in a 'contract of service', the dominant feature of the activity is intellectual. Fees paid with respect to a ‘contract of work’ does not constitute "fees for technical services" and consequently the assessee is not liable to deduct tax at source. (ITA No. 642/kol/2016, dt. 04.01.2017) (AY. 2012-2013) ITO v. Emami Paper Mills Ltd. (Kol.)(Trib.); www.itatonline.org S. 9(1)(vii):Income deemed to accrue or arise in India - Fees for technical services - Taxability of "Other income" under DTAA-Only income not covered by specific Articles (e.g. alimony, lottery income, gambling income, damages etc) can be charged as "Other


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Income” , fees for technical services cannot be taxed as other income – DTAA- India –Thailand-Mauritius. [S.90, Art. 6 to 21, 22 ] Dismissing the appeal of the revenue , the Tribunal held that ;income which is not chargeable under specific provisions of Articles 6 to 21 cannot be taxed under the residuary provision. Only income not covered by specific Articles (e.g. alimony, lottery income, gambling income, damages etc) can be charged as "Other income". Fees for technical services cannot be taxed as other income.(AY. 2011-12, 2012-13) DCIT v. Ford India Limited (2017) 148 DTR 25 / 184 TTJ 291 (Chennai)(Trib.) S. 10(4) : Exemption—Interest earned on non-resident external account is entitle exemption. [S.10(4)(ii)] Assessee a non-resident on deputation to India. Interest earned on non-resident external account. Assessee entitled to exemption. (AY. 2008-2009, 2010-2011) Venkatesh Satyaraj v. DCIT(2017) 53 ITR 406 (Mum.)(Trib.) S. 10(10C) : Public sector companies - Voluntary retirement scheme –Entitle to exemption though the revised return was filed beyond limitation period.[S. 119(1), 139(5)] Allowing the petition the Court held that; where default in complying with requirement was due to circumstances beyond control of assessee, Board was entitled to exercise its power and relax requirement contained in Chapter IV or Chapter VI-A ,thus assessee being a senior citizen could not have been denied benefit of exemption under section 10(10C). S. Sevugan Chettiar v. PCIT (2017) 244 Taxman 267/ 291 CTR 596 / 145 DTR 279 (Mad.)(HC) S.10(15): Interest payable-Foreign currency loan-Requirement of approval of Central Government necessary with regard to rate of interest-Assessee getting approval for transaction and rate of interest from Department of Economic Affairs--Entitled to benefit of deduction of interest. [S.10(15)(iv)(c), 40(a)(i).] Allowing the appeal of the assessee the Court held that;a plain reading of the provision under section 10(15)(iv)(c) bear out the fact that the approval of the Central Government which was necessary was not with respect to the transaction, but with regard to the rate of interest. Since no specific agency was named where either the specific power was granted or the concerned authority itself was mentioned, the particular reference to the Central Government could not in any manner undermine or render valueless the approval granted by one of the agencies or Departments of the Government. Further, the Department of Revenue did not express any contrary opinion in its approval. What the Department of Economic Affairs approved was the transaction and the rate of interest. That the assessee availed of a lesser amount of credit or loan did not mean that there was no approval particularly, because it was not the Department's case that the Department approved an entirely different transaction. The assessee was entitled to the benefit of exemption of interest made by it, in its return. (AY. 1996-1997 ) Tej Quebcor Printing Ltd. v. JCIT (2017) 392 ITR 67/ 246 Taxman 73 (Delhi)(HC) S.10(20):Local authority--Greater Noida Industrial Development Authority is not municipality or local authority hence not entitled to exemption [ S.194I, art. 243Q. ] Greater Noida Industrial Development Authority is not municipality or local authority hence not entitled to exemption Rajesh Projects (India) P. Ltd. v. CIT (TDS)-II (2017) 392 ITR 483/ 293 CTR 121/ 78 taxmann.com 263 / 148 DTR 33 (Delhi)(HC)


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S.10(20): Local authority—Interest earned on temporary place in deposit was held to be exempt -Contribution to provident fund and gratuity fund is entitled to exemption. [S.11, 12] The Interest earned by the assessee on its surplus or idle funds was assessable under the head "Income from other sources" and the rest of the income, being miscellaneous in character was assessable as income from other sources, which was also exempt under section 10(20). That where the entire income of the assessee had been held to be exempt under section 10(20) there was no case for making disallowance of any expense at all. Any disallowance made of expenditure would only result in enhancing the income of the assessee which in any case had been held to be exempt from tax. Further the entire income earned from rendering services had been held to be exempt at the threshold itself therefore there was no requirement of resorting to the computational provisions relating to income under the head "Business and profession" stipulated under section 28 to section 44. No disallowance on account of contribution to the unapproved pension fund could be made. (AY. 2000-2001 to 2003-2004) Haryana State Agricultural Marketing Board v. ACIT (2017) 54 ITR 368 (Chd.)(Trib.) S.10(20A):Local authority-Remand by High Court to Tribunal –Appeal of revenue was dismissed. Dismissing the appeal of the revenue, the Court held that; remand by High Court to Tribunal to consider matter in terms of Act under which assessee constituted and other Acts and Rules affecting matter. Addl. CIT v. Vidarbh Irrigation Dept. Corporation (2017) 392 ITR 1/ 150 DTR 150 / 294 CTR 12 (SC) Editorial : Vidarbha Irrigation Development Corporation v. Addl. CIT (2005) 278 ITR 521 (Bom) (HC) S.10(22A): Hospitals and Nursing Homes- Disqualification under section 13 does not apply to institutions covered under section 10(22A) -Benefits received by settlor cannot debar assessee from eligibility it fundamentally has under section 10(22A)-Entitled to exemption. [ S.12A,13(3) ] Held, allowing the appeals, that the exclusion of amounts received by virtue of section 10(22A) was not the subject matter of section 13(1) of the Act or any of its further conditions. In other words, the disqualification which attached in absolute terms by virtue of the provisions of section 13(1) especially through section 13(3) to the income out of which some benefit flowed to a settlor, would not apply to institutions covered by section 10(22A) of the Act. Having regard to the specific nature of the income which till March 31,1999 could not be included as part of the total income, and which Parliament later subsumed through sections 10(23C) and 12A of the Act by deleting section 10(22A), there was no question of confusion regarding the amount received by Dr.P.N.Behl, as benefits that could debar the assessee to the eligibility it fundamentally had under section 10(22A) of the Act. The assessee was entitled to exemption. (AY. 1993-1994, 1994-1995, 1995-1996) Skin Institute and Public Services Charitable Trust v. CIT (E.) (2017) 390 ITR 609/ 245 Taxman 61/ 291 CTR 427 / 145 DTR 425 (Delhi)(HC) S. 10(23C): Exempt income-Educational institution-Mere receipt of interest-free loan not indicative of commercial activity. Held, exemption u/s 10(23C) could not be refused merely because a company had granted an interest-free loan to the assessee for the purpose of establishing and running the educational institution. The mere receipt of an interest-free loan was not indicative of a commercial activity for profit. Amrawati Welfare Society v. CBDT (2017) 390 ITR 471 (P&H)(HC)


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S.10(23C): Educational institution—Delayed application- Order passed contrary to circular of CBDT denying the exemption was not justified-Directed to Commissioner to pass fresh orders. [S.10(23C)(vi), 147] Allowing the petition the court held that ; as clause (4) of the Central Board of Direct Taxes Circular No. 7 of 2010 provided that an exemption once granted operated in perpetuity till it was withdrawn, the orders passed by the Department ignoring the circular were contrary to law and liable to be set aside. The Commissioner was to pass fresh order on the assessee's application considering the relevant clause of the circular.(AY. 2008-2009, 2009-2010 ) Param Hans Swami Uma Bharti Mission v. CCIT(2016) 238 Taxman 538/ 287 CTR 350/ (2017) 391 ITR 131 (P&H)( HC) S. 10(23C): Educational and medical institution-Application cannot be rejected on the ground that the assesse charges fees for educational course or made arrangement with other institutes to render medical facilities.[S12A, 80G] Allowing the petition, the Court held that the objects of the assessee society were solely for the purposes of education and medical care and not for the purpose of profit. Merely because it charged fees for educational courses or that it entered in to arrangements with other institutions to set up satellite centers, to give medical treatment, or that its treatment involved a layered subsidization programme that would not justify rejection of its application. Denial of exemption was not justified and the order was quashed . Venu Charitable Society v DGI( 2017) 383 ITR 63/ 150 DTR 51 (Delhi) (HC) S. 10(23C): Educational institution- Generation of surplus is not fatal to the grant of exemption, if such surplus is utilized for charitable purposes. The fact that the hospital charges of the assessee, as compared to other commercial establishments, are very nominal, throws further light on its charitable character. [S.10(23)(vi), 10(23)(via), 12A,80G] The Commissioner of Income Tax rejected the claim of the assessee to renew the exemption granted to it under Section 80G of the Act. Tribunal allowed the claim. On appeal by revenue, dismissing the appeal the Court held that; in Visvesvaraya Technological University v. ACIT (2016) 384 ITR 37 (SC), on the first issue, the Apex Court held that if the surplus accumulated over the years is ploughed back for educational purposes, the institution would continue to exist solely for educational purposes and not for the purpose of profit. However, on the second issue, on facts, the Apex Court came to the conclusion that the assessee therein was neither directly nor substantially financed by the Government and thus, not coming under the expression “wholly or substantially financed by the Government”, as appearing in Section 10(23C)(iiiab). Having not agreed with the assessee on the second issue, the appeal was dismissed (Islamic Academy of Education v. State of Karnataka – (2003) 6 SCC 697 and Queen’s Educational Society vs. Commissioner of Income Tax – (2015) 8 SCC 47 referred). In view of the findings of the Apex Court in paragraphs 8 and 9 of its judgment in Visvesvaraya’s case (supra), as reproduced earlier, we unhesitantly conclude that even if substantial surplus is generated, but the same is found to have been ploughed back for building infrastructure/assets, which in turn are used for educational/charitable purposes, the institution would not lose its charitable character. In the case before us, it has not been disputed that the assessee is registered under Section 12A and that it has been held entitled to the grant of exemption under Section 10 (23C)(vi) of the Act as per orders of this Court passed in C.W.P. No. 6031 of 2009, upheld by the Apex Court in Civil Appeal No. 9606 of 2013. It has further come on record that the assessee was granted exemption under Section 80G of the Act from the year 1997 till the passing of the impugned order. Further, the finding of the Tribunal, that the assessee has never mis-utilized its funds, has not been assailed before us. The generated surplus having been ploughed back for expansion purposes also remains undisputed by the Revenue as no challenge to the same has been made. In fact, the


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utilization of surplus for large scale expansion at the behest of the assessee was also acknowledged by the Commissioner. The Tribunal had further detailed in its order the receipts, expenditure, capital expenditure, income/surplus of receipts over expenditure, income applied for the charitable purposes and percentage of the income applied in a tabulated form, which clearly depicted utilization of surplus by the assessee for only charitable purposes.(AY. 2010-11 to 2014-15 ) CIT v. Gulab Devi Memorial Hospital Trust(2017) 146 DTR 34 (P & H)(HC) S.10(23C): Educational institution-Each educational institution should be considered separately for applying threshold annual receipt of Rs. 1 crore for allowing exemption. [S. 10(23C)(vi), 12AA] Allowing the appeal the Tribunal held that; each educational institution should be considered separately for applying threshold annual receipt of Rs. 1 crore, matter required a fresh look by Assessing Officer. (AY. 2010-11,2011-12) PKD Trust v. ITO (2017) 163 ITD 502 (Chennai) (Trib.) S. 10(26):Scheduled tribe-Assessee's claim for exemption to be determined if he were residing in such area, matter remanded. Allowing the petition the Court held that; The jurisdictional Income-tax Officer had to re-visit the assessees' claim for tax exemption, under section 10(26) of the Income-tax Act, by identifying the area where they resided and where they earned their salary income, in the context of the areas specified in the notification dated February 23, 1951.Matter remanded. Hara Kanta Pegu v. UOI (2016) 76 taxmann.com 131/(2017) 392 ITR 247 (Gauhati) (HC) S. 10(37) : Capital gains-Exemption-Transfer of agricultural land -The fact that the assessee entered into a settlement with the Collector regarding the compensation amount does not mean that the acquisition was not "compulsory" if the prescribed procedure was followed- Exemption was allowed.[S.148 , Land Acquisition Act, 1894 , S.6] The issue before the Court was “whether, on the facts and in the circumstances of the case, the High Court was justified in denying the claim for exemption under section 10(37) of the Income –tax Act, 1961 to the appellant” Reversing the judgement of the High Court the Court held that, The fact that the assessee entered into a settlement with the Collector regarding the compensation amount does not mean that the acquisition was not "compulsory" if the prescribed procedure was followed and proceedings under section 148 was quashed. ( AY. 2009-10 ) Balakrishnan v. UOI(2017) 391 ITR 178 / 247 Taxman 16 / 149 DTR 137/ 294 CTR 6 (SC) Editorial:Decision of Kerala High Court in Info Park Kerala v. ACIT (2008) 4 KLT 782 ( 2017) 391 ITR 178 overruled S. 10(38): Long term capital gains from equities-Penny stocks- Shares- Transactions cannot be held to be bogus.[S.45, 68] Dismissing the appeal of revenue, Tribunal held that ;the fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus. (ITA No. 1442/Ahd/2013 & Co. No. 209/Ahd/2013., dt. 06.01.2017)(AY.2005-06) ACIT v. Vineet Sureshchandra Agarwal (Ahd.)(Trib.); www.itatonline.org S.10(38): Long term capital gains from equities–Long term capital loss –Long term capital gains- Unlisted shares-Loss on sale of shares off market transaction where no STT was paid


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can be set off against long term capital gains on sale of long term capital gains arising on sale of unquoted shares. [S.45 , Finance, Act No 2, 2004, S.88] Allowing the appeal of the assessee, the Tribunal held that; Loss on sale of shares off market transaction where no STT was paid can be set off against long term capital gains on sale of long term capital gains arising on sale of unquoted shares.(AY. 2009-10) Asara Sales& Investments (P.) Ltd.v. ITO (2017) 163 ITD 682/ 151 DTR 215 (Pune)(Trib.) S. 10(38): Long term capital gains from equities–Penny stocks-Shares-Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault. [S.45, 68] Allowing the appeal of assessee the Tribunal held that,capital gains from penny stocks- Long-term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in order. The fact that the Company whose shares were sold has violated SEBI norms and is not traceable does not mean that the assessee is at fault. CIT vs. Carbo Industrial Holdings Ltd. (2000) 244 ITR 422 (Cal)(HC).( ITA No. 1213/Kol/2016, dt. 11.01.2017)(AY. 2005-06) Surya Prakash Toshniwal HUF v. ITO (Kol.)(Trib.); www.itatonline.org S.10A: Free trade zone–Depreciation and business losses pertaining to non 10A unit cannot be set off against profits of units eligible for exemption. Dismissing the appeal of the revenue, the Court held that, depreciation and business losses pertaining to non 10A unit cannot be set off against profits of units eligible for exemption. Referred CIT v. Yokogawa India Ltd ( 2017) 391 ITR 274 (SC). ( AY. 2004-2005) PCIT v. Makino India P. Ltd. (2017) 393 ITR 291 (SC) S.10A: Free trade zone-Unabsorbed depreciation and business loss brought forward can be set off against current year’s profit Dismissing the SLP of the Revenue, the Court held that ; Unabsorbed depreciation and business loss brought forward can be set off against current year’s profit. (AY. 2005-06) CIT v. J.P. Morgan Services India Pvt.Ltd. ( 2017) 393 ITR 24 / 152 DTR 287 (SC) Editorial: Decision of Bombay High Court in CIT v. J.P. Morgan Services India Pvt.Ltd.ITA No. 2188 of 2013 dt 21—03 2016 (Bom)(HC) is affirmed . S.10A: Free trade zone–Exempt income to be enhanced to the extent of disallowance.[S.14A] That when any part of the expenditure claimed by the assessee was disallowed under section 14A then as a consequence thereto the profits of the assessee eligible for deduction under section 10A would witness a corresponding increase, leading to a consequent increase in the claim of deduction of the assessee under section 10A pursuant whereto the net effect would remain at Rs. nil. (AY.2010-2011, 2011-2012) Informed Technologies India Ltd. v. DCIT (2017)54 ITR 397 (Mum.)(Trib.) S. 10A: Free trade zone - Disallowance of expenses consequential enhancement of exemption is allowable.[S. 14A] Allowing the appeal the Tribunal held that; disallowance of expenses consequential enhancement of exemption allowable. (AY. 2010-11,2011-12) Informed Technologies India Ltd. v. Dy.CIT (2017) 162 ITD 153 / 54 ITR 397 / 183 TTJ 60 (Mum.)(Trib.)


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S. 11: Property held for charitablepurposes–Charitable objects -mere charging fee for services rendered would not make it non-charitable unless profit motive was established. [S. 2(15), 12, 12A] Allowing the appeal of the assessee the Tribunal held that; object of trust was providing guarantee to lending institutions helping only SSIs and micro enterprises in availing credit facilities and it was not carrying any 'trade, commerce or business', mere charging fee for services rendered would not make it non-charitable unless profit motive was established Credit Guarantee Fund Trust v. ITO (2017) 163 ITD 285 (Mum.) (Trib.) S.11: Property held for charitable purposes–Exemption cannot be denied for reshuffle of specified investment. [S.2(15), 11(5)] AO held that one set of mutual funds was divested within period of sixty days in violation of provisions of section 11(5), denied assessee's claim for exemption of income. On appeal by the revenue, the Tribunal held that there is no stipulation under section 11(5) placing restriction on reshuffle of specified investment and even otherwise, since assessee-trust had reshuffled one set of investments only with purpose of safeguarding interest of trust and in view of apprehension that value of said mutual fund was fast declining, order passed by Assessing Officer was not sustainable.(AY. 2008-09) Dy.DIT v. M.C. Natha Bhatia High School Trust, (2017) 163 ITD 460 (Mum.)(Trib.) S. 11 : Property held for charitable purposes-statues of the assessee in the earlier years, no change in facts and circumstances of the case–Entitled to exemption.[S.12A] Assessee formed with the main object of town planning having been granted registration under S.12A and the revenue having accepted in the earlier years that the activities carried out by the assessee were charitable in nature, it is entitled to exemption under S. 11 in the relevant assessment year. (AY. 2009-10) ITO v. Moradabad Development Authority (2017) 146 DTR 120 (Delhi)(Trib.) S.11: Property held for charitable purposes-Mutuality-Substantial part of assessee's earning from advertisement in souvenirs, fees from seminars or conferences, interest--Conducting conferences or seminars not incidental activity but pre-dominant activity-Assessee not entitled to exemption on ground of mutuality. [S.2(15 )] Dismissing the appeal of the assesse the Tribunal held that ; there could be no doubt that the assessee was earning substantial income from seminars, interest on investments and miscellaneous items. The assessee could not claim that its earnings were only incidental to its main objects nor that its income was exempt on the principle of mutuality since admittedly the items comprised in other income were not exclusively earned from its members. Conducting conferences or seminars was not done as an incidental activity but during the relevant previous year it was the assessee's pre-dominant activity. It may not be appropriate to give an interpretation to section 2(15) which is not in consonance with the words used by the legislation, where the predominant activity carried on was akin to a business or trade or service in connection thereto. Therefore the assessee could neither be considered to perform charitable activities within the meaning of section 2(15) during the relevant previous year nor could it be considered as exempt on the principle of mutuality. (AY.2009-2010) Employers' Federation of Southern India v. ADIT (2017) 54 ITR 568(Chennai)(Trib.) S. 11: Property held for charitable purposes-Propagation of yoga itself is a charitable purpose-Trust-is entitle to exemption [S. 2(15) 12, 12A] Tribunal held that achieving medical relief through several methods and yoga one method. Legislature removing all doubts by inserting yoga in definition as charitable purpose hence


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propagation of yoga itself is a charitable purpose. Charging of fee to meet a part of cost for rendering charitable services, would not alter charitable character of services therefore Trust is entitled to exemption. Activities undertaken outside India by assessee neither substantiated nor expenditure quantified therefore denial of exemption was not justified. (AY. 2009-10) Patanjali Yogapeeth (Nyas) v. Add; DIT(E) (2017) 163 ITD 323 / 54 ITR 616 / 151 DTR 114 / 185 TTJ 1(Delhi) (Trib.) S. 12A: Registration of trust–One assessee having two registration for two educational institutions of different date was held to be not proper. Assessee, a society running two educational institutions. Application by assessee on 28-9-2004 to grant registration in name of society. Commissioner granting registration in name of society with effect from 1-4-2004 cancelling individual registrations. Appellate Tribunal granting registration with effect from 1-4-1973 was held to be not proper. Such registration would cause overlapping of period during which the two institutions had been enjoying the registration with effect from different periods and that that would create complications in the matter had been overlooked. CIT v. Allahabad High School Society (2017) 390 ITR 75 / 147 DTR 258 / 294 CTR 170 (All)(HC) S. 12A : Registration–Trust or institution-Educational institution- Refusal of registration was held to be not justified.[S. 2(15, 11,12AA) Allowing the appeal of the assessee the Tribunal held that; objects and activities of assessee-society were to run education institutions to impart balanced and wholesome education to youth, registration under section 12A was to be granted Labana Sikh Educational Society v.CIT (2017) 163 ITD 87 (Chd.)(Trib.) S. 12A : Registration–Trust or institution-Registration cannot be cancelled or withdrawn only on the ground that the assessee trust was hit by monetary limits prescribed under section 2(15) of the Act. [ S.2(15), 11 ,12AA ] Allowing the appeal of the assessee, the Tribunal held that; registration granted cannot be cancelled on the ground that; the assessee trust was hit by monetary limits prescribed under section 2(15) of the Act. (AY. 2009-10) Bhakti Kala Kshetra v. DIT (E) (2017) 163 ITD 440 (Mum.)(Trib.) S. 12A : Registration –Trust or institution-Merely charging of fees for carrying such activities would not loose character of charity. [S. 2(15)] Tribunal held that where department had granted registration treating activities as charitable, mere charging of fees for carrying such activities would not loose character of charity. Assessee is entitle to registration.(AY 2010 – 2011) Quality Circle Forum of India v. Dy.CIT (2017) 162 ITD 122 (Hyd.)(Trib.) S.12AA: Procedure for registration–Trust or institution-Receipts on account of commercial activities exceeding limits prescribed in proviso to section 2(15), in particular year, does not give automatic power to Commissioner for cancellation of registration. [S. 2(15), 12, 13(8)] Dismissing the appeal of the revenue , the Court held that; mere fact that in one particular year, the assessee had income receipts in excess of Rs. 10 lakhs or such other limit as provided in the proviso to section 2(15) of the Act, by itself would not warrant cancellation of the registration under section 12AA(3) and that there was a difference between registration and exemption.No question of law arose. (AY .2009-2010) DIT (E) v. North Indian Association (2017) 393 ITR 206/ 246 Taxman 318/293 CTR 169/ 148 DTR 76 (Bom.)(HC)


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S. 12AA : Procedure for registration–Trust or institution- Activities of trust is genuine Restoration of registration granted was held to be proper. [S. 2(15), 11] Dismissing the appeal of the revenue , the Court held that ; the Commissioner could exercise his power to cancel the registration granted to a trust only if at least one of the two conditions, that either (i) the activities of the trust or institution were not genuine, or (ii) the activities of the trust or institution were not being carried out in accordance with the objects of the trust or institution, as specified therein was found to be satisfied. Such satisfaction of any of the two conditions had not been shown by the Department. The Appellate Tribunal's order restoring the registration granted was proper. CIT v. Institute Management Committee of Industries Training Institute (2017) 393 ITR 161/ 148 DTR 74/ 293 CTR 167 (Bom.)(HC) S. 12AA:Procedure for registration–Trust or institution – If aggregate receipts exceeds specified relief exemption would be denied, however registration shall not be cancelled. [S.2(15)] Dismissing the appeal of the revenue, High Court ,referred to the CBDT’s circular No. 21/2016 dt. 27-05-2016 and held that;if the aggregate receipts from activities of advancement of any other object of general public utility during the year exceeds 25% of total receipts of the trust or institution, the tax exemption would be denied to such trust or institution. But, registration granted u/s. 12AA of the Act, shall not be cancelled. CIT v. Himachal Pradesh Road Transport Corporation (2017) 291 CTR 417 / 145 DTR 257 (HP) (HC) S.12AA: Procedure for registration–Trust or institution- No material indicating that assessee or its affairs not carried out in accordance with object of trust--Registration cannot be cancelled. [S.(2.15)] Dismissing the appeal of the revenue, the Court held that; there was nothing referred to by the Director (E) which could show that the assessee was undertaking any activities which would demonstrate that it was not a genuine trust or institution. There was no material which would indicate that the assessee or its affairs were not being carried out in accordance with the object of the trust or institution. These two aspects referred to in sub-section (3) of section 12AA of the Act and the materials in that behalf were completely lacking. Therefore, there was no reason for the Director (E) to exercise the power which he purported to exercise. (AY.2009-2010) DIT (E) v. Maharashtra Housing & Area Development Authority (2017) 392 ITR 240 (Bom.) (HC) S. 12AA : Procedure for registration–Trust or institution- Registration cannot be refused on the ground that it has not yet commenced charitable or religious activity.[S. 2(15) 11, 12A] Allowing the appeal of the assessee, the Tribunal held that; Registration cannot be refused on the ground that it has not yet commenced charitable or religious activity . ( AY. 2016-17) Ashutosh Charitable Trust of Educational & Medical Sciences v.CIT (20170 163 ITD 301 (Chd.)(Trib.) S.12AA: Procedure for registration –Trust or institution- If the object of the trust is charitable, registration cannot be denied. [S.80G] Allowing the appeal the Tribunal held that; if the object of the trust is charitable registration cannot be denied. Accordingly, the Commissioner was directed to grant registration to the assessee under section 12AA and also grant exemption certificate under section 80G of the Act. Abacus Foundation v. CIT (2017) 53 ITR 629 (Kol.) (Trib.)


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S. 12AA: Procedure for registration–Trust or institution- The activities of Banquet Hall Hiring, Hospitality (Restaurants) and Permit Room (Bar) are prima facie in the nature of carrying on trade, commerce, or business, the DIT is required to conduct detailed enquiry and examination as to the nexus between the activities and trade, commerce or business, matter was set aside to decide de novo. [S.2(15), 11, 12A ] The DIT(E) cancelled the registration by invoking newly inserted proviso to Section 2(15) of 1961 Act by holding that the assessee’s main object is not for advancement of any other object of general public utility as the assessee is carrying on the activities which are in the nature of trade, commerce or business for consideration, therefore, in view of amended provisions of Section 2(15) of 1961 Act. Section 2(15) of 1961 Act, the assessee is not entitled for exemption u/s 11 of 1961 Act. On appeal by the assessee to the Tribunal held that ; the activities of Banquet Hall Hiring, Hospitality (Restaurants) and Permit Room (Bar) are prima facie in the nature of carrying on trade, commerce, or business for consideration and are hit by the proviso to s. 2(15). If the receipts from these activities are in excess of the minimum prescribed threshold limit, the DIT is required to conduct detailed enquiry and examination as to the nexus between the activities and trade, commerce or business, following theHon’ble Bombay High Court in a recent decision in DIT(E) v. North Indian Association, (2017) 79 taxman.com 410 (Bom.) dated 14-2-2017, wherein, a significant observations in context of amended provisions of Section 2(15) of 1961 Act in para-9 was made contemplating that if the transactions are in the nature of trade, commerce and business are consistent and continuous/regular basis and exceeds threshold limit, as prescribed by statute u/s 2(15) of 1961 Act , then it is a matter of probe / investigation to come to conclusion that the activities of the trust/institution is not genuine, in the light of amended provisions of Section 2(15) of 1961 Act. Accordingly the matter was set side to decide de novo determination of the issue on merits in the light of the amended Section 2(15) of the Act read with Section 11 of the Act, considering the decision of Hon’ble Bombay High Court in the case of DIT(E) v. North Indian Association ( ITA No.602/Mum/2012 & ITA No.4638/Mum/2013, dt. 18.04.2017)(AY. 2009-10) MIG Cricket Club v. DIT (E) (Mum.)(Trib.);www.itatonline.org S. 13: Denial of exemption-Trust or institution-Investment - Major activities charitable and a few religious activities, Trust is entitled to exemption. [S.11, 263] Court held that, major activities charitable and a few religious activities, Trust is entitled to exemption, revision was held to be not valid, 263. Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/ 245 Taxman 101 (Patna)(HC) Shri Mahavir Sthan Nyas Samiti v. UOI(2017) 392 ITR 301 /245 Taxman 101 (Patna) (HC) S.13: Denial of exemption-Trust or institution-Investment restrictions -Disallowance of repayments of loans from trustees and family members treating them as transfer of trust funds-Matter remanded to Assessing Officer for fresh adjudication.[S.11, 13(1)(c)] Allowing the appeal of the assesse the Court held that ;The Assessing Officer did not discharge his role as investigator relying upon any material or evidence to support his adverse finding that the repayment of loan to its trustees was transfer of funds to trustees .Therefore, the claim was remanded to the Assessing Officer for fresh adjudication on any evidence that might be adduced to disprove the claim. No adjudication on the claim of accumulated deficit had been found in the assessment order.Matter remanded. (AY. 2005-2006) Devi Kamal Trust Estate v. DIT (E) (2017) 392 ITR 178/ 246 Taxman 196/ 151 DTR 82 (Cal)(HC) S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot be made in the absence of proof that expenditure has actually been incurred in earning dividend


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income –If the AO has accepted in earlier years he cannot take a contrary stand if the facts and circumstances have not changed – Argument that the dividend is not tax free in the hands of the payee is not accepted. [S.10(33), 115O, 115R, R.8D] Allowing the petition the Court held that;disallowance cannot be made in the absence of proof that expenditure has actually been incurred in earning dividend income. If the AO has accepted in earlier years he cannot take a contrary stand if the facts and circumstances have not changed. Argument that the dividend is not tax free in the hands of the payee is not accepted, section 14A disallowances has to be made also with respect to dividend on shares and units on which tax is payable by the payer u/s 115-0 and 115R.(AY. 2002-03) Godrej & Boyce Manufacturing Co Ltd v. DCIT(2017) 394 ITR 449 / 247 Taxman 361/ 151 DTR 89 ( SC) S.14A:Disallowance of expenditure-Exempt income-Assessing Officer must record satisfaction that claim regarding expenditure is not satisfactory-Disallowance of expenditure on basis of estimate by Assessing Officer was held to be not permissible [R.8D]. Court held that, the Assessing Officer must record satisfaction that claim regarding expenditure is not satisfactory-Disallowance of expenditure on basis of estimate by Assessing Officer was held to be not permissible, however the Assessing Officer was justified in presuming that assesse had incurred expenditure towards administration activities necessary to earn exempt income hence entitle to resort rule 8D. (AY.2008-2009 ) Punjab Tractors Ltd. v. CIT (2017) 393 ITR 223/246 Taxman 31 / 293 CTR 50/ 147 DTR 307 (P&H)(HC) S.14A: Disallowance of expenditure-Exempt income-Shares held by assessee treated as stock-in-trade-No disallowance can be made.[R.8D] Dismissing the appeal of the revenue, the Court held that ; the shares held by the assessee having been treated as stock-in-trade no disallowance can be made. (AY. 2008-2009 ) CIT v. GKK Capital Markets (P) Ltd. (2017) 392 ITR 196 / 246 Taxman 52 / 293 CTR 323 / 147 DTR 330 (Cal.)(HC) S.14A: Disallowance of expenditure-Exempt income-No disallowance can be made in the absence of exempt income [R.8D] No disallowance can be made in the absence of exempt income.(AY. 2007-2008 ) Redington (India) Ltd v. Addl. CIT (2017) 392 ITR 633/ 77 taxmann. com 257 (Mad.)(HC) Editorial : Order in Redington (India) Ltd. v. Addl. CIT (2015) 41 ITR 646 (Chennai) (Trib.) is reversed. S.14A:Disallowance of expenditure-Exempt income-Incumbent upon Assessing Officer to enquire and determine whether there is nexus. Dismissing the appeal of the revenue, the Court held that ; it was incumbent upon the Assessing Officer to enquire into such larger amount and determine whether it had nexus with the expenditure relatable to exempt income to attract section 14A. Without that procedure, section 14A would be reduced to a mere formality. There was no infirmity in the reasoning and conclusions of the Appellate Tribunal. (AY. 2006-2007) PCIT v. U.K. Paints (India) P. Ltd. (2017) 392 ITR 552 / 244 Taxman 309 (Delhi)(HC) S.14A: Disallowance of expenditure- Exempt income- Stock in trade- no disallowance can be made.[R.8D] Dismissing the appeal of the revenue, the Court held that; the securities constituted the assessee's stock-in-trade and the income that arose on account of the purchase and sale of the securities was its business income and was brought to tax as such. Whether the securities yielded any income


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arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to it. The Appellate Tribunal's deletion of the addition made on account of disallowance under section 14A was proper. (AY. 2008-2009 ) P. CIT v. State Bank of Patiala (2017) 391 ITR 218/ 245 Taxman 273/ 293 CTR 35 / 147 DTR 290 (P&H)(HC) S. 14A: Disallowance of expenditure-Exempt income– Assessing Officer cannot blindly apply the Rule 8D, without elucidating and explaining why assessee's voluntary disallowance was unreasonable and unsatisfactory. [R.8D(2)] Dismissing the appeal of the Revenue the Court held that, the Assessing Officer cannot blindly apply the Rule 8D, without elucidating and explaining why assessee's voluntary disallowance was unreasonable and unsatisfactory.(AY. 2006-07) PCIT v. U.K. Paints (India) (P.) Ltd. (2017) 244 Taxman 309 (Delhi)(HC) S. 14A: Disallowance of expenditure-Exempt income- Book profit- The computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962, (ii) Only those investments are to be considered for computing the average value of investment which yielded exempt income during the year. [S. 115JB, R.8D] The Special Bench had to consider the following two important questions of law: (i) Whether the expenditure incurred to earn exempt income computed u/s 14A could not be added while computing book profits u/s 115JB of the Act? And (ii) Whether investments which did not yield any exempt income should enter into the computation under Rule 8D while arriving at the average value of investment, income from which does not form part of the total income? HELD by the Special Bench deciding both issues in favour of the assessee: (i) We answer the question referred to us in favour of the assessee by holding that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962. (ii) Only those investments are to be considered for computing the average value of investment which yielded exempt income during the year.(ITA No. 502/Del/2012 & C.O. No. 68/del/2014, dt. 16.06.2017)(AY. 2008-09) ACIT v. Vireet Investment Pvt. Ltd. (SB) (Delhi)(Trib.), www.itatonline.org S. 14A : Disallowance of expenditure-Exempt income–Non satisfaction of assesses claim disallowance cannot be made. [R.8D] The ITAT held that for the purpose of applying provisions u/s.14A r.w.rule 8D, the AO has to record his non satisfaction on the claim of assessee for expenditure. If AO does not record the same about the correctness of claim in respect of expenditure in relation to income which does not form part of total income same is unsustainable in law. ( AY. 2008 -09) Exim Scrips Dealers (P.) Ltd. v. DCIT (2017) 162 ITD 390 (Kol.) (Trib.) S. 14A : Disallowance of expenditure-Exempt income-AO cannot directly invoke rule 8D for making disallowance without examining the claim of the assesee.[R.8D] Allowing the appeal of the assesssee, the Tribunal held that ; AO cannot directly invoke rule 8D for making disallowance without examining the claim of the assessee. ( AY. 2010-11) Fereshte Sethna (Ms) v. ACIT (2017) 162 ITD 412 (Mum.)(Trib.) S. 14A: Disallowance of expenditure–Exempt income-Sufficient own funds, henceno part of interest expenditure paid on borrowed fund could be disallowed.[R.8D]


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Tribunal held that, the assessee proved that they holds sufficient own funds with other interest free borrowed funds which were sufficient to cover corresponding investments which give rise to tax free dividend income and other non-business utilization of funds. Therefore, No part of interest expenditure paid on borrowed fund could be disallowed u/s. 14A. (AY. 2009-10) Nirma Credit & Capital (P.) Ltd. v. ACIT (2017) 162 ITD 396 (Ahd.)(Trib.) S.14A:Disallowance of expenditure –Exempt income –Stock in trade or investment is irrelevant, disallowance was held to be justified. [R.8D] Dismissing the appeal of the assesee the Tribunal held that; mandates of section 14A is to disallowance of any expenditure in relation to income not forming part of total income, and does not concern itself with character of such income, therefore holding of asset/property under reference either as an investment or as stock-in-trade becomes inconsequential or irrelevant for section 14A application. (AY. 2011-12, 2012-13) Voltech Engineers (P.) Ltd. v.DCIT 163 ITD 469 (Chennai) (Trib.) S.14A:Disallowance of expenditure-Exempt income-Recording of satisfaction–Not expressly recording of satisfaction cannot be the ground to hold that no disallowances can be made- No fresh investments during the year hence disallowance was to be deleted. [R.8D] Tribunal held that mere fact that Assessing Officer did not expressly record his satisfaction while making said disallowance, cannot the ground to delete the addition. On facts , there was no fresh investment made by assessee during year under consideration and tax free dividend income had been earned from old investments, disallowance made by Assessing Officer was directed to be deleted. (AY. 2009-10 ) Delhi Towers Ltd. v.DCIT ( 2017) 163 ITD 124 (Delhi)(Trib.) S. 14A : Disallowance of expenditure-Exempt income–Sales and purchase of shares-AO had correctly applied formula prescribed under rule 8D(2)(ii) for determination of expenditure attributable to dividend income. [R.8D] Dismissing the appeal of the assessee, the Tribunal held that; assessee was engaged in sales and purchase of shares and it had declared certain income as dividend income, which was exempt from tax, AO had correctly applied formula prescribed under rule 8D(2)(ii) for determination of expenditure attributable to dividend income.( AY. 2008-09) Digvijay Finlease Ltd. v.DCIT (2017) 163 ITD 431 (Ahd.) (Trib.) S. 14A :Disallowance of expenses–Exempt income-Investments which are not capable of yielding dividend income needs to be excluded from total investment.[R.8D] Dismissing the appeal of the revenue , the Tribunal held that ;in computing expenditure incurred in relation to income not includible in total income under section 14A, read with rule 8D(2)(iii), investments which are not capable of yielding dividend income needs to be excluded from total investment. (AY. 2009 -2010) Dy.CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.)(Trib.) S.14A: Disallowance of expenditure-Exempt income–No exempt income, hence no disallowance could be made. [R. 8D] Assessee not claiming any exempt income hence no disallowance could be made, however disallowance was restricted in view of offer made by assesse.(AY.2007-2008, 2008-2009) Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum) (Trib.) S.14A: Disallowance of expenditure–Exempt income-Average investment from which exempt income was received–Matter was set aside for verification [R.8D] Allowing the appeal the Tribunal held that the Assessing Officer was to recalculate the disallowance according to rule 8D according to the guidelines given by the Tribunal and calculate


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the disallowance of expenditure under rule 8D(2)(iii) taking the average investment from which the exempt income is received. (AY. 2009-2010, 2012-2013 ) Yashoda Health Care Services P. Ltd. v. DCIT (2017) 54 ITR 26 (Hyd.)(Trib.) S. 14A : Disallowance of expenditure - Exempt income –PMS brokerage fee and other incidental expenses for making investment in to shares have not been debited in the P& Loss account- No disallowance can be made. [ R.8D] Assessing Officer disallowed the expenses merely following the formula u/s 14A Read with R.8D. Assessee contended that the expenses relating to investment was debited to personal account which was deducted from capital hence no disallowance can be made. CIT( A) accepted the submission of assessee and deleted the addition. On appeal by Revenueismissing the appeal of revenue the Tribunal held that; PMS brokerage fee and other incidental expenses for making investment in to shares have not been debited in the P& Loss account, hence no disallowance can be made.) (AY. 2010-11 , 2011-12) ACIT v. Sachin R. Tendulkar (2017) 163 ITD 65/ 147 DTR 282 / 184 TTJ 374 (Mum.)(Trib.) S. 14A : Disallowance of expenditure-Exempt income–Disallowance under the Rule 8D is automatic, unless the AO examines the accounts and records the finding why the assessee's claim/ computation is not proper.[ R.8D ] Allowing the appeal of the assessee the Tribunal held that ;disallowance under theRule 8D is automatic, unless the AO examines the accounts and records the finding why the assessee's claim/ computation is not proper .( ITA No. 3053/Mum/2015, dt. 03.03.2017)(AY. 2011-12 ) Shapoorji Pallonji & Co. Ltd. v. DCIT (Mum.)(Trib.); www.itatonline.org S.14A: Disallowance of expenditure–Exempt income- Securities held as stock in trade has to be considered for computing disallowance,however, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration. [R.8D] Disallowance u/s 14A & Rule 8D has to be made even in respect of securities that are held as stock-in-trade by the assessee. However, the disallowance has to be computed by taking into consideration only those shares which have yielded dividend income in the year under consideration.(AY.2010-11) Kalyani Barter (P) Ltd. v. ITO (2017) 163 ITD 571 (Kol.)(Trib.) S. 14A: Disallowance of expenditure - Exempt income – Assessing Officer not recording reasoning for his dissatisfaction with regard to claim of assesse. Authorities ignoring mandate of section 14A. Disallowance was held to be not sustainable. [R.8D ] Assessing Officer not to apply method prescribed by Rules straightaway without considering whether claim made by assessee in respect of such expenditure is correct. Satisfaction of Assessing Officer must be arrived at on an objective basis. Assessing Officer not following guidelines of objective satisfaction. Assessing Officer not recording reasoning for his dissatisfaction with regard to claim of assesse. Authorities ignoring mandate of section 14A. Disallowance was held to be not sustainable. (AY.2009-2010) JCIT v.J.M. Financial Services Ltd. (2017) 54 ITR 120 (Mum.)(Trib.) S.14A: Disallowance of expenditure–Exempt income-No borrowed funds utilised for investment— No disallowance could be made. [R.8D]


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Source of investment out of grants received from Government of Karnataka or out of profits earned by assesse. Assessing Officer failing to show direct nexus between borrowed funds and tax-free investments, no disallowance could be made. (AY. 2008-2009, 2010-2011) JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd.(2017)54 ITR 425 (Bang) (Trib) S.14A: Disallowance of expenditure-Exempt income– Satisfaction was not recorded, disallowance cannot be made. [R.8D] Assessing Officer has not recording satisfaction as to correctness of claim or otherwise having regard to accounts of assessee. Disallowance was deleted. (AY.2008-09) Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/ 148 DTR 201 / 184 TTJ 229 (Mum) (Trib.) S. 14A : Disallowance of expenditure-Exempt income- Assessing Officer to consider only those investments which yielded dividend income during previous year-,exclude investments which were strategic investments, if own funds sufficient to cover investment, presumption that assessee used in its own funds. [R.8D] Assessing Officer not justified in including closing balance of investments in mutual fund while calculating average value of dividend earning investment. Assessing Officer to consider only those investments which yielded dividend income during previous year. Assessing Officer to exclude investments which were strategic investments. If own funds sufficient to cover investment, presumption that assessee used in its own funds. (AY.. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.)(Trib.) S.17(3):Profits in lieu of salary -Amount paid to ex-employees under settlement cannot be regarded as 'profit in lieu of salary- Not liable to deduct tax at source. [S. 15, 17(3)(i), 133A, 192, 201 (1), 201(IA)] Dismissing the appeal of the revenue, the Tribunal held that ;amount paid to ex-employees under settlement cannot be regarded as 'profit in lieu of salary' under section 17(3)(i) and, thus, assessee is not required to deduct tax at source while making said payment. (AY. 2009-10) ITO v. Kuwait Airways Corporation (2017) 163 ITD 263 (Mum.) (Trib.) S.22: Income from house property-Business income-The objects clause is not determinative. Income earned from sub –licenses is required to be taxed under the head “Income from House Property”. [S. 27(iii)(b),28(i), 269UA(f)] Dismissing the appeal pf the assessee, The Supreme Court held that to determine whether income earned by the appellant from the shopping canter was required to be taxed under the head business income or income from house property;analysing various sections and case laws the Court held that; the object clause, as contained in the partnership deed, would not be the conclusive factor. Matter has to be examined on the facts of each case as held in Sultan Bros. (P) Ltd. case. Even otherwise, the object clause which is contained in the partnership firm is to take the premises on rent and to sub-let. In the present case, reading of the object clause would bring out two discernible facts. The Tribunal had specifically adverted to this issue and recorded the finding that the assessee had not established that it was engaged in any systematic or organised activity of providing service to the occupiers of the shops or stalls so as to constitute the receipts from them as business income . The Tribunal being final fact finding authority and the assessee has not shown the finding was perverse. ( AY. 2000-01) Raj Dadarkar & Associates v. ACIT (2017) 394 ITR 592 (SC)


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S. 22 : Income from house property-Income from other sources-Rental income received from lessee was to be taxed as Income from house property. [S. 24, 56] Allowing the appeal the Tribunal held that; the assessee had let out land and building to tenant with super structure, therefore, rental income received by it would be in nature of income from house property therefore claim for deduction was also to be allowable. (AY. 2011 – 2012) Premier Electrical Industries v. JCIT (2017) 162 ITD 45 (Chd.)(Trib.) S. 23 : Income from house property-Annual value–Property remained vacant throughout the year annual value will be determined notionally.[S. 22, 23(1)(b), 23(1)(c)] Dismissing the appeal of the assessee, the Court held that, the annual value of the properties which are more than one,owned by the assessee and which remained vacant throughout the previous year would not be assessed under Section 23(1)(c) but under Section 23(1)(a).The annual value would ,therefore , be determined notionally (AY. 2001-02 to 2007-08) Susham Singla v. CIT (2017) 244 Taxman 302 / 150 DTR 28 (P&H)(HC) Editorial : SLP of the assessee is dismissed. Susham Singla v. CIT (2017) 247 Taxman 312 (SC) S. 23 : Income from house property - Annual value –Let out building annual value is to be estimated [ S. 22, 23(1)(b) ] Allowing the appeal of the Revenue the Court held that ; the annual value of the properties which are let out by owners to firm or companies in which they are interested is to be determined by applying the provision of section 23(1)(b) . (AY. 1996-97) CIT v. Dr. K.M. Mehaboob (2017) 244 Taxman 263 (Ker.)(HC) S. 23 : Income from house property –Notional interest on interest free security deposit has to be considered. [ S. 22 ] Dismissing the appeal of the assesse , the Tribunal held that ; the interest-free security deposit received while letting out the property should be considered. (AY. 2007 – 2008, 2009 – 2010) Sobha Interiors (P.) Ltd. v. DCIT (2017) 162 ITD 267 (Bang.)(Trib.) S. 23: Income from house property--Annual letting value-Property was vacant for the purposes of letting out, annual value to be taken at nil. [S. 22, 23(1)(c ) ] Property let in earlier period and vacant for whole relevant year. Assessee holding property for purpose of letting out therefore annual value of property to be taken at nil.(AY.2010-2011, 2011-2012) Informed Technologies India Ltd. v. DCIT (2017)54 ITR 397 (Mum.)(Trib.) S. 23 : Income from house property-Annual value-Vacancy allowance- Property is let in earlier period and is found vacant for whole year under consideration, annual value of said property would be determined u/s. 23(1)(c). [S. 23(1)(c)] Allowing the appeal the Tribunal held that ; as long as a property is let in earlier period and is found vacant for whole year under consideration, subject to condition that such vacancy of property is not for self-occupation of same by assessee, annual value of said property would be determined u/s. 23(1)(c) ) (AY. 2010-11, 2011-12) Informed Technologies India Ltd. v. Dy.CIT (2017) 162 ITD 153 / 54 ITR 397 / 183 TTJ 60 (Mum.)(Trib.) S. 28(i):Business income-Interest earned on short-term fixed deposits is assessable as "profits and gains of business" and not as "income from other sources". [S.56] Dismissing the appeal of revenue the Court held that ;The Tribunal records the fact that the three fixed deposit were for a period of 1 day, 28 days and 90 days respectively. Considering the nature of business of the assessee, the Tribunal, was of the view that the interest earned would be taxable


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under the head ‘business income’. In support reliance was placed by the impugned order upon the decision of this Court in CIT v. Indo Swiss Jewels Ltd. & another(2006) 284 ITR 389 (Bom.)(HC). In the context of the respondent’s business and the period of fixed deposits, the Tribunal holds the interest earned on them is taxable as business income. In fact this Court is almost similar circumstances in Indo Swiss Jewels Ltd. (supra) has held interest earned on short term deposits on the money kept apart for the purposes of business had to be treated as income earned from business and could not be treated as income from other sources. Considering the short duration in which the amounts were kept in fixed deposit awaiting use in its business operations would necessarily mean income earned on account of business following the ratio of this Court in Indo Swiss Jewels Ltd. ( AY. 2011-12 ) CIT v. Green Infra Limited ( 2017) 392 ITR 7 / 292 CTR 233/ 146 DTR 262// 78 taxmann.com 340 (Bom)(HC) S.28(i):Business-Income from house property-Main business activity of assessee consisting of construction of different types of buildings and leasing them out, incomes will be assessable as business income.[S.22] Dismissing the appeal of the revenue, the Court held that the main objective of the assessee as manifest from the partnership deed was to carry on business in construction of different types of buildings such as godowns, residential or commercial buildings, flats and shops and lease them out as a part of its business activity but not as exploitation of the property as an owner. The assessee was right in showing its income under the head income from business. (AY. 2008-2009 ) PCIT v. Sri Bharathi Warehousing Corporation (2017) 392 ITR 160/ 246 Taxman 137 (T&AP)(HC) S. 28(i): Business income-Short term capital gains- Shares were held for less than 30 days during year assessable as business income.[S. 2(42A, 2(42B), 45] Dismissing the appeal of the assesse the Tribunal held that ; where the assessee had declared income both by way of long-term capital gain and short-term capital gain arising from sale of shares, lower authorities were not justified in treating short-term capital gain as business income on plea that shares were held for less than 30 days during year. ( AY.2008-09) Digvijay Finlease Ltd. v.DCIT (2017) 163 ITD 431 (Ahd) (Trib.) S. 28(i):Business loss-The loss on sale of shares of a wholly-owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. [S.37(1)] Allowing the appeal, the Tribunal held that;The loss on sale of shares of a wholly-owned subsidiary is allowable as a business loss if the investment in the subsidiary was made for commercial purposes. (ITA No. 223/Coch/2015 and 189/Coch/2016, dt. 10.1.2017) (AY. 2010-2011 and 2011-12) Apollo Tyres Ltd. v. ACIT (Cochin)(Trib.); www.itatonline.org S.28(i) : Business loss-Forward contracts on foreign exchange - Loss not a speculation loss. Assessee making gains and loss on account of revaluation and claiming net loss is not a speculation loss. (AY.2005-2006, 2006-2007, 2008-2009) ACIT v. Dow Agro sciences India Private Limited (2017) 53 ITR 590 (Mum.)(Trib.) S.28(i) : Business loss-Expenditure for provision of liability regarding exchange rate fluctuation was held to be revenue loss.[S.28(i)] The Tribunal held that the liability was incurred on account of raw material components and hence it was revenue loss. (AY. 2004-05)


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ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) ACIT v Timex Group India Ltd ( 2017) 183 TTJ 27 .145 DTR 81 (Delhi)(Trib.) S. 28(i) : Business loss-– Amount fraudulently withdrawn from the account was held to be allowable as business loss . The Tribunal held that AO had not disputed this fact that there was a loss as a result of unauthorized withdrawals made from the bank account in the course of business of the assessee and once such was the position then such sum was eligible for deduction. (AY. 2004-05, 2005-06, 2006-07 ) ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) ACIT v Timex Group India Ltd. (2017) 183 TTJ 27 / 145 DTR 81 (Delhi)(Trib.) S.28(i): Business loss-Cash destroyed by fire was held to be allowable as business loss. Allowing the appeal of the assessee, the Tribunal held that; Cash destroyed by fire was held to be allowable as business loss. Assessing Officer could not disallow said claim without making proper enquiries from persons from whom cash was alleged to have been received. (AY. 2010-11) Aparna Agency Ltd v ITO ( 2017) 163 ITD 511 ( Kol.)(Trib.) S. 28(i): Business loss-Co-operative bank-loss incurred on shifting securities from 'Available for sale' (AFS) category to 'Held to Maturity' (HTM) category is not allowable as business loss The assesse - bank claimed loss on shifting of securities from 'Available for sale' (AFS) category to 'Held to Maturity' (HTM) category as business loss.The AO disallowed the said loss. Dismissing the appeal of the assessee,the Tribunal affirmed the view of the AO. (AY.2009-10) Hindustan Co-operative Bank Ltd. v. JCIT (2017) 162 ITD 434 (Mum.)(Trib.) S. 28(i) : Business loss-Forward exchange contracts –Losses incurred on account of entering with banks for purpose of hedging loss in connection with its import/export business was held to be allowable as business loss. [S.43(5)] Assessee was in business of export of rice and agricommodities and it entered into forward exchange contracts with its bankers to hedge possible fluctuation in foreign currency. Loss was claimed as business loss.AO held that forward contracts entered were in nature of speculative transactions therefore he rejected the same, further observed that loss incurred was a marked to market (MTM) losses, which was in nature of notional loss and could not be allowed as deductions. CIT (A) held that loss was allowable as business loss. On appeal by the revenue, dismissing the appeal the ITAT held that when the foreign exchange loss incurred on account of entering into forward contracts with banks for purpose of hedging loss in connection with its import/export business it had to be a business loss. (AY. 2009 – 2010) ACIT v. Sri Ramalingeswara Rice & Oil Mill (2017) 162 ITD 696 (Visakha)(Trib.) S.28(1): Business loss-Chit fund -If subscriber incur the loss and if the amount was utilsed for the purpose of business , the same is allowable as business loss. [S. 37(1)] Allowing the appeal of the assessee the Tribunal held that; in case amount of chit fund money is utilized for the purpose of business, if any loss incurred out of the same is allowable as business expenditure.(AY. 2004-05) Kamal Raheja v. ITO 2017) 162 ITD 55 183 TTJ 538 / 145 DTR 225 (SMC)(Luck.)(Trib.) S.28(1): Business loss- Fenders which were reflected as a ‘Fixed asset in the ‘Balance sheet- Loss was not allowable as business loss.


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Tribunal held that the assessee had failed to place on record any material which could go to substantiate its claim that the fenders were purchased pursuant to orders placed on it by a shipping company, which orders could not fructify for the reason that by the time the fenders were received the vessels had already left the docks, and held that the fenders were purchased by the assessee with a predetermined intent of commercially exploiting the same and deriving income therefrom. As a result the appeal of the assesee was dismissed ( AY. 2009-10) International Ships Stores Suppliers v. JCIT (2017)162 ITD 73/ 183 TTJ 161/ 145 DTR 1 (Mum.)(Trib.) S. 28(i) : Business loss-Share trading and future and option losses-loss on derivatives being future option loss on transactions entered on NSE, he would be entitled to set off same against profit on sale of property. [S. 22] Dismissing the appeal of the revenue , the Tribunal held that ; loss on derivatives being future option loss on transactions entered on NSE, assesse would be entitled to set off same against profit on sale of property. (AY. 2007 – 08) ITO v. PKS Holdings (2017) 162 ITD 1/152 DTR 215 (Kol.)(Trib.) S. 28(i) : Business loss-Trading-Fenders were purchased which was reflected as capital asset in books of account, loss on sale of fenders was held to be not allowable as business loss. Dismissing the appeal of the revenue, the Tribunal held that; Fenders were purchased which was reflected as capital asset in books of account, loss on sale of fenders was held to be not allowable as business loss. (AY. 2009 – 2010) International Ships Stores Suppliers v. JCIT (2017) 162 ITD 73 / 183 TTJ 161/ 145 DTR 1 (Mum.)(Trib.) S. 28(i) : Business loss-Chit fund business-If a subscriber incurs loss in subscribing to chit fund to raise funds to use them in his business or for business purpose, such a loss is an allowable deduction. Allowing the appeal the Tribunal held that; If a subscriber incurs loss in subscribing to chit fund to raise funds to use them in his business or for business purpose, such a loss is an allowable deduction. Referred,CBDT instruction No.1175 under order F. No. 169/21/78-IT (80) dated May16, 1978. (AY. 2004-05) Kamal Raheja v. ITO (2017) 162 ITD 55 / 183 TTJ 538 / 145 DTR 225 (SMC)(Luck)(Trib.) S.31: Repairs – Current repairs-Textile Mill-Repair or substitution of old machine is not current repairs. [S. 37(1)] Allowing the appeal of the Revenue, the Court held that ; when each division old textile mill performed different functions , repair or substitution of an old machine would not come within the definition of the word “ current repairs “ and the assesse is not entitle to deduction. ( AY. 1974-75) CIT v. Sarangpur Cotton Mfg. Co Ltd ( 2017) 393 ITR 108/ 152 DTR 233 (SC) S.32: Depreciation-Building on leased premises ,assesse is not entitled to depreciation. Dismissing the appeal the Court held; (i) that the building which was constructed by the firm belonged to the firm. Admittedly it was immovable property. Title to immovable property cannot pass when its value is more than Rs. 100 unless it is executed on a proper stamp paper and is also duly registered with the Sub-Registrar. Nothing of the sort took place. In the absence thereof, it could not be said that the assessee had become the owner of the property.


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(ii) That under Explanation 1 to section 32 of the Income-tax Act, 1961, it is only when the assessee holds a lease right or other right of occupancy and any capital expenditure is incurred by the assessee on the construction of any structure or doing of any work in or in relation to and by way of renovation or extension of or improvement to the building and the expenditure on construction is incurred by the assessee, that the assessee would be entitled to depreciation to the extent of any such expenditure incurred. The construction was made by the firm. It was a different thing that the assessee had reimbursed the firm. The construction was not carried out by the assessee itself. Therefore, the Explanation would not come to the aid of the assessee. (AY. 1992-1993) Mother Hospital P. Ltd. v. CIT (2017) 392 ITR 628/ 247 Taxman 12/ 149 DTR 63/ 294 CTR 25 (SC) Editorial: Decision in CIT v. Mother Hospital Pvt. Ltd. (2005) 275 ITR 563 (Ker) (HC) is affirmed. S.32:Depreciation-Additional depreciation-Acquisition of machinery in previous year and installation during assessment year-Assessee entitled to additional depreciation at 20 per cent.[S. 32(1)(iia)] Held, dismissing the appeal of the revenue the Court held that ; The purpose and object of granting additional depreciation under section 32(1)(iia) was to encourage industries and to give a boost to the manufacturing sector by permitting the assessees setting up new undertakings or installation of new plant and machinery an additional depreciation allowance. Thus, the provision of section 32(1)(iia) was required to be interpreted reasonably and purposively as the strict and literal reading of section 32(1)(iia) would lead to an absurd result denying the additional depreciation to the assessee though the assessee had installed new plant and machinery. No question of law arose. (AY. 2006-2007) PCIT v. IDMC Ltd. (2017) 393 ITR 441/ 246 Taxman 6 (Guj.)(HC) S. 32: Depreciation--Additional depreciation—leasing- Additional depreciation is allowable- Lessee using machinery in double shift and not assesse. Assessee entitled to extra shift allowance of depreciation.[S. 32(1)(iia)] Court held that for claiming additional depreciation under section 32(1)(iia), there was no requirement that the plant and machinery must be installed and used by the assessee for manufacture of articles or things. Therefore, the additional depreciation claimed by the assessee was allowable. Lessee using machinery in double shift and not assesse. .Assessee entitled to extra shift allowance of depreciation. (AY. 1986-1987) CIT v. Industrial Credit and Investment Corporation of India Ltd. (2007) 393 ITR 298 (Bom.)( HC) S. 32 : Depreciation – Lease of hotel premises –Lessee is entitle to depreciation. Dismissing the appeal of the revenue , the Court held that ;where the lessee was given an option to purchase the leased property on expiry of three years from the commencement of the lease, the lessee was entitled to depreciation on such leasehold property. Followed, Mysore Minerals Ltd. v. CIT (1999) 156 CTR 1 (SC). (AY. 1994-95) CIT v. Bhushan Steels & Strips Ltd. (2017) 146 DTR 169 (Delhi)(HC) S. 32: Depreciation-Lessee cannot be said to be owner for claiming depreciation, however lessee is entitled to depreciation on the cost of construction incurred by him but not on the cost incurred by the owner and reimbursed by the lessee. Dismissing the appeal of the assesse theCourt held that ; title to immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also


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duly registered with the sub-Registrar. Accordingly, a lessee cannot be said to be the "owner" for purposes of claiming depreciation. Under Explanation 1 to S.. 32, the lessee is entitled to depreciation on the cost of construction incurred by him but not on the cost incurred by the owner and reimbursed by the lessee. ( CA. No. 3360 of 2006, dt.08.03.2017)( AY.1992-93) Mother Hospital Pvt. Ltd. v. CIT (SC) www.itatonline.org S. 32: Depreciation- Carry forward deficit of earlier years- Entitle to claim the depreciation and also allowed to set off carry forward deficit of earlier years. [S.11] Dismissing the appeal of the revenue , the Court held that; an education trust could claim depreciation on assets acquired for purpose of carrying out charitable activities and also carry forward deficit of earlier years and set it off against income of current year. (AY. 2007-08) DIT v. Mumbai Education Trust (2017) 244 Taxman 163 (Bom.)(HC) S. 32: Depreciation-Ownership of asset - Toll roads not owned by assessee - Order of Appellate Tribunal directing Assessing Officer to grant depreciation on toll roads was held to be not proper. Held, the Appellate Tribunal was not right in granting depreciation on assets not owned by the assessee treating the toll roads as plant and machinery. (AY. 2007-2008) CIT v. West Gujarat Expressway Ltd. (No.1) (2017) 390 ITR 398 (Bom.)(HC) S. 32: Depreciation-Building constructed solely for manufacture of medicine - Factory building a plant-Entitled to depreciation at 25%. Held, allowing the appeal, that in view of the finding of the Assessing Officer that the factory building was a plant of the assessee and qualified for depreciation at 25% for the previous two assessment years, 1997-98 and 1998-99, and applying the functional test, the building which was constructed solely for the manufacturing of medicine was a "plant" and was entitled to higher depreciation at the rate of 25%. (AY. 1999-2000 ) Cachet Pharmaceuticals P. Ltd v. CIT (2017) 390 ITR 466 (Patna)(HC) S. 32: Depreciation-Ownership of asset-Leased premises- Non-registration of lease agreement-Does not negate entitlement to continue in possession in part performance of agreement to sell - Assessee entitled to claim depreciation. [Transfer of Property Act, 1882, S.53A] Non-registration of the agreement did not imply that the benefit otherwise available under section 53A of the Transfer of Property Act, 1882 of being entitled to continue in possession in part performance of an agreement to sell, was to be denied.( AY. 1994-1995 ) CIT v. Bhushan Steels and Strips Ltd (2017) 390 ITR 485 (Delhi)(HC) S. 32: Depreciation - Plant - Truck terminus charging parking fees - Plant entitled to higher rate of depreciation at 25%.[S.43] Held, the truck terminus was spread across 27 bighas of land. The trucks were parked in the truck terminus for which parking fee was collected by the assessee and in order to encourage the truck drivers to park their vehicles in the truck terminus, resting and toilet facilities were provided in the appurtenant building in the truck terminus. The definition of the term plant is of wide magnitude and when it was clear enough that the buildings were not let out by the assessee to earn rent, the parking fee income generated by the truck terminus could not be attributed to the building which housed the resting quarters and the toilet facility, for the truck drivers. The truck terminus was a plant and not building, for the purpose of claiming depreciation under section 32 read with section 43. Consequently the assessee was held entitled to depreciation at the rate of 25% as prescribed for plant and not at 10%, as applicable for building. (AY.2004-2005)


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Guwahati Metropolitan Development Authority v. CIT (2017) 390 ITR 137/ 291 CTR 297 / 77 taxmann.com 116 (Gauhati)(HC) S. 32: Depreciation-User of asset-Not necessary that all items falling within plant and machinery should be simultaneously used - Finding that assets used for business-Assessee entitled to depreciation. Once the factory building was put to use, it was not possible to restrict the depreciation on the building on the ground that only a portion thereof was put to use. In relation to block of assets, it was not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. Once it was found that the assets were used for business, it was not necessary that all the items falling within plant and machinery have to be simultaneously used for being entitled to depreciation. Therefore, the Tribunal was not right in disallowing the depreciation. Nirma Credit and Capital Ltd. v. ACIT (2017) 390 ITR 302 (Guj.)(HC) S.32: Depreciation -Generation of electricity by windmills amounts to production of an article or thing and, entitle for additional depreciation on purchase of windmills.[S. 32(1)(iia)] Allowing the appeal of the asessee the Tribunal held that generation of electricity by windmills amounts to production of an article or thing and, therefore, assessee's claim for additional depreciation on purchase of windmills under section 32(1)(iia) was to be allowed. ( AY. 2011-12, 2012-13) Giriraj Enterprises v.CIT (2017) 163 ITD 1 (TM) (Pune) (Trib.) S.32:Depreciation–Put to use-Trial run without generation of electricity–Depreciation was held to be not allowable. Assessee claimed depreciation on new windmill purchased during relevant year on the basis of trail run production and though no commercial production was produced . AO disallowed the claim . On appeal tribunal held that the claim based on trial production was without any basis hence disallowance was confirmed.(AY 2010 – 2011) G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum.)(Trib.) S.32: Depreciation-Company engaged in business of carrying passengers in buses on licenced routes, was entitled to claim depreciation on buses at higher rate of 30 per cent. Allowing the appeal of the assessee, the Tribunal held that the, assessee-company engaged in business of carrying passengers in buses on licenced routes, was entitled to claim depreciation on buses at higher rate of 30 per cent. ( AY. 2008-09 to 2012- 2013) Dabwali Transport Co. Ltd. v. DCIT (2017) 163 ITD 579 (Asr.) (Trib.) S. 32: Depreciation-Intangible assets-Bombay Stock Exchange and National Stock Exchange membership cards is entitled to depreciation. Bombay Stock Exchange and National Stock Exchange membership cards is entitled to depreciation. (AY.2009-2010) JCIT v.J.M. Financial Services Ltd ( 2017) 54 ITR 120 (Mum.) (Trib.) S. 32 : Depreciation-Intangible assets-slum purchase of a business right to use distribution network did not result in creation of any intangible asset hence not eligible for depreciation. Dismissing the appeal of the assesse the Tribunal held that ; right to use distribution network did not result in creation of any intangible asset hence not eligible depreciation. (AY. 2006 – 07) Sanyo BPL (P.) Ltd. v. Dy.CIT (2017) 162 ITD 176 / 185 TTJ 227 (Bang.)(Trib.)


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S.32: Depreciation-Airport operator-Upfront fee for development and modernise airport and collect charges was held to be intangible asset and entitle depreciation. Payment for licence to develop and modernise airport and collect charges is intangible asset and is entitled to depreciation.(AY.2008-09) Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/ 148 DTR 201 (Mum.)(Trib.) S.32: Depreciation - Airport operator - Taxiways and aprons - Depreciation is allowable at 15%. Depreciation on taxiways and aprons is allowable at fifteen per cent. (AY.2008-09) Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/ 148 DTR 201 (Mum.)(Trib.) S.32: Depreciation-Additional depreciation-Claimed in the subsequent year when the plant and machinery was put to use was held to be allowable.[S. 32(1)(iii)] Assessee claimed balance additional depreciation in subsequent year not claimed in year acquiring and installing plant and machinery as the plant and machinery being put to use for a period less than 180 days. Additional depreciation was held to be allowable. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017 )53 ITR 5 (Kol) (Trib) S. 32 : Depreciation–Computer accessories and peripherals form an integral part of the computer system is entitle to 60 percent depreciation. The Tribunal held that computer accessories and peripherals form an integral part of the computer system and the same cannot be used without computer and they are entitled to depreciation at the higher rate of 60 per cent. (AY. 2005-06,2006-07) ACIT v. Timex Group India Ltd. (2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) ACIT v. Timex Watches Ltd(2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) S. 32 : Depreciation-Additional depreciation – Cutting & Polishing of diamond amounts to manufacture and eligible additional depreciation. [ S.32(1)(iia) The Tribunal held that cutting and polishing of diamonds amounts to manufacture eligible for additional depreciation under section 32(1)(iia). (AY. 2008-09) ACIT v. D. A. Jhaveri (2017) 183 TTJ 447/ 148 DTR 132 (Mum.)(Trib.) S. 32A: Investment allowance—Leasing - leasing machinery to third party for use of machinery in manufacture is entitled to investment allowance. leasing machinery to third party for use of machinery in manufacture is entitled to investment allowance. (AY. 1986-1987 ) CIT v. Industrial Credit and Investment Corporation of India Ltd. (2007) 393 ITR 298 (Bom.)( HC) S. 32AB: Investment deposit account-Interest-Cannot be considered as business income for purposes of sections 32AB and 80HHC-Directions to Assessing Officer to pass fresh assessment order.[S. 56,80HHC] Allowing the appeal of the revenue, the Court held that ; what sub-section (3) of section 80HHC of the Act required was a consideration of the profits of the business as rightly computed under the head "Profits and gains of business". It could not possibly have required consideration of the amounts wrongly computed under the head "Profits and gains of business". There was no warrant for knowingly including amounts under a wrong head. To insist upon an error being continued invited the authorities and the court to endorse the error. There was nothing in law or in principle


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that prohibited the authorities under the Income-tax Act, 1961, or the court from returning a finding regarding the correct head under which the income ought to have been assessed and then directing the Assessing Officer to pass a fresh assessment order in accordance with the finding for all purposes. The Court also held that ; the assessee's case fell under clause (b) of sub-section (3) of section 32AB and not clause (a). Clause (b) did not provide for the profits to be computed in accordance with the requirements of Parts II and III of Schedule VI to the Companies Act, 1956. Reading the missing words in clause (b) would amount to re-writing the clause which was not permissible. The Legislature in the same sub-section, provided for a particular manner of computation of profits in the clause but not in the other must have been deemed to have intended that the profits were to be calculated differently in those sub-clauses. Unlike as in section 80HHC the words in clause (b) were not "profits of the business" as computed under the head "Profits and gains of business", which however, made no difference. It was not necessary for the Legislature to use the entire expression in clause (b) for sub-section (1) itself referred to the income as including income chargeable to tax under the head "Profits and gains of business or profession". (AY. 1989-1990) CIT v. Hero Cycles Ltd. (No.1) (2017) 393 ITR 144 (P&H) (HC) Editorial: SLP is granted to the assessee;Hero Cycles Ltd. (No.1) v.CIT (2017) 391 ITR 344 (St.) S. 35: Scientific research expenditure- Development of in-house research and development facility--Assessee entitled to weighted deduction. [S.35(2AB)]. Court held that the Appellate Tribunal rightly held that the assessee was entitled to weighted deduction in respect of the entire expenditure incurred for the development of in-house research and development facility in terms of section 35(2AB). (AY .1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S.35: Scientific research expenditure-Donation to Institute of Life Sciences for research project was held to be not deductible as commercial expediency of donation was not established. [S.37(1)] Donation to Institute of Life Sciences for research project was held to be not deductible as commercial expediency of donation was not established. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 / 184 TTJ 41 (Hyd.)(Trib.) S.35: Scientific research expenditure-Weighted deduction— Merger-Post-merger expenditure cannot be reduced.[S. 35(2AB)]. Company merged with assessee incurring expenditure on scientific research. Post-merger all activities of company also activities of assessee. Facility and expenditure approved by prescribed authority. The AO disallowed the claim.Tribunal held that ;in-house research and development facility of the assessee was approved by the prescribed authority as provided under section 35(2AB). The expenditure approved by the prescribed authority included a sum of Rs.1054.314 lakhs on account of PPL. A copy of Form 3CL was placed on record. By virtue of merger with effect from June 1, 2006, all the activities of the PPL were also the activities of the assessee. As the facility and also the expenditure had already been approved by the relevant authority, post-merger, the expenditure could not be reduced while allowing the deduction under section 35(2AB). Therefore the deduction under section 35(2AB) was allowable even on the expenditure incurred on PPL after January 1, 2006 i.e. the date of its merger. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.)(Trib.)


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S.35: Scientific research expenditure-Clinical trials-Entitle deduction 100% . [ S. 35(1)(iv) ] Assessee having research and development center but not approved by prescribed authority, assessee is entitled to deduction under section 35(1) and hundred per cent. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 ( Hyd) (Trib) S.35 :Scientific research expenditure- Weighted deduction on gross amount and not on net amount of expenditure. [S.35(2AB) ] The Tribunal held that the Tribunal has decided this issue for A.Y. 2005-06 against the assessee and the ground of the assessee is rejected. (AY. 2005-06 & 2006-07) Bosch Ltd. v. ACIT (2017) 183 TTJ 215/ 150 DTR 345 (Bang.)(Trib.) S. 35AB: Know-how–Expenses incurred for use of technical know-how-Matter remitted to Assessing Officer for adjudication. [ S. 37(1) ]. Court held that ; the Appellate Tribunal was right in remitting the matter to the Assessing Officer for adjudication in respect of the allowability of deduction on the sums of the expenses incurred on account of use of technical know-how. (AY .1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S. 35D: Amortisation of preliminary expenses-Premium collected by a company on subscribed issued share capital is not “capital employed in the business of the Company" hence not includible in preliminary expenses for amortization. [S. 37(1)] Dismissing the appeal of the assessee, the Court held that; Premium collected by a company on subscribed share capital is not “capital employed in the business of the Company" within the meaning of S. 35D so as to enable the claim of deduction of the said amount as prescribed u/s 35D. ( AY.196-97, 1997-98) Berger Paints India Ltd. v. CIT ( 2017) 394 ITR 113/ 149 DTR 57 / 294 CTR 18 / 247 Taxman 1 (SC) S. 36(1)(iii): Interest on borrowed capital--Borrowed funds spent on incomplete project--Capitalised interest--Expenditure incurred for business purpose hence allowable as deduction. Court held that the capitalised interest receipt paid on borrowed funds was expenditure incurred for the purpose of business and the assessee was entitled to deduction under section 36(1)(iii). (AY.1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S. 36(1)(iii):Interest on borrowed capital-Interest-free advance to another concern for purpose of business-Assessee proving availability of interest-free funds-Deletion of disallowance proper.[S.37(1)] Court held that the records showed that the assessee had earned income during the assessment year and it had submitted evidence and proved that it had enough funds to have advanced interest-free advance to another company. There was nothing on record to prove that the borrowed funds


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were diverted for making the interest-free advances. It was found by the Appellate Tribunal that the advances were given for the purpose of business. Interest expenditure was allowable deduction.(AY .1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S. 36(1)(iii): Interest on borrowed capital-Interest paid for two years-Interest was held to be deductible as prior period expenditure. Dismissing the appeal of the revenue, the Court held that ,interest paid for two years-Interest was held to be deductible as prior period expenditure. (AY. 1993-1994) CIT v. Nav Sansar Agro Products (2017) 392 ITR 399 (Delhi)(HC) S. 36(1)(iii) : Interest on borrowed capital- Sufficient interest free own funds were available –Disallowance cannot be made on presumptions. Allowing the appeal, the Tribunal held that; when there is sufficient interest free fund are available, disallowance of interest cannot be made on the presumption that borrowed funds was used for non business investment. (AY. 2010–2011) Kissan Fats Ltd. v. DCIT (2017) 162 ITD 404 (Chd.) (Trib.) S. 36(1)(iii): Interest on borrowed capital-Furniture deposit— Held to be allowable. For purpose of assessee's business and for use of existing furniture for which assessee not paying rent hence allowable as deduction. (AY.2010-2011) CIT v. Sales India Pvt. Ltd. (2017) 54 ITR 272 (Ahd.)(Trib.) S.36(1)(iii): Interest on borrowed capital-Shares held as stock-in-trade converted into investments on 31-3-2005-Interest paid on loan deductible. Tribunal held that the department had not shown any evidence that the shares were converted on dated April 1, 2004. The Department failed to bring anything on record. On the other hand, the assessee had given sufficient proof in support of its claim that the shares were converted as investment on dated March 31, 2005. At the time of hearing the Department failed to bring anything contrary to the findings of the Commissioner (Appeals). Thus there was no reason to interfere in the order of the Commissioner (Appeals). (AY.2005-2006 to 2009-2010) ITO v. Right Address Ltd. (2017) 54 ITR 287 (Kolk.)(Trib.) S.36(1)(iii) :Interest on borrowed capital-Interest free loans funds, presumption is that such funds came from interest free funds , disallowance of interest was not justified. When the assesse is having sufficient interest free funds and interest-free loans far below interest-free funds, presumption that such investments came out of available interest-free funds and not out of interest bearing funds or overdraft account. Assessee has no onus to prove that advance was not from borrowed funds .Disallowance of interest was not justified. (AY.2010-2011) Kushalbagh Marbles P. Ltd. v. JCIT (SMC) (2017) 53 ITR 134 / 183 TTJ 99 / 145 DTR 106 (Jodh.)(Trib) S. 36(1)(iii) : Interest on borrowed capital -Investing borrowed funds through its sister concern in shares as stock in trade,interest was held to be allowable. The assessee invested the borrowed funds through its sister concern in the shares of VNL. Therefore, the shares in VNL were acquired in the ordinary course of business and were correctly disclosed as stock-in-trade in the balance-sheet,hence the interest paid on borrowed capital was held to be allowable. Divakar Solar Systems Ltd. v. Dy.CIT (2017) 53 ITR 516 (Kol.)(Trib.)


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S.36(1)(v): Contribution approved gratuity fund-Payment towards LIC group leave encashment scheme is held to be deductible. Payment towards LIC group leave encashment scheme is held to be deductible. (AY.2010-2011) A.P. Beverages Corporation Ltd. v.DCIT (2017) 54 ITR 228 (Hyd.)(Trib.) S. 36(1)(va): Any sum received from employees-Employees' contribution towards employees' State insurance and employees' provident fund-Payments after due dates prescribed in relevant statutes but before filing return was entitled to deduction.[S. 2(24)(x)] Allowing the appeal the Court held that; the admitted position being that the amounts of the employees' contribution to the employees' state insurance and employees' provident fund were credited much before the date of filing the return under the Income-tax Act, 1961, the assessee was entitled to the deletion of the addition.(AY. 2004-2005) Bihar State Warehousing Corporation Ltd. v. CIT (2017) 393 ITR 386 (Patna)( HC) S.36(1)(va): Any sum received from employees-Provident Fund and Employees' State Insurance contributions, cannot be disallowed if paid after due date under respective Act but paid before filing of return. [S. 43B, 139(1)] Dismissing the appeal of the revenue the Court held that; Provident Fund and Employees' State Insurance contributions, cannot be disallowed if paid after due date under respective Act but paid before filing of return. (AY. 2003-2004 to 2008-2009) CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421 (Raj.)(HC) CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421 (Raj.)(HC) Editorial : SLP of the revenue was dismissed ,CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 392 ITR 2 (St.) S.36(1)(vii):Bad debt-Profit and loss account was debited when provision was made and debtors' accounts credited in year when finally debtors' accounts written off, assessee is entitled to claim deduction. Profit and loss account debited in year when provision made and debtors' accounts credited in year when finally debtors' accounts written off. Profit and loss account already debited with corresponding amount according to accounting procedure followed by assessee, provision complied with and the assessee is entitled to claim deduction.(AY.2011-2012) Greater Bombay Co-op. Bank Ltd. v. Dy.CIT (2017)53 ITR 356 (Mum.)(Trib.) S. 36(vii): Bad debt-Amount written off bad debts in books of account is held to be deductible. [S.36(2)] Amount representing sales made by assessee in earlier years, amount written off bad debts in books of account is held to be deductible. (AY.-2005-2006, 2006-2007, 2008-2009) ACITv. Dow Agro Sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.)(Trib.) S. 37(1) : Business expenditure–Capital or revenue-Expenditure incurred under a Technical Collaboration Agreement for setting up of new plant for the first time to manufacture cars constitutes capital expenditure. Dismissing the appeal of the assessee, the Court held that;expenditure incurred under a Technical Collaboration Agreement for setting up of new plant for the first time to manufacture cars constitutes capital expenditure. (CA No. 4918 of 2017, dt. 09.06.2017)(AY. 1999-2000, 2005-06) Honda Siel Works Cars India Ltd. v. CIT (SC),www.itatonline.org


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S. 37(1): Business expenditure–Capital or revenue-Interest paid on loan taken for establishment of new unit was held to be revenue expenditure.[S. 32, 145] Dismissing the appeal of the revenue, the Court held that, the Tribunal was justified in allowing the expenditure incurred by the assessee towards the interest paid on loans taken and expenditure on other items connected with establishment of the unit which have been capitalized by the assessee but claimed as revenue expenditure. Court also observe that if the assessee has taken any depreciation on the on the amount of interest and other items which has been allowed as revenue expenditure that such much depreciation should be reversed by the assessing authority.(AY. 2000-01) CIT v. Shri Rama Multi Tech Ltd. (2017) 393 ITR 371/ 151 DTR 169 (SC) S.37(1): Business expenditure-Accrued or contingent liability—Award of damages- Dispute pending-Grant of stay by Division Bench does not relieve assessee from liability of interest-Entitled to deduction on interest. [S. 40(a)(i), 145] Allowing the appeal the Court held that ; with the award being made rule of the court by a single judge, the mere fact that the judgment and decree was stayed by a Division Bench would not relieve the assessee of its obligation to pay the interest in terms thereof to A. Such liability had commenced in the previous year in which the judgment and decree was passed by the single judge. The order of the Special Bench of the Appellate Tribunal confirming the disallowance of interest was unsustainable. ( AY. 2001-2002, 2002-2003 ) National Agricultural Co-op. Marketing Federation of India Ltd v. CIT (2017) 393 ITR 666 /81 taxmann.com 117/ 150 DTR 385 (Delhi)(HC) Editorial : Order in National Agricultural Co-operative Marketing Federation of India Ltd. v. J CIT [2015] 44 ITR 275 (SB) (Delhi)(Trib.) was set aside S. 37(1): Business expenditure-Redemption of debentures-Premium-Assessee's obligation to debenture holders in praesenti hence allowable expenditure. Dismissing the appeal of the revenue , the Court held that ; the assessee's obligation to pay the debenture-holders at a premium was certain in praesenti and known at the time when the debentures were issued and was to be payable in ordinary circumstances. It was only for the company to avoid payment of such liability if it decided to repurchase the debentures earlier. Such repayment prior to the due date, was contingent on exercise of option. It would not make the liability, which was certain in praesenti, a contingent one merely because on happening of a certain event, it could be avoided. The Appellate Tribunal was in error in confirming the order of the Assessing Officer disallowing the expenditure. (AY .1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S. 37(1) :Business expenditure-Mercantile system of accounting-Dispute pending in suit -Interest neither paid nor entries in books of account showing it to have accrued, deduction cannot be claimed. [S. 145 ] allowing the appeal of the revenue , the Court held that ; the assessee could not be permitted to claim deduction for the bank interest which was neither paid nor shown to have been accrued in the books of account. The assessee had also disputed the liability. If the liability on account of principal itself was disputed, there could be no basis for any liability on account of interest. (AY. 1990-1991, 1991-1992) CIT v. Hanuman Sugar Industries Ltd. (2017) 393 ITR 561 (Cal.) HC)


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S. 37(1):Business expenditure-capital or revenue-Commercial expediency-Payment of privilege fee to Government for procuring right to manufacture and sell liquor-Statutory levy having direct nexus to carry on and continue with business, allowable as revenue expenditure. Dismissing the appeal of the revenue , the Court held that ;Payment of privilege fee to Government for procuring right to manufacture and sell liquor--Statutory levy having direct nexus to carry on and continue with business , allowable as revenue expenditure. The commercial expediency is to be considered from the angle of a businessman and not from the angle of Revenue. The Revenue cannot sit in the arm chair of a businessman and dictate the terms to the assessee as to how one is required to conduct the business or incur an expenditure and how it is to be allowed. (AY. 2003-2004 to 2008-2009) CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421 (Raj) (HC) CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421 (Raj)(HC) Editorial : SLP of the revenue was dismissed ,CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 392 ITR 2 (St.) S. 37(1): Business expenditure–Provision for disputed excise tax liability was allowable as a business expenditure in case of an assessee following mercantile systems of accounting. [S.145] Allowing the appeal ,the Court held that ; in the mercantile system of accounting, a prudent assessee can certainly make provision for expenditure towards tax liability, even though the assessee may dispute the departmental claim. The precise amount of excise duty payable in the concerned year has remained inconclusive and therefore the reflection of the disputed amount in the books of accounts cannot be said to be an unreasonable act. (AY. 2009-10) Modi Revlon (P.) Ltd. v. CIT (2016) 291 CTR 420 /77 Taxmann.com 83/ (2017) 145 DTR 109 (Gauhati)(HC) S. 37(1): Business expenditure-Assesses not under legal obligation to make payments to original allottee-Amount cannot be claimed as against costs for development of land. [S. 45, 48] Dismissing the appeal, that the memorandum of understanding clearly stated that the transfer of expenses included all expenses such as, licence fee, external development charges and conversion charges. Instead, the expenses towards conversion and development of the commercial complex were to be transferred to the books of account of the assessee. Significantly, it did not stipulate reimbursement of any monies by the assessee to the original allottee. Therefore, the assessee was under no obligation to make any payments to the original allottee. Hence, its payment to the original allottee was of its free volition and under no legal obligation under any of the documents relied upon by the assessee. The amount could not be claimed as against the costs for development of the land. The valuation of the closing stock whatever it might be would by itself not create a liability to pay any amounts to the original allottee, since no such liability was transferred to the assessee. The Tribunal was right in disallowing the cost claimed by the assessee Unitech Hospitality Services Ltd. v. ACIT (2017) 392 ITR 508 / 246 Taxman 243 (Delhi)(HC) S. 37(1): Business expenditure-Expenditure on motor cars and telephone bills-Finding that expenditure had not been incurred solely for business purposes-Disallowance of 50% of expenditure was held to be justified. The Assessing Officer found that eight cars were maintained by the assessee as his personal fad. It was also found that the assessee had not maintained any log register or other materials to establish that all these 8 cars were used by the assessee exclusively for the purpose of carrying on


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his business. The Tribunal had also found that the assessee had not maintained a proper data base to verify whether all the phones were used for the purpose of his business. Disallowance of 50% of the expenditure on the cars and telephone bills was justified. (AY. 2004-2005) S. Gopalkrishnan v. CIT (2017) 390 ITR 518 (Ker.)(HC) S. 37(1): Business expenditure-Expenditure incurred in executing contract was held to be allowable. Dismissing the appeal of the revenue, the Court held that; the Tribunal had rightly deleted the whole addition. For execution of the Dahej project, expatriates were working. The sub-contract was also given to the Indian company which was a subsidiary of the parent company and the expenses were to be borne by the parties as per the agreement. Some technical persons were required to be employed and their expenses were debited and the Tribunal had rightly appreciated this aspect of the matter.(AY .1998-1999 ) DIT(IT) v. Sksanska Cementation International Ltd. (2017) 390 ITR 441 (Guj.)(HC) S. 37(1): Business expenditure-Liquidated damages for failure to pay dividends was held to be not deductible. The assessee issued thirty lakhs cumulative redeemable preference shares of Rs. 10 each at par aggregating to a sum of Rs. 3 crores to UTI Bank redeemable at par on March 31, 2000 carrying assured dividend of 12% per annum. The case of the assessee was that it was unable to pay dividend to the shareholders as agreed. The shares were, therefore, redeemed before the prescribed time. After the shares were redeemed, in order to avoid ruinous litigation, a sum of Rs. 50,71,328 was paid by the assessee to the former shareholders by way of liquidated damages. The assessee claimed deduction of the amount. The Assessing Officer and the Tribunal held that the amount was not deductible. On appeal: Held, the fact that the payment took the character of liquidated damages did not obliterate the fact that the liability to pay was on account of dividend. Failure on the part of the assessee to pay dividend was a breach of the contract which entitled the UTI bank to recover damages. Therefore, when the assessee paid the damages the assessee was really discharging its liability to pay dividend under the contract. The amount was not deductible. (AY. 2002-2003 ) G.G.L. Hotels and Resort Company Ltd. v. CIT (2017) 390 ITR 160 (Cal.)( HC) S. 37(1): Business expenditure-Capital or revenue- Expenditure on launching new product was held to be revenue expenditure. Court held that since the expenditure was incurred in connection with launching of the assessee's new product it was deductible as revenue expenditure. (AY .2004-2005) S. Gopalkrishnan v. CIT (2017) 390 ITR 518/ 77 taxmann.com 97 (Ker.)(HC) S.37(1):Business expenditure-Capital or revenue-Expenditure incurred on replacement of old fittings with new ,expenditure creating advantage of enduring nature expenditure which is capital in nature. Dismissing the appeal the Court held that; the finding of the Tribunal revealed that by making such expenditure, the assessee had renovated and refurnished its hotel which enhanced the standard of the hotel and added an advantage of an enduring nature which would be reflected in terms of the higher rental and higher occupancy in the hotel. Therefore, the expenditure could not be covered under the general provisions of expenditure allowable under section 37 of the Income-tax Act, 1961. (AY. 1995-1996) U.P. Hotels Ltd. v. CIT (2017) 391 ITR 203 (All)(HC) S. 37(1):Business expenditure-Loss- "setting up of business" and "commencement of business". All expenditure after "setting up" is deductible business expenditure even if the business has not commenced. A business is "set up" when steps are taken to recruit


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employees and take premises etc. Expenditure incurred was held to be allowable as business loss. [S. 28(i),29] Dismissing the appeal of revenue, the Court held that ;all expenditure after "setting up" is deductible business expenditure even if the business has not commenced. A business is "set up" when steps are taken to recruit employees and take premises etc Followed Western India Vegetable Products Ltd. v. CIT ( 1954 ) 26 ITR 151 (Bom)(HC). ( AY. 2007-08) CIT v. Axis Pvt. Equity Ltd. ( 2017) 391 ITR 370 (Bom)(HC) S.37(1): Business expenditure-Accrued liability-Mercantile system of accounting- Liability for payment of 60 per cent. arising during assessment year in question is ascertained liability hence be allowed as deduction. [S. 145] Dismissing the appeal of the revenue the court held that ; provision for payment of arrears made in two consecutive years in instalments of 40 per cent. and 60 per cent. -Liability for payment of 60 per cent. arising during assessment year in question- hence ascertained liability was to be allowed. (AY. 2010-2011) CIT v. Haryana Agro Industries Corporation Ltd. (2017) 391 ITR 127 (P&H)( HC) S. 37(1) : Business expenditure–Commission-Volcker Committee-Not proved that commission payments were illicit, it could not be concluded that same were not made for purpose of business and, thus, Expl. 1 to s. 37(1) could be invoked. Allowing the appeal of the assessee, the Tribunal held that; Explanation 1 to s. 37(1) could not be invoked merely on basis of an un-established doubt that expenditure incurred could be for infraction of law. Assessee exported goods to Iraq under UNO 'oil for food scheme. In this connection, it paid commission to its agent for providing services to them and realization of export proceeds. Authorities below held that commission paid by assessee were illicit payments. It was noticed that commission payments were for services rendered by its agents to it. Further, noticed that there was nothing to show that said transactions were non genuine or excessive or unreasonable. It was held that not proved that impugned commission payments were illicit, it could not be concluded that same were not made for purpose of assessee's business and Expl. 1 could not be invoked. (AY. 2003-04 2005-06) Bajaj International (P.) Ltd. v. DCIT 162 ITD 278 (Mum)(Trib.) S. 37(1): Business expenditure–Tribunal restricted the disallowance of 10% of land development expenses as against 25 % disallowed by the AO. On appeal by the assessee the Tribunal;restricted the disallowance of 10% of land development expenses as against 25% disallowed by the AO.( AY. 2009-10) Fatehsinh Mohansinh Chauhan v. DCIT (2017) 163 ITD 591 (Ahd.)(Trib.) S. 37(1) : Business Expenditure- Once business is set up even if no business income is earned during the year, business expenses would be allowable. Allowing the appeal of the assesse , the Tribunal held that ,Once business is set up even if no business income is earned during the year, business expenses would be allowable .( AY.2010-11) Globex Energia (P.) Ltd. v. ACIT (2017) 162 ITD 532 (Mum)(Trib.) S.37(1) : Business expenditure-Capital or revenue–Software expenses-Expenditure for installation of ERP software is a capital expenditure. Assessee incurred expenditure for installation of Enterprise Resource Planning (ERP) software and claimed it as revenue expenditure. Tribunal held that ;since ERP was part of profit making apparatus of business, for enabling its management and operations, for improving productivity without which said business operations would not have been possible, it had been rightly


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regarded as a capital asset and expenditure on same being capital expenditure. (AY. 2011-12, 2012-13) Voltech Engineers (P.) Ltd. v.DCIT 163 ITD 469 (Chennai) (Trib.) S. 37(1): Business expenditure–Capital or revenue-Dubbing costs, foreign language TV program was held to be capital expenditure and to be amortised along with cost of licence fee. Allowing the appeal of the revenue, the Tribunal held that; without incurring dubbing costs, foreign language TV program could not be utilised for earning revenue, hence it would form part of licence fees paid for acquiring said program; it would amount to capital expenditure should be amortised along with cost of licence fee. (AY. 2010-11 ) DCIT v. United Home Entertainment (P.) Ltd. (2017) 163 ITD 172 (Mum.)(Trib.) S.37(1): Business expenditure-SBLC charges paid to bank as guarantee to a bank was held to be allowable as business expenditure. Dismissing the appeal of the revenue, the Tribunal held that; SBLC charges were received by assessee as income and similar charges were paid as guarantee to a bank, same amount being income on one hand and expenditure on other hand, nullified all accounts, therefore, such amount would be considered as business expenditure.( AY. 2009-10) ITO v. Shalini Properties & Developers (P.) Ltd. (2017) 163 ITD 666 (Kol.) (Trib.) S. 37(1): Business expenditure-Interest income from FDR was shown in excess in previous year, cannot be claimed as expenditure in subsequent year. [S. 145 ] Dismissing the appeal of the assesse the Tribunal held that, Interest income from FDR was shown in excess in previous year, cannot be claimed as expenditure in subsequent year. Only remedy was revising return for said year. ( AY. 2012-13 ) Haryana State Electronics Development Corporation Ltd. v.DCIT (2017) 163 ITD208 (Chd.)(Trib.) S. 37(1) : Business expenditure–Commission-Assessee has to prove the services rendered by recipient of commission, matter was set aside. Allowing the appeal of the revenue, the Tribunal held that; to claim expenditure on account of commission had to prove that services were rendered, by recipient of commission from assessee. Payment was made by account payee cheque or fact that tax had been deducted at source or fact that recipient of commission had declared commission in his return of income and paid taxes thereon, were all irrelevant considerations. Since evidence regarding nature of services rendered by recipient of commission had not been placed on record matter required to be re-adjudication. (AY. 2007-08) ITO v. PKS Holdings (2017) 162 ITD 1/ 152 DTR 215 (Kol.)(Trib.) S. 37(1) : Business expenditure–Ad-hoc disallowance-Where the books of accounts were audited, AO was not justified in disallowing 20 per cent expenditure. Allowing the appeal of the assessee the Tribunal held that; where the books of accounts were audited, AO was not justified in disallowing 20 per cent expenditure. (AY. 2010 – 2011) Quality Circle Forum of India v. Dy.CIT (2017) 162 ITD 122 (Hyd.)(Trib.) S.37(1): Business expenditure–Cricketer-Direct nexus between professional income along with expenditure needs to be established before allowing expenses-Matter remanded. Assessee a cricketer received match fees/retainerships from various cricket bodies as declared under head 'income from business and profession. The expenditure was claimed against the said income, which was rejected by the AO. In appeal the CIT(A), partly allowed the appeal . On


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appeal by the revenue, the Tribunal held that there has to be direct nexus between professional income and expenditure, however, neither Assessing Officer nor Commissioner(Appeals) sought to establish a direct nexus between assessee's professional income and expenditure, thus, matter was to be remanded back for adjudication afresh. (AY. 2009-10, 2012-13) DCIT v. Parthiv A. Patel (2017) 163 ITD 146 (Ahd.) (Trib.) S. 37(1): Business expenditure-Capital or revenue-Renovation of rented show rooms was held to be revenue expenditure. Expenditure incurred to make premises more suitable and conducive to business activity on replacement or repairing of existing furniture and fixtures and modification to facilitate display of products was held to be revenue expenditure (AY.2010-2011) CIT v. Sales India Pvt. Ltd. (2017) 54 ITR 272 (Ahd.)(Trib.) S.37(1):Business expenditure-Capital or revenue-Setting up of business-Expenses incurred after business set up and before commencement of business was held to be revenue expenditure. Expenses incurred after business set up and before commencement of business was held to be revenue expenditure. (AY. 2002-2003, 2003-2004) CIT v. Geo Connect Ltd. (2017) 54 ITR 481 (Delhi)(Trib.) S. 37(1) : Business expenditure–Business of giving rigs on hire for drilling oil has been set up in earlier years, mobilization expenses is to be allowed as revenue expenditure. Where assessee imported new rigs to give them on hire for oil drilling and incurred mobilization expenses thereupon to make them operational, said expenses were of revenue nature as rigs were acquired as expansion of existing business and no new business had been set up nor any new source of income had come to existence. (AY. 2009-10) Dewanchand Ramsaran Industries (P) Ltd. v. ACIT (2017) 146 DTR 25 (Mum.)(Trib.) S. 37(1) : Business expenditure – Pharma Company - Advertisement and sales promotion expenses –Expenses incurred by assessee could not be reckoned as freebies given to doctors, thus expenditure being purely for business purpose had to be allowed as business expenditure. Expenditure incurred by assessee Pharma Company for customer relationship management, key account management, gift articles, free medicine sample, advertisement and sales promotion was purely for brand recognition and could not be considered as freebies given to doctors. Hence, the same is allowable as business expenditure and were not impaired by Explanation 1 to section 37(1). (AY.2010-11) Dy. CIT v. PHL Pharma (P) Ltd. (2017) 163 ITD 10 / 146 DTR 149 / 184 TTJ 1 (Mum.)(Trib.) S. 37(1): Business expenditure–Foreign travel–Expenditure on travelling expenses of the partner was held to be allowable. Dismissing the appeal of the revenue, the Tribunal held that expenses incurred by partners of the firm on foreign travel to countries from which substantial business was generated, was to allowed as deduction. ( AY. 2009-10) ACIT v. Allied Gems Corporation (Bombay) (2017) 163 ITD 56 (Mum.)(Trib.) S. 37(1):Business expenditure-Capital or revenue-Stock Options (appreciation rights) are intended to motive employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse.


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Allowing the appeal of assessee the Tribunal held that;Stock Options (appreciation rights) are intended to motive employees and so the expenditure thereon is a deductible revenue expenditure. The discount (difference between market price and vesting price) is allowable upon vesting subject to reversal if the options lapse. (ITA No. 2283/Del/2013, dt. 04.01.2017)(AY. 2008-9-09) Religare Commodities Ltd. v. ACIT (Delhi)(Trib.); www.itatonline.org S.37(1) : Business expenditure-Amount paid to State authority-Not payment for infringement or irregularity of law, payment cannot be disallowed. [S. 37(1), Expln., Maharashtra Housing and Area Development Act , 1976] The construction expenses incurred for alleged bogus tenants was disallowed on the ground that the payments was in contravention of, Maharashtra Housing and Area Development Act , 1976. On appeal the CIT (A) held that the proportionate cost of construction was to be disallowed in the year when project was completed .On appeal Tribunal held that; since the project was not completed by the assessment year 2008-09, no profit could be assessed for that year there no disallowance can be made for the relevant year. The Tribunal also held that expenditure incurred was legal and accordance with law and the amount under Maharashtra Housing and Area Development Act, 1976 was also in the nature of cost of construction and admissible as business expenditure . The payment was either in the nature of fine nor in the nature of penalty. It was not attributable to any irregularity or infringement of law. Therefore the claim was admissible for deduction as business expenditure. (AY.2004-2005 to 2011-2012) ACIT v. Layer Exports P. Ltd.(2017) 53 ITR 416 (Mum)(Trib.) S.37(1): Business expenditure-Capital or revenue- Renovation of road is held to be revenue expenditure. Treatment as capital in books of account not relevant, refurbishment expenses of terminals of airport is held to be revenue expenditure. (AY.2008-09) Addl. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 / 148 DTR 201 (Mum.)(Trib.) S.37(1):Business expenditure-Penalty-Demurrage charges are in the form of punitive charges not illegal payment or payment opposed to public policy,payment being under contractual obligation, allowable as deduction. Dismissing the appeal of the revenue the Tribunal held that; Demurrage charges are in the form of punitive charges not illegal payment or payment opposed to public policy, payment being under contractual obligation, allowable as deduction. (AY. 2010 -11) Dy. CIT v. Ripley and Co. Ltd. (2017) 53 ITR 541 (Kol.)(Trib.) S.37(1):Business expenditure-Employees stock option scheme-Discount on issues of option allowable-Assessing Officer was directed to work out deduction. Discount on issue of option on employees stock option scheme, the Assessing Officer was directed to work out the deduction. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.) S.37(1): Business expenditure Capital or revenue-Process of research includes trial run of new drug, experiments on new drug not new line of business, expenses allowable as revenue. Process of research includes trial run of new drug, experiments on new drug not new line of business, expenses allowable as revenue. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.)(Trib.)


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S.37(1): Business expenditure-Capital or revenue-ERP package for recording of manufacturing and accounting is held to be revenue expenditure. ERP package for recording of manufacturing and accounting is held to be revenue expenditure.(AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. Add. CIT (2017) 53 ITR 285 (Hyd.)(Trib.) S.37(1) : Business expenditure-Capital or revenue-Laying of roads was held to be revenue expenditure. Tribunal held that Lying of roads, facilitating assessee to carry on business effectively which is revenue expenditure.(AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 ( Hyd) (Trib) S.37(1): Business expenditure-Capital or revenue-Website development expenses was held to be revenue expenditure. Website development expenses was held to be revenue expenditure it does not create an asset but only to provide a means for disseminating information about assessee.(AY.2002-2003) ITO v. All India Technologies Ltd. (2017) 53 ITR 620 (Kol.) (Trib.) S.37(1): Business expenditure-Liquor business-Privilege fee or special privilege fee paid to Government is held to be deductible. Privilege fee or special privilege fee paid to Government is held to be deductible. (AY.2010-2011) A.P. Beverages Corporation Ltd. v.DCIT (2017) 54 ITR 228 (Hyd.)(Trib.) S.37(1): Business expenditure—Capital or revenue-Setting up of business—Expenses incurred after business set up and before commencement of business is revenue expenditure. Dismissing the appeal of the revenue , the Tribunal held that expenses incurred after business set up and before commencement of business was held to be revenue expenditure. (AY. 2002-2003, 2003-2004 ) CIT v.GEO Connect Ltd. (2017) 54 ITR 481 (Delhi)(Trib.) S.37(1):Business expenditure-Contribution to Chief Minister Fund deductible. Contribution to Chief Minister Fund is held to be deductible. (AY. 2008-2009, 2010-2011) JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd.(2017)54 ITR 425 (Bang.)(Trib.) S. 37(1) : Business expenditure–Provision for legal and statutory services, matter was set aside. The Tribunal sent the matter back to AO to verify whether the amount pertains to this year. (AY. 2005-06,2006-07) ACIT v. Timex Group India Ltd. (2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) S. 37(1) : Business expenditure–Capital or revenue-Project expenses written off is held to be allowable as revenue expenditure. The Tribunal held that the expenditure incurred on the project which was abandoned at the stage of work in progress did not result in creation of any new asset or an advantage of enduring nature and therefore, the said expenditure which have been written off in the books of account are allowable as revenue expenditure. (AY. 2011-12) Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 / 145 DTR 57 (Jp.)(Trib.)


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S. 37(1) : Business expenditure–Payment for acquisition of trade mark cannot be allowed as revenue expenditure, however depreciation is allowable. [S. 32(1)(iii)] The Tribunal held that as per section 32(1)(ii) and expl. 3 to section 32(1) expression assets includes intangible assets including trade mark and depreciation of 25% is prescribed on such intangible assets. The view taken by AO in earlier years is not a possible view as per law and claim for deduction cannot be allowed by adhering to rule of consistency. (A.Y. 2005-06 & 2006-07) Bosch Ltd. v. ACIT (2017) 183 TTJ 215 / 150 DTR 345 (Bang.)(Trib.) S.40(a)(i):Amounts not deductible deduction at source- Payments made by assessee not in nature of royalty either under domestic law or under DTAA--No disallowance can be made. [S.195] That under the Agreement the restricted meaning of the term royalty shall continue to operate despite the amendment in law. Therefore the payments made by the assessee were not in the nature of royalty either under the domestic law or under the Agreement. The obligation under section 195 to deduct tax is at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of cheque or draft or any other mode, whichever is earlier. Therefore, it is relevant to see the obligation of the payer at the time of credit or actual payment and any subsequent amendment through retrospective effect, cannot create any obligation upon the payer which did not exist at the time of crediting or actual payment of the sum. Therefore no disallowance could have been made under section 40(a)(i) for non-deduction of tax on the payments to non-resident parties. (AY. 2002-2003, 2003-2004) CIT v. Geo Connect Ltd. (2017) 54 ITR 481 (Delhi)(Trib.) S.40(a)(i): Amounts not deductible–Deduction at source- Payment of transponder fee to US based company for utilizing its transponder facilities in India and not for right to use artistic work or scientific equipment, it did not fall within ambit of royalty, hence not liable to deduct tax at source-DTAA-India –USA [S. 9(1)(vi), 195, Art. 12] Assessee, a Mauritian company, entered into an agreement with US company to utilize transponder facility for telecasting its sports channel in India and made payment to said company . The Assessing Officer held that the said payment was taxable under section 9(1)(vi) as 'royalty' and also under article 12(3)(b) and since no TDS was deducted, he invoked section 40(a)(i) and made disallowance. Allowing the appeal of the assesee the Tribunal held that, payment of transponder charges to U.S Company was not for 'use' or 'right to use' any copyright of a literary, artistic, or scientific work. It was also not for use or right to use any industrial, commercial, or scientific equipment. On facts, said payment did not fall within ambit of royalty in terms of Article 12, hence not liable to deduct tax at source. (AY.2006-07 to 2008-09) Taj TV Ltd. v. DIT (2017) 162 ITD 674 (Mum.) (Trib.) S. 40(a)(i) : Amounts not deductible Deduction at source- Commission paid to its foreign agents for soliciting sale orders abroad–Not liable to deduct tax at source as non-resident agents does not have PE in India. [S.9(1)(i), 195, Art.7 OECD Model Convention] Allowing the appeal of the assesssee, the Tribunal held that, commission paid to its foreign agents for soliciting sale orders abroad was cannot be disallowed for failure to deduct tax at source as the non-resident agents does not have PE in India. (AY. 2010 – 2011) G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum)(Trib.) S. 40(a)(i): Amount not deductible–Deduction at source- payment to non-resident parties for “call transmission services was held to be not liable to deduct tax at source , hence no disallowance can be made. DTAA-India-USA. [S. 9(1)(i), 9(1)(vi), 9(1)(vii),195, Art. 12(2), 12(4)]


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Allowing the appeal of assesee the Tribunal held that;no disallowance could have been made under section 40(a)(i) of the Act for non-deduction of tax on the payments to non-resident parties, namely, M/s Kick Communication and M/s IGTL Solutions. Since in the call connectivity and transmission from end of the Indian Territory at Mumbai to the termination of call in USA, no technical knowledge has been made available to the assessee, respectfully following the decision of the Tribunal in the case of Bharti Airtel Ltd v.. ITO we hold that payment for the services of call transmission through dedicated bandwidth provided by the non-resident parties to the assessee, cannot be termed as Fee for Technical services under the treaty also, in the hands of the recipients.( ITA No. 1927/Del/2008 & 127/Del/2011, dt. 17.01.2017) (AY. 2002-03 & 2009-10) Geo Connect Ltd. v. DCIT (Delhi)(Trib.); www.itatonline.org S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-DTAA-India & Belgium–Issuing gradation certificate, the payment cannot be characterize as fees for technical services, not liable to deduct tax at source-DTAA-India- Belgium [S. 9(1)(vii], Art. 12,13] The Tribunal held that the Belgium company is not ‘making available’ its technical knowledge, expertise skill or know how to the assessee in the course of issuing gradation certificate, the payment cannot be characterize as fees for technical services. Taxability of a sum in the hands of recipient on account of subsequent retrospective amendment would not expose the payer of income to an impossible situation of requiring deduction of tax at source on the anterior date of payment of such income. Thus on this count also assessee cannot be held to be in default for not deducting the tax at source. Disallowance was rightly deleted by CIT(A). (AY. 2008-09) ACIT v. D. A. Jhaveri (2017) 183 TTJ 447/ 148 DTR 132 (Mum.)(Trib.) S.40(a)(ia):Amounts not deductible-Deduction at source– Though there is a difference between “paid” and “payable”, section covers not only those cases where the amount is payable but also when it is paid. [S.194C, 200] Though there is a difference between “paid” and “payable”, S. 40(a)(ia) covers not only those cases where the amount is payable but also when it is paid. The contrary interpretation that s. 40(a)(ia) applies only to cases where amounts are “payable” will result in defaulters going scot free. S. 194C read with s. 200 are mandatory provisions. Court held that ; view taken by the High Courts of Punjab & Haryana, Madras and Calcutta is the correct view and the judgment of the Allahabad High Court in CIT v. Vector Shipping Services (P) Ltd., (2013) 357 ITR 642 did not decide the question of law correctly. Thus, insofar as the judgment of the Allahabad High Court is concerned, we overrule the same. Consequences of the aforesaid discussion will be to answer the question against the appellant/assessee thereby approving the view taken by the High Court. ( AY.2006 -07) Palam Gas Service v. CIT (2017) 394 ITR 300/ 247 Taxman 379 (SC) S.40(a)(ia):Amounts not deductible-Transaction one of purchase and sale—Payment was not in nature of royalty and provisions of section 9(1)(vi) is not applicable, assessee was not liable to deduct tax at source.[S. 9(1)(vi),194J] Dismissing the appeal of the revenue, the Court held that; It was an admitted fact that the assessee was engaged in buying and selling software in the open market. The transaction in question was thus one of purchase and sale of a product and nothing more, hence the Tribunal was justified in deleting the disallowance. CIT v. Vinzas Solutions India P. Ltd. (2017) 392 ITR 155/ 292 CTR 332/ 245 Taxman 289/ 147 DTR 105 (Mad)(HC)


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S.40(a)(ia):Amounts not deductible-Deduction at source – Commission and audit fee -payments was shown as part of income of payees which was duly returned and tax was paid thereon, assessee could not be treated as assessee in default Allowing the appeal of the assesse, the Tribunal held that; where assessee incurred expenses towards commission and audit fees, to extent assessee was able to adduce evidence that payments formed part of income of payees which was duly returned and tax was paid thereon, assessee could not be treated as assessee in default.(AY. 2012-13) Susai Raju (F.) v. ITO (2017) 163 ITD 533 / 184 TTJ 780 (Chennai) (Trib.) S.40(a)(ia): Amounts not deductible – Deduction at source- Tax deducted was deposited before filing of return – No disallowance can be made. [S. 139(1), 200(1) ] Allowing the appeal of the assessee, the Tribunal held that; Tax deducted was deposited before filing of return,no disallowance can be made. (AY.2007 08) Aarson Engg. Construction (I) (P.) Ltd. v. ITO (2017) 163 ITD 696 (Mum.)(Trib.) S.40(a)(ia) : Amounts not deductible-Day of arrival and day of departure-One of the days excludible to consider period of stay-Period of stay in India less than ninety days-Amount not taxable in India—No disallowance can be made- DTAA-India-USA. [S.9(1)(vii)(b), Art.15, 16] Allowing the appeal the Tribunal held that, there was no dispute with reference to the applicability of section 9(1)(vii)(b), the issue as decided by the Commissioner (Appeals) was with reference to article 15 of the Double Taxation Avoidance Agreement between India and the U. S. A. The provisions of the Agreement would override the provisions of the Act. If the services were considered as dependent personal services rendered by the executive director of a one-man company then they would come under article 16 in respect of which the Commissioner (Appeals) gave a finding that the amount was not taxable. In the alternative, if the services were reconsidered as independent personal services under article 15 the period of ninety days was relevant. However, the Commissioner (Appeals) made a mistake in calculating the days by including the day of arrival and the day of departure also for the period of stay. One of the days was to be excluded to consider the period of stay. If that was taken into consideration, for the seven trips made by the person the period of stay would come to eighty-six days i.e., less than ninety days. In either case, as the amount was not taxable in India applying the provisions of the Agreement the question of disallowance under section 40(a)(ia) did not arise. Moreover no steps were taken by the Assessing Officer under section 201 and section 201(1A) under the tax deduction at source provisions. Keeping the amendment brought to section 40(a)(ia) on the issue also the amount was not disallowable under section 40(a)(ia). ( AY. 2009-2010) Spectrum Power Generation Ltd. v CIT (2017) 162 ITD 516/ 54 ITR 751 (Hyd.)(Trib.) S.40(a)(ia) :Amounts not deductible-Deduction at source-If income is not taxable in terms of the Income–tax Act, no disallowance can be made.[S.195] Allowing the appeal the Court held that ;before effecting deduction at source one of the aspects to be examined is whether such income is taxable in terms of the Income-tax Act. This aspect had not been considered by the Tribunal while concluding that the assessee had committed a default in not deducting the tax at source. The disallowance under section 40(a)(ia) was not justified. Sesa Resources Ltd. v. Dy. CIT (2017) 391 ITR 413 (Bom.)(HC) S.40(a)(ia): Amounts not deductible-Deduction at source–Payment of commission to non-resident agents for carrying out activities outside India - No disallowance can be made. [S.9(1)(i), 195]


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Commission paid by the assessee to the non-resident agents for carrying out business activities outside Indian territories is not taxable in the hands of the letter in India under s.9(1)(i) or under s.9(1)(vii). Hence, the provisions of S.195 are not attracted to such payments. Therefore, commission paid by the assessee cannot be disallowed under s.40(a)(ia) of the Act. (AY. 2009-10) Dy.CIT v. Troikara Pharmaceuticals Ltd. (2017) 146 DTR 177 / 184 TTJ 120 (Ahd.)(Trib.) S.40(a)(ia): Amounts not deductible - Deduction at source-connection – Non-resident commission agents were not taxable in India in respect of their commission earnings from orders procured abroad, not liable to deduct tax at source. [S.195] Since no part of the operations of the business of the commission agents is carried out in India, the non-resident commission agents were not taxable in India in respect of their commission earnings from abroad. Hence, the assessee was not under any obligation to deduct TDS from the commission payments to the non-residents. Therefore, commission payments could not be disallowance under s. 40(a)(ia). (AY.2012-13) ITO v. Excel Chemicals India Ltd. (2017) 146 DTR 171 / 184 TTJ 114 (Ahd.)(Trib.) S.40(a)(ia): Amounts not deductible-Deduction at source–The amounts paid by the assessee to the clinical research organisations were not taxable in India. There was no need for the assessee to deduct tax at source- DTAA-India –Canada. [S.195, Art, 12, 15] Tribunal held that ,tax resident of Canada was only providing final results to its Indian clients by using highly sophisticated bio-analytical know-how, without providing any access whatsoever to the clients to such know-how, fee received by it was business income and not fees for technical or fees for included services or royalty and the assessee having no permanent establishment in India, such income would not be taxable in India by virtue of the relevant provisions of the Double Taxation Avoidance Agreement between India and Canada. The amounts paid by the assessee to the clinical research organisations were not taxable in India. There was no need for the assessee to deduct tax at source. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.) S.40(a)(ia): Amounts not deductible –Deduction at source- Royalty -Payments made by assessee not in nature of royalty either under domestic law or under DTAA--No disallowance for non-deduction of tax at source- DTAA-India –USA. [Art. 12] Payments made by assessee not in nature of royalty either under domestic law or under DTAA, hence no disallowance for non-deduction of tax at source. (AY. 2002-2003, 2003-2004 ) CIT v.GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.) S. 40A(2): Expenses or payments not deductible – Excessive or unreasonable –Rate of tax being same no disallowance can be made. Allowing the assessee's appeal and dismissing the Department’s that the Department had not controverted the findings of the Tribunal in an identical case and no distinction had been brought on record with respect to the terms and conditions of the administrative support agreement. The fact that both the companies had the same incidence of tax had also not been rebutted. The claim of the assessee for the assessment years 2007-08 to 2011-12 was to be allowed. (.AY. 2007-2008 - 2011-2012) CIT v. Tata Ficosa Automotive Systems Ltd.(2017) 54 ITR 203 (Pune)(Trib.) S. 40A(2): Expenses or payments not deductible–Excessive or unreasonable–Commission- No distinction drawn between facts of current assessment year vis-a-vis in earlier years hence expenditure is held to be allowable. [S. 37(1)]


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Allowing the appeal the Tribunal held that ; there was no dispute that the assessee had actually made the commission payments after deducting tax at source thereupon at the prescribed rates in furtherance of the various agreements with its payees for marketing and other similar services. Their confirmations by way of contra accounts and debit notes were filed. The confirmations were nowhere doubted before both the lower authorities. There was no distinction drawn between the facts of the assessment year vis-a-vis those in the earlier years. The Assessing Officer was directed to allow its entire claim of commission payments.(AY. 2011-2012) Stallion Laboratories P. Ltd. v. ITO (2017) 53 ITR 633(Ahd.)(Trib.) S. 40A(2) : Business expenditure–Disallowance-Excessive and unreasonable payments-excess of fair market value-Onus is on Department-No material comparable brought on record - No disallowance could be made. The A.O. held that assessee had paid interest to the customer of the assessee for the unsecured loan advanced. That payments made to the holding company was unreasonable and in excess of the fair market value and therefore he added 2% u/s. 40A(2). The Tribunal held that the AO to bring on record to show that in the facts and circumstances of the case, the provisions of section 40A(2) are indeed applicable. Only in such cases, he could disallow to the extent that such payment was found to be excessive or unreasonable in his opinion. In this case, the AO not brought any comparable cases on record to disprove the purchases made from holding company by the assessee. Divakar Solar Systems Ltd. v. Dy.CIT (2017) 53 ITR 516 (Kol.)(Trib.) S. 40A(2) : Business expenditure—Disallowance-Excessive and unreasonable payments - Salary and professional fee– furnished full details regarding nature of services provided - No disallowance could be made. Tribunal held that none of these services purported to be rendered by CP was disputed by the Department except merely harping on the technical educational qualification as a pre-requisite for rendering the services. Business expediency in the subject mentioned transaction was proved by engaging a liaison officer who was a trusted person of the management more especially stakes involved in thetelecommunications project. For rendering these services at least, no technical qualification was required as the service could be done by experience. Business acumen is developed by a person not by educational qualification but by his or her native intelligence and presence of mind which does not come from education alone. The assessee had made payments to CP disallowed by the Department, which was not rectified even when specifically brought to its notice. The assessee had provided the complete details of nature of services rendered by CP. In the absence of bringing any other evidence to the contrary, no disallowance could be made in the facts and circumstances of the case. Just because the payment was made to a relative of the director, the principles of business expediency did not get disturbed. Even if no difference whether the expenditure was incurred towards relatives or non-relatives per se was incurred wholly and exclusively for the purpose of business. (S.37) Divakar Solar Systems Ltd. v. Dy.CIT (2017) 53 ITR 516 (Kol.)(Trib.) S. 40A(3) :Expenses or payments not deductible-Cash payments exceeding prescribed limits -Unless plea that seller insisted for cash payment was proved, same could not be regarded as valid ground to allow cash payment.[R.6DD] For purchase of immovable property, assessee made a part of payment in cash. He claimed that payments were made for business expediency and the sellers insisted for cash payment . Dismissing the appeal of the assesse the Tribunal held that ;mere plea that sellers insisted on cash payment, itself being unproved, was not a legally valid argument. Disallowance was up held.(AY. 2012-13) F.Susai Raju v. ITO (2017) 163 ITD 533 / 184 TTJ 780 (Chennai)(Trib.)


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S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits –Burden is on assessee is to demonstrate that its case was covered by either of exceptions contemplated under rule, mere genuineness of transaction is not sufficient. [R. 6DD] Dismissing the appeal of the assesse , the Tribunal held that; since assessee had not been able to demonstrate that its case was covered by either of exceptions contemplated under rule 6DD, amount has been rightly disallowed . (AY. 2009 – 2010) International Ships Stores Suppliers v. JCIT (2017) 162 ITD 73 / 183 TTJ 161/ 145 DTR 1 (Mum)(Trib.) S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Payments to local producer of raw hides/skin exceeding Rs.20,000-No disallowance could be made. [R.6 DD] Dismissing the appeal of the revenue, the Tribunal held that; payments to local producer of raw hides/skin exceeding Rs.20,000, no disallowance could be made. ( AY.2010-11) ITO v. Standard Leather (P.) Ltd. (2017) 162 ITD 285 (Kol.)(Trib.) S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits–Identity, genuineness and business expediency was explained hence disallowance was held to be not justified. The Tribunal held that the identity and existence of the payees and genuineness of transactions are not at all disputed. It was only because of the insistence of the seller, that the assessee had to pay in cash and the assessee has explained the business expediency of making the cash payments to parties. Followed, Anupam Tele Services v. ITO (2014) 268 CTR 121 (Guj.) , Smt. Harshila Chordia v. ITO (2008) 298 ITR 349 (Raj.). (AY. 2011-12) Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 / 145 DTR 57(Jp.)(Trib.) S. 40A(3) :Expenses or payments not deductible-Cash payments exceeding prescribed limits – Mere genuineness of payment cannot be the ground allow the claim, unless the assesse establishes exceptional circumstances . [R.6DD(j) The Tribunal held that the assessee has not been able to demonstrate that its case is covered by either of the exceptions under R.6DD. Mere finding of the purchase transactions as genuine would not take the same beyond the scope of the disallowance u/s 40A(3). The exception contemplated by sub-r (j) of R.-6DD to relax the rigours of S..40A(3) in certain situations was omitted from the statue by an amendment. Hence the same cannot come to the rescue of the assessee whose case is covered by the post amended section 40A(3)r/w r.6DD hence the disallowance was upheld. ( AY. 2009-10) International Ships Stores Suppliers v. JCIT (2017)162 ITD 73/ 183 TTJ 161/ 145 DTR 1 (Mum.)(Trib.) S. 41(1) : Profits chargeable to tax - Remission or cessation of trading liability–Loan taken for the purpose of acquisition of capital asset on remission was not chargeable to tax either under section 41(1) or S. 28(iv).[S. 28(iv)] Dismissing the appeal of the revenue the Tribunal held that, Loan taken for the purpose of acquisition of capital asset on remission was not chargeable to tax either under section 41(1) or S. 28(iv) Garware Polyster Ltd. v.Dy.CIT ( 2017) 151 DTR 228 / 185 TTJ 276 ( Mum.) (Trib.) S. 41(1) : Profits chargeable to tax - Remission or cessation of trading liability - Share application money which was subsequently written back in books of account, could not be treated as income either under section 41(1) or section 28(iv). [S. 28(iv)]


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Dismissing the appeal of the revenue , the Tribunal held that the ,amount received by assessee on account of share application money which was subsequently written back in books of account, could not be treated as income of assessee either under section 41(1) or section 28(iv) of the Act. ( AY. 2011-12) DCIT v. Nalwa Chrome (P.) Ltd. (2017) 163 ITD 598 (Mum.) (Trib.) S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Waiver of loan taken for acquisition of a capital asset and on capital account cannot be taxed as it is neither on revenue account nor a remission of a trading liability so as to attract tax in the year of remission. Allowing the appeal of the assessee, the Tribunal held that;waiver of loan taken for acquisition of a capital asset and on capital account cannot be taxed u/s 41(1), as it is neither on revenue account nor a remission of a trading liability so as to attract tax in the year of remission. (ITA No. 923 & 930/Bang/2009, dt. 13.01.2017) (AY. 2004-05) JSW Steel Ltd. v. ACIT (Mum.)(Trib.) www.itatonline.org S. 43(1) : Actual cost- Purchase of assets from related party, assigned inflated value to those assets in order to claim higher depreciation, AO was justified in determining actual cost of assets by invoking Explanation 3 to s. 43(1). [S. 32] Dismissing the appeal of the assessee,the Tribunal held that; assessee purchased assets from related party which had already been depreciated, assigning higher value to those assets in order to avoid tax liability resulted in satisfaction of conditions prescribed under Expl. 3 to s. 43(1). Therefore, decision of the AO was to be upheld. (AY. 2006 – 07) Sanyo BPL (P.) Ltd. v. Dy.CIT (2017) 162 ITD 176 / 185 TTJ 227 (Bang.)(Trib.) S.43(1): Actual cost- Depreciation–Purchased old wind mill much higher than the original cost, cost in hands of assesse was to be reduced. [S.32] Dismissing the appeal of the assessee, the Tribunal held that; old windmill was purchased at enhanced price which resulted in aggregate of depreciation claimed by previous and present owner much higher than original cost, purpose of transfer was reduction of tax liability and, hence, cost in hands of assessee was to be reduced. (AY.209-10) V. Sabithamani (Smt.) v.ACIT (2017) 163 ITD 478 (Chennai) (Trib.) S.43(5):Speculative business-Cash segment and futures segment and final outcome profit-Profit or loss against both segments be adjusted or set off against each other. [S. 73] Dismissing the appeal of the revenue, the Tribunal held that; Assessee carrying out transactions in cash segment and futures segment and final outcome profit. Both segments part of composite business of assesse. Business of assessee cannot be segregated to arrive at profit and loss in both transactions independently or separately. Profit or loss against both segments be adjusted or set off against each other. (AY.2009-2010) JCIT v.J.M. Financial Services Ltd. (2017) 54 ITR 120 (Mum.) (Trib.) S.43(6): Written down value - Depreciation-Intangible assets-Two valuation reports – Matter was set a side- Alterative claim was not adjudicate by CIT(A)- Matter was set a side. Purchaser has obtained two valuation reports and the CIT(A) has not adjudicated alternative claim hence the matter was seta side .(AY.2007-2008, 2008-2009) Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum.)(Trib.) S. 43B: Deduction only on actual payment--Electricity Board collecting electricity duty from customers as agent of State—Provisions is not applicable . [Electricity Duty Act, 1963, 3(1) ]


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Dismissing the appeal of the revenue , the Court held that ; Electricity Board collecting electricity duty from customers as agent of State hence provisions is not applicable. (AY. 2008-2009) CIT v. Kerala State Electricity Board (2017) 393 ITR 337 (Ker.)(HC) Editorial: Order in A CIT v. Kerala State Electricity Board (2015) 38 ITR 458 (Cochin) (Trib) is affirmed. SLP is granted to the revenue, CIT v. Kerala State Electricity Board (2016) 380 ITR 8 (St.) S. 43B : Deductions on actual payment –Deposited contribution towards provident fund and ESI before due date of filing of returns , deduction is allowable.[S.36(1)(va)] Allowing the appeal of the assessee, the Court held that ;employer contribution and employee contribution made towards provident fund and ESI can be claimed as deduction if deposited before due date of filing of the return.(AY. 2001-02) Sagun Foundry (P.) Ltd. v. CIT (2017) 291 CTR 557/ 78 taxmann.com 47 / 145 DTR 265 (All.)(HC) S.43B: Deductions on actual payment–Amount deposited as custom duty – Held to be allowable deduction. Dismissing the appeal, the Court held that;the deposit amounts paid were expenses and within the ambit of section 43B. (AY. 2007-2008) PCIT v. Praveen Saxena (2017) 391 ITR 365 (Delhi)(HC) S.43B : Deduction only on actual payment-Provision for leave salary—Assessing Officer would take necessary action after pronouncement of judgment by Supreme Court.[S.43B(f)] Commissioner (Appeals) directing Assessing Officer to take necessary consequential action in pursuance of final outcome of special leave petition filed before Supreme Court. Interest of assessee taken into consideration by Commissioner (Appeals)--Assessing Officer would take necessary action after pronouncement of judgment by Supreme Court. (AY.2007-2008, 2008-2009) Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum.)(Trib.) S.43B: Deduction only on actual payment-Provision for leave encashment—Stay on decision of High Court-Assessing Officer was directed to decide issue in accordance with final decision of Supreme Court. [S.43B(f)] Supreme Court ordering stay of decision of High Court holding provision invalid and directing disallowance to be made in terms of provision during pendency of appeal. Assessing Officer to decide issue in accordance with final decision of Supreme Court. ( AY.-2005-2006, 2006-2007, 2008-2009) ACIT v. Dow Agrosciences India Private Limited (2017) 53 ITR 590 (Mum.)(Trib.) S.43B: Deduction only on actual payment-Additional claim made in revised computation, appellate authorities entitled to consider new claim made subsequent to filing of return. [S.139 (1)] Additional claim made in revised computation, appellate authorities entitled to consider new claim made subsequent to filing of return. (AY.-2005-2006, 2006-2007, 2008-2009) ACIT v. Dow Agro sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.)(Trib.) S.43B: Deduction only on actual payment-Bank interest-Amount credited by assessee written back upon waiver of partial interest-Interest remaining outstanding after


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conversion of write off into loan-If income to be considered then loss also to be considered for relevant assessment year-Interest allowable as deduction.[S. 37(1)]. Allowing the appeal the Court held that;if the income was to be considered then the loss was also to be considered for the relevant year and therefore, the interest was allowable as deduction. Sunil Synchem Ltd. v. CIT (2017) 392 ITR 165 (Raj)(HC)(HC) S. 44: Insurance company-Profit on sale of investment was held to be not assessable–Circular of CBDT is binding on the revenue.[S. 119] Dismissing the appeal of the Revenue, the Court held that; Profit on sale of investment was held to be not assessable.Circular of CBDT is binding on the revenue. (AY.2005 -06) PCIT v. National Insurance Company Ltd. (2007) 393 ITR 52 (Cal.) (HC) S.44AD:Civil construction business-Gross receipts of assessee exceeding Rs. 40 lakhs provision is not applicable–Application of net profit at 7 percent. Dismissing the appeal of the revenue ,the Court held that;according to the proviso to section 44AD(1) of the Income-tax Act, 1961 read with Circular No. 737, dated February 23, 1996( 1996) 218 ITR 97 (St.)of the Central Board of Direct Taxes, section 44AD was not applicable to the assessee whose gross receipts exceeded Rs. 40 lakhs. Resultantly, the challenge to the claim to depreciation allowed by the Appellate Tribunal failed. A net profit rate of 8 per cent. could not be applied as the provisions of section 44AD were not attracted. Application of net profit rate at 7 per cent. as ordered by the Appellate Tribunal was not arbitrary or perverse. (AY. 2010-2011) CIT v. Ram Kumar (2017) 392 ITR 561 (P&H)(HC) S.44AD: Civil construction–Computation–Rejection of books of account and estimation income at 8 percent of gross receipt was held to be justified as the assesse had kept only self made vouchers in respect of major expenses- When the income was estimated further deduction of depreciation was held to be not allowable. [S. 32,145] Dismissing the appeal of the assessee the Tribunal held that; Rejection of books of account and estimation income at 8 percent of gross receipt was held to be justified as the assessee had kept only self made vouchers in respect of major expenses. When the income was estimated further deduction of depreciation was held to be not allowable.(AY. 2009-10) G. Raja Gopala Rao v. DCIT (2017) 163 ITD 46 (Visakha) (Trib.) S. 44B : Shipping business-Non-residents–Slot hire charges' received from operation of ships in international traffic was eligible for article 8 benefit of India-UAE DTAA, not liable to tax in India. [S.90, Art. 8] Allowing the appeal of the assessee,the Tribunal held that; income from slot hire charges earned by the assessee, a UAE company engaged in shipping business from Indian company, was a part of income from shipping operations in international traffic and, thus, it would be eligible for benefit of article 8 and consequently, same was not taxable in India.(AY. 2007 - 2008) Orient Shipping Services LLC v. ADIT (2017) 162 ITD 509 (Mum.)(Trib.) S. 44BB : Mineral oils–Computation–Reimbursement of actual expenses was not be excluded while computing the income.[S.2(45), 5(2)] Dismissing the appeal of the assessee,the Court held that; Reimbursement of actual expenses was not be excluded while computing the income as section 44BB is a complete code in itself. Ensco Maritime Ltd. v. ADIT (2017) 244 Taxman 261 (Uttarakhand)(HC) Editorial:SLP is granted to the assessee; Ensco Maritime Ltd. v. Addl. DIT (2017) 244 Taxman 190 (SC)


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S.44BB:Mineral oils-Include crude petroleum and liquid products derived from crude petroleum, not restricted to petroleum and natural gas. Words and phrases--"Mineral oils". Section 44BB is a special provision and has a self contained code relating to the taxability of non-residents for providing services in connection with prospecting for, extraction of and production of mineral oils and prevails over other general provisions including that of section 44DA. Hyundai Heavy Industries Co. Ltd., In re (2017) 392 ITR 37 (AAR) S. 44BB : Mineral oils–Non–residents-Amount received from hiring of barge used for offshore accommodation of employees was also liable to be taxed under section 44BB. Allowing the appeal of the assessee the Tribunal held that; Amount received by assessee from hiring of barge used for offshore accommodation of employees was also liable to be taxed under section 44BB as the said section does not envisage only direct use of plant and machinary in prospecting for or extraction or production of mineral oils. ( AY. 2007-08) Valentine Maritime (Gulf) LLC v. ADIT (2017) 163 ITD 32/ 55 ITR 8 (Mum.)(Trib.) S. 44BB :Mineral oils–Business for prospecting/exploration, mineral oil etc.–Insertion of s. 44DA in proviso to s. 44BB is with effect from 1-4-2011 is prospective in nature.[S. 44DA] The assessee filed its return of income offering the income u/s 44BB. The AO had completed assessment u/s.44DA by making additions as revenue generated outside India. CIT (A) deleted the addition . On appeal by the revenue dismissing the appeal the Tribunal held that ; proviso of s.44DA in proviso to s. 44BB is inserted w.e.f. 1-4-2011, is prospective in nature. (AY. 2005 – 2006 ,2009 – 2010) ADIT (IT) v.Iranian Offshore Engineering & Construction Company (2017)162 ITD 425 (Delhi) (Trib.) S.45:Capital gains-An amount received from a wholly-owned subsidiary in consideration of transfer of shares of the WOS to a group of shareholders is not taxable as capital gains. The Department cannot subject a transaction under the Gift-tax Act and also levy tax under the Income-tax Act. [Gift –tax Act] Dismissing the appeal of the Revenue Court held that ;an amount received from a wholly-owned subsidiary in consideration of transfer of shares of the WOS to a group of shareholders is not taxable as capital gains. The Department cannot subject a transaction under the Gift-tax Act and also levy tax under the Income-tax Act. CIT v. Annamalaiar Mils(2017) 393 ITR 293/ 150 DTR 66 / 294 CTR 4 (SC) S.45:Capital gains-Family arrangement does not amount to transfer –Lifting of corporate veil on the basis of family arrangement was held to be not valid, the fact that the company is wholly owned subsidiary of the family is irrelevant- Transfer of shares are held to be liable to capital gains tax. [S. 2(47), 47] The Question before the High Court was “whether in the facts and circumstances of the case and in law the Tribunal was right in holding that the transaction of transfer of shares by the assessee company in pursuance of family arrangement amounted to transfer and was exigible to tax” Dismissing the appeal of the assesee the Court held that; a family arrangement/settlement does not amount to a "transfer" u/s 2(47) as it only recognizes "pre-existing rights" between the parties, the same applies only to members of the families and not to transfers made by corporate entities. The corporate veil can never be lifted at the instance of the company itself because that would amount to its denying its own corporate existence. The fact that the Company is wholly owned by the members of the family is irrelevant. Transfer of shares are held to be liable to capital gains tax . Accordingly the Tribunal was correct in holding that the transaction of transfer of shares by the independent corporate entity was assessable to capital gain tax. Therefore, the substantial


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questions of law which arise for our consideration are all decided in favour of the respondent/revenue and against the appellant/assessee. ( ITA No. 73 of 2002, dt. 12.06.2017)( AY. 1995-96) B. A. Mohota Textiles Traders Pvt. Ltd. v. DCIT (Bom)(HC) , www.itatonline.org S. 45: Capital gains-Business income-Equity shares–Frequent transactions- Receipts to be treated as short-term capital gains [S. 28(i),111A] Dismissing the appeal of the revenue, the Court held that; Appellate Tribunal had taken note of the clauses in the partnership deed by which the partners/firm were debarred from doing trading activities in shares and mutual funds and wherever the assessee had incurred losses the assessee had never claimed them as business losses. Finding of fact, hence no substantial question of law. (AY .2008-2009, 2009-2010) CIT v. Tejas Securities (2017) 393 ITR 132/ 245 Taxman 362 (Guj.)(HC) S. 45: Capital gains-Transfer of trading stock into investment is permissible--Profit from sale of shares was held to be assessable as Long-term capital gains and not as business income.[S.10(38),28(i), 45(2)] Allowing the appeal the Court held that; the Tribunal erred in affirming the order of the Assessing Officer rejecting the conversion of the trading shares into investment shares and treating the long-term capital gains that arose from the sale of those shares as profit of trading in shares and chargeable business income. The only reason given by the Appellate Tribunal in rejecting the claim of the assessee for the previous assessment year 2005-06 was that there was no provision in the Income-tax Act, 1961 in respect of conversion of stock-in-trade into investment. Section 45(2) provided for the conversion by the owner of a capital asset into or its treatment by him as stock-in-trade of a business carried on by him as chargeable to tax as income of his previous year in which such stock-in-trade was sold or otherwise transferred by him and fair market value of the asset on the date of conversion or treatment should be deemed to be the full value of the consideration received or accrued as a result of the transfer of a capital asset. The Act however did not provide for the conversion of stock-in-trade into capital asset. Such omission could not operate as a bar on an assessee. It was a fundamental principle of law that a natural person had the capacity to do all lawful things unless his capacity had been curtailed by some rule of law. (AY. 2006-2007) Deeplok Financial Services Ltd. v. CIT (2017) 393 ITR 395/ 247 Taxman 139/ 151 DTR 267 (Cal.)(HC) S.45: Capital gains or business income-land had been purchased as investment, gains on sale of land was assessable as capital gains.[S.28(i), 260A] Dismissing the appeal of the revenue the Court held that ; land had been purchased as investment, gains on sale of land was assessable as capital gains. . The view on the basis of facts placed before the Tribunal was one of possible views and not an impossible view applying the test of reasonable prudence. The income was assessable as capital gains. (AY. 2005-2006 ) Bagmane Developers P. Ltd. v. CIT (2017) 392 ITR 379 (Karn.)(HC) S. 45:Capital gains-Sick Company–When assessee started earning profits liability to capital gain tax was up held. Scheme for revival of assessee was sanctioned by BIFR. Assessee started earning profits. Joint Director (Recovery) rejected assessee's request for exemption. On writ the dismissing the petition the Court held that; liability to capital gains tax on sale of assets of assessee was justified. However, having regard to these peculiar facts, HC issued direction to the Revenue not to charge interest or penalty on the capital gains tax amounts. (AY.2010-11)


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Laxmi Automatic Loom Works Ltd. v. DCIT & Anr. (2017) 390 ITR 150/ 292 CTR 243/ 146 DTR 271/78 taxmann.com 335 (Delhi )(HC) S.45: Capital gains-Full value of consideration is neither market value nor necessarily price stated in document for sale but the price actually arrived at between parties to transaction. [S. 48,55A] Dismissing the appeal of the revenue , the Tribunal held that ; The Assessing Officer is not entitled to determine fair market value merely because parties interrelated. Consideration stated in sale document higher than valuation by stamp authority. Full value of consideration received by or accruing to assessee to be taken into consideration for computing capital gains. Market price of property not relevant for this purpose hence reference to Valuation Officer was without jurisdiction. (AY. 2006-2007 ) PCIT v. Quark Media House India P. Ltd. (2017) 391 ITR 145/ 245 Taxman 226/ 292 CTR 46 (P&H) (HC) S.45: Capital gains-Cost of acquisition–Life interest in trust –Relinquishment/ surrender does not constitute gift–Cost of acquisition of asset would be deemed to be nil [ S. 49(1)(ii), Gift tax Act, 1958, S. 2(xii), 4(1)(c ), 4(1)(d)] Answering the question in favour of the assessee, the Court held that Tribunal was not justified in holding that the life interest held by the assessee in trust was an asset coming within the purview of section 49(1)(ii) , as it was acquired on the release executed by the previous life interest holder which amounted to a gift and therefore the cost of the acquisition of asset would be deemed to be the cost of the original settlor .( AY. 1984-85) Nulsi N.Wadia v. CIT ( 2017) 151 DTR 325 (Bom.)(HC) Editorial: Order in Nulsi N.Wadia v. ACIT ( 1996) 56 TTJ 88 ( Mum) (Trib) is set aside. S. 45: Capital gains-Capital or revenue-Amount received from assignment of patent is taxable as capital gain under section 55(2)(a) and its cost has to be taken at Rs. Nil. [S. 55(2)(a)] AO has held that the amount received on sale of patent was held to be revenue receipt. On appeal CIT(A) held that receipt was assessable as capital gain and cost to be taken at nil. On appeal dismissing the appeal of the assessee the Tribunal held that; amount received from assignment of patent is taxable as capital gain under section 55(2)(a) and its cost has to be taken at Rs. Nil.(AY. 2008-09) Bharat Serums & Vaccines Ltd. v.ACIT (2017) 163 ITD 253 (Mum.) (Trib.) S.45: Capital gains- Penny stock–Failure to provide a copy of the statement and cross examination,the addition is bad in law- Direct evidences relating to sale /purchase , brokers note cannot be disregarded. Allowing the appeal of the assessee, the Tribunal held that; failure to provide a copy of the statement relied upon and of cross-examination renders the assessment order void. The claim of capital gains from penny stocks cannot be denied on presumption and surmises by disregarding direct evidences relating to the sale/purchase transactions of shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account..( ITA No. 501 & 502/Ahd/2016, dt. 09.03.2017)(AY. 2008-09) Sunita jain (Smt.) v. ITO (Ahd.)(Trib.): www.itatonline.org Rachna Sachin jain(Smt.) v. ITO (Ahd.)(Trib.);www.itatonline.org S. 45: Capital gains Penny stocks-Failure to give opportunity of cross examination- Addition was deleted.[S. 131 ]


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The s. 131 statement implicating the assessee is not sufficient to draw an adverse inference against the assessee when the documentary evidence in the form of contract notes, bank statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to provide cross-examination is a fatal error. Additions made by the AO was deleted .( ITA No. 1957/Mum/2015, ITA No. 3018/Mum/2015 and ITA No. 3019/Mum/2015, dt. 22.05.2017)(AY. 2006-07) Kamla Devi S. Doshi v. ITO (Mum.)(Trib),www.itatonline.org Jaswantraj Bhutaji Shah HUF v. ITO (Mum.)(Trib.),www.itatonline.org Rajmal M .Sanghvi v. ITO (Mum.)(Trib.),www.itatonline.org S.45: Capital gains–Capital loss-Capital asset-Convertible share warrants– Share warrant is a capital asset and loss generated from its forfeiture is capital loss. [S. 2(14)] Dismissing the appeal of the revenue ; share warrant is a capital asset and loss so generated from forfeiture of share warrant is nothing but a capital loss . (AY. 2009 – 2010) Dy. CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.)(Trib.) S. 45: Capital gains-Long term capital gains –Purchase of shares in off market–Sale consideration received should be assessable as long term capital gain and not income from undisclosed sources. [S.69] Assessee having purchased and sold shares through a registered broker which are supported by proper contract notes and demat account and received the sale consideration by account payee cheques, the transactions cannot be treated as bogus and sham, more so as the broker as well as the stock exchange has confirmed the purchase and sale transactions. Thus, the income arising from sale of shares is assessable as long term capital gains. (AY.2005-06) Dolarrai Hemani v. ITO (2017) 146 DTR 93 (Kol.)(Trib.) S.45: Capital gains-Business income–Investment portfolio-Investment was kept for long term assessable as capital gain and not as business income. [S. 28(i)] Tribunal held that ; the A.O himself admitted that Assessee not only maintained two separate portfolios in the year under appeal but also in earlier years. Further the same was also supported by the Assessee’s books of accounts. In addition, the Books of accounts of Assessee were not rejected by A.O and the stand of Assessee in offering long term capital gains under investment portfolio was not disputed by revenue, therefore, it was held that the net surplus on sale of shares under investment portfolio should be chargeable to capital gains only and Assessee was not to be treated as a trader in respect of sale and purchase of shares in investment portfolio.(AY. 2006-07) Dy.CIT v. Lokenath Saraf Securities Pvt. Ltd. (2017) 183 TTJ 241 (Kol.)(Trib.) S. 45 : Capital gains–Business income-Shares transferred from trading to investment account were held for a long time- Surplus arising on sale of shares under investment portfolio was to be brought to tax as capital gains. [S.28(i)] Where assessee, a stock broker, holding dual portfolio, i.e., investment portfolio and stock portfolio, earned capital gain from sale of shares kept in investment portfolio, in view of fact that assessee did not use borrowed funds for buying those shares and, moreover, it kept shares in question for sufficiently long period of time, income declared by assessee could not be brought to tax as business income. (AY. 2006-07) Dy. CIT v. Lokenath Saraf Securities (P) Ltd. (2017) 146 DTR 125 (Kol.)(Trib.) S. 45: Capital gains- Full value of the consideration-Under value of assets- If the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot make an addition to the stated consideration. [S.40A(2)(b) , 48, 50C, 55A]


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Dismissing the appeal of the Revenue the Court held that; the AO is not bound to accept the consideration stated in the sale deed. In a case where property is sold between arm’s length parties at a gross undervaluation, the onus is on the assessee to explain and if there is no explanation, the AO is entitled to draw an inference. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. However, if the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot made an addition to the stated consideration. (CIT v. George Henderson and Co. Ltd. (1967) 66 ITR 622 (SC) & CIT v. Gillanders Arbuthnot& Co. (1973) 87 ITR 407 (SC) (AY.2006-07) PCITv. Quark Media House India Pvt. Ltd.(2017) 292CTR 146/ 146 DTR 233 ( P & H)(HC) S. 45: Capital gains-Long term or short term-Letter of allotment–for considering whether an asset is a "long-term capital asset", the period of holding must be computed on a de facto basis. The letter of allotment, even though not "ownership", must be taken as the date of holding the assetand not the agreement to sell was registered. [S. 2(14),2(29A), 2(42A), 2(47), 54, 54F] Allowing the appeal of the assessee the Tribunal held that, S. 2(42A) uses the term "held", the other provisions use the terms "acquired", "purchased" and "owner". Accordingly, for considering whether an asset is a "long-term capital asset", the period of holding must be computed on a de facto basis. The letter of allotment, even though not "ownership", must be taken as the date of holding the asset and not the agreement to sell was registered.(AY. 2011-12 ) Anita D. Kanjani v. ACIT(2017) 163 ITD 451 (Mum.)(Trib.) S. 45: Capital gains-Business income-Portfolio Management Scheme (PMS)–Gains assessable as capital gains and not as business income.[S. 28(i), 48] Dismissing the appeal of the revenue, the Tribunal held that; Share held in portfolio Management Scheme (PMS) cannot be assessed as business income, it has rightly assessed as capital gains. CBDT Circular No. 4/7 dated 15.06.2007 and Circular No. 6 of 2016 dated 29.02.2016 considered and entire law on the subject is explained. (AY. 2010-11 , 2011-12) ACIT v. Sachin R. Tendulkar (2017) 163 ITD 65/ 147 DTR 282 / 184 TTJ 374 (Mum.)(Trib.) S.45:Capital gains- Business income-Investor in shares-Long term capital gain was accepted as an investor, short term capital gains cannot be assessed as business income as an trader. [S. 10(38), 28(i)] Dismissing the appeal of the revenue, the Tribunal held that; if the AO has accepted the claim for exemption for long-term capital gains and conceded that the assessee is an "investor", he cannot change his stand and treat the assessee as a "trader" in respect of the claim of short-term capital gains alone. (ITA No. 2799 & 2799/Kol/2013, dt. 27.01.2017) (AY. 2006-07 & 2009-10) ITO v. Dilip B. Desai HUF (Kol.)(Trib.); www.itatonline.org S. 45: Capital gains-The capital gains arising on transfer by a foreign company of shares in another foreign company holding assets in India is liable to tax in India-DTAA-India-UK. [S. 2(14), 2(47),9(1)(i), Art. 14] Dismissing the appeal of the assessee,the Tribunal held that, The capital gains arising on transfer by a foreign company of shares in another foreign company holding assets in India is liable to tax in India.The argument that the transfer is a mere re-organisation of assets within the group and that there is no “real income” is not acceptable. The argument that the India-UK DTAA should be given a “static” interpretation and that the retrospective amendment to s. 9 by the Finance Act 2012 should be ignored is also not acceptable. Where the DTAA provides that the income shall


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be chargeable to tax in accordance with the provision of the domestic law, the said domestic law has to be the amended law.(AY.2007-08) Cairn UK Holdings Ltd. v. DCIT ( 2017) 150 DTR 57 / 185 TTJ 593 (Delhi)(Trib.) S.45: Capital gains—Business income-Portfolio management scheme--Principle of consistency—AO was directed to assesse the income as capital gains. [S. 28(i)] Allowing the appeal the Tribunal held that ; department consistently in all subsequent years treating sale proceeds as capital gains. Assessing Officer directed to treat income from portfolio management services as capital gains.(AY. 2008-2009, 2010-2011) Venkatesh Satyaraj v. DCIT( 2017) 53 ITR 406 (Mum.)(Trib.) S.45: Capital gains-Search -Purchase and sale of shares-Long-term capital gains was to be accepted.[S. 153A] Dismissing the appeal of the revenue , the Tribunal held that ; the assessing Officer not making any attempt to collect details from return filed by share broker. Assessee selling shares through another broker by dematerialising shares. Dematerialisation of shares would not happen without physical shares, hence long-term capital gains on sale of shares declared by assessee to be accepted. (AY.2003-2004) CIT v. Asha V. Mehta (Smt.) (2017) 54 ITR 191 (Mum.)(Trib.) S. 45 : Capital gains–Sale of shares cannot be assessed as income from undisclosed sources when the broker and stock exchange confirmed the genuineness of transaction. [S.69] The Tribunal held that the assessee having purchased and sold shares through a registered broker which are supported by proper contract notes and demat account and received the sale consideration by account payee cheque, the transactions cannot be treated as bogus and sham. The broker as well as the stock exchange have confirmed the purchase and sale transactions and therefore, the income arising therefrom is assessable as long term capital gains and not as income from undisclosed sources. (AY. 2005-06) Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.)(Trib.) S.47: Capital gains-Conversion of partnership in to a company –Premature transfer of shares, transferee company is not liable to pay capital gains tax.[ S.45, 47(xiii), 245 N ] Application was filed before the AAR on a question as to whether notwithstanding the non –compliance with clause ( d) of proviso to section 47(xiii), the assesse was liable to pay capital gain tax. AAR has held that, the assesse was not liable to capital gains tax . On writ by the Revenue, dismissing the petition the Court held that , where there is no gain or profit arises at the time of conversion of partnership firm in to a company, in such a situation, notwithstanding non compliance with clause (d) of proviso to section 47(xiii) by premature transfer of shares, transferee company is not liable to pay capital gains tax . CIT v. Umicore Finance Luxemborg (2017) 244 Taxman 43 / 291 CTR 174/ 145 DTR 121 (Bom.)(HC) S.48: Capital gains-Family partition-Indexed cost of acquisition to be computed with reference to year in which previous owner acquired asset and not year in which assessee acquired asset. [S.45] When capital asset is acquired by assessee through family partition, indexed cost of acquisition to be computed with reference to year in which previous owner acquired asset and not year in which assessee acquired asset. (AY. 2010-2011) ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai) (Trib)


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S. 50 : Capital gains - Depreciable assets - Block of assets – Acquiring the property for fit-out has demonstrated that it acquired the property, however if the property was not used for the purpose of business during the relevant year the assesse is not entitle to depreciation. [S. 32] The Tribunal held that when the assesse has paid entire consideration and taken the possession for fit –out the same is sufficient to hold that the assesse has acquired the property on the basis of part occupation certificate though the assessee has not entered in to a registered agreement with the builder. However the depreciation was not allowable, if the property was not used for the purpose of business during the relevant year the assessee is not entitle to depreciation. (AY. 2012-13 ) Indogem v.ITO (2017) 151 DTR 376 (Mum.)(Trib.) S. 50 : Capital gains - Depreciable assets - Block of assets - Asset on which depreciation is not allowable on account of its non-user for business purpose during relevant year, would not form part of said block for calculation purpose. [S. 2(11), 32] The Assessee sold old windmill which resulted in profit as the WDV of relevant block was less . Assessee purchased new windmill and added to the block of asset . AO disallowed the depreciation on new wind mill for failure to use relevant assessment year and reduced from the block resulting in to surplus from sale of old wind mill as short term capital gains . On appeal Tribunal held that ; even though for purpose of computing capital gain arising from sale of a depreciable asset falling in block of asset, it is value of block at end of relevant year which is relevant, yet an asset on which depreciation is not allowable on account of its non-user for business purpose during relevant year, would not form part of said block for calculation purpose. Since, new windmill was purchased on last day of relevant year and, thus, depreciation could not be allowed on it due to its non-user, capital gain was to be computed on sale of old windmill after excluding cost of new windmill from value of block of asset standing at end of relevant year. (AY. 2010 – 2011) G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum.)(Trib.) S. 50B : Capital gains–Slump sale-Undertaking is sold as a running business with all assets and liabilities for a slump price, no part of the consideration can be attributed to depreciable assets -If the undertaking is held for more than three years, it constitutes a "long-term capital asset" and the gains are assessable as a long-term capital gain.[S. 45, 48,50(2)] On appeal by the department to the Supreme Court HELD dismissing the appeal; If an undertaking is sold as a running business with all assets and liabilities for a slump price, no part of the consideration can be attributed to depreciable assets and assessed as a short-term capital gain.. If the undertaking is held for more than three years, it constitutes a "long-term capital asset" and the gains are assessable as a long-term capital gain.(AY.1991-92 ) CIT v. Equinox Solution Pvt. Ltd. (2017) 393 ITR 566 / 247 Taxman 89/ 294 CTR 1/ 150 DTR 137 (SC) S.50B:Capital gains-Slump sale-Specific and separate valuation for land, building and machinery was ascertained hence the sale cannot be considered as of "slump sale"- Review petition was dismissed. [S.2(14), 2(42C), 45] Dismissing the review petition against the order in Vatsala Shenoy v. JCIT [2016] 389 ITR 519 (SC), the Court held that;by order of court business continued by partners with controlling interest pending completion of winding up. Assets of firm ultimately put to sale in winding up and outgoing partners receiving net share of value of assets of firm after deduction of liabilities. Asset sold was capital asset and gains from transfer thereof capital gains. Specific and separate


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valuation for land, building and machinery was ascertained therefore the sale was not a case of "slump sale". (AY. 1995-1996 ) Vatsala Shenoy v. JCIT (2017) 391 ITR 363/ 247 Taxman 155 (SC) S. 50B : Capital gains–Slump sale–If defiant assets are or properties left out because they cause certain circumstances exemption cannot be denied. [ S.2(19A), 2(42C), 45] Allowing the appeal of the assessee, the Court held that; where in case of slump sale certain assets or properties are left out because they would cause inconvenience or lead to some kind of a trouble for buyers, it is well within assessee's right to exclude same from list of assets. Merely because two assets were retained by assessee, i.e., one in form of bad debt and another shown to be written off, it could be said that it was not a case of slump sale so as to deny benefit of section 50B to assessee Triune Projects (P.) Ltd. v. CIT (2017) 291 CTR 268 /77 taxmann.com 40 (Delhi)(HC) S. 50C: Capital gains-Full value of consideration-stamp valuation- Failure by the AO to refer the valuation of the capital asset to a valuation officer instead of adopting the value taken by the stamp duty authorities is a fatal error and the assessment order has to be annulled. The matter cannot be set aside to the AO for a second chance. The power of the ITAT to set aside cannot be exercised so as to allow the AO to cover up the deficiencies in his case.[S. 45, 254(1)] Dismissing the appeal of the revenue, the Tribunal held that; On the very perusal of the provisions laid down under section 50C of the Act reproduced hereinabove, we fully concur with the finding of the id. CIT (Appeals) that when the assessee in the present case had claimed before Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing Officer should have referred the valuation of the capital asset to a valuation officer instead of adopting the value taken by the state authority for the purpose of stamp duty. The very purpose of the Legislature behind the provisions laid down under sub section (2) to section 50C of the Act is that a valuation officer is an expert of the subject for such valuation and is certainly in a better position than the Assessing Officer to determine the valuation. Thus, non-compliance of the provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and justified. The Honble jurisdictional High Court of Allahabad in the case of Shashi Kant Garg 285 ITR 158 (All) has been pleased to hold that it is well settled that if under the provisions of the Act an authority is required to exercise powers or to do an act in a particular manner, then that power has to be exercised and the act has to be performed in that manner alone and not in any other manner. Similar view has been expressed by the other decisions cited by the id. AR.( ITA No. 4166/Del/2013, dt. 07.06.2017)(AY. 2009-10) ITO v. Aditya Narain Varma (HUF) (Delhi)(Trib.),www.itatonline.org S. 50C :Capital Gains–Full value of consideration-Stamp valuation- Value adopted by Stamp Authorities is deemed to be full value of consideration for purposes of computation of capital gains. [S.48] The Assessee has sold the his ancestral property for Rs. 1.05 crores.The AO applied the provisions of S. 50C and on basis of report of stamp valuation authority, adopted sale consideration for Rs. 1.06 crores . On appeal by the assesse, dismissing the appeal the Tribunal held that; the Assessee neither challenged value as adopted by stamp duty valuation authorities nor sought reference to DVO. Therefore, deeming fiction of s. 50C would come into operation for adoption of value for purposes of S. 48. (AY. 2009 – 2010) Niamat Mahroof Virji v. ITO (2017) 162 ITD 378/186 TTJ 133 (Mum.)(Trib.)


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S. 50C : Capital gains-Full value of consideration-Stamp valuation-Family settlement –Transfer of a plot to his nephews in terms of mutual family settlement and no sale deed was registered, provisions of section 50C could not be invoked. [S. 2(47), 45] Allowing the appeal of the assessee, the Tribunal held that; Transfer of a plot to his nephews in terms of mutual family settlement and no sale deed was registered, provisions of section 50C could not be invoked. ( AY. 2009-10) Ramesh Verma v.DCIT (2017) 163 ITD 421 (Chd.)(Trib.) S.50C: Capital gains—Stamp valuation- On request of the assesse the Assessing Officer to make reference to District Valuation Officer.[S. 45] Allowing the appeal the Tribunal held that, before considering the valuation under section 50C(1), if the assessee requests for reference to the Departmental Valuation Officer, the Assessing Officer shall refer the matter to the Departmental Valuation Officer and he could not overlook it. Hence, the Assessing Officer was directed to refer the matter to the District Valuation Officer and thereafter frame the assessment in accordance with law. ( (AY.2006-2007) Nitin R. Bhuva v. ITO (2017) 54 ITR 14 (Chennai) (Trib.) S. 50C: Capital gains-Full value of consideration - Stamp valuation - The stamp duty value on the date of the agreement to sell has to be adopted and not the value on the date of the deed of sale. The proviso to s. 50C, though inserted by the Finance Act 2016 w.e.f. 01.04.2017, has to be given retrospective effect from 01.04.2003 as it is intended to remove an undue hardship and is curative in nature. [S.45] Allowing the appeal of the assessee the Tribunal held that;The stamp duty value on the date of the agreement to sell has to be adopted and not the value on the date of the deed of sale. The proviso to s. 50C, though inserted by the Finance Act 2016 w.e.f. 01.04.2017, has to be given retrospective effect from 01.04.2003 as it is intended to remove an undue hardship and is curative in nature .( ITA.No.639/Vizag/2013, dt. 23.12.2016)(AY. 2009-10) Chalasani Naga Ratna Kumari (Smt.) v. ITO ( Vizag)(Trib) ; www.itatonline.org S. 50C : Capital gains-Full value of consideration-Stamp valuation- Unregistered property was sold on 7-08-2006-Provisions of Section 50C will not be attracted since the sale is before 01/10/2009, which is the date on which the circular becomes applicable. [S. 45, 48] The Tribunal held as per the CBDT circular, provisions of Section 50C were not applicable in so far as sales deed so executed were not registered with the Stamp Duty Valuation Authority and since the difference between the sale consideration of the property shown by the assessee and the FMV determined by the DVO under Section 50C(2) being less than 10 per cent, AO was not justified in substituting the value determined by the DVO for the sale consideration disclosed by the assessee. The tribunal further held that since transfer was made prior to the amendment of Section 50C w.e.f. 1/10/2009, the provisions of section 50C would not be applicable. The unregistered property was sold on 07/08/2006 which means, since the unregistered property was sold before the clarification was issued under Circular No.5/2010 dated 03/06/2010 where it clearly states that the scope of the provisions do not include transactions which are not registered with stamp duty valuation authority, and executed through agreement to sell or power of attorney and hence the provisions of Section 50C will not be attracted since the sale is before 01/10/2009, which is the date on which the circular becomes applicable. In the result, appeal of the assessee was allowed.(AY. 2007-2008) Krishna Enterprises v. Addl. CIT(2017) 183 TTJ 677 (Mum.)(Trib.) S. 54 : Capital gains-Profit on sale of property used for residence - New residential house purchased outside India is entitle to exemption-Prior to the amendment by the Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015. [S.45, 54F]


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Dismissing the appeal of the revenue , the Tribunal held that ; there is no requirement that the investment in the new residential house should be situated in India prior to the amendment by the Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015. ( ITA no. 6883/Mum/2014, dt. 26.04.2017)(AY.2011-12) ITO v. Nishant Lalit Jadhav (Mum.)(Trib.),www.itatonline.org S. 54 : Capital gains-Profit on sale of property used for residence–Purchase of house on credit for which the payment to be made in future–Exemption cannot be denied.[S. 45, 139(4)] Allowing the appeal of the assessee the Tribunal held that; assessee had invested in the new property within the time allowed u/s. 139(4), therefore assesse entitled for exemption u/s. 54 to the extent the amount invested in the new property.Even if an assessee acquires a new house on credit, i.e., payment for which may be made in future. (AY 2007 – 2008) Gopal Saran Darbari v. ITO (2017) 162 ITD 342 (Delhi)(Trib.) S.54:Capital gains-Profit on sale of property used for residence - Utilisation of loan and capital gains from sale of old house for purchase of new house–Entitle to exemption. [S.45] Allowing the appeal of assessee the Tribunal held that; assessee had availed loan and also utilised capital gain from sale of old house for purchase of a new house, and total investment was much more than loan amount plus amount of capital gain, capital gain was to be treated as an investment in purchase of new house is entitle for exemption. ( AY. 2008-09) Joseph Devadass v. ACIT (2017) 163 ITD 712 (Bang.) (Trib.) S.54: Capital gains-Sale of residential house property and investment sale consideration in another residential property-Conversion of two flats into one flat-Entitle to exemption. [S. 45, 54F] Assessee acquiring flats with intention to use them as one residential unit, whether flats constructed as such by builder or flats altered or combined into one at the instance of assesse, there is no distinction. Assessee is entitled to exemption. (AY.2011-2012 CIT v. Sanjay B. Pahadia (2017) 54 ITR 37 (Mum.)(Trib.) S. 54 : Capital gains - Profit on sale of property used for residence – Investment with in time – Delay in construction due to default of the builder exemption cannot be denied. [S.45] Asseseee invested with in time, however, due to default on part of builder causing delay in construction of flat within time limit prescribed under Act which is beyond control of assessee, assessee is entitled to benefit.(AY. 2010-2011) ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai)(Trib.) S. 54 : Capital gains-Profit on sale of property used for residence -Investing gains in house property in United States of America, change in law is only with effect from April 1, 2015 [S.45] Assessee investing gains in house property in United States of America in previous year relevant to assessment year 2010-11, is entitled to exemption,in previous year relevant to assessment year 2010-11. Change of law with effect from April 1, 2015 that property must be purchased only in India is prospective in nature. (AY. 2010-2011) ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai)(Trib.) S. 54EC: Capital gains-Investment in bonds-The amounts received as an advance is eligible for education. The fact that the investment is made prior to the transfer of the asset is irrelevant.[S.45]


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Dismissing the appeal of revenue the Court held that ; an amount received on sale of a capital asset as an advance on the basis of Agreement to Sale and the same being invested in specified bonds before the final sale, would entitle the assessee to the benefit of Section 54EC of the Act.The Tribunal upheld the claim of the assessee by following the decision of its coordinate bench in Bhikulal Chandak HUF v.ITO (2009 ) 126 TTJ 545 (Nag)(Trib) wherein it has been held that where an assessee makes investment in bonds as required under Section 54EC of the Act on receipt of advance as per the Agreement to Sale, then the assessee is entitled to claim the benefit of Section 54EC of the Act. The Revenue had preferred an appeal against the order of the Tribunal in Bhikulal Chandak HUF (supra) to this Court (Nagpur Bench) being Income Tax Appeal No.68 of 2009. This Court by an order dated 22nd August, 2010 refused to entertain the Revenue’s above appeal from the decision of the Tribunal in Bhikulal Chandak HUF (supra). In the above view, the question as proposed for our consideration in the present facts does not give rise to any substantial question of law.(ITA No. 1009 of 2014, dt. 14.12.2016)( AY.2008-09) CIT v. Subhash Vinayak Supnekar (Bom.)(HC); www.itatonline.org S. 54EC : Capital gains–Period of six months mentioned in s. 54EC has to be regarded as six British Calendar months. [S. 45, General Clauses Act, 1897) The assessee sold his ancestral property on 13-10-2008 and received the consideration. The Assessee invested the said amount in REC bonds on 24-4-2009 whereas bonds were allotted on 30-4-2009. While filling the ROI assessee claimed deduction u/s. 54EC. The AO held that, the investment made u/s. 54EC was not made on or before 12-4-2009, i.e., within six months from the date of transfer of the property, assessee not eligible for claim made u/s.54EC. Allowing the appeal of the assessee, the Tribunal held that ;in terms of General Clauses Act, 1897, period of six month mentioned in S.54EC has to be regarded as six British Calendar months and therefore, assessee sold his ancestral property on 13-10-2008, and investment made in REC bonds on 30-4-2009 was eligible for deduction. (AY. 2009 -2010) Niamat Mahroof Virji v. ITO (2017) 162 ITD 378 /186 TTJ 133 (Mum.)(Trib.) S.54F: Capital gains-Investment in a residential house–Surrender of tenancy rights-Failure by assessee to obtain allotment letter under provision of Maharashtra Ownership of Flats Act, 1963,not entitle to exemption.[S.45,Maharashtra Ownership of Flats Act, 1963] Dismissing the appeal of the revenue, the Court held that; Failure by assessee to obtain allotment letter under provision of Maharashtra Ownership of Flats Act, 1963,not entitle to exemption. (AY 2006-2007) Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536/ 150 DTR 73 (Bom.)(HC) S.54F:Capital gains-Investment in a residential house- Purchase of residential house outside India prior to amendment-Exemption is allowable. [S.45] Allowing the appeal the Court held that ; Purchase of residential house outside India prior to amendment is entitle to exemption.It was only after the amendment to section 54F of the Act by the Finance (No. 2) Act, 2014, which came into force with effect from April 1, 2015 that the assessee should invest the sale proceeds arising out of sale of capital asset in a residential house situated in India within the stipulated period. When section 54F was clear and unambiguous, there was no scope for importing into the statute words which were not there. Leena Jugalkishor Shah v. ACIT (2017) 392 ITR 18 (Guj.)(HC) S. 54F: Capital gains - Investment in a residential house– Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. [S. 45 ,139(1)]


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The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered. Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. Humayun Suleman Merchant vs. CCIT is not per incuriam. Assessee is not entitle to exemption. ( AY. 2006-07) Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/ 80 taxmann.com 22 (Bom.)(HC) S. 54F : Capital gains-Investment in a residential house-A trust which is for the sole benefit of an individual, has to be assessed as an “individual” and not as an “AOP”. Consequently, a trust is eligible for exemption.[S.161] Allowing the appeal of the assessee, the Tribunal held that; from the above case laws it is amply clear that by virtue of Section 161 of the I.T. Act the representative assessee is subject to the same duties, responsibilities and liabilities as if the income was received by him beneficiary, and whatever benefits the beneficiary will get in the said assessment must be made available to the trustee while assessing him u/s. 161. It is clear that it is only by virtue of u/s. 161 that the trust has been assessed for the income that is for benefit of sole beneficiary. According respectfully following the precedent we hold that the assessee is principally entitled to deduction u/s. 54F and it cannot be said that since it is a AOP and not a individual or HUF the said exemption/deduction should be denied.( ITA No. 5661/Mum/2016, dt. 03.05.2017)(AY. 2012-13) Balgopal Trust v. ACIT (Mum.)(Trib.),www.itatonline.org S.54F:Capital gains-Investment in a residential house– Deposit was not within due date for filing return but return filed belatedly-Deposit in specified bonds made within due date for filing was held to be entitled to exemption. [S. 45,54EC, 139(4)] Tribunal held that, the assessee filed the return within the time provided under section 139(4) of the Income-tax Act, 1961. The return was not filed within the time provided under section 139(1). Therefore, the matter needed to be reconsidered by the Assessing Officer and shall find out whether the assessee had invested the money in construction of property after getting approval of the Panchayat Union and thereafter decide the issue afresh in accordance with law after giving a reasonable opportunity to the assessee. That the property was sold on January 10, 2011 and the assessee deposited a sum of Rs. 50 lakhs on March 31, 2011 and another sum of Rs. 20 lakhs on June 30, 2011 in the REC Bonds. Since the deposit was made within the due date for filing of the return, the Commissioner (Appeals) had rightly allowed the claim of the assessee. (AY.2011-2012) Eswari (Mrs.) v. ITO (2017) 54 ITR 557 (Chennai) (Trib) S. 54F : Capital gains-Investment in a residential house–Net consideration invested in the construction of new house before the due date of filing return of income -Construction of the house was also completed within the prescribed time limit of three years–exemption cannot be denied. [S. 139(1)] Assessee having sold a property and invested more than the net consideration thereof in a new residential plot even before the due date prescribed under s.139(1) and also completed construction of the house within the time limit of three years under s. 54(1), exemption cannot be denied on the ground that the assessee did not deposit the sale consideration as per the scheme notified by the Government under s.54F(1) of the Act. (AY. 2010-11) Nirmala Yadav (Smt.) v. ITO (2017) 146 DTR 63 /183 TTJ 769/54 ITR 387 (Jodhpur)(Trib.) S. 54G : Capital gains-Shifting of industrial undertaking from urban area - Deposit of unutilised capital gain was made by assessee within time limit provided for filing of return under section 139(5), assessee would be entitled to exemption-Period of six months for


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making deposit under section 54EC should be reckoned from the dates of actual receipt of the consideration. [S.54G(2), 54EC, 139(1),139(5)] Dismissing the appeal of the revenue, the Tribunal held that; Deposit of unutilised capital gain was made by assessee within time limit provided for filing of return under section 139(5), assessee would be entitled to exemption and also period of six months for making deposit under section 54EC should be reckoned from the dates of actual receipt of the consideration, because if the assessee receives part payment as on the date of transfer and receives part payment after six months then it would lead to an impossible situation by asking assessee to invest money in specified asset before actual receipt of the same.(AY. 2009-10) DCIT v. Kilburn Engineering Ltd. (2017) 163 ITD 522 (Kol.) (Trib.) S. 56: Income from other sources-A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to s. 56(2)(vi). [S. 56(2)(vi)] Dismissing the appeal of the revenue , the Tribunal held that ;A HUF is a "group of relatives". Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as provided in the Explanation to S.. 56(2)(vi) ( ITA no. 1906/Mum/2014, dt. 19.04.2017)(AY. 2010-11) DCIT v. Ateev V. Gala (Mum.)(Trib.),www.itatonline.org S.56: Income from other sources – Gift-Gift was given by donor at time of illness, or it was 'occasioned' while donor was undergoing treatment, would not by itself make it a gift in contemplation of death; same would be assessable. [S. 2(24)(xv), 56 (2)(vii) ] Tribunal held that , just because the Gift was given by donor at time of illness, or it was 'occasioned' while donor was undergoing treatment, would not by itself make it a gift in contemplation of death; same would be assessable ( AY. 2012-13) F.Susai Raju v. ITO (2017) 163 ITD 533 / 184 TTJ 780 (Chennai) (Trib.) S. 56: Income from other sources- Interest on fixed deposits was held to be assessable as income from other sources. [S. 44AD] Dismissing the appeal of the assessee the Tribunal held that; there was no nexus between interest receipts and works contracts executed by assessee, interest on fixed deposits was separately assessable under head 'Income from other sources. ( AY. 2009-10) G. Raja Gopala Rao v. DCIT (2017) 163 ITD 46 (Visakha) (Trib.) S.57 :Income from other sources-Interest on money borrowed for purchase of shares—Interest was held to be deductible. [S.56, 57(iii), IITA, 1922, S. 12(2)] Allowing the appeal the Court held that ; Interest on money borrowed for purchase of shares was held to be deductible. There was no evidence to demonstrate that the shares had been purchased in order to gain control of company. (AY. 1997-1998) Satish Bala Malhotra (Smt.) v. CIT ( 2016) 75 taxmann.com 42 (2017) 391 ITR 256 (P&H)(HC) S.57:Income from other sources-Loan was taken for purchase of shares-Interest and service charges was held to be deductible.[S. 37(1), 56] Dismissing the appeal of the revenue the Court held that; the expenditure clearly was not towards acquisition of the capital nor was it an integral part of it, it was only the service alone. It was of a similar kind that would otherwise have been permitted under section 37 of the Act. Since this expenditure did not pertain to the stream of income covered by section 37 and was not excluded by section 57(iii), it had to be and was correctly allowed. (AY. 1993-1994 to 1996-1997) CIT v. Virat Investment and Mercantile Co. (2017) 392 ITR 202 / 148 DTR 161 (Delhi)(HC)


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S. 64: Clubbing of income-Salary paid to spouse-Finding that spouse did not possess any technical qualification, salary was includible in total income of assessee. [S.64(1)] Dismissing the appeal of the assessee, the Court held that; the contention of the assessee was that the assessee had the imparted secret formula of his medicine to his wife. In other words, apart from imparting the secret formula to his wife, even the assessee did not have a case that the wife was earning her salary on account of her technical or professional knowledge or experience. In such a case, the payment made by the assessee to his wife would not qualify for the benefit of proviso to section 64(1)(ii) of the Act. Addition of the amount paid as salary to the spouse in the total income of the assessee was justified. ( AY. 2004-2005 ) S. Gopalkrishnan v. CIT (2017) 390 ITR 518 / 77 taxmann.com 97 (Ker.)(HC) S.68:Cash credits-Peak credit-Unexplained entry in bank statement-Claim for benefit of peak credit-Implication after application of section 68 to opening balance of assessee vis-a-vis further transactions-Matter remanded. Allowing the petition the Court held that; the factual foundation for applying the theory of peak credit was not laid by the assessee. The assessee might have impliedly done so, but expressly no such attempt was discernible. The plea was not raised before the Assessing Officer. The Appellate Tribunal had proceeded solely on the basis of the judgment in the case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC)which was not concerned with an identical set of facts as in the case of the assessee. What would be the implication after application of section 68 of the Income-tax Act, 1961 to the opening balance of the assessee vis-a-vis the further transactions was a question of fact which had to be considered. Entitlement of assessee to benefit of peak credit theory was to be decided by the Appellate Tribunal on the basis of evidence, which might be adduced by the assessee.Matter remanded. Piyush Poddar v. CIT (2017) 393 ITR 381 (Cal.)(HC) S. 68: Cash credits-Gift from brother–Capacity of the brother to give gift was not established–Addition was held to be justified. Dismissing the appeal of the assessee, the Tribunal held that, the though the money was transferred to him through banking channel from account of his brother from Dubai, the assessee has not established the capacity of the brother to give gift the amount, hence the addition was held to be justified.(AY. 2009-10) Sunil Thomas v. ITO (2017) 294 CTR 129 (Ker.)(HC) S. 68: Cash credits-Failure by assessee to prove three essential requirements i.e.,identity of creditor, genuineness of transactions and credit worthiness of creditor, addition was held to be justified. Allowing the appeal of revenue , the Court held that ,the Failure by assessee to prove three essential requirements i.e.,identity of creditor, genuineness of transactions and credit worthiness of creditor, addition was held to be justified. CIT v. Universal Empire Educational Society (2017) 393 ITR 502/80 taxmann.com 44 (Ker.)(HC) S.68: Cash credits—Partner-Ability of partner to contribute amount in cash to assessee not substantiated by supporting documents, liable to tax in hands of assesse. Dismissing the appeals the Court held that, mere explanation was not sufficient to discharge the onus of the assessee under section 68 of the Act. The explanation must also be supported by documents in respect of its genuineness. Since the stand taken was that the cash had been derived from the sale of agricultural land, the sale deed with regard to the sale was called for by the Assessing Officer and the assessee had failed to produce it or any other cogent document or evidence to satisfy the Assessing Officer that its partner was in a position to contribute such an


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amount in cash to the assessee. The amount involved as capital contribution could be added as unexplained income of the assessee in terms of section 68 of the Act. (AY. 2004-2005, 2005-2006) R.A. Himmatsinghka and Co. v. ACIT (2017) 392 ITR 587 (Patna)(HC) S.68: Cash credits- Share capital-Merely on the basis of report of investigating wing additions cannot be made. Dismissing the appeal of the revenue, the Court held that; Fact that the investigation wing’s report alleged that the assessee was beneficiary to bogus transactions and that the identity of shareholders, genuineness etc was suspect is not sufficient. The AO is bound to conduct scrutiny of documents produced by the assessee and cannot rest content by placing reliance on the report of the investigation wing. (ITA 169/2017, C.M. APPL.7385/2017, dt. 14.03.2017)( AY. 2002-03) CIT v. Laxman Industrial Resources Pvt. Ltd. (Delhi)(HC),www.itatonline.org S.68: Cash credits-Subscriptions of share premium done through banks and recorded in books of account-Genuine, identity of subscribers and capacity of subscribers proved- Addition was held to be not justified . Dismissing the appeal of the revenue, the Court held that the assesse has proved ,genuine, identity of subscribers and capacity of subscribers hence addition was held to be not justified .(AY .2011-2012 ) CIT v. Green Infra Ltd. (2017) 392 ITR 7/292 CTR 233/146 DTR 262/ 78 taxmann.com 340 (Bom.)(HC) S. 68: Cash credits-Share application money—Failure by Assessing Officer to conduct adequate and proper inquiry into materials, no addition can be made. [S. 147, 148, 151] Dismissing the appeal of the revenue, the Court held that; assessee furnishing documents to evidence genuineness of transactions and identity and creditworthiness of parties. Failure by Assessing Officer to conduct adequate and proper inquiry into materials while invoking section 68, no addition can be made. (AY. 2001-2002 ) CIT v. N.C. Cables Ltd (2017) 391 ITR 11 (Delhi) (HC) S.68: Cash credits-Bogus share capital/ premium-The proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. if the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit. Dismissing the appeal of the Revenue, the Court held that;The proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. if the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit . The Court relied on CIT v.. Lovely Exports (P)Ltd. 317 ITR 218 (SC).( ITA No. 1613 of 2017, dt. 20.03.2017)( AY.2008-09) CIT v. Gagandeep Infrastructure Pvt. Ltd. (Bom)(HC) : www.itatonline.org S.68: Cash credits–Share capital-Entries made in pay–in–slips cannot prevail over entry in books of account, addition cannot be made as income from undisclosed sources. Dismissing the appeal of the revenue the Court held that; the conclusion drawn by the Assessing Officer that the amount received was compensation and the amount was undisclosed income of the assessee could not be sustained since the treatment of the receipts in the books of account of


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the assessee should prevail being maintained in the usual course of business. There was nothing on record to establish that the entries made in the books of account could not be relied upon. No material was brought on record indicating that the amount received by the assessee was by way of compensation. The cross examination of the assessee in respect of the entries made in the pay-in slips revealed that the narrations in the pay-in slips of the two cheques were made by them on their own without any directions or instructions from the assessee. The entries made in the pay-in slips could not prevail over the entries in the books of account since the books of account would reflect the appropriate record wherein treatment of receipts would be found. The statements recorded of the managing director of the assessee were not reliable. The Appellate Tribunal was justified in holding that the amount could not be assessed as undisclosed income. CIT v. Likproof India P. Ltd. (2017) 390 ITR 377 / 291 CTR 493/ 245 Taxman 76/ 145 DTR 321 (Bom.)(HC) S. 68: Cash credits- Statement recorded under duress, which is retracted later, cannot be the sole basis for addition- When the assesse has given explanation of source addition cannot be made only on the ground that lender has raised bogus share capital . Allowing the appeal of the assessee the Tribunal held that; If the assessee has explained the source of the loans received by it, the fact that the lender may have raised bogus share capital to advance the funds to the assessee does not mean that the loan received by the assessee can be treated as unexplained income. A statement recorded under duress, which is retracted later, cannot be the sole basis for addition.(ITA No. 369/Mum/2017, dt. 13.04.2017) ( AY. 2013-14 ) Anil Chhaganlal Jain v. ACIT (Mum.)(Trib.),www.itatonline.org Anil Chhaganlal Jain (HUF) v. ACIT (Mum.)(Trib.) ,www.itatonline.org S. 68: Cash credits-Share capital-Assessee is not required to prove the source of the source.[S.153A ] Allowing the appeal of the assessee the Tribunal held that; (i) The AO cannot ignore the documentation produced by the assessee to show that the investors are genuine, (ii) A s. 132(4) statement cannot be relied upon if the assessee is not give right of cross-examination, (iii) Fact that the shareholders did not respond to s. 133(6) notices does not warrant an adverse inference, (iv) Fact that the shareholders have low income does not warrant adverse inference, (v) Assessee is not required to prove source of source. ( I.T.A .No.-2523 to 2525/Del/2015, dt. 17.04.2017)(AY. 2011-12) Prabhatam Investment Pvt. Ltd. v. ACIT (Delhi)(Trib.) ,www.itatonline.org Prabhatam Buildtech Ltd. v. ACIT (Delhi)(Trib.),www.itatonline.org S.68: Cash credits–Gift-Identity and capacity of the donor was established–Addition was deleted- Source of the source need not be proved. Allowing the appeal of the assessee, the Tribunal held that; assessee had discharged the onus of proving identity of donor, capacity of donor as also genuineness of transaction, addition could not be made by asking assessee to file their income tax return and bank statement, revenue was verifying source of source which could not be done. (AY.2010-11) Nirmal Rani v. DCIT (2017) 163 ITD 491 (Chd.) (Trib.) S. 68 : Cash credits-Sundry creditors cannot be assessed as cash credits when the corresponding purchases from them were admitted and payments to some sundry creditors continuing from earlier years were accepted by AO as genuine payments. [S. 41(1),133] The AO issued notice to sundry creditors which could not be served on them. AO held them as non-existing bogus sundry creditors and made addition to assessee's income as cash credits . On appeal CIT(A) held that ,additions cannot be made either u/s 41(1) or u/s 68 of the Act. On appeal by the revenue , the Tribunal held that ; ITAT held that when corresponding purchases were admitted and payments made to many sundry creditors continuing from earlier years and same


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were accepted by AO which means genuinity of payments to these creditors are proved hence additions cannot be made as cash credits . (AY. 2010 – 2011) ITO v. Standard Leather (P.) Ltd. (2017) 162 ITD 285 (Kol.)(Trib.) S. 68: Cash credits-Share capital-Identity, genuineness of subscriber was established, addition cannot be made-AO is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and veracity of the repudiation- Addition cannot be made without giving an opportunity of cross examination. [S. 131]. Allowing the appeal of the assessee the Tribunal held that; when identity, genuineness of subscriber was established, addition cannot be made-AO is duty bound to investigate the creditworthiness of the creditor/subscriber, the genuineness of the transaction and veracity of the repudiation. Addition cannot be made without giving an opportunity of cross examination. Andaman Timber Industries v. CCE 281 CTR 241 (SC) and Hon’ble jurisdictional High Court in HR Mehta vs ACIT 387 ITR 561 (Bom.)(HC) (ITA No. 6492/Mum/2016, dt. 21.04.2017)(AY. 2007-08) Arceli realty limited v. ITO (Mum.)(Trib.),www.itatonline.org S. 68: Cash credits-"On Money" received by an assessee for sale of agricultural land has to be treated as "agricultural income" and exempted from tax if the facts show that the assessee has no other source for the receipt. [S.2(14), 56] Dismissing the appeal of the revenue , the Tribunal held that ; the assessee is an aged person, who had settled down in his native place. He was engaged in agricultural activities on his retirement and there is nothing on record to suggest that the assessee alongwith his wife were in a position to generate unaccounted income of Rs.39 lakhs other than on-money on account of sale of agricultural land. The payment of on-money is an unfortunate practice in most part of our country, and none can deny this factual situation. It is the case of the assessee that the buyers were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside. I also place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO v. Dr. Koshy George wherein ( 2009) 317 ITR (AT) 116 (Cochin) (Trib), was held by the Tribunal that any surplus money arising to an assessee on sale of agricultural land would partake the character of agricultural income itself.(AY. 2013-14) ITO v. Abraham Varghese Charuvil(2017) 151 DTR 209 (Cochin)(Trib.) S. 68: Cash credits-Even if the premium at which the shares are issued defies commercial prudence, the receipt cannot be assessed as "unexplained credit" if the identity of the payer, genuineness of the transaction and capacity of the subscriber are not disputed. Dismissing the appeal of revenue the Court held that , even if the premium at which the shares are issued defies commercial prudence, the receipt cannot be assessed as "unexplained credit" if the identity of the payer, genuineness of the transaction and capacity of the subscriber are not disputed. The Revenue has not been able to show in any manner the factual finding recorded by the Tribunal is perverse in any manner. (AY. 2011-12 ) CIT v. Green Infra Limited (2017) 292 CTR 233/ 146 DTR 262 (Bom.)(HC) S. 68:Cash credits-Bogus capital gains-A transaction cannot be treated as fraudulent if the assessee has furnished documentary proof and proved the identity of the purchasers and no discrepancy is found-The AO has to exercise his powers u/s. 131 & 133(6) to verify the genuineness of the claim and cannot proceed on surmises. [S. 131, 133(6)] Dismissing the appeal of the revenue, the Court held that;The assessee has adduced the documentary evidences in support of the transaction in question. The identity of the purchasers of


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the shares was established as it was borne on the record of the Income Tax Department. The purchasers have PAN card as well. Turning to the shares which were sold by the appellant as per its version, there is no evidence or material to even suggest, as pointed out as on behalf of the assessee, that the cheques directly or indirectly emanated from the assessee so that it could be said that the assessee’s own money was brought back in the guise of sale proceeds of the shares. Though, the purchasers of the shares could not be examined by the AO, since they were existing on the file of the Income Tax Department and their Income Tax details were made available to the AO, it was equally the duty of the AO to have taken steps to verify their assessment records and if necessary to also have them examined by the respective AOs having jurisdiction over them which has not been done by him. ( ITA No. 43/2016 & 44/2016, dt. 18.01.2017)( AY. 2003-04) PCIT v. Jatin Investment Pvt. Ltd. (Delhi)(HC); www.itatonline.org S. 68: Cash credits-Penny stocks-A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a bogus transaction. [S.45] Allowing the appeal of the assessee; the Tribunal held that ; if the AO relies upon the statement of a third party to make the addition, he is duty bound to provide a copy of the statement to the assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment proceedings. A transaction evidenced by payment/receipt of share transaction value through banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a bogus transaction so as to attract s. 68.( ITA No. 6494/Mum/2014, dt. 02.01.2017)(AY. 2005-06) Sunil Prakash v. ACIT (Mum.)(Trib.);www.itatonline.org S.68:Cash credits-Advances received from customers towards supply of products later adjusted against subsequent sales cannot be assessed as cash credits. Advances received from customers towards supply of products later adjusted against subsequent sales cannot be assessed as cash credits. Assessee cannot force its customers to furnish their permanent account numbers. In case advances not adjusted against subsequent sales assessee should be provided with an opportunity to explain reasons .The Assessing Officer was directed to decide in accordance with law. (AYs.2005-2006, 2006-2007, 2008-2009) ACIT v. Dow Agro sciences India Private Limited (2017) 53 ITR 590 (Mum.)(Trib.) S. 68 : Cash credits–Gift by parents–Addition was deleted. Allowing the appeal the Tribunal held that the , the assessee is owning the agricultural land hence creditworthiness of donor to give gift cannot be completely ignored therefore declaration of gift by mother cannot be treated as non-genuine. (AY.2009-2010) Anandasayanam P. Pillai v.CIT (2017)54 ITR 607 (Mum.)(Trib.) S. 68 : Cash credits–Genuineness of gift cannot be disbelieved simply because there was no occasion to make gift . The Tribunal held that the gift falls within the exception clause under section 56(2)(v) as the assessee has filed his bank statement reflecting the amount gifted to him by his co-brother, joint IT return of the donor and his wife and the affidavit of the donor confirming the gift duly notarized in USA, the genuineness of the gift cannot be disbelieved simply on the ground that there was no occasion to make the gift. The Tribunal deleted the addition. (A.Y. 2005-06) Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.)(Trib.) S.69:Unexplained investments – Survey- Merely on the basis of stock found in the premises additions cannot be made as undisclosed stock when proper explanation was furnished with supporting evidence.[S. 133A]


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In the course of survey stock was found in the premises, the explanation was furnished stating that ,manufacturer keeping materials in possession of assessee by virtue of agreement between manufacturer, assessee and contractors till dues payable to manufacturer cleared by contractors. Assessee gaining commission which would compensate providing storage facilities to contractors and enhance business prospects of assessee. Assessee and his brother conducting business in same premises. Ownership of such property vested in assessee's brother therefore addition cannot be made as undisclosed stock of assessee. (AY.2010-2011) Niranjan Kumar Agrawal v. ITO (2017) 53 ITR 643 (Patna)(Trib.) S.69:Unexplained investments- Unexplained deposits in bank, addition was held to be justified. Dismissing the appeal of the assessee, the Court held that; failure by assessee to prove creditworthiness and genuineness of transaction and identity of depositors,addition made on ground of unexplained deposits justified. Pure question of facts. (AY. 2009-2010) Swarn Singh v. CIT (2017) 391 ITR 135 (P&H)( HC) S. 69: :Unexplained investments- Bogus purchases-Burden is on revenue to prove that the transaction is of benami nature, addition was deleted.[S.132] Allowing the appeal of the assesse the Tribunal held that, the Assessing Officer merely rejecting explanation of assessee without bringing any evidence on record to support case of benami nature of transaction. The concerns assessed separately to income-tax therefore the investment made in concerns not proved to have been made by assessee.( AY. 2004-05 to 2008-09) Ashok Nanda v.DCIT (2017) 54 ITR 54 (Indore)(Trib.) S. 69A: Unexplained money-Cash deposits in bank-No documentary proof in respect of credit purchases linking sales-Addition was held to be justified.[S. 44AF, 147] Dismissing the appeal of the assessee the Court held that the assessee has not produced any documentary proof in respect of credit purchases linking sale hence addition as unexplained money in respect of cash deposited in banks was held to be justified . (AY .2008-2009 ) Naresh Kumar v. CIT (2017) 393 ITR 389 (P&H) (HC) S. 69A :Unexplained money- Recurring deposit in joint names of assessee and his wife—Addition of amount and interest was not justified. Allowing the appeal of the assessee the Tribunal held that; the assessee's wife having taxable income more than investment in deposits and assessee had sufficient source of income for deposits, therefore addition of amount and interest thereon unsustainable. (AY.2009-2010) Anandasayanam P. Pillai v.CIT (2017)54 ITR 607 (Mum.)(Trib.) S.69B:Amounts of investments not fully disclosed in books of account-Difference between stock statement furnished to bank for availing higher credit facilities and that in books of account—Deletion of addition was held to be justified. Dismissing the appeals of the revenue, the Court held that;the Appellate Tribunal was right in deleting the addition made on account of the difference in stock statement as furnished to the bank for availing higher credit facility as compared to that shown in the books of account by the assessee. (AY .2002-2003, 2003-2004) CIT v. Patel Proteins (P) Ltd. (2017) 393 ITR 274 (Guj.)( HC) Editorial: SLP is granted to the revenue,CIT v. Patel Proteins (P) Ltd. (2017) 391 ITR 345 (St.) S. 69C: Unexplained expenditure-An admission of the assessee which is retracted cannot be the basis of addition- The addition cannot be sustained in the absence of material which


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would conclusively show that huge amounts revealed from the seized documents are transferred from one side to another. [S.132(4), 153C] Dismissing the appeal of the revenue, the Court held that; the addition cannot be sustained in the absence of material which would conclusively show that huge amounts revealed from the seized documents are transferred from one side to another and if the Revenue did not bring on record a single statement of the vendors of the land in different villages and if none of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. ( ITA No. 72 of 2017, dt. 23.06.2017)( AY. 2009-10) CIT v. Lavanya Land Pvt. Ltd. (Bom.)(HC) , www.itatonline.org CIT v. Krishna Land Realty Pvt. Ltd. (Bom.)(HC), www.itatonline.org CIT v. Arpit Land Pvt. Ltd.(Bom.)(HC), www.itatonline.org CIT v. Ganaraya Land Pvt. Ltd.(Bom.)(HC), www.itatonline.org CIT v. Hita Land Pvt. Ltd.(Bom.)(HC), www.itatonline.org CIT v. Dilp V.Derai (Bom.)(HC), www.itatonline.org S.69C: Unexplained expenditure-Bogus purchases-Matter was set aside to the Assessing Officer to decide considering the facts of the case – Counsel for both sides have agreed for set aside of the matter. The High Court had to consider whether the Tribunal was justified in deleting the addition made by the AO with regard to bogus purchases allegedly made by the assessee. HELD by the High Court allowing the appeal: (i) Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs. Commissioner of Income Tax, Special Leave to Appeal decided on 06.04.2015 whereby the Supreme Court has dismissed the SLP and confirmed the order dated 09.12.2014 passed by the Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K. Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are bound by the principle of law pronounced in the aforesaid three judgments. (ii) We remit back the case to the Assessing Officer for deciding afresh on the factual matrix. The authority will accept the law but the transaction whether it is genuine or not will be verified by the Assessing Officer on the basis of the aforesaid three judgments. The issues are answered accordingly. The appeal is accordingly disposed of.( ITA no. 170/2009, dt. 10.05.2017) CIT v. Carpet Mahal (Raj.)(HC),www.itatonline.org S.69C:Unexplained expenditure—Bogus purchases-No quantity details maintained-Failure to produce sellers-Addition was held to be justified. Allowing the appeal of the revenue, the Court held that; the findings of the Appellate Tribunal were perverse. The purchases were bogus and all paper transactions were for the purpose of taking benefit of export and tax benefits by the assessee. Mere vouchers of the import and export challans of the customs clearance would not prove physical delivery of the material. There was nothing on record to certify that the precious stones were verified by any valuer. The Commissioner (Appeals) had confirmed the finding of the Assessing Officer and the supplier had specifically contended that they were not transfer by them and were absconding. The Appellate Tribunal had given its finding only on the statement of the power of attorney holder of the supplier. The finding which had been arrived at by the Appellate Tribunal was not in consonance with the provisions of law and therefore, was reversed. CIT v. Bright Future Gems (2017) 392 ITR 580 (Raj)(HC) S. 69C: Unexplained expenditure - Bogus purchases- Addition was restricted to 2 % of purchases.


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Allowing the appeal of the assessee, the Tribunal held that;(i) The AO is not entitled to treat the purchases as bogus merely on the basis of information from the sales-tax dept. He has to make independent inquiry, (ii) Fact that the vendors did not respond to s. 133(6) notices & the assessee did not produce them is not sufficient if the documentation is in order and payments are through banking channels. The addition made by estimating further profit of 12.5% earned by the assessee is not sustainable in law and facts. Keeping in view the totality of facts and circumstances of the case, we are inclined to restrict the addition to the extent of 2% of such purchases. We direct accordingly.( ITA No. 3699/Mum/2016,dt. 05.05.2017)(AY. 2009-10) Geolife Organics v. ACIT (Mum.)(Trib.),www.itatonline.org Vikram N.Chandan v. ACIT (Mum.)(Trib.),www.itatonline.org Jabarsingh B.Daiya v.ACIT (Mum.)(Trib.),www.itatonline.org Rajendra Nemichandji v.ACIT (Mum.)(Trib.),www.itatonline.org S. 69C : Unexplained expenditure-Bogus purchases, Merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus. Allowing the appeal the Tribunal held that;merely non-appearance of the supplier in absence of any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the transaction of purchase is bogus. In the result the purchases made from M/s Mahaveer Textiles have not been proved to be bogus by the Revenue and the said additions cannot be sustained in the eye of law in absence of any conclusive evidence brought on record.(ITA No. 508/JP/2016,dt. 10.04.2017)(AY. 2007-08) Beauty Tax v. DCIT (Jaipur)(Trib.); www.itatonline.org S.69C : Unexplained expenditure -Bogus purchases- Purchases of paddy recorded and matched with report of Agricultural Marketing Committee (AMC)–No disallowance on ground that failed to maintain proper books of account [ S. 145 ] The AO held that the assessee was not maintained proper gate passes for recording purchases of paddy, accordingly disallowed 5 per cent of purchases. CIT (A) , deleted the addition. On appeal the Tribunal held that; the assessee had reconciled quantity of paddy purchases from the order passed by agricultural marketing committee (AMC) and its books of account and same were matched with AMC reports. Since, revenue failed to controvert finding of facts therefore; addition cannot be sustained as bogus purchase of paddy. (AY. 2009 – 2010) ACIT v. Sri Ramalingeswara Rice & Oil Mill (2017) 162 ITD 696 (Visakha)(Trib.) S. 69C:Unexplained expenditure-Expenditure covered under FBT-Ad–hoc disallowances of 10% expenses was held to be not justified. [S. 145] The AO disallowed 10 per cent expenditure under head freight charges, travelling and conveyance, administrative expenses, vehicle maintenance, repairs & maintenance expenditure on ground that assessee had failed to substantiate those expenses with necessary bills & vouchers. On appeal Tribunal held that expenditure was covered under FBT and AO while assessing the same FBT had been accepted as expenditure as genuine in nature. Once expenditure had been accepted as genuine, then no reason for disallowance of expenses . (AY.2009-10) ACIT v. Sri Ramalingeswara Rice & Oil Mill (2017) 162 ITD 696 (Visakha)(Trib.) S. 69C: Unexplained expenditure-Bogus Purchases-Purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department- Additions cannot be made without giving an opportunity of cross examination. [S.133(6)] Dismissing the appeal of Revenue, the Court held that; purchases cannot be treated as bogus merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-tax department. The said statements cannot be relied upon without cross-examination of the


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parties. The fact that the parties did not respond to the s. 133(6) notices is not relevant if the assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of materials, copies of bank statements to evidence that payments for these purchases were made through normal banking channels, etc to establish genuineness of the aforesaid purchases. Addition cannot be made u/s 69C of the Act.(AY. 2010-11) ACIT v. Mahesh K. Shah (2017) 148 DTR 1(Mum.)(Trib.) S.69C: Unexplained expenditure-Bogus purchases-If the assessee has not discharged the onus of producing the documentation and the suppliers , the AO is entitle to estimate the gross profit.[S. 133(6),145] Tribunal held that ;If the assessee has not discharged the onus of producing the documentation and the suppliers, the AO is entitled to estimate the gross profit. The GP estimate should be fair, honest and rational and cannot be arbitrarily applied at the discretion of the AO. Industry comparisons or other rational comparability vis-à vis preceding years GP ratio should be brought on record. The books should be rejected. On facts, GP ratio of 12.5% as applied in Simit P Sheth 356 ITR 451(Guj) is fair, reasonable and rational after giving credit for the GP already declared.( ITA No. 4463/Mum/2016, dt. 04.04.2017)(AY. 2009-10) Ratnagiri Stainless Pvt. Ltd. v. ITO (Mum.)(Trib.): www.itatonline.org S.69C: Unexplained expenditure-Bogus purchases-Additions to be made to make profit comparable with that of preceding year. Assessing Officer has made entire purchases u/s 69C of the Act In appeal CIT (A) restricted the disallowance at 12.5% of the net profits. Department has accepted the order of CIT(A). On appeal by the assessee, the Tribunal restricted the disallowance of net profit rate of 10.43 per cent. Earned by the assessee in preceding year. (AY. 2010-2011) Arun Shimpi v. ITO (2017) 53 ITR 151 (Mum.)(Trib.) S. 70: Set off of loss- One source against income from another source - Same head of income- Loss arising on sale-purchase of shares on which STT was paid could be set off against gains arising from sale purchase of shares on which STT was not paid [S.111A] Dismissing the appeal of the revenue, the Tribunal held that; Loss arising on sale-purchase of shares on which STT was paid could be set off against gains arising from sale purchase of shares on which STT was not paid. (AY. 2009 -2010) Dy. CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.)(Trib.) S.72: Carry forward and set off of business losses-Long-term capital loss- Assessing Officer to determine entitlement of assessee towards carry forward of loss.[S.45, 154] That the Assessing Officer, according to section 154(8), was under a statutory obligation to have suo motu disposed of the application within a period of six months from the end of the month in which the application was received by him, but had allowed a period of about one and half year to lapse after the date of filing the application under section 154 and failed to dispose of the application of the assessee. Despite a specific direction by the Commissioner (Appeals) to the Assessing Officer on the basis of a circular issued by the Central Board of Direct Taxes, the Assessing Officer had not cared to dispose of the application even till date. The Assessing Officer was to determine the entitlement of the assessee towards carry forward of the long-term capital loss so claimed by it according to law. (AY.2010-2011, 2011-2012) Informed Technologies India Ltd. v. DCIT (2017)54 ITR 397 (Mum.) (Trib.) S. 72A : Carry forward and set off of accumulated loss and unabsorbed depreciation – Amalgamation – Income accrued to amalgamated company u/s 41(1) had to be adjusted and thereafter net loss is allowed to be set off.[S.41(1)]


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Affirming the decision of the High Court, the Court held that; the assessee was allowed to set off the accumulated losses of HPL under the provisions of section 72A of the Act. The effect thereof was that though these losses were suffered by the amalgamated company they were deemed to be treated as losses of the assessee-company by virtue of section 72A of the Act. When the assessee was allowed the benefit of the accumulated losses, while computing those losses, the income which accrued to it had to be adjusted and only thereafter could the net losses have been allowed to be set off by the assessee-company. The assessee could not claim to be entitled to take advantage of the accumulated losses but while calculating these accumulated losses in the hands of the amalgamated company, i.e., HPL, not account for the income accrued under section 41(1) of the Act in the hands of HPL. That had to be necessarily adjusted in order to see what the actual accumulated losses were, the benefit whereof was to be extended to the assessee. ( AY. 1983-1984 ) McDowell and Company Ltd v. CIT (2017) 393 ITR 570/ 247 Taxman 101 (SC) Editorial: Decision in McDowell and Company Ltd v. CIT( Karn)(HC) I.T.R.C NO 12 0f 2002 dt .5 -04-2005 was affirmed . S.73: Losses in speculation business-Loss in share transactions to be treated as speculative loss-Loss cannot get settled as business income with other trading. [S.28(i)] Dismissing the appeal the Court held that ; since the assessee was dealing in purchase and sale of shares, the Explanation to section 73 of the Income-tax Act, 1961 would have a bearing on the issue. Thus, the loss suffered by the assessee in share transactions was to be treated as a speculative loss within the meaning of section 73 of the Act. Ratnamani Seamless P. Ltd. v. ITO (2017) 393 ITR 339 (Guj.)(HC) S. 73 : Losses in speculation business -loss incurred in trading of shares was to be treated as speculation loss. Assessee was engaged in business of property dealing and derived business income from sale of properties. AO treated short term capital loss from trading in shares as speculation loss.Tribunal held that,since gross total income of assessee mainly consisted of income from property business and not income from house property or capital gain and other sources, Assessing Officer was justified in invoking provisions of Explanation to section 73 and treating loss arising out of sale of shares as speculation loss. ( AY. 2008-09, 2010-11 ) DCIT v. Mangal Tirth Estates Ltd.(2017) 163 ITD 705 (Chennai) (Trib.) S. 73 : Losses in speculation business-Future and options – Share transactions entered electronically (screen based) in recognised stock exchanges loss there from would be speculative in nature but could not be termed as sham. [S. 43(5)] Dismissing the appeal of the revenue , the Tribunal held that ; Share transactions entered electronically (screen based) in recognised stock exchanges viz. BSE, NSE, and said transactions were intraday and no delivery of shares had taken place, loss therefrom would be speculative in nature but could not be termed as sham. (AY. 2007-08) ITO v. PKS Holdings (2017) 162 ITD 1/152 DTR 215 (Kol.)(Trib.) S.80G: Donation-No requirement of renewal of registration in case of valid registration on 1-10-2009. [S. 11,263] Court held that; in the case of both the petitioners their registration under section 80G was valid till March 31, 2010. The position was even accepted by the Central Board of Direct Taxes in its circular issued from time to time. Hence the orders of the Commissioner were illegal and invalid. Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/ 245 Taxman 101 (Patna)(HC)


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Shri Mahavir Sthan Nyas Samiti v. UOI(2017) 392 ITR 301 /245 Taxman 101 (Patna) (HC) S.80G: Donation-Surplus funds utilised for setting up new institutions- Eligible for approval[ S. 2(15) 11 ] Dismissing the appeal of the revenue, the Court held that ; the assessee educational institution which had shown surplus for previous three years and utilised them for setting up of two new institutions and no surplus was distributed as profits amongst members of society , assesse was entitle to be granted approval under section 80G of the Act. CIT v. Dr. Virendra Swaroop Educational Foundation. (2017) 391 ITR 386/ 245 Taxman 68 (All) (HC) S.80G:-Donation- Surplus income utilised for charitable purposes--Trust entitled to approval for purposes of section 80G. [S. 10(23C),11, 12AA] Dismissing the appeal of the revenue, the Court held that; it was admitted that the assessee was registered under section 12AA and that it has been held entitled to the grant of exemption under section 10(23C)(vi). The generated surplus having been ploughed back for expansion purposes.The assessee was entitled to approval for purposes of section 80G. (AY. 2010-2011 to 2014-2015) CIT v. Gulab Devi Memorial Hospital (2017) 391 ITR 73/ 245 Taxman 73/ 291 CTR 471 (P&H) (HC) S.80G:Donations for charitable purposes—Contribution to Chief Minister's Relief Fund is held to be deductible. Contribution to Chief Minister's Relief Fund is held to be deductible. (AY.2010-2011) A.P. Beverages Corporation Ltd. v.DCIT (2017) 54 ITR 228 (Hyd.)(Trib.) S.80HH :Newly established industrial undertakings-Back ward areas-Scientific research expenditure-Expenditure on research not to be reduced from profits and gains of eligible undertaking- Job charges- Allowable as deduction.[S.35(1)(iv),80I] Dismissing the appeal of the revenue, the Court held that; The research centre was an independent centre and its main object was to conduct research for the business of the assessee. Therefore, the research centre was not directly linked with the eligible undertaking and for the purpose of computing deduction under sections 80HH and 80-I, the profits are not to be reduced by the deductions under section 35(1)(iv). That the deduction on account of job charges was allowable. (AY.1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC ) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S. 80HHC : Export business-Assess was entitled to reduce interest paid by it from interest received by it, while calculating deduction- Delay of 3381 days in refiling the special leave petition was not condoned. [S.80HHC (4A)] Dismissing the appeal of the revenue, the Court held that assessee was entitled to reduce interest paid by it from interest received by it, while calculating deduction .As regards delay of 3381 days in refiling the special leave petition , the delay was not condoned, however stated that the concerned authorities need to wake up. CIT v. Krishna K. Aggarwal (2017) 245 Taxman 75 (SC) Editorial: Refer, CIT v. Krishna K. Aggarwal (2008) 170 Taxman 23 (Delhi)(HC)


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S. 80HHC : Export business–Amendment Act, 2005 is prospective in operation and would apply to both categories of exporters having turnover below Rs. 10 crores and above Rs. 10 crores. Dismissing the appeal of the Revenue the Court held that; S. 80HHC as amended by Taxation Laws (Second Amendment) Act, 2005 is prospective in operation and the said section would apply to both categories of exporters having turnover below Rs. 10 crores and above Rs. 10 crores. Followed CIT v Avani Exports ( 2015) 232 Taxman 357 (SC) UOI v. Paliwal Overseas (P.) Ltd. (2017) 244 Taxman 195 (SC) S.80HHC: Export business—Computation-Ninety per cent. of net interest or net rent included in profits and not of gross interest or gross rent, to be deducted. [S.80HHC, Cl. 1, Expln. (baa)] Dismissing the appeal of the revenue, the Court held that; Ninety per cent. of the net rent or net interest and not of the gross rent or gross interest, which had been included in the profits of business of the assessee as computed under the head "profits and gains of business or profession" was to be deducted under clause (1) of Explanation (baa) to section 80HHC for computing the profits of the business. (AY.1995-1996) CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.)(HC ) Editorial: SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392 ITR 5 (St.) S.80HHC:Export business-Hundred per cent. export oriented undertaking— Export turnover-Deduction cannot be denied where assessee has availed of exemption under section 10B. [S.10B] Allowing the appeal of the assessee the Court held that; section 80HHC of the Act did not preclude the assessee from availing of the deduction thereunder in the event of the assessee having availed of the benefit of section 10B. Wherever the Legislature intended to exclude the benefit under a provision on account of an assessee having availed of a benefit under another provision, it so provided. The fact that section 10B(4)(iii) did not refer to section 80HHC indicated strongly that the Legislature did not intend to deny an assessee who had availed of the benefit of section 10B the deduction under section 80HHC. The assessee manufactured the goods exported by it and, therefore, clause (a) of sub-section (3) of section 80HHC applied to the assessee's case. The proviso to definition of "total turn over" in Explanation (ba) excluded from the expression "total turnover" sums referred to in section 28(iiia), (iiib) and (iiic) but not section 10B. The definition of the expression total turnover did not warrant the exclusion of any benefit under section 10B. The nature and benefits under section 80HHC and section 10B were also entirely different. Circular dated December 16, 1988 issued by the Central Board of Direct Taxes provided that section 10B was introduced to confer an additional benefit upon the assessee. Section 80HHC defined the terms "export turnover", "total turnover" and "profits of business". None of those definitions excluded the export turnover in respect whereof benefit had been derived under section 10B. The Assessing Officer was to compute the assessee's income accordingly. (AY. 1996-97 ) Mahavir Spinning Mills Ltd. v. CIT (2017) 391 ITR 290 / 151 DTR 303 (P&H)(HC) S.80I: Industrial undertaking-Old machinery used in old unit and depreciation claimed on it in earlier assessment year- Entitled to benefit of deduction on machinery. The assesse was entitle to deduction on the machinery which was put to use by the assesse in its old unit and on which it had claimed depreciation in the earlier assessment year. CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.)( HC)


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S.80I: Industrial undertaking-Forklift truck used in old unit and ready for use in new unit-Not plant and machinery-Assessee not entitled to benefit envisaged under section 80I(2). [S. 80I(2)] That the forklift truck, which was on the trial run in the old unit and was ready for use in the new unit, could not be considered as plant and machinery and the assessee was not entitled to the benefit envisaged under section 80I(2) of the Act. CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.)( HC) S.80IA:Industrial undertaking-Loss in year prior to initial assessment year already absorbed cannot be notionally brought forward and set off against profits of eligible business. Dismissing the appeal of the revenue, the Court held that ,it was not required that the losses which had already been set off against the income of the previous year, should be reworked again for computation of current income under section 80-IA of the Income-tax Act, 1961 for the purpose of computing the admissible deductions there under. The Appellate Tribunal had not erred in following the ratio laid down in the judgment. (AY. 2010-2011 ) PCIT v. GRT Hotels and Resorts P. Ltd. (2017) 392 ITR 440 (Mad)(HC) S. 80IA : Industrial undertakings – Infrastructure development- Developing, operating and maintaining infrastructural facility of toll road would be eligible for deduction, ownership is not required. [S.80IA(4)] Assessee was deriving income from developing, operating and maintaining infrastructural facility of toll road. The assessee claimed deduction u/s 80IA of the Act. The AO denied the claim on ground that assessee was merely executing job of civil construction on basis of works contract awarded by Executive Engineer and he is not a 'owner' of facility and roads constructed were not fall under expressway or highway category. Allowing the claim the Tribunal held that ;S. 80IA(4) refer to ownership of enterprise by a company that carried on business and there was no requirement that assessee should be owner of infrastructure facility to claimed the deduction. When assessee engaged technically and administratively qualified team of persons and shouldered out investment and technical risk in respect of development of infrastructure facility and further where it was liable for liquidated damages, in case it would fail to fulfil obligation laid down in agreement. Just because a contractor and not a developer deduction claimed u/s.80IA (4) cannot be denied. (AY. 2011 – 2012) BMW Industries Ltd. v. DCIT (2017) 162 ITD 650 (Kol.) (Trib.) S.80IA: Industrial undertaking-Generation of electricity for captive consumption- Market value-Assessing Officer to compute such profits and gains on such reasonable basis as he may deem fit by objective satisfaction and not a subjective satisfaction. [S.80IA (8)] For captive consumption, the Assessee computed the market value and recorded in its books of account. Assessee taking rate charged by Electricity Board from customers whereas assessing Officer applying tariffs determined by State Electricity Regulatory Commission. Tribunal held that; assessing Officer to compute such profits and gains on such reasonable basis as he may deem fit, by objective satisfaction and not a subjective satisfaction. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.)(Trib.) S. 80IB: Industrial undertakings-Transport Subsidy is a part of operational profits and therefore assessee entitled to deduction of transport subsidy.


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Dismissing the appeal of revenue the Court held that; the transport subsidy has bearing on the cost of production of the industrial undertaking of the assesse is a part of operational profits and entitle to deduction. (AY.2009-10) PCIT v. Shree Mahabir Foods Ltd. (2017) 146 DTR 189 / 292 CTR 112 (Meghalaya) (HC) S. 80IB:Industrial undertakings- Eligible deduction cannot be treated as inflated merely because there are common customers-Matter was set aside to Tribunal. [S.80IB(8), 80(IB)(13) ] Allowing the appeal, the Court held that; The profits of an undertaking eligible for deduction cannot be treated as "inflated" in the absence of material on record to show that there is an arrangement between the eligible unit and the non-eligible unit to generate more than ordinary profits for the eligible unit. The mere fact that there are common customers of both the units does not by itself indicate transfer of profits to the eligible unit. Matter was set aside to Tribunal to decide according to law. (AY. 2009-10) Malay N. Sanghvi v. ITO(2017) 391 ITR 382 (Bom.)(HC) S.80IB(10): Housing projects—Interest income is not derived from the and part of business income hence not eligible deduction – In respect of eligible business the assesse is entitle to prorate deduction. Tribunal held that the assesse has not demonstrating receipt of interest income derived from and part of business receipts to claim de, hence not eligible deduction. As regards eligible income the assesse is entitled to pro rata deduction on each of projects. (AY-2010-2011) Bramha Corporation Ltd. v.ITO (2017)54 ITR 465 (Pune)(Trib.) S. 80IB(10):Housing projects-Interest income was held to be not entitle to deduction - Entitled to pro rata deduction on each of projects. Dismissing the assessee's appeal, that the Tribunal for the earlier years had held that the assessee was unable to demonstrate that the interest was derived from and was part of business receipts in order to enable it to claim deduction under section 80-IB(10).Dismissing the Department's appeal, that the assessee pointed out that identical grounds of appeal were raised in the assessment year 2008-09 and the Tribunal had directed the Assessing Officer to allow pro rata deduction under section 80-IB(10). (AY.2010-2011) ITO v. Bramha Corporation Ltd. (2017) 54 ITR 465 (Pune)(Trib.) S.80IB(10) :Housing projects-Project was approved by Slum Rehabilitation Authority before 1-4-2004-Not eligible for deduction-Proviso introduced by Finance Act, 2004 is not retrospective. Dismissing the appeal of the assessee, the Tribunal held that, the Housing project (Slum Rehabilitation) project was approved prior to 1-4-2004 by slum Rehabilitation Authority, the claim of deduction u/s.80IB(10) was not eligible as proviso introduced by Finance Act, 2004 clearly grants relief to slum redevelopment or reconstruction projects which approved by Board and Board Notification clarifies that benefit available to projects approved on or after 1-4-2004, and before 31-3-2008 therefore claim of 80IB(10) is not eligible to assessee. (AYs. 2006-07, 2007-08) Bhavya Construction v. ACIT (2017) 162 ITD 352 (Mum.)(Trib.) S.80IB(10) :Hosing projects-Additional evidences had a material bearing; the AO has to decide issue afresh. [S. 254(1)] The AO denied benefit of s. 80IB(10) on ground that area of each unit was more than 1000 sq.ft.. Tribunal held that when certificate issued by the Municipal Corporation stating that none of units


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was having area more than 1000 sq.ft. and the same was filed as additional evidences, AO was directed to decide the issue giving an opportunity of hearing . (AY. 2008-09) DCIT v. Siroya Developers (2017) 162 ITD 718 (Mum)(Trib.) S. 80IB(10) :Housing projects –Deduction can be allowed only return of income filed on or before the due date of filling return. [S.80AC, 139(1)] Tribunal held that the assessee has filed return belated to avail the benefit of deduction u/s. 80IB(10) , the assessee has to file return within due date as prescribed u/s. 139(1), read with section 80AC of the Act . (AY. 2009-2010) DCIT v. Siroya Developers. (2017) 162 ITD 718 (Mum.)(Trib.) S. 80IC : Special category States-Production of electric bikes by assembling imported parts amounts to manufacture and entitle to deduction. The Tribunal held that activity of assembling the parts by the assessee amounted to manufacture and, therefore, the assessee is entitled to deduction under section 80IC. (AY. 2008-09) ACIT v. Accura Bikes (P.) Ltd. (2017) 183 TTJ 547 (SMC) (Ahd.)(Trib.) S. 80JJAA : Employment of new workmen –If some work men were employed for a period less than 300 days in the previous year then no deduction is allowable and such workmen is not a causal work men or workmen employed through contact labour . The Tribunal held that if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wages to such workmen because the deduction is allowable for three years including the year in which the employment is provided, and such workmen is not a causal work men or workmen employed through contact labour (AY. 2005-06 & 2006-07) Bosch Ltd. v. ACIT (2017) 183 TTJ 215/ 150 DTR 345 (Bang.)(Trib.) S.80P: Co-operative societies--Society providing credit facilities to members-Benefit of exemption cannot be denied.[S. 80P(2)(a)(i)]. Dismissing the appeal of the revenue , the Court held that; that the appellate authorities had clearly perceived that the assessee was not a co-operative bank and that the activities of the assessee were not in the nature of accepting deposits, advancing loans, etc., but was confined to its members only and that too in a particular geographical area. Exemption under section 80P(2)(a)(i) could not be denied on the ground that the members of the assessee society were not entitled to receive any dividend or have any voting right or right to participate in the general administration or to attend any meeting etc., because they were admitted as associate members for availing of loans only and were also charged a higher rate of interest. The assessee society was entitled to deduction under section 80P(2)(a)(i) of the Act. CIT v. S-1308 Ammapet Primary Agricultural Co-op. Bank Ltd. (2017) 392 ITR 55 (Mad.)(HC) S.80P:Co-operative societies -Co-operative society includes co-operative bank-Interest earned from deposits in co-operative bank is deductible. [S. 80P(2)(d),Banking Regulations Act, 1949 S. 56(i)(ccv) ] Dismissing the appeal of the revenue the Court held that;Co-operative society includes co-operative bank. Interest earned from deposits in co-operative bank is deductible. Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary co-operative society/ bank as the meaning of co-operative society. Therefore, a co-operative society/ bank would be included in the words "co-operative society". Therefore under section 80P(2)(d) of the Income-tax Act, 1961 the amount of interest earned from a co-operative society/ bank would be deductible.


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PCIT v. Totagars Co-op. Sale Society (2017) 392 ITR 74 / 78 taxmann.com 169 (Karn.)(HC) S. 80P : Co-operative societies–Interest received from members - Providing credit facilities to only members hence not co –operative Bank eligible deduction. [80P(2)(a)(i)] Dismissing the appeal of the Revenue, the Court held that ; a co-operative credit society providing credit facilities to its members alone, and not to general public at large, hence the assessee would not be covered by description of term 'co-operative bank' and, thus, would be entitled to seek deduction under section 80P(2)(a)(i). CIT v. Nilgiris Co-operative Marketing Society Ltd. (2017) 244 Taxman 256/ 148 DTR 173 / 293 CTR 367 (Mad.)(HC) S. 80P: Co-operative societies-Where an employee co–operative society earned income from investments in banks and other financial institutions, same was not eligible for deduction- Matter remanded. [Multi –State Co –operative Societies Act, 2002,S. 63, 64] The assessee was a co-operative credit society granting credit facility to its members. For the assessment years 2003-04 and 2004-05, the Assessing Officer disallowed its claim to special deduction under sub-section (2) of section 80P of the Act on the sum of interest received on account of its investments of surplus funds and the disallowance was affirmed by the Commissioner (Appeals). The Appellate Tribunal reversed the order and held that the assessee was entitled to deduction of interest income. On appeal: Held, that the Assessing Officer was to calculate the interest earned by the assessee under sections 63 and 64 of the Multi-State Co-operative Societies Act, 2002 and to allow the benefit under section 80P. The interest paid to the members to the extent for the purpose of earning the sums on account of interest from investments was to be ascertained. Such interest was to be deducted from the expenses of eligible business. Consequently the increased amount of profits of eligible business was to be the amount of deduction available to the assessee under section 80P.Matter remanded.Income from investments in banks and other financial institutions, same was not eligible for deduction. (AY. 2003-2004, 2004-2005) CIT v. South Eastern Railway Employees Co-op Credit Society Ltd. (2016) 73 taxmann.com 123/(2017) 390 ITR 524 (Cal.) (HC) S.80P:Co-operative societies -Co-operative federation-Entitled to deduction [S. 80P(2)(a)(vi)] Dismissing the appeal, of revenue the following the order of earlier year the assesse was held to be entitle to deduction. (.AY.2010-2011) ITO v. Nashik District Labour Societies Co-operative Federation. (2017) 54 ITR 253 (Pune)(Trib.) S. 90: Double taxation relief–Dividend income from an Omani Company on which it was not liable to pay any tax in Oman by virtue of exemption granted as per Omani Tax laws, purpose of exemption being to promote economic developments, assessee would be entitled to tax credit in respect of such deemed dividend tax foregone by Oman- DTAA-India –Oman. [S.9(1)(i), 263 ,Art. 25 ] Dismissing the appeal of the revenue, the Court held that;assessee society received dividend income from an Omani Company on which it was not liable to pay any tax in Oman by virtue of exemption granted as per Omani Tax laws, purpose of exemption being to promote economic developments, assessee would be entitled to tax credit in respect of such deemed dividend tax foregone by Oman. Revision was held to be not valid . (AY. 2010-11, 2011-12 ) PCIT v.Krishak Bharati Co-operative Ltd. (2017) 80 taxmann.com 326 / 151 DTR 13 (Delhi) (HC)


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Editorial: Order of Tribunal in, Krishak Bharati Cooperative Ltd. v.ACIT (2016) 158 ITD 777 (Delhi) (Trib.) is affirmed. S.90: Double taxation relief-Loan to subsidiary at Cyprus-Interest income at 10% -DTAA-India Cyprus. [Art. 25(4)] Assessee entitled to tax relief at ten per cent. Assessing Officer to verify whether assessee paid tax on interest in India and if so to allow deduction of tax admitted to have been paid. (AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.) S. 90 :Double taxation relief-where assessee-company receives certain amount from AEs after deduction of tax at source, tax credit has to be allowed to it only to extent corresponding income suffers tax in India. Where assessee-company receives certain amount from AEs after deduction of tax at source, tax credit has to be allowed to it only to extent corresponding income suffers tax in India and it is not correct approach to take into account gross receipts for purpose of computing admissible tax credit. (AY. 2009-10) Elitecore Technologies (P) Ltd. v. Dy. CIT (2017) 146 DTR 77 / 184 TTJ 166 (Ahd.)(Trib.) S. 92A: Transfer Pricing-"associated enterprise"-The mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises "associated enterprises" so as to subject their transactions to the rigors of transfer pricing law.[S. 40A(2)(b), 92CA] Dismissing the appeal of revenue; the Tribunal held that ; The mere fact that an enterprise has de facto participation in the capital, management or control over the other enterprise does not make the two enterprises "associated enterprises" so as to subject their transactions to the rigors of transfer pricing law. Accordingly the Tribunal held that; as these enterprises are not associated enterprises, the ALP adjustments in respect of the transactions between these enterprises were wholly unwarranted. For this short reason, and without going any further into the matter, we approve the impugned deletion of ALP adjustment. The plea of the assessee, in cross objection, is upheld and, for that reason, grievance of the Assessing Officer, in appeal, is dismissed as infructuous. (AY. 2008-09) ACIT v. Veer Gems ( 2017 ) 146 DTR 1 (Ahd.)(Trib.) S. 92A: Transfer Pricing-Associated Enterprises- Even if the conditions of S. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled.[S.92C] Allowing the appeal of assessee the Tribunal held that ; the fact that an enterprise can “influence prices and other conditions relating to sale” does not make it an “associated enterprise” of the assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee and thus does not fulfill the basic rule u/s 92A(1). S. 92A(2)(i) has to be read with s. 92(A)(1). Even if the conditions of s. 92A(2)(i) are fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of s. 92A(1) are not fulfilled. There is an inadvertent omission , with respect to threshold application of Section 92A(2)(i), whether in terms of a percentage of such sales or otherwise , in the statute .It is the apparent omission which is resulting in wholly avoidable litigation on the applicability of section 92(A)(2) ( ITA No. 771/CHNY/2016, dt. 30.11.2016)(AY. 2011-12) Orchid Pharma Limited v. DCIT (Chennai)(Trib.);www.itatonline.org S. 92A : Transfer pricing-Associated enterprises-In cases of public sector companies, even all or majority of shareholdings may be kept by Union or State Governments, these


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companies, for that reason alone, cannot be said to be associated enterprises for purposes of section 92A. [S.92C] Dismissing the appeal of the assessee the Tribunal held that; in cases of public sector companies, even all or majority of shareholdings may be kept by Union or State Governments, these companies, for that reason alone, cannot be said to be associated enterprises for purposes of section 92A. ( AY.2009-10) DCIT v. Hazira LNG (P.) Ltd. (2017) 163 ITD 223 / 184 TTJ 440 / 147 DTR 1 (Ahd.)(Trib.) S. 92A : Transfer pricing-Associated enterprises-Assessee being a partnership concern could not be said to be controlled by an 'individual' hence, clause (j) of s.92A(2) has no application in the present case. [S.92C] A partnership concern cannot be said to be controlled by an 'individual' and, hence, as per section 92A(2)(j), cannot be an AE of another enterprise run by relative of partners even though it may have a de facto participation in capital, management or control of other enterprise. (AY. 2008-09) ACIT v. Veer Gems (2017) 146 DTR 1 (Ahd.)(Trib.) S.92B: Transfer pricing-International transactions- Advertisement, marketing and promotion expenditure-Whether outbound business constituted international transaction for which arm's length price to be determined-Matter remitted to Appellate Tribunal. [S.92C]. Court remanded the matter to the Tribunal to decide whether reporting of AMP expenditure in regard to outbound business constituted an international transaction for which ALP determination was necessary .(AYs.2009-2010, 2010-2011 ) Le Passage to India Tour and Travels (P) Ltd v. Dy. CIT (2017) 391 ITR 207/ 245 Taxman 129/292 CTR 241/ 147 DTR 57 (Delhi)(HC) S. 92B : Transfer pricing - International transaction-Interest– Non-charging or under charging of interest on excess period of credit allowed to AE for realization of invoices amounts to an international transaction-Matter sent to AO for redetermination of working. [S.92C] Non-charging or under charging of interest on excess period of credit allowed to AE for realization of invoices amounts to an international transaction. Matter sent to AO for redetermination of working. (AY. 2011-12) CPA Global Services (P.) Ltd. v. ITO (2017) 162 ITD 64 / 151 DTR 385 (Delhi)(Trib.) S.92C: Transfer pricing- Arm’s length price-If the advances are made to a AE situated abroad, the LIBOR rate has to considered to determine the Arms Length interest and not the interest rate in India (SBI PLR). This would be reasonable and proper in applying commercial principles Dismissing the appeal of the revenue the Court held that ; If the advances are made to a AE situated abroad, the LIBOR rate has to considered to determine the Arms Length interest and not the interest rate in India (SBI PLR). This would be reasonable and proper in applying commercial principles. Followed ,In CIT v. Tata Autocomp [2015] 56 taxmann.com 206,( Bom)(HC) The Tribunal has directed the appropriate rate would be LIBOR plus 2% instead of LIBOR plus 3% applied by the TPO.( ITA No. 1869 of 2014, dt. 09.06.2017)(AY. 2007-08) CIT v. Aurionpro Solutions Ltd. (Bom.)(HC) , www.itatonline.org S.92C:Transfer pricing-Arm's length price-Selection of comparables-Company outsourcing major part of its business cannot be taken as comparable for company not outsourcing major part of its business.


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Dismissing the appeal of the revenue , the Court held that ,both the companies were not appropriate comparables, since a major part of their business was outsourced, whereas the major part of the assessee's business was not outsourced. Moreover, the company Vishal Information Technologies Ltd had a low employee cost of 1.25 per cent. of operating revenue. The assessee's wages to sales was 53 per cent. which was not comparable to Vishal Information Technologies Ltd. Thus the exclusion of Nucleus Net soft and Vishal Information Technologies Ltd was justified. (AY. 2006-07) PCIT v. IHG IT Services (India) P. Ltd. (2017) 392 ITR 77 (P&H)(HC) S. 92C: Transfer pricing-Arm's length price-Enabled services (ITES) to AE-Financial aspects of dissimilar activities of two enterprises not comparable-Companies rendering entirely different services not comparable-Company following different financial year can be adopted as comparables if data for relevant period available. Dismissing the appeal of the revenue, the Court held that; transfer pricing was not an exact science. It was not capable of arithmetical precision. A minuscule difference could not result in the rejection of the case, if it was otherwise comparable. There was no difficulty in permitting reasonable deviation so long as the deviation did not render the case incomparable to the one in question. The financial results of enterprises involved in dissimilar activities could not be compared. Similarly the financial aspects of dissimilar activities of two enterprises could not be compared. Only the similar activities of the two could be considered, provided they were financially comparable. (AY. 2009-2010) CIT v. Mercer Consulting (I) P. Ltd. (2016) 76 taxmann.com 153 / (2017) 390 ITR 615/292 CTR 42 / 146 DTR 108 (P&H)(HC) S. 92C: Transfer pricing- Reference to Transfer Pricing Officer –Writ court will not interfere with order of reference to Transfer Pricing Officer- Res Judicata-Principle not applicable to income-tax proceedings. [Art. 226] Dismissing the petition the Court held that Assessing Officer need not come to definite finding that transactions were international. Opinion of Transfer Pricing Officer not binding on Assessing Officer. Assessee has second opportunity to raise issue before Assessing Officer or Dispute Resolution Panel - Prima facie material to infer international transaction. Writ court will not interfere with order of reference to Transfer Pricing Officer. Res Judicata - Principle not applicable to income-tax proceedings. (AY. 2009-2010, 2010-2011, 2011-2012) Lovelock and Lewes v. CIT (2017) 390 ITR 356/ 291 CTR 121 / 245 Taxman 1 / 145 DTR 145 (Cal) (HC) Price Waterhouse v. CIT ( 2017) 390 ITR 356/ 291 CTR 121 / 245 Taxman 1 / 145 DTR 145 (Cal)( HC) S.92C: Transfer pricing--Arm's length price-DEPB includible in determining operating profit and depreciation includible in determining total costs as in comparable companies- Loss suffered in a particular year does not exclude a company from comparability analysis Dismissing the appeal of the revenue, the Court held that ; while determining the arm's length price, DEPB includible in determining operating profit and depreciation includible in determining total costs as in comparable companies. Loss suffered in a particular year does not exclude a company from comparability analysis. (AY. 2008-2009 ) CIT v. Welspun Zucchi Textiles Ltd. (2017) 391 ITR 211/ 245 Taxman 132/292 CTR 1 /146 DTR 128 (Bom)( HC)


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S. 92C: Transfer pricing-Licensing of brand and supply of technical know-how-TPO/DRP/Tribunal disaggregated transaction & benchmarked technical support arrangement applying CUP method – Matter remanded for determining whether aggregation is warranted or not Tribunal disaggregated transaction & benchmarked technical support arrangement applying CUP method. On appeal ;High court held that that aggregation of closely linked transactions are permissible, therefore the matter was remanded back for fresh consideration. On the issue of applicability of most appropriate method, the High Court did not give any definite ruling and opined that it should be determined based on the aggregation/de-segregation of transactions. (AY.2011-12) Gruner India (P) Ltd. v. DIT (2017) 146 DTR 266 (Delhi )( HC) S. 92C:Transfer pricing - Where the assessee applied more than one of permissible methods, then qua each transaction, the TPO was required to give reasons as to why he preferred one of such methods over others. Allowing the appeal of the assesse the Court held that ;Where the assessee applied more than one of permissible methods, then qua each transaction, the TPO was required to give reasons as to why he preferred one of such methods over others. (AY.2006-07) Honda Motorcycle & Scooters India (P) Ltd. v. ACIT (2017) 146 DTR 201 (P&H)( HC) S. 92C: Transfer pricing- Arms length price- Where there was a strike in the assessee company, the net profit margin was required to be adjusted on account of such abnormal event . Allowing the appeal of the Court held that ;where there was a strike in the assessee company, the net profit margin was required to be adjusted on account of such abnormal event and further directed TPO to make appropriate adjustment in the profit margin of comparable company. (AY.2006-07) Honda Motorcycle & Scooters India (P) Ltd. v. ACIT( 2016) 76 taxmann.com 75 (2017) 146 DTR 206 / 292 CTR 318 (P&H)( HC) S.92C: Transfer Pricing-Transfer Pricing Officer does not reflect any justifiable factors for selecting the RPM method in preference to the TNM method selected by the assessee as the most appropriate method-Arm’s length rate of the corporate guarantee commission/fee was estimated at 0.5% . Tribunal held that ;considering the unsustainability of the approach of the Transfer Pricing Officer in selecting the RPM can also be gauged if one takes into consideration the provisions of Rule 10C of the Rules. As noted earlier, the computation of arm’s length price under section 92C(1) of the Act is required to be made in terms of the most appropriate method prescribed therein. Sub-section (1) of section 92C of the Act also enumerates the methods prescribed and Rule 10C(1) of the Rules postulates that the most appropriate method shall be the method which is “best suited to the facts and circumstances of each particular international transaction”, and which provides the “most reliable measure” of an arm’s length price in relation to the international transaction . Sub-rule(2) of Rule 10C provides the factors which shall be taken into consideration while selecting the most appropriate method. Quite clearly, the entire discussion in the order of the Transfer Pricing Officer does not reflect any justifiable factors for selecting the RPM method in preference to the TNM method selected by the assessee as the most appropriate method. Moreover, it is factually evident that assessee has undertaken similar international


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transactions of sale of television programmes and film rights to its associated enterprises in the past as well as in subsequent years and the same were benchmarked by considering the TNM method as most appropriate method; and, such position has been accepted by the assessing authority in the respective years. No doubt, the principles of res judicata are not strictly applicable to the incometax proceedings, so however, if a qualitatively comparable situation exists in more than one assessment year, then the rules of consistency cannot be given a go by. In the instant case, we find that the impugned international transaction of sale to the associated enterprise, ATL Mauritius is effected in terms of Memorandum of Understanding dated 01/10/2005, which clearly shows that qualitatively similar transactions have been undertaken by the assessee in the past year, wherein benchmarking done by selecting the TNM method as the most appropriate method stands accepted. In the course of hearing, the Ld. Representative for the assessee had asserted that similar fact situation prevails in the subsequent assessment years also, and such assertion has not been controverted by the Revenue before us. Even otherwise, we find that the Transfer Pricing Officer has not brought out any justifiable reasons to depart from adopting the TNM method, which has otherwise been found to be applicable in the assessments of past as well as subsequent assessment years upto to the assessment year 2012-13, as stated before us by the Ld. Representative for the assessee before us. Therefore, on the principle of consistency also, we are unable to uphold the selection of RPM method as the most appropriate method by the Transfer Pricing Officer in preference to the TNM method selected by the assessee. As regards corporate guarantee commission , considering the entirety of facts and circumstances, Tribunal up held the rate of 0.5% for the purposes of determining arm’s length rate of the corporate guarantee commission/fee and set aside the order of CIT(A). (ITA No. 3406/Mum/2014, dt. 05.05.2017)(AY. 2008-09) Zee Entertainment Enterprises Ltd. v. ACIT (Mum)(Trib) : www.itatonline.org S. 92C : Transfer pricing-Arm's length price–Comparable- Functional difference -A company engaged in rendering KPO services, and a company providing highly technical engineering consultancy services, could not be accepted as comparables while determining ALP. Tribunal held that the,assessee Company was providing IT enabled services (ITES) to its AE. A company in whose case extraordinary event of amalgamation took place during relevant year which affected its financial results, could not be accepted as comparable. A company which outsourced major part of its work resulting in very low employee cost, was also not acceptable as comparable. Acompany earning revenue from sale of its own software products, could not be accepted as comparable. A company engaged in rendering KPO services was also not acceptable as comparable. A company providing highly technical engineering consultancy services was also rejected as comparable on account of functional difference. (AY.2007 – 08) TNS India (P.) Ltd. v. ACIT (2017) 162 ITD 556 (Hyd.)(Trib.) S. 92C : Transfer pricing - Arm's length price -Working capital adjustment was remanded back for disposal afresh. Tribunal held that, when working capital adjustment was wrongly considered by considering total receivables and arrivals including third party transactions and making a negative working capital adjustment. TPO was directed to examine issue relating to working capital adjustment afresh. (AY 2007 – 2008) TNS India (P.) Ltd. v. ACIT (2017) 162 ITD 556 (Hyd.)(Trib.) S.92C: Transfer pricing–Arm’s length price–Resale price method ( RPM)was held to be as most appropriate method to determine ALP of aforesaid international transactions-Rejection of cup method was held to be justified.


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Dismissing the appeal of the revenue , the Tribunal held that ; in respect of purchase of Liquified Natural Gas (LNG) from its foreign AEs and thereupon sold re-gasified LNG (R-LNG) to various customers in India, RPM (resale price method) was to be adopted as most appropriate method to determine ALP of aforesaid international transactions.Tribunal also held that Cup method cannot be thrust upon the assessee. ( AY.2009-10) DCIT v. Hazira LNG (P.) Ltd. (2017) 163 ITD 223 / 184 TTJ 440 / 147 DTR 1 (Ahd.) (Trib.) S.92C:Transfer pricing–Arm’s length price-Resale price method( RPM) is best suited for determining ALP of an international transaction in nature of purchase of goods from an AE, which are resold as such to unrelated parties. Assessee adopted RPM method where as the TPO has applied TNMM method , which was confirmed by the CIT(A). On appeal allowing the appeal of the assesse, the Tribunal held that; Resale price method(RPM) is best suited for determining ALP of an international transaction in nature of purchase of goods from an AE, which are resold as such to unrelated parties. ( AY. 2003-04) Bose Corporation India (P.) Ltd. v. ACIT (2017) 163 ITD 186 (Delhi) (Trib.) S. 92C: Transfer pricing-Arm's length price-Reimbursement costs should be excluded as they do not involve any functions to be performed so as to consider it for profitability purposes while computing operating cost. Tribunal held that reimbursement costs should be excluded as they do not involve any functions to be performed so as to consider it for profitability purposes while computing operating cost.(AY.2011-12) CPA Global Services (P.) Ltd. v. ITO (2017) 162 ITD 64 / 151 DTR 385 (Delhi)(Trib.) Editorial : Affirmed , PCIT v. CPA Global Services (P.) Ltd. ( 2017) 151 DTR 161 ( Delhi)(HC) S.92C:Transfer pricing-Arm's length price-Service industry-Working capital adjustment not to be denied on ground of non-matching of working capital adjustment with financials-opportunity to be given to assessee to get financials corrected- Software development-Selection of comparable--Functional comparability in current year only. [S .92CA] Tribunal held that opportunity to be given to assessee to get financials corrected and assessing Officer to examine assessee's claim for grant of working capital adjustment on merits. As regards software development, selection of comparable, functional comparability in current year only. Software Product Company having intellectual property rights over some of products developed by it not comparable. Companies said to be functionally dissimilar was to be excludible from list of comparable. (AY. 2008-2009) Comverse Network Systems India P. Ltd. v. ACIT (2017) 54 ITR 158 (Delhi)(Trib.) S.92C: Transfer Pricing-The accretion of brand value, as a result of use of the brand name of foreign AE under the technology use agreement, which has been accepted to be an arrangement at an arm’s length price, does not result in a separate international transaction hence a notional adjustment cannot be made in the hands of the Indian AE towards compensation receivable from the foreign AE for “deemed brand development”.[S.2(24),92B] Tribunal held that;the arrangement under the technology use agreement, which permits the assessee and binds the assessee to use the brand name of the AE on the products manufactured by the assessee, has been specifically held to be an arm’s length transaction. An aspect covered by this agreement, therefore, cannot be subject matter of yet another benchmarking exercise. Every


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benefit accruing to an AE, as a result of dealing with another AE, is not on account of service by the other AE. That takes us to last component of definition of ‘international transaction’ under section 92 B. This refers to a transaction in the nature of any other transaction having a bearing on the profits, income, losses or assets of such enterprises. An accretion in the brand valuation of a brand owned by the AE does not result in profit, losses, income or assets of the assessee company, and it cannot, therefore, result in an international transaction qua the assessee. Unless the transaction is such that it affects profits, losses, income or assets of both the enterprises, it cannot be an international transaction between these two enterprises. If the assets of one of the enterprises are increased unilaterally, without any active contribution thereto by the other enterprise, such an impact on assets cannot, in our humble understanding, amount to an international transaction. The accretion in brand value of the AE’s brand name is not on account of costs incurred by the assessee, or even by its conscious efforts, and it does not result in impact on income, expenditure, losses or assets of the assessee company. It is not, therefore, covered by the residuary component of definition of ‘international transaction’ either. As for the emphasis placed by the learned Departmental Representative, as also by the authorities below, on the exhaustive definition of ‘intangibles’ in Explanation to Section 92B, Tribunal held that,this definition would have been relevant only in the event of there being any transaction in the nature of sale, purchase of lease of intangible assets but then, it is not even the case of the revenue, that there was any sale, purchase or lease of intangibles. In view of these discussions, as also bearing in mind entirety of the case, we are of the considered view that the accretion of brand value, as a result of use of the brand name of foreign AE under the technology use agreement- which has been accepted to be an arrangement at an arm’s length price, does not result in a separate international transaction to be benchmarked. ( I.T.A. No. 739 and 853 /Chny/2014, 563 and 614 /Chny/2015, 842 and 761/Chny/16 and CO 73/Chny/16, dt. 27.04.2017)(AY. 2009-10 to 2011-12) Hyundai Motor India Limited v. DCIT (Chennai)(Trib.); www.itatonline.org S.92C:Transfer Pricing-Arms length price-International transaction can be clubbed, if such transactions are closely connected with each other, contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted. An international transaction can be clubbed / aggregated with other international transactions if such transactions are closely connected with each other. The onus is on the assessee to establish the justification for clubbing the transactions. If the TPO has not applied TNMM at the entity level and has bench marked the royalty payment on standalone basis and not subjected the cost of production or other transactions to bench marking, the contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted.( IT(TP)A Nos. 159/Bang/2015, 132/Bang/2016 & 86/Bang/2017, dt. 21.04.2017)(AY. 2010-11 to 2012-13) Kaypee Electronics & Associates Pvt. Ltd. v. DCIT (Bag.)(Trib.); www.itatonline.org S.92C: Transfer pricing-Arm's length price-Royalty-Five per cent. on domestic sales and eight per cent. on export sales to be considered as at arm's length rate. Tribunal held that in respect of royalty payable to associated enterprise, five per cent. On domestic sales and eight per cent. on export sales to be considered as at arm's length rate. (AY.2005-2006, 2006-2007, 2008-2009) ACIT v. Dow Agro sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.)(Trib.) S.92C: Transfer pricing - Arm's length price-Interest on loans -International interest rate fixed being LIBOR linked interest rate to be applied.


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Tribunal held that; Comparable uncontrolled price method is most appropriate method. Reserve Bank of India approval cannot be considered as benchmark for arriving at arm's length price. Transactions to be considered on commercial principles in international market. International interest rate fixed being LIBOR linked interest rate to be applied.(AY.2007-2008, 2008-2009) Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.)(Trib.) S.92C: Transfer pricing-Arm's length price-Interest-free loans to associated enterprise-LIBOR rate applicable and not domestic rate. DRP directed the TPO to compute the upward adjustment applying an arm’s length interest rate of 11 percent. i.e. 8 percent .plus 3 percent ( Credit spread) .On appeal the Tribunal held that instead of the base rate of 8 percent. ( based on lending rates of banks in India for commercial borrowing) , it would be appropriate to apply LIBIR rate and not the domestic lending rate. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.)(Trib.) S.92C: Transfer pricing-Arm's length price-Giving guarantee on a loan availed of by its associated enterprises is an international transaction, arm's length guarantee commission at 0.5 per cent was directed to be adopted against at 2 percent adopted by DRP. Giving guarantee on a loan availed of by its associated enterprises is an international transaction, arm's length guarantee commission at 0.5 per cent was directed to be adopted against at 2 percent adopted by DRP. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.)(Trib.) S. 92C : Transfer pricing–Arms length price-proportion to international transaction bears to the total turnover. The Tribunal held that CIT(A) was justified in directing the AO to make transfer pricing adjustment of the expenses in the proposition which the international transactions bear to the total turnover. (AY. 2004-05, 2005-06, 2006-07) ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27/ 145 DTR 81 (Delhi)(Trib.) S. 92CA: Reference to transfer pricing officer -Before making a reference to the TPO, the assessee is required to be given an opportunity to show-cause why the reference may not be made to the TPO and thereafter a speaking order is required to be passed by the AO. [S.92C, Art. 226] The assessee filed a Writ Petition, challenging the action of the AO in making a reference to the TPO without disposing of the objection raised by the assessee as provided under the Instruction No. 3/2016 dated 10th March 2016. The HC quashing the reference made by the AO, held that as per the CBDT Instruction No. 3/2016 dated 10th March 2016, the AO before making a reference to the TPO, is required to give an opportunity to the assessee showing cause as to why a reference may not be made to TPO and thereafter, a speaking order is required to be passed disposing of the objections so raised by the assessee. The HC remitted back the matter to AO to pass a speaking order while making a reference to TPO after considering the objections raised by the assessee. Alpha Nipon Innovatives Ltd. v. DCIT( 2016) 76 taxmann.com 166 / (2017) 291 CTR 309 (Guj) (HC) S. 92CA: Reference to transfer pricing officer - jurisdiction of TPO is extendable to other international transactions which come to his notice during the course of proceedings before him. Even though original jurisdiction of TPO is confined to international transactions referred to him by AO for determination of ALP, but, such jurisdiction is extendable to other international


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transactions which comes to his notice during the course of proceedings before him. (AY. 2011-12) Nikon India (P) Ltd. v. Dy. CIT (2017) 146 DTR 107 (Delhi)(Trib.) S.115BBC: Anonymous donations-Trust noting names and addresses of donors--Assessing Officer failing to verify donors--Treatment of receipt as anonymous donation was not justified. [ S.11, 80G(5)(vi) ] Allowing the appeal the Tribunal held that the assessee had also furnished affidavits of organisers of ad hoc committees through whom the assessee had organised yoga camps made available but the Assessing Officer did not bother to verify the details even on test-check basis. In the absence of such efforts by the Assessing Officer, the authorities below were not justified in making and sustaining the treatment of receipt as anonymous donation. Undisputedly, in almost all donations the names and addresses of the donors had been maintained and thus the bona fides of the assessee could not be doubted where such detail had remained to be maintained in some cases. (AY. 2009-2010 ) Patanjali Yogpeeth (Nyas) v. ADIT (2017)/ 163 ITD 323 / 54 ITR 616/ 151 DTR 114/185 TTJ 1 (Delhi) (Trib.) S. 115J: Book profits - Assessing Officer cannot go behind net profit shown except as provided in Explanation to section 115J. The matter stood decided against the Department between the assessee and the Department for the assessment year 1988-89 and hence no question of law arose. Assessing Officer could not go behind net profit shown except as provided in Explanation to section 115J. PCIT v . J.K. Synthetics Ltd. (2017) 390 ITR 129 (All.)(HC) Editorial: SLP of revenue was dismissed, PCIT v . J.K. Synthetics Ltd. (2016) 388 ITR 54 (St.) S. 115JB: Book profit --State Electricity Board-Provisions is not applicable. [Electricity Duty Act, 1963, S. 3(1)] Dismissing the appeal of the revenue, the Court held that; Electricity Board collecting electricity duty from customers as agent of State hence provisions is not applicable. (AY. 2008-2009 ) CIT v. Kerala State Electricity Board (2017) 393 ITR 337 (Ker.)(HC) Editorial: Order in A CIT v. Kerala State Electricity Board (2015) 38 ITR 458 (Cochin) (Trib) is affirmed. SLP is granted to the revenue, CIT v. Kerala State Electricity Board (2016) 380 ITR 8 (St.) S. 115JB : Book Profit –Any deduction which is otherwise not provided by Explanation would be outside scope, provision have overriding effect upon other provisions of Act . The assessee filed a NIL return of income as its Profit and Loss account contained a capital receipt under the head ‘Other Income’ which was not taxable under the normal provisions of the Act. However, the AO opined that ‘Book Profit’ was defined as per S. 115JB and was a self-contained code and would apply notwithstanding any other provisions of the Act. Further, he also opined that there was no scope for any deduction under any other head then provided by way of Explanation u/s 115JB and took the book profit shown as per profit and loss account as the income for applying the tax rate of 7.5%, The Order of AO was confirmed by CIT(A) and Tribunal. On appeal affirming the order of Tribunal , the Court held that ; the provisions of S.115JB of the Act have overriding effect upon other provisions of the said Act and when the mechanism or operation of the area was a complete code by itself, any deduction which was otherwise not provided by the Explanation would be outside the scope of operation of S.115JB of the Act. (AY. 2005-06) B&B Infratech Ltd. v. ITO (2016) 76 taxmann.com 188 / (2017) 146 DTR 103 (Karn) HC)


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S. 115JB: Book profit-Rent equalization reserve debited to profit and loss account was to be added back while computing book profit. [AS.19] Dismissing the appeal of the assessee the Tribunal held that; Rent equalization reserve debited to profit and loss account was to be added back while computing book profit.(AY. 2008-09) Stryker Global Technology Center (P.) Ltd v. ACIT ( 2017) 163 ITD 200 ( Delhi)(Trib.) S.115JB:Book profits-waiver of loan cannot be added while computing the book profit. [S. 41(1)] Allowing the appeal of the assessee the Tribunal held that; A capital surplus thus, in respect of waiver of loan amount cannot be regarded as being amount available for distribution through the profit & loss account. This follows from the very definition of expression ‘capital reserve’ that it must be accounted directly to the credit of the capital reserve account instead of being credited to the profit & loss account so as to ensure that it is not left for being distributed through the profit & loss account. Accordingly the waiver of a loan is a capital receipt which is part of the capital reserve and cannot be reckoned as working result of the company and therefore, it does not form part of the net profit as per the profit & loss account. Thus, such a capital receipt cannot be taxed as ‘book profit’ as envisaged in terms of section 115JB.(ITA No. 923 & 930/Bang/2009, dt. 13.01.2017) (AY. 2004-05) JSW Steel Ltd. v. ACIT (Mum.)(Trib.);www.itatonline.org S.115JB: Book profits-Expenditure relatable to dividend income which was exempt. [S. 10(38), 14A] That though the assessee while computing the book profit had excluded the dividend income credited in its profit and loss account, being exempt under section 10(34) which was in conformity with section 115JB(2), Explanation 1(ii), it had objected to the addition of the expenditure relatable to earning of such exempt income. The Assessing Officer while computing the book profit under section 115JB had not erred in making an addition of the expenditure relatable to exempt income so determined under section 14A. Guided by the provision as contemplated in section 115JB(2), Explanation 1(f), he had rightly made an addition being the amount of expenditure relatable to the dividend income of Rs. 11,36,128 which being exempt under section 10(34) had duly been excluded by the assessee while computing the book profit and accepted as such by the Assessing Officer. There was no infirmity in the addition by the Assessing Officer, which thereafter had rightly been sustained by the Commissioner (Appeals). (AY.2010-2011, 2011-2012) Informed Technologies India Ltd. v. DCIT (2017)54 ITR 397 (Mum.)(Trib.) S. 115JB :Book profits- While computing book profits AO was justified in making addition of expenditure relatable to exempt income determined u/s. 14A. [S. 14A] Dismissing the appeal of the assessee, the Tribunal held that; AO was justified in making addition of expenditure relatable to exempt income so determined u/s. 14A. once 'profit' adopted by AO as starting point for computing 'Book profit' u/s. 115JB, is amount before provision for dividend, then there remains no occasion to make a separate addition in respect of provision for dividend. (AY. 2010-11, 2011-12) Informed Technologies India Ltd. v. Dy.CIT (2017) 162 ITD 153 / 54 ITR 397 / 183 TTJ 60 (Mum)(Trib.) S. 115JB: Book profits-Provision for bad and doubtful debts not deductible. Allowing the appeal of the revenue , the Tribunal held that ; amount withdrawn from any reserve if credited to profit and loss account. Reduction permissible only if such provision had gone to increase book profits in year of creation of reserve. Assessee not satisfying condition hence provision for bad and doubtful debts not deductible.(AY. 2008-2009, 2010-2011)


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JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd.(2017)54 ITR 425 (Bang.)(Trib.) S.115JB: Book profits-Disallowance always a part of expenditure debited to profit and loss account-Disallowance should be added to book profits for purpose of computing tax liability-Amount of addition should be restricted to actual disallowance. [S.14A, R.8D] Disallowance should be added to book profits for purpose of computing tax liability and the amount of addition should be restricted to actual disallowance.(AY. 2008-2009, 2010-2011) JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd.(2017)54 ITR 425 (Bang.)(Trib.) S.115JB: Book profits-Capital gains-Long-term capital gains-Benefit of indexed cost of acquisition to be considered for purpose of computing tax liability. [S.45] Benefit of indexed cost of acquisition to be considered for purpose of computing tax liability.(AY. 2008-2009, 2010-2011) JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd.(2017)54 ITR 425 (Bang.)(Trib.) S. 115O : Domestic companies-Tax on distributed profits-Paid dividend distribution tax within stipulated time period of 14 days from date of declaration of dividend levy of interest was set side.[S. 115P] The AO levied interest for late payment of dividend distribution tax by assessee. On appeal Tribunal held that, assessee has paid dividend distribution tax within stipulated time period of 14 days from date of declaration of dividend levy of interest was set side. (AY. 2010-11,2011-12) Informed Technologies India Ltd. v. Dy.CIT (2017) 162 ITD 153 / 54 ITR 397 / 183 TTJ 60 (Mum.)(Trib.) S.115P: Domestic companies-Tax on distributed profits–Interest -Assessee declaring dividend on 25-9-2009 and paying tax on 6-10-2009-No interest could be levied. The assessee had declared dividend on September 25, 2009 and the dividend distribution tax on the dividend was paid within the stipulated time period of fourteen days, i.e., as on October 6, 2009. The assessee could not be held to have defaulted as regards making of the payment within the stipulated time period of fourteen days as required under section 115-O(3). Thus no interest under section 115P was liable to be imposed. (AY.2010-2011, 2011-2012) Informed Technologies India Ltd. v. DCIT (2017) 54 ITR 397(Mum.)(Trib.) S. 120: Income tax authorities–Additional ground on jurisdiction was admitted - Additional Commissionerperform functions and exercise powers of an AO only if he is specifically directed u/s. 120(4)(b). [S. 2(7A), 120(4)(b), 127 , 245(1)] Allowing the appeal of the assessee, the Tribunal held that; S.2(7A), defines term AO to mean Assistant or DY.CIT, however Board may direct Addl. CIT to exercise AO’s powers vide special order u/.s 120(4)(b). Where revenue had not been able to demonstrate that Addl. CIT who had passed assessment order had valid authority to perform and exercise powers and functions of an AO of assessee and to pass order. Assessment order had been passed without following the procedure of law. 2(7A))( AY. 2001-02) Tata Sons Ltd. v. ACIT (2017) 162 ITD 450 (Mum.)(Trib.) S. 127: Power to transfer cases–Decision of transfer could not become illegal unless and until assessee showed as to how assessee was prejudiced by not given an opportunity of being heard. The jurisdiction was transferred for the reason of restructuring of Department. Thereafter, an order was passed directing the assessee to appear and to satisfy the authority with respect to the


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aforesaid decision. The assessee challenged the decision/orders of the authorities of income-tax by filing Writ Petition. The Court held that; that a notice is required to be given on the principle that no man can be condemned without hearing him but merely on the ground of not providing any opportunity of being heard, the decision taken by the authority cannot be said to be illegal, unless and until the party shows as to how he has been prejudiced by not providing an opportunity of being heard. Further, HC held that even if an opportunity of hearing was provided, then would there be any change of the situation and if no, then order for transfer of case cannot be challenged. In the present case, authorities have passed well reasoned order which was re-structuring of the Income Tax Department in the area concerned and which did not cause any prejudice to the assessee. Thus, Writ Petition to quash the transfer of cases was not maintainable. Dr. Monu Pattanayak v. PCIT (2017) 146 DTR 55 /291 CTR 507 (Orissa)(HC) S. 127 : Income tax authorities–Additional ground on jurisdiction was admitted-Power to transfer cases –Assessment order passed without authority of law was held to be bad in law.[S. 2(7A), 120(4)(b), 143(3), 254(1)] During the hearing the assessee filed additional grounds raising jurisdictional issue for validity of assessment order as the assessment order was passed by the Addl. CIT u/s.143(3) who was not competent under the law to discharge functions of the AO. Allowing the appeal the Tribunal held that, Assessment proceedings were initiated by ACIT but were taken over in middle of proceedings by Addl.CIT and completed by him without there being any valid transfer of jurisdiction as required u/s. 127, therefore, assessment was illegal and had to be quashed. (AY. 2001 – 2002) Tata Sons Ltd. v. ACIT (2017) 162 ITD 450 (Mum.) (Trib.) S. 132:Search and seizure–Survey–Assessment-It is but natural that concealed income found at the time of search and survey has to be distributed among all the family members who were carrying on business. It is also a reasonable conclusion that the income had been earned over a period of time and should be spread over various years.[S.133A, 260A] Dismissing the appeal of the Revenue, the Court held that;the Department has failed to bring on record any material to the contrary except the seized documents which, in our considered opinion, could not absolve the Department or give any right to negate the view taken by the first Appellate Authority and the Tribunal. So far as the income divided among the family members of the assessee is concerned, we find that all of them were carrying on same business from the same premises. Therefore, it is but natural that if any concealed income has been found at the time of search and survey, it has to be distributed among all the family members who were carrying on business.(AY.1988-89 to 1990-91 ) CIT v. Rekha Bai(2017) 393 ITR 22 / 150 DTR 49/ 246 Taxman 369 / 294 CTR 16 (SC) S.132: Search and seizure-Warrant of authorisation-Section did not compel him to give reasons and non-mention of reasons in itself did not vitiate the order and the court would never go into the adequacy of such reason-Writ petition is held to be not maintainable [ S. 153, 153A, Arts. 226, 227] Dismissing the petition, the Court held that; Once there existed reasonable grounds for the authority to form the above belief, that was sufficient to invoke the jurisdiction under section 132. Whether the grounds were adequate or not was not a matter for the court to investigate. The sufficiency of the grounds which induced the Income-tax Officer to act was therefore not a justifiable issue, though he could not make a search or authorise any Officer to make a search unless he had the reason to believe the existence of the facts mentioned in the section. The section did not compel him to give reasons and non-mention of reasons in itself did not vitiate the order and the court would never go into the adequacy of such reason. ( AY.2009-2010 to 2014-2015 )


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Aditya Narayan Mahasupakar v. CCIT (2017) 392 ITR 131/ 246 Taxman 106 / 293 CTR 73/ 147 DTR 373 (Orissa)(HC) S.132: Search and seizure-Notice u/s. 131(1A) is not required to be issued prior to carrying out search proceedings - Writ Petition is not maintainable [S. 131(IA), 153A, Art. 226] The assessee was engaged in export of iron ore. A search was carried out in assessee's premises for relevant years and, thereupon, a notice was issued u/s. 153A requiring the assessee to furnish return of income for assessment years covered within the block. The assessee filed a writ petition contending that since no notice was issued u/s. 131(1A), search and seizure conducted by department itself u/s. 132 was illegal and thus, pursuant thereof notice issued u/s. 153A also did not have any sanctity. The assessee also submitted that in absence of any reason which led the authority to resort to the provision of section 132, the notice u/s. 153A was not tenable in the eye of law. Dismissing the petition the Court held that , there is no requirement of issuance of notice u/s. 131(1A) of the Act before proceeding with the provision of section 132 as the whole purpose of conducting search and seizure will vanish if assessee knows the fact that search is going to be conducted u/s. 132 making the proceeding a futile exercise. It was further held that, where there is alternate remedy available, the jurisdiction of this Court under article 226 of the Constitution of India cannot be invoked. The HC also observed that search and seizure was well within the knowledge of the assessee, but the jurisdiction was not challenged fairly for a period of more than two years and it is only after the notice u/s. 153A was issued, this Writ Petition has been filed on the basis of above reasons. On the basis of above reasons, the writ petition filed by the assessee was dismissed. (AY.2009-10 to 2014-15) Liberty Marine Syndicate (P) Ltd. v. PCIT (2017) 146 DTR 1 / 292 CTR 12 (Orissa) ( HC) S.132(4): Search and seizure—Surrender of income - Onus on assessee to prove genuineness, addition as unexplained income was held to be justified.[S. 132 ] Tribunal held that the assessee accepting figure 40 representing Rs. 40 lakhs and accepting his handwriting and there was no allegation that assessee pressurised to surrender that sum. Addition was held to be justified.(AY. 2004-05 to 2008-09) Ashok Nanda v.DCIT (2017) 54 ITR 54 (Indore)(Trib.) S.133A: Survey-Admission of addition of income-Rejection of books of account was held to be justified- Gross profit could be telescoped to addition made on excess stock. [S.145] Tribunal held that the rejection of books of account was held to be valid. Officer was directed to telescope the income added as gross profit. (AY. 2007-08) Mamatha Silk Centre v. ITO (2017) 54 ITR 561 (Hyd.)(Trib.) S. 139AA: Quoting of Aadhar number–Provision is held to be valid - Proviso to s. 139AA(2) cannot be read retrospectively as it takes away vested rights. It will only have prospective effect. [Art. 14, 19(1)(g)] Section 139AA of the Income Tax Act, 1961, inserted by the amendment to the said Act vide Finance Act, 2017,which mandates quoting of Aadhaar number with the PAN is constitutionally valid under Articles 14 and 19(1)(g). The proviso to s. 139AA(2) (which deems the PAN void ab initio if the Aadhaar number is not quoted) is also valid. However, as the challenge under Article 21 is pending before the Constitution Bench, a partial stay is granted. Those who are already enrolled under the Aadhaar scheme should comply with s. 139AA (2). Those who are not enrolled need not do so for the time being and their PAN will not be treated as invalid. The said proviso to s. 139AA(2) cannot be read retrospectively as it takes away vested rights. It will only have prospective effect. ( WP no. 247 of 2017, dt. 09.06.2017) Binoy Visam v.UOI (Andhaar Card Linkage with Pan) (SC),www.itatonline.org


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S.142(2A): Inquiry before assessment–Special audit– Assessing Officer can direct special audit having regard to volume and multiplicity of transactions and nature and complexity of accounts. [ S. 132, 153A, Art. 226] Dismissing the petition the Court held that; Assessing Officer can direct special audit having regard to volume and multiplicity of transactions and nature and complexity of accounts. Officer can direct special audit only on basis of material discovered from assessee. Assessing Officer statutorily empowered to seek such particulars as are necessary for completion of assessment. Once conditions satisfied directions by Assessing Officer for special audit justified. (AY. 2008-2009 to 2014-2015) Sharad Kantilal Shah v. Dy. CIT(2016) 76 taxmann.com 129/ (2017) 393 ITR 594 (Bom.)(HC) S.142(2A):Inquiry before assessment–Special audit - -Complexity of accounts- Assessee given opportunity to be heard hence-Appointment of special auditor-Justified. Dismissing the petition the Court held that; under the circumstances, when a large number of papers were required to be considered and verified vis-a-vis the assessee and other persons whose names figured in the requisitioned papers and when considering section 142(2A) of the Act, the Assessing Officer had thought it fit to exercise powers under section 142(2A) of the Act, it could not be said that the Assessing Officer had committed any error or illegality. The order had been passed after giving an opportunity to the assessee and having been satisfied with respect to the complexity and multiplicity of transactions. The order was valid. (AY. 2009-2010 to 2015-2016) Ulhas Securities P. Ltd. v. DCIT (2017) 393 ITR 514/ 246 Taxman 231/ 148 DTR 369 (Guj)( HC) S. 142A :Estimate of value of assets by Valuation Officer–Income from undisclosed sources-Reference could have been made since proceedings was pending before the High Court-Finding was not disturbed in view of finding of Tribunal that local PWD rates to be applied and not CPWD rates.[S.69, 260A] Reversing the judgment of High Court the Court held that; Reference could have been made since proceedings was pending before the High Court-Finding was not disturbed in view of finding of Tribunal that local PWD rates to be applied and not CPWD rates . BP. 1988-89 to 1997 -98) CIT v. Sunita Mansingha (2017) 393 ITR 121/ 152 DTR 249 (SC) S. 142A :Estimate of value of assets by Valuation Officer –Reference to valuation Officer was held to be not valid, unless there is some material before the Assessing Officer. [S.69] Allowing the appeal of the assessee the Court held that; No doubt, it is true that section 142A can be resorted to even during the assessment or after assessment but, at the same time, while making said reference, the officer has to satisfy the conditions precedent which are be reflected in relevant statutory provisions, which in the instant case are completely missing and therefore, no such action is permissible in law. Upon considering the materials on records and the contentions raised by respective parties and in view of the aforesaid proposition of law laid down, it is opined that the action of making reference is not sustainable in the eye of law and therefore it is quashed and set aside.) (AY. 2008-09) Anand Banwarilal Adhukia v. DCIT (2017) 244 Taxman 243 / 148 DTR 262 (Guj.)(HC) S. 143(1)(a): Assessment- Even though there was a raging controversy amongst the High Court’s on whether expenditure for raising capital is capital or revenue in nature, the judgement of the jurisdictional High Court is binding on the assessee and any view contrary thereto is a "prima facie" mistake that requires adjustment. [S.35D, 37(1)] On appeal by the department to the Supreme Court held; Even though there was a raging controversy amongst the High Court’s on whether expenditure for raising capital is capital or


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revenue in nature, the judgement of the jurisdictional High Court is binding on the assessee and any view contrary thereto is a "prima facie" mistake that requires adjustment .Accordingly, the order passed by the CIT (Appeals), the Income Tax Appellate Tribunal and also the order of the Gujarat High Court impugned herein cannot sustain and are set aside as they have wrongly held that the issue was debatable and could not be considered in the proceedings under section 143 (1) of the Act.( AY. 1994-95) CIT v. Raghuvir Synthetics Ltd. (2017) 394 ITR 1/ 151 DTR 153 (SC) S. 143(2) : Assessment–Notice–Notice served on the old address- Assessment was held to be void. [S. 282,292BB, General Clauses Act, S. 27] Dismissing the appeal of assessee the Court held that; the issue of a notice u/s 143(2) bearing the wrong (old) address of the assessee does not amount to a valid service of the notice u/s 282 r.w.s. 27 of the General Clauses Act. The non-service of a notice u/s 143(2) before the expiry of 12 months from the end of the month in which the return was filed renders the assessment void. As the assessee objected to the same before completion of proceedings, the assessment order is not saved by s. 292BB.In the above view, as the position is self evident on a plain reading of Section 143(2) of the Act read with Section 127 of the General Clauses Act, thus no substantial question of law arises for our consideration.( ITA No. 1382 of 2014, dt. 07.02.2017)( AY.2006-07) CIT v. Abacus Distribution Systems(India)Pvt. Ltd. (Bom.)(HC); www.itatonline.org S. 143(2) : Assessment–Notice-if the Department fails to produce evidence relating to the issue and service of the s. 143(2) notice, an adverse inference has to be drawn as per s. 114 of the Evidence Act. The assessment order has to be held invalid and void ab initio. On merit addition on account of share application money was deleted. [S. 68,143(3)] Dismissing the appeal of the revenue, the Tribunal held that; if the Department fails to produce evidence relating to the issue and service of the s. 143(2) notice, an adverse inference has to be drawn as per s. 114 of the Evidence Act. The assessment order has to be held invalid and void ab initio. On merit addition on account of share application money was deleted.(ITA No.5626/DEL/2012 & CO 319/DEL/2016, (dt. 30.03.2017)( AY. 2004-05) ITO v. Gravity Systems Pvt.Ltd. (Delhi)(Trib.), www.itatonline.org S. 143(2): Assessment-Notice-Proper service of the notice u/s. 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorized person appeared on behalf of the assessee before the AO does not mean that the notice was properly served. [S. 143(3)] Allowing the appeal the Tribunal held that;Proper service of the notice u/s 143(2) is mandatory and its failure renders the assessment order void. The fact that an unauthorized person appeared on behalf of the assessee before the AO does not mean that the notice was properly served.( ITA Nos. 181 & 426/Kol/2013, dt. 30.11.2016)(AY. 2008-09) DCIT v. M. K. Enterprise (Kol)(Trib); www.itatonline.org S. 143(2): Assessment-Notice –Affixture of notice in the first instance for the reason of that otherwise limitation of service would have expired was held to be in valid. [S. 282, 292BB] Allowing the appeal the Tribunal held that ,affixture of notice in the first instance for the reason of that otherwise limitation of service would have expired was held to be in valid. S. 292BB introduced w..e.f 1stApril 2008 was not applicable for the assessment year 2000-01 .( AY.2000-01) Heaven Distillery (P) Ltd. v.ITO (2017) 152 DTR 10 /185 TTJ 197 (Mum.)(Trib.)


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S. 143(3): Assessment–Certified copies of assessment order- Assessing Officer must provide the certified copies of assessment proceedings on payment of amount payable for providing such copies. [S. 144, 153C, Arts. 226, 227] Application for certified copies of the order was rejected by the Assessing Officer.On writ the Court held that; every assessee to seek for the certified copies of the entire order sheet of any assessment proceeding. While such copies were sought, even if the details had not been provided, since the entire order sheet had been sought, it was open to the authorities to compute whatever was the amount payable for providing such certified copies and issue a notice and demand the assessee to deposit the amount. On deposit of the amount, the assessee was entitled to be handed over the requested certified copies. (AY. 2010-2011 to 2015-2016) Shankarlal Khaitan v. ACIT (2017) 393 ITR 484 (Orissa)(HC) S.143(3): Assessment-Bogus purchases-Cross examination-A statement by the alleged vendor that the transactions with the assessee are only accommodation entries and that there are no sales or purchases cannot be relied upon by the AO unless the assessee is given the opportunity to cross-examine the vendor. [S.131] Dismissing the appeal of Revenue the, Court held that;the question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in his statement had stated that there were no sales / purchases but the transactions were only accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact that the assessee had disputed the correctness of the above statement and admittedly the assessee was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had sought remand report and even at that stage the genuineness of the statement has not been established by allowing cross examination of the person whose statement was relied upon by the revenue. In these circumstances, the decision of the Tribunal being based on the fact, no substantial question of law can be said to arise from the order of the Tribunal. The appeal is dismissed with no order as to costs. (ITA No. 4299 of 2009, dt. 22.02.2011) CIT v. Ashish International (Bom.)(HC); www.itatonline.org S.143(3): Assessment-Ex-parte order not ordinarily be passed-Order was seta-side. [S.147, 148] The Court held that, ex-parte proceedings and ex-parte orders are generally frowned at by the Courts of law unless there are compelling reasons or good justification for the same.It is of utmost importance that any proceedings which is likely to affect the civil rights of a party is conducted strictly in accordance with the principles of natural justice.Audi alteram partem does not enshrine a principle of mere formality.It embodies a very valuable right of a citizen, i.e.not to be condemned unheard.Hence, to the extent possible, courts insist on the principles of natural justice being observed in the matter of conducting proceedings which culminate in orders likely to affect the rights of the party concerned. (AY. 2007-2008 to 2011-2012 ) Korp Resources P. Ltd. v. DCIT (2017) 390 ITR 336/ 149 DTR 23 /293 CTR 571 (Cal.)(HC) S. 143(3): Assessment-An addition towards income cannot be made merely on the basis of the statement of a third party that an amount has been paid to the assessee in the absence of conclusive evidence. [S. 131] The AO made the addition on the basis of the statement of the seller of the land, who in his statement before the DDIT (Inv.) has stated that the sale consideration was at Rs. 2,10,000/- per


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bigha and he had received total sale consideration of Rs. 35,00,000/-. The Counsel has not refuted the statement. However, he submitted that the statement was not bonafide but Shri Hanuman Yadav was black mailing the assessee. He submitted that interestingly the Revenue has accepted the sale consideration of the nearby vicinity. The CIT (A) affirmed the view of the AO in this respect. Now the issue which requires our consideration is whether the addition can be sustained solely on the basis of the statement of Shri Hanuman Yadav, when there is no material placed on record that Shri Hanuman Yadav has made any claim against the assessee in any court of law seeking cancellation of sale deed or filing a recovery suit. The Coordinate Bench of the Tribunal after following the ratio laid down by Hon’ble Supreme Court under the similar circumstances in Union of India vs. T. R. Verma 1957 SC 882 and Kishan Chand Chellaram vs. CIT, 125 ITR 713 (SC) has held in the case of Ghanshyam Das Agarwal vs. ITO in ITA No. 1161/JP/2010 that in the absence of any conclusive evidence the document could not have been disbelieved. The D/R could not point out any binding precedent wherein it has been held that the oral statement would over ride the documentary evidence. Therefore, respectfully following the decision of the Coordinate Bench in the case of Ghanshyam Das Agarwal vs. ITO in ITA No. 1161/JP/2010, we are of the view that the AO was not justified to make addition solely on the basis of the statement of Shri Hanuman Yadav when there was a registered sale deed and more particularly when the maker of statement has not challenged the sale deed before any court of law. It is also not placed on record whether the sale deed was executed under coercion. Therefore, considering the totality of facts of the present case, we hereby direct the AO to delete the addition. (ITA No. 467/JP/2011 and 519/JP/2011, dt. 25.11.2016) ( AY. 2007-08) Sharad U. Mishra v. DCIT (Jaipur)(Trib.); www.itatonline.org S.143(3): Assessment-Bogus purchases-One to one relationship/nexus between the purchases and sales has not been established by the assessee, the purchases have to be treated as bogus and 12% of the purchase cost is assessable as profits. [S.69C] Dismissing the appeal of the assessee the Tribunal held that; the assessee has failed to place on record any material evidence to controvert the findings of the CIT(A). In this view of the matter, we uphold the order of the CIT(A) on this issue of bringing to tax in the assessee’s hands the profits embedded in the bogus purchase @ 12% of the purchase cost i.e. Rs. 5,15,377, since the direct one to one relationship/nexus between the said purchases and sales have not been established by the assessee. ( ITA No. 2601/Mum/2016, dt. 18.01.2017)( AY. 2009-10) Kiran Navin Doshi v. ITO (Mum.)(Trib.); www.itatonline.org S. 143(3):Assessment-Dumb documents–On money- Flats were sold at concessional rates ,additional was held to be not justified on mere suspicion. [S.145] Allowing the appeal of the assessee, the Tribunal held that; Loose papers which do not have full details are "dumb documents" and have no evidentiary value. The fact that the assessee sold the flats at a concession does not mean that that the difference between sale value and market value can be assessed as income. The onus is on the AO to make inquiries from the buyers and bring incriminating evidence on record to show that the assessee sold flats at a higher rate. Accordingly the addition made on a pure guess without any material or evidence was held to be not justified. ( ITA No. 1502/Ahd/2015, dt. 14.02.2017)(AY. 2011-12) Nishant Construction Pvt. Ltd. v. ACIT (Ahd.)(Trib.) www.itatonline.org S. 143(3) : Assessment–Validity-Return selected for scrutiny in violation of CBDT guidelines–assessment order passed is ab-initio-void. Return filed by the assessee manually selected for scrutiny without obtaining prior approval of Chief Commissioner of Income Tax being in violation of CBDT guidelines in F. No. 225/93/2009/IT.II, scrutiny assessment made by A.O. was without jurisdiction. (AY. 2008-09) JCIT v. S. F. Chougale (2017) 146 DTR 213 (Pune)(Trib.)


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S.143(3):Assessment-Addition made on basis of dumb paper was held to be not valid.[S. 132] Tribunal held that the , Addition made on basis of dumb paper was held to be not valid.(AY. 2004-05 to 2008-09) Ashok Nanda v.DCIT (2017) 54 ITR 54 (Indore)(Trib.) S.143(3): Assessment – Assessment was done without following the guidelines of scrutiny and without taking the approval, the order was held to be bad in law. [S.133A, 143(2)] The issue in the appeal is that, the assessee claims that its case was not selected for scrutiny under CASS but was selected manually. For selection of any return for scrutiny manually by the Assessing Officer, the requirement of guidelines issued for this purpose for relevant assessment year was that the same should be after obtaining approval of the CCIT/DGIT. Since no such approval was received, the AO had no jurisdiction to proceed with the scrutiny assessment. After the AO’s oder an appeal was filed before the CIT(A) wherein the AO’s order was upheld, thereafter the assessee moved an application under the Right to Information Act, wherein a specific question that whether its case was selected for scrutiny under CASS was asked by the assessee and in case it was not selected under CASS, why the same was picked up for scrutiny. The assessee also asked that under which norms the case was selected for scrutiny and whether relaxation in selection of cases in which survey action was carried out on fulfilling the criteria was available in the said norms or not. In reply it was stated that the guidelines/instructions were followed but since the guidelines were confidential in nature, the copy of same could not be provided. In reply to the next question whether the case was selected under CASS, the categorical answer was ‘No’. The said RTI reply further stated that the case was selected for scrutiny in view of the guidelines contained in F.No.225/93/2009/ITA.II. On appeal before the Tribunal it was held that the AO had failed to follow the guidelines issued for selecting the cases for manual scrutiny and as the case was selected manually and no previous approval of CCIT was obtained, the AO lacked jurisdiction to carry out the scrutiny assessment and the assessment order passed by AO was bad in law.(AY.2008- 09) S.F. Chougule v. Jt. CIT (2017) 183 TTJ 779 (Pune) (Trib.) S. 144: Best judgment assessment-Principle of telescoping-Assessee unable to show that particular amount from particular bank account used for purchase of specific property--No question of telescoping being permitted.[S. 142(1), 271(1)(b), 276CC] Dismissing the appeal the Court held that; the source of income was being generated continuously by the assessee and his other co-accused and further the assessee had been unable to show before the authorities of the Department that a particular amount from a particular bank account had been used for the purchase of specific property, movable and immovable, and in the said circumstances, there could be no question of any telescoping being permitted. Liability to tax remains so long as it is income of particular assessment year whether derived from legal or illegal source .Attachment of properties under Criminal Law Amendment Ordinance, 1944 and liability of forfeiture to State Government not material. Gauri Shankar Prasad (Dr.) v. ITAT (2017) 393 ITR 635 (Patna)(HC) S.144: Best judgement assessment–Method of accounting–Trading in iron scrap-Failure to produce books of accounts was held to be justified in rejecting the books of account ,however the AO was directed to apply GP at 5% of turnover. [S.145(3)] The assessee is in the business of trading in iron scrap. AO issued the notice u/s 143(2) and directed to produce the books of account. As the books of account was not produced he estimated gross profit at 20 per cent of turnover. In appeal CIT(A) held that when books of account were not produced, Assessing Officer could not reject same and make estimated addition. On appeal by


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the revenue , allowing the appeal the Tribunal held that ; Failure to produce books of accounts was held to be justified in rejecting the books of account ,however the AO was directed to apply GP at 5% of turnover.( AY. 2009-10) ITO v. Jayaben K. Ghelani(Smt.) (2017) 163 ITD 560 (Rajkot) (Trib.) S.144C: Reference to dispute resolution panel-Forwarding of draft assessment order-Actual service of copy of draft assessment order necessary-Time limit of nine months from end of month in which draft order forwarded to assessee for Dispute Resolution Panel to pass order-Receipt of draft assessment order dated 26-3-2014 on 22-8-2014-Jurisdiction of Dispute Resolution Panel to pass order did not lapse on 31-12-2014. High Court can remand case to Dispute Resolution Panel even though time limit would have expired. Court held that ;Time limit of nine months from end of month in which draft order forwarded to assessee for Dispute Resolution Panel to pass order. Receipt of draft assessment order dated 26-3-2014 on 22-8-2014Jurisdiction of Dispute Resolution Panel to pass order did not lapse on 31-12-2014.High Court can remand case to Dispute Resolution Panel even though time limit would have expired.The order of the Dispute Resolution Panel, Bengaluru, dated June 22, 2015 was set aside and the Dispute Resolution Panel, Bengaluru was directed to take up form 35A filed by the assessee. (AY. 2008-2009)) Dy.CIT v. Rain Cements Ltd.(2016) 243 taxman 496 / (2017) 392 ITR 253 (T&AP) (HC) Editorial: SLP of assessee was dismissed, Rain Cements Ltd. v.Dy.CIT (2017) 390 ITR 3 (St.)/ 245 Taxman 58 (SC) S.144C : Reference to dispute resolution panel-Assessment u/s. 143(3) making certain adjustment to ALP without passing draft assessment order was held to be invalid. [S.92C] Allowing the appeal the Tribunal held that; AO passed the order along with issued the demand notice and show cause notice for levy of penalty. The AO had issued covering letter where it says that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand was crystallized and demand notice was issued. The AO not followed the correct procedure as provided in the Statute and has passed final assessment order without passing draft assessment order which is against the provisions of the Act and hence, the same is invalid in law. Therefore the same was set aside. ( AY. 2010-11) Soktas India (P.) Ltd. v. ACIT (2017) 162 ITD 366 (Pune) (Trib.) S. 144C: Reference to dispute resolution panel-The lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assesee may file objections with the DRP, seeking its directions to the AO was quashed . Allowing the appeal of assessee the Tribunal held that;The lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assesee may file objections with the DRP, seeking its directions to the AO, is only a procedural irregularity, which does not impinge on the jurisdiction on the AO to pass the assessment order. The assessee has no vested right against procedure. However, as the lapse was held to be fatal in Vijay Television 369 ITR 113 (Mad), the same has to be followed. Respectfully following the decision in Vijay Television (P.) Ltd. (supra), we hold the assessment in the present case as bad in law. In consequence, the assessee is only liable for tax on its’ returned income. CIT v. Shelly Products ( 2003) 261 ITR 367 (SC). The assessment failing, we do not consider it relevant or necessary to address the issue arising in quantum assessment on merits.( ITA No. 818/Mds/2015, dt. 30.12.2016)(AY. 2010-11) Daewon Kang Up Co. Ltd. v. DDIT (2017) 147 DTR 201 / 184 TTJ 426 (Chennai)(Trib.) S.144C:Reference to dispute resolution panel -DRP has the power to entertain a new claim even in absence of a revised return- Direction is binding on the Assessing Officer.[S.139]


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DRP has the power to entertain a new claim even in absence of a revised return . Direction issued by Panel is binding on Assessing Officer. DRP directed to treat sales tax remission as capital receipt. Assessing Officer reducing value of sales tax remission from block affixed assets which is violation of the provision. (AY. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.)(Trib) S.145:Method of accounting-Method of accounting consistently followed and accepted by Revenue in earlier years cannot be rejected. Allowing the appeal of the assesse, the Court held that; the Tribunal was not right in law in rejecting the project completion method which was followed consistently by the assessee and instead applying the work-in-progress method. (AY. 2001-2002) Manjusha Estate P. Ltd. v. ITO (2017) 393 ITR 644 (Guj.)(HC) S. 145: Method of accounting-Service charges from sister concern-uncertainty in realising the receivable-Deletion was held to be not proper-Remedy is available of rectification. [S.4, 154] Allowing the appeal of the revenue , the Court held that;with regard to the service charges from the sister concern and students, even if it was later realised by the assessee that some of the receivables in accordance with mercantile system were not actually realised, the remedy available to the assessee was to seek rectification. It was not right to delete the addition made on this. CIT v. Universal Empire Educational Society (2017) 393 ITR 502/80 taxmann.com 44 (Ker.)(HC) S. 145: Method of accounting–Valuation-Average price principle-Decision of Tribunal after considering material on record that method of accounting could not be changed is a question of fact. [S. 256(2)] Dismissing the application of the Revenue the Court held that; The Tribunal recorded a finding of fact on the basis of the material on record that no fault could be found with the method of valuation, by applying the "average price principle". The Tribunal found that in some years, by adopting the method of average price principle, even the assessee would have been adversely affected. The Tribunal found that during the last years where the said method of accounting had affected the assessee, the assessee did not change the method of valuation and even the Revenue did not point out the fact to the assessee. The Tribunal rightly held that merely because the change of the method would help the Revenue in a particular year, the Assessing Officer was not at liberty to change the method of valuation that was followed by the assessee for a considerably long period. The findings of fact recorded by the Tribunal do not give rise to any substantial question of law. CIT v. Vidarbha Tobacco Products P. Ltd. (2017) 393 ITR 218/ 246 Taxman 262/ 294 CTR 103 / 149 DTR 132 (Bom.)( HC) S. 145: Method of accounting -Valuation of closing stock--Assessee under obligation to create stock of levy sugar at controlled levy price through public distribution system--Closing stock of levy sugar cannot be valued at sale price of free sale sugar. Dismissing the appeal of the revenue, the Court held that; the assessee was under an obligation to create stock of levy sugar at the controlled levy price through the public distribution system, therefore, closing stock of levy sugar cannot be valued at sale price of free sale sugar. (AY. 2006-2007) PCIT v. Kishan Sahkari Chini Mills Ltd (2017) 393 ITR 507/ 246 Taxman 293 (All.)(HC)


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S. 145:Method of accounting- If the AO has not rejected the books of account, it means that the assessee has maintained the books of accounts in accordance with the prescribed standards as per s. 145 of the Act. If so, the AO is not entitled to make any addition on account of sale of goods out of books or for investment in stock out of undisclosed sources. Dismissing the appeal of the revenue, the Court held that ; If the AO has not rejected the books of account, it means that the assessee has maintained the books of accounts in accordance with the prescribed standards as per s. 145 of the Act. If so, the AO is not entitled to make any addition on account of sale of goods out of books or for investment in stock out of undisclosed sources. ( ITA No. 165 of 2010, dt. 04.05.2017) CIT v. Pashupatinath Agro Food Products Pvt. Ltd. (All)(HC) : www.itatonline.org S. 145: Method of accounting–Estimation of income on the basis of material on record and on the basis of statement is a question of fact.[S. 132(4), 260A] Dismissing the appeal the Court held that ; estimated income of the assessee was arrived at on the basis of the material on record and on various statements made by the employees and directors during the search and survey proceedings. The HC further observed that subsequent retraction of statements was not found acceptable by the authorities and therefore, the findings of the authorities below do not give rise to any substantial question of law. (AY. 2006-07, 2007-08) Punjab Sind Dairy v. Dy.CIT (2017) 146 DTR 21 (Bom.)(HC) S. 145: Method of accounting–Project completion method–Justified in debiting costs such as advertisements, interest, brokerage, incurred on account of agreement with the purchasers- Writing off 45% of land which he is required to leave open for roads, parks, schools, colleges, hospitals, clubs and community sites under HDRUA, is allowable . Dismissing the appeal of the revenue; the Court held that; project completion method is a known and recognised method of accounting. As regards allowability of expenses debited for writing off of land, the HC confirming the Tribunal’s order, held that the assessee is required to keep 45% of land vacant for government or community sites and thus, has complied with the law laid down by HDRUA. Further, in the previous as well as subsequent assessment years, such claim has been accepted in the original assessment proceedings. (AY. 1994-95) CIT v. DLF Universal Ltd. (2017) 291 CTR 532/ 145 DTR 296 (Delhi) (HC) S.145:Method of accounting-Valuation of closing stock—Revised return-Tribunal finding that method of valuation by Assessing Officer was correct, question of fact.[S.139(5),260A] Dismissing the appeal of the assesse the Court held that ; there was no error in the approach of the Assessing Officer as well as the Tribunal as no material to support assessee's plea of wrong valuation of finished goods needing rectification in return. Assessing Officer was based on sales that were quoted by the assessee in his return and not hypothetical and that normally the stock was to be valued either at the market price or at the cost price and that the assessee had adopted an unrealistic method of valuation. (AY. 1998-1999 ) Pooja Rice and General Mills v. CIT (2017) 391 ITR 140 (P&H)(HC) S.145:Method of accounting-Rejection of accounts-Decline in gross profit-Suppression of sales–Deletion of addition was held to be justified. Dismissing the appeal of the revenue, the Court held that; Assessing Officer making addition on account of suppressed sales due to decline in gross profit. Tribunal finding that there was justification for decline in gross profit and deletion of addition as in earlier years. No question of law.(AY. 2006-2007 ) CIT v. Parth laboratories P. Ltd. (2017) 391 ITR 70 (Guj.)(HC)


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S. 145: Method of Accounting-Gross profit rate-Estimate of 32 per cent. to be adopted considering average profit of six years shown by assessee. The Court held that; Assessing Officer estimating gross profit rate at 35 per cent.. Commissioner (Appeals) and Appellate Tribunal abruptly deducting profit without assigning reasons. Court held estimate of 32 per cent. to be adopted considering average profit of six years shown by assessee. CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.)(HC) S.145: Method of accounting–Weighted average cost of valuing stock is an accepted method of accounting , which is approved by accounting standard issued by the ICAI. AO is not entitle to disregard the method if the assessee has consistently followed the said method. Dismissing the appeal of the Revenue , the Court held that, in the case of manufacture of jewelry, weighted average cost of valuing stock is an accepted method of accounting , which is approved by accounting standard issued by the ICAI. AO is not entitle to disregard the method if the assesse has consistently followed the said method. ( AY. 2009-10) (ITA No. 297 of 2014 dt 6-03-2017) CIT v. Uday M.Ghare (Bom.)(HC),www.itatonlne.org. S. 145: Method of accounting-Application of net profit rate of 9 % on gross receipt was held to be justified. Dismissing the appeal of the assessee the Court held that, the estimation of net profit rate at 9% by the Tribunal was not arbitrary or unreasonable warranting interference and it had adopted a plausible view. (AY.2005-2006, 2007-2008, 2008-2009) S.P. Construction v. ITO(2016) 68 taxmann.com 334/ (2017) 390 ITR 314 (P&H)( HC) S. 145 : Method of accounting-Foreign company which has established place of business in India, as per the provisions of Companies Act, 1956, AS-7 is applicable .[S. 44AA(2),44BBB(1), AS-7, Companies Act, 1956, 227(4A)] Dismissing the appeal of the revenue, the Tribunal held that; Foreign company which has established place of business in India, as per the provisions of Companies Act, 1956, AS-7 is applicable hence rejection of books of account was held to be not justified to a foreign company. ( AY. 2009-10) ADIT v. Shandong Tiejun Electric Power Engineering Co. Ltd. (2017) 163 ITD 94 (Ahd.) (Trib.) S. 145: Method of accounting–Mercantile system of accounting -loss incurred on account of short realisation of export proceeds at end of relevant year was held to be allowable though realised in subsequent year. [S. 28(i)] Dismissing the appeal of the revenue, the Tribunal held that when assesse followed mercantile system of accounting loss incurred on account of short realisation was held to be allowable, though realised in subsequent assessment year. ( AY. 2009-10) ACIT v. Allied Gems Corporation (Bombay) (2017) 163 ITD 56 (Mum.)(Trib.) S. 145A: Method of accounting-Valuation of closing stock-Unpaid excise duty on goods in stock was not includible in valuing closing stock. [S.145] Dismissing the appeal of the revenue, the Court held that; unpaid excise duty on goods in stock was not includible in valuing closing stock.(AY. 2003-2004 to 2008-2009) CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421 (Raj.)(HC) CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421 (Raj.)(HC)


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Editorial : SLP of the revenue was dismissed ,CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 392 ITR 2 (St.) S. 147: Reassessment-Audit objections-If the AO disagrees with the information/ objection of the audit party and is not personally satisfied that income has escaped assessment but still reopens the assessment on the direction issued by the audit party, the reassessment proceedings are without jurisdiction. [S.148] Allowing the appeal of the assessee the Court held that;If the AO disagrees with the information/ objection of the audit party and is not personally satisfied that income has escaped assessment but still reopens the assessment on the direction issued by the audit party, the reassessment proceedings are without jurisdiction.( AY.1991-92) Larsen & Toubro Ltd. v. State of Jharkhand (SC) www.itatonline.org S. 147: Reassessment-After the expiry of four years- Disallow part of expenditure-No allegation of failure to disclose material facts necessary for assessment, notice was held to be not valid. [S. 37(1),148] Allowing the petition,the Court held that ; there was no allegation that there was any failure on the part of the assessee in disclosing the true and correct facts due to which, there was escapement of income from the assessment. The notice for reassessment was not valid.( AY. 2009-2010) Micro Inks P. Ltd. v. ACIT (2017) 393 ITR 366/ 246 Taxman 143 (Guj.)(HC) S. 147: Reassessment-After theexpiry of four years-Nothing to show failure by assessee to disclose true and correct facts, notice was held to be invalid. [ S.37(1), 40(a)(ia),148, 194H] Allowing the petition, the Court held that; where during original assessment proceedings the assesse has filed all necessary details, the reopening of assessment beyond the period of four years was held to be in valid. (AY. 2009-2010) Navkar Share and Stock Brokers P. Ltd v. ACIT (2017) 393 ITR 362/ 77 taxmann.com 152 (Guj.)(HC) S. 147:Reassessment-After the expiry of four years-Cash credits Notice on grounds that loans were not genuine and cost of construction was inflated was held to be invalid as there was no failure to disclose material facts necessary for assessment. [S. 68, 69,148] Allowing the petition the Court held that; there was no failure to disclose material facts necessary for assessment therefore notice issued after expiry of four years on the alleged ground that loans were not genuine and cost of construction was inflated was held to be invalid. (AY.2009-2010) Rajivraj Ranbirsingh Choudhary (Dr.) v. ACIT (2017) 393 ITR 650 / 79 taxmann.152 / 149 DTR 153 (Guj.)(HC) S.147: Reassessment- After the expiry of four years- Brokers client code modification- Failure by assessee to substantiate loss by producing evidence-Assessee participating in reassessment proceedings without pressing its earlier objections raised, reassessment was held to be valid. [S.148] Dismissing the petition, that the Assessing Officer had received credible information regarding income escaping assessment for the relevant assessment year. He had applied his mind to it and had informed the assessee of his intention to invoke section 148 of the Income-tax Act, 1961 and had given his reasons for doing so. The assessee had objected to the reasons furnished by the Assessing Officer for invoking section 148. The assessee had neither insisted upon disposal of its objections filed prior to the reassessment nor had pressed its objections but had participated in the reassessment proceedings. The assessee had also furnished the documents required by the Assessing Officer in the proceedings under section 148 after raising the objections. The conduct of the assessee allowed one to infer that it had waived its rights to have the objections disposed


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of, or alternatively, the assessee had withdrawn its objections to the invocation of section 148. From the reasons supplied by the Assessing Officer it could be inferred that he had applied his mind to the issue. The assessee had not demonstrated any material to substantiate that the loss from brokers by client code modification being booked in its accounts was placed before the Assessing Officer for consideration and that, the Assessing Officer had taken a view after production of the material facts by the assessee. Rampuria Industries and Investments Ltd. v. Dy. CIT (2017) 391 ITR 18/ 149 DTR 148 (Cal.)( HC) S.147 :Reassessment-After the expiry of four years-On money-No new tangible material available showing income escaped assessment-Reassessment notice not valid [S.69A, 143(3), 148]. Allowing the petition the Court held that; the reopening was not permissible, more particularly in the absence of any other tangible material available with the Assessing Officer that in the year 2005-06, the assessee had received any on-money and when the notice was issued beyond the period of four years and more particularly when the original assessment was done under section 143(3) of the Act. (AY. 2005-2006) Sopan Infrastructure P. Ltd v. ITO (2017) 391 ITR 107/ 78 taxmann.com 170 (Guj.)(HC) S. 147: Reassessment–After expiry of four years -No material to show that claim was wrongly allowed in original assessment- Reassessment was held to be not valid. [S. 80IB,148] Court held that, the notice of reassessment had been issued after four years. The reason recorded was that the profits shown by the assessee in comparison to other builders were very high and the abnormal rate of profit declared by the assessee appeared to be influenced by 100% deduction available under section 80-IB. No reasons were assigned by the respondent-authority to claim that the earlier Assessing Officer had wrongly allowed the claim of the assessee. The notice was not valid.(AY. 2003-2004) Jalaram Developers v. ITO (2017) 390 ITR 83 (Guj.)(HC) S. 147: Reassessment-Merger–Issue which was subject matter of appeal reopening of assessment was held to be bad in law. [S. 148, 246] Allowing the petition, the Court held that; if the subject matter of the reopening is also the subject matter of appeal, the principle of merger would apply. There cannot be two separate considerations to the same subject matter relatable to the income, one by the appellate authority and another by the AO in fresh assessment. ( SLP. No. 16644 of 2012, dt. 14.06.2017)( AY. 2010-11) Radhaswami Salt Works v. ACIT (Guj.)(HC), www.itatonline.org S. 147: Reassessment-Issue decided by High Court in earlier years – Reassessment was held to be bad in law- Writ is maintainable.[S. 148, Art.226] Allowing the appeal of the assessee the Tribunal held that ; when the issue was decided in favour of assessee by High Court in earlier years, reassessment was held to be bad in law. Writ is maintainable. (AY. 2006 -07) Prabhadevi Singhvi (Smt.) v.UOI (2017) 294 ITR 139 (Raj.)(HC) S. 147: Reassessment-Best judgment assessment-Failure to file return-Failure to comply with notices issued— Reassessment was held to be valid.[S. 142(1), 144,148] Dismissing the appeal of the assesse the Court held that; Corroborative evidence and materials including movable and immovable assets and statements of third parties was held to be sufficient for reassessment.


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Gauri Shankar Prasad (Dr.) v. ITAT (2017) 393 ITR 635 (Patna)(HC) S.147: Reassessment-Change of opinion—Cash credits-Reopening on mere change of opinion by subsequent Assessing Officer is not permissible.[S. 68, 133, 148] Allowing the petition the Court held that; the reasons on which the assessment was sought to be reopened were already gone into in detail by the Assessing Officer while framing the scrutiny assessment and after raising the specific queries and only thereafter the Assessing Officer framed the assessment. Reopening was on a mere change of opinion by the subsequent Assessing Officer and it was not permissible. The notice under section 148 of the Act was to be quashed. (AY .2011-2012 ) Orient News Prints Ltd. v. Dy. CIT (2017) 393 ITR 527/ 78 taxmann.com 108 (Guj.)(HC) S.147: Reassessment–Cash credits–Unsecured loans Subsequent information discovered as bogus- Reassessment was held to be justified. [S. 68 , 131, 133A, 143(1), 148] Dismissing the petition the Court held that the initial assessment was not subjected to scrutiny and Subsequent information discovered that the unsecured loans was bogus, hence the reassessment was held to be justified. (AY. 2012 -13) Virbhadra Singh v. Dy.CIT (2017) 291 CTR 439/ 146 DTR 65 (HP)(HC) Vikramaditya Singh v. Dy.CIT (2017) 291 CTR 439/ 146 DTR 65 ( HP)(HC) Pratibha Singh v. Dy.CIT (2017) 291 CTR 439/ 146 DTR 65 (HP)(HC) S.147: Reassessment-Agricultural land-Information rendering genuineness of municipal corporation certificate produced by assessee doubtful-Notice for reassessment was held to be justified.[ S. 2(14), 143(3), 148] Dismissing the petition the Court held that ; The Assessing Officer had recorded that fresh material was found which proved that the evidence submitted by the assessee regarding the distance of land from the municipal corporation was incorrect. The retired executive engineer had stated that he had never issued the certificate produced as evidence by the assessee and the Road and Building Division of the Municipal Corporation had stated that the copy of such a certificate was not found in their records. The information collected by the Department after the assessment was over in the form of statement of the Additional Assistant Engineer and the certificate issued by the Deputy Collector of the Municipal Corporation indicated that the distance between the two limits was much shorter than 8 kilometres. The very foundation of the assessee's case of the land being at a distance of more than 8 kilometres from the outer limit of the Municipal Corporation failed. The notice issued under section 148 invoking section 147 for reopening was valid and proper. (AY. 2008-2009) Thakorbhai Maganbhai Patel v. ITO(2016) 74 taxmann.com 225; (2017) 393 ITR 612 (Guj.)(HC) Editorial: SLP of assessee was dismissed,Thakorbhai Maganbhai Patel v. ITO (2017) 391 ITR 346 (St.) S.147: Reassessment-Assessee was neither owner of land nor received any sale consideration-Reassessment was held to be not valid. [S.148, 226] Allowing the petition the Court held that; the assessee was never the owner of the land in question and in fact the subsequent sale deeds were executed by the original land owners.It was an admitted position that the respective assessee had never executed any sale deeds. Therefore, nothing was on record to show that any sale consideration was received by the respective assessee. The notice of reassessment was not valid.(AY. 2009-2010) Vinodbhai Shamjibhai Ravani v. Dy.CIT (2017) 393 ITR 491/ 79 taxmann.com 237 (Guj)(HC)


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S.147: Reassessment-Unexplained investment-CIT(A) holding that no addition was either on the basis of report of valuation officer or of valuation of stamp duty- Reopening on the basis of District valuation officer was held to be bad in law.[S. 69, 148] Allowing the petition the court held that; an opinion given by the District Valuation Officer was not per se information for the purpose of reopening an assessment under section 147. Once having failed before the Commissioner (Appeals) to enhance the unexplained investment under section 69, relying upon the District Valuation Officer's report, thereafter, it was not open for the Assessing Officer to reopen the assessment under section 147 on the very same ground. Notice issued under section 148 for reopening could not be sustained. (AY. 2005-2006) Akshar Infrastructure P. Ltd. v. ITO (2017) 393 ITR 658 / 246 Taxman 353 (Guj.)(HC) S.147: Reassessment—Bogus transactions-Statement of third person not having live link with assessee's suspected income, the reassessment was held to be bad in law. [S.68, 133A, 148] Allowing the petition the Court held that; the statement of third person not having live link with assessee's suspected income, the reassessment was held to be bad in law . The material should have a live link with the assessee`s suspected income or non-disclosure of a material fact. That kind of live link was absent. Therefore the notice under section 148 read with section 147 of the Act was to be quashed. (AY. 1997-1998 to 2001-2002) AMSA India P. Ltd. v. CIT (2017) 393 ITR 157/ 82 taxmann.com 29 (Delhi)( HC) S. 147: Reassessment-Reassessment has to be based on "fresh material". A reopening based on reappraisal of existing material is invalid. [S. 148] Dismissing the appeal of the revenue,the Court held that;a reopening based on reappraisal of existing material is invalid. Reassessment has to be based on "fresh material".(ITA Nos.1058/2011, 1061/2011 & 1063/2011, dt. 18.05.2017)( AY. 1998-99, 1999-00, 2001-02 ) DIT v. Rolls Royal Industries Power India Ltd. (Delhi)(HC),www.itatonline.org S. 147: Reassessment-Objection raised by the assessee was not dealt with,Assessing Officer was directed to pass speaking order.[S. 142(1), 148] Allowing the appeal of the assessee the Court held that; Objection raised by the assessee was not dealt with, Assessing Officer was directed to pass speaking order. ( AY. 2011-12 ) Goa State Co–operative Bank Ltd. v. ACIT (2017) 151 DTR 273 (Bom.)(HC) S.147:Reassessment-Information received from Directorate of Revenue Intelligence regarding bogus purchases by assessee-Existence of tangible material-Directed the Tribunal to hear Department's appeals on merits. [S. 148] Allowing the appeal of the revenue, the Court held that ;the notes disclosed the source of information, the Directorate of Revenue Intelligence, which had sent information based upon the Commissioner of Central Excise's investigations. To add further conditions to the nature of discussions or reasons that the Officer authorising the notice would have to discuss in the note or decision was beyond the purview of the courts and was not justified. The orders of the Appellate Tribunal could not be sustained. The Appellate Tribunal was directed to hear the Department's appeals on their merits. (AY .2003-2004 to 2005-2006 ) PCIT v. Paramount Communication P. Ltd. (2017) 392 ITR 444 /79 taxmann.com 409 (Delhi)(HC) S.147: Reassessment-Business income-Audit party-Assessing Officer reopened the assessment considering the audit objections and independently considering other issues, hence reassessment was held to be valid. [S. 28(i), 148] Dismissing the writ petition, that if the audit objections were compared to the reasons recorded for reassessment it would be clear that the Assessing Officer had included all objections pointed


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out by the audit party but had also included one more ground namely of the escaped capital gains on sale of land by the assessee.This ground was not part of the audit objections. This would indicate that the Assessing Officer had independently applied his mind and formed a belief that on the grounds mentioned by the audit party in its objection letter and the additional ground recorded in the reasons, income chargeable to tax in the case of the assessee had escaped assessment. In all the issues except ground (2a) recorded by the Assessing Officer in the reasons, there was detailed scrutiny during the original assessment. On such issues, therefore, the reopening even within a period of four years would not be permissible. However, even if one ground succeeds, as in the present case, reopening would have to be permitted. ( AY. 2009-2010) Elecon Engineering Co. Ltd. v. ACIT(2016) 76 taxmann.com 233/ (2017) 392 ITR 404 (Guj.)(HC) S.147:Reassessment-Wrong claim–reassessment was held to be valid. [S. 36(1)(viia). 148, Art. 226] Dismissing the writ petition, the Court held that; the assessee had claimed deduction to which it was not entitled which fact came to the notice of the Department only in 2010-11 when it was verified whether the assessee had rural branches. This was a valid reason for reopening the assessments. No prejudice had been caused to the assessee by the passing of the assessment order. It could appeal against the orders. The notices of reassessment were valid.(AY. 2007-08, 2008-09) Palakkad Dist. Co-op. Bank Ltd. v. Addl. CIT (2017) 392 ITR 539 /293 CTR 328 / 77 taxmann.com 349/ 147 DTR 236 (Ker.)(HC) S. 147:Reassessment-Information received from Investigation Wing- Reassessment was held to be justified. [S. 131,148] Dismissing the appeal, that the reasons to believe recorded by the Assessing Officer showed that specific information with respect to the nature of the credit received by the assessee from known entry operators had been shown to the Assessing Officer while recording his satisfaction in the issuance of notice under section 148 of the Income-tax Act, 1961. In such circumstances reassessment notice could not have been questioned. In the reassessment proceedings, the assessee was unable to satisfactorily explain the correctness of the entries in question. The share applicants appeared to be not in existence and did not answer the summons issued under section 131. Furthermore, given that the findings of the three lower authorities were concurrent, no question of law arose. ( AY. 2001-2002 ) Paramount Intercontinental P. Ltd. v. ITO (2017) 392 ITR 505 (Delhi)(HC) S.147: Reassessment-Date of issue would be date on which notice is handed over to Postal Department-Notice handed over to Postal Department before expiry of time hence notice was not barred by limitation. [S. 148, 149] Dismissing the petition the Court held that; the date of issue of notice under section 149 of the Income-tax Act, 1961 would be the date on which it was handed over for service to the proper officer, i.e., the Postal Department. The approval was granted by the Principal Commissioner of the Income-tax also on March 30, 2015. The notice was valid. (AY. 2008-2009) Rajesh Sunderdas Vaswani v. C.P. Meena, Dy.CIT (2017) 392 ITR 571 / 149 DTR 49 (Guj.)(HC) Editorial : SLP of the assesssee was dismissed,Rajesh Sunderdas Vaswani v. C.P. Meena, Dy.CIT (2016) 389 ITR 7(St.) S.147:Reassessment-Notice under compulsion by audit party was held to be not valid. [S.148]


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Allowing the petition the Court held that, the Assessing Officer had acted under the compulsion of the audit party which held a belief that on account of discrepancy in the turnover figures, income chargeable to tax had escaped assessment. The Assessing Officer was inclined to believe the assessee`s explanation that such discrepancy could be reconciled. The notice of reassessment was not valid. (AY. 2010-2011) Reckit Benckiser Healthcare India P. Ltd v. Dy. CIT(2016) 74 taxmann.com 260/ (2017) 392 ITR 336 (Guj.)(HC) S.147: Reassessment—Notice issued solely on objections of audit party was held to be not valid.[S. 148] Allowing the petition, the Court held that; the allegation that the assessment was reopened solely on the objection raised by the audit party and there was no independent formation of opinion by the Assessing Officer that the income had escaped assessment, had not been denied or disputed and hence the notice under section 148 of the Income-tax Act, 1961, could not be sustained. (AY. 2000-2001) Torrent Power S.E.C. Ltd v. ACIT (2017) 392 ITR 330/77 taxmann.com 57 (Guj.)(HC) S. 147: Reassessment–Accommodation entries-Ex-parte assessment orders passed in meantime set aside and permission granted to assessee to file objections–Cost was imposed on the assessee-AO was directed to dispose the objections of the assessee. [S.148 , Art. 226.] During the pendency of the writ petition five ex parte assessment orders were passed. The assesse filed the writ petition and contended that; since the Department had not complied with the court's order dated December 18, 2014 the section 148 proceedings would stand dropped: Court held that (i) the Department duly issued fresh communication dated January 15, 2015 and along with it supplied certified copy of the enquiry report containing details of the investigation conducted by the Department at the business premises of the assessee-company. The report made it clear as to why the section 148 notices were issued for reassessment. The assessee should have filed its objection to the reasons communicated by the Department and then it would have been incumbent upon the Assessing Officer to pass an order dealing with such objection before proceeding with the reassessment proceeding. (ii) That although there was no impediment to the Assessing Officer proceeding with the reassessment in respect of the assessee since there was no order of stay, yet, it would have been proper for the Department to obtain leave of the court before proceeding ex parte against the assessee since the writ petition was pending. Courts insist on the principles of natural justice being observed in the matter of conducting proceedings which culminate in orders likely to affect the rights of the party concerned. The assessee was permitted an opportunity to file its objections to the reasons recorded by the Assessing Officer for issuing the notices under section 148 of the Act so that the Assessing Officer might conduct the assessment proceedings afresh from that stage and dispose of the objections by a reasoned order, before proceeding, if at all with the reassessment in accordance with law and the principles of natural justice. If the assessee did not file its objections within the time indicated, the assessment orders dated March 31, 2015 would stand revived. The court imposed costs on the assessee and directed that in default of payment of the cost, the writ petition was to stand dismissed. (AY. 2007-2008 to 2011-2012 ) Korp Resources P. Ltd. v. DCIT (2017) 390 ITR 336/ 149 DTR 23 /293 CTR 571 (Cal.)(HC)


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S. 147: Reassessment-Cash credits-Share application money- Genuineness of transactions and creditworthiness of investors not established by assessee to satisfaction of Assessing Officer - Reassessment notice was held to be valid. [S.68 ,133A, 148] Dismissing the petition, the Court held that; that there was no full disclosure of material facts by the assessee and the reassessment notice was valid. The reassessment notice brought out certain aspects that information was received by the Department with respect to bogus entries made, resulting in a survey and impounding of certain documents. On the basis of those, certain inference were sought to be drawn. There could not be any denial that it amounted to tangible material. Whilst the assessee, replied to the queries addressed to it, the materials on record showed that there was no full disclosure. Therefore, the reassessment notice was valid. (AY. 2008-2009) Aravali Infrapower Ltd. v. DCIT (2017) 390 ITR 456 / 77 taxmann.com 322 (Delhi)(HC) S. 147: Reassessment-Deduction allowed after inquiry– Reassessment was held to be not valid. [S.24, 148] Since the entire claim of interest expenditure was before the Assessing Officer during the original assessment proceedings on which the Assessing Officer had raised several queries with respect to the interest paid by the assessee on the borrowed capital and deduction allowed after being satisfied, any attempt on part of the Assessing Officer to reopen this issue would be based on mere change of opinion. The notice was not valid. ( AY. 2010-2011 ) Aryan Arcade Ltd v. DCIT ( 2016) 72 taxmann.com 54/(2017) 390 ITR 67 (Guj)(HC) S. 147: Reassessment-Notice issued after three years of receipt of information from U. K. tax authority-Exclusive reliance upon U. K. revenue authorities' information not sufficient to attribute sum of money to assessee's income – Re assessment was held to be bad in law. [S.148] Dismissing the appeal of the revenue ,the Court held that; the exclusive reliance placed upon the U.K. revenue authorities' information was not sufficient to conclude that the amount which was attributed to the deceased assessee belonged to him. The materials showed that the amounts were brought to tax in the hands of the assessee's relative. There were pointers to omissions, leads that could have been developed by the Assessing Officer, such as queries to the bank for foreign inward remittances and their source. Having received information the Department could have proceeded through reassessment proceedings at the earliest opportunity. However, the Department chose to wait for three years and sought to reopen a decade late completed assessment and by then the assessee had died. The order of the Appellate Tribunal deleting the additions was not perverse. ( AY. 1982-1983 ) CIT v. Late K.M. Bijli (2017) 390 ITR 402/ ( 2017) 152 DTR 147 (Delhi) (HC) S. 147: Reassessment-Service of notice on accountant of assessee-company - Power of attorney given to accountant to conduct assessment proceedings not including authority to accept any fresh notice- Reassessment was not valid. [S. 148, 282 ] Dismissing the appeal of the revenue the Court held that ; the power of attorney had confined the authority to representation to conduct the case. It did not include in it any authority to accept any fresh notice. The person on whom the notice under section 148 was served was not the principal officer of the assessee nor was there any material to show that he had been authorised by the assessee to accept any notice. The Appellate Tribunal was correct in concluding that the reassessment proceedings were vitiated. (AY. 1996-1997 ) CIT v. Kanpur Plastipack Ltd. (2017) 390 ITR 381 (All) ( HC)


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S. 147: Reassessment-Client code modification by assessee's stock broker not showing any link to conclude income of assessee escaped assessment-Reason to suspect and not reason to believe-Notice without jurisdiction - Interim relief granted. [S. 148] On a writ petition: the court held that prima facie, the notice under section 148 of the Act was without jurisdiction as it lacked reason to believe that income chargeable to tax had escaped assessment. The reasons did not indicate the basis for the Assessing Officer to come to a reasonable belief that there had been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available was that there was a client code modification done by the assessee's broker but there was no link from there to conclude that it was done with a view to escape assessment of a part of the assessee's income. Prima facie, it was a case of reason to suspect and not reason to believe that income chargeable to tax had escaped assessment. Interim relief was granted. (AY. 2009-2010 ) Coronation Agro Industries Ltd. v. DCIT (2017) 390 ITR 464 (Bom.)(HC) S. 147: Reassessment –Depreciation- Truck terminus-Material giving rise to belief must be mentioned in notice - Material not appearing in notice – Notice was held to be not valid.[ S.32, 43(3), 148 ] The reason to believe to conclude that income had escaped assessment was not reflected in the order passed by the Assessing Officer. The Assessing Officer had not said that income from collection of parking fee from the trucks was attributable to building and not to the parking facility provided for the trucks. Even if the order recorded by the Assessing Officer were liberally construed, the requisite material or the nexus on the basis of which, the reasonable belief was reached did not exist for ordering the reassessment proceeding. Therefore the action initiated against the assessee under section 148 was without jurisdiction. (AY .2004-2005 ) Guwahati Metropolitan Development Authority v. CIT (2017) 390 ITR 137 / 291 CTR 297/ 77 taxmann.com 116/ 145 DTR 194 (Gauhati) (HC) S.147: Reassessment–Merely because the assessee's income is "shockingly low" and others in the same line of business are returning a higher income. The invocation of the jurisdiction on the basis of suspicions and presumptions cannot be sustained . [S.148] Allowing the petition , the Court held that ; though Explanation 2 of s. 147 authorizes the AO to reopen an assessment wherever there is an "understatement of income", the AO is not entitled to assume that there is "understatement of income" merely because the assessee's income is "shockingly low" and others in the same line of business are returning a higher income. The invocation of the jurisdiction u/s 147 on the basis of suspicions and presumptions cannot be sustained.(WP. No. 36483/2016, dt. 13.02.2017) (AY. 2012-13 ) Rajendra Goud Chepur v. ITO (AP&T)(HC);www.itatonline.org S. 147: Reassessment–Within four years–Loss on sale of share Misrepresentation of facts- Reassessment was held to be valid. [S. 73,148] Allowing the appeal of the revenue , the Court held that ; where during the original assessment proceedings, assessee misrepresented the facts relating to loss on purchase and sale of shares and explanation was accepted by AO, action of AO in allowing such loss based on incorrect facts would constitute reason to believe - Reopening to reassess such loss was permissible. (AY. 2001-02) CIT v. Eureka Stock & Share Broking Services Ltd.( 2016) 74 taxmann.com 114/ (2017) 291 CTR 313 (Cal.) (HC) S. 147 : Reassessment- Change of opinion – Reassessment was held to be not valid. [S.148]


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Dismissing the appeal of the revenue, the Court held that;where during the original assessment proceedings, the Assessing Officer raised query and sought information/materials which were supplied by the assessee, reopening of assessment was merely a reappraisal of the assessment records. A mere change of opinion did not constitute a “reason to believe” to reopen a concluded assessment. (AY. 2007-08) PCIT v. Anil Nagpal (2017) 291 CTR 272/ 145 DTR 209 (P&H)(HC) S.147 : Reassessment–Within four years–Query was raised in the assessment proceedings which were responded, non consideration of same in the assessment order, does not give raise to reassessment proceedings. [S.148] Dismissing the appeal of the revenue, where a query raised by the AO during the regular assessment proceedings was responded by the Assessee, then non-consideration of the same in the assessment order by the AO could not be an evidence of non-satisfaction and thus subsequent reopening was not justified. Followed Aroni Commercials Ltd. v DCIT (2014) 367 ITR 405(Bom)(HC). (AY. 2005-06) CIT v. Aroni Commercial Ltd. (2017) 393 ITR 673 /146 DTR 145 / 292 CTR 229 (Bom.)(HC) S. 147:Reassessment–Share premium-No material to suggest that the assesse had received any share premium- Reassessment was quashed.[S.148] Allowing the petition the Court held that ;where the AO had no material to suggest that the assessee had during the relevant period, received any share capital or share premium or any other sum from the companies controlled and managed by another individual, notice for reassessment was liable to be quashed.(AY. 2008-09) Sunbarg Trdelink P Ltd. v. ITO (2017) 146 DTR 182 (Guj) (HC) S. 147: Reassessment-A question relating to jurisdiction which goes to the root of the matter can always be raised at any stage- Issue of notice or service of notice in the setaside appeal can be raised- Matter was set aside to Tribunal to decide the jurisdictional issue of reassessment. [S.148] Allowing the petition the Court held that;(i) a question relating to jurisdiction which goes to the root of the matter can always be raised at any stage, be in appeal or revision,(ii) initiation of proceedings under section 147 of the Act and/or service of notice are all questions relating to assumption of jurisdiction to assess escaped income,(iii) if an issue has not been decided in appeal and the matter has simply been remanded, the same can be raised again notwithstanding with the fact that no further appeal has been preferred,(iv) in the reassessment proceedings, relief in respect of item which was not originally claimed cannot be claimed again as the reassessment proceedings are for the benefit of the Revenue and (v) relief can only be claimed in respect of the escaped income.The principles laid down by the Apex Court in the case of Sun Engineering Works P. Ltd. would not apply as the appellant is not claiming any deduction or relief on the taxability of any item in the reopened assessment proceedings which had not been claimed in the original assessment.( ITA No. 87 of 2009, dt. 30.03.2017)(AY. 1997-98). Teena Gupta v. CIT (All.)(HC);www.itatonline.org S. 147: Reassessment–Unabsorbed depreciation- Reassessment was held to be not permissible. [S. 32(2), 148] Allowing the petition the court held that; in the absence of any tangible material which alone could be the basis, for reopening of a completed assessment. The Department could not have issued the notice. The benefit of carrying forward the depreciation was limited by the pre-existing ruling that, it could be done for eight years . All that the amendment by the Finance , Act , 2002 did , with effect from April 1, 2002 , was to remove the cap which meant that the


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previously limited benefit was subjected to such restrictions.The notice was unsustainable and the reassessment was quashed. (AY. 2010-11) Motor and General Finance Ltd. v. ITO (2017) 393 ITR 60 (Delhi) (HC) S. 147: Reassessment-After the expiry of four years -Full particulars were furnished in the course of original assessment proceedings-Reassessment was held to be not valid. [S.40(a)(ia), 148] Allowing the appeal of the assessee the Tribunal held that, full disclosure was made in the course of original assessment proceedings and tax deducted was deposited before due date of filing of return, Reassessment was held to be bad in law. (ITA Nos.658 & 865/Mum/2014, dt. 26.05.2017)(AY. 2005-06) Crescent Construction Co. v. ACIT (Mum.)(Trib.),www.itatonline.org S.147: Reassessment-On the basis of information from investigation wing in order to verify the genuineness of transaction in modification of clients code, reassessment was held to be bad in law. [S. 45,143(3)] Allowing the appeal the Tribunal held that; Reassessment, On the basis of information from investigation wing in order to verify the genuineness of transaction in modification of clients code, reassessment was held to be bad in law. (ITA No. 501 & 502/Ahd/2016, dt. 09.03.2017)(AY. 2008-09) Sunita jain ( Smt) v. ITO (Ahd.)(Trib.);www.itatonline.org Rachna Sachin jain(Smt.) v. ITO (Ahd.)(Trib.);www.itatonline.org S. 147:Reassessment- Reasons recorded for reopening of the assessment based on factual error and finding based on the said recorded reason is held to be null and void – Refusal of exemption was held to be not justified. [S. 10(23C), 148] Allowing the appeals of the assessee the Tribunal held that; reasons recorded for reopening of the assessment based on factual error and finding based on the said recorded reason is held to be null and void . Tribunal also held that, merely because governing body of school had objects of religious nature and school did not have any objects of its own, it could not be said that objectives of assessee were also partly religious in nature, therefore refusal of exemption under section 10(23C) was not justified. (AY. 2007-08, 2008 -09) KMV Collegiate Sr. Sec. School v. ITO (2017) 163 ITD 653 (Asr.) (Trib.) S.147: Reassessment-Share application money-Reopening of assessmentto make roving inquiry is impermissible and negative burden that purchasers not relatives cannot be put to assessee-Reasons of reopening recorded by Assessing Officer not sustainable. [S. 68, 148] Allowing the appeal of the assessee the Tribunal held that; the assesse introduced own unaccounted capital through share capital and premium nowhere mentioned in assessment order. There is no material to prima facie indicate assessee's unaccounted income invested in share capital and there is no live nexus between reasons recorded and income sought to be reassessed. Reopening of assessment to make roving inquiry is impermissible. Negative burden that purchasers not relatives cannot be put to assesse hence reasons of reopening recorded by Assessing Officer not sustainable. (AY.2009-2010) Laxmiraj Distributors Pvt. Ltd. v. ACIT (2017) 53 ITR 376 (Ahd.) (Trib.) S. 147: Reassessment–Audit information-Reopening of assessment when the AO is acting on the dictates of the audit party and is not applying his own mind was held to be bad in law.[S. 148]


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Allowing the petition the Court held that;Reopening of assessment when the AO is acting on the dictates of the audit party and is not applying his own mind was held to be bad in law .( SCA No. 8343 of 2013.dt, 19.06.2017) (AY. 2007-08) Mehsana District Central Co-op Bank Ltd. v. ACIT (Guj.)(HC), www.itatonline.org S.147: Reassessment–Disclosing lower sale consideration –Reassessment was held to be valid.[S.45, 50C, 148] Dismissing the appeal the Tribunal held that; the reasons recorded gave clear picture that the Assessing Officer had got material evidence to form his opinion for taking recourse to section 147 read with section 148 .The reasons recorded by the Assessing Officer clearly speaks for the under assessment of tax hence, the conditions stood fulfilled in so far as the reassessment proceedings were concerned .In so far as the reasons recorded, the Assessing Officer has “reasons to believe“, that income had escaped assessment. This fact confers jurisdiction on him to reopen the assessment. (AY. 2006-07) Nitin R.Bhuva v.ITO (2017) 54 ITR 14 (Chennai) (Trib.) S.147: Reassessment–Mutuality-Commissioner (Appeals) presuming assessee did not claim mutuality factually incorrect--Receipts other than interest and rental income from members of assesse, would fall within ambit of mutuality. Order enhancing income not sustainable. [S.4,11, 148] Allowing the appeal the Tribunal held that ; Commissioner (Appeals) presuming that the assessee did not claim mutuality factually incorrect--Receipts other than interest and rental income from members of assessee, would fall within ambit of mutuality. Order enhancing income not sustainable. (AY. 2006-2007 to 2012-2013) Sports and Cultural Club (Regd.) v. JCIT (2017) 53 ITR 160 (Delhi) (Trib.) S.147: Reassessment-Information from Investigation Wing--No valid notice served upon assessee either through registered post or through affixture, reassessment was held to be not valid. [S.148] Allowing the appeal the Tribunal held that; no valid notice served upon assessee either through registered post or through affixture, reassessment was held to be not valid.(AY.1996-1997) Auram Jewellery Exports P. Ltd. v. ACIT (2017) 54 ITR 1 (Delhi) (Trib.) S.147: Reassessment-Undated reasons—Reopening on borrowed satisfaction was held to be impermissible. [S. 148] Allowing the appeal the Tribunal held that ; the reasons recorded, it was clear that the reasons were undated, which itself proved that the Assessing Officer had not applied his mind. Nothing appeared in the reasons recorded suggesting that the Assessing Officer had made any positive enquiry before coming to the conclusion that the income chargeable to tax had escaped assessment. The Assessing Officer had reopened the case on the basis of borrowed satisfaction, which was not permissible under the law. The reassessment proceedings were invalid. ( AY. 2004-2005) Charanjiv Lal Aggarwal v. ITO (2017) 54 ITR 349 (Amritsar) (Trib.) S. 151 : Reassessment-Sanction for issue of notice-The mere appending of the word "approved" by the CIT while granting approval to the reopening is not enough- He has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. [S. 68,147, 148] Dismissing the appeal of revenue the Court held that; the mere appending of the word "approved" by the CIT is not sufficient.While the CIT is not required to record elaborate reasons, however, he


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has to record satisfaction after application of mind. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. (AY. 2001-02) PCIT v. N. C. Cables Ltd. (2017) 391 ITR 11/ 149 DTR 90 (Delhi)(HC) S. 153A : Assessment–Search-Search being declared void, consequential assessment based on the void search was held to be in valid- Revenue was directed to pay cost of Rs. 10,000. [S.132] Allowing the petition the Court held that; search conducted on Locker No. 4979 by issuing an authorization dated 27th February, 2012 under Section 132 of the Act against the Petitioner was invalid. The said authorisation is hereby quashed. Consequently, question (b) is also answered in the negative by holding that there was no legal justification for the issuance of the impugned notice dated 22nd October, 2012 to the Petitioner under Section 153 A of the Act for the AYs 2006-2007 to 2011-2012. The said notice is also hereby quashed. All consequential actions of the Respondents are hereby declared invalid. Revenue was directed to pay cost of Rs 10000. (AY. 2006-07 to 2011-12) Ameeta Mehra v. ADIT( 2017) 152 DTR 278 (Delhi)(HC) S. 153A: Assessment–Search-Concluded assessment cannot be reopened in the absence of incriminating material found during the search- Statement cannot be construed as incriminating material. [S. 132] Dismissing the appeal of the revenue, the Court held that; Concluded assessment cannot be reopened in the absence of incriminating material found during the search . Statement cannot be construed as incriminating material ( ITA Nos. 306, 307, 308, 309 & 310 of 2017, dt. 25.05.2017)( AY. 2001-01 to 2004-05) PCIT v. Meetu Gutgutia, Prop Ferns ’N’ Petal (Delhi)(HC),www.itatonline.org S.153A: Assessment–Search-Absence of seizure of any new material during search, fresh examination was held to be unjustified.[S.132, 260A] Dismissing the appeal of the revenue, the Court held that;in the absence of any material seized during the search proceeding a fresh examination of the valuation issue was not justified. No question of law arose. (AY. 2008-2009) PCIT v. Anita Rani (Smt.) (2017) 392 ITR 501 (Delhi)(HC) S. 153A : Assessment-Search or requisition–Though no incriminating material was found in the course of search, notice in pursuance of search and assessment thereafter was held to be valid. [S.132] Dismissing the appeal of the assessee, the Court held that; Though no incriminating material was found in the course of search, notice in pursuance of search and assessment thereafter was held to be valid E.N. Gopakumar v. CIT (2017)390 ITR 131/ 244 Taxman 21 / 148 DTR 296 (Ker.)(HC) S. 153A:Assessment-Search and seizure–Statement in the course of search could be relied upon to make addition. [S.132(4), 260A] Dismissing the appeal of the assessee the Court held that;Statement in the course of search could be relied upon to make addition. The findings of the Appellate Tribunal did not reveal any fundamental error calling for interference. Ajay Gupta v. CIT (2017) 390 ITR 496 (Delhi)(HC) Dayawanti (Smt.) v. CIT (2017) 390 ITR 496 (Delhi)( HC) S.153A: Assessment-Search and seizure-Discovery of incriminating material during search not pre-condition to issue of notice. [S. 132]


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Dismissing the appeal of the revenue the Court held that; the issuance of notice under section 153A(1)(a) of the Act it was not necessary that the search on which it was founded should have necessarily yielded any incriminating material against the assessee or the person to whom such notice was issued. E.N. Gopakumar v. CIT (2017) 390 ITR 131 / 244 Taxman 21 / 293 CTR 450 / 148 DTR 296 (Ker.)(HC) S. 153A:Assessment–Search- When the Addl. CIT records that he is granting “mechanical approval” u/s 153D to the draft assessment order for want of time to have meaningful discussion, the assessment order is bad in law and has to be annulled. [S. 153C, 153D] The Addl. Commissioner has showed his inability to analyze the issues of draft order on merit clearly stating that no much time is left, inasmuch as the draft order was placed before him on 31.12.2010 and the approval was granted on the very same day. Considering the factual matrix of the approval letter, we have no hesitation to hold that the approval granted by the Addl. Commissioner is devoid of any application of mind, is mechanical and without considering the materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl Commissioner to grant or not to grant approval is coupled with a duty. The Addl Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him for approval in the light of the material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. Commissioner before granting the approval. Therefore, we have no hesitation to hold that the assessment order made u/s. 143(3) of the Act r.w. Sec. 153A of the Act is bad in law and deserves to be annulled. ( ITA No. 167,168,321,322 & 192/Lkw/2016, dt. 28.04.2017)(AY. 2010-11) AAA Paper marketing Ltd. v. ACIT (Lucknow)(Trib.),www.itatonline.org Sidhibhoomi Alloys Ltd v. ACIT (Lucknow)(Trib.),www.itatonline.org DCI v. Appurva Goel (Lucknow)(Trib.),www.itatonline.org S. 153A: Assessment–Search-Unexplained investment-Surrendered income during search and explanation thereafter, explaining the source-AO was directed to verify. Allowing the appeal the Tribunal held that; the claim that part of sum surrendered during search covered by purchase by cheque and the Bank account showing assessee paying certain sum for purchasing jewellery. Tribunal held that an opportunity given to assessee to submit details to Assessing Officer to substantiate claim that jewellery purchased were included in jewellery found during search. (AY.2011-2012) P. Rama Devi v. DCIT (2017) 54 ITR 30 (Hyd.)(Trib.) S. 153A: Assessment–Search-No incriminating material found at time of search and when original assessment was completed additions cannot be made in pursuance of search proceedings . [S.143(3)] Where the assessment proceedings were completed prior to date of search on basis of original return and no incriminating documents were found for the relevant year, the Assessing Officer could not and ought not to have examined in assessment proceedings under section 153A. Claim to treat as capital receipt sales tax remission brought to tax in original assessment, cannot be subject matter of determination of total income under section 153A.(AY.. 2003-2004 to 2011-2012) Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib) S. 153A : Assessment – Search- on money –Noting in seized papers –Additions cannot be made as undisclosed income- Additions cannot be made on the basis of estimate and extrapolation theory- Accounting Standard-7 is not applicable when sale of flats on


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ownership basis- Receipt is taxable only in the year when possession of flats or occupation certificate is given where assessee follows projection certificate.[S. 132, 145A] Dismissing the appeal of the revenue, the Tribunal held that ;merely on the basis of noting in seized papers additions cannot be made as undisclosed income , when purchasers have denied making any cash to the assessee. Additions cannot be made on the basis of estimate and extrapolation theory. Affidavits filed by assessee not to be rejected on ground that he produced no documentary evidence. Accounting Standard-7 prescribing method of accounting of construction contracts in books of contractors is not applicable when the assessee carrying on construction activity on ownership basis and not in pursuance of any contract with a contractee. When assesse follows project completion certificate , receipts taxable only in year in which project completed and possession of flat or occupancy certificate given for flat . (AY.2004-2005 to 2011-2012) ACIT v. Layer Exports P. Ltd.(2017) 53 ITR 416 / 184 TTJ 469 (Mum.)(Trib.) S. 153C : Assessment - Income of any other person-Search-Same Assessing Officer having jurisdiction over persons in respect of whom search conducted and assessed-Satisfaction of Assessing Officer recorded-Finding of Appellate Tribunal that proper satisfaction not recorded unsustainable-Matter remanded.[S. 132, 153A] The Appellate Tribunal quashed the assessment order on the ground that there was no proper recording of satisfaction by the Assessing Officer to issue notice under section 153A, that proceedings under section 153C were to be undertaken or drawn up. On appeals, the Court held that ; the finding of the Appellate Tribunal with regard to absence of any satisfaction being recorded under section 153C of the Income-tax Act, 1961 was unsustainable. The appeals were remitted to the Appellate Tribunal for consideration on the merits. PCIT v. Satkar Fincap Ltd. (2017) 393 ITR 378 (Delhi)(HC) S. 153C : Assessment-Income of any other person-Search-The requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue- The non-satisfaction of the condition renders the entire proceedings was held to be null and void. [S. 69C, 132] Dismissing the appeal of the revenue, the Court held that;the requirement that the documents found during search should “belong” to the assessee is a condition precedent and a jurisdictional issue. The non-satisfaction of the condition renders the entire proceedings null and void. The fact that the searched person and the assessee are alleged to be “hand in glove” is irrelevant.In view of the above reasons and particularly the finding of fact that seized document which forms the basis of the present proceedings, do not belong to the petitioner and the same not being shown to be perverse, the question as raised does not give rise to any substantial question of law and thus not entertained.(AY.2007-08, 2008-09) CIT v. Arpit Land Pvt. Ltd (2017) 393 ITR 276 (Bom.)(HC) CIT v. Ambit Reality Pvt. Ltd.(2017) 393 ITR 276 (Bom.)(HC) S. 153C : Assessment-Income of any other person– Satisfaction note-Quashing of order on hyper technical ground was held to be in valid – Matter remanded. [S. 132,133A] Allowing the appeal of the revenue the Court held that ; where the Assessing Officer had issued a satisfaction note u/s. 153C after satisfying himself with contents of documents seized, Tribunal could not declare it as invalid on hyper technical ground of incorrect terminology used in said note. Matter was set aside to Tribunal to decide on merit . (AY. 2005-06 to 2010-11) PCIT v. Super Malls (P) Ltd. (2016) 76 taxmann.com 267 / (2017) 291 CTR 142/(2017) 393 ITR 557 (Delhi) (HC) S. 154:Rectification of mistake–Review petition was rejected –order cannot be rectified by the AO. [S.10(23C)(vi), 253(1)]


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Review petition filed by the assessee was rejected by the CCIT on the ground that there is no provision under the Act to review an order passed under section 10(23C)(vi) of the Act. On appeal by the assessee against the said order, dismissing the appeal the Tribunal held that ; order passed under section 10(23C)(vi), on which review petition was filed, had specifically stated that application was being rejected for non-mentioning of non-profit nature of institutions run by assessee in its trust deed, accordingly rectification application was rightly rejected. (AY.2010-11,2011-12 ) PKD Trust v. ITO (2017) 163 ITD 502 (Chennai) (Trib.) S. 158BC:Block assessment-No incriminating material found during search-Additions made on basis of evidence gathered from extraneous source and on basis of statement or document received subsequent to search-Assessing Officer has no jurisdiction to make additions. [S. 132, 158BB(1)] Dismissing the appeal of the revenue the Court held that if no incriminating material was found in the course of search proceedings , additions cannot be made on basis of evidence gathered from extraneous source and on basis of statement or document received subsequent to search.-Assessing Officer has no jurisdiction tomake additions. CIT v. Pinaki Misra (2017) 392 ITR 347 / 148 DTR 219 / 293 CTR 377 (Delhi)(HC) CIT v. Sangeeta Misra (2017) 392 ITR 347/ 148 DTR 219/293 CTR 377 (Delhi)(HC) S.158BC:Block assessment- Search and seizure -Tribunal quashing notice on ground that warrant of authorisation not issued in name of assessee- Findings required to be revalued and reappreciated after verifying documents--Matter remanded. [S.132, 176(3)] Allowing the appeal of the revenue, the Court held that; the findings arrived at by the Tribunal that the search was at the only residential premises of one of the partners which was not supported by the original form. The Tribunal was required to arrive at a finding after reappreciation of the evidence by calling for the original documents and after giving opportunity to both sides for inspecting the documents and offering their comments. Therefore, the matter was remitted to the Tribunal only on the one point. It was required to be revalued and reappreciated after verifying the documents. Matter remanded. CIT v V.K. Rana (2017) 392 ITR 449/ 148 DTR 362 (Raj.)(HC) CIT v. Ratan Mandir ( 2017) 148 DTR 362 (Raj.)(HC) Dharmendra Kumar Rana v CIT (2017) 148 DTR 362 (Raj.)(HC) S.158BC:Block assessment-Assessing Officer issuing notice to file return "within 15 days"-Assessment on basis of invalid notice was held to be illegal. [S.132] Allowing the appeals the court held that, under section 158BC of the Income-tax Act, 1961 by the Assessing Officer to file returns "within 15 days" violated the provisions of the section which required to issue a notice providing time of "not being less than 15 days" and hence the assessments made on the basis of such notices were bad in law. Assessments made on the basis of illegal and invalid notice were bad in law. Bhawana Batwani v. CIT (2017) 392 ITR 369 / 149 DTR 105 / 293 CTR 559 (Raj.)(HC) Jaipal das v. CIT (2017) 392 ITR 369/ 149 DTR 105 / 293 CTT 559 (Raj.)(HC) Surya Dev Kumawat v. CIT (2017) 392 ITR 369/ 149 DTR 105/ 293 CTR 559 (Raj.)(HC) Rajpal Das v. CIT (2017) 392 ITR 369 (Raj.)(HC) Rajkumar Batwani v. CIT (2017) 392 ITR 369 / 149 DTR 105/ 293 CTR 559(Raj.)(HC) Tek Chand Batwani v. CIT (2017) 392 ITR 369/ 149 DTR 105 / 393 CTR 559 (Raj.)(HC) S. 158BC:Block assessment - Search and seizure Merely on the basis of statement addition was held to be not justified. [S. 132(4)].


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Dismissing the appeal of the revenue, the Court held that; a mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement. CIT v. Jayalakshmi Ammal (2017) 390 ITR 189 (Mad.)(HC) S.158BC:Block assessment-Undisclosed income-Additions to income based on facts-Merely because a protective assessment had been made in the hands of asseees’s wife did not ipso facto mean that the assessment of such items of assets at hands of assessee was unsustainable. [S.158BD] Dismissing the appeal the Court held that ; additions to income was confirmed on facts hence the order was justified . Merely because a protective assessment had been made in the hands of asseees’s wife did not ipso facto mean that the assessment of such items of assets at hands of asseee was unsustainable R. Ramachandran Nair v. Dy. CIT (2017) 391 ITR 343/ 292 CTR 72/ 78 taxmann.com 110/146 DTR 193 (Ker.)(HC) S. 158BC : Block Assessment–Jurisdictional defects cannot be cured-Notice was not addressed in accordance with provision and status and block period was not mentioned, block assessment was illegal and void.[S.282] Dismissing the appeal of the revenue, the Court held that;where a notice was not addressed in accordance with provisions of S. 282 of the Act and also, where status of the person and proper block of period were not mentioned, the block assessment was illegal and void. Chapter XIV-B was a self-contained code and would get attracted as a result of search proceedings initiated by IT authorities u/s. 132 of the Act. Further, it held that, the language of the section was mandatory and thus a jurisdictional defect could not be cured. (AY. 1993-94 to 1997-98) CIT v. Monga Metals (P.) Ltd. (2017) 146 DTR 134/ 292 CTR 81 (All.)(HC) S. 158BD: Block assessment-Undisclosed income of any other person - Search and seizure-The fact that the search was invalid because the warrant was in the name of a dead person does not make the proceedings invalid if the assessee participated in them. [S. 132,158BC] Dismissing the petition of the assesse, the Court held that ; The fact that the search was invalid because the warrant was in the name of a dead person does not make the proceedings invalid if the assessee participated in them. The issue of invalidity of the search warrant was not raised at any point of time prior to the notice under Section 158BD. In fact, the petitioner had participated in the proceedings of assessment initiated under Section 158BC of the Act. The information discovered in the course of the search, if capable of generating the satisfaction for issuing a notice under Section 158BD, cannot altogether become irrelevant for further action under Section 158BD of the Act. Gunjan Girishbhai Mehta v. DIT(2017) 393 ITR 310 / 150 DTR 65 / 294 CTR 14 /247 Taxman 22 (SC) S.158BC:Block assessment-Commissioner (Appeals) upholding assessment relying on Supreme Court decisions on different subjects and holding decision in ACIT v. Hotel Blue Moon [2010] 321 ITR 362 per incuriam—On writ the court held that order of CIT(A) was held to be untenable,orderwas set aside [S. 143(2), Art , 226 ]. On a writ petition against an order passed by the Commissioner (Appeals) in an appeal against a block assessment, recording a finding that notice under section 143(2) of the Income-tax Act, 1961 was not issued, but holding that the judgment of the Supreme Court in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362, wherein it was held that block assessment could not be framed until notice under section 143(2) had been served upon the assessee, was per incuriam in view of


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the two Supreme Court judgments in Govt. of A.P. v. J.B. Educational Society [2005] 3 SCC 212 and State of Punjab v. Shamlal Murari [1976] 1 SCC 719 : Held, allowing the petition, that the finding recorded by the Commissioner (Appeals) was not tenable as neither of the two Supreme Court judgments referred to or dealt with the case of block assessment and of not serving a notice under section 143(2) of the Income-tax Act, 1961 which issue was raised and decided in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC). The Commissioner (Appelas) had committed a grave illegality in holding that such judgment was per incuriam. Kiran Prakashan v. Dept. of Income tax (2017) 391 ITR 31 (Patna)(HC) S. 158BFA: Block assessment–Non levy of interests–If the delay in filing the return due to non furnishing of copies of the documents and not giving inspection of the seized documents, levy of interest was not justified, provision pre, 2002 [ S. 119 ] Allowing the petition, the Court held that; if the delay in filing the return is completely attributable to the revenue for non-furnishing of copies of the documents and not giving inspection of the documents seized within a reasonable time after making the demand, the interest has to waived. Though s. 158BFA(1) does not (pre 2002) confer the power to waive interest, it has to be read in on equitable construction because the subject cannot be made to pay for the negligence of the Officers of the State (CIT v.J. H. Gotla ( 1985) 4 SCC 343 followed).At the relevant time when the assessment orders were passed under the Act, Section 158BFA of the Act was not a part of Section 119(2)(a) of the Act which empowered C.B.D.T. ( ITA No. 42 of 2007, dt. 29.06.2017) Mahavir manakchand Bhansali v. CIT (Bom.)(HC), www.itatonline.org S. 164: Representative assessees-Charge of tax–Beneficiaries unknown-Whether shares are determinable even when even or after the Trust is formed or may be in future when the Trust is in existence, the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees. [S. 161] From the order of the ITAT Bangalore in DCIT vs. India Advantage Fund-VII, the High Court had to consider the following question at the instance of the department: “Whether, the Tribunal, on the facts and in the circumstances of the case was right in holding that the assessee trust cannot be assessed as on AOP even though the requirements of section 164(1) were not met, inasmuch as the shares of the beneficiaries were indeterminate/unknown and hence the assessing officer was justified in invoking the provisions of section 164(1) of the Act and make the assessee liable to be assessed at the maximum marginal rate in the status of AOP. Hence it is not relevant whether the necessary ingredients for formation of an AOP are fulfilled by the assessee or not?” HELD by the High Court dismissing the appeal: the Court held that once shares are found to be determinable. the income is to be taxed of that respective sharer or the beneficiaries and not in the hands of the trustees which has already been shown in the present case. (AY. 2008-09) CIT v. India Advantage Fund- VII(2017) 148 DTR 241 (Karn.)(HC) CIT v. ICICI Emerging Sectors Fund (2017) 148 DTR 241 (Karn.)(HC) CIT v. ICICI Econet Internet & Technology Fund (2017) 148 DTR 241 (Karn.)(HC) S.164: Representative assessee-If the trust deed provided that benefits amongst beneficiaries were to be shared proportionate to their investments, shares of beneficiaries were determinate and levy of tax on trustees at maximum marginal rate treating them as AOP was not proper- Order of the Tribunal was not perverse [S.260A] Dismissing the appeal of the revenue, the Court held that; If the trust deed provided that benefits amongst beneficiaries were to be shared proportionate to their investments, shares of beneficiaries were determinate and levy of tax on trustees at maximum marginal rate treating them as AOP was


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not proper.In an appeal to the High Court the finding of fact by the Tribunal is final unless perverse. Perversity can be tested in two ways : (a) if any finding of fact is not supported by record and is on some hypothesis or surmises, (b) that the finding arrived at which any person with reasonable prudence may not record. Then it can be said that such finding is perverse. On the facts the finding of the Tribunal was held to be not perverse. CIT v. ICICI Emerging Sectors Fund (2017) 392 ITR 209 / 246 Taxman 149/ 293 CTR 510/ 148 DTR 241 (Karn.)(HC) CIT v. ICICI Econet Internet & Technology Fund (2017) 392 ITR 209 / 246 Taxman 149/ 293 CTR 510/ 148 DTR 241 (Karn.)(HC) CIT v. India Advantage Fund –I (2017) 392 ITR 209 / 246 Taxman 149/ 293 CTR 510 / 148 DTR 241 (Karn.)(HC) CIT v. India Advantage Fund –VII (2017) 392 ITR 209 / 246 Taxman 149/ 293 CTR 510/ 148 DTR 241 (Karn.)(HC) Editorial: Orders in Dy. CIT v. India Advantage Fund-VII [2014] 36 ITR 304 (Bang.)(Trib.) and ITO v. India Advantage Fund-I [2015] 39 ITR 360 (Bang.)(Trib.) is affirmed S. 172:Shipping business-Double taxation avoidance- Shipping corporation in Singapore earning income from operations in India-Certificate by Internal Revenue of Singapore that income accrued and was taxable in Singapore-Fact that freight receipts were remitted to U. K. not relevant–DTAA-India- Singapore [ S.90, 264,Arts. 8, 24.] The Assessing Officer held that ST was not entitled to the benefit of article 8 of the Double Taxation Avoidance Agreement by virtue of the provisions contained in article 24 therein. He held that the freight receipts were remitted to London and not to Singapore. The assessee filed a revision petition which was dismissed. On a writ allowing the petition the Court held that; in the absence of any rebuttable material produced by the Revenue, one would certainly be guided by the factual declaration made by the Internal Revenue Authority of Singapore in the certificate and this declaration was that the income would be charged at Singapore considering it as an income accruing or derived from business carried on in Singapore. In other words, the full income would be assessable to tax on the basis of accrual and not on the basis of remittance. The amount was not taxable in India.(AY. 2011-2012 ) M.T. Maersk Mikage v. DIT (IT) (2017) 390 ITR 427/ 291 CTR 184 (Guj.)(HC) S. 192 : Deduction at source – Salary -'TIPS' from guests on behalf of its employees,assessee was not required to deduct tax at source while paying said amount to its employees .[ S.15, 17 ] Allowing the appeal of the assessee the Tribunal held that; Assessee collecting 'TIPS' from guests on behalf of its employees is not liable to deduct tax at source as the contract of employment was not a proximate cause for receipt of 'TIPS', it would be outside dragnet of sections 15 and 17 of the Act. ( AY. 2007-08) EIH Ltd. v. ITO (2017) 163 ITD 413 (Delhi) (Trib.) S.194A: Deduction at source-Interest on compensation-Motor accident claim-Interest so computed in hands of each claimant was, below threshold limit of Rs 50000 per year , considering the smallness of the amount the appeal was dismissed and the question of law is left open. Dismissing the appeal of the revenue, the Court held that; Interest so computed in hands of each claimant was , below threshold limit of Rs 50000 per year , considering the smallness of the amount the appeal was dismissed and the question of law is left open. CIT v. Hansaguri Prafulchandra Ladhani and Ors. (2017) 383 ITR 82/ 152 DTR 288 (SC) CIT v Aruna Begum & Ors ( 2017) (2017) 383 ITR 82 / 152 DTR 288 (SC) CIT v. Mani Gopal & Ors ( 2017) (2017) 383 ITR 82 / 152 DTR 288 (SC)


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S. 194A : Deduction at source - Interest other than interest on securities -Since payee-university's application for retrospective registration under section 12AA was pending before CBDT, assessee bank could not be regarded as assessee-in-default. [S.10(23C, 12AA , 119(2)(b), 201] Allowing the appeals of the assesse the Tribunal held that; since payee-university's application for retrospective registration under section 12AA was pending before CBDT, assessee bank could not be regarded as assessee-in-default, just because the exemption was withdrawn later on. ( AY. 2011-12 to 2015-16) State Bank of Mysore v. ITO (2017) 163 ITD 566 (Panaji) (Trib.) S. 194C: Deduction at source–Contractor-Deployment of technical personnel not for and on behalf of customer but for and on behalf of contractor for execution of contract, amounts to works contract and not fees for technical services. [S.194J] Dismissing the appeal of the revenue ,the Court held that; the contract entered into between the assessee and each of the contractors did not involve supply of professional or technical services at least within the meaning of section 194J. Therefore, the considerations paid under the contracts were not for professional or technical services rendered by the contractors to the assessee and section 194J was not applicable. The technical personnel were deployed not for and on behalf of the customer, but for and on behalf of the contractor itself with a view to ensuring that the contractor supplied the equipment in accordance with the contractual specifications. The nature of human intervention was reflected in the terms and conditions of the agreement itself.(AY. 2012-2013) PCIT (TDS) v. Senior Manager (Finance), Bharat Heavy Electricals Ltd. (2017) 390 ITR 322/ 291 CTR 161 /77 taxmann.com 269 (P&H)( HC) S.194C:Deduction at source-Fees for technical services— Floating tender, tax was to deducted under section 194J whereas for maintenance work tax was to deducted u/ s 194C [S. 194J] Assessee floating tender for marine geotechnical investigation for rock excavation. Tender mainly towards rendering of technical services and technical in nature, tax was deductible at source under section 194J and where as payment for maintenance work of air-conditioners, lifts, electrical fittings, fire hydrants and pest control, no technical expertise required tax was deductible u/s194C.(AY. 2008-2009, 2011-2012) ITO v. Mumbai Metropolitan Regional Development Authority (MMRDA) (2017) 54 ITR 580/ 152 DTR 185 (Mum.)(Trib.) S. 194C : Deduction at source–Contractors-Payments for production of films liable to deduction at source as contractor and not as fees for professional or technical services. [S.194J]. Assessee was engaged in business of celebrity endorsement, events promotion and management, production of telefilms, ad films and promotion of motion pictures . Assessee made payments of certain amount to several parties for production of complete film, against which tax was deducted at source by assessee under section 194C. AO held that payments were in the nature of payments for professional or technical services and liable to deduction at source u/s194J and raised the demand u/s201(IA). CIT(A) held that the provision of section 194C is applicable . On appeal the Tribunal held that ; since legislature had widened scope of section 194C vide Finance Act, 1995, with effect from 1-7-1995, by incorporating 'Production of programmes for such broadcasting or telecasting' within sweep of section 194C, assessee had rightly deducted tax at source under section 194C at time of making payments for production of films. (AY. 2008-09) Alliance Media & Entertainment Ltd. v. ITO (2017) 163 ITD 627 (Mum.)(Trib.)


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S.194I: Deduction at source–Rent-Lease premium-Amounts paid as premium capital payments not subject to deduction of tax at source-Interest on lump sum lease premium was held to be exempt from deduction of tax at source-Annual lease rent subject to deduction of tax at source-Directions issued to Noida authority to make payments in compliance with provisions of law. [S.10(20)] On writ petitions: the Court held that;(i) that the Greater Noida Industrial Development Authority was not a municipality and therefore, not entitled to the benefit of section 10(20) of the Income-tax Act, 1961. (ii) That the payments made towards lease did not constitute "rent" so as to attract section 194-I. Part of the payments were capital in nature. A small percentage of the agreed amounts were paid as part of the lease premium and were towards the acquisition of the asset and consequently fell in the capital stream and were not "rents". The balance of such premium payments were spread over a period of 8 to 10 years, in specified annual or bi-annual instalments. (iii) That in respect of the amounts reserved as rent (generally 1 per cent. of the total consideration, payable annually) the payments were rent and not capital and the assessees were liable to deduct tax at source from the payments made to the Noida authority. Since the assessees could not make the deductions at the insistence of the Authority, a direction was issued to the Authority to comply with the provisions of law and make all payments, which were otherwise part of the deductions, for the period in question, till the end of the date of the judgment. All payments to be made to it, henceforth, should be subjected to deduction of tax at source. (iv) That the amounts which were payable towards interest on the payment of lump sum lease premium, in terms of the lease which were covered by section 194A were covered by the exemption under section 194A(3)(iii)(f) and therefore, not subjected to deduction of tax at source and any payments of interest that had accrued in favour of the Authority by the bank towards fixed deposits were also exempted from deduction of tax at source. Rajesh Projects (India) P. Ltd. v. CIT (TDS)-II (2017) 392 ITR 483/ 293 CTR 121/ 78 taxmann.com 263/ 148 DTR 33 (Delhi)(HC) S.194I:Deduction at source–Rent-Payment towards 'premium' for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source.[S. 201, 201(IA)Transfer of Property Act. S.105] In all the cases the petitioners received notice from the income-tax authorities, alleging that they were assessed in default in as much as they had failed to deduct tax at source from the interest component paid to the lessor /authority.The Revenue was prima facie of the opinion that these interest amounts resulted income in the hands of the authority which is facially taxable and that the failure of the assessees, in deducting amounts mandated under section 194I is without legal foundation. The petitioners were served with the notice u/s 201, 201(IA) of the Act. Allowing the petitions of the assessees, the Court held that,Payment towards 'premium' for the lease (even if paid annually) is a capital payment and is not subject to deduction of tax at source . Referred Circular No .35/ 2016 dated 13-10-2016.(WP.(C) 8085/2014, C.M. Appl. 18876/2014, dt. 16.02.2017) Rajesh Project (India) Pvt. Ltd. v. CIT (Delhi)(HC); www.itatonline.org Ajay Enterprises Pvt. Ltd. v ACIT (Delhi)(HC); www.itatonline.org IITL-Nimbus, the Hyde Park, Noida v.UOI (Delhi)(HC); www.itatonline.org Exotica Housing Pvt. Ltd. v CIT (Delhi)(HC); www.itatonline.org Gulshan Homes & Infrastructures Pvt. Ltd. v.CIT(Delhi)(HC); www.itatonline.org United Bank of India v.ITO (Delhi)(HC); www.itatonline.org Civitech Developers Pvt.Ltd. v.CIT (Delhi)(HC); www.itatonline.org


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S. 194I : Deduction at source–Rent–Passenger Service Fee paid by an Airline Company to the Airport Operator was not covered under the definition of ‘Rent’ and therefore, not liable for deduction tax at source. [S. 201(1), 201(IA)] Dismissing the appeal of the revenue, the Court held that; Passenger Service Fee paid by an Airline Company to the Airport Operator was not covered under the definition of ‘Rent’ and therefore, not liable for deduction tax at source.(A.Y.2010-11) CIT v. Jet Airways (India) Ltd. (2017) 98 CCH 118 / 146 DTR 124 (Bom.)(HC) S.195: Deduction at source-Non-resident-Assessee carrying on business in India through permanent establishment- Payments made to assessee under race promotion contract- Business income and chargeable to tax- Liable to deduct tax at source –DTAA-India –United kingdom.[Art. 5(5), 13 ] Court held that; since the assessee carried on business in India through a permanent establishment, the payments made to the assessee, under the race promotion contract were business income and accordingly chargeable to tax, according to the rates applicable in India at that time. JS was bound to make appropriate deductions from the amounts payable to the assessee under section 195. CIT v. Formula One World Championship Ltd. (2017) 390 ITR 199 /291 CTR 24 (Delhi)(HC) Jaiprakash Associated Ltd. v. CIT (2017) 390 ITR 199 / 291 CTR 24 (Delhi)(HC) S.194J: Deduction at source-Fees for professional or technical services -Provision for 'payments to be made to artists', assessee company couldn't ascertain identity of payees and amount to be paid to them was also not crystalised and was subject to negotiation, assessee had no liability to deduct tax at source in respect of provision so made. [S. 201(IA)] Allowing the appeal of the assessee, the Tribunal held that ; Provision for 'payments to be made to artists', assessee company couldn't ascertain identity of payees and amount to be paid to them was also not crystalised and was subject to negotiation, assessee had no liability to deduct tax at source in respect of provision so made. (AY.2008-09 ) Alliance Media & Entertainment Ltd. v. ITO (2017) 163 ITD 627 (Mum.)(Trib.) S. 197 : Deduction at source-Certificate for lower rate-Statutory provision of deduction of tax at source at lower rate is 'person specific' and cannot be restricted to amount specified by recipient of payment while making an application for grant of certificate. [S. 194A, 201(IA)] Allowing the appeal of the assesse the Tribunal held that ; Statutory provision of deduction of tax at source at lower rate is 'person specific' and cannot be restricted to amount specified by recipient of payment while making an application for grant of certificate .Therefore, the assessee could not be treated as a person who has not deducted tax at source on the difference between the amounts specified in the certificate issued under section 197 of the Act and the amounts actually paid by it. Consequently, the levy of interest under section 201(1A) could not be sustained and the same is directed to be deleted. ( AY. 2008-09, 2009-10 ) Twenty First Century Securities Ltd. v.ITO (2017) 163 ITD 270 / 152 DTR 305 (Kol.) (Trib.) S. 199 : Deduction at source - Credit for tax deducted – since other co-owners had not availed any tax credit out of TDS on rental income, assessee-company would be entitled to enjoy benefit of tax deducted at source in its entirety. [S.194I]


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Dismissing the appeal of the Revenue, the Court held that ;since other co-owners had not availed any tax credit out of TDS on rental income, assessee-company would be entitled to enjoy benefit of tax deducted at source in its entirety . (AY. 2005-06) CIT v. Ganesh Narayan Brijlal Ltd. (2017) 244 Taxman 14 / 147 DTR 136 / 292 CTR 518 (Cal.)(HC) S.199:Deduction at source - Credit for tax deducted –Identity of the payee was not possible while making the provision for expenditure under several heads of income , assesse was not required to deduct tax at source. [S. 194C] Allowing the appeal of the assesse the Tribunal held that ; When the identity of the payee was not possible while making the provision for expenditure under several heads of income, assessee was not required to deduct tax at source . ( AY.2010-11, 2011-12 ) Apollo Tyres Ltd. v.DCIT (2017) 163 ITD 177 (Delhi) (Trib.) S. 199 : Deduction at source-Credit for tax deducted – Once certificate for deduction at source is issued ,only deductee can claim benefit of deduction of tax at source and in no circumstances deductor can claim any refund out of excess amount of tax deducted at source on behalf of deductee – Surcharge and educational cess was held to be not leviable – Excess paid was liable to be refunded - DTAA – India –USA [ S. 206A, Art, 12 ] Tribunal held that ; Once certificate for deduction at source is issued , only deductee can claim benefit of deduction of tax at source and in no circumstances deductor can claim any refund out of excess amount of tax deducted at source on behalf of deductee. Surcharge and educational cess was held to be not leviable. Withholding tax was at 15% and not 25 % as determined by the Assessing Officer.(AY. 2014-15 ) Computer Sciences Corporation India (P.) Ltd. v. ITO (2017) 163 ITD 151 (Delhi) (Trib.) S. 201: Deduction at source-Failure to deduct or pay-Recipient having no taxes payable and claiming refund-Question of "withholding any tax money" belonging to Department did not arise-Levy of interest not warranted.[S. 197,201IA] Allowing the appeal, that where the recipient had no taxes payable at all and had claimed refund of taxes, no interest was to be charged from the defaulting deductor since the Department was required to refund of tax along with due interest. Accordingly the company which gave loan to the assessee included the income from the assessee in the return filed for the subject assessment years paid taxes on the amount and had claimed refund of taxes. It was not liable to pay any tax and hence the question of "withholding any tax money" belonging to Department did not arise. Therefore, it could not be said that the assessee had withheld/enjoyed the tax amount belonging to the Government to warrant the levy of interest under section 201(1A).(AY.2005-2006 to 2009-2010) ITO v. Right Address Ltd. (2017) 54 ITR 287 (Kolk.)(Trib.) S.201:Deduction at source-Person to whose account credit for such tax deducted at source to be given is not identifiable, provisions of tax deduction at source not applicable-Assessing Officer to verify whether payee identifiable and amount payable to him ascertainable. [S.201(1A)] Allowing the appeal, the Tribunal held that ; Person to whose account credit for such tax deducted at source to be given is not identifiable, provisions of tax deduction at source not applicable--Assessing Officer to verify whether payee identifiable and amount payable to him ascertainable . ( AY. 2010-2011, 2011-2012) Apollo Tyres Ltd. v. Dy. CIT (2017) 163 ITD 177 / 54 ITR 1 (Delhi)(Trib.)


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S.206AA: Requirement to furnish Permanent Account Number -Tax has to be deducted at source at fixed rate of 20 per cent , surcharge and education cess cannot be levied. Tribunal held that , in terms of clause (iii) of section 206AA(1), tax has to be deducted at source at fixed rate of 20 per cent and surcharge and education cess was held to be not leviable. (AY. 2014-15 ) Computer Sciences Corporation India (P.) Ltd. v. ITO (2017) 163 ITD 151 (Delhi) (Trib.) S.206AA: Requirement to furnish Permanent Account Number - AO rightly raised demand on deductor on its failure to apply 20 per cent TDS rate when payee had furnished wrong PAN. Assessee payer having failed to discharge its obligation to verify the PAN submitted by the payee which has been eventually found to be incorrect by the department at the time of processing of the TDS return, A.O. was justified in raising demand for the differential tax that the assessee should have deducted in terms of S.206AA on account of submission of incorrect PAN by the payee. (AY.2011-12) Office of Xen, PHED v. ITO (2017) 146 DTR 19 (Jaipur)(Trib.) S. 206C : Collection at source–Cotton wastage–Writ is not maintainable , as the buyers can seek refund by filing returns. [Constitution of India, Art. 226] Petitioner filed a writ petition praying for mill owners from collecting TCS on purchase of cotton waste Dismissing the petition the Court, held that there was uncertainty regarding applicability of section 206C to cotton waste hence, no direction could be issued to restrain mill owners, to stop collecting TCS on purchase of cotton waste. Further, it was always open to petitioners to seek refund by filing appropriate returns and hence remedy under Act itself was available, thus instant petition would not be maintainable . Amarjeet Beeton v. CIT (2017) 391 ITR 124/244 Taxman 240 (P&H)(HC) S. 206AA: Requirement to furnish Permanent Account Number –Deduction at source-In case where payments have been made to deductees on the strength of the beneficial provisions of S. 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of s. 206AA cannot be invoked by the AO insisting to deduct tax @ 20% for non-availability of PAN [ S.90(2), 115A(1)(b), 195, 200A ] Allowing the appeal of assessee the Tribunal held that; In case where payments have been made to the deductees on the strength of the beneficial provisions of section 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of section 206AA cannot be invoked by the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN. (ITA No. 1204/Ahd/2014, dt. 04.01.2017)(AY. 2011-12) Quick Flight Limited. ITO (Ahd.)(Trib.); www.itatonline.org S. 206AA: Requirement to furnish Permanent Account Number -Section does not have an overriding effect over the other provisions of the Act. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN. [S.90(2)] Special Bench was constituted to decide the following questions involved. “Whether on the facts and circumstances of the case,provisions of section 206AA, of the Act will have a overriding effect for all other provisions of the Act, and that being the case, assessee is required to deduct tax at the rate prescribed therein in case of persons having taxable income in India, including non-residents, who do not furnish their Permanent account number“ Special Bench held that; section does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at


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higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN (AY. 2011-12, 2012-13) Nagarijuna Fertilzers and Chemicals Ltd. v. ACIT (2017) 149 DTR 137 / 185 TTJ 569 (Hyd.)(Trib.)(SB) S. 215: Advance tax- Interest- Liable to pay interest for short or non payment of advance tax . Assessee is Liable to pay interest for short or non payment of advance tax. (AY. 1976-77) E.Merck (India) Ltd. v.CIT (2017) 393 ITR 91 (Bom.)(HC) S. 220 : Collection and recovery- Assessee deemed in default–High Court was directed to dispose the petition at the earliest. Allowing the petition the Court held that;since writ petition was pending before High Court, it was not necessary for Court, at this stage, to go into various disputed contentions raised by parties on merits. in peculiar facts and circumstances of case, High Court was to be directed to dispose of writ petition expeditiously; in case writ petition was dismissed, assessee shall, subject to order passed by High Court and subject to order attaining finality, deposit amount as ordered by High Court. State of Andhra Pradesh v. CCIT (2017) 391 ITR 302/ 244 Taxman 287/ 149 DTR 67 / 294 CTR 29 (SC) S. 220 : Collection and recovery-Stay of proceedings–Pendency of appeals before CIT(A)- Direction to Commissioner (Appeals) to decide pending appeals within one month and Department not to attach any other accounts of assessee or take coercive steps till disposal of appeal by Commissioner (Appeals)-Matter was remanded. [S. 225, 226] Supreme Court directed the Commissioner (Appeals) to decide pending appeals within one month, Department to withdraw Rs. 400 crores approximately already attached. Term deposit of Rs. 1000 crores to be kept by assessee as security till disposal of appeal and Department not to attach any other accounts of assessee or take coercive steps till disposal of appeal by Commissioner (Appeals).Matter was remanded . (AY. 2007-2008 to 2012-2013) Maharashtra Industrial Development Corporation v. CIT (E) (2017) 393 ITR 315/247 Taxman 10 (SC) S.220:Recovery of tax-Waiver of interest-Enforcement of law not a hardship--Assessee not co-operating in assessment or recovery proceedings, interest cannot be waived. [S.220(2A), 222] Dismissing the petition the Court held that the assessee has not co operated with the department and not shown any hardship hence the condition for waiver of interest was not satisfied. Mookambika Associates v. ACIT(2016) 76 taxmann.com 333 (2017) 391 ITR 26 (Karn.)(HC) S. 220 Collection and recovery-Assessee deemed in default- stay - The AO and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to "genuine hardship" to the assessee”. [S.220(6)] Allowing the petition the Court held that;CBDT Circular dated 29.2.2016 does not supersede Instruction No.1914 but modifies it. Both have to be read together. The AO and CIT cannot straightaway demand payment of 15% of the dues but have to grant complete stay if the assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed demand leads to "genuine hardship" to the assessee”. Commissioner was directed to decide the Review petition filed by the assessee with in a period of two weeks. (AY. 2014-15 )


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Flipkart India Private Ltd. v. ACIT(2017) 149 DTR 75 (Karn.)(HC) S. 220: Collection and recovery-Assessee deemed in default- If the AO demands 15% to be paid, the assessee is entitled to approach the Pr CIT for review of the AO's decision. [S.220(6)] Allowing the petition, the Court held that; CBDT's instruction dated 29.02.2016 on stay of demand by the AO does not require the assessee to make a pre-deposit of 15% of the disputed demand. As per the Instruction, if the AO requires the assessee to pay less, or more, than 15% of the demand, the sanction of the Pr. CIT is required. If the AO demands 15% to be paid, the assessee is entitled to approach the Pr CIT for review of the AO's decision. ( Spl. C A No. 5679 of 2017, dt. 28.012.2017) Jagdish Gandabhai Shah v. PCIT (Guj.)(HC); www.itatonline.org S. 221: Collection and recovery–Penalty-Tax in default -tax in arrears would not include the interest payable. [S. 2(43), 156 220(2), 234A, 234B, 234C] Dismissing the appeal of the revenue, the Court held that; a reading of s. 221 conjointly with the definition of “tax” in s. 2(43) leads to the irresistible conclusion that the phraseology “tax in arrears” in s. 221 would not take within its realm the interest component. The AO can impose penalty for default in making the payment of tax, but the same shall not exceed the amount of tax in arrears. Tax in arrears would not include the interest payable u/s 220(2) of the Act. ( ITA No. 01 of 2015, dt. 01.06.2017) CIT v. Oryx Finance and Investment Pvt. Ltd. (Bom.)(HC), www.itatonline.org S. 221 : Collection and recovery–Penalty-Tax in default–Failure to pay self assessment tax due to Financial crunch, levy of penalty was held to be not justified. [S. 140A, 221(1)] Allowing the appeal of the assessee the Tribunal held that; failure to pay self assessment tax due to Financial crunch, levy of penalty was held to be not justified.( AY. 2010-11) Life Time Realty (P.) Ltd. v. DCIT (2017) 163 ITD 553 (Mum.)(Trib.) S. 221 : Collection and recovery of tax - Penalty - Tax in default – Financial difficulties –levy of penalty was held to be not justified, matter remanded.[S.140A] Tribunal held that unless it could be shown that loans had been raised with mala-fide intent, deliberately, carelessly and irresponsibly to avoid paying just and due taxes to State, plea of the assesse cannot be rejected. Therefore penalty order was remanded back for afresh. (AY. 2011 – 2012) Orbit Resorts (P.) Ltd. v. Addl. CIT(2017) 162 ITD 477 / 185 TTJ 418 (Chand.)(Trib.) S. 222 : Collection and recovery-Certificate to Tax Recovery Officer- Attached property was not sold within three years, attachment order of said property would be deemed to be vacated [Second Schedule, Rule 68B] Allowing the petition the Court held that; Sub rule (4) of Rule 68B of II Schedule further clarifies that where the sale of immoveable property has not been made within three years as required under Rule 68B to Second Schedule to the Act , the effect would be attachment order of the said property deemed to be vacated .Accordingly the attachment of immoveable properties stands vacated. K. Venkatesh Dutt v. TRO (2017) 244 Taxman 1 (Karn.)(HC) S.222: Collection and recovery-Attachment of property-Property jointly owned by four co-owners including assessee-Sale of property during pendency of recovery proceedings-Assessee paying entire amount of tax due along with interest-Transaction of sale cannot be declared null and void. [S.220(2), Sch. II, RR. 16, 48, 60 ]


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Allowing the petition,the Court held that; according to rule 60 of the Second Schedule to the Income-tax Act, 1961, even in a case where the property was already sold by the Department in an auction for the dues of the original assessee, the defaulter, or the person interested in the property could submit an appropriate application to set aside the sale on payment of the entire amount due and payable by the assessee/defaulter with other amounts as mentioned in rule 60. No further proceedings were initiated against the assessee by the Department and the property was not put to auction and before that, the assessee had paid the entire amount due with the interest under section 220(2) under the certificate for which the property was attached. Under these circumstances the order declaring the transaction in favour of the petitioner as null and void was unsustainable. The order of attachment under rule 48 could be issued only with respect to the certificate issued for the amount due and payable by the defaulting assessee. The contention of the Department that the attachment order dated January 4, 2005 could be continued with respect to the amount due and payable under the penalty order dated March 17, 2006 could not be accepted as the penalty order had been subsequently passed and was not even in existence when the attachment order was passed. Nitaben Harishbyhai Shah v. TRO (2017) 392 ITR 619/ 246 Taxman 346 / 150 DTR 210 (Guj.)(HC) S. 220 : Collection and recovery- Stay-Assessee’s income assessed was ten times more than the returned income, demand is to be stayed till the disposal of appeal. Where assessee, a non-resident, received management fee from its Indian subsidiary but Assessing Officer made assessment at sum 10 times higher to returned income and raised demand, stay on said demand should be granted to assessee in view of CBDT Instruction No. 96 dated 21/08/1969. (AY. 2011-12) Dimension Data Asia Pacific Pte. Ltd. v. Dy. CIT (IT) (2017) 146 DTR 89 (Mum.)(Trib.) S. 222 : Collection and recovery - Certificate to Tax Recovery Officer- Since entire tax liability of assessee was wiped off pursuant to order of Tribunal, in such a case, even if revenue's appeal was entertained by High Court, that by itself would not make assessee as an assessee-in-default- Tax recovery Officer was directed to lift the attachment of the immoveable property. [S.225] Allowing the petition the Court held that ; Since entire tax liability of assessee was wiped off pursuant to order of Tribunal, in such a case, even if revenue's appeal was entertained by High Court, that by itself would not make assessee as an assessee-in-default. Tax Recovery Officer is directed to pass appropriate orders for lifting the order of attachment of the immovable property of the assessee. (AY. 2009-10 to 2011-12) Coromandel Oils (P.) Ltd. v. TRO (2017) 244 Taxman 165 / 291 CTR 600 (Mad.)(HC) S. 226: Collection and recovery–Auction- Purchaser was held to be deemed defaulter-Person in possession of property permitted to retain title to property after making due payment with interest - Department entitled to proceed for auction and sale of properties if person in possession of property fails to deposit amount. [Sch. II, r. 58.] Allowing the petition the Court held that ; till date, neither the purchaser nor the legal heirs had cared to deposit the balance sale consideration. In such circumstances, rule 58 of Schedule II to the Act would come into operation and the predecessor-in-interest would have to be deemed to be a defaulter. The sale in favour of the predecessor in interest would stand set aside. The petitioner had been in possession of the property prior to the date of sale. The petitioner had, in fact, filed a claim petition at the relevant time, which was rejected. The petitioner, admittedly, was in possession of the cashew factory in the property purchased by him. A licence was issued in the name of the petitioner`s father. In such circumstances, equity demanded that the petitioner be


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given a chance to settle the entire dues under the Act created by the fourth respondent, which also occasioned the charge being created on the property purchased by the petitioner. Therefore, the petitioner could retain title to the property after making the due payment with interest. If the petitioner failed to deposit the amount, the Department would be entitled to proceed for auction and sale of the properties, in which event any amounts remaining after satisfaction of the dues would be paid to the petitioner and the legal heirs or assignees of the fourth respondent, in proportion to the extent of their respective holding. Mohammed Niyas v. CIT (2017) 390 ITR 13 (Ker.)(HC) S. 226: Collection and recovery-Garnishee proceedings- Seizure of fixed deposit receipt from the bank was held to be illegal, order was quashed . Allowing the petition the Court held that; on the date on which the notice was issued under section 226 of the admittedly in view of the correspondence which had come on record, and complete documentary evidence, it was clearly established that the petitioner was a creditor and the fixed deposit receipt lien was with the petitioner-bank. The Department had seized the fixed deposit receipt, which was not proper. Therefore, the bank was a creditor and notice under section 226 of the Act and recovery pursuant thereto was misconceived and not proper. The order was liable to be quashed. Kalupur Commercial Co-op Bank Ltd v. UOI(2017) 390 ITR 115 (Guj.)(HC) S. 226 : Collection and recovery–Mortgaged property –Dispute between bank and the Revenuewill not affect the purchaser of the property. The petitioner purchased the mortgaged property. The Tax Recovery Officer issued an order of attachment on property for outstanding tax dues of the directors. On allowing the petition the Court held that; mere communication to the bank by the Income-tax Department conveying that Income-tax Department had to recover huge amount of tax from the Director, its HUF and company would not take shape of the attachment of the property which can be so in terms of rule 48 of the procedure for recovery of tax long after the property was sold to 'A' who in turn, sold part of it to the petitioner. Even if the bank had disregarded such a communication of the income-tax department and not shared with the department proceeds of the sale of such property, at best may be a dispute between the income tax department and the bank and in any case, cannot harm the petitioner who was the subsequent purchaser for consideration without notice. On such grounds, petition is allowed. Impugned attachment is lifted qua the properties in question. Prajakta M. Shah v. TRO (2017) 244 Taxman 183 / 148 DTR 101 / 293 CTR 197 (Guj.)(HC) S. 234C: Interest-Advance tax-Shortfall due to unanticipated income - Interest is leviable. Dismissing the appeal the Court held that; levy of interest u/s. 234C was valid even if the shortfall to pay advance tax was due to unanticipated income.(AY. 2007-2008) MRF Ltd v. DCIT (LTU) ( 2016) 76 taxmann.com. 282 / (2017) 390 ITR 18/ 293 CTR 151/ 148 DTR 58 (Mad)(HC) S. 234C: Interest - Deferment of advance tax –Interest is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift. Allowing the appeal of assesse the Tribunal held that ;though levy of interest for deferment of advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is not leviable if the income was not predictable and the assessee could not have anticipated its receipt e.g. the receipt of a gift was on 17-12-2011. (ITA No. 7661/Mum/2013, dt. 13.07.2016)(AY. 2012-13) Kumari Kumar Advani v. ACIT (Mum.)(Trib.); www.itatonline.org


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S. 234C : Interest - Deferment of advance tax -Interest is applicable in respect of income returned under section 139 as well as income returned in response to notice under section 148. [S. 139,148] Dismissing the appeal of the assessee the Tribunal held that; interest under section 234C is chargeable in respect of income returned under section 139 as well as income returned in response to notice under section 148. ( AY. 2009-10) V. Umayal v.ITO (2017) 163 ITD 278 (Chennai)(Trib.) S.234E: Fee-Default in furnishing the statements- Provision is valid- Right of appeal is provided.[Art. 226] The provision is not onerous even in the absence of a right of appeal as it is always open for the aggrieved person to approach the High Court under article 226 of the Constitution of India. However, section 200A was amended by the Finance Act, 2015 incorporating clause (c) and an order passed under section 200A is made appealable under section 246A. This benefit of appeal is available only after the commencement of the Finance Act, 2015. Section 234E is valid. Sree Narayana Guru Smaraka Sangam Upper Primary School v. UOI (2017) 392 ITR 457 / 147 DTR 108 (Ker.)(HC) S. 245D : Settlement Commission Books of accounts - Entries in loose papers/ sheets are irrelevant and inadmissible as evidence- Offences and prosecution- Settlement commission. [S.2(12A) , 132, 143(3) 245D, Evidence Act, S.34] Entries in loose papers/ sheets are irrelevant and inadmissible as evidence. Such loose papers are not “books of account” and the entries therein are not sufficient to charge a person with liability. Even if books of account are regularly kept in the ordinary course of business, the entries therein shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the person relying upon those entries to prove that they are in accordance with facts. Finding of Settlement Commission disregarding such evidence as in admissible and unreliable . The materials in question were not good enough to constitute offences to direct the registration of a first information report and investigation therein . (C.B.I. v. V.C. Shukla (1998)3 SCC 410 (SC) followed) Common Cause ( A Registered Society ) v. UOI ( 2017) 394 ITR 220 (SC) S. 245D : Settlement Commission–Survey–Revised enhanced offer made by the assessee must be considered in the nature of sprit of the settlement Commission, order of Settlement Commission was up held . [S. 245C] Dismissing the petition of the Revenue against the order of settlement Commission, the Court held that ; during course of proceedings, if revised enhanced offers are made by assessee, then in nature of spirit of settlement, same is to permitted to be considered by settlement commission. (AY. 2011-12 , 2012-13) CIT v. ITSC (2017) 244 Taxman 156 (Guj.)(HC) S. 245D: Settlement commission- Finding that there had been no full and true disclosure of income and manner in which it was earned , rejection of applications was held to be justified, high court cannot interfere on finding of fact. [S. 153A, 245D(2C), 245D (4), Art. 226] Dismissing the petition the court held that, though the applications allowed and order passed under section 245D(2C). Subsequent inquiry under section 245D(3) if it was found that hat there had been no full and true disclosure of income and manner in which it was earned, the rejection of applications under section 245D(4) was justified. High Court under Writ jurisdiction has limited power. Bharat Singh v. UOI (2016)76 taxmann.com 239/ (2017) 391 ITR 305 (Patna) ( HC)


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Kumbh Nath Singh v. UOI(2016) 76 taxmann.com. 239 / (2017) 391 ITR 305 (Patna)(HC) Lal Bahadur Singh v. UOI (2016) 76 taxmann.com. 239 /(2017) 391 ITR 305 (Patna) (HC) S.245D: Settlement Commission-Commissioner filing report before Settlement Commission does not have any adjudicatory role and is entitled to file writ petition against order of Settlement Commission-Settlement commission had not properly considered issue of addition or genuineness of claim of advances from others, matter was remanded to Settlement Commission. [S. 245C,245D(4), 245I, Art. 226] Allowing the Writ petition filed by the Commissioner, the Court held that; Commissioner filing report before Settlement Commission does not have any adjudicatory role and is entitled to file writ petition against order of Settlement Commission- Settlement commission had not properly considered issue of addition or genuineness of claim of advances from others, matter was remanded to Settlement Commission. CIT v. ITSC (2017) 391 ITR 374/ 291CTR 433/ 146 DTR 97 / 77 taxmann.com 167 (Ker.)( HC) S. 245H: Settlement Commission-Payment of tax was made before filing special leave petition-Payment to be taken to have been made within time. [S. 245C] Assesse could not make the payment with in time granted by the Settlement Commission. On writ the High Court refusing to extend time. The assessee filed SLP and payment was made before filing of the SLP. Allowing the petition the Court held that , the payments to be taken to have been made with in time . ( AY. 2004-05 to 2010-11 ) Sandeep Singh v.UOI (2017) 393 ITR 77/ 147 DTR 305 / 292 CTR 361 (SC) S. 246 : Appeal-Commissioner (Appeals)-Levy of interest- Where levy of advance tax was disputed only levy of interest was held to be not maintainable. [S. 215] On reference the Court held that; where levy of advance tax was disputed only levy of interest was held to be not maintainable . Assessee can seek waiver or reduction before Assessing Officer Authority. ( AY. 1976-77) E. Marck (India) Ltd. v. CIT (2017) 393 ITR 91 (Bom.)(HC) S. 251 : Appeal-Commissioner (Appeals)–Powers-Additional evidence-Cash credits-Deliberate attempt to defraud the revenue hence refusal to admit additional evidence was held to be justified. [R. 46A] Dismissing the appeal the Court held that; the conduct of the assessee was a deliberate attempt to defraud the Department. The relief, which the assessee had claimed explaining the two transactions which pertained to the creditors, could not be examined in isolation in the absence of other entries in the books of account, which could not be explained by the assessee at the time of assessment as the queries raised by the Assessing Officer were not responded to and complete books of account were not produced. Accordingly refusal to admit additional evidence was held to be justified. (AY. 2009-2010 ) Rishi Sagar v. CIT (2017) 393 ITR 214 (P&H)( HC) S. 251: Appeal-Commissioner (Appeals)–Powers-The CIT(A) has no power to enhance by discovering a new source of income which is neither discussed in the assessment order nor mentioned in the return of income filed by the assessee [ S. 2(22)(e), 250] Allowing the appeal of the assessee the Tribunal held that; It is well settled law laid down by the Hon’ble Apex Court in CIT v. Shapoorji Pallonji Mistry, (1962) 44 ITR 891 (SC) and CIT v. Rai Bahadur Hardutroy Motilal Chamaria (1967), 66 ITR 443 (SC) and subsequently followed by the Hon’ble Delhi High Court in CIT v. Sardari Lal & Co.(2001) 251 ITR 864 (Delhi)(FB) that


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the CIT(A) is not competent to enhance assessment in appeal by discovering new source of income not mentioned in return or consider by the Assessing Officer in assessment. We hold that the Commissioner of Income Tax (Appeals) has exceeded his jurisdiction in making addition u/s. 2(22)(e) of the Act as there is no reference of such income either in the return of income or in the assessment proceedings.( ITA No. 746/PN/2013, dt. 30.12.2016) ( AY. 2009-10) Ram Infrastructure Ltd. v. JCIT (Pune) (Trib.)www.itatonline.org S. 251 :Appeal- Commissioner (Appeals)–Powers- Additional evidence-For admission of additional evidence, application under rule 46A is not mandatory. [R. 46A] Allowing the appeal of the assessee the Tribunal held that; For admission of additional evidence, application under rule 46A is not mandatory. As the assesse could not produce the evidence due to the assessee’s wife's illness was prevented from producing evidences before AO, CIT (A) could not refuse to admit such evidences merely for want of an appropriate application under rule 46A. The matter was set aside to the CIT(A) to admit the additional evidence and decide the matter after obtaining the remand report from the AO. (AY.2011-12) Padam Lal Dua v.ITO (2017) 162 ITD 524 (Delhi)(Trib.) S. 254(1):Appellate Tribunal-Additional evidence-Natural justice-Sufficient opportunity was provided to argue the matter hence there is no violation of principle of natural justice–Not necessary to pass a separate order.[S. 54F, R. 29] Dismissing the appeal the Court held that; Tribunal by not passing the separate order either accepting or rejecting the application for additional evidence did not cause any injustice to assessee- Sufficient opportunity was provided to argue the matter hence there is no violation of principle of natural justice. It is not necessary to pass a separate order. (AY 2006-2007 ) Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536 (Bom.)( HC) S.254(1):Appellate Tribunal-Powers-Matter remanded by Tribunal with directions at par with order for earlier year-Tribunal has no power to issue further orders regarding mode in which its directions are to be complied with. [S.92C] Allowing the appeal the Court held that; the further observations made by the Tribunal after recording the finding that the matter was required to be remanded to the Transfer Pricing Officer/Assessing Officer with identical directions as given in case of the assessee for the assessment year 2007-08 was not justified. Resultantly, the order passed by the Tribunal making observation exceeding the identical direction given in case of the assessee for the assessment year 2007-08 would no more operate. The Transfer Pricing Officer/Assessing Officer would be required to consider the matter in the same manner as was considered earlier and at par with the direction issued in case of the assessee for the assessment year 2007-08. Fosroc Chemicals (India) P. Ltd. v. Dy. CIT (2017) 392 ITR 172 / 246 Taxman 278 (Karn.)(HC) S.254(1): Appellate Tribunal –Additional grounds–Assessee must satisfy the appellate authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons.[S.80IA] Dismissing the appeal, the Court held that, an additional ground cannot be permitted to be raised if the necessary evidence that the assessee is entitled to the claim is not on record. The fact that claim has been allowed by the AO in a subsequent year and that there is no reason why the claim should not be allowed in the present year is irrelevant. Also, the assessee must satisfy the appellate authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons.(ITA No. 1060 of 2014, dt. 18.04.2017) Ultratech Cement v. ACIT (Bom.)(HC)www.itatonline .org S. 254(1): Appellate Tribunal–Powers-Tribunal has no power to enhance assessment.


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Allowing appeal the Court held that ;the Tribunal has no power under the Act to enhance the assessment in appeal in view of the statutory provisions. Mcorp Global P. Ltd. v. CIT [2009] 309 ITR 434 (SC) followed. (AY. 1989-1990 ) Fidelity Shares and Securities Ltd. v. DCIT (A) (2017) 390 ITR 267 ITR (Guj.)(HC) S. 254(1): Appellate Tribunal – Additional evidence –Question of fact [S. 68, 69, 260A, ITR, 1962, r. 29.] Dismissing the appeal of the assesse the Tribunal held that ; the view adopted by the Appellate Tribunal was a plausible view based on appreciation of material on record and therefore, did not warrant interference. The assessee was not successful in demonstrating that the findings recorded by the Appellate Tribunal were based on either misreading or misappreciation of material on record. No question of law arose. (AY. 2008-2009 ) Sanjeev Bajaj v. CIT (2017) 390 ITR 478 (P&H)(HC) Editorial: SLP of assesse is dismissed; Sanjeev Bajaj v. CIT (2016) 389 ITR 39 (St.) S.254(1): Appellate Tribunal-Additional evidence-Ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated. [ITATR.18, 29] Court held that;ordinarily an application seeking admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons thereof have to be stated, however in the present case no injustice is done to the assessee, hence the Tribunal has not committed any error by not passing a separate order on the additional evidence filed before the Tribunal. (AY. 2006-07) Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/ 80 taxmann.com 22 (Bom.)(HC) S. 254(1): Appellate Tribunal-The Respondent is entitled to raise an objection under Rule 27 even in respect of fresh issues. It is not necessary that the ground should have been decided against the by the CIT(A). [ITAT Rule, 27] R Tribunal held that; A cursory look at the language of rule 27 transpires that a respondent has been empowered to support the order appealed against on any of the grounds `decided against him.’ In other words, the challenge can be made by a respondent only in respect of a `ground decided against him’. In such circumstances, a question arises that if there is no decision at all of the CIT(A) on a particular aspect, which is otherwise germane to the overall issue decided in favour of the respondent, can the respondent espouse such aspect under rule 27 in an appeal filed by the plaintiff ? If we go by the literal interpretation of the Rule, then the answer is in negative that unless the ground is not `decided against’ the respondent, he cannot take recourse to this provision. However, it is of paramount importance to keep in mind the fundamental object of enshrining rule 27, being giving an opportunity to the respondent to support the impugned order in an appeal filed by the plaintiff. A pragmatic approach on consideration of the object of such Rule, in our considered opinion, necessitates the adoption of liberal interpretation that when a particular issue is decided in favour of the respondent and the plaintiff has come up in appeal against such decision on the issue, then all the relevant aspects having bearing on the overall issue, even though not specifically decided against the plaintiff, should be open for challenge by the respondent under the rule. If the respondent is debarred from raising that aspect of the issue, which was not taken up before the first appellate authority or taken up but remained undecided, and the appeal of the plaintiff is allowed, the respondent would be rendered without remedy. It has been noticed above that a respondent is not entitled to file cross objection on such aspects of the issue u/s 253(4) of the Act, the scope of which provision is circumscribed to challenging the ultimate unfavourable conclusion drawn by the CIT(A). In common parlance, when an issue is decided in favour of one party whether on one aspect or the other, it is not expected of such a


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party to challenge the order by asserting that the decision should have been given in his favour on that issue on all the aspects and not on that particular aspect on which it was given. When an appeal is filed against such favourable decision on the issue by the other party, and suppose the impugned order is not sustainable on that aspect of the issue on which it was decided, but on some other aspect which was not decided by the first appellate authority and the respondent is restrained from taking up such aspect on the reasoning that Rule 27 is not applicable on such aspect, the respondent would stand nowhere. In view of the foregoing discussion, it is clear that hyper technicalities of rule 27 cannot come in the way of the deciding such aspects of the issue taken up by the respondent before the tribunal which were germane to the main issue but were not contested or decided provided no fresh investigation of facts is required for rendering decision on such aspects. (ITA No. 167,168,321,322 & 192/Lkw/2016, dt. 28.04.2017)(AY. 2010-11) AAA Paper marketing Ltd. v. ACIT (Lucknow)(Trib.),www.itatonline.org Sidhibhoomi Alloys Ltd. v. ACIT (Lucknow)(Trib.),www.itatonline.org DCI v. Appurva Goel (Lucknow)(Trib.),www.itatonline.org S. 254(1): Appellate Tribunal-Additional evidence- Foreign allowance was received outside India–Additional evidence was filed before the Tribunal–Matter was send back to AO to decide a fresh-DTAA-India–UK. [S. 5, 9(1)(ii), Art. 16] The Tribunal held that, additional evidence filed before Tribunal for his claim that salary income received was not taxable in India, since said evidence were not available before authorities below, matter was send back for to decide afresh.(AY. 2011 – 2012 Ravishankar Rajendran v. ITO (2017) 162 ITD 503 (Chennai)(Trib.) S.254(1) : Appellate Tribunal-Admission of additional evidence by the CIT(A) was held to be justified. [R. 46A] The Tribunal held that the CIT(A) has rightly admitted additional evidences which were necessary for arriving at justice. The learned CIT(A) has passed a reasoned and speaking order and has passed the order after obtaining remand report from the AO. The appeal of the revenue is dismissed. (A.Y. 2009-10) ACIT v. Saraswati Builders (2017) 183 TTJ 13 (UO) (Asr.)(Trib.) S. 254(2): Appellate Tribunal-Rectification of mistake apparent from the record–Non consideration of paper book filed is a mistake apparent from the record , Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assesee. Allowing the petition the Court held that, Non consideration of paper book filed is a mistake apparent from the record, Tribunal was directed to hear the appeal of the assessee afresh on the basis of documents which have been already found to be filed by the assesee. (AY.1996-97) Nisha Synthetics Ltd. v. CIT (2017) 145 DTR 345/291 CTR 328 (SC) Editorial: Judgment of Bombay High Court in Nisha Synthetics Ltd v. ITAT ( 2017) 145 DTR 346/291 CTR 329 (Bom.)(HC) is set aside. S. 254(2) :Appellate Tribunal-Rectification of mistake apparent from the record – If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake. Dismissing the petition the Court held that; plea that the appeal was mistakenly withdrawn on the advice of Counsel and that the same should be restored should be backed by evidence. If the assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the withdrawal was an apparent mistake. Jayant D. Sanghavi v. ITAT(2017) 147 DTR 370 (Bom.)(HC)


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S. 254(2): Appellate Tribunal–Rectification of mistake–Tribunal is duty bound to pass necessary consequential orders even without alternative submission, if situation warrants - Tribunal is directed to allow miscellaneous application and consider alternative plea made by assessee. [S.254(1)] On reference the Court held that ;the Tribunal is bound by the law to consider the alternative plea raised by the assessee at the hearing of the appeals. The miscellaneous application taken out before the Tribunal by the assessee brought out an error apparent on record insofar as the original order passed by the Tribunal was concerned. Therefore, the miscellaneous application was to be allowed and the Tribunal was to consider the alternative plea made by the assessee in the light of the decision of the Bombay High Court which stated that the Tribunal was duty bound to pass necessary consequential orders even without an alternative submission, if the situation warranted. Referred Ciba of India Ltd. v. CIT [1993] 202 ITR 1 (Bom) and CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710 (SC) .[Since the final order of the Tribunal on the appeal could only be crystallised after the plea was so considered by the Tribunal, the reference made was returned unanswered. (AY. 1987-1988, 1988-1989 ) Parmanand Builders P. Ltd. v. CIT(2016) 76 taxmann.com 283/ (2017) 390 ITR 40/ 292 CTR 382 / 147 DTR 248 (Bom.)(HC) S. 254(2): Appellate Tribunal-Rectification of mistake apparent from the record–The mere placing of a case law in the paper book does not mean that it was cited before the ITAT and non-consideration thereof is not a mistake apparent from the record. [ S.254(1) ] Dismissing the petition the Court held that ; Facts recorded by the ITAT have to be accepted as correct and conclusive and cannot be contradicted by affidavit or otherwise. The mere placing of a case law in the paper book does not mean that it was cited before the ITAT and non-consideration thereof is not a mistake apparent from the record. A MA to rectify such alleged mistake of non-consideration of a judgement must be filed as quickly as possible. ( WP. 2844 of 2016, dt. 12.01.2017)( AY. 2002-03 ) Ashish Gandhi Builders & Developers P. Ltd. v. ITAT (Bom.)(HC); www.itatonline.org S.254(2):Appellate Tribunal-Rectification of mistake-Order was passed beyond period of 90 days –Tribunal was directed to pass fresh order. [S. 254(1), ITATR, 34(5)(c), 34(8)] Allowing the petition the Court held that ; Tribunal while rejecting the rectification application did not dispute the fact that the order dated February 3, 2016 was passed beyond the period of 90 days from the date of conclusion of its hearing. However, it recorded that administrative clearance had been taken to pass such an order beyond the period of 90 days. The meaning of "administrative clearance" was not clear in the face of rule 34(5)(c) read with rule 34(8) of the Income-tax (Appellate Tribunal) Rules, 1963. The provisions mandated the Tribunal to pronounce its order at the very latest on or before the 90th day, after the conclusion of the hearing. Therefore, the order was not sustainable. The Tribunal was to consider the rectification application afresh. (AY. 2009-2010 ) Otters Club v. DIT(E)(2017) 392 ITR 244 (Bom.)(HC) S.260A: Appeal-High Court—Limitation-Delay of fourteen days condoned and High Court was directed to hear the appeal on merits. Where the High Court refused to condone a delay of fourteen days in filing the appeal under section 260A of the Income-tax Act, 1961 on the ground that there was no such power given to the High Court, on appeal : Held, allowing the appeal, that subsequently, sub-section (2A) of section 260A of the Act was inserted which empowers the High Court to condone the delay. Whether it had effect prospectively or retrospectively, the High Court had inherent jurisdiction to condone such delay


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of fourteen days. The Supreme Court condoned the delay of fourteen days and directed the High Court to decide the appeal on the merits in accordance with law.. CIT v. Pheroza Framroze and Co. (2017) 392 ITR 626/ 80 taxmann.com 261 / 152 DTR 139 (SC) S.260A: Appeal–High Court–Transfer pricing-The contention that there is an error because mere mathematical calculation shows that the arm's length purchase price as worked out by the TPO falls beyond (+)/(-) 5% range and consequently falls outside the scope of the second proviso to S.. 92C(2) cannot be considered if it was not raised before the CIT(A) & ITAT. [S.92C] Dismissing the appeal of the Revenue the Court held that; The grounds which were never agitated before the Commissioner of Income Tax (Appeals) and the Tribunal and those grounds based on the facts, cannot be agitated in the present appeal. (ITA No. 980 of 2014, dt. 07.06.2017) CIT v. Metter Toledo India Pvt. Ltd. (Bom.)(HC), www.itatonline.org S. 260A: Appeal-High Court-Issue concluded by decisions of High Courts, appeal is not maintainable- No substantial question of law. Dismissing the appeal of the revenue , the Court held that ; when both the issues were covered by the decisions of two High Courts no substantial question of law arose and the appeal was not maintainable. (AY. 2009-2010) CIT v. Brindavan Beverages P. Ltd. (2017) 393 ITR 261 (Karn.)(HC) S.260A: Appeal- High Court-Limitation-Appeal by department- Receipt of the order by any of the Officer of the department including Commissioner (Judicial) is to be considered for computing the period of limitation –Administrative instructions cannot override the statute. [S.260A(2)(a)] Assessee contended that for computing the period of limitation the copy of order was available with the Commissioner (Judicial) to be considered and with the Commissioner (Central). The Department contended that limitation would start to run from the date of service of the order of the Tribunal on the concerned Commissioner having jurisdiction over the assesse. On appeal the Court held that; the word “ received “ occurring in section 260A(2)(a) of the Income –tax Act, 1961, would mean received by any of the named officers of the Department, including the Commissioner (Judicial). The provision names four particular officers, i.e., the Principal Commissioner, Commissioner, Principal Chief Commissioner, and the Chief Commissioner of Income Tax . These were the only designated officers who could receive a copy of the order of the Tribunal by any of those officers in the Department including the Commissioner (Judicial) would trigger the period of limitation. The statute was not concerned with the internal arrangements that the Department might make by changing the jurisdiction of its officers.The limitation would begin to run when a certified copy was received first by either the Commissioner ( Judicial) or one of the officers of the Department and not only when the Commissioner “concerned” received it. Administrative, instructions are for the administrative convenience of the Department and would not override the statute, in particular, section 260A(2)(a) of the Act. CIT v. Odeon Builders P.Ltd. (2017) 393 ITR 27/ 150 DTR 1/ 294 CTR 30 (FB) (Delhi)(HC) CIT v. Gulbarga Associates P.Ltd (2017) 393 ITR 27 /150 DTR 1 / 294 CTR 30 (FB) (Delhi)(HC) S. 260A : Appeal-High Court -Delay of 335 days in filing the appeal by 335 days was not condoned.


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Dismissing the appeal, the Court held that; Government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for Government departments. The mere fact that the AO was busy in other time-bearing assessments is not an excuse for delay particularly given the fact that s. 260A provides a long time period of 120 days. Every day’s delay has to be explained. On facts delay in filing appeal by 335 days was not condoned.(ITA No. 409/2017, dt. 19.05.2017) CIT v. Historic Infracon (Delhi)(HC),www.itatonline.org S.260A: Appeal–High Court- Additional evidence -Amounts not deductible–Deduction at source- -Documents showing payment of tax on sums in question by payee produced before court--Matter remanded to Assessing Officer to consider documents and dispose of matter. [ S. 40(a)(ia)]. In an appeal to the High Court arising out of disallowance of expenditure under section 40(a)(ia) of the Income-tax Act, 1961, the assessee filed an application for permission to produce additional evidence showing payment of income-tax by the deductee on the amount paid by the assessee , Court held that, the additional evidence produced by the assessee were relevant accordingly the court remanded the matter to the Assessing Officer to examine the veracity, authenticity and relevancy of the documents adduced as additional evidence and adjudicate the matter in respect of the issue regarding section 40(a)(ia) of the Act. (AY. 2006-2007) Gopal Cotton Industries P. Ltd. v. CIT (2017) 392 ITR 276 / 78 taxmann.com 266 (P&H) (HC) S.260A: Appeal–High Court–Delay of 448 days in filing of appeal was not condoned and strictures passed regarding the "standard excuses" of the department for delay in filing appeals, namely, budgetary constraints, lack of infrastructure to make soft copies, change of standing counsel etc. Dismissing the appeal of the revenue , the Court held that ;there is an inordinate delay of 448 days in re-filing the appeal. The Court finds that the standard excuse that the Department is putting forth in all such applications for condonation of delay in re-filing the appeal is two-fold. The first is regarding the budgetary constraints of the Department which delayed payment of the differential court fees as a result of the Court Fees Delhi Amendment Act, 2012 which came into force on 1st August 2012. The second is regarding the practice directions issued by the Court pertaining to filing of soft copies of the paperbooks in tax matters. ( ITA no. 934 of 2016, dt. 17.04.2017) PCIT v. Diana Builders & Contractors Pvt. Ltd. (Delhi)(HC); www.itatonline.org S.260A: Appeal- High Court- Substantial question of law –Share premium- Question admitted. [S.68] High court admitted the question as to whether the Tribunal was justified in holding that an amount of Rs 490 per share received by the assesse constituted share premium of the assessee is a question of law. (AY. 2011-12) CIT v. Green Infra Ltd. (2017) 292 CTR 233 (Bom.)(HC) S.260A: Appeal-High Court-Territorial jurisdiction- Assessment was at Surat and Appeal was decided by Appellate Tribunal at Punjab-Punjab and Haryana High Court lacks territorial jurisdiction to adjudicate appeal from order of Tribunal.[S. 254(1)] Assessment proceedings initiated and final assessment framed at Surat. Appeal filed before Appellate Tribunal in Gujarat but transferred to and disposed of by Tribunal in Punjab because assessee's head office transferred . Dismissing the appeal the Court held that ; since the initial process of assessment was started at Surat and the final assessment was framed by the Assessing


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Officer at Surat, the Punjab and Haryana High Court lacked territorial jurisdiction to adjudicate the matter. (AY. 2001-2002 ) CIT v. Balak Capital P. Ltd. (2017) 391 ITR 112 (P&H)(HC) S. 261 : Appeal - Supreme Court – Delay-Supreme Court issues strictures against the income-tax department stating that it is "extremely unhappy" with the delay of 3381 days in refiling the SLP and demands that "The concerned authorities need to wake up". Learned Solicitor General says that in view of the decision of this Court in ACG Associated Capsules (P) Ltd. v. Commissioner of Income Tax (Central-IV), Mumbai [(2012) 3 SCC 321], this petition be dismissed on merits. We are extremely unhappy with the delay of 3381 days in refiling the special leave petition but make no other comment. The concerned authorities need to wake up.The special leave petition is dismissed both on the ground of delay as also on merits.( SLP No. 871/2017, dt. 16.01.2017) CIT v. Krishan K. Agarwal (SC),www.itatonline.org S.263: Commissioner-Revision of orders prejudicial to revenue-Additional depreciation-Estimated downward revision of sales--Revision on these two points set aside by High Court- -Subsequent events obviating need to go into justification for revision. [S.32(1)(iia)] Dismissing the appeal of the revenue, the Court held that ; This court is of the opinion that the question of law framed in this appeal has to be answered in favour of the assessee. The Commissioner acted erroneously in exercising revisional power under section 263. The orders of the Commissioner and the Income-tax Appellate Tribunal are hereby set aside. The order of the Assessing Officer dated November 27, 2006 is restored. However, the merits of that order, on aspects other than what has been discussed here and pending in appeal, are not being touched upon. The appeal is allowed in the above terms. (AY. 2005-2006 ) CIT v. NTPC Ltd. (2017) 392 ITR 426 (SC) S. 263: Commissioner-Revision of orders prejudicial to revenue - Failure by Assessing Officer to examine actual price of land purchased by assessee-Revision by Commissioner was held to be justified.[S. 40A(3), 132] Allowing the appeal of the revenue, the Court held that; failure by Assessing Officer to examine actual price of land purchased by assessee, revision by Commissioner was held to be justified .It would, however be open to the assessee to adduce appropriate evidence to prove that it was not connected with the land purchased, evidenced by the title deeds found during the course of the search in the premises of the assessee. CIT v. Bharat Lub Industries (P) Ltd. (2017) 393 ITR 417 (Cal.)(HC) S. 263: Commissioner-Revision of orders prejudicial to revenue - Assessing Officer allowing all related expenditure without applying provisions of section 40A(3)-Revision order setting aside assessment order restored. [S.40A(3), 132, 158BC]. Allowing the appeal of the revenue. the Court held that; as regards the applicability of section 40A(3) of the Income-tax Act, 1961 there were never two views possible. It was not open to the Assessing Officer to ignore the provisions of section 40A(3) nor did he appear to have done so consciously. The revision order passed by the Commissioner was justified and was to be restored.(BP. 1-4-1996 to 25-9-2002) CIT v. Mohanlal Agarwal (2017) 393 ITR 402 (Cal)(HC) S. 263: Commissioner-Revision of orders prejudicial to revenue -Order of Commissioner enhancing disallowance was held to be unsustainable.[S. 14A] Dismissing the appeal of the revenue, the Court held that; the amount of disallowance under section 14A of the Income-tax Act, 1961 was restricted to the amount of exempt income only and


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not at a higher amount. For the assessment year 2008-09 the issue was answered in favour of the assessee. The exercise of jurisdiction under section 263 was not proper. The order of the Appellate Tribunal quashing the order under section 263 was justified. No question of law arose. (AY. 2009-2010 ) PCIT v. State Bank of Patiala (2017) 393 ITR 476 (P&H)(HC) S.263: Commissioner-Revision of orders prejudicial to revenue - partial was held to be valid -Revision in was Failure to make necessary enquiries, order of revision was held to be valid.[S. 11,13, 80G] The Court held that,The Commissioner had also noted that the assessee trust had claimed various expenses as debited in its income and expenditure which needed to be examined/verified to ascertain genuineness before it could have been accepted that its claim was applied towards its objects. Merely because it had been granted exemption under section 12AA of the Act, it could not be said that therefore, nothing was required to be done during the assessment proceeding except to accept the return of the charitable institution. Hence it was not a fit case for setting aside the order of revision. The Court also observed that The Assessing Officer while making assessment was to keep in mind the fact that both the order refusing renewal of approval under section 80G and the show-cause notice for cancellation of registration had been quashed by the court and accordingly decide the matter in accordance with law. Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/ 245 Taxman 101 (Patna)(HC) Shri Mahavir Sthan Nyas Samiti v. UOI(2017) 392 ITR 301 /245 Taxman 101 (Patna) (HC) S. 263 : Commissioner-Revision of orders prejudicial to revenue –Commission payment to sister concern- Revision was held to be not justified. Dismissing the appeal of the revenue, the Court held that ; because no income had escaped taxation and no prejudice or loss was caused to the Revenue. The Tribunal was right in deleting the disallowance made by the Commissioner. (AY.1998-1999) CIT v. Micromatic Grinding Technologies Ltd. (2017) 392 ITR 268 (All)(HC) S.263: Commissioner-Revision of orders prejudicial to revenue -Changing method of accounting in accordance with Accounting Standard 7-Not erroneous and prejudicial to Revenue. [S.145] Dismissing the appeal of the revenue, the Court held that ; when the assesse followed the accounting standard and the scrutiny assessment was completed, the revision was held to be not justified. (AY .2007-2008) CIT v. A2Z Maintenance and Engineering Services Ltd. (2017) 392 ITR 273/ 246 Taxman 193 (Delhi)(HC) S.263 : Commissioner-Revision of orders prejudicial to revenue – Where the AO failed to consider the absence of any business activity for the purpose of treating an expenditure allowable for deduction, the order of AO was erroneous and prejudicial to Revenue and therefore, revision u/s. 263 by the CIT was sustainable. Dismissing the appeal of the assessee, the Court held that;where the AO failed to consider the absence of any business activity for the purpose of treating an expenditure allowable for deduction, the order of AO was erroneous and prejudicial to Revenue and therefore, revision u/s. 263 by the CIT was sustainable. Zuari Management Services Ltd. (2017) 146 DTR 177/ 292 CTR 327 (Bom.)(HC) S.263: Commissioner–Revision of orders prejudicial to revenue–CIT can revise an assessment order where an issue has not been examined by the AO.


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Dismissing the appeal of the assessee the Court held that; the assessee did not furnish the valuation of unquoted shares even after AO had raised a specific query. Thereafter, the AO did not enquire into the same. Thus, this is case of non-enquiry as opposed to inadequate enquiry and accordingly, CIT was right in revising the assessment order. (AY. 1997-98) Jeevan Investment & Finance (P.) Ltd. v. CIT (2017) 291 CTR 241 / 145 DTR 252 (Bom.)(HC) S. 263: Commissioner-Revision of orders prejudicial to revenue – The fact that the AO is silent in the assessment order does not mean that he has not applied his mind so as to justify exercise of revisional powers by the CIT. Allowing the appeal the Tribunal held that ; there is a distinction between “lack of enquiry” and “inadequate enquiry”. If the AO has called for the necessary details and the assessee has furnished the same, the fact that the AO is silent in the assessment order does not mean that he has not applied his mind so as to justify exercise of revisional powers by the CIT. (ITA No. 2464/Mum/2013, dt. 24.02.2017)(AY. 2009-10) Small Wonder industries v. CIT (Mum.)(Trib.);www.itatonline.org S. 263: Commissioner - Revision of orders prejudicial to revenue - Non submission of report of prescribed authority, revision was held to be not justified. [S.35(2AB)] Allowing the appeal of the assessee, the Tribunal held that ; where the assessee had already obtained approval of its in house Research & Development facility in Form 3CM, revision merely on ground of non-submission of report of prescribed authority in form 3CL was held to be not justified . (AY. 2009 – 2010) Sun Pharmaceutical Industries Ltd. v. PCIT (2017) 162 ITD 484 (Ahd.)(Trib.) S. 263 : Commissioner - Revision of orders prejudicial to revenue -Capital gains - Investment in bonds - Transfer of shares to be considered on the date of execution transfer form neither the date of agreement nor the date of receipts. [S. 2(47), .45, 54EC, 54F, 263 ] Assessment was completed u/s 143(3), allowing the claim u/s54EC and S. 54 F of the Act. Commissioner in revision proceedings held that, period of six months to be computed from the date of receipt of money. Giving a share certificate along with share transfer form at a subsequent date would not change the nature of transaction.Accordingly the assessee was held to be not eligible for exemption u/s 54EC and 54F of the Act. On appeal allowing the appeal, the Tribunal held thattransfer of shares to be considered on the date of execution transfer form neither the date of agreement nor the date of receipts. Order of AO was up held.(AY.2010-11 ) Y.V. Ramana v. ADIT (2017) 162 ITD 662 / 183 TTJ 337 (Visakha)(Trib.) S. 263 : Commissioner-Revision of orders prejudicial to revenue - Not earned any dividend during the relevant years–Revision was not justified for disallowance of expenses u/s 14A. [S.14A] Allowing the appeal of the revenue, the Tribunal held that ;Revision was not justified for disallowance of expenses u/s 14A, when the assessee has not earned any dividend during the relevant years. ( AY. 2008-09 to 2012- 2013) Dabwali Transport Co. Ltd. v. DCIT (2017) 163 ITD 579 (Asr.) (Trib.) S. 263:Commissioner-Revision of orders prejudicial to revenue – Claim was allowed by the Assessing Officer without applicability of the notification, hence revision was held to be justified.[S. 54F] Dismissing the appeal of the assesse , the Tribunal held that the Assessing Officer failed to examine applicability of notification dealing with sale of share of Indian company to non-resident


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by assesse and allowed claim of assessee u/s 54F, hence the revision was held to be justified. ( AY. 2011-12 ) Ravi Kannan v.CIT (2017) 163 ITD 640 (Chennai) (Trib.) S. 263 : Commissioner-Revision of orders prejudicial to revenue–Depreciable asset–Insurance claim–AO was directed to re do the assessment in accordance with law without influencing the observations of the Commissioner. [S.45 (IA)] Fire accident took place on assessee's cold storage and it received claim from insurance company. Assessee claimed long term capital loss under section 45(1A) by adopting indexation cost of acquisition. Assessing Officer simply accepted return filed by assessee and allowed capital loss claimed by assessee without asking any query in respect of capital loss claimed by assessee - In revision, Commissioner observed that once asset was put to use, it would amount to a depreciable asset and consequently, it would attain character of a short term capital asset, which is not entitled for indexation of its cost. On appeal the Tribunal held that; since Commissioner had not considered provision of Act, his findings were baseless and deserved to be set aside. AO was directed to re do the assessment in accordance with law without influencing the observations of the Commissioner .( AY. 2009-10) Hima Bindu Cold Storage (P.) Ltd. v. CIT (2017) 163 ITD 487(Visakha) (Trib.) S. 263 : Commissioner-Revision of orders prejudicial to revenue –Provision for loss on assets–No enquiry was made by the Assessing Officer ,revision was held to be justified. [S. 115JB] Dismissing the appeal of the assessee, the Tribunal held that; AO while computing book profit had not made enquiry in respect of provision and accepted same, hence the assessment order erroneous and prejudicial to interest of revenue.(AY. 2007 -08) Hitachi Home & Life Solution (India) Ltd. v. DCIT (2017) 163 ITD 1 (Ahd.) (Trib.) S.263: Commissioner-Revision of orders prejudicial to revenue - Depreciation- View taken by Assessing Officer a plausible view supported by various judicial precedents, revision was not valid. [S. 32] Assessee holding concession for 30 years from Delhi Metro Rail Corporation under Build-Operate, transfer Scheme. Assessing Officer making enquiries regarding additions to fixed assets and assessee giving details including bills of purchase of plant and machinery. Assessment completed thereafter allowing depreciation not erroneous. Commissioner has not establishing that order passed by Assessing Officer unsustainable in law. View taken by Assessing Officer a plausible view supported by various judicial precedents, revision was not valid.(AY.2011-2012) Delhi Airport Metro Express Pvt. Ltd. v. PCIT (2017) 54 ITR 358 / 146 DTR 189 (Delhi)(Trib.) S. 263: Commissioner - Revision of orders prejudicial to revenue - Order was passed detailed enquiry – Revision was held to be not valid. Allowing the appeal of the assessee the Tribunal held that, order was passed by the Assessing Officer with detailed enquiry. It is the general presumption of law that the Assessing Officer has considered all the details before completion of assessment and the Commissioner of Income-tax cannot presume that enquiries conducted by the Assessing Officer are insufficient and that the Assessing Officer has not applied his mind, unless the Commissioner proves that the assessment order passed by the Assessing Officer is erroneous. (AY- 2010-2011) G. V. R. Associates v. ITO (2017) 54 ITR 307 (Visakha)(Trib.) S.263: Commissioner-Revision of orders prejudicial to revenue - Capital or revenue-Depreciation- Revision was held to be valid. [S. 32, 37(1)]


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Expenditure on modifying and improving leased property allowed as revenue expenditure. Revision was held to be justified. Assessee can claim depreciation on value spent on such improvement or changes in structure. (AY. 2011-2012) MSA Motors v. ACIT (2017) 54 ITR 8 (Hyd.)(Trib.) S. 263: Commissioner-Revision of orders prejudicial to revenue –Works contract-AO has applied the mind–Revision was held to be not valid. [S.80IA] Allowing the appeal the Tribunal held that; AO making enquiries and assessee filing adequate replies.-AO applying his mind taking a plausible view that project undertaken by assessee was not works contract. Revisional order not pointing out how view of Assessing Officer incorrect. Commissioner not referring to document, clause or agreement to hold project was works contract, revision was held to be not valid .(AY. 2011-2012) Unipro Techno Infrastructure P. Ltd. v. PCIT (2017) 54 ITR 726 / 184 TTJ 205 (Chd.)(Trib.) S. 263: Commissioner-Revision of orders prejudicial to revenue - Revision based on special audit report and incorrect presumption hence revision was held to be not valid. [S. 2(22) (e)] Commissioner initiated revisionary proceedings based on special audit report obtained in the case of a company as the company converted into public company, deemed dividend provision not applicable hence revision was held to be not valid. (AY.2005-2006 to 2007-2008) Gurucharan Dass Arora v. CIT (2017) 53 ITR 364 (Delhi) (Trib.) S. 263: Commissioner - Revision of orders prejudicial to revenue - Cash credits – Share capital premium- Bogus share capital- Onus is on the assessee prove the creditworthiness of the subscribers- Revision was held to be justified [ S. 56(2) (viib),68 ] Dismissing the appeal of the assessees, the Court held that ; mere fact that payment was received by cheque or that the applicants were companies borne on the file of the Registrar of Companies does not prove that the transaction was genuine. Even under the un amended S. 68, the onus is on the assesse to prove the creditworthiness of the subscribers. Argument that the amendment to S.. 68 is not retrospective is not required to be considered. ( AY. 2007-08 to 2009-10 ) Pragati Financial Management Pvt. Ltd. v. CIT (2017) 394 ITR 27 / 150 177 / 82 taxmann.com 12 (Cal.)(HC) Valley Towers Pvt Ltd v. CIT ( 2017) 394 ITR 27 (Cal.)(HC) Axis Shoppers Pvt Ltd v. CIT ( 2017) 394 ITR 27 (Cal.)(HC) Cape town Merchandise Pvt. Ltd v. CIT(2017) 394 ITR 27 (Cal.)(HC) Sangini Vyapar Pvt. Ltd. v. CIT (2017) 394 ITR 27(Cal.)(HC) Orbit Traders Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.)(HC) Trinetra Vincom Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal. )(HC) Danila Commotrade Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.)(HC) Kunj Behari Tie–Up Pvt. Ltd. v. CIT (2017) 394 ITR 27(Cal.)(HC) Mangalgouri Vanijia Pvt. Ltd. v. CIT(2017) 394 ITR 27 (Cal.)(HC); S. 263 : Commissioner - Revision of orders prejudicial to revenue - Assessing Officer arriving at decision after examination and enquiry, revision on the basis of audit objection was held to be bad in law. [S.154 ] Allowing the appeal the Tribunal held that ; the Assessing Officer had made necessary enquiries with respect to matters covered by order of Commissioner and arrived a decision after examination and enquiry. As regards audit objection, the assessing Officer categorically replying to objections raised by internal audit party objections and dismissed audit objections by replying on each and every issue on merits. Rectification proposed by Assessing Officer on matter of


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interest was also forms part of record before Commissioner. Order by the Assessing Officer was neither erroneous nor prejudicial to interests of Revenue hence revision was not valid.(AY.2006-2007) Lotus Energy (India) Ltd. v. CIT (2017) 53 ITR 227(Mum.)(Trib.) S. 263 : Revision – Revision of orders prejudicial to revenue -write off investment as revenue expenditure Excess deduction was allowed – Revision was held to be valid. The assessee claimed a deduction which was accepted by the AO in the assessment order. On revision proceedings it was found that excess deduction was allowed to the assessee . Tribunal held that revision was held to be valid . ILC Industries Ltd. v. PCIT (2017) 53 ITR 342 (Bang)(Trib.) S. 263 : Commissioner - Revision of orders prejudicial to revenue - Mutuality-CIT(A) allowed the exemption in earlier years , order cannot be regarded as erroneous [[S. 11] The Tribunal held that the CIT(A) in the appellate orders for AY 2008-09 & 2009-10 held that the assessee cannot be denied the benefit of exemption under section 11 as well as on the principle of mutuality. Therefore, the order of AO was based on the order of CIT(A), accepting nil income, it was not erroneous & prejudicial to the interests of revenue and consequently the revision under section 263 is not sustainable. (AY. 2011-12) Calcutta Cricket & Football Club v. ITO (2017) 183 TTJ 112 (Kol.)(Trib.) S. 264:Commissioner - Revision of other orders - Application for exemption after long delay-Commissioner has power to consider claim- Remuneration from foreign State under technical assistance agreement with Government of India-Salary received under agreement-Entitled to exemption- No collection of tax which is not authorised [ S.10(8),art. 265 ] Allowing the petition the Court held that ;Held, allowing the petition, that The remuneration paid by the Association for Voluntary Surgical Contraception to the assessee was exempted under section 10(8) of the Act and as the exemption had not been claimed in the income-tax return for the assessment year 1998-99, 1999-2000 and 2000-01 erroneously and in ignorance of the legal provision, the amount was liable to be refunded. The competent authority was directed to refund the tax deducted at source by the employer from the assessee`s remuneration for the assessment years 1998-99, 1999-2000 and 2000-01 with interest at the rate of 6 per cent. per annum after modifying the intimation under section 143(1), if necessary. (AY. 1998-1999, 1999-2000, 2000-2001 ) Dr. Jyoti Vajpayee v. CIT (2017) 392 ITR 518/ 145 DTR 324/ 292 CTR 175 (All.)(HC) S. 264: Commissioner-Revision of other orders-Salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955. [S. 5(2), 15, 143(1)] The petitioner was working as a marine engineer and had rendered services as such to a foreign shipping company during the assessment year 2011-2012. The petitioner had filed income tax return for such assessment year under the residential status as non-residential Indian. He disclosed a receipt of a remuneration of Rs. 5,63,850/- in US Dollars. The petitioner was issued an assessment order cum intimation under Section 143(1). The petitioner did not file any appeal. The petitioner had applied under Section 264 of the Income Tax Act, 1961 claiming that the income had accrued outside India and was not taxable in India. The CIT rejected the assessee’s claim. On a Writ Petition by the assessee HELD allowing the claim held that ;salary received by a non-resident for services rendered abroad accrues outside India and is not chargeable to tax in India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise


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them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955 .Relied CIT v.Mahalaxmi Sugar Mills Ltd (1986) 160) ITR 920 ( SC) The matter was remanded to the assessing officer to do the needful. Utanka Roy v. DIT ( 2017) 390 ITR 109 /291 CTR 501 / 146 DTR 27 ( Cal)(HC) S. 264: Commissioner - Revision of other orders – Application for revision is maintainable if appeal against assessment order withdrawn. [ S. 246, 246A ] The Commissioner would be precluded from exercising revisional powers under sub-section (1) of section 264 of the in the situations listed under sub-section (4) thereof. Merely because at one stage, the assessee preferred an appeal against the order of assessment but withdrew it, on a reasonable bona fide apprehension about maintainability of such appeal arising at a future date in view of the provisions contained in sections 246 and 246A of the Act, that would not prevent the assessee from presenting a revision petition within the framework provided under section 264 of the Act. (AY. .2011-2012) M.T. Maersk Mikage v. DIT (IT) (2017) 390 ITR 427 (Guj)(HC) S. 269SS :Acceptance of loans and deposits–Bona fide belief that share application money was neither loans or deposits, deletion of the penalty was held to be justified. [S. 271D] Dismissing the appeal of the revenue the Court held that ; in the instant case also, the assessee was under the bona fide impression that the money received was only towards allotment of shares and it is not a loan or deposit. Hence, no question of law much less any substantial question of law arises for consideration in the instant appeal. (AY. 2002-03 to 2004-05) CIT v. Object Frontier Software (P.) Ltd. (2017) 244 Taxman 292 (Mad.)(HC) S. 269UD: Purchase of immovable property by Central Government-Natural justice -Fresh order passed in compliance with principles of natural justice within two months , order was held to be valid- Re-vesting of property can be claimed only by transferor and not by transferee . [ S269UG, 269UH ] Court directed the competent authority to pass fresh order passed in compliance with principles of natural justice within two months, order was held to be valid. Court also held that the transferee should prove payment made by it in pursuance of execution of agreement to sell--Re-vesting of property can be claimed only by transferor and not by transferee. Failure by transferee to prove payment made by it, transferee is not entitled to re-vesting of property. Magadh Stock Exchange Association v. UOI(2017) 393 ITR 581/ 151 DTR 225 (FB)(Patna)( HC) S.269UD:Purchase of immovable property by Central Government--Subsequent auction sale of property-Sale on "as is where is and whatever there is" basis-Liability of auction purchaser to pay out standings pertaining to property not known at time of auction--Demand for unearned incremental charges in 1991-Auction purchaser liable to pay charges. [Chapter XXI] Dismissing the petition the Court held that in accordance with the conditions of the auction sale, it was only the out standings known to the Income-tax Department, which had to be announced at the time of the sale. The sale itself was on "as is where is and whatever there is" basis. If any demand was made towards any out standings pertaining to the property, which was not known at the time of the auction, the responsibility to honour such demand was clearly that of the auction purchaser. The Collector chose to raise such demand after the auction purchase was effected. These charges were not known to the Department at the time the auction sale was effected. Such demand would be covered in the conditions of sale. The petitioners were liable to pay the charges. Ashwin Bhagwandas Choksey v. Appropriate Authorities (2017) 392 ITR 394 / 145 DTR 430 (Bom.)(HC)


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S.271(1)(b):Penalty - Failure to comply with statutory notice—Insufficient time was given- Levy of penalty was held to be not justified. [S.132, 153A, 274] Allowing the appeal the Tribunal held that insufficient time given to gather voluminous information for a period of seven years. Assessment completed with all material facts required for assessment proceedings. Levy of penalty was held to be not justified. (AY. 2012-2013, 2013-2014) Pillala Vishnu Vandana v. ACIT (2017) 54 ITR 458 (Visakha) (Trib.) S. 271(1)(c): Penalty–Concealment-Omission by the AO to explicitly specify in the penalty notice as to whether penalty proceedings are being initiated for furnishing of inaccurate particulars or for concealment of income makes the penalty order liable for cancellation. The Karnataka High Court had to consider the following question of law. “Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?” The High Court ruled in favour of the assessee with the following observations: “The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT v Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.” The department filed a Special Leave Petition to challenge the aforesaid judgement of the High Court. HELD by the Supreme Court dismissing the SLP: (CC. No. 11485/2016, dt. 23.11.2015) “We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.” (AY. 2009-10 ) CIT v. SSA’s Emerald Meadows (SC); www.itatonline.org Editorial: Order in CIT v. SSA’s Emerald Meadows ITA No 380 of 2015 dt 23-11-2015 (Karn)(HC) is affirmed . S. 271(1)(c):Penalty-Concealment- Income disclosed in return and income assessed is nil, penalty is not leviable. Dismissing the appeal of the revenue, the Court held that , penalty is not leviable if the income disclosed in the return and the income assessed is nil . JCIT v. Classic Industries Ltd. (2017) 393 ITR 20/ 152 DTR 235 ( SC) Editorial: Decision of Gujrat High Court is affirmed , JCIT v. Classic Industries Ltd ( TA .No. 1798 of 2005 dt. 27 -7- 2016) ( Guj)(HC) S.271(1)(c):Penalty—Concealment-Additions made in quantum proceedings-Levy of penalty improper. Allowing the appeal the court held that ; the Appellate Tribunal was not right in confirming the levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 consequent to the confirmation of additions in the quantum proceedings before it. ( AY. 1994-1995) Rama Natha Gadhavi v. ITO (2017) 393 ITR 590/ 79 taxmann.com 152 (Guj)(HC) Editorial: SLP of revenue was dismissed CIT v. Rama Natha Gadhavi (2017) 392 ITR 44 ( St.)


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S.271(1)(c): Penalty—Concealment-Assessing Officer initiating penalty proceedings for furnishing of inaccurate particulars of income and imposing penalty for concealment of income—Levy of penalty was held to be not valid. Dismissing the appeal of the revenue, the Court held that; the satisfaction of the Assessing Officer with regard to only one of the two breaches under section 271(1)(c) of the Act, for initiation of penalty proceedings would not permit penalty being imposed for the other breach. Thus, the order imposing penalty was to be made only on the ground on which the penalty proceedings were initiated and it could not be on a fresh ground of which the assessee had no notice. The Tribunal rightly deleted the penalty. (AY. 2003-2004 to 2006-2007) CIT v. Samson Perinchery (2017) 392 ITR 4 (Bom.)(HC) S. 271(1)(c) : Penalty-Concealment–when return filed was accepted there is no concealment of income. Assets seized relating to assessment years 2005-06 and 2006-07, penalty not leviable for assessment year 2007-08 . [S. 132 , 153C] Dismissing the appeals the Court held that ; when return filed was accepted there is no concealment of income. Assets seized relating to assessment years 2005-06 and 2006-07, penalty not leviable for assessment year 2007-08 . (AY. 2005-2006, 2006-2007) PCIT v. Ankur Aggarwal (2017) 393 ITR 1 / 293 CTR 298/ 79 taxmann.com 96/ 147 DTR 342 (Delhi)( HC) PCIT v. Neeraj Jindal (2017) 393 ITR 1 / 293 CTR 298/ 79 taxmann.com 96/ 147 DTR 342 (Delhi)( HC) S.271(1)(c): Penalty—Concealment- Estimation of profit – Levy of penalty was held to be not justified. [S.153A] Dismissing the appeal of the revenue , the Court held that, Tribunal has directed to estimate the profit 5 % of recoveries of three projects .When the return was filed the order of the Tribunal was not available and the income was offered on estimate basis .On the facts the view of the Tribunal deleting the penalty was reasonable, hence no substantial question of law.( AY. 2002-03, 2003-04) CIT v. Juhu Construction Co ( 2017) 151 DTR 157 ( Bom)(HC) S.271(1)(c):Penalty--Concealment –Arm’s length price--Difference in method leading to rejection of loss claimed in respect of genuine new line of business--Penalty cannot be imposed. [S. 92CA ] Dismissing the appeal of the revenue, the Court held that ;Difference in method leading to rejection of loss claimed in respect of genuine new line of business--Penalty cannot be imposed. PCIT v. Mitsui Prime Advanced Composites India P. Ltd. (2017) 392 ITR 280/ 79 taxmann.com 283 (Delhi)(HC) S.271(1)(c): Penalty—Concealment-Incorrect claim cannot amount to furnishing inaccurate particulars- Levy of penalty was held to be not justified.[S. 68, 132, 245H] Immunity was granted by the Settlement Commission in respect of surrender of cash credits .Consequential disallowance of interest in respect of surrendered loans of earlier years penalty was levied . Levy of penalty was confirmed by the Tribunal .On reference the Court held that ,incorrect claim cannot amount to furnishing inaccurate particulars accordingly levy of penalty was held to be not valid .(AY. 1981-1982, 1983-1984) Ashirbad Enterprises v. CIT (2017) 392 ITR 289/ 78 taxmann.com 21 (Patna)(HC)


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S. 271(1)(c): Penalty—Concealment-Opinion of chartered accountant – Se off under different head – Levy of penalty was held to be not justified. Dismissing the appeal of the Revenue the Court held that based on the opinion of chartered accountant set off under different head does not amount to furnishing inaccurate particulars or concealment of income, hence penalty was not leviable. ( AY. 2004-2005) PCIT v. Atotech India Ltd. (2017) 391 ITR 117 (P&H) ( HC) S.271(1)(c):Penalty—Concealment-Search and seizure— Disclosure in return filed under section 153A amounts to extension of disclosure made under section 132(4), hence penalty cannot be levied [ S 132(4), 153A , 153C ] Dismissing the appeal of the revenue , the Court held that ; disclosure in return filed under section 153A amounts to extension of disclosure made under section 132(4) hence penalty cannot be levied.(AY. 2002-2003 to 2006-2007) PCIT v. Gopal Das Kothari (HUF) (2017) 391 ITR 390 (Cal.) (HC) S. 271(1)(c):Penalty-Concealment–Revised return- Amount disclosed in the revised return – Levy of penalty was held to be not valid.[S. 139(1), 153A] The High Court had to consider the interpretation and application of Section 271(1)(c) of the Act and Explanation 5 thereto. Two broad issues arose for consideration in this regard: (i) Whether under Section 271(1)(c) as it stood prior to the insertion of Explanation 5, levy of penalty is automatic if return filed by the assessee under Section 153A of the Act discloses higher income than in the return filed under Section 139(1)? (ii) What would be the position of law after insertion of Explanation 5 and whether it is attracted in the facts of this case? Dismissing the appeal of the revenue the Court held that ; “The word „concealment‟ inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. In this case, the A.O. in his order noted that the disclosure of higher income in the return filed by the assessee was a consequence of the search conducted and hence, such disclosure cannot be said to be “voluntary”. Hence, in the A.O.’s opinion, the assessee had “concealed” his income. However, the mere fact that the assessee has filed revised returns disclosing higher income than in the original return, in the absence of any other incriminating evidence, does not show that the assessee has “concealed” his income for the relevant assessment years. On this point, several High Courts have also opined that the mere increase in the amount of income shown in the revised return is not sufficient to justify a levy of penalty.( AY. 2005-06, 2006-07) PCIT v. Neerj Jindal (2017) 393 ITR 1 (Delhi)(HC) PCIT v.Ankur Aggarwal (2017) 393 ITR 1 (Delhi)(HC) S. 271(1)(c): Penalty–Concealment- If the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied.[S. 260A] Dismissing the appeal of the revenue , If the quantum appeal is admitted by the High Court, it means that the issue is debatable and penalty cannot be levied. . The court also held that the


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argument of the Dept that CIT v. Nayan Builders and Developers ( 2014) 368 ITR 722 (Bom) does not lay down this proposition is not correct.( ITA No. 1498 of 2014, dt. 17.02.2017)( AY. 2006-07) CIT v. Advaita Estate Development Pvt. Ltd. (Bom.) (HC); www.itatonline.org S. 271(1)(c):Penalty- Concealment –Disclosure of income after detection, levy of penalty was held to be justified .[ S. 142(1), 143(2)] Dismissing the appeal of the assesse the Court held that ;a disclosure of income, or withdrawal of claim for deduction, by the assessee after a specific notice under section, 142(1)/ 143(2) notice is issued cannot be said to be a "voluntary disclosure" so as to avoid the levy of penalty. The argument that the earlier non-disclosure of income/ wrong claim for expenditure was due to "mistake" is not an acceptable.( AY. 2007-08) Samson Maritime Ltd. v. CIT( 2017) 393 ITR 102 (Bom)(HC) S. 271(1)(c): Penalty-Concealment- The bonafides of the explanation of the assessee for not complying with the law have to be seen- Levy of penalty was held to be not justified . Dismissing the appeal of the revenue the Tribunal held that ; penalty cannot be levied unless there is "evidence beyond doubt" that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee. The fact that the assessee did not voluntarily furnish the return of income, and that the merits were decided against it, does not per se justify levy of penalty. The bonafides of the explanation of the assessee for not complying with the law have to be seen.(ITA No. 1393/Del/2011, dt. 28.04.2017) (AY. 1997-98) DDIT v. Metapath Software international Ltd. (Delhi.)(Trib.),www.itatonline.org S. 271(1)(c): Penalty-Concealment–The non-striking of the irrelevant portion in the show-cause notice means that the AO is not firm about the charge against the assessee and the assessee is not made aware as to which of the two limbs of s. 271(1)(c) he has to respond hence the levy of penalty is bad in law. Allowing the appeal of the assessee, the Tribunal held that ;penalty proceedings are “quasi-criminal” and ought to comply with the principles of natural justice. The non-striking of the irrelevant portion in the show-cause notice means that the AO is not firm about the charge against the assessee and the assessee is not made aware as to which of the two limbs of s. 271(1)(c) he has to respond. The fact that the assessment order is clear about the charge against the assessee is irrelevant, levy of penalty was deleted .( ITA No. 2555/Mum/2012, dt. 28.04.2017)(AY. 2008-09) Meherjee Cassinath Holding Pvt. Ltd. v. ACIT (Mum.)(Trib.), www.itatonline.org S. 271(1)(c): Penalty–Concealment –Revised return was filed prior to initiation of reassessment proceedings – Levy of penalty was held to be not justified .[ S.69A ] Allowing the appeal of the assessee, the Tribunal held that, assessee declared certain amount deposited in bank by filing a revised return prior to initiation of reassessment proceedings, merely because tax evasion petition was filed against assessee family earlier did not mean that he had concealed income or furnished inaccurate particulars of income and, thus, impugned penalty order passed was set aside. (AY. 2005 -06 , 2007 -08) Murli Dodeja v. ITO (2017) 163 ITD 617 (Mum.) (Trib.) S.271(1)(c):Penalty—Concealment-re allocation of expenses- Levy of penalty was held to be not justified . On reallocation of expenses levy of penalty was held to be not justified. (AY.2005-2006) ITO v. Bio-Vet Industries. (2017) 54 ITR 600 (Mum)(Trib.)


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S. 271(1)(c):Penalty—Concealment-Satisfaction of Assessing Officer mandatory- Failure to apply his mind at time of issuing penalty notice to assessee-Levy of penalty invalid. [S. 274] Allowing the appeal the Tribunal held that the AO not certain whether he has to proceed on basis that assessee has concealed his income or had furnished inaccurate particulars of its income. Assessing Officer failed to apply his mind at time of issuing penalty notice to assessee. Levy of penalty was held to be invalid. (AY-2012-2013 ) Prince Consultancy P. Ltd v. DCIT (2017) 54 ITR 334 (Mum) (Trib.) S. 271(1)(c): Penalty –concealment – The failure by the AO to specify in the S.. 274 notice which of the two charges is applicable reflects non-application of mind and is in breach of natural justice as it deprives the assessee of an opportunity to contest. The penalty proceedings have to be quashed. [ S. 274 ] Allowing the appeal of the assesse the Tribunal held that ;Furnishing of inaccurate particulars of income' and 'concealment of particulars of income' have different connotations. The failure by the AO to specify in the s. 274 notice which of the two charges is applicable reflects non-application of mind and is in breach of natural justice as it deprives the assessee of an opportunity to contest. The penalty proceedings have to be quashed. ( ITA No. 1261/Mum/2011, dt. 17.05.2017)(AY. 2006-07) Jehangir HC Jehangir v. ACIT (Mum.)(Trib),www.itatonline.org S. 271(1)(c):Penalty-concealment -Penalty cannot be levied if the omission to offer income, and the wrong claim of deduction, was by oversight and the auditors did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s 271(1)(c) is imposed is a fatal error. Allowing the appeal of the assessee the Tribunal held that;penalty cannot be levied if the omission to offer income, and the wrong claim of deduction, was by oversight and the auditors did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s 271(1)(c) is imposed is a fatal error. ( ITA No. 2158/Mum/2016, dt. 24.02.2017)(AY. 2011-12) Wadhwa Estate & Developers India Pvt. Ltd. v. ACIT (Mum.)(Trib.); www.itatonline.org S. 271(1)(c) : Penalty – Concealment- Bogus purchases- Surrendered in the course of assessment – Levy of penalty was held to be not justified, however merely on the basis of defects in the notice penalty cannot be deleted. [ S. 69C,274, 292BB ] In the course of assessment proceedings the assesse surrendered the alleged bogus purchases to buy peace and not contested the addition in quantum proceedings . The AO levied the penalty which was confirmed in appeal by CIT( A). In appeal deleting the penalty the Tribunal held that, the claim of the assesse was bona fide and same was coupled with documentary evidence hence imposition of penalty was not justified . As regards the legal ground on alleged the defects in the notice , the Tribunal held that penalty could not be deleted merely on the basis of defect pointed out in the notice . ( AY. 2010-11)( ITA No.6617/ Mum/ 2014 dt 2-05-2017) Earth moving Equipment Service Corporation v. DCIT (Mum.)(Trib.) www.itatonline.org. S. 271(1)(c) : Penalty--Concealment –Excess claim of interest under bona fide belief , levy of penalty was held to be not justified . Allowing the appeal of the assesse, the Tribunal held that; Excess claim of interest under bona fide belief, levy of penalty was held to be not justified. No finding by authorities that assessee either concealed income or filed inaccurate particulars of income. Assessee neither concealing income nor filing inaccurate particulars. Penalty levied was deleted. (AY.2010-2011) Lata Hospitals Pvt. Ltd. v. DCIT (2017) 53 ITR 625(Visakh)(Trib.)


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S.271(1)(c):Penalty--Concealment --Additions deleted by Tribunal hence penalty levied was held to be not sustainable. Allowing the appeal, since the additions themselves had been deleted by the Tribunal, levy of penalty was held to be not valid. (AY.2007-2008) Birla Sun Life Asset Management Co. Ltd v. JCIT (2017) 54 ITR 472 (Mum) (Trib) S. 271(1)(c):Penalty—Concealment--Bogus purchase and sale of shares—Additions deleted -Penalty was held to be not leviable [ S. 45, 153A ] Dismissing the appeal of the revenue, the Tribunal held that ; the Commissioner (Appeals) having cancelled the additions made by the Assessing Officer the Commissioner (Appeals) deleted the penalty under section 271(1)(c) on correct reasoning and hence his order did not call for any interference. (AY.2003-2004) CIT v. Asha V. Mehta (Smt.) (2017) 54 ITR 191 (Mum) (Trib) S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 - Assessee entitled to adjustment of seized cash to advance tax--Penalty cannot be imposed- Explanation 2, to section 132B is not retrospective. [S.132B, 234B ] Dismissing the appeal of the revenue , the Court held that ; the assessee was entitled to adjustment of cash seized during the search against the advance tax dues. Explanation 2 to section 132B of the Income-tax Act, 1961, inserted by the Finance Act, 2013, was not retrospective in nature. Moreover, Explanation 2 to section 132B came into force on June 1, 2013 whereas the assessee's case related to the assessment year 2011-12. (AY. 2011-2012 ) PCIT v. Surinder Kumar Khindri (2017) 393 ITR 479 (P&H)( HC) S. 271AAA : Penalty – undisclosed income - Assessee submitted break up and proximate source of income - penalty was set aside. The AO while completing assessment had also passed a penalty order u/s. 271AAA. Undisputed fact that assessee had during course of search proceedings, declared undisclosed income and also submitted break up of same and proximate manner of income earned. The AO without identifying same levied penalty u/s. 271AAA. The ITAT held that when detailed break up and item-wise of income given and also explained the proximate manner of income earned/derived then penalty order required to be set aside. (A.Y.2009 – 2010) DCIT v. Vijay Ravji Gajra (2017) 162 ITD 210 (Mum)(Trib.) S. 271B :Penalty-Failure to get accounts audited–Project completion method - levy of penalty was held to be justified. [S.44AB] Dismissing the appeal of the assessee, the Tribunal, held that; application of section 44AB is independent and is not depended upon the method of accounts adopted by the assessee under section 145, whether it is project completion method or percentage completion method. Levy of penalty was held to be justified.(AY. 2006 -07 to 2008-09) Lalanath Reddy v. ACIT (2017) 163 ITD 612 (Bang.)(Trib.) S. 271F : Penalty -Failure to furnish – Reasonable cause for non filing of return will also a reasonable cause for non levy of penalty [ S. 153A ] Allowing the appeal of the assesse , the Court held that ; where a cause is found to be reasonable for non-filing of return immediately in response to notice issued under section 153A, such cause can also be construed as a reasonable cause, while considering as to whether penalty has to be levied under section 271F.Accordingly ;the writ petition is allowed and the impugned orders levying penalty under section 271F is set aside. (AY. 2008-09 to 2014-15)


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S. Jayanthi Shri v. ACIT (2017) 244 Taxman 295 (Mad.)(HC) S. 272A : Penalty - Failure to answer questions - Sign statements - Furnish information – Reasonable cause – Levy of penalty was held to be not justified. [ S. 272A(2)(c ), 272(2)(k) ] Allowing the appeal , the Tribunal held that ; delay in filing TDS returns cannot be levied if the delay was caused due to requirement to collect PAN of payees. The non-availability of the PAN of the payees is a reasonable cause. The delay is unintentional and it causes no loss to the revenue as the TDS has been deducted and deposited in the treasury. Wrong levy of penalty u/s 272A(2)(k) (failure to deliver TDS certificate) instead of u/s 272A(2)(c) (delay in filing TDS returns) shows that AO is not clear of the charge and vitiates the penalty proceedings. ( ITA No. 522/JP/2016, dt. 24.05.2017)(AY. 2011-12) Argus Golden Trade India Ltd. v JCIT (Jaipur)(Trib) ,www.itatonline.org S.279:Offences and prosecution--Compounding of offences--Failure by assessee to deposit amount deducted as tax at source was beyond its control, Order rejecting application for compounding not sustainable- Guidelines issued by CBDT do not bar for consideration of application of offence having regard to facts of the case. [ S. 276B, 279(2) ] Allowing the petition the Court held that ;failure by assessee to deposit amount deducted as tax at source was beyond its control, Order rejecting application for compounding not sustainable- Guidelines issued by CBDT do not bar for consideration of application of offence having regard to facts of the case. Sports Infratech P. Ltd. v.Dy. CIT (2017) 391 ITR 98/ 246 Taxman 21/ 150 DTR 93 / 294 CTR 66 (Delhi)( HC) S. 279: Offences and prosecutions – Compounding of an offence –No time limit is prescribed-The CBDT has no jurisdiction to demand that the assessee pay a 'pre-deposit' as a pre-condition to considering the compounding application. Allowing the petition ;the Court held that ; As, there is no time limit prescribed for filing an application for compounding of an offense, the CBDT is not entitled to reject an application on the ground of 'inordinate delay'. The CBDT has no jurisdiction to demand that the assessee pay a 'pre-deposit' as a pre-condition to considering the compounding application. The larger question as whether in the garb of a Circular the CBDT can prescribe the compounding fee in the absence of such fee being provided for either in the statute or prescribed under the rules is left open. Vikram Singh v. UOI ( 2017) 394 ITR 746/ 247 Taxman 212 (Delhi)(HC) S. 281: Certain transfers to be void - Recovery of tax--Order declaring purchase void in breach of principles of natural justice and to be quashed. Allowing the petition the court held that before passing the order under section 281(1) of the Act, no opportunity of being heard was given to the transferee. Therefore, the order under section 281(1) of the Act was absolutely in breach of the principles of natural justice and deserved to be quashed and set aside. Arvindkumar Kuberbhai Patel v. Dy.CIT (2017) 391 ITR 103 / 294 CTR 120/ 150 DTR 24 (Guj) (HC) S. 282: Service of notice – When a notice is sent by RPAD and its return by the postal authorities with the remark "addressee refused to accept" amounts to a valid service .[ Bombay Sales tax Rules , 1959 , R.68 ] Court held that admittedly, in the present case, there is an endorsement on the packet which was sent to the address of the notice, namely, the sole proprietor; that the sole proprietor received it but refused to accept the same. When it was sent by R.P.A.D. to the address, it was returned by


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the postal authorities with the remark, that the addressee refused to accept the packet. That is why it is returned. Thus, the presumption that when the addressee whose address is set out on the envelope had an occasion to notice and peruse the packet, meant for him, but he refuses to accept it, then, that is deemed to be served. The addressee in this case is correctly described. There is no dispute about his identity. Even his address is correct. It is at that address the packet is carried and by the concerned postal authority. The duly authorised person carrying the packet reached the address. On noticing the addressee, he serves it, but the addressee after having perused the packet refused to accept it. It is in these circumstances, the postal remark that the concerned person has refused to accept; hence, returned to the sender denotes good and valid service. Then there was no occasion to resort to the proviso. In the given facts and circumstances, when there was sufficient and adequate notice and the sole proprietor had an occasion to appear and object to the stand of the Department on merit, so also by raising other legal contentions, then, the conclusion is inevitable that there is no defect or deficiency as far as this service is concerned. There is a factual finding recorded that Rule 68(1) has been complied with. To our mind, therefore, such a conclusion in the backdrop of the peculiar facts and circumstances raises no question of law. There was nothing that required any answer and opinion by this Court. A purely factual finding and which, to our mind, would suffice enables the Tribunal to render a complete decision on the appeal. In other words, the other points in the appeal could have definitely been considered and answered, if required. The Tribunal got carried away only with this technical or procedural aspect of the matter and erroneously refused to consider and decide the appeal on merits. The Tribunal should have rendered that conclusion once the aspect of notice is duly taken care of. As a result of the above discussion, we are of the opinion that the reference is wholly unnecessary. The Tribunal’s orders and referred by us above do not raise any question of law for opinion and answer of this Court. Suffice it to say that whether Rule 68 has been complied with in a given case would depend upon the circumstances and the record of that case. Whether there is proof of service or not would, therefore, necessarily depend on the facts and circumstances in each case. No general rule can be laid down.( STR No. 53 of 2009, dt. 21.03.2017) CST v. Sunil Haribhau Pote (Bom)(HC) : www.itatonline.org Finance Act, 2016 . Finance Act ,2016 - Pradhan Mantri Garib Kalyan Yojna, 2016 S. 199A : Pradhan Mantri Garib Kalyan Yojna, 2016- Legislative powers- Judicial review -Court declined to enter into or encroach upon policy making arena and suggest a different policy on ground that it was not within domain of Court- There is a distinction between assailment of the constitutional validity of a policy and conception of framing of a better policy. [S. 199E, 199FArt. 32 ] Challenging the Section 199A of the Finance Act , 2016, Pradhan Mantri Garib Kalyan Yojna, 2016 the petitioner urged for a different and better scheme which could have got more good money in banks and honest tax payers would have deposited amount. However Court declined to enter into or encroach upon policy making arena and suggest a different policy on ground that it was not within domain of Court, therefore there was no justification to issue notice in instant petition and accordingly it was to be dismissed Siddharth Mehta v. UOI (2017) 393 ITR 312 / 244 Taxman 289/ 148 DTR 248/ 293 CTR 365 (SC) Income Declaration Scheme, 2016- Finance Act, 2016 S. 184: Advance tax- tax deducted at source – Entitle to credit of advance tax paid previously pertaining to assessment years for which declaration was filed . [S. 182, ItAct, 1961, S. 139, 210 ]


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Assessee not filing returns for assessment year 2010-11 onwards owing to internal problems. Declaration under Scheme for assessment year 2010-11 onwards. Advance tax paid and tax deducted at source for those years. Allowing the petition the Court held that the ; Assessee entitled to credit of advance tax amounts previously paid pertaining to assessment years for which declaration filed. Kumudam Publications P. Ltd. v. CBDT (2017) 393 ITR 599 /247 Taxman 25/ 294 CTR 54 / 150 DTR 33 (Delhi)(HC) Kar Vivad Samadhan Scheme, 1998 S.86(m): Tax arrear-Computation of tax arrears - Advance tax paid prior to application - Cannot be adjusted while determining balance. [ S.90 ] Once the statute clarified that amounts paid towards tax were not to be deemed "unpaid" for any reason, the normal provisions which had applied, when they did during the course of assessment, could not have been reversed or given a go by, as sought by the assessees. Doing so would be contrary to law. The assessees' grievance was limited to the scheme for reduction of the demand for finalisation of its request for settlement under the Kar Vivad Samadhan Scheme, 1998. The normal operation of law was predicated upon treatment of amounts paid and their appropriation as required by the provisions of the Act. In the assessees' cases, the demands had been made much after the advance tax payments were due. Furthermore, the amounts were to be adjusted towards the outstanding arrears for the previous years. Therefore, the assessees were not correct in contending that the amounts of advance tax paid had to be necessarily adjusted while determining the balance. Inter Craft Ltd v. CIT (2017) 390 ITR 409 / 147 DTR 95 (Delhi)(HC) Old Village Industries Ltd v. CIT (2017) 390 ITR 409 / 147 DTR 95 (Delhi)(HC) S.90: Time and manner of payment of tax arrear-Certificate issued under the scheme is conclusive-Settlement Commission has no jurisdiction to pass the order after issue of certificate by competent authority . [ S. 88,95, 245C, 245D ] Allowing the petition the Court held that ; The certificate issued under section 90(1) of the Scheme making a determination as to the sum payable under Scheme is conclusive as to the matters stated therein and cannot be reopened in any proceedings under law for the time being in force, except on the ground that false declaration by a declarant. Subsequently the Settlement Commission passed orders. Court held that the order dated June 25, 1999 passed by the Settlement Commission under section 245D(4) of the Act was void and liable to be set aside. (1987-1988 to 1989-1990 ) Hasmukhlal Thakordas Dalwala v. CIT( 2016) 75 taxmann.com 186 / (2017) 393 ITR 280 (Guj.)(HC) Voluntary Disclosure of Income Scheme, 1997--Finance Act, 1997 S.64: Tax deduction at source- Tax payable under 1961 Act is not tax payable under 1997 Scheme--Tax deducted at source on income under 1961 Act cannot be taken into account to determine tax payable on voluntarily disclosed income under Scheme. [ S. 65(3), 66, 67 , ITAct,S.4, Art 226 ] Dismissing the petition, the Court held that ; Tax payable under 1961 Act is not tax payable under 1997 Scheme hence tax deducted at source on income under 1961 Act cannot be taken into account to determine tax payable on voluntarily disclosed income under Scheme. ( AY .1995-1996, 1996-1997, 1997-1998) Earnest Business Services P. Ltd. v. CIT (2017) 393 ITR 453/ 294 CTR 80 / 80 taxmann.com 11/ 149 DTR 1 (Bom.)( HC)


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Wealth –tax Act, 1957 S. 7: Valuation of assets - Residential property in existence before 1996 - JDA Regulations not applicable [Jaipur Development Authority Act, 1982 and Regulations 1996 - Held, that for the purpose of valuation of the property in dispute, reliance placed on the 1996 Regulations was neither correct nor valid nor in accordance with law. The regulations would have no application for the purpose of valuation of the building in dispute and it would have to be made only in accordance with Schedule III, as it is. Statutes which are not declaratory or clarificatory or procedural, are prospective unless provided otherwise and in tax matters, there should not be any approach so as to make a provision retrospective if it is not otherwise. (AY 1987-1988 to 2001-02 ) CWT v. Late Padampat Singhania (2017) 390 ITR 86/ 148 DTR 301/ 293 CTR 420 (All)(HC)


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Interpretation of taxing statues Precedent- Dismissal of Special leave petition in limine – Not an affirmation of High Court. [ S.40(a)(ia), 194C, 200 ] The fact that the Special leave petition against the decision of the High Court was dismissed by the Supreme Court would not amount to a confirmation of the view of the High Court . Palam Gas Service v. CIT ( 2017) 394 ITR 300/ 247 Taxman 379 / 151 DTR 1 (SC) Precedent – Law laid down by High Court is binding on all in State The law laid down by the High Court is binding on all the State CIT v. Raghuvir Synthetics Ltd( 2017) 394 ITR 1/ 151 DTR 153 (SC) Interpretation- Res judicata- Need for consistency and certainty While it is true that the principle of res judicata would not apply to assessment proceedings under the Act, the need for consistency and certainty and existence of strong and compelling reasons for a departure from a settled position has to be spelt out for departure from settled position .Followed Radhasoami Satsang v CIT( (1992) 193 ITR 321 (SC) Godrej & Boyce Manufcaturing Co .Ltd v .Dy.CIT (2017) 394 ITR 449 / 247 Taxman 361/ 151 DTR 89 (SC) Precedent – Supreme Court decision It is axiomatic that a decision of the Supreme Court does not make the law but it only declares the law as always existing since its inception . E.Mark ( India) Ltd v CIT ( 2017) 393 ITR 91 ( Bom)(HC) Interpretation of taxing statutes - Rule against retrospectivity. The Court held that, in the matter of taxation , unless things are very clear, no attempt shall be made to make a provision retrospective . CWT v. Lt. Padampat Singhania (2017) 390 ITR 86/148 DTR 301 / 293 CTR 420 (All)(HC) Interpretation-Double taxation avoidance agreements---Context in agreement and any subsequent agreement to be taken into account. While interpreting tax treaties and conventions , the emphasis is upon the context –in the instrument itself , and “ any subsequent agreement between parties” as to the interpretation of the treaty or the application of its provisions . DIT v. KLM Royal Dutch Airlines (2017) 392 ITR 218/ 245 Taxman 341/ 292 CTR 121 (Delhi)(HC) DIT v. Lufthansa German Airlines (2017) 392 ITR 218/ 245 Taxman 341/ 292 CTR 121 (Delhi)( HC) Interpretation of taxing statutes--Reasonable and purposive interpretation to be adopted The purpose and object of section 32(1)(iia) of the Income-tax Act, 1961 is to encourage the manufacturing sector by allowing the deduction of a further sum equal to 20 per cent. (prior to amendment 15 per cent.) of the actual cost of machinery or plant acquired and installed. Therefore, the underlying object and purpose is to encourage the industries by permitting the assessee in setting up the new undertaking or installing of new plant and machinery to claim the benefit of additional depreciation. While interpreting the taxation statues , reasonable and purposive interpretation to be adopted .


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PCIT v. IDMC Ltd. (2017) 393 ITR 441 / 246 Taxman 6 (Guj)( HC) Allied laws . Advocate – Vakalatnama- NOC from Advocate to appoint new advocate- The Registry cannot insist on a NOC from the old advocate and refuse to take the new vakalatnama on record. The High Court had to consider whether vakalatnama filed by a new advocate is to be accepted in the absence of ‘no objection’ of the advocate already on record. HELD by the High Court:A litigant has the absolute right to appoint an advocate of his choice and to terminate his services any time and for whatever reason. There is no concept of an "irrevocable vakalatnama". A party has the absolute freedom to change his advocate. Fairness demands that the party should inform his advocate already on record though this is not a condition precedent to appoint a new advocate. The Registry cannot insist on a NOC from the old advocate and refuse to take the new vakalatnama on record.(ANo. 6525/2013, dt. 02.012.2016) Karnataka Power Transmission Corp. Ltd. v. M. Rajashekar( Karn)(HC) : www.itatonline.org Advocate -Strictures passed against Advocate for making frivolous arguments without having the file and wasting the valuable time of the Court. Costs imposed Shri. M. Selvakumar, learned counsel has made frivolous argument without having the file or and document in his hand. He has wasted the valuable time of the court. He also made a request for adjournment. This as a fit care where the Bench may recommend to Tamilnadu Bar Council to take appropriate action against him. But, by keeping a lenient view in mind, we adjourn the case at the cost of Rs. 1,000/-(Rupees on thousand only) which will deposited by the counsel toward Prime Minister’s Relief Fund within three days from today. On the next date of hearing, proof of deposit shall be submitted. (A No. C/126/2007-DB) 17.01.2017 ) Clarion Power Corp v. Commissioner of Customs (CESTAT) (Trib.) , www.itatonline.org Chartered Accountants Act, 1949. S. 22 :Professional misconduct-Issue of certificate without verification was held to be professional misconduct. Action of disciplinary committee suspending the chartered Accountant, from practicing as a Chartered Accountant for a period of three years as recommended by Institute was held to be justified . On reference by the Institute of Chartered Accountant’s of India , the Court held that ; issue of certificate without verification was held to be professional misconduct. Action of disciplinary committee suspending the chartered Accountant from practicing as a Chartered Accountant for a period of three years as recommended by Institute was held to be justified Institute of Chartered Accountants of India, In re (2017) 244 Taxman 59 (AP)(HC) Constitution of India Art . 141 : Strike by Advocates: Court held that ; giving a call to protest when the Bill is still at a draft stage is premature. Wisdom has to prevail on the Advocates in the light of the law laid down in Harish Uppal AIR 2003 SC 739. The law laid down by the Supreme Court is binding on the Advocates as well under Article 141 of the Constitution. The lawyers' community has to appreciate their responsibility in discharging the duties of their profession. ( PIL No. 37 of 2017, dt.30.03.2017) Manoj Laxman Shirsat, Adv. v. Bar Council of India (Bom)(HC); www.itatonline.org Code of Criminal Procedure , 1973 S.300. Fodder scam- Delay - The Court has to ensure that owing to some delay on part of the machinery, miscarriage of justice should not take place. It is also contended that the


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power under Section 5 of the Limitation Act should be exercised to advance substantial justice- Delay was condoned - Severe strictures passed against the High Court for "inconsistent decision-making" and passing orders which are "palpably illegal, faulty and contrary to the basic principles of law" and by ignoring "large number of binding decisions of the Supreme Court" and giving "impermissible benefit to accused". Law on condonation of delay explained. CBI directed to implement mechanism to ensure that all appeals are filed in time [ Constitution of India , Art .20(2), Limitation Act , S.5 ] Reliance was placed for condonation of delay ; the State of Tamil Nadu v. M. Suresh Rajan (2014) 11 SCC 709 is apt in which the time consumed in taking opinion on change of Government was held to be sufficient cause so as to condone the delay. Reliance has also been placed on Indian Oil Corporation Ltd. & Ors. v. Subrata Borah Chowlek, etc. (2010) 14 SCC 419 in which there was a delay in filing the appeals in which this Court has observed that Section 5 owes no distinction between State and citizen. The Court has to ensure that owing to some delay on part of the machinery, miscarriage of justice should not take place. It is also contended that the power under Section 5 of the Limitation Act should be exercised to advance substantial justice by placing reliance on State of Nagaland v. Lipok AO & Ors. (2005) 3 SCC 752. The Court condoned the delay .The Court also passed severe strictures against the High Court for "inconsistent decision-making" and passing orders which are "palpably illegal, faulty and contrary to the basic principles of law" and by ignoring "large number of binding decisions of the Supreme Court" and giving "impermissible benefit to accused". Law on condonation of delay explained. CBI directed to implement mechanism to ensure that all appeals are filed in time. ( CA No. 394 of 2017, dt. 08.05.2017) State of Jharkhand v. Lalu Prasad Yadav (SC), www.itatonline.org State of Jharkahnd v. Dr.Jagannath Mishra (SC), www.itatonline.org Assam Value Added Tax Act, 2003 (8 of 2005), S.81:Revision--High Court--Revision before High Court--Value added tax--Limitation--Specific provision under Value Added Tax Act making sections 4 to 12, Limitation Act applicable. Amounts to exclusion of operation of section 5, Limitation Act by necessary implication [ S. 84,Limitation Act (36 of 1963), S. 5, 29(2).] Dismissing the appeal the Court held that ; The court cannot interpret the law in such a manner so as to read into the Act an inherent power of condoning the delay by invoking section 5 of the 1963 Act so as to supplement the provisions of the 2003 Act which excludes the operation of section 5 by necessary implications. It is for the Legislature to set right the deficiency, if it intends to give power to the High Court to condone the delay in filing revision petition under section 81 of the 2003 Act. Accordingly, that the application under section 5 of the Limitation Act, 1963 to a proceeding under section 81(1) of the Assam Value Added Tax Act, 2003 which prescribed a limitation period of 60 days within which revision petition was to be preferred to the High Court, stood excluded by necessary implication, by virtue of the language employed in section 84 of the 2003 Act. Patel Brothers v. State of Assam (2017) 391 ITR 244 (SC) Editorial : Decision in Patel Brothers v. State of Assam [2016] 93 VST 230 (Gauhati) (HC) is affirmed. Service of notice by Whatsapp- E-Mail & Whatsapp are not formally approved but if service is shown to be effected and is acknowledged it cannot be said that the Defendants


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had ‘no notice’. Defendants who avoid and evade service by regular modes cannot be permitted to take advantage of that evasion The Court held that ; the purpose of service is put the other party to notice and to give him a copy of the papers. The mode is irrelevant. The rules and procedure are not so ancient or rigid that only antiquated methods of service through a bailiff or by beat of drum is acceptable. E-Mail & Whatsapp are not formally approved but if service is shown to be effected and is acknowledged it cannot be said that the Defendants had ‘no notice’. Defendants who avoid and evade service by regular modes cannot be permitted to take advantage of that evasion. ( Suit No. 162 of 2017, dt. 23.05.2017) Kross Television India Pvt. Ltd. v. Vikhyat Chitra Production (Bom)(HC) : www.itatonline.org Prevention of Corruption Act, 1988. S.13: Government Servant -Prevention of corruption-Cash credits –Gifts-Assets was found disproportionate to known sources of income-Income-tax returns and orders passed in income-tax proceedings not by themselves proof that income was lawfully earned. Further scrutiny and analysis required to determine whether offence under 1988 Act made out. [ S. 56, 68, 139, 143 ] Where charges are levelled against the assessee of having assets disproportionate to his known sources of income under the Prevention of Corruption Act, 1988, income-tax returns and orders passed in income-tax proceedings recording the income of the assessee as disclosed in his returns would not by themselves establish that such income had been earned from lawful sources as contemplated in the Explanation to section 13(1)(e) of the 1988 Act and independent evidence would be required to account for it. Court also held that ; none of the assessees had been examined on oath. The income-tax returns had been filed and the orders in the proceedings pertaining thereto had been passed after the charge-sheet under the 1988 Act had been submitted. There was a charge of conspiracy and abetment against the assessees. In the overall perspective therefore neither the income-tax returns nor the orders passed in the proceedings relatable thereto, either definitively attested the lawfulness of the sources of income of the assessees nor were they of any avail to satisfactorily account for the disproportionateness of their pecuniary resources and properties as mandated by section 13(1)(e) of the 1988 Act. Decision of the Karnataka High Court reversed. State of Karnataka v. Selvi J. Jayalalitha and others (2017) 392 ITR 97/78 taxmann.com 161 (SC) State of Karnataka v. Indo Doha Chemicals and Pharmaceuticals (2017) 392 ITR 97/78 taxmann.com 161 (SC) K.Anbazhagan v. Indo Doha Chemicals and Pharmaceuticals (2017) 392 ITR 97 (SC) K.Anbazhagan v. Selvi J. Jayalalitha (2017) 392 ITR 97/78 taxmann.com 161 (SC) Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the authors nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, noncommercial use) without express written permission of itatonline.org Compiled by Research team of KSA LEGAL CHAMBERS and AIFTP Journal committee

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