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Recent Controversies in Income Tax

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Title: Recent Controversies in Income Tax


1
Recent Controversies in Income Tax
  • By CA. Kapil Goel FCA LLB
  • Advocate (Delhi High Court)
  • 9910272806
  • advocatekapilgoel_at_gmail.com

2
What is contained for discussion in next slides!
  • Search and Seizure related controversies
  • Reopening related developments
  • Section 14A developments
  • Karnataka High Court orders! Charity taxation!
  • Section 195/ Section 40(a)(i) Sec. 9(1)(vii)
  • Section 37 36(1)(iii) Section 40(a)(ia) 41(1)
  • Section 68 Section 271D/269SS penalty
  • Section 263 law in D.G.Housing case
  • Section 271(1)(c) Guj HC gift addition

3
Search and seizure Assessment etc
4
Search Assessment section 292C Presumption
Gujarat High Court
  • BABULAL JIVANLAL PATEL Whether on the facts and
    in the circumstances of the case, the Appellate
    Tribunal was justified in law in not taking
    cognizance of provisions of section 292C of the
    Income Tax Act, 1961, in correct perspective as
    the said document was seized from the premises of
    the assessee?
  • The facts emerging from the record indicate that
    during the course of search a loose paper file
    annexure A-1 showed calculation of net profit of
    some trading activity. Such entries were made on
    the letter head of Doctor Shri Maganbhai Patel
    who had visited the family on 1.7.1999 when
    someone in the family was sick. The assessee had
    explained that the entries were not in his
    handwriting or in the handwriting of any of his
    family members. HELD
  • However, in the facts of the present case, what
    is found is a loose paper on the letter head of a
    Doctor on which entries were made regarding some
    trading activity. The assessee has denied the
    handwriting to be his or that of any of his
    family members

5
Search Assessment section 292C Presumption
  • . Considering the nature of the document, viz., a
    prescription of a doctor, on which certain
    entries were made on the reverse side, along with
    the fact that the assessee had explained that the
    handwriting, was not his or that of any of his
    family members, the presumption that the same
    belonged to the assessee stood rebutted. Besides
    as recorded by the Commissioner (Appeals) though
    search had been carried out in the entire group,
    no evidence whatsoever had been found during the
    search operations which could show that the
    assessee did carry out any business in his
    individual capacity to earn such income.
    Moreover, the assessee was not found to be in
    possession of unaccounted assets etc. which could
    be said to have been made out of such alleged
    unaccounted income. Thus, in the absence of any
    corroborative evidence to support the case of the
    revenue that the assessee had actually earned
    such huge income, the Tribunal was justified in
    upholding the deletion of the addition of
    Rs.21,25,000/-

6
Search Assessment section 292C Presumption
  • UMANG H THAKKAR - Opponent(s) GUJ. HIGH COURT
    SEC. 292C/132(4A) etc.
  • From the office of father of assessee file
    containing loose paper (176 pages) was impounded
    and on the basis of the notings made in this
    file, Assessing Officer added the sum of Rs . 2.8
    crores as the assessee's unaccounted investment
    in land. . At the outset, it is required to be
    noted that though there are four questions raised
    for consideration the issue hinges on one aspect
    and i.e. Whether addition made by Assessing
    Officer to the tune of Rs. 2.8 crores by way of
    unaccounted investment can be sustained or not ?
    10. It can be seen from the findings of the
    Tribunal noted above that addition made by the
    Assessing Officer has been rightly deleted by the
    Tribunal upholding the version of CIT(A) .

7
Search Assessment section 292C Presumption
  • .Firstly on the settled law that no addition
    could be made on the basis of statement of the
    3rd party, this deletion is made. Even if the
    person concerned was the father of assessee.
    Tribunal had noted that alleged loose
    papers/documents where the rough jottings were
    made on the papers, they were not handwriting of
    either assessee or any of his employees neither
    was there were any dates nor the figures
    indicative of anything (UMANG H THAKKAR )

8
DHIRAJLAL DURLABHBHAI PATEL - HUF
  • Admittedly, except for the unsigned document,
    there is no other corroborating evidence to
    establish any transaction having been taken
    place, more particularly in relation to the
    amount stated in the said document. There is no
    evidence, nor any finding by any authority, that
    the possession of land was handed over by the
    assessee as contended by the learned counsel. In
    this factual matrix in absence of any cogent
    evidence to treat the amount stated in the
    unsigned document as the value of the transaction
    resulting in taxable income the Tribunal was
    justified in deleting the addition

9
Section 132 Search Validity
  • High Court of Bombay (Nagpur Bench) in Spacewood
    Furnishers (P) Ltd. Ors. v. Director General of
    Income Tax (Investigation) Ors., (2012) 246 CTR
    Reports 313

10
Section 132 Search Validity
  • The note of IT (Investigation) authorising the
    search was considered and it was held that same
    did not show any date, time or place, when the
    discreet enquiries were made and did not name the
    person from whom it was made. The market
    information did not find place in the
    satisfaction note and no details of the discreet
    enquiry were disclosed. It was held that
    satisfaction note must be based upon
    contemporaneous material, information becoming
    available to the competent authority. Loose
    satisfaction notes placed by authorities before
    each other cannot meet the requirement of the
    provisions and thus the authorisation in that
    case was found to be bad and unsustainable.

11
Orissa High Court search sec. 132 updates
  • Maa Vaishnavi Sponge Ltd. vs Director General of
    Income Tax and Ors 339 ITR 413
  • 10. The intention of legislature is certainly
    not to give unbridled power to the authorized
    officer to seize or issue prohibitory order in
    respect of any asset/bank account etc. found in
    the course of search without application of his
    mind for forming of an opinion/a belief on the
    basis of any material available on record that
    the asset/deposit in bank account represents
    wholly or partly the undisclosed income of the
    assessee. Therefore, order under s. 132(3
    cannot be issued indiscriminately or it is not
    automatic in a search and seizure proceeding as
    contended by learned senior standing counsel Mr.
    A.K. Mohapatra.

12
Orissa High Court search sec. 132 updates
  • Visa Comtrade Ltd. vs UOI and Ors. 338 ITR 343
  • Top most care should be taken before taking
    seizure action in respect of a bank account
    already disclosed to the Income Tax Department
    The Act has not given unbridled and arbitrary
    power to the I.T. Authorities to invoke power
    under Section 132 of the Act. Needless to say
    that subjective satisfaction must have some
    objective foundation. It cannot be ipse dixit of
    the Authorized Officer. On those untested
    allegations and in absence of any findings that
    source of any deposit in the current bank account
    has not been explained or not disclosed in the
    regular books of account, no seizure is
    sustainable. As noted above, the correctness of
    allegation has to be assessed in assessment.

13
Visa Comtrade Ltd. vs UOI and Ors. 338 ITR 343
  • It is a settled legal proposition that if an
    order is bad in its inception, it does not get
    sanctified at a later stage. A subsequent
    action/development cannot validate an action
    which was not lawful at its inception, for the
    reason that the illegality strikes at the root of
    the order.

14
M.D. Overseas Ltd. vs Director General of Income
Tax and Ors 333 ITR 407 . All. High Court
  • 70. Let's consider the question, whether the
    relevancy of information leading to reasons to
    believe for authorising the search is to be
    adjudged after disclosing and hearing the
    aggrieved person or not. 75. A man's home is his
    castle, is a proverbial expression of personal
    privacy and security. It means, there is nothing
    more sacred more strongly guarded than one's own
    home a man's home is his castle where he can be
    in perfect safety from intrusion.  76. More than
    400 hundred years ago, Sir Edward Coke, an
    English judge, in Semayne's Case (1604) 77 Eng.
    Rep. 194 gave it legal recognition by observing,
    'The house of every one is to him as his castle
    and fortress, as well for his defence against
    injury and violence as for his repose.'

15
M.D. Overseas Ltd Contd
  • Since then it is not only part of English
    jurisprudence but of all democratic nations of
    the world so is the case with us the
    Constitution guarantees fundamental rights and
    protects our privacy under article 21 of the
    Constitution.
  • 77. We are not only exercising writ
    jurisdiction, but are also sentinel on the qui
    view for protections of the rights we are on
    alert on any encroachment on any freedom. Should
    we decide a point relevant to intrusion of
    privacy without affording reasonable opportunity
    to the petitioners should we adopt a procedure
    that might not be fairthe ultimate aim of all
    jurisprudence the yardstick on which all
    procedure should be tested.
  •  

16
M.D. Overseas Ltd Contd.
  • The procedure of indicating information and
    reason to believe (except the source) to the
    petitioner, then taking a decision on relevancy
    of the information after hearing the parties,
    ensures fairness. Had their disclosure barred by
    any enactment or were they privileged under the
    Evidence Act, then it would have been otherwise.

17
Siksha "O" Anusandhan vs CIT 336 ITR 112
HC (Orissa)
  • (i) Whether in absence of warrant in the name of
    an assessee the search conducted in its premises
    is a valid search as contemplated under Section
    132 of the I.T. Act, 1961?
  • (ii) Whether initiation of a valid search as
    contemplated under Section 132 of the I.T. Act,
    1961 in case of a person is a pre-requisite to
    issue notice for making assessment/reassessment
    under Section 153 A of the I.T. Act, 1961 in
    respect of such person ?
  • (iii) Whether on the facts and circumstances of
    the case, the I.T.A.T. is justified in remanding
    the matter to the Commissioner of Income Tax
    (Appeal) to adjudicate on a question of law
    raised before it instead of deciding the issue
    itself?

18
Siksha "O" Anusandhan
  • In order to assume jurisdiction to assess a
    person under Section 153A, there must be
    initiation of a valid search in respect of such
    person under Section 132 of the I.T. Act, 1961.
    The word 'person' appearing in Section 132 and in
    Section 153 A of the I.T. Act, 1961 is one and
    the same person. Thus the person, in respect of
    whom search under Section 132 is initiated, is
    the same person against whom notice under Section
    153A is to be issued for making
    assessment/reassessment under that Section.

19
Siksha "O" Anusandhan
  • In view of the above, we are not inclined to
    accept the contention of Mr A. Mohapatra that
    even if there is any illegality in the search
    warrant, the same will not invalidate the search
    assessment proceeding initiated under Section
    153A of the I.T. Act, 1961 Therefore, we are of
    the view that initiation of a valid search as
    contemplated under Section 132 of the I.T. Act,
    1961 in case of a person is a prerequisite to
    issue notice for making assessment/reassessment
    under Section 153A of the I.T. Act, 1961 in
    respect of such person.
  • Law is well settled that once the materials are
    available on record, the appellate Court should
    have disposed of the case on merit taking those
    materials into consideration and there is no need
    to direct remand. (apex Court in Indian Bank vs.
    K.S.Govindan Nair and Ors., (2004) 13 SCC 697 )

20
ACIT vs Amit Pande ITAT, Indore 28 July 2011
  • Prima facie the Assessing Officer of the searched
    person should form an opinion with regard to any
    document, valuables, etc., as found during the
    course of search, and that such document, which
    are declined by the searched person, actually
    belongs to some other person against whom
    proceedings u/s 153C are required to be put into
    operation. After recording of such satisfaction,
    the document so seized should be handed over to
    the Assessing Officer having jurisdiction over
    such other person, therefore, the requirement of
    recording of such satisfaction cannot be
    substituted by an appraisal note which is
    prepared by the search party after completion of
    search. Appraisal note is a secret internal
    document of the department for its internal use
    and the contents of the same are not conveyed to
    the assessee nor its copy supplied to the
    assessee even on making a written request,
    therefore, it cannot be treated at par with the
    recording of satisfaction as stipulated u/s 153C
    of the Act which is a mandatory requirement

21
CIT vs Late J. Chandrasekar (HUF) 338 ITR 61
HC (Chennai)
  • In the light of the fact that the Revenue did not
    produce any material to show that the materials
    were available at the hands of the Assessing
    Officer at the time of issuing notice, rightly
    the Tribunal came to the conclusion that the
    assumption of jurisdiction goes against the very
    tenor of section 153C of the Act. Consequently,
    the appeal had to fail. Even though the learned
    standing counsel for the appellant strenuously
    contended that the files were available in the
    office of the Assessing Officer, yet, there is
    hardly any material to show that the contention
    taken by the learned standing counsel before this
    court can be substantiated or was substantiated
    before the Tribunal.

22
(No Transcript)
23
(No Transcript)
24
(No Transcript)
25
Section 153A/C Search Asst.
  • Ahd bench in Dr Manshukh Shah Mahipat Raichand
    Khemani Distilleries Shri Babubhai H. Parikh
    also states similar views
  • Calcutta High Court Dinanath HUF All. High Court
    Shaila Aggarwal 246 CTR 266 (abatement meaning
    u/s 153A)
  • Mumbai Bench ITAT in Vama Apparels 22/07/2011
  • It was not open to the Assessing Officer to
    re-agitate the issues which has already
    crystallized in the original assessment under
    section 143(3) of the Act, without there being
    incriminating material found as a result of
    search.

26
Section 15 3A/153C
  • Gujarat High Court in Gambhir Silk Mills
    (approving AHd Bench ITAT order)
  • Bang Bench ITAT in United Spirits case 13/01/2012
  • However, in the present appellants case, no
    books of account nor any incriminate documents
    pertaining to the appellant were seized when a
    search was conducted in the residential premises
    of Sri Miglani and that no books of account or
    documents or assets seized or requisitioned were
    handed over to the assessing officer having
    jurisdiction over the appellant, but, only (Para
    3 of Asst. order) 3.A satisfaction note for
    initiation of action u/s 153C/148 in the case of
    CBDL was also received from the DCIT, CC-19, New
    Delhi. Thus, the AO, in our considered view,
    was not within his realm for initiation of
    proceedings u/s 153A r.w.s 153C of the Act in the
    case of the present appellant

27
Guj High Court in case of MHASKAR GENERAL
HOSPITAL 09/08/2011
  • A) Whether on the facts and circumstances of the
    case and in law, the Appellate Tribunal is right
    in quashing the order u/s.263 of the I.T.Act
    without considering the decision of this Hon'ble
    Court in the case of Fakir Mohmed Haji Hasan v.
    CIT 247 ITR 290? Refer Deputy CIT v. Radhe
    Developers India Ltd., (2010) 329 ITR 1(Guj.)
    With respect to second question, we may notice
    that the assessee's stand is that its sole
    business was that of running a hospital. It had
    no other source of income and that therefore,
    treating such undisclosed income from other
    source was not justified

28
Reopening u/s 148 of the Act
29
Gujarat High Court
  • 1) Bakulbhai Ramanlal Patel v. Income Tax Officer
    reported in (2011) 56 DTR(Guj.) 212, wherein
    Division Bench of this Court observed that the
    assessment cannot be reopened to verify whether
    any income chargeable to tax has escaped
    assessment and further that reopening of
    assessment cannot be permitted on vague and
    nonexistent reasons for a mere fishing inquiry.
  • 2) Hotel Oasis(Surat) (P) LTD. v. Deputy
    Commissioner of Income Tax reported in (2011) 57
    DTR (Guj) 378, wherein Division Bench of this
    Court observed that assessment cannot be reopened
    merely to make inquiries.

30
Voltas Limited WRIT PETITION NO.312 OF 2012 IN
THE HIGH COURT OF JUDICATURE AT BOMBAY 15
February 2012
  • While a subsequent decision of a Court or a
    legislative amendment enforced after the order of
    assessment may legitimately give rise to an
    inference of an escapement of income, before the
    Assessing Officer  proceeds to reopen an
    assessment after the expiry of four years of the
    end of the relevant Assessment Year, he must
    nonetheless apply his mind to the fundamental
    question as to whether there has been a failure
    to disclose on the part of the assessee. In the
    present case, ex facie there is no such
    allegation (referDIL Limited v. Assistant
    Commissioner of Income Tax (Writ Petition (Lodg.)
    No.2786 of 2011)Commissioner of Income Tax v.
    M/s. K. Mohan Co. (Exports) (Income Tax Appeal
    (Lodg.) 2347 of 2010 and 1263 of 2011 decided on
    1 July 2011), Sesa Goa Ltd. v. Joint Commissioner
    of Income Tax)

31
NYK Line (India) Ltd.. WRIT PETITION NO.159 OF
2012 HIGH COURT OF JUDICATURE AT BOMBAY 10
FEBRUARY 2012
  • 14 Now, undoubtedly an order of assessment which
    has been passed for a subsequent assessment year
    may furnish a foundation to reopen an assessment
    for an earlier assessment year. However, there
    must be some new facts which come to light in the
    course of assessment for the subsequent
    assessment year which emerge in the order of
    assessment. Otherwise, a mere change of opinion
    on the part of the Assessing Officer in the
    course of assessment for a subsequent assessment
    year would not by itself legitimise the reopening
    of an assessment for an earlier year. The point
    to be emphasized is, therefore, that where in the
    case of assessment proceedings for a subsequent
    year certain additional information is obtained
    by the Revenue which was not available to it in
    the course of an assessment for an earlier year,
    that may legitimately be utilized as a ground for
    reopening an assessment of the earlier year

32
NYK Line (India) Ltd.. WRIT PETITION NO.159 OF
2012 HIGH COURT OF JUDICATURE AT BOMBAY 10
FEBRUARY 2012
  • The new information which has come to the
    knowledge of the Revenue would, therefore,
    constitute tangible material. Consequently and in
    this background the mere fact that the Assessing
    Officer for Assessment Year 200708 had come to a
    different conclusion would not justify the
    reopening of the assessment for Assessment Year
    200607. In order to establish that the reopening
    of the assessment for Assessment Year 200607 is
    not a mere change of opinion, the Revenue must
    demonstrate before the Court that during the
    course of the assessment proceedings for the
    subsequent year i.e. Assessment Year 200708 some
    new information or material had been brought on
    record which was not available when the
    assessment order was passed for Assessment Year
    2006-07.

33
IN THE HIGH COURT OF JUDICATURE AT BOMBAY INCOME
TAX APPEAL NO.6375 OF 2010 ICICI Bank Ltd
  • 7. This aspect of the matter has been considered
    in a judgment of a Division Bench of this Court
    in Ashoka Buildcon Ltd. Vs. Assistant
    Commissioner of Income Tax 2010 325 ITR 574
    (Bombay)2. Explanation 3 enables the Assessing
    Officer to assess or reassess income chargeable
    to tax which he has reason to believe had escaped
    assessment and other income which has escaped
    assessment and which comes to his notice
    subsequently in the course of the proceedings
    under the section. There is nothing on the record
    of the present case to indicate that there was
    any other income which had come to the notice of
    the Assessing Officer as having escaped
     assessment in the course of the proceedings
    under Section 147 and when he passed the order of
    reassessment.

34
Gujarat High Court in case of PRASAD KOCH TECHNIK
TECH PVT LTD reopening not for roving enquiries
and scope of sec. 40(a)(i) vis a vis Foreign
supplier raw material payment
  • The Assessing Officer supplied reasons he had
    recorded for reopening the assessment, which read
    as under- The assessee company filed its return
    of income on 22.12.2006, declaring total income
    of Rs.1,00,86,370/-. The assessment u/s.143(3)
    was finalized on 18.06.2008 determining the
    taxable income of Rs.1,00,86,370/-. It is seen
    that the assessee company had made payment of
    Rs.21,60,399/- in Foreign Company for  purchase
    of raw materials. However, neither did the
    company deduct TDS on this amount nor any
    certificate obtain from the concerned Assessing
    Officer for non-deduction of TDS. Thus, in view
    of the provisions of section 40a(i) and judgment
    of Karnataka High Court, entire amount was
    required to be disallowed and added back to the
    total income.  As discussed above, the disallow
    expenditure of Rs.21,60,399/- resulted in under
    assessment of same income. In view of the facts
    discussed above, I have reason to believe that
    income of Rs.21,60,399/- being the amount of
    disallowable u/s.40a(i) chargeable to tax has
    escaped assessment for A.Y.2006-07 and
    accordingly it is the fit case for reopening the
    assessment u/s. 147 for the A.Y.2006-07.

35
Gujarat High Court in case of PRASAD KOCH TECHNIK
TECH PVT LTD reopening not for roving enquiries
and scope of sec. 40(a)(i) vis a vis Foreign
supplier raw material payment
  • 22. In the reasons recorded, there is not even a
    prima facie belief or disclosure that on what
    basis, the Assessing Officer has formed his
    reason to believe that such payment to the
    foreign supplier attracted tax in India. In
    absence of any live link with the reasons
    recorded and the belief formed, we are of the
    opinion that the notice was wholly invalid. 23.
    If, as suggested by the counsel for the Revenue,
    we permit the Assessing Officer to ascertain full
    facts and bring them on record, and then decide
    whether income chargeable to tax had escaped
    assessment or not, we would permit the Assessing
    Officer to reopen the assessment only for fishing
    enquiry.

36
Section 14A Exempt Income
37
M/s Siva Projects Engineering IN THE INCOME TAX
APPELLATE TRIBUNAL A BENCH, CHENNAI 17.02.2012
  • 3. At the outset, we would like to state here
    that the ld. CIT(A) in the appeal of the assessee
    has confirmed the disallowance of expenditure of
    Rs. 37,87,800/- and has deleted the disallowance
    of interest of Rs. 27,447/-made u/s 14Aof the
    Act. Therefore, the grievance of the assessee
    which remains to be adjudicated by us is with
    regard to disallowance of expenditure of Rs.
    37,87,800/-. 10. Before us, the ld. A.R. of the
    assessee submitted that no exempt income was
    earned during the year and no expenditure was
    incurred in relation to earning exempt income and
    therefore disallowance by invoking Rule 8D was
    not warranted. She also submitted that the claim
    of the assessee that no expenditure was incurred
    in relation to investment of Rs. 101,56,27,000/-
    was not found to be incorrect by the ld. CIT(A).
    Therefore, disallowance of Rs. 37,87,800/- should
    have been deleted by the ld. CIT(A).

38
  • Chennai bench ITAT Contd (Siva Projects )
  • However, we find that in the instant case, the
    Assessing Officer has not brought no material on
    record to show that the claim of the assessee
    that no actual expenditure was incurred in making
    investments in question was not correct. The
    Assessing Officer, without disputing the
    correctness of the claim of the assessee has
    invoked the provisions of Rule 8D. . 14. Thus it
    is observed that for determining the amount
    disallowable as per provisions of Rule 8D(2) the
    condition precedent is that the Assessing Officer
    must come to a conclusion having regard to the
    accounts of the assessee that claim of the
    assessee that no expenditure was incurred in
    relation to exempt income is not correct. We find
    that in the instant case, no such satisfaction
    has been arrived at. Therefore, computation of
    disallowable amount as per Rule 8D(2) cannot be
    sustained

39
Gujarat High Court
  • SUBMERSIBLES LTD TAX APPEAL No. 868 of 2010
    Section 14A Whether the Appellate Tribunal is
    right in law and on facts in confirming the order
    passed by CIT (A) in deleting the disallowance of
    Rs. 13,82,778/ made under Section 14A of the Act
    ?
  • Thus, from the entire gamut of facts, the
    Tribunal held that there was sufficient surplus
    funds available with the assessee to invest and
    there was no nexus that could be established with
    the expenditure incurred by the assessee for
    earning the dividend income. (ITAT order upheld)

40
Delhi bench I.T.A. No.3571(Del)/2011 M/s Mohan
Exports Pvt. Ltd 2/3/2012
  • The ld. CIT(Appeals) has given a very specific
    finding that the examination of the bank account
    shows that such investments are out of
    interest-free funds available with the
    assessee-company. Rule 8D(2)(ii) deals with a
    case where the assessee has incurred expenditure
    by way of interest during the previous year which
    is not directly attributable to any particular
    income or receipt in terms of the decision in the
    case of Maxopp Investments Ltd. (supra). The
    lower authorities were expected to examine
    whether the interest paid in this year is or is
    not directly attributable to any particular
    income or receipt. There is a finding that the
    interest is not directly related to receipts by
    way of dividends.Therefore, In view of the
    finding of the ld. CIT(Appeals), no interest
    expenditure had been incurred for earning
    tax-free income. Therefore, the provision
    contained in Rule 8D(2)(ii) cannot be invoked.

41
Delhi bench
  • ITA No. 2061/Del/2011 Seaview Developers Ltd.,
    Law do not permits to assume hypothetically some
    expenses are there (where there is none in
    assessees PL account) and then apply estimated
    rate to dividend income for disallowing notional
    expenses relatable to tax free income.
  • U/s 115JB whether rule 8D can apply? Apparently No

42
Other developments
  • Ahd ITAT in case of G M M Pfaulder Ltd, B ITA
    No.1241/Ahd/2006 Section 14A section 36(1)(iii)
    disallowance of expenses on AD-HOC basis
    exhaustive analysis
  • SC in Wallfort 326 ITR PAGE 1
  • Delhi High Court Maxopp (18.11.2011) 203 Taxman
    364

43
Karnataka High Court orders!
44
Karnataka High Court orders Subandam Uday Kumar
case
  • Section 54F is a beneficial provision promoting
    the construction of a residential house,
    therefore the same should receive liberal play in
    light of purpose for which sec. 54F is
    incorporated in statute, which aims to encourage
    investments in acquisition of residential house
    and completion of construction or occupation of
    house is not the requirement of law. B) If after
    making the entire payment merely because a
    registered sale deed has not been executed and
    registered in favor of assessee before the period
    stipulated, he cannot be denied the benefit of
    section 54F deduction. C) Similarly in case
    assessee has invested the relevant sale
    consideration in construction of the house and
    merely because the construction was not complete
    in all respects and it was not in a fit condition
    to be occupied within the period stipulated, can
    be no bar for availing section 54F deduction.

45
PH High COurt on Section 54/54F  LONG TERM
CAPITAL ASSET PERIOD OF HOLDING HOW TO BE COUNTED
  • Vinod Kumar Jain Date of Decision 24.9.2010
    held 16. In view of the above, it is concluded
    that the provisions of Sections 2(14), 2(29A) and
    2(42A) encompasses within its ambit those cases
    of capital asset which are held by an assessee.
    Once that is so,adverting to the facts of the
    present case, the assessee was allotted flat on
    27.2.1982 on payment of instalments by issuance
    of an allotment letter and he had been making
    payment in terms thereof but the specific number
    of the flat was allocated to the assessee and
    possession delivered on 15.5.1986. The right of
    the assessee prior to 15.5.1986 was a right in
    the property. In such a situation, it cannot be
    held that prior to the said date, the assessee
    was not holding the flat. 
  •  

46
PH High COurt on Section 54/54F  LONG TERM
CAPITAL ASSET PERIOD OF HOLDING HOW TO BE COUNTED
  • Whether on the facts and circumstances of the
    present case and the provisions of Section 2(29A)
    and Section 2(42A) read with section 54 of the
    Income Tax Act, the flat allotted to the
    appellant vide allotment letter dated 27.2.1982
    is a long term capital gain and further the
    investing of that amount for the purchase of
    another house is exempted under the provisions of
    Income Tax Act, 1961?
  •   

47
Karnataka High Court orders K Satish Kumar Singh
  • Section 249 Admitted tax payment a) When once
    CIT-A dismiss the appeal in limine on limited
    ground of non payment of admitted tax as per
    ROI/ITR in terms of section 249(4), in case
    subsequently assessee comes up with relevant tax
    challans, CIT-A has power/duty to recall the
    earlier dismissal order for fresh decision on
    merits of the case b) Likewise, ITAT can look
    into the request of assessee where CIT-A do not
    entertain suggested recall application on
    subsequent payment of admitted tax

48
Karnataka High Court Rama Krishna Sewa Ashram
ITA 248/2010
  • The parliament intended to pass on the benefit
    of exemption of income tax to charitable and
    religious institutions. We are really surprised
    at the attitude of these authorities who are over
    technical in denying the benefit to deserving
    institutions, which are rendering laudable
    services to rural masses. By not granting the tax
    exemption benefit which they deserve  the
    authorities have hampered said social activities
     of the trust and they are made to waste their
    precious time, energy and money in fighting this
    litigation.unfortunately  the person who took
    decision to file this appeal before this court
    are wasting precious time of the trust which
    could have been used in the social service.this
    attitude on the part of the department cannot be
    countenanced. National Litigation policy 2011 to
    be kept in mind before filing appealsRs 1 lac
    costs imposed on department

49
Karnataka High Court In case of Karuna Health
care society ITA 77/2011
  • The order of DIT(E) gives us an impression that
    he was not concerned about the charitable
    activity carried on by the trust as such. He had
    no doubt in his mind that they were carrying on
    charitable activity. In the absence of any
    finding of siphoning of funds on part of trust
    for non charitable activity/personal activity, no
    adverse view should be taken at registration
    stage.  Both the DIT(E) and ITAT missed the
    object with which the parliament has enacted
    these provisions to offer an incentive to persons
    who are well placed in life to take up charitable
    activities. Cost Rs 25000 imposed on Department

50
IN THE HIGH COURT OF JUDICATURE AT MADRAS Tax
Case (Appeal)No.641 of 2011 Sarvodaya Ilakkiya
Pannai
  • (i) Whether, on the facts and in the
    circumstances of the case, the Income Tax
    Appellate Tribunal was right in law in holding
    that the registration granted to the assessee
    under section 12A(a) would hold good, even though
    the assessee's main object in publication,
    purchase and sale of books which are not
    definitely charitable activity and the activities
    are purely a commercial venture with profit
    motive is valid ?

51
Sarvodaya Ilakkiya Pannai Mad. HC case contd.
  • 6. In order to apply the above provision, there
    must be a specific finding by the Commissioner
    that the activities of the trust or institution
    are not genuine or not being carried out in
    accordance with the objects of the trust or
    institution as the case may be. The question is,
    whether the order of the Commissioner of Income
    Tax could fall under the powers conferred on him
    under section 12AA(3) of the Act. The only reason
    given by the Commissioner of Income Tax to cancel
    the registration is that the activities of the
    trust were not charitable and therefore, the
    trust is not entitled to exemption under section
    11 and consequently, cancelled the registration
    granted under section 12AA.

52
Sarvodaya Ilakkiya Pannai Mad. HC case contd.
  • 10. The Tribunal had allowed the case of the
    assessee with the finding that none of the
    conditions under section 12AA(3) were violated
    and therefore, the satisfaction which was arrived
    at by the Commissioner of Income Tax was not
    justified (On a challenge to the said order
    cancelling registration, the Appellate Tribunal
    has found that the order of the Commissioner was
    not justified as the power to cancel could be
    only traced out to section 12AA(3) and in the
    absence of any activity carried on by the trust
    contrary to the objects, the registration cannot
    be revoked )

53
The Chartered Accountant Study Circle Tax Case
(Appeal) No.593 of 2011 13.2.2012 (Madras High
Court)
  • 2. The assessee-trust is a Society known as "The
    Chartered Accountants Study Circle".  The aims
    and objects of the Society among other things are
    as follows
  •             "a. To conduct periodical meetings on
    professional subjects
  •              b. To publish books, booklets, etc.
    on professional subjects
  •              c. To organise Seminars,
    Conventions, Conferences, etc., as may be deemed
    fit from time to time

54
The Chartered Accountant Study Circle Tax Case
(Appeal) No.593 of 2011 13.2.2012 (Madras High
Court)
  • Madras High Court Order on aforesaid factual
    background
  •  
  •             6. We have considered the above
    submission. The question, therefore, is whether
    the publication of books of professional interest
    to be used as a reference material by the general
    public including the professionals in respect of
    Bank Audit, Tax Audit, etc. would be construed to
    be a charitable purpose.
  • Therefore, it cannot be held that the activities
    of the assessee-trust in publishing and selling
    books of professional interest, which are meant
    to be used as a reference material even by the
    general public as well as the professionals in
    respect of Bank Audit, Tax Audit, etc., cannot be
    construed to be one of commerce in nature.  The
    finding of the Tribunal in this regard requires
    no interference. 

55
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 
  • The first question raised is whether a seminary
    coaching and training students for priesthood is
    an educational institution as referred to in the
    above provision of the I.T. Act. Educational
    institution is not defined under the I.T.Act

56
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 
  • Freedom to practice and propagate religion is a
    right conferred under Article 25 of the
    Constitution. Propagation of religion necessarily
    involves education and training of young
    generation on religious matters and unless the
    same is systematically done religious beliefs and
    practices cannot be carried to future
    generations. Therefore religious teaching is a
    right recognized under the Constitution. A person
    admitted to seminary takes as much as about 10
    years to become a qualified priest and the long
    duration by itself reveals the extensive coaching
    and training required to become a priest who is a
    religious practitioner. So much so, there cannot
    be any controversy that religious teaching is
    also education within the meaning of the term
    contained in S.10 (23C)(iiiad) of the I.T.Act.

57
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 
  • There is nothing to indicate that
    S.10(23C)(iiiad), requires the educational
    institutions referred to therein to impart
    education in any particular subject or in any
    manner whatsoever.        So much so, the term
    'education' should enjoy a wide connotation
    covering all kinds of coaching and training
    carried on in a systematic manner   leading to
    personality development of an individual.
  • So much so, we hold that religious teaching in
    the seminary is also education and seminary is
    therefore an "educational institution" entitled
    for exemption u/s 10 (23C)(iiiad) of the I.T.Act.

58
Sec. 12AA Sec. 80G Charity JITO CHENNAI
CHAPTERR  Tax Case Appeal Nos.337 338 of  2011
 IN THE HIGH COURT OF JUDICATURE AT MADRAS
  • 2.  A reference to the order of the Director of
    Income Tax (Exemptions) shows that the
    application filed by the assessee  under Section
    12AA of the Income Tax Act for registration of
    the Society, has been rejected at the threshold
    holding that in the object clause of the  deed,
    particularly, in clause 3(a) and 3(f), there is a
    provision for domestic and overseas markets and
    also settlement of disputes by arbitration and
    therefore, the Director of Income Tax(Exemptions)
    has come to a conclusion that the object is not
    charitable in accordance with Section 2(15) of
    the Act and is commercial in nature.

59
Sec. 12AA Sec. 80G Charity JITO CHENNAI
CHAPTERR  Tax Case Appeal Nos.337 338 of  2011
 IN THE HIGH COURT OF JUDICATURE AT MADRAS
  • 6. We have gone through the object clauses,
    namely, 3(a) and 3(f), referred to by the
    Director of Income Tax(Exemptions), which are as
    follows . (f) To provide for arbitration in
    respect of settlement of disputes arising in the
    course of trade, services, vacations, industry or
    other business matters of the community and to
    secure the services of experts if found necessary
    or desirable."        
  • 7. We have also gone through the other clauses of
    the deed and it is very clear that the object of
    the Society is to propagate Non-violence and
    Tenets of Truth and to encourage universal
    spiritual uplifment as preached by the Tirthankar
    Bhagwants.  What is stated about the settlement
    of dispute is only incidental thereto and cannot
    be stated to be commercial in  nature. 

60
Bombay High Court in  The Chembur Gymkhana INCOME
TAX APPEAL NO.5568 OF 2010 February 13, 2012
  • There is a finding of fact that the assessee is
    providing sports facilities as a part of its
    activities consisting of badminton, table tennis,
    billiards, cricket and skating among others. On
    these facts, the primary issue which has been
    decided by the Tribunal must be answered by
    holding that the assessee for Assessment Year
    199697 fulfilled the definition of the expression
    charitable organization in Section 2(15). The
    first question of law would, accordingly, have to
    be answered in the affirmative. ((1) Whether in
    the facts and circumstances of the case and in
    law, the Tribunal was right in holding that the
    assessee performs a charitable purpose within the
    meaning of Section 2(15) of the Income Tax Act,
    1961)

61
BHC in Gymkhana case
  • Supreme Court in CIT vs. Surat Art Silk Cloth
    Manufacturers Association,5 it is a settled
    principle of law that the primary or dominant
    purpose of the institution must be charitable.
    The test to be applied is whether the object
    which is pursued is of the main or primary object
    or whether it is ancillary to a dominant object

62
Delhi High Court orders!
63
Samora case (271D/269SS)
  • ITA No.313/2006 Judgment delivered on 23.02.2012
    Whether on the facts and circumstances of the
    case, the Income Tax Appellate Tribunal was right
    in law in concluding that no penalty was leviable
    on the assessee under the provisions of section
    271D of the Income Tax Act, 1961?

64
Samora case (271D/269SS)
  • 20. The Supreme Court in Asst. Director of
    Inspection (Investigation) v. Kum. A.B. Shanthi
    255 ITR 258 (SC) observed that (1) if there was
    a genuine and bona fide transaction and (2) if
    for any reason the taxpayer could not get a loan
    or deposit by account-payee cheque or demand
    draft for some bona fide reasons, the authority
    vested with the power to impose penalty has got
    discretionary power. The existence of a genuine
    or bona fide transaction is not sufficient to
    attract the relief under section 273B of the said
    Act. It must also be established that for some
    bona fide reasons the assessee could not get a
    loan or deposit by an account payee cheque or
    account payee bank draft.

65
Samora case (271D/269SS)
  • In the present case, the Tribunal has not
    returned any finding as to the second aspect.
    Without a clear finding on both the aspects
    referred to in the said Supreme Court decision,
    the Tribunal, in law, could not have concluded
    that the assessee had reasonable cause for its
    failure to accept the said amounts in compliance
    with section 269SS of the said Act.
  • There is nothing on record to show that there
    were bona fide reasons for not accepting the said
    amounts through account payee cheques or account
    payee bank drafts. And, unless that is
    established, the shelter of section 273B is not
    available

66
Kamdhenu case (Section 68)
  • We may repeat what is often said, that a
    delicate balance has to be maintained while
    walking on the tight rope of Sections 68 and 69
    of the Act. On the on hand, no doubt, such kind
    of dubious practices are rampant, on the other
    hand, merely because there is an acknowledgement
    of such practices would not mean that in any of
    such cases coming before the Court, the Court has
    to presume that the assessee in questions as
    indulged in that practice. To make the assessee
    responsible, there has to be proper evidence. It
    is equally important that an innocent person
    cannot be fastened with liability without cogent
    evidence.

67
Kamdhenu case (Section 68)
  • 7) Even the Tribunal acts purely as an appellate
    authority. In that capacity, the Tribunal has to
    see whether the assessment framed by the AO, all
    for that matter, orders of the CIT(A) were
    according to law and purportedly framed on facts
    and whether there was sufficient material to
    support it. It is not for the Tribunal to start
    investigation. The Tribunal is only to see as to
    whether the additions are sustainable and there
    is adequate material to support the same if not
    the addition has to be deleted. At that stage,
    the tribunal would not order further inquiry. It
    is to be kept in mind that the AO is prosecutor
    as well as adjudicator and it is for the AO to
    collect sufficient material to make addition

68
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  
  • i Whether a particular expenditure could be
    questioned by the Assessing Officer on the ground
    of justification and be disbelieved without any
    enquiry in order to hold the genuineness of a
    transaction as suspicious without holding any
    enquiry and giving opportunity to the assessee
    ?ii If the answer to the above is in favour of
    assessee then whether the Tribunal was justified
    in law in upholding the disallowance of the
    payment of Rs.2,84,362/- made by the appellant to
    M/s. Aditya Associates towards labour charges for
    the purposes of the appellants business and its
    purported findings in that behalf are arbitrary,
    unreasonable and perverse ?

69
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  
  • In this case no attempt has been made to dispute
    the case made out by the appellant. Moreover,
    without examining the details with regard to the
    payment made in a year to the said Aditya
    Associates and looking at the aggregate figure,
    the cash transaction should not have been
    disbelieved or should not have been declared
    unacceptable under the proviso of sub-Section 3
    of Section 40A. In view of the aforesaid reason,
    we think that all the authorities below did not
    render justice and this needs reconsideration

70
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  
  • We see force in the submission of Mr. Khaitan
    that the finding of all the authorities below
    that the said Aditya Associates, the sister
    concern of the company, is based on no evidence.
    We noticed that apparently there has been a
    document to show separate and distinct entity of
    the said Aditya Associates and in order to
    establish the same being unreal, it is something
    more which is required to be done by the Revenue
    as it has been ruled by the Supreme Court in the
    case of Commissioner of Income-tax (Central)
    Commissioner of Income-Tax (Central), Calcutta
    supra. At the bottom of page 360 continued at
    page 361 of the said decision, the Supreme Court
    made the statement the statement of law in this
    regard as follows  
  • The onus to prove that the apparent is not the
    real is on the party who claims it to be so. As
    it was the department which claimed that the
    amount of fixed deposit receipt belonged to the
    respondent firm even though the receipt
    .., the burden lay on the department
    to prove that the respondent was the owner of the
    amount...
  •  

71
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  
  • Apart from the statement of law made by the
    Supreme Court, we quote the provision of Section
    103 of the Indian Evidence Act, which is as
    follows
  •  
  • 103. Burden of proof as to particular fact.
    The burden of proof as to any particular fact
    lies on that person who wishes the Court to
    believe in its existence, unless it is provided
    by any law that the proof of that fact shall lie
    on any particular person.
  •  
  • Here, the assessee thought it best to engage
    outsider in order to meet the contractual
    obligation with various government companies for
    supplying drums. Their existing labour force,
    perhaps, would not be adequate to meet the demand
    of the customers. Having regard to the expediency
    and necessity, the company decided to engage an
    outsider, namely M/s. Aditya Associates. How
    M/s.Aditya Associates has rendered services to
    the company could have been examined by the
    authorities concerned and this could have been
    done only by calling the said Aditya Associates
    or examining the other documents regarding the
    payment made to the said Aditya Associates. This
    exercise was not undertaken by the Assessing
    Officer

72
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)
  • In the present case, it is noticed that the
    assessee utilixed land belonging to M/s Standard
    Sulphonators Ltd. as a security against loan
    raised from the bank, this fax is also clear from
    page 17 of the assessee's compilation, which is a
    copy of certificate issued by the State Bank of
    India, Civil Lines, Kanpur wherein it is
    certified that the property owned by M/s Standard
    Sulphonators Ltd. Was pledged with the bank as
    security against lona provided to the assessee.
    The value of the said property as per valuation
    report dated 20.9.2007 was Rs.2.25 cores.  

73
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)
  • Since the company, M/s Standard Sulphonators
    Ltd. Had provided its land as security to the
    bank against loan taken by the assessee and in
    lieu of that the assessee deposited a sum of
    Rs.50 lakhs with the said company i.e. M/s
    Standard Sulphonators Lted., so it cannot be said
    that the said amount of Rs.50 lakhs was an
    interest free advance or loan. Therefore, the
    Assessing Officer was not justified in making the
    disallowance on account of notional interest on
    the said depositThe Tribunal has allowed the
    assessee's claim regarding disallowances of
    interest paid on borrowed funds vis a vis
    advances/deposits made to M/s Standard
    Sulphonators Ltd. on the ground that the said
    company had given its property papers to the
    assessee for securing loan/advances from the
    State Bank of India. Property papers given by M/s
    Sulphonators Ltd. Was necessary as the bank was
    not willing to advance/ loan in the absence of
    any collateral security.

74
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)
  • That being the position, we are of the considered
    opinion that it is in the course of business
    transactions, and, therefore, the Tribunal was
    justified in deleting disallowance of the
    interest on assumed interest free advance S

75
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010
  • 4. We have heard the rival submissions and
    perused the relevant material on record in the
    light of precedents cited. The entire dispute
    centers around the taxability of the amount
    received by the assessee from Menlo India in
    respect of services performed outside India on
    the export consignments of Menlo India
    originating from India. There is no quarrel over
    the nature of services for which the above
    referred amount has been paid to the assessee
    being, freight and logistics services such as
    transport, procurement, customs clearance,
    sorting, delivery, warehousing and pick up
    services. Now the primary question which arises
    for our consideration is as to whether the
    payment in respect of these services can be held
    as fees for technical services within the
    meaning of section 9(1)(vii).

76
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010
  • In the absence of any specific definition of the
    phrase managerial services as used in section
    9(1)(vii) defining the fees for technical
    services, it needs to be considered in a
    commercial sense. It cannot be interpreted in a
    narrow sense to mean simply executing the
    directions of the other for doing a specific
    task. For instance, if goods are to be loaded and
    some worker is instructed to place the goods on a
    carrier in a particular manner, the act of the
    worker in placing the goods in the prescribed
    manner, cannot be described as managing the
    goods. It is a simple direction given to the
    worker who has to execute it in the way
    prescribed. It is quite

77
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010
  • natural that some sort of application of mind is
    required in each and every aspect of the work
    done. As in the above example when the worker
    will lift the goods, he is expected to be
    vigilant in picking up the goods moving towards
    the carrier and then placing them. This act of
    the worker cannot be described as managing the
    goods because he simply followed the direction
    given to him. On the other hand, managing
    encompasses not only the simple execution of a
    work, but also certain other aspects, such as
    planning for the way in which the execution is to
    be done coupled with the overall responsibility
    in a larger sense. Thus it is manifest that the
    word managing is wider in scope than the word
    executing. Rather the later is embedded in the
    former and not vice versa
  • It is only when some consideration is given for
    rendering some advice or opinion etc., that the
    same falls within the scope of consultancy
    services. The word consultancy excludes actual
    execution. The nature of services, being
    freight and logistics services provided by the
    assessee to Menlo India has not been disputed by
    the authorities below. There is nothing like
    giving any consultation worth the name.

78
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010
  • . Where simply an equipment or a standard
    facility albeit developed or manufactured with
    the use of technology is used, such a user cannot
    be characterized as using technical services.
    The essence of theconsideration for the payment
    is rendering of services and not the use of
    computer. If incidentally computer is used at any
    stage, which is otherwise not necessary for
    rendering such services, the payment for freight
    and logistics will not partake of the character
    of fees of technical services. We, therefore,
    repel this contention raised on behalf of the
    Revenue.

79
Jaipur bench ITAT in Modern Insulator case 56
DTR 362 Delhi bench in HAVELLs case 140 TTJ 283
  • Further, as held by Jaipur bench of ITAT in
    Modern Insulator case 56 DTR 362 (also refer
    Delhi High Court in EON technology 203 Taxman
    266) that commission related services rendered by
    foreign agent do not attract tax withholding u/s
    195 of the Act as same are not in nature of
    technical /managerial services, same conclusion
    is available in number of Mumbai bench ITAT
    orders.
  • Further, as pointed in HAVELLs case that
    certification services provided by foreign agency
    to Indian party in connection with export sales,
    is something which stands utilized for the
    purpose of earning the income from a source
    outside India (here export orders from foreign
    buyers) and on that count itself there is no
    requirement of tax withholding u/s 195 read with
    section 9(1)(vii) of the Act on stated
    certification payments.

80
ACIT Vs. Merchant Shipping Services (P) Ltd. and
Others, 135 TTJ (Mum)
  • 589 Where no technical services are provided as
    such, but the payment is made for the use of some
    machinery or equipment or standard facility which
    may have been created or brought into existence
    with the input of technical services along with
    man, machine and material, such payment would not
    partake of the character of fees for technical
    services. Take for example a person going to a
    cinema and purchasing ticket for watching a
    movie. When he purchases ticket, he pays for
    watching the movie and not for availing any
    technical service. It is a different matter that
    the move is exhibited on screen by way of some
    technical input)

81
(Pune bench in Glaxo case)
  • To be more precise, any payment for technical
    services in order to be covered u/s. 194J, should
    be a consideration for acquiring or using
    technical knowhow simplicitor provided or made
    available by human element. There should be
    direct and live link between payment and
    receipt/use of technical services/information.

82
Guj H.C Concealment penalty
  • KOKILABEN A SHAH Concealment penalty and GIFT
    addition u/s 68 Guj High Court Having perused the
    orders on record with the assistance of learned
    counsel for the Revenue, we see no reason to
    interfere. Tribunal observed that gift was
    received through normal banking channel. Identity
    of donor was disclosed and established. Assessee
    had furnished complete details of the gift.
    Tribunal noted that none of the departmental
    authorities made any attempt to find out whether
    the explanation of the assessee was false.
    Tribunal relied on decision of Division Bench of
    this Court in case of National Textiles v.
    Commissioner of Income Tax reported in 249 ITR 125

83
Guj H.C Concealment penalty
  • , wherein Bench observed that if the assessee
    gives an explanation which is unproved but not
    disproved, it would not lead to inference that
    assessee's case is false. We are also in broad
    agreement with the same. Relying on the decision
    of Nashaben H. Jariwala, wherein it was observed
    that merely because assessee failed to prove the
    gift in the manner required by the department, it
    is not possible to conclude that assessee
    concealed her income, tribunal in the present
    case deleted penalty.

84
Delhi High Court order in case of ORALCE INDIA
  MARCH 30, 2011 243 CTR 103
  • It is well-settled that it is not open to the
    Department to adopt a subjective standard of
    reasonableness and disallow a part of business
    expenditure as being unreasonably large, or
    decide what type of expenditure the assessee
    should incur and in what circumstances.  Thus,
    the jurisdiction of the AO is only confined to
    deicide Profits and gains of business or
    profession, i.e., whether the expenditure
    claimed was actually and factually expended or
    not and whether it was wholly and exclusive for
    the purposes of business. Reasonableness of the
    expenditure can be considered only from this
    limited angle for the purpose of determining
    whether in fact amount was spent or not. REFER
    Atherton Vs. British Insulated Helsby Cables
    Ltd. reported as 10 TC 155, 191 (HL) Supreme
    Court in the case of Commissioner of Income Tax
    Vs. Walchand, 65 ITR 381

85
CIT vs Vardhman Overseas Ltd. 204 Taxman 524
Delhi H.C.
  • If, as contended before us by the learned
    standing counsel for the revenue, the alleged
    benefit enjoyed by the assessee by utilizing the
    amounts payable to the sundry creditors in its
    own business for a period of four years or more
    is to be brought to tax under Section 28(iv),
    notwithstanding that the conditions of Section
    41(1), which govern the factual situation, are
    not satisfied, then it would render the latter
    section otiose or a dead letter

86
HOTLINE ELECTRONICS LTD  ITA NO.1073/2011 Delhi
H.C.
  • The Tribunal is also right in its view that
    unless notices were issued to the creditors and
    they had stated that they have given up the
    claims against the assessee, no decision can be
    taken by the income tax authorities, merely on
    the ground that the debts remained unpaid in the
    assessees books for a number of years, that the
    liability has ceased or has been remitted. In the
    present case the Assessing Officer has not issued
    any notice to the creditors to confirm from them
    whether they have given up their dues from the
    assessee

87
HOTLINE ELECTRONICS LTD  ITA NO.1
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